What Buyers Really Want: Systems, Stability, and Scalability

Narrator: Welcome to Witham Sounding Board, a podcast sharing powerful business tips, insights and trends for those seeking to become a rock star in their industry.

Teddy Thomas: Hello and welcome back to Witham's CFO Podcast, or C Suites Podcast. I'm your host, Teddy Thomas. I'm part of Witham Altos Accounting and Fractionals here for Practice Line. We support the offices, controllers and CFOs. And if you'd like to know more about what we do and how we support our clients, please go to www.witham.com Oasis. I have the utmost pleasure of welcoming Judith Wilkes today. Judith is the founder and principal consultant at ah, Steadfast Ventures, where she partners with C Suite executives who not only want to survive, but also want to thrive through their company's strategic journey. And these are, uh, in areas of, and not limited to expansion, restructuring or due diligence. Chidi, welcome. How are you?

Judith Wilkes: Thank you. Thank you, Katie, for the opportunity to join you on this wonderful podcast. I am, um, well, thank you very much. I'm excited to be here and have this wonderful conversation with you.

Teddy Thomas: Wonderful, wonderful. And the one part that I miss is just to let the listeners know that we're going to touch on areas including your career path and building enterprise value through operational excellence, which I spend a lot of time looking through your LinkedIn profile and all the cool stuff you've done. So I am m very, very excited to have you here today.

Judith Wilkes: Well, uh, my LinkedIn profile is quite exciting. Sometimes it shocks me what I've already accomplished.

Teddy Thomas: Good, good. Tell us a little bit about your background. What led you to found Steadfast Ventures?

Judith Wilkes: Well, for the majority of my career, which spans over 25 years, I spent it doing work in the high tech and engineering and manufacturing realm, from aviation, where my background is in aeronautical engineering, to working in the power utility Robo robotics area, as well as software development. And I spent it most of the time as a project manager in different capacities in each one of these industries, each one of these types of businesses. And how I came to operations was, in essence, by accident. It took me a while to define what I wanted to do as a, uh, independent consultant. And it literally hit me while putting up holiday decorations three years ago and listening to a news broadcast. And I realized the problems with a, uh, series of businesses and layoffs that we've been experiencing is twofold communication and clarity of direction. And within that 45 second broadcast, Steadfast Ventures was boring.

Teddy Thomas: Uh, and just to expand on that, what type of organizations do you typically work with and what challenges are they Facing when they come to you.

Judith Wilkes: Typically the organizations I mostly work with are those within the high tech and engineering as well as manufacturing. That is my strong suit though I decide to leave myself open to other industries to be more agnostic per se. So to help them out as I will call it, bring a satellite view and bring it down to that business owner's level and communicate with them, um, in their language in order to achieve the growth goals that they're seeking.

Teddy Thomas: Let's talk about stability, this stability premium. So what are uh, typically the red flags investors see when a business is overly reliant on key individuals? And we don't get started with that. I do valuation work sometimes and we, we stress about yeah, this is a business, you have to get yourself out of the business if this, if your end goal is to sell the business. So from your perspective, what are the red flags you typically investors typically see?

Judith Wilkes: Well, there's two of them, One of them owner centric or small number of individuals that know everything. And superstars, if you have an owner centric or a small number of individuals that know everything and documentation is not clearly identified, process, procedures, how they do things actually the essence of the business clearly and it's in the minds of those individuals, we have to hope that they don't get hit by a bus or any other situation happens with them because that knowledge is gone with the superstars. Same situation, they know all the work, they know how to do, it is not documented anywhere. And if they were approached by a competitor or they get bored and decide to leave, all that knowledge walks out the door. And that is a major risk for many middle market businesses as well as larger businesses.

Teddy Thomas: Yeah, you know, it's, it's, it's also analogous to the things that we do here from a business continuity perspective. We have folks that are part of a team and then we cross train them. One is to make sure that the client is always serviced irrespective of someone is on leave, let alone getting run over by boss, getting sick. And we try to talk. That's one of the quality of what makes us different than our competitors. Because we provide the business continuity. Somebody's going to always call in or call out m from work and we need to be able to continuously support the client.

Judith Wilkes: Exactly. And there's not a lot of businesses who use that process that you describe, like they call it the stead or ste depending how you want, how you emphasize it, who is second in command, who's able to have that knowledge, who they can go to to sign off on something. So when everything gets laid into one individual, that's where the bottleneck is. And that is very dangerous.

