1. Powered by SmartPros Powered by: SmartPros ADP LUNCH & LEARN CPE PROGRAM “Small Business Growth Strategies” Based on a program by: Prof. Bruce R. Barringer, Univ. of Central Florida Adapted for CPE accreditation by SmartPros Ltd. (www.smartpros.com)www.smartpros.com The ADP Logo is a registered trademark of ADP of North America, Inc. Powered by: V.1109a

2. Powered by SmartPros Powered by: SmartPros 2 Agenda Presentation Group Discussion on Review Questions Review of Program Reference Material Review Instructions to Complete Course on ADP’s Accountant Website Today’s Agenda

3. Powered by SmartPros Powered by: SmartPros 3 Overview Preparing for Growth  The Benefits & Obstacles  Opportunities for Growth  Key Factors to Success  Implementing a Business Plan  Helpful Tips Growth Through Internal Development  Advantages & Disadvantages  Growth through: Products & Services Geographic Expansion Growth Through Acquisitions  Advantages & Disadvantages  Focusing on Key Acquisition Targets  Steps of an Acquisition Group Discussion Today we will discuss the key areas of business growth:

4. Powered by SmartPros Powered by: SmartPros 4 Course Objectives Analyze how small businesses can grow successfully Distinguish the relative advantages & disadvantages of growth through internal development and acquisitions Upon successful completion of this segment you should be able to:

5. Powered by SmartPros Powered by: SmartPros 5 I. Preparing for Growth Broader Access to Markets Enhancement of Reputation The Opportunity to Work with Larger Channel Partners Growth Can be Satisfying and Profitable Benefits:

6. Powered by SmartPros Powered by: SmartPros 6 I. Preparing for Growth Raising Additional Capital Recruiting Additional Staff Supervising & Managing a Larger Organization Growth Can Be Difficult and Stressful Obstacles:

7. Powered by SmartPros Powered by: SmartPros 7 I. Preparing for Growth Read Trade Publications & Other Periodicals Attend Industry Trade Shows Network Everywhere You Go Survey the Following:  Customers  Employees  Suppliers Uncovering Opportunities for Growth:

8. Powered by SmartPros Powered by: SmartPros 8 I. Preparing for Growth Technological Forces: Equalized opportunity and competitive advantage Streamlined business operation Innovation - new product and service offerings Socio-cultural Forces: Changes in parenting culture Telecommuting workforce Aging workforce Political Forces: Trade agreements Income tax laws Outsourcing labor to other countries Forces that Provide Opportunities for Growth:

9. Powered by SmartPros Powered by: SmartPros 9 I. Preparing for Growth Create a Business Plan Seek Good Advice Develop a Strategy that is Compatible with the Firm's Strengths & Distinctive Competencies What are the Key Factors to Success?

10. Powered by SmartPros Powered by: SmartPros 10 I. Preparing for Growth Analyze current & future business activities Determine if the growth strategy is realistic Be consistent with the company’s overall mission Be compatible with internal strengths & external opportunities Implementing a Business Plan Forces a Business to:

11. Powered by SmartPros Powered by: SmartPros 11 I. Preparing for Growth Professional Advisors Accountants can provide valuable information to small businesses looking to grow Attorneys can offer many services to help during a period of growth Volunteer Advisors Bankers can often assist in financial matters Non-competitive business owners can provide valuable insight Seek Advice:

12. Powered by SmartPros Powered by: SmartPros 12 I. Preparing for Growth Periodically compare your products & services to others  This helps ensure the quality of internal processes & methods Network with non-competitive businesses to compare & share best practices Duplicate your best practices and Incorporate the best practices of others Benchmark Success:

13. Powered by SmartPros Powered by: SmartPros 13 I. Preparing for Growth- Helpful Tips Try to Avoid Roadblocks: Balance Entrepreneurial Stress Average business owner works 50.8 hours per week Average business owner works in 1.4 different locations Don’t Grow for the Wrong Reasons Bigger is not always better Avoid taking advice with potential ulterior motives

14. Powered by SmartPros Powered by: SmartPros 14 II. Growth Through Internal Development A Small Business Can Grow & Develop Internally by: Developing and/or building new products Extending existing product lines Increasing sales of existing products Expanding to a new location Many businesses, such as Wal-Mart, have grown exclusively through internal development!

