The Importance Of A Good Management Team When Investing In A Company

I am regularly asked by clients and investors of the importance of company management. When deciding to invest in a company, out of all the attributes and qualities that we review, we first focus on how important are the people in charge. Secondly how do we measure this?

Some of the attributes and qualities that we look at when reviewing a share investment include: are debt levels under control? And, what is the growth potential? However, these review factors quickly become meaningless if there is not a strong and trustworthy leadership in place.

People in managerial positions have a tremendous impact on the success, or failure, of a business. Their vision, leadership and abilities all combine to determine the future of the business.

One such person, who is often singled out as a strong leader in New Zealand, is Don Braid from Mainfreight. The company’s success is based around the unique culture among staff, which is demonstrated from the top, by management. Having a strong company vision and a focused strategy are both critical to business success.

So the answer is a resounding ‘yes’. Quality management is crucial and is top of the list when deciding which companies belong in our clients’ portfolios.

In answer to the second most popular question: how we measure this, is a lot harder to answer. Quantitative and financial review factors are easier to see and therefore measure – these can be put into spreadsheets with forecasts applied. Measuring intangible quality factors associated with management however, is much more difficult, yet arguably somewhat more important.

So what are some of the quality factors we look at in company leaders? These include:

– someone who is very focused on delivering shareholder returns
– someone who knows their businesses intimately
– someone who has a track record of success
– someone who can provide transparent and open communications with shareholders
– a disciplined, sensible approach to business growth

Many companies do not succeed because they take an overly aggressive approach to expanding, or by buying good assets but paying too much and getting the business into too much debt in the process. Large transformation decisions, such as strategic acquisitions are not bad, they just require some added scrutiny.

A lot of successful companies have management teams that have remained stable for a long period of time. While a new approach can often refresh a business, continuity is also critical. We look for managers who have been part of a company’s team in charge for a reasonable length of time. Having an equally competent team is another important factor and a good manager will surround themselves with such a team. This is also a factor we look for. The alarm bells start to ring when there have been a lot of different executives.

We also look for management that has a history of doing what they say they will do, supported by financial forecasts with. It is additionally a good sign when a CEO and managerial team have invested their own money into the business. This not only demonstrates that their interests are aligned with their shareholders, but ensures that management shares the successes and failures with shareholders.

Investing in a company equals investing in the team in charge of running it. It doesn’t matter how good the assets or prospects of a company are, it can fail to deliver if managed poorly.

Good Financial Management

Good financial management is essential to the survival and success of every business. Unfortunately, many small business owners have relatively limited exposure to financial management and are unaware of how strategically important it is to their business’s performance.

In general, financial management deals with the procurement of funds for a business and the effective use of those funds in the operations of the business. It also involves using accounting numbers to measure the financial health of a business, to understand the reasons for the current financial position, and to make strategic decisions that will improve the general performance of the business.

The best way to demonstrate the importance of good financial management is to describe some of the tasks that it involves:

o Taking care not to over-invest in fixed assets

o Ensuring that there is a sufficient level of short-term working capital to sustain and manage accounts receivables and inventory

o Setting sales revenue targets that will deliver growth

o Increasing gross profit by setting the correct pricing for products or services, reducing the costs of raw materials, negotiating supplier prices, and managing other factors that influence the costs of production or service provision

o Controlling the level of general and administrative expenses by finding more cost-efficient ways of running the day-to-day business operations

o Tax planning that will minimise the taxes a business has to pay

o Managing employee benefits

o Performing financial analysis using numbers generated from financial statements.

Good financial management begins with a solid book-keeping system that will allow for the production of accurate financial statements. It requires knowledge of how to use the figures in the financial statements to the business’s advantage. For example, a good financial manager should know that a positive net profit and an increase in sales does not automatically translate into financial success. If the business’s borrowed capital has increased at a rate higher than the increase in profits or sales, it means the company is financially worse-off than it previously was. Are you and your management team aware of this?

There are many other strategic mistakes that managers who are unfamiliar or untrained in financial management make. Over time these mistakes can become detrimental to a business’s success and survival so it is crucial that you learn as much as possible about how to financially manage your small business. If you have trouble with this, you may want to consider soliciting the services of a professional who knows the ins and outs of the process.

For more information on financial management, have a look at my article “Impress your bank manager! How to read your profit and loss account report”.

5 Reasons Why You Need a Trade Show Management Team

One of the most effective ways of keeping your business competitive is to present at industry trade shows. For events like this, it’s all about putting your company’s best foot forward and staying apprised of changes in your industry. If you are a business owner or an executive, you know that shows are one important component of an overall marketing strategy. What you might not know is that a third-party vendor can help you by building and handling the logistics of your show booth.

Here are some of the compelling reasons to hire a third-party management team.

1. It Saves You Time

Time is hard to come by these days, and whenever you can delegate time-consuming and tedious work to someone else, that frees up time to focus on other things. The ability to have someone outside of your business developing and building your booth means you and your own team can spend less time worrying about the event preparation, and more time worrying about your bottom line.

2. You Get Second Opinions

These are management teams with valuable experience. No matter how much you try to foster discussion and independent thinking in your business, at some point, it is possible to get stuck on one idea and lose touch with other ways of doing things. Having experts with novel ideas on how to utilize your trade show booth can help you regain a sense of perspective.

3. You Get New Contacts

Networking is all about who you know. Trade show management experts know a lot of people, and what better way to position yourself as a preeminent leader in your industry than to network through experts? You get a number of benefits from simply talking to people who know other people.

4. It Makes Financial Sense

One big benefit to such events is the way it helps you market your company. Advertising can be a shot in the dark sometimes, but you know that anyone at the trade show inherently has some interest in the kind of product or service your company provides. The money you put towards building your trade show exhibit can pay dividends later when you get new clients and contacts.

5. They Know Trade Shows

Since the point of a trade show exhibit is about marketing your company, you should turn to the people who build exceptional exhibits for a living. You might know your company, and even your industry, but a management team know these type of events best. Let them help you with their expertise.

To learn more about how you can build or rent a custom booth for your business,and have it delivered to your next trade show, contact Acer Exhibits.