Mr. Sussman developed the Business Transitions consulting process to help owners of small and medium size businesses improve and enhance the value of their companies. This process is now the Business Transitions Program for Value Building.
Business Transitions is the culmination of Mr. Sussman’s years of practical experience in the Corporate environment; where he worked in Finance, Strategic and Operations management positions; the small to mid-size enterprise environment; where he founded, financed, operated and exited via sale transactions five different companies (2 to public companies, 2 to strategic acquirers, and 1 turnaround and sale in a private transaction); and as an investment banker, where he has acted as an M&A advisor on numerous sale, capital raises, recapitalizations and joint venture transactions. Throughout this journey, Mr. Sussman has frequently encountered good businesses, where the owners, stakeholders and management are unable or unwilling to exit or raise capital because the value of their business is not what they need it to be, in order to take that next step. Business Transitions for Value Building addresses this issue.
Business Transitions begins with an assessment of where the business is today, both internally and externally on the value scale. The next step is working through each area of the value chain and for each; putting in place the plans, operations, systems, processes, procedures and controls to improve and enhance performance, efficiency, revenue and earnings growth, and corresponding increases in free cash flow or EBITDA. EBITDA, Earnings before interest, taxes, depreciation and amortization is the key measure of business valuation, thus it is also the key measure for Value Building. For most every business, whether the purpose is to raise capital, growth through acquisitions, or a liquidity event; the greater the EBITDA and the more sustained the EBITDA growth, the greater the value of that company.
Business Transitions for Value Building is a corporate training program that effects, and drives change throughout a company. Throughout the company is important to keep top of mind. Over the course of this training program, the key aspects of your business that power its stability and current state will be analyzed, reviewed and effected with the common goal of building the value of the company.
The root cause of why most training programs designed to drive meaningful change throughout a company are unsuccessful is the that the focus is on the wrong areas and thus, the training itself is not appropriately focused and therefore frequently does not involve the relevant employees. Owners who want to drive improvement and build value within their company must implement training that addresses their business as an entire entity and focus on the key items that drive value. This limitation is addressed with Business Transitions.
Business Transitions is all about organizing and operating a company with a view towards the future goal and that future goal can take many forms; organic growth, growth via acquisitions, sale, pass to the next generation, semi-retirement or full retirement. Value Building is essential for each.
Organic Growth: Capital is generated by the business via increased sales or reducing expenses, or a combination thereof. In today’s fast paced, competitive business world it can be challenging to readily increase sales, but it is possible with discipline and, a proven and repeatable sales process. On the expense side, a strategy of pure cost cutting may have a meaningful impact in the year implemented, however, it is not a process with meaningful year over year improved results. A meaningful process for expense reduction is operational processes that are designed with the most efficient operation for sustainable operations.
Acquisitive Growth: Acquisitive growth with cash or equity. If cash, the cash must have been generated by the company or obtained from a third party. If the cash is raised via debt, the lender will evaluate the loan based upon the value of the underlying assets of the combined entity and the ability to repay the debt out of future cash flow. If equity is to be utilized value continues to be key. The greater the value of the company, the less equity the company will have to provide to the company being purchased or to a third party to raise the required cash.
Sales and Recapitalizations: Sales and recapitalizations of the company is the exchange of company for consideration such as; cash or equity in another company. Sales can be total sales, or majority or minority recapitalizations. A majority recapitalization is where a third-party purchases 51% or more of the company, while a minority recapitalization is the purchase of less than 50% of the company. In each case, value of the company is key. Company value determines the amount of consideration to be received, which in turn determines the next step in the owner’s life; exiting or remaining and continuing to manage the business. Owners frequently exit and move to the next phase in their life with a total sale. In a majority or minority recapitalization, owners typically remain with the company, execute a growth plan with the new majority or minority owner and then sell their remaining equity at hopefully greater value in the future. This is frequently referred to as “having a second bite at the apple.” Essentially what the third party knows and expects when making the recapitalization investment is that they will be able to successfully implement their version of a building value and increase the value of the company substantially to achieve their intended financial return on investment.
