Revisiting Joint Goals

Executive Roundtable is a weekly column by TEC Worldwide, an international organization of more than 7,000 business owners, company presidents and chief executives. TEC members meet in small peer groups to share their business experiences and help one another solve problems in a roundtable session. The following questions and answers are summaries of discussions at recent TEC meetings in Southern California.

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Question: We are a $14-million sheet metal fabrication business. Due to rapid consolidation in our industry, we need to grow to $25million over the next few years to remain independent. I have put together a plan to achieve that growth via acquisitions and regional expansion.

The problem is my partner, who owns half the company. He doesn’t see the need for such rapid growth and fears losing everything we have worked so hard to build over the last 10 years. Certainly, there is some risk involved, but if we don’t grow we may have to sell out before we achieve our financial goals. How can I win him over to my side?

Answer: Before putting the strong-arm on your partner, you might want to step back and ask yourself some critical “big picture� questions.

First and foremost, is your strategy for rapid growth a product of careful research or a knee-jerk reaction to your own fear of being acquired? Have you done a SWOT (strengths, weaknesses, opportunities and threats) analysis as it applies to your company and your industry? If so, does the research truly support your fast-growth scenario or is your decision just a gut reaction to the current trends in your market?

Second, have you examined how much it would cost to fuel your growth plans and whether you can afford it? Do you have access to the necessary capital, and, if yes, how would an acquisition affect your balance sheet? Have you done sales, growth and profitability projections using both favorable and unfavorable scenarios? Do the projected returns justify the financial risk?

From your partner’s perspective, what specifically doesn’t he like about your growth plans? Are his concerns valid? Do others on your management team share his concerns? Have you overlooked some key points that his point of view brings to the table?

Finally, have you had a real heart-to-heart with your partner to make sure you are still in alignment regarding your long-term plans and goals for the business? The two of you may have started out on the same page in the beginning, but personal wants and needs often change over time.

If you truly believe that you’re moving in the right direction, you might be able to overcome your partner’s skepticism by creating a formal strategic and marketing plan. If so, says Steve Driscol, president of Thermal-Vac Technology in Orange, you may want to consider using an outside facilitator to guide the planning process and avoid the appearance of forcing your agenda on your partner.

“Having an objective, third-party opinion takes it out of the realm of ‘I want this and you want that’ and puts it in the realm of ‘Here’s an opportunity; how do we both exploit it to our mutual benefit?�’ he explains. “When I had a partner, he always had more of an open mind for ideas that came from an accountant, lawyer, consultant or other outside perspective.�

Don Dressler, president and chief executive of Western Growers Insurance Services in Newport Beach, suggests broadening the scope of your vision for the company. “Be careful of focusing on the growth/consolidation issue to the exclusion of all others,� he says. “In reality, there might be other opportunities you haven’t yet considered that could have even more long-term impact on your business. This is the perfect time to get together with your partner and do some serious brainstorming around all the issues facing your company.

“At the same time, don’t overlook the value of your partner’s input just because he doesn’t agree with your point of view. Rather than trying to force him to see things your way, use his concerns as a chance to validate or more carefully think through what you’re planning. In the end you may still disagree about the company’s ideal growth rate, but you will both feel better knowing that you have explored the situation to its fullest extent.�

Michael Valentine, president of Tustin-based DMK Inc., sees the situation as a crucial turning point not just for your business but for your partnership. He stresses the need to be in agreement with your partner on your goals for the company before making any strategic decisions of this magnitude.

“Instead of squaring off against each other, stand side by side and look into the future together,� he says. “Individually and collectively ask yourselves, ‘Where do we really want to go with this company? What do we hope to accomplish?’ Get your personal visions, dreams and financial ‘magic numbers’ aligned and then figure out the best way to achieve them. Most important, think long and hard about whether you can travel that road together or whether the time has come to go your separate ways.�

If after careful deliberation you and your partner can’t break your strategic logjam, your best option may involve buying him out. “Whatever you do, don’t try to take on another 50/50 partner at this stage of the company’s evolution,� Valentine says. “That involves a long courtship process and presents an iffy proposition at best. If it doesn’t work out, you end up with another partner you can’t agree with.

“Instead, find a way to buy out your partner and hire an operations person to handle his responsibilities. It will cost you a lot less to hire an experienced operations pro, and the money saved can go toward paying back what you had to borrow to buy out your partner. If the operations person doesn’t work out, it’s a lot easier to find a new employee than a new partner.�

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If there is a business issue you would like addressed in this column, contact TEC at (800) 274-2367, Ext. 3177. To learn more about TEC, visit www.teconline.com.