How Will You Scale Your Business and Build Value?Chia-Li Chien, Ph.D., CFP®, PMP®, CPBC
Chia-Li Chien | Apr. 02, 2012
We’re in the Aggregation Age! The Aggregation Age marks the ability of a business to leverage their intellectual property on a scalable platform. The business owns minimum resources with tightly controlled processes over profits, human capital and integrated supply chain, yielding substantial value creation for the owners.
Mr. Gregory J. Tigani, President of Northwest Companies, has deployed a plug-and-play business model since 2008. The Northwest Companies have grown organically an average of 25% annually for the past three years, while most businesses have struggled to survive in tough economic conditions.
The Northwest Companies essentially have been in business since 1984. In 2008, it acquired Northwest Landscape Management Inc. and Northwest Snow Management Inc., then merged them together and implemented their strategies to scale the business and broaden the market and verticals to where things are today. In the first full-year of operations, the company more than tripled the top line revenue from operations and had expanded the service footprint from a 9-state region to over 40 states with operations. Today it operates in 48 states and is continuing to expand its client base nationally.
Northwest Companies service corporations with multiple locations, such as restaurant chains, banks, regional daycare centers, hospitals and utility companies. Most of their customers are Fortune 500 firms. They handle exterior facilities management as well as exterior facilities development and snow management.
Mr. Tigani leverages one of their intellectual properties, a Service Reporting System (SRS), which provides real-time status and reporting to his customers, as well as manages subcontractors in job delivery. At the time of this writing, the Northwest Companies has 32 employees and 1,200 sub-contractors (per 1099 info). Mr. Tigani is projecting to more than double his business by 2015. That means double the number of employees and triple the number of sub-contractors.
A tight control on niche, relationships, cost, risk and processes on a scalable platform allows Mr. Tigani to grow in substantial value without diminishing the capital base. Within this system that scales well, he is able to maintain or even increase the level of performance or efficiency when tested by larger operational demands. (In a corporate sense, a scalable company can maintain or improve profit margins while sales volume increases.)
With a one-year long sales cycle, Mr. Tigani’s sales team has a full pipeline to bring in works beyond their current capacity. Their supply chain is equipped with a streamlined subcontractors vetting process. It allows them to build up top quality inventory to meet their customer contracts. With a three-tier structure for service providers or subcontractors, the better subcontractors perform the more protected stream of income for these small businesses. Each of these small businesses or subcontractors has a minimum of 12 people in their team.
Essentially, Northwest Companies takes care of all the sales and marketing for these subcontractors. This powerful platform not only creates jobs throughout the U.S. but also allows an attractive buying power for any of their supplies such as premium Anti/De-icing Clean Tech products. Not to my surprise, another global player in the industry is currently using the SRS. Absolutely brilliant!!
Mr. Tigani has five children, a cancer survivor and an ex-executive of Jefferies & Company. He relies on his deep roots of M&A leadership experience to successfully scale his business. His wealth of knowledge and experience in measuring business success, its structure and team, has allowed him to create this successful venture in a very short time. As a Business Architect, Mr. Tigani humbly credits his success through active learning in leadership, operations and strategy.
“My goal as the visionary and CEO is to provide sustainability of the organization through the leveraging of systems, technology and skilled management,” said Mr. Tigani. His focus in human capital development creates a solid foundation of management infrastructure, which allows him to scale rapidly.
Leveraging Mr. Tigani’s core competencies, including a good judge of character, trusting his instinct in management, knowing daily cash reserve position and being proactive in actions from Key Performance Indicators truly make him the ultimate solution guy. He has become an expert in the business of substantial VALUE creation (by my definition of more than 5X of current value).
Mr. Tigani recommends three critical success factors for all entrepreneurs:
• Build great customer relationships beyond the current network and consciously diversify your customer base.
• Leverage competencies and dedicated talents or human capital, including employees and subcontractors.
• Control value growth without diminishing capital base.
Just like any other great investor, Mr. Tigani is already planning beyond 2015. His vision is to have more companies like Northwest Companies in his future venture portfolio. With solid customer relations, substantial financial value (from the investors’ point of view) and management infrastructure (from employees/contractors’ perspective), this secret and powerful Triple Bottom Line formula solidly exists on the scalable platform Mr. Tigani has created.
It is not IF— it is WHEN—can a business owner exit profitably in his or her own terms? I want to remind all privately-held owners out there to take a closer look at your own business(es). Regardless of the performance of your Triple Bottom Line formula, you must you look beyond three years into the future. Have you done that yet? If yes, what is your definition of substantial VALUE creation from your business? And can it actually meet or exceed your financial independence expectations? If your business is not built on a scalable platform, then how will you build it in value in order to embark on your NEXT JOURNEY®?