4/25/12

Abraham, Martin & John

Lions & Lambs (Part 11)


Abraham, Martin and John own a services company in an upper end suburban town, part of a major metro area. There is enough business in the town in terms of both volume and dollars to support several good sized competitors, especially if the areas around the town are included. Martin and John grew up in their area and the family name is on an assortment of businesses in the town. Abraham married into a fairly prominent family in the town. All three are good men and, in their own ways, are pillars of the community.

Originally, the business that provided the services they now provide was the family business of Martin and John’s family. The elder brothers who had started the business wanted it to be continued as the small main street business it had always been. When it came time for the elders to pass the business on, there was a division between the elder brothers, Martin, John and their cousins in terms of what the business and the business model should be. Life circumstances made the decision when Martin and John’s father passed and the cousin bought his share of the business. With their inheritance, Martin and John started up a similar business with a different model and very different ambitions.

Martin and John wanted more than a small Main Street business, they wanted a dominant business that the family and town would be proud of. This meant expanded services, more people working for the business and a brand name that would set it apart. Their dreams required money, which is where Abraham comes in. The family he married into was highly involved in the community with a name well recognized as a founding family and there was money.

Each brought to the company different areas of interest and expertise and all were willing to work hard to reach their goals, including taking key roles in generating revenue for the company. None of them had an interest in titles and roles beyond what was necessary. They believed that the strength of their partnership would be cemented if they were all involved in key initiatives, meetings and decisions. There were few singular conversations if it involved the company.

Abraham, being the most social of the three, took on the primary responsibility for company relationships other than vendors. Martin being a numbers and detail person took on financial, accounting and vendors. John was the most interested in technology, systems and tools so he took on infrastructure. It made for a company that could grow and ran fairly smoothly, giving each the opportunity to generate revenue and build not only company but also personal wealth. Their original investment was returned and life was good.

Challenges arose when the economy tightened and business dynamics changed. There was more pressure on their revenue generation as well as stronger requirements in managing the company. When momentum was taken away, their machine needed a lot of work. When times are good, it is not unusual for the cracks and necessary maintenance to be overlooked. When times are lean, these problems demand attention.

More than the economy had changed. When they started the company, they were each young men without families. Now they had reached middle age, with the many milestones and challenges that life events present. They had become accustomed to lives built around a generous income stream and had the toys to show for it. Now re-investment and cash infusion was needed in the company. Their partnership agreements had created a small reserve but the practice had been that most of the profits were disbursed to the three partners. At first, it was not a problem. Then as the downturn lengthened and other requirements for cash were needed in the company, the partnership hit its rockiest point.

Where there had never been questions on each partner’s contribution in time, effort and money before, there was now scrutiny in how decisions were made for expenditure and how the company was run. Growth and recruiting had been primarily the product of the big getting bigger and attracting talent rather than specific effort and strategic planning. Now the lack of infrastructure to recruiting and growth systems showed a gaping void.

Add to the challenges that Abraham and Martin had envisioned a retirement plan even though it had not been formally shared. John did not want to own or run the company on his own. No exit strategies had been planned and there was no funding for internal buyouts. They always thought that they would simply sell the company when the time came. Now there were no buyers and the company had a lot of infrastructure baggage that made it less attractive to the few buyers available. Since the three partners were so heavily involved in revenue production, the company without them as producers had a greatly diminished value. In a sense, they were indentured servants until the economy turned around or they were able to change the operations to a much leaner model. Perhaps the greatest challenge was how to build revenue production that was saleable.

The good news is that reason among Abraham, Martin and John prevailed. They realized that they could not individually meet their goals unless they worked together and put plans in place. Roles and responsibilities were re-examined, plans were put in place and the metrics developed to track progress on driving revenue through other producers. They downsized bricks and sticks, cut what was unnecessary and could be replaced by technology. There are buy/sell agreements in place and funding has been set up to create survivability of the company beyond the partnership.

The lions roared when they understood their chalenges and the lambs were herded to be the future of the flock.


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