Geographic Expansion

Geographic Expansion is the process of defining the target customers and business potential to expand a company’s presence to new geographies. This is not a simple sales presence expansion. Expanding geographical presence also has to include expanding the supply chain, delivery, and after-sales servicing capabilities to those geographic locations.

Selection of a CFO is Sometimes Your Most Important Decision

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Ambler CFOHaving a complementary CEO and CFO has become a competitive advantage in the dynamic world of major hospitals.

Read health industry or business publications, and you’ll soon notice the name Amy Mansue. She’s the CEO of Children’s Specialized Hospital. NJSPOTLIGHT.com recently recognized Mansue as a “Top Healthcare Policy Analyst.” Plus NJBIZ includes CHILDREN’s SPECIALIZED Hospital on its list of “best places to work.” With an ever expanding geographic reach and 12 locations, CHILDREN’s SPECIALIZED Hospital’s services now include inpatient, outpatient, rehabilitation, long term care, medical day-care, early intervention, etc.

Mansue clearly leads the process of identifying opportunities for CHILDREN’s SPECIALIZED Hospital but is the first to point out that CFO Joseph Dobosh plays “an important role in the expansion.” Mansue particularly values that Dobosh is a “visionary.” 17% of the 1,200 fte report to CFO Dobosh.

TRINITAS CEO Gary Horan also speaks highly of their CFO, Karen Lumpp. “In this ever changing healthcare environment, a CEO needs a CFO with the background and expertise Karen brings to the table,” says Horan. TRINITAS is the result of combining Elizabeth, NJ’s three previously struggling hospitals. 10% of TRINITAS’s 2,000 FTE report to CFO Lumpp.

John Sheridan is the CEO, and Doug Shirley is the CFO of COOPER University Health Care in southern New Jersey. 400 of COOPER employees in this $900 Mil/yr entity report to CFO Shirley. Well known for its trauma center, COOPER has expanded dramatically over the past several years. “We recognized the need to increase our access to clinical trials,” said CFO Shirley. COOPER had already looked at 4-5 leading cancer hospitals when MD Anderson contacted COOPER. CFO Shirley played a key role in deal structure and making sure managed care rates were in place during the creation of the recently opened $100 Mil MD Anderson COOPER Cancer Center. “The two-way due diligence process spanned about a year,” said CFO Shirley.

These CEOs and CFOs agree that today’s hospital-based CFO must have extensive experience handling major projects. The CFO doesn’t just “crunch numbers” any more. Dobosh, Lumpp and Shirley all view their CFO role as predominantly focused on major strategic initiatives. It is very telling that these hospital CFOs view ICD 10 compliance as a “short term project.” CFO Lumpp shared that hospitals complying with ICD 10 coding by October 1, 2014 involves “quadruple the information, a big learning curve and dual coding.” CFO Dobosh shared that the project to transform hospital records to a MediTech paperless system involved “a few years and less than $6 Mil.” Clearly, changes in coding and going paperless would have been viewed as major projects for a CFO not very long ago. When CFO Shirley isn’t structuring a joint venture with the #1 hospital in the country, he is leading COOPER’s Lean Six Sigma initiative or teaching niche surgeons about supply costs. When CFO Dobosh isn’t structuring the financing for a new service and/or location, he is “retiring debt, refinancing to direct placement or thinking about Triple-B bonds.”

Clearly, today’s hospital-based CFO must have strong communication skills. No longer do CEOs and board executive committees consider strategic options and then consult the CFO. The CFO is “at the table.” Hospital CFOs are expected to make frequent presentations at executive team and board meetings. It can take as long as five years for a CFO to earn trust in a hospital setting, so the CFO must demonstrate that he/she is motivated to help find ways to help other professionals use state of the art technology, treatment techniques, etc. Today’s CFO cannot sound like a negative bean counter.

Perhaps more than in any other industry, health care-based CFOs must be level headed and accept that the rules will constantly change. CFO Lumpp says that hospital CFOs must “replace the word hospital with health care systems.” The reality is “by the time a brick-and-mortar project is built, it will already be out of date. Even insurance could collapse into a new system,” predicted CFO Lumpp. Apparently, she is correct given the recent headlines about Saint Barnabas’ plan to introduce its own health insurance plan.