Teddy Thomas: Yeah. From your perspective, how do companies go about having a structure or start building operational continuity without slowing down growth or without, you know, having just the one person feeling like, oh, I'm going to be replaced, how do they go about that?

Judith Wilkes: Well, when it comes to building some organized situational structure or documentation or however you want to create that continuity, it has to be an organizational conversation. It has to include everyone. Part of either a department, part of the entire company. Everyone needs to feel accountable as well as a contributor. So everyone understands who's doing what, where, when, how and why. And we're not expecting them to develop a 500 page book, you know, manual overnight. This is a progressive thing. It's a living document. Just like the traditional SOPs for the standard operatings. There is the extension. It takes time for it. Things change. And the main thing to focus on is to ensure that those documents that you write, that you compose can grow with you. It not does not just focus on the here and now, but where will you think of seeing yourself 5, 10, 15, 20 years from now when you start from 5 or 10 employees in the beginning as a startup, um, and end up 250 employees later? Because what you do with 5 and 10 cannot work with 2250. So you got to think futuristic. You can't think that far ahead. That's fine, three years where you foresee yourself and that's how to develop it as you go.

Teddy Thomas: It's also a uh, cultural thing from within and how that is impact imputed into, into your, your staff. Let's talk about tribal knowledge trap. It's everywhere, you know.

Judith Wilkes: Yes, it is. Yes it is.

Teddy Thomas: It, it's something many companies struggle with. How do you define it? What is it?

Judith Wilkes: I call it the. This is how we've been doing it. I just know how it's supposed to be. Been doing it this way for umpteen years. Why change? I can go on, um, and on, um, and on, but we do not have the time. That is a mindset. That is a combination of fear, that's a combination of a little bit of insecurity as well as they're stuck in time. What they did then is going to work now. And in this advent time of technology, look how the technological revolution has occurred. When we learned about I'm going to be aging myself real fast. And uh, when we started talking about computers, when computers first started to come out, everyone was frightened. The concept Was, oh my God, we're going to be replaced by the machine. We could even go before that with the industrial revolution. When machines started coming into manufacturing, everyone was thinking they'll be replaced by a machine. Then it was replaced by a computer. Now we're threatened with replaced by AI. It has to be looked at as how can we develop ourselves to adjust, accommodate with the changes of time, not against it, but work with it. And that is where the struggle comes in. It's the fear factor. Got to get through the m. Psychological fears as to what that threat, quote unquote threat happens to be and get through it. Get through those individuals at the staff level, get through it to the ownership level in order to see the broader picture and, and help them get out of that tunnel vision.

Teddy Thomas: Yeah, uh, this is a good point. And, and from an organization perspective, it's, it's on leadership to be able to balance that in terms of okay, how do we want. Have people feel comfortable about this and want to be part of the process and then to the mission critical knowledge is hiding within the organization and how, how do do. How does companies, how is that now? Is it something that is done or for lack of better term, the risk of not addressing this before a transaction or growth phase. Where and when should this be? I think I know what you're going

Judith Wilkes: to say, but earlier the better. Earlier the better because when you wait too long, the reactions you will get will be more harmful to your organization than beneficial. So if you start thinking, hey folks, we're planning of, uh, I'm going to use AI as a perfect example. We hear about the advent of AI, we're going to try and use it within our framework. Start asking, has anybody used it? Has anybody been exposed to it? What are your thoughts? Get them involved in the conversation, Find out how can we integrate it into what we're doing to help us with in specific areas. Now we got to make sure when we use certain things, you're going to have to have those conversations, especially with the technology and advanced technology. What are the guardrails? Because we don't want everybody using it and getting foolish on the, on um, employee level or anybody in the, in the building using it and causing a problem, bringing in viruses, bringing in hacking system, bringing in whatnot. So but start a small, start small. Apply it to a section or a thing that you know is repetitive that everyone dreads doing. Put it on that and see what happens. And then as time goes on, you kind of spread it out a little bit and get people comfortable communication is so important. Communicate with your staff clearly, succinctly, so that everyone hears what is being done, not misinterprets what's going to be happen so they feel comfortable and willing to suggest open dialogue.

Teddy Thomas: Yeah, I totally agree. I totally agree. Uh, if the conversation and communication is done in a way that it's more inclusive for everyone and it's done in a way that people don't feel like, uh, oh, I'm going to get fired when you're going to let go. This is going to replicate my job, it's going to replace me. And I think people will be more open to, to be part of the process.

Judith Wilkes: Exactly.

