Business process improvement: Finding the right approach to organizational change

Read this if you are a business owner or an advisor to business owners.

In times of uncertainty, exit planning can be a strong reason to focus on the opportunity in front of you. Instead of waiting for conditions to improve, business owners are often best served by staying active, involved, and focusing their efforts on improving their business. Consider what opportunities you can take advantage of and be ready to succeed when the climate improves.

Assessing risks and strengthening operations

In periods of uncertainty, the landscape shifts—revealing weaknesses, threats, and hidden hazards. How these challenges are navigated can shape long-term outcomes. Will this moment be used to identify, assess, and address these risks? 

It is important to view challenging times in the context of a larger, long-term perspective. It presents the perfect opportunity to focus on building resiliency, redundancy, and strength. Unsettled times allow business owners to discover and understand: 

• What broke first and why? 
• How can you shore it up for better operations in the days ahead?
• What weak spots you didn’t know about are now apparent?
• How can you address those weaknesses?
• How can you leverage existing resources differently to chart a path forward?

Models of priority: The progress of a business

There are various stages or hierarchies of priority in thinking about the progress of a business. Each priority model features bases and pinnacles. The pinnacles of each model are realized in a long-term setting, after the remaining bases have been solidified. While continued development of a clear vision for your business is paramount, dynamic shifts in the landscape call for reassessment of the bases. In the long-term, self-fulfillment manifests from properly executed strategy, but in the near- and mid-term, these various frameworks force strategic planning back to assess and address the base components.  

The bases of each model should serve as safe havens for reversion. When facing uncertainty and failure, have you made your base strong enough to redirect your efforts into an actionable plan for the long-term? 

Action Planning Pyramid and Value Maturity Index

The Value Maturity Index, broken into five stages, is a stepwise assessment of active exit and business strategy. Inherent in the value acceleration framework are the concepts of resiliency, redundancy, disaster recovery, and actionable planning. 

While we may have been fully entrenched in the build phase, setbacks due to dynamic changes in the landscape force us back to protect mode—the assessment and methodical shoring up of weaker points of the operation to protect against future downside risks.

Though this stepwise progression is linear in nature, flexibility and adaptability are paramount in changing course to address the needs of your current state. 

When we look at action planning, parallels can be drawn to the various models. Certainly, we are focused on continuing sales, marketing, and customer relationships, but it becomes a question of reversion to meeting the basic needs and serving a client’s pain points rather than beginning ground-breaking efforts.  

An uncertain climate forces us to the base, where the focus is on solidifying any exposed areas that have emerged, and likely compounded, by the current challenges. Concerns related to management, metrics, core values, and priorities are the bases in need of coverage. 

Maslow’s Hierarchy of Needs
 

Maslow’s Hierarchy of Needs¹ is a well-known motivational theory in psychology that comprises a five-tiered model of human needs, whereby each successive tier must be fulfilled (beginning at the base) before rising to the next tier. It can be used to view similar information from a psychological perspective.

Value acceleration and creating successful outcomes are largely tied to a clear long-term vision. We typically reside in the self-actualization level of the hierarchy of needs when undertaking the high-level view of the framework.

In periods of uncertainty, the emphasis is on adaptability, so there will be less concern with the top levels. Those levels remain available but are not the pressing issue of the moment. If we think about shoring up bases (the protect stage) when viewing this psychological model, our focus is on the “basic needs” level. That is, keeping people (i.e., self, family, and employees) safe and remaining connected for immediate continuity.

McKinsey & Company Event Horizons

Many others in related fields view uncertain times in similar terms. In the McKinsey & Company Events Horizon view²:

• Resolve addresses those immediate hurdles and challenges a business is currently facing.
• Resilience focuses on near-term items to be addressed once the initial base is covered. 
• Return views the mid-term horizon in understanding how to return to scale by focusing on understanding metrics and increasing the frequency of measurements for informed decision-making. 
• Reimagination and reform typically go hand in hand, but without covering bases of needs, crafting a dynamic shift in operations to incorporate new environments may be counterproductive. 