It is a challenge given the limited time available, but health care-based CFOs must commit to continuous learning. CFO Shirley reads industry publications like Healthcare Financial Management (HFM) Magazine, Healthcare Executive, Modern Healthcare and HealthLeaders Magazine. CFO Lumpp warns that a health care CFO’s time can “too easily be chewed up by simplistic popular ideas that don’t consider the 40+ variables involved.” CFO Dobosh is convinced that his auditing background, experience as a referee for high school basketball and leadership level participation in the Healthcare Financial Management Association (HFMA) have helped him. He suggests that someone who is interested in becoming a health care-based CFO should “look for mentors and get experience handling major projects within the industry.”

Clearly one of the most important decisions made by a hospital CEO is the selection of the CFO.

Don’t Let Homogenization Lead to Cookie Cutter Geographic Expansion

Geographic Expansion

With 400 locations, Giraffas® is the second largest chain of restaurants in Brazil. In 2011, Giraffas® executives concluded that it was time to expand into the United States. They didn’t want to compete head on with McDonald’s. Even though their menu includes hamburgers, they went with a “fast casual” concept instead of just “fast food.” They don’t have waitresses, but guests can buy steak, salmon, specialty sandwiches or fancy Brazilian specialties in addition to burgers. They are currently getting ready to launch their 8th US location (in Florida). Giraffas® is an example of adapting a model when the growth strategy involves geographic expansion. They could see the need to adapt when looking at the USA from BRAZIL. They have started in Florida. Let’s hope they know that Florida can feel like its own country when compared to Texas or Minnesota.

Many of the chains that use a nationwide menu need to localize their marketing. Applebee’s has one menu, but the walls of each restaurant have posters, news clippings, banners and photos of local sports teams. They want you and me to think in terms of “your neighborhood Applebee’s.” When you Google “Applebee’s” and click through to their website, the home page features the address and information about the special events at the location near you. They know where you live!

As our consulting firm expanded from the Mid-Atlantic region of the United States into the southeastern and Midwestern regions, we needed to add a reasonable number of employees who didn’t talk so fast and were comfortable with words/phrases like “y’all,” “you take care now, ya’ hear?” and “have a blessed day.” Also, it was more than that. Embracing differences in time management, family values and the open discussion of religion, etc. helped.

Our expansion into Europe involved hiring local “pathfinders” who knew the countries, local customs, politicians, educators and business leaders. It also involved language lessons, legal fees and tailored marketing campaigns.

When you travel to most locations in the United States now, the strip malls look the same. The condominium communities look alike. Chain restaurants can be found everywhere. If you base your geographic expansion on what you see, you can make some expensive errors. Things seem to be fairly homogeneous across this country…until you relocate (live) in a different region for an extended period of time. You cannot convince me that a marketing campaign that was tailored to the people who live in BANGOR (Maine) will be as effective for people in BROOKLYN (New York) or BOISE (Idaho).

 

Do Some Homework Before Expanding into “THE CITY”

New York City

Recently, I was visiting with a family from Vietnam. They were convinced they knew what America is like because they had visited New York City. To me, that is like saying you have a sense of Mongolia because you once visited Beijing.

A few of our growth strategy and executive search clients have their eyes (and hearts?) set on expansion into Manhattan. One is headquartered in NE Pennsylvania. The other is in Princeton, New Jersey. They are both very very good at what they do. NYC is enticing. We “get it”, but when we started to run some cost projections that included multiple team members, office space and increased out of pocket allocations for dining & entertainment, ground transportation & parking and gifts & donations both clients seemed a bit taken aback. The truth is some cities like NYC, Tokyo, Singapore, Hong Kong, Rio de Janeiro, Monte Carlo and Dubai are more like separate countries than cities. Despite the value of new technology, you still just can’t phone (or Skype) it in.

Perhaps you have seen the tongue-in-cheek posters of “Manhattan’s View of the World” that include clear images of individual buildings in Manhattan, a blur of images for boroughs like Brooklyn & Queens, and just curved words for LONG ISLAND, NEW JERSEY & CONNECTICUT. The poster’s images jump fairly quickly to FLORIDA and CALIFORNIA. You would never know that the United States includes places like IOWA, ALABAMA or WYOMING.