15. Powered by SmartPros Powered by: SmartPros 15 II. Growth Through Internal Development Competencies Expertise Technology Employees Internal Growth & Development Relies on a Company’s:

16. Powered by SmartPros Powered by: SmartPros 16 II. Growth Through Internal Development Incremental and even-paced growth Maximum quality control and cost Preservation of organizational culture Encouragement for internal entrepreneurship:  Gives employees a chance to grow within the company  Creates promotional opportunities Advantages of Internal Development Include:

17. Powered by SmartPros Powered by: SmartPros 17 II. Growth Through Internal Development Incremental and even-paced growth may mean slow growth The need to develop new products and/or enhance existing products may increase A capital investment in a failed effort may be difficult to recoup If growth adds to industry capacity, it may force competition, leading to less industry profitability Disadvantages of Growth Through Internal Development:

18. Powered by SmartPros Powered by: SmartPros 18 II. Growth Through Internal Development Increase revenue & sales by improving an existing product or service Increase market penetration Extend product lines by offering new or value-added products and/or services Ways to Grow Businesses Internally Through Products and/or Services:

19. Powered by SmartPros Powered by: SmartPros 19 II. Growth Through Internal Development Ensure the performance at the headquarters location is good Establish the legitimacy of expansion locations  Not all communities represent the same opportunity for growth Understand and acknowledge the following:  Expansion locations may require the same or more attention than headquarters location  Expansion locations may or may not be as profitable as the headquarters location Ways to Grow Businesses Internally Through Geographic Expansion:

20. Powered by SmartPros Powered by: SmartPros 20 III. Growth Through Acquisitions Competitive Elimination Product Line Expansion  Access Proprietary Technology & Technical Expertise Access to Additional Distribution Channels Client Base Expansion  Expanding Geographic Reach Natural Economies of Scale Diversification of Business Risks According to a recent survey on Rapid-Growth, conducted by PricewaterhouseCoopers, 24% of the survey’s participants had recently purchased at least one business, while 48% were planning to acquire another business within the next 3 years. The Advantages of Acquisitions Include:

21. Powered by SmartPros Powered by: SmartPros 21 III. Growth Through Acquisitions The Disadvantages of Acquisitions Include: Incompatibility Top Management  Risk of losing key employees Corporate Cultures Operations and/or Processes Technologies Increased Assumption of Debt  Paying too much for acquired company Business Complexity It is important for a company to find acquisition candidates that they are compatible with and that meet their specific objectives

22. Powered by SmartPros Powered by: SmartPros 22 III. Growth Through Acquisitions Operations in a Growing Industry Proprietary Products & Services Market Positions that are Established Key Third-Party Consent  Bankers & Creditors  Suppliers  Employees  Customers Key Acquisition Targets Should Have:

23. Powered by SmartPros Powered by: SmartPros 23 III. Growth Through Acquisitions 1.Conduct initial negotiations with a target 2.Assess the situation:  When will the target be ready to sell?  How does the target value themselves? 3.Identify & budget sources for funding 4.Obtain all shareholder & third-party consent 5.Make an offer to purchase 6.Negotiate non-compete agreements with key personnel Steps Involved in an Acquisition:

24. Powered by SmartPros Powered by: SmartPros 24 Overview Preparing for Growth  The Benefits & Obstacles  Opportunities for Growth  Key Factors to Success  Implementing a Business Plan  Helpful Tips Growth through Internal Development  Advantages & Disadvantages  Growth through: Products & Services Geographic Expansion Growth through Acquisitions  Advantages & Disadvantages  Focusing on Key Acquisition Targets  Steps of an Acquisition Today we discussed the key areas of business growth:

25. Powered by SmartPros Powered by: SmartPros 25 Discussion Questions 1.Do you think every small business should be interested in growth? If yes, why?

26. Powered by SmartPros Powered by: SmartPros 26 Discussion Questions, continued 2.What role do you, or your firm, play in your client's growth?

27. Powered by SmartPros Powered by: SmartPros 27 Discussion Questions, continued 3.The program points out the problems of "entrepreneurial stress," with small business owners working many hours under a great deal of pressure. To what extent do you observe the signs of stress among your clients?

28. Powered by SmartPros Powered by: SmartPros 28 Discussion Questions, continued 4.The program indicates that external forces can provide opportunities for business growth, such as technological forces, socio-cultural forces, and political forces. How can businesses take advantage of these opportunities?

29. Powered by SmartPros Powered by: SmartPros 29 Discussion Questions, continued 5.Why do you think growth through acquisition is a risky strategy?

30. Powered by SmartPros Powered by: SmartPros 30 Next Steps Review Handout Material for Additional Content Information Review CPE Card Access CPE Certificate by Completing Online Components Through www.accountant.adp.comwww.accountant.adp.com Thank you