1. Established Management Structure, i.e.: Middle Management
In many local medium-sized companies, the owner holds the most important customer relationships and also looks for new clients. Though there is some form of plant manager, the owner is still consulted, even for the tiniest details during the manufacturing process. Likewise, finances are handled by a family member, who often has no specialized education. There is no authorized executive team, looking to achieve optimum corporate performance, with the authority to
make decisions, even in only a small, well-defined remit. Such leadership teams cost money; through analysis, we have shown that a full management team (4-5 people) in a local mid-sized company incurs a cost of at least EUR 1 million, including
a CEO (depending on the jurisdiction). Therefore, this is a large cost saving, for someone not incorporating this level of management structure into the company. However, this leads to two issues as a result: firstly, the current person/manager takes on much more work and responsibility necessary due to the lack of middle management, and and secondly, whoever takes over the company would need to do the same or incur extensive additional costs by establishing their own middle management team.
2. Clearly Defined Company Vision
Many local companies lack a clearly defined company strategy. There is no well thought out 2-3-year business plan which management follows, formally defined projects, project descriptions
for selected projects or project postmortems
at closure. As such, many things are done ad-
hoc, driven by current events and with little formalization. This may be perfectly in line with
the operating model used by companies with
old business habits; however, this practice is not conducive to businesses looking to sell.
3. Structured Administration
For many of our clients, we see that financial administration only means complying with accounting laws, i.e. there are no control systems,
or management reports. In many cases, financial audit processes are endlessly simplified providing legal compliance only and do not serve to ensure
that the owner is confident that his or her company is operating properly. This practice only works as long as all the other details are carefully stored in the business owner’s executive head and if no serious due diligence has been carried out. However, it is unsustainable the moment the ownership and management roles are separated, and the company goes up for sale.
In this case, we often see that practices that do not comply with the latest legislation are discovered and the budget, energy and time required to implement a structured administration is not always available.
4. Established Control Mechanisms
Very few domestic medium and large companies have processes in place for systematic business risk analysis. Hardly any systematically follow their competitors, analyzing the concentration of their customer portfolio or their suppliers. Likewise, only a small number systematically use different methods of financial risk management.
5. Operating Decision-making Bodies
There is hardly any domestic medium or large enterprise that we know of, that has some form
of corporate governance - whereby the owner is supported by a consultative body, a supervisory board or a board of directors. Where we have found this to be the case, the owner greatly appreciates having an external party involved in making decisions, ensuring that the opinions, experience and knowledge of others further contribute to the success of their business.
6. Independent Senior Management
The most significant indicator of a company being well-structured, is its successful appointment of
a long-term independent executive, who runs the company under independent management. According to the puzzle in the image above, the 6 levels are interconnected; however, we believe that there is also a timetable for structuring that is determined by order. In
our experience, no independent executive can be appointed nor function, unless the first 5 elements have been adequately resolved.