Once these bases have been clearly assessed and addressed, the path forward may appear dramatically different. This is when creative solutions to enhance opportunity should begin to take shape. Examples may include newly emerged revenue streams and opportunities, fully integrated systems and dashboards to capture timely decision-making data points, or strategic pivots in your business model to improve navigation in changing environments. 

Discover and control in uncertain times

Consider what the period of uncertainty has revealed and ask yourself: 

• What existing challenges became more apparent?  
• How can these areas be addressed? 
• Is this the time to make large investments in the company or the right investments? 

Taking stock of your company’s future through the incorporation of lessons learned will bolster value in the long-term by de-risking and developing new opportunities, methods, work, shifts in productivity, and shifts in mentality. That approach also brings lots of questions: 

• If there are no early warning signs, why not?  
• What should your indicators be?  
• What metrics are crucial in identifying the pulse of your current situation?  
• What is your business reliant on?  
• How can you build information and indicators for rapid shifts in decision-making?  
• How strong are your current controls and how integrated are your management and information systems? 

To answer these questions, you need to quantify and develop metrics that will aid in the early identification of future challenges, thus increasing your responsiveness with data-driven decision mechanisms. Having your fingers on the pulse of your company and understanding the impact of each input on your strategy will focus your attention on the information that matters most. This allows you to understand, position, and adapt to changes in your business and community environment in a proactive and agile manner. Measurements, forecasts, and dashboards should provide you with regular, valid, and relevant information you can use to take informed action in decision-making. 

The importance of look-backs

Historical look-backs during various points of time will allow you to key in on pivotal data indicators and inflection points. When looking at this from an operational view, industry and economic factors impacting your company can serve as corroborating pieces of evidence to further support data metrics analyzed.

• It's best practice to regularly study and update development, pipeline, and reliance metrics for feedback and information discovery with data integrated throughout your operations. This helps avoid lag time in reporting on stale information towards real-time actionable data points.  
• Each metric is specific to your business and can be directly mapped back to increases in shareholder value. Understanding these business value drivers will focus your attention and intention on improving in the right areas, while avoiding distracting and less impactful pain points. 
• Instead of focusing on precision, build in flexibility and adaptability with scenario- and sensitivity-based criteria to understand changes, implications, and reliance of each input. Understanding these relationships in a broader scheme aids you in quick, impactful decision-making, guiding you toward enhanced value. 

Remaining resilient in challenging times 

This approach allows an opportunity to fully assess the known and unknown problem areas, weaknesses, perils, and hazards your business may be facing. From that base, you can begin to address these issues to scale effectively with lower overall risk when activity picks up. 

Management metrics, core values, and priorities drive resilience for long-term continuity by shoring up the foundation to build for the future. Assembling evidence in troubled times provides an opportunity to capitalize on and fulfill core values. Documenting these decisions and improvements memorializes your decision-making and impact on value enhancement, and serves as a playbook for future events. 

What you make of difficult periods through identification, assessment, and addressing newly emerged risk areas provides the opportunity to increase success as the climate rebounds.

Key takeaways

• Stay active during uncertainty: Improve the business now rather than waiting for conditions to recover. 
• Identify and mitigate newly exposed risks: Examine what broke first, what weak spots surfaced, and how to shore up operations. 
• Reinforce the “base” of the business: Prioritize management practices, core values, metrics, controls, and near-term continuity. 
• Measure what matters more often: Build timely dashboards, forecasts, and early-warning indicators to support faster, data-driven decisions. 
• Document lessons learned and improvements: Create a repeatable playbook that reduces future downside risk and supports long-term value. 

BerryDunn can help 

Our credentialed business valuation specialists bring clarity to the complexities of valuation while adhering to strict development and reporting standards. Through our assessments, risk profiling, and benchmarking analyses, we help business owners discover the largest gaps across the company, prioritize the most impactful problem areas to address, and implement changes to enhance business value through continuous improvement. We render an independent, objective opinion of your company’s value in a reporting format tailored to meet your needs. If you have questions about your unique situation, or would like more information, please contact the business valuation consulting team.