Those posters are correct. How many people just say “I’m going into THE CITY” when referring to Manhattan? A LOT! Go ahead and try to ask a Manhattan-based person to come meet you for lunch in a great restaurant in Jersey City! Right!!!

Companies, like Welocalize, Inc., have become increasingly important as more businesses seek globalization. Expansion is not just about geographic distance. Many times, it is more about culture and a capacity to relate to the people involved. Welocalize provides valuable research about local cultures, customs, purchasing patterns, neighborhoods, community leaders, sensitivities, etc. We have concluded that just as much research and thought is needed to expand into NYC as when a firm expands from Princeton into Frankfurt, Sydney, or Shanghai.

Turn the Waves of the Economic Ocean into Success

The cover of the 09-09-13 issue of BLOOMBERG BUSINESSWEEK proclaimed HOLY SHIP … for good reason. Drake Bennett’s article shares that Maersk Corp. has recently ordered 10 of the new Triple-E cargo ships that can haul 18,000 TEU (standard shipping containers). That is huge! It wasn’t very long ago when carrying 6,000 TEU was remarkable. One Triple-E ship is as long as the Empire State Building is high and can carry 182 million IPADs or 111 million pairs of shoes from Shanghai to Rotterdam. That 25 day trip involves 530,000 gallons of fuel. When you visit Shanghai Harbor, you cannot help but notice the three Triple-E hulls on DSME’s floating docks. At this point, a new Triple-E is entering service every 6-7 weeks.

Although a portion of the readers of my weekly blogs are in ship building, import/export, and/or transportation, I realize that not all of you are. So why should you care that Maersk ordered 10 Triple-E cargo ships?

Maersk is the world’s biggest shipper in part because its leaders apparently know how to read the rise and fall of the economy and spot windows of opportunity. The shipping industry is very cyclical. They started planning to GO HUGE 4 years ago. The 500+ page contract to order 10 Triple-Es (with an option to buy 10 more) was signed in February 2011. It takes a year to build, test, and deliver one Triple-E, so the ships are now launching during the 3rd and 4th quarters of 2013. If competitors try to copy Maersk, their timing would be way off.

This is yet another example of true wealth that can be traced back to actions taken during recessions and periods of uncertainty. 2008-2010 were some of the most stressful years for most companies. Maersk was busy getting ready to buy/fill/launch 10 HUGE Triple-Es. By the way, Maersk did not exercise its option to buy 10 more, but isn’t it impressive that they created the opportunity for themselves?

Although we are not anywhere near the scale of Maersk, we do benefit from the fact that 3 of our 5 related businesses grow more rapidly during periods of uncertainty and/or recessions. That didn’t just happen. The concept of establishing a suite of related businesses (and 2 unrelated companies) was the result of deliberate research, analysis, and negotiations. Fortunately, none of our contracts were/are 500+ pages, like Maersk’s.

What is your executive team doing to read the cycles of the global (macro) economy? your industry’s economy? your company’s micro-economy?

What risk will you be taking to turn the waves of the economic ocean into success?

[video posts] Face It – Geographic Expansion Happens

Face It – Geographic Expansion Happens

Is geographic expansion really an optional growth strategy?  As soon as someone on the other side of the globe orders one of your products from your website, you have been thrust into geographic expansion, right?

Although an investment in bricks and mortar locations is not always necessary, attraction of more customers in a variety of locations requires intentionality.  Some basics:

Consider your marketing. Are you conveying that you truly welcome purchases from customers based in Beijing or Shanghai if your website hasn’t been translated into Mandarin or Cantonese? Which currency are you prepared to receive? Can you handle letters of credit? Most midsized companies don’t have enough money to appeal to every country. You can start with English speaking countries. When you are ready to tailor your marketing messages to specific countries and cultures, consider using the services of companies like WELOCALIZE, Inc. To listen to my interview with their CEO, Yewell Smith, visit www.TheGrowthStrategistShow.com.