Teddy Thomas: If you have it.

Judith Wilkes: Exactly. Because if you don't, you know, people are going to start climbing up and they will shut down and be difficult and they will hoard information. They wouldn't want to share it because they want to have it as their leverage so that, oh, okay, so they try to get rid of me. Guess what?

Narrator: Ha.

Judith Wilkes: Uh-huh.

Teddy Thomas: Ha ha, huh, huh. Ha.

Judith Wilkes: I know how this works. And you're going to be in trouble. And I'm not writing it down because exactly what you said. If I write it down or if I share it or if it whatever, I'm going to get replaced.

Teddy Thomas: Yeah, that's true. And thanks for, uh, your detailed answer on that section. Let's talk about operational acceleration. How can SOPs actually accelerate growth and increase enterprise value?

Judith Wilkes: The one thing about the SOPs and those other documentation, it helps create speed through certainty. That's the one phrase I will use. For example, when you have a new hire that comes in, they know exactly what to do on day one. Now, there are some companies who use different methodologies when new hires come in and they may say, oh, you shadow this person for X number of days, but they're still lost. Where is the documentation? You want them to have something of certainty that they know what they can hold on to, refer back to, so that the profitability can start showing up in a short period of time instead of a longer period of time. Especially when you have different classes or different groups of employees. Fresh outs those just grown up, graduated from university or college, they will have the classroom knowledge and those who are experienced, they will normally come in ready to hit the ground running. But there is a way to move around in the business so they want to know what the framework is. The experienced person will know what question to ask versus the fresh out. They need a little more guidance. But nevertheless, having those things clear can help increase the certainty, the confidence and on the business side, profitability. Because the less time you spend with the guesswork, the more profitable they become.

Teddy Thomas: Thanks. If we switch over a little bit to enterprise value and how a uh, key man or owner dependent affect the value of the company with within the company or outside of the company. What does it mean to move from. Ollie, uh, Gibson, Uh, how do you evangelize owners, you know, a company to move from owner dependent model to a ah, more enterprise driven value model because the end goal is really you're trying to maximize the enterprise value.

Judith Wilkes: That's right, that's right, that's right. So sometimes I ask them, um, depending on who the owner is and how the conversation goes. So when was the last time you went on vacation? And I get that. Hold on, got to think about it. It's been the minute, I get the first r, second. Oh, it's that long, right. Who do you not trust? Who do you have in your organization that you can trust to stand in your spot while you get some rest? So they need to start setting up a system, getting out of their head so they can go to Tahiti for three weeks and only be called if you so dare if something detrimental happens. But leave a uh, level of assurance that it's handled and everything continues smoothly so that when you come back, when the owner comes back from that wonderful relaxed vacation, he can walk into the room, walk into his back building and not be knocked over with this problem, that problem, this problem, that problem, that problem. It's like everything is smooth sailing. Or we had this one little issue, but it got settled in a short period of time. Or better yet, he doesn't need to know the issue. But when it's owner centric, they never rest. Everything has to go through them and they are the bottleneck. So if they go away on vacation or take a uh, long weekend, the rest of the business comes to a standstill. So they need to one, be confident enough to release the reins to someone in their organization who is trusted and has the skill set to do what they need to do and let them relax so they can work in their genius.

Teddy Thomas: That's good, that's a good point. So let me ask you, how do you get them to actually take that vacation?

Judith Wilkes: We don't have enough time. We don't have enough time. In short, I sometimes use myself, just one thing I did not touch on sometimes I say, listen, what you need is a fractional COO such as myself. I'm going to do a shameless plug right now. A fractional COO who Basically can take the reins, take that weight, interest me to handle what needs to be done. As long as I know what division the mission is clear from the owner, I can take on um, the reins, do the so called mundane everyday work and let them focus at the thing they're really good at. Many owners are doing everything every and there's certain things, you know, you have your super strengths and the others you are average or below average. But you got to do it because for some reason you feel if you don't do it it will never get done. The question to ask is what is the talent you have in your organization. You never investigate the talent of your organization. You never know who can do the social media one. Well, we got someone who loves doing social media, but you won't know that if you don't ask.

Teddy Thomas: Right.

Judith Wilkes: Yeah, there it is. And it gets done.