¹Maslow’s Hierarchy of Needs, Saul McLeod, updated March 20, 2020. SimplyPsychology. www.simplypsychology.org/maslow.html.
²Beyond coronavirus: The path to the next normal, Kevin Sneader and Shubham Singhal, McKinsey & Company, March 23, 2020.  www.mckinsey.com/industries/healthcare-systems-and-services/our-insights/beyond-coronavirus-the-path-to-the-next-normal. COVID-19: Briefing note, March 30, 2020, Our latest perspectives on the coronavirus pandemic. Matt Craven, Mihir Mysore, Shubham Singhal, Sven Smit, and Matt Wilson. McKinsey & Company. www.mckinsey.com/business-functions/risk/our-insights/covid-19-implications-for-business.

Read this if you are a business owner or an advisor to business owners.

This article is part two of a three-part series. 

With continued uncertainty in the business environment—driven by shifting economic conditions, market volatility, and evolving tax policy—now may be a good time to utilize trust, gift, and estate strategies in the transfer of privately held business interests. Periods of uncertainty can create an opportunity to free up considerable portions of lifetime gift and estate tax exemption amounts through transfers, particularly as uncertainty and increased risk serve to reduce business valuations. 

An element to consider is the ability to transfer noncontrolling interests in a business. These interests are potentially subject to discounts for lack of control and lack of marketability. This may further reduce the overall value transferred through a given strategy, potentially offloading a larger percentage of ownership in a business while retaining large portions of the gift and estate lifetime exemption. Part one of this series focused on the discount for lack of control. For part two, we'll focus on the discount for lack of marketability. 

Discount for lack of marketability

In the context of a hypothetical willing buyer and willing seller, the buyer may place a greater value on an ownership interest in an investment that is “marketable.” Marketable investments can be bought and sold easily and offer the ability to extract liquidity compared to an interest where transferability and marketability are limited. 

Simply put, buyers would rather own investments they can sell easily and will pay less for the investment if it lacks this ability. Noncontrolling interests in private businesses lack marketability—few people are interested in investing in a business where control rests in someone else’s hands. Discounts for lack of control commonly reduce the value of the transferred interest by 5% to 15%, while discounts for lack of marketability can drop the value of the business by 25% to 35%. 

Market-based evidence of proxies for discounts for lack of marketability can be found within the following resources, studies, and methods (including but not limited to): 

• Various restricted stock studies 
• The Quantitative Marketability Discount Model (QMDM) developed by Z. Christopher Mercer 
• Various pre-initial public offering studies 
• Option pricing models 
• Other discounted cash flow models 

In addition to these resources, to fully assess the degree of discount applicable to a subject interest, consider company-specific factors when estimating the discount for lack of marketability. The degree of marketability is dependent upon a wide range of factors, such as the payment of dividends, the existence of a pool of prospective buyers, the size of the interest, any restrictions on transfer, and other factors. 

Assessing discount for lack of marketability

To establish a comprehensive view on the applicable degree of discount, here are more things to consider. In a ruling on the case Mandelbaum v. Commissioner¹, Judge David Laro outlined the primary company-specific factors affecting the discount for lack of marketability, including:

1. Restrictions on transferability and withdrawal
2. Financial statement analysis
3. Dividend policy
4. The size and nature of the interest
5. Management decisions
6. Amount of control in the transferred shares

Business owners are knowledgeable of the facts and circumstances surrounding a business interest. They take a close look at what they are buying before they make an offer. Like most owners, they prefer investments they can readily convert into cash and are generally not willing to pay the pro-rata value for a minority interest in a business that lacks marketability. To assess an appropriate discount for lack of marketability, consider resources such as those referred to above, then ensure selected discounts are appropriate based on the factors specific to the company and interest being valued. 