Consider your approach to sales.  It makes a HUGE difference if your sales professionals clearly respect people from a variety of cultures.  It pays to bring in coaches who can teach you and your employees about cultural nuances. Although my years of traveling 250,000 miles/year are behind me, I have worked with clients in 33 countries and enjoy learning about different cultures. But I feel like a neophyte compared to other globe trotters. Maybe that’s good because no one should get complacent. Before I travel to a new location, I like to read books, go online, review recent news articles, and brush up on language and the pronunciation of peoples’ names.

Consider your approach to customer service.  Are you sensitive to different time zones? Have you developed strategic alliances around the globe to provide technical support and problem solving on a local basis? If you place expatriates, are you ready to handle local laws and regulations related to payroll?  Check out www.Expaticore.com.

We have found that memberships in the Global Speakers Federation and the World Association of Women Entrepreneurs (FCEM) have been helpful to us.  Plus we have appreciated the help provided by the US Chamber of Commerce and US Embassies around the world.

 

Aldonna R. Ambler, CMC, CSP has earned the right to be called THE GROWTH STRATEGIST®. She has won over 2 dozen national and statewide “entrepreneur of the year” awards for the resilient growth of her international businesses across 4 recessions.  Her midsized BtoB clients get on…and then stay on…the published lists of the fastest growing privately held companies. She owns and operates a suite of companies that help privately held midsized companies achieving accelerated growth with sustained profitability® through opportunity & resource analysis, 4 approaches to strategic planning, executive advisory services, growth financing, and targeted search.  2012 is Ambler’s 8th year hosting a weekly peer-to-peer-to-peer syndicated on line talk show that features interviews with CEOs/Presidents of midsized companies (typically between $20 and 200 Mil/yr) sharing success tips about the growth strategy-of-the-week. An archive of over 300 interviews is available at www.GrowthStrategistShow.com. She can be reached toll free at 1-888-Aldonna or at Aldonna@AMBLER.com.

Don’t Give Up on Geographic Expansion if You Aren’t Feeling Wealthy

Several of our B2B clients are convinced that organic growth is THE only way to go as they expand into other locations. These companies establish research budgets to identify places with the best potential and surface people within their industry who know the target towns and want to be their employees.  The corporate headquarters owns the physical assets of the branches (buildings, equipment and inventory), provides administrative services (accounting, human resources, legal), pays for the overhead, and supports marketing. Corporate headquarters also provides reasonable base salaries for the new branch managers, business plans, and incentives based on generating gross profit.

Several other B2B clients swear by geographic expansion through acquisition. Instead of trying to find completely new areas and guess at the potential, they look for underserved towns. Instead of looking for people who view themselves as employees, they look for people who have exhibited some entrepreneurial traits.  Those local entrepreneurs usually have established customer bases and gained positive reputations, but hit plateaus. Having a larger corporation fund inventory, marketing, and administrative costs provides the boost the entrepreneurs need to keep growing. The entrepreneur trades some of his/her independence for the money paid for physical assets and a head start in the town.  But the past few years has brought financial challenges for even the most experienced executives of privately held midsized companies.  What can you do if you want to expand geographically but cannot afford to do organic growth or acquisitions?

The relationship between local and corporate leaders is at the top of the list of success factors when it comes to geographic expansion so it’s important not to waste time wondering whether the relationship will be called a joint venture, a merger, an equity deal or franchising.  We have found that once the parties involved have a non disclosure/non-compete agreement signed, it helps to assign responsibilities for each line item in the financial statement…one row at a time.  The discussion that flows from such a process is absolutely fascinating…and the resulting summaries of responsibilities provide sufficient information for your attorney(s) to tell you the type of deal involved.

We are currently helping a few clients with this process.  With one company, their new branch in the northeast will involve a joint venture and their new branch in the southeast will involve an equity deal.                