Teddy Thomas: Yeah, yeah, that's, that's, yeah, that's a very good point. The fractional what before now the CEO, cfo, it's a new thing. Well it's not quite, it's just a fascinating. People have been doing this for a long time but I think, I think how just the business sector is moving towards uh, a more reliance and consultant and the things that you and I do. And I think there is a lot of benefits to talking to someone like you especially if someone is looking to have the help with operational success and process driven just getting them ready to sell. Because I mean I think the end goal for most of the companies is they're not going ipo. It's an exit through eminent and they need to be ready, they need to be talking to folks like, you know.

Judith Wilkes: Exactly, exactly. And the one thing though, some folks think that I'm just here to help them. Oh to get their business ready to sell. That is the end goal. After if you're in it 20 plus years, you do want to retire. You want either retire to sell it or prepare the succession plan for the next generation to take over. So you want to make sure everything is aligned in such a way that when you do that transition it can be done. Now on the other end of the spectrum, the more younger businesses, the ones who finally are still in startup mode or coming out of startup mode, you want to make sure on that end that all your documents are in a row. Because for in the technology industry for example, which is always rapid growth, they will start with five people. Three. Three to five people. And before you know they explode to 50 and before you know they explode to 100 and 200. Very rapidly. And what you do with five people you can't do with 250. So having those, those documents in line can help them with growing to keep their vision, to keep their focus, to keep where they want to go. Not only in the development of the technology or the software or the hardware or whatever that product they're trying to make, but in order to sustain who they are. Because you never know 10 years down the line, 5 years down the line, 15 years down the line, all of a sudden you have a, uh, God forbid I shouldn't say that. But you know, you got a Google come and want to buy you, you got a Microsoft who wants to buy you, you got a Boeing notice, you got something, they want to buy your stuff. Are you ready to sell? Can they understand who you are? The essence, not only there's the product, but how you operate. So they could integrate who you are into their business, into their culture, into everything that who you are. Because that's usually gets lost in those mergers and acquisitions. That's what gets lost. And then the communication style has to be clear. Why? Who's the first person you think going to leave the company when they don't hear, they hear the rumors of a sale, the rumors of a takeover or an acquisition. The top talent is the first ones running out the door screaming, yeah, and your valuation just dropped this job.

Teddy Thomas: Yeah, that's right. So communication is the key. I don't think you answered or ask, I don't think I asked you about. Those are common mistakes companies make when trying to implement operational processes. You may have answered some of it, but feel free to bank most of

Judith Wilkes: the times they make it too complicated. Now having been a full time employee in corporate and I also worked as a consultant, we all know those manuals are not entertaining, the great bedtime stories to take with you to go to bed. But at the same time they make them so regimented and complicated that it is hard for the average employee to digest. So what I personally believe is best to have two level types of documentation. One that's more legalistic for the administrative level so that for audits and whatnot, and the exact same type of information but a little more broader or maybe a little more detailed, that's more layman language, if I can use that term for the staff so they can understand it and digest it and get clarity of how they need to function. The more complicated it is, the more resistance you will receive and they will not read it. They will skim it and forget it within a matter of seconds.

Teddy Thomas: Agreed. All Right. So I. Closing remarks. Yeah. I have another good question for you. If you could give one piece of advice to a CEO preparing for growth or future exit, what would it be?

Judith Wilkes: The one thing I learned from my fellow M and A colleagues, and that's mergers and acquisitions. And just to define it clearly, is to build your company like you're going to sell it tomorrow. Even if you want to keep it forever despite it all, you want to build it as if. If anything happens to you, the owner, it can go on and it could be sold tomorrow as is, but it will continue to succeed. The legacy of who you are and the legacy of your business, being ready to sell will be easier to run versus one that looks like a project.

Narrator: Yeah.

Teddy Thomas: Uh, totally agreed. Totally agreed. Well, uh, that is all the questions I have for Judy. I wanna. I wanna thank her for her time, for coming on, for spending time with me. I wanna encourage listeners to check out a WYTHM podcast. It's through our website and you should be able to find it again. I'm your host, Cody Thomas. I am part of Witham's outsourced, uh, accounting and fractional CFO. We support the offices, controllers and CFOs. If you'd like to know more about what we do and we support our clients, please go to witham.com Oasis thank you very much again, Judy. It was a pleasure.

Judith Wilkes: Thank you very much. It was a pleasure being here. I, uh, look forward to meeting up with you again.

Teddy Thomas: Yes, absolutely. Yes, absolutely. Thank you.

Narrator: Thanks for joining us. Be sure to subscribe to our podcast so you'll be first in line to hear what's coming next. Don't want to wait for our next episode? Check us out@witham.com that's w I t h u m m dot com.