Key takeaways

• Use periods of uncertainty to consider trust, gift, and estate strategies for transferring privately held business interests.  
• Recognize that noncontrolling interests may qualify for discounts for lack of marketability, reducing reported transfer value.  
• Expect marketability discounts to be materially larger than control discounts in many cases, potentially reducing value by roughly 25% to 35%. 
• Reference market-based studies and valuation models when estimating the discount. 
• Evaluate company-specific factors when determining the discount. 

BerryDunn can help 

Our credentialed business valuation specialists bring clarity to the complexities of valuation while adhering to strict development and reporting standards. We render an independent, objective opinion of your company’s value in a reporting format tailored to meet your needs. If you have questions about your unique situation, or would like more information, please contact the business valuation consulting team. 

¹Mandelbaum v. Commissioner, T.C. Memo 1995-255 (June 13, 1995).

Read this if you are a business owner or an advisor to business owners.

This article is part one of a three-part series. 

With continued uncertainty in the business environment—driven by shifting economic conditions, market volatility, and evolving tax policy—now may be a good time to utilize trust, gift, and estate strategies in the transfer of privately held business interests. Periods of uncertainty can create an opportunity to free up considerable portions of lifetime gift and estate tax exemption amounts through transfers, particularly as uncertainty and increased risk serve to reduce business valuations.  

An element to consider is the ability to transfer noncontrolling interests in a business. These interests are potentially subject to Discounts for Lack of Control (DLOC) and lack of marketability. This may further reduce the overall value transferred through a given strategy, potentially offloading a larger percentage of ownership in a business while retaining large portions of the gift and estate lifetime exemption. For the first part of this series, we’ll focus on the DLOC.

What is discount for lack of control?

In the context of a hypothetical willing buyer and willing seller, the buyer may place a greater value on an ownership interest with the ability to make changes at their discretion, compared to an alternative ownership interest lacking control. Simply put, buyers like to be in control, and they will pay less for the investment if the interest lacks these characteristics.  

When valuing noncontrolling business interests, there is an inherent discount to full value recognized to reflect the fact that the subject interest does not hold a controlling position. As a result of this discount, the value of a noncontrolling interest in a company will differ from the pro-rata value per share of the entire company. DLOCs alone commonly reduce the value of the transferred interest by 5% to 15%. 

All else being equal, a noncontrolling ownership position is less desirable (valuable) than a controlling position. This is because of the majority owner’s right to control any or all of the following activities:

• Managing the assets or selecting agents for this purpose 
• Controlling major business decisions, asset allocation choices, setting salary levels, admitting new investors, acquiring assets, selling the company, and declaring/paying distributions

Market-based evidence of proxies for DLOCs can be found within the following subscription-based databases, including but not limited to: 

• Control premium studies published in the Mergerstat^® Review series by FactSet Mergerstat/Business Valuation Resources
• Closed-end fund data
• The Partnership Profiles, Inc. Minority Interest Database and Executive Summary Report on Re-Sale Discounts for applicable entity types

In addition to these resources, to fully assess the degree of discount applicable to a subject interest, consider company-specific factors when estimating the DLOC. The degree of control for a subject interest may be impacted by relevant state statutes and the governing documents of the subject company. These factors are analyzed in conjunction with the current operational and financial policies established and implemented in practice by management to establish a comprehensive view on the applicable degree of discount.

Hypothetical business owners are knowledgeable of the facts and circumstances surrounding a business interest. They take a close look at what they are buying before they make an offer. Like most owners, they prefer to be in control and are generally unwilling to pay the pro-rata value for a minority interest in a business that lacks control. To assess an appropriate discount for lack of control, consider resources such as those referred to above, then ensure the selected discounts are appropriate based on the factors specific to the company and interest being valued. 

Key takeaways

• Use periods of uncertainty to consider trust, gift, and estate strategies for transferring privately held business interests. 
• Recognize that noncontrolling interests may qualify for discounts for lack of control, reducing reported transfer value. 
• Define a DLOC as the price reduction buyers apply when an ownership stake cannot influence decisions or change operations. 
• Expect DLOCs alone to commonly reduce transferred-interest value by 5%–15%, making minority value differ from pro‑rata value. 
• Support a DLOC with market evidence (control premium studies, closed-end fund data, minority interest databases) and company-specific factors (state statutes, governing documents, operating policies). 