 

Aldonna R. Ambler, CMC, CSP has earned the right to be called THE GROWTH STRATEGIST™. She has won over 2 dozen national and statewide “entrepreneur of the year” awards for the resilient growth of her international businesses across 4 recessions.  Her midsized BtoB clients get on…and then stay on…the published lists of the fastest growing privately held companies. She owns and operates a suite of companies that help privately held midsized companies achieve accelerated growth with sustained profitability® through opportunity & resource analysis, 4 approaches to strategic planning, executive advisory services, growth financing, and targeted search.  2012 is Ambler’s 8th year hosting a weekly peer-to-peer-to-peer syndicated on line talk show that features interviews with CEOs/Presidents of midsized companies (typically between $20 and 200 Mil/yr) sharing success tips about the growth strategy-of-the-week. An archive of over 300 interviews is available at www.GrowthStrategistShow.com. She can be reached toll free at 1-888-Aldonna or at Aldonna@AMBLER.com.

It’s Time to Address Two Expensive Executive Behaviors

If you read my weekly blogs, you undoubtedly also know that I host a weekly on-line radio show called The Growth Strategist™. I’m in my seventh year hosting it and just LOVE hearing about what people have done to make growth strategies like acquisitions, franchising, market expansion, etc really work.  My guests are all Presidents/CEOs of midsized companies (typically $20 -200Mil/yr) so they are all bright and experienced. Most convey enthusiasm and are articulate.  We are coming up on our 300th show soon (YEAH!) plus I’ve provided strategic guidance to over 800 consulting clients over the years.  The point is…by now I can hear some distinctive patterns. Some of the patterns may not be surprising.  But in a way, if they are so predictable, wouldn’t you think that more executives would be addressing them by now?

For example: When I am rehearsing with the President/CEO of a family-owned business, I usually get candid responses to questions about target markets, primary customers, and key products.

Don’t get ahead of me here.  Of course, I can’t start with questions about succession, exit strategies, or executive compensation.  Heck…an executive doesn’t have to be running a family owned business to be reluctant to talk about all of that.

Take a step back from all of that. The answers from executives of family owned businesses seem strained when the topics of strategic alliances, joint ventures, or acquisitions come up. The implication is that internal relationship issues make negotiations with outside entities more difficult.  These days, that fact would certainly turn “family owned” into a handicap because customer expectations are going up and up.  The cost of trying to do everything yourself is becoming prohibitive.  Plus the world is getting smaller and smaller.  Today, a family must proactively address relationship issues that slow down strategic analysis or decision-making.  It sure comes across in media interviews. The radio guests who attract new business opportunities as a result of appearing on my show have conveyed openness, clarity of direction, a capacity to interact with a wide range of people, and an understanding of how deals are struck.

I’ve also noticed that most of the female executives avoid directly answering questions about strategy. I repeat, my guests are all Presidents/CEOs of midsized companies. These are accomplished executives!  I’ve been amazed how many times I have had to encourage (no, plead) with the female guests to share the logic behind major decisions like acquisitions, new products, or geographic expansion. Several have been reluctant to directly respond to the straight forward question about their gross revenue… even though the numbers are plastered all over press releases and resources on the Internet.  And when these reluctant female executives do share their gross revenue, they provide too much explanation. It sounds almost like an apology.  Some of them are running $Bil businesses!  Why on earth are they apologizing to anyone?

There are undoubtedly several understandable reasons for the reticence to just talk, but frankly, my experience as a talk show host has given me new insight about why so many corporations have been reluctant to appoint successful women business owners to their corporate boards. The major search firms who are looking for board members screen shows like mine. They must be concluding that the female guests CAN’T think strategically or CAN’T keep up with a high level discussion. That’s very sad.

Aldonna R. Ambler, CMC, CSP has earned the right to be called THE GROWTH STRATEGIST™. She has won over 2 dozen national and statewide “entrepreneur of the year” awards for the resilient growth of her international businesses across 4 recessions.  Her midsized BtoB service, technology, and distribution clients get on…and then stay on…the published lists of the fastest growing privately held companies. All of her own service businesses (strategic planning, executive advisory, growth financing, radio show, speaking, search) help privately held midsized companies achieve accelerated growth with sustained profitability.™ Ambler is in her 7th year hosting a weekly peer-to-peer-to-peer on line radio program at www.Business.VoiceAmerica.com and www.growthstrategistradioshow.com that features interviews with CEOs/Presidents of midsized companies (typically between $20 and 200 Mil/yr) sharing success tips about the growth strategy-of-the-week. Family owned businesses will be emphasized in 2011. Ambler can be reached toll free at 1-888-Aldonna or at Aldonna@AMBLER.com

Are Multiple Locations Driving or Draining Your Profitability?

