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The Three Key Challenges That Middle-Market Businesses are Facing
All companies face difficulties when it comes to sustaining growth due to unpredictable economic conditions and competition. Middle-market companies, however, deal with their own unique hurdles. Middle-market companies only account for three percent of the companies in the U.S. and one-third of the private sector GDP. Since middle-market companies are too big for government subsidies and too small to weather the ebbs and flows of business cycles, they need to be disciplined in planning and execution if they are going to survive.
Three key challenges facing middle-market businesses are:
1. Disciplined Financial Planning and Execution
2. Managing and Sustaining the “Right Growth”
3. Attracting and Retaining Talent
Below are insights from Oliver Wight principals based on their real-world experience with helping middle-market companies overcome these key challenges.
The Need for Disciplined Financial Planning and Execution
Best-selling author Jim Collins took it upon himself to research small companies that made it big over a 30-year period; i.e Microsoft and Southwest Airlines. He wanted to know what they did differently than their competitors, which he later called “productive paranoia” - a practice of taking a conservative approach to balance sheets and risk taking.
We were able to validate Collins’ findings based off of our own experiences. For example, we often find companies have many operating plans and forecasts created by sales, marketing, supply chain, research and development, and other functional areas. This forces the finance organization to create its own forecast to add to the mix, which is usually as unreliable as the operating plans and forecasts of the other functional areas.
In our experience, companies with an Integrated Business Planning process establish financial discipline by getting the business oriented around a single operating plan. This is the primary output of an Integrated Business Planning process. A single operating and financial plan, updated and agreed upon by the executive team every month, takes the chaos out of planning and execution.
Managing and Sustaining the “Right Growth”
It is not unusual to find our client companies have far more projects than people and financial resources to support product innovation and launch. What makes things worse; these companies do not have a process to prioritize their projects. As a result, resources are shifted and then re-shifted causing products to rarely ever finish on time.
Visibility of at least a 24-month rolling planning horizon gives companies these advantages:
●The ability to anticipate and prevent problems
●The ability to leverage the risks and opportunities associated with all company initiatives
●Enabling executive management to gain firm control while connecting business plans and strategies to functional execution
The characteristics shown above are hallmarks of a well-run Integrated Business Planning process.
Companies utilizing Integrated Business Planning principles in the management of the product and service portfolio avoid the pitfalls of short-sightedness, avoidance of issues, and uninformed decision making. The portfolio plans are balanced with resource plans, and there is sufficient rigor to ensure that only approved projects are being worked. Projects that are not performing to expectations are suspended or removed entirely from the pipeline.
Ultimately, growth comes down to agility and responsiveness to changing market conditions.
The Challenge of Attracting and Retaining Talent
Attracting and retaining talent is a challenge for all companies, especially when unemployment rates are low. The key is to “get professional early.” Founders of startups are so busy driving innovation and seeking new customers that they lose sight of developing a structured business management approach. Employees want to feel that they are connected and that they can contribute to something bigger, especially for millennial employees. Developing talent through a professional management process like IBP ensures that a growing company has a strong bench of future leaders at the ready.
So how can companies overcome their financial, growth, and personal hurdles, with reasonable cost and rapid time to results? The answer is simple; the Integrated Business Planning process’s purpose is to align strategy, portfolio, demand, supply, and resulting financials through a focused and exception-driven, monthly re-planning process. Read our white paper on this topic. Register for our webinar, on 4/26, on this topic and where you can ask the authors questions.
Oliver Wight is credited with pioneering the Sales & Operations Planning (S&OP) and Integrated Business Planning (IBP) processes which are being used by numerous successful mid-market companies and widely cited as industry standard processes. Contact us to learn more about how this process could help your company.