BerryDunn can help 

BerryDunn’s credentialed business valuation specialists bring clarity to the complexities of valuation while adhering to strict development and reporting standards. We render an independent, objective opinion of your company’s value in a reporting format tailored to meet your needs. If you have questions about your unique situation, or would like more information, please contact the business valuation consulting team. 

In a closely held business, ownership always means far more than business value. Valuing your business will put a dollar figure on your business (and with any luck, it might even be accurate!). However, ownership of a business is about much more than the “number.” To many of our clients, ownership is about identity, personal fulfillment, developing a legacy, funding their lifestyle, and much more. What does business ownership mean to you? In our final article in this series, we are going to look at questions around what ownership means to different people, explore how to increase business value and liquidity, and discuss the decision of whether to grow your business or exit—and which liquidity options are available for each path. 

While it may seem counterintuitive, we find that it is best to delay the decision to grow or exit until the very end of the value acceleration process. After identifying and implementing business improvement and de-risking projects in the Discover stage and the Prepare stage (see below), people may find themselves more open to the idea of keeping their business and using that business to build liquidity while they explore other options. 

Once people have completed the Discover and Prepare stages and are ready to decide whether to exit or grow their business, we frame the conversation around personal and business readiness. Many personal readiness factors relate to what ownership means to each client. In this process, clients ask themselves the following questions:

• Am I ready to not be in charge?
• Am I ready to not be identified as the business?
• Do I have a plan for what comes next?
• Do I have the resources to fund what’s next? 
• Have I communicated my plan?

On the business end, readiness topics include the following:

• Is the team in place to carry on without me?
• Do all employees know their role?
• Does the team know the strategic plan?
• Have we minimized risk? 
• Have I communicated my plan?

Whether you choose to grow your business or exit it, you have various liquidity options to choose from. Liquidity options if you keep your business include 401(k) profit sharing, distributions, bonuses, and dividend recapitalization. Alternatively, liquidity options if you choose to exit your business include selling to strategic buyers, ESOPs, private equity firms, management, or family. 

When it comes to liquidity, there are several other topics clients are curious about. One of these topics is the use of earn-outs in the sale of a business. In an earn-out, a portion of the price of the business is suspended, contingent on business performance. The “short and sweet” on this topic is that we typically find them to be most effective over a two- to three-year time period. When selecting a metric to base the earn-out on (such as revenue, profit, or customer retention), consider what is in your control. Will the new owner change the capital structure or cost structure in a way that reduces income? Further, if the planned liquidity event involves merging your company into another company, specify how costs will be allocated for earn-out purposes. 

Rollover equity (receiving equity in the acquiring company as part of the deal structure) and the use of warrants/synthetic equity (incentives tied to increases in stock price) is another area in which we receive many questions from clients. Some key considerations:

• Make sure you know how you will turn your rollover equity into cash.
• Understand potential dilution of your rollover equity if the acquiring company continues to acquire other targets. 
• Make sure the percentage of equity relative to total deal consideration is reasonable.
• Seller financing typically has lower interest rates and favorable terms, so warrants are often attached to compensate the seller. 
• Warrants are subject to capital gains tax while synthetic equity is typically ordinary income. As a result, warrants often have lower tax consequences.
• Synthetic equity may work well for long-term incentive plans and for management buyouts. 

We have found that through the value acceleration process, clients are able to increase business value and liquidity, giving them control over how they spend their time and resources.

If you are interested in learning more about value acceleration, please contact the business valuation services team. We would be happy to meet with you, answer any questions you may have, and provide you with information on upcoming value acceleration presentations. 

What are the top three areas of improvement right now for your business? In this third article of our series, we will focus on how to increase business value by aligning values, decreasing risk, and improving what we call the “four C’s”: human capital, structural capital, social capital, and consumer capital.