You probably know a few family owned businesses that are headquartered in the northern half of the United States that have a second office in Florida or Arizona.  If your company has viable prospects and/or customers in Florida or Arizona, the second location pays off in two ways. Real business growth can be accomplished plus the second office can help the founder of the business spend winter months in a warmer climate, ease into retirement, and deduct at least some of the costs associated with the second location.

But, recently, I was brought in to help a 4 location family owned business with its strategic thinking and implementation planning. During a speech, they had heard me say that “one secret to achieving accelerated growth with sustained profitability™ is to reverse the phrase.” So, they were not surprised when I started our discussion with questions about what drives their profitability.

It didn’t take long to discover what has been draining their profitability.  The four locations!

The Colorado location was selected because one son enjoys skiing. The Florida location was selected because the father enjoys golf. The Manhattan location fed the daughter’s Broadway show and retail therapy habit. The youngest son enjoyed surfing, so you probably have already guessed that their fourth location is in California.  Hey…it could have been Hawaii!

Not to be harsh…but let’s ask the honest question about the real purpose of this family business.  Apparently, the business serves as a mechanism to fund/support preferred lifestyles for members of the immediate family. But once that self serving goal has been met, can the business ever really grow?  It wasn’t surprising to learn that profitability and limited cash flow were chronic recurring problems for them.  Imagine how de-motivating this pattern would be for their employees.  I wondered if this family actually believed that their customers hadn’t picked up on their real motives.

It would take a little while to add more customer-centric thinking to this family owned business, but it is possible.

It is one thing to make sure your family business rewards the hard work of relatives who increase the value of the enterprise on a daily basis. It’s another to make business decisions with little consideration of customers and employees.

Aldonna R. Ambler, CMC, CSP has earned the right to be called THE GROWTH STRATEGIST™. She has won over 2 dozen national and statewide “entrepreneur of the year” awards for the resilient growth of her international businesses across 4 recessions.  Her midsized BtoB service, technology, and distribution clients get on…and then stay on…the published lists of the fastest growing privately held companies. All of her own service businesses (strategic planning, executive advisory, growth financing, radio show, speaking, search) help privately held midsized companies achieve accelerated growth with sustained profitability.™ Ambler is in her 7th year hosting a weekly peer-to-peer-to-peer on line radio program at www.Business.VoiceAmerica.com and www.growthstrategistradioshow.com that features interviews with CEOs/Presidents of midsized companies (typically between $20 and 200 Mil/yr) sharing success tips about the growth strategy-of-the-week. She can be reached toll free at 1-888-Aldonna or at Aldonna@AMBLER.com

The Most Costly Deal is the One that Drags On and On

Even with all of the information available on line, physical presence and being accessible still matter for most service firms. So you’ve concluded that your service firm should expand and become a regional entity with multiple offices.  Should you invest in executive talent for your headquarters and send your sales-oriented employees out into the field to attract new regional accounts? Should you leave your headquarters alone and recruit/hire branch managers who would then hire their own teams?  Should you consider equity deals or franchising to attract more entrepreneurial leaders for the new offices? Should you strike a series of strategic alliances deals with complementary companies that already have visibility in your desired expansion area(s)?  Or should you acquire competitors?

If you got tired just reading that paragraph, slow down and DO NOT start exploring which types of deals will be involved. There are great resources available to help you with the structure and logistics of various deals, but they only pay off once you are centered.

You probably need a bit more market research about the region.  What is the size of that market…REALLY? Who are your best prospects? Where do they live?  What do they read, listen to, and join? Whose advice do they take? Which firms are they currently utilizing? What is the difference between the results your firm achieves? Do you know for sure that the region NEEDS what you have to offer? What is your window of opportunity? How quickly should your expansion be accomplished?

You may end up with a combination of organic growth, acquisitions and equity deals. The best part is…you’ll know why.

Make sure you are good at market research and analysis before you lose yourself in deal making.  My 30+ years has taught me that the negotiation of deals between people who are not centered leads to indecision so the process drags on and on and on.  And those are the most expensive deals.

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