To back up for a minute, value acceleration is the process of helping clients increase the value of their business and build liquidity into their lives. Previously, we looked at the Discover stage, in which business owners take inventory of their personal, financial, and business goals and assemble information into a prioritized action plan. Here, we are going to focus on the Prepare stage of the value acceleration process.

Aligning values may sound like an abstract concept, but it has a real world impact on business performance and profitability. For example, if a business has multiple owners with different future plans, the company can be pulled in two competing directions. Another example of poor alignment would be if a shareholder’s business plans (such as expanding the asset base to drive revenue) compete with personal plans (such as pulling money out of the business to fund retirement). Friction creates problems. The first step in the Prepare stage is therefore to reduce friction by aligning values.

Reducing risk

Personal risk creates business risk, and business risk creates personal risk. For example, if a business owner suddenly needs cash to fund unexpected medical bills, planned business expansion may be delayed to provide liquidity to the owner. If a key employee unexpectedly quits, the business owner may have to carve time away from their personal life to juggle new responsibilities. 

Business owners should therefore seek to reduce risk in their personal lives, (e.g., life insurance, use of wills, time management planning) and in their business, (e.g., employee contracts, customer contracts, supplier and customer diversification).

Intangible value and the four C's

Now more than ever, the value of a business is driven by intangible value rather than tangible asset value. One study found that intangible asset value made up 87% of S&P 500 market value in 2015 (up from 17% in 1975). Therefore, we look at how to increase business value by increasing intangible asset value and, specifically, the four C’s of intangible asset value: human capital, structural capital, social capital, and consumer capital. 

Here are two ways you can increase intangible asset value. First of all, do a cost-benefit analysis before implementing any strategies to boost intangible asset value. Second, to avoid employee burnout, break planned improvements into 90-day increments with specific targets.

At BerryDunn, we often diagram company performance on the underlying drivers of the 4 C’s (below). We use this tool to identify and assess the areas for greatest potential improvements:

By aligning values, decreasing risk, and improving the four C’s, business owners can achieve a spike in cash flow and business value, and obtain liquidity to fund their plans outside of their business.

If you are interested in learning more about value acceleration, please contact the business valuation services team. We would be happy to meet with you, answer any questions you may have, and provide you with information on upcoming value acceleration presentations.

We’ve all heard stories about organizations spending thousands on software projects, such as Enterprise Resource Planning (ERP), Electronic Health Record (EHR), or Student Information Systems (SIS) that take longer than expected to implement and exceed original budgets. One of the reasons this occurs is that organizations often don’t realize that purchasing a large, Commercial Off-The-Shelf (COTS) enterprise system is a significant undertaking. If the needs aren’t sufficiently defined, there can be many roadblocks, including implementation delays, increased cost, scope creep, and ultimately, unsatisfactory results (delayed or unfinished projects and cost overruns).

These systems are complex, and implementation efforts impact both internal and external stakeholders. Procurement often requires participation from different departments, each with unique goals and perspectives. Ignore these perspectives at your own peril. Here are key questions to consider for making the best buying decision:

1. Should we purchase software that similar organizations have purchased?
   As vendor consolidation has diminished the number of distinct COTS systems available, this question is increasingly common. Following this approach is similar to deciding to buy the car that your neighbor did, because they seem satisfied. How can you be sure that the systems purchased by similar organizations will meet your needs, particularly if your needs are undefined? One way to identify your organization’s needs—and to avoid costly mistakes down the road—is to identify requirements during the procurement process.

2. What are the functional and technical requirements of the system?Requirements are details that help describe a software system. There are two types of requirements and you need to understand and review both:
   
   Functional requirements. These define specific functions of a system to meet day-to-day needs of an organization or department. They describe the necessary system capabilities that allow users to perform their jobs. For example, “The vendor file must provide a minimum of four (4) remit-to addresses.” Functional requirements may also define the mandated state or federal capabilities required of a system, such as the ability to produce W-2 or 1099 forms.
   
   Technical requirements. These requirements identify criteria used to judge the operation of a system, rather than specific behaviors. They can be requirements that define what database the system must support. For example, “The system must support use of the client preferred database.” They may also describe security capabilities of the system, the ability to import or export data, or the ease of use and overall end-user interface.

3. Who should help define and document requirements for the new enterprise system?
   
   When it comes to documenting and revising requirements, work with your IT staff; incorporating technology standards into a set of requirements is a best practice. Yet it is also necessary to seek input from non-IT individuals, or business process owners from multiple departments, those who will use and/or be affected by the new software system.
   
   Help these individuals or groups understand the capabilities of modern software systems by having them visit the sites of other organizations, or attend software industry conferences. You should also have them document the current system’s deficiencies. As for those in your organization who want to keep the current system, encourage their buy-in by asking them to highlight the system’s most valuable capabilities. Perspectives from both new system supporters and those not so eager to change will help build the best system.
    
4. When do you revise enterprise system requirements? 
   It is always important to begin the software procurement process with a documented set of requirements; you need them to identify the best solution. The same goes for the implementation process where vendors use the requirements to guide the setup and configuration of the new system. But be prepared to revise and enhance requirements when a vendor solution offers an improved capability or a better method to achieve the results. The best way to approach it is to plan to revise requirements constantly. This enables the software to better meet current needs, and often delivers enhanced capabilities.

Be sure to document system requirements for an efficient process

There may be thousands of requirements for an enterprise system. To make the procurement process as efficient as possible, continually define and refine requirements. While this takes time and resources, there are clear benefits:

• Having requirements defined in an RFP helps vendors match the capabilities of their software systems to your organization’s needs and functional expectations. Without requirements, the software procurement and selection process has little framework, and from a vendor perspective becomes a subjective process — making it hard to get consistent information from all vendors.
• Requirements help determine specific tasks and activities to address during the implementation process. While applications can’t always meet 100% of the requested functionalities, it’s important to emphasize the requirements that are most important to users, to help find the system that best meets the needs of your organization.
• Requirements prove valuable even after implementation has begun, as they can help you test your system to make sure the software meets your organization’s particular needs before production use of the new system.

Our experienced consultants have led many software procurement projects and have firsthand knowledge about the challenges and opportunities associated with purchasing and implementing systems large and small. BerryDunn maintains an active database of requirements that we continually enhance, based on work performed for various clients and on technological advancements in the marketplace. Please contact us and we can help you define your requirements for large software system purchases.

There’s a good chance that your organization is in the position of needing to do more with less under the strain of staffing constraints and competing initiatives. With fewer resources to work with, you’ll need to be persuasive to get the green light on new enterprise technology initiatives. To do that, you need to present decision makers with well-thought-out and targeted business cases that show your initiative will have impact and will be successful. Yet developing such a business case is no walk in the park. Perhaps because our firm has its roots in New England, we sometimes compare this process to leading a hiking trip into the woods—into the wild. 

Just as in hiking, success in developing a business case for a new initiative boils down to planning, preparation, and applying a few key concepts we’ve learned from our travels. 

Consensus is critical when planning new technology initiatives

Before you can start the hike, everyone has to agree on some fundamentals: 

Who's going? 

Where are we going? 

When do we go and for how long? 

Getting everyone to agree requires clear communication and, yes, even a little salesmanship: “Trust me. The bears aren’t bad this time of year.” The same principle applies in proposing new technology initiatives; making sure everyone has bought into the basic framework of the initiative is critical to success.

Although many hiking trips involve groups of people similar in age, ability, and whereabouts, for your business initiative you need to communicate with diverse groups of colleagues at every level of the organization. Gaining consensus among people who bring a wide variety of skills and perspectives to the project can be complex.

To gain consensus, consider the intended audiences of your message and target the content to what will work for them. It should provide enough information for executive-level stakeholders to quickly understand the initiative and the path forward. It should give people responsible for implementation or who will provide specific skills substantive information to implement the plan. And remember: one of the most common reasons projects struggle to meet their stated objectives (and why some projects never materialize to begin with), is a lack of sponsorship and buy-in. The goal of a business case is to gain buy-in before project initiation, so your sponsors will actively support the project during implementation. 

Set clear goals for your enterprise technology project 

It’s refreshing to take the first steps, to feel that initial sense of freedom as you set off down the trail. Yet few people truly enjoy wandering around aimlessly in the wilderness for an extended period of time. Hikers need goals, like reaching a mountain peak or seeing famous landmarks, or hiking a predetermined number of miles per day. And having a trail guide is key in meeting those goals. 

For a new initiative, clearly define goals and objectives, as well as pain points your organization wishes to address. This is critical to ensuring that the project’s sponsors and implementation team are all on the same page. Identifying specific benefits of completing your initiative can help people keep their “eyes on the prize” when the project feels like an uphill climb.

Timelines provide additional detail and direction—and demonstrate to decision makers that you have considered multiple facets of the project, including any constraints, resource limitations, or scheduling conflicts. Identifying best practices to incorporate throughout the initiative enhances the value of a business case proposition, and positions the organization for success. By leveraging lessons learned on previous projects, and planning for and mitigating risk, the organization will begin to clear the path for a successful endeavor. 

Don’t compromise on the right equipment

Hiking can be an expensive, time-consuming hobby. While the quality of your equipment and the accuracy of your maps are crucial, you can do things with limited resources if you’re careful. Taking the time to research and purchase the right equipment, (like the right hiking boots), keeps your fun expedition from becoming a tortuous slog. 

Similarly, in developing a business case for a new initiative, you need to make sure that you identify the right resources in the right areas. We all live with resource constraints of one sort or another. The process of identifying resources, particularly for funding and staffing the project, will lead to fewer surprises down the path. As many government employees know all too well, it is better to be thorough in the budget planning process than to return to authorizing sources for additional funding while midstream in a project. 

Consider your possible outcomes

You cannot be too singularly focused in the wild; weather conditions change quickly, unexpected opportunities reveal themselves, and being able to adapt quickly is absolutely necessary in order for everyone to come home safely. Sometimes, you should take the trail less traveled, rest in the random lean-to that you and your group stumble upon, or go for a refreshing dip in a lake. By focusing on more than just one single objective, it often leads to more enjoyable, safe, and successful excursions.

This type of outlook is necessary to build a business case for a new initiative. You may need to step back during your initial planning and consider the full impact of the process, including on those outside your organization. For example, you may begin to identify ways in which the initiative could benefit both internal and external stakeholders, and plan to move forward in a slightly new direction. Let’s say you’re building a business case for a new land management and permitting software system. Take time to consider that this system may benefit citizens, contractors, and other organizations that interact with your department. This new perspective can help you strengthen your business case. 

Expect teamwork

A group that doesn’t practice teamwork won’t last long in the wild. In order to facilitate and promote teamwork, it’s important to recognize the skills and contributions of each and every person. Some have a better sense of direction, while some can more easily start campfires. And if you find yourself fortunate enough to be joined by a truly experienced hiker, make sure that you listen to what they have to say.

Doing the hard work to present a business case for a new initiative may feel like a solitary action at times, but it’s not. Most likely, there are other people in your organization who see the value in the initiative. Recognize and utilize their skills in your planning. We also suggest working with an experienced advisor who can leverage best practices and lessons learned from similar projects. Their experience will help you anticipate potential resistance and develop and articulate the mitigation strategies necessary to gain support for your initiative.

If you have thoughts, concerns, or questions, contact our team. We love to discuss the potential and pitfalls of new initiatives, and can help prepare you to head out into the wild. We’d love to hear any parallels with hiking and wilderness adventuring that you have as well. Let us know! 

BerryDunn’s local government consulting team has the experience to lead technology planning initiatives and develop actionable plans that help you think strategically and improve service delivery. We partner with you, maintaining flexibility and open lines of communication to help ensure that your team has the resources it needs.

Our team has broad and deep experience partnering with local government clients across the country to modernize technology-based business transformation projects and the decision-making and planning efforts. Our expertise includes software system assessments/planning/procurement and implementation project management; operational, management, and staffing assessments; information security; cost allocation studies; and data management.