Pass Business to the Next Generation: Many times businesses are transitioned from one generation to the next. Unfortunately, historical statistical data shows that 70% of these businesses fail when passing from the first generation to the 2nd and 90% fail when passing from the second to the third. This is not a desirable outcome. The cause? Most frequently is the lack of proper planning, structure and organization of the business. The current business does well for the owners, but the structure, people, processes and the like are not in place to sustain the business. These are all essential elements for Business Transitions and all, if in place, significantly build value of the business.
Business Transitions provides options for company owners to take control of their business and generate the greatest return on their own efforts.
The outlook for improving business valuations remains very strong and will continue to grow into the future. For the most part, buyers and investors buy earnings. And strong and increasing earnings drive value. Thus, there is no doubt that building value is as much the future as it is the current, and the past.
Based upon demographics, it is safe to estimate that 12 million +/- businesses are owned by baby boomers and will be sold or transitioned in some method over the next 10 to 15 years due to retirement or other factors. Many owners of these businesses face the uncertain dilemma of their business not being valuable enough in a transaction that enough cash proceeds will remain after taxes to support the lifestyle to which they have become accustomed. Thus, building value today is essential for their future.
Similarly, although not as large a number, almost 8000 businesses are owned or backed by private equity in the US. The typical private equity firm has a time frame on the holding period for their investments due to maturity dates of their investment funds. This means that within their holding period, typically 5 – 7 years, the value of the businesses they own must increase. Only by increasing value of those businesses is the private equity fund able to sell that business at a multiple that represents a sale price enough greater than the purchase price and investment over time to provide their target return to their investors. Private equity funds that do not provide adequate returns to their investors have difficult times raising subsequent funds.
Finally, public companies also focus on earnings. Share prices represent multiples of earnings. The greater the earnings, the greater the share price and correspondingly the value of the company. Overall, building value is the central key to success for all businesses, from the smallest to the largest. Greater values, driven by increasing EBITDA is the key to increasing equity for the owners and other stakeholders of all businesses. With increased value, it provides the flexibility and ability of companies to drive their own futures in a way that meets the needs of the owners and stakeholders in the business.
Business Transitions is based on practical experience, accepted business theories and proven results; integrated into a realistic approach to build value. The first four modules are designed to establish the baseline current state of the business, align management on the goals and expectations of the program and learn the key tools and methods to be utilized throughout Business Transitions.
Module 1 focuses on tools and techniques. It is essential that management of the company understand, accept and embrace the concepts of building value towards the objective of business transition and the tools and methodologies for assessing and evaluating decisions going forward.
Module 2 focuses on establishing the baseline for overall performance of the business. As business transitions is about building value, the baseline measurement is determined based on the financial performance of the company, i.e. the financial statements. To understand this, in this module we will learn the language of financial statements, how read them, how to interpret them and what actions and direction they can provide.
Module 3 focuses on Key Performance Indicators (KPIs). KPIs are a system for managing the business, performance of elements of the business and people within the business. KPI’s should be designed to demonstrate real time information so that decision can be assessed on both a current and proactive basis.
Module 4 focuses on delegation. Effective delegation is key to building value. Successful delegation is difficult. This module is designed so managers may gain the understanding and techniques for successful delegation. Successful delegation is key to building value.
The next several modules, 5 thru 14, are the implementation modules of Business Transitions. Each module follow a consistent flow for each value driver area; analyze, plan, evaluate, select, implement, measure, reassess and adjust. Ultimately each module works both independently and collectively to build value and position for the business transition.
Module 5 value driver: Systems Processes. The objective of this module is to measure the extent to which the business is run by processes or by people and to then effectively understand how to build processes, define policies and implement them within the business.
Module 6 value driver: Growth Potential. In this module we will look at growth potential. Businesses with greatest growth potential have the highest value.
Module 7 value driver: Proven and Repeatable Sales Process. Sales and topline revenue growth is key to building value. In this module learn to develop a Proven and Repeatable Sales Process or PRSP for the business.
Module 8 value driver: Neutrality Structure. In this module we will analyze the dependence of the business on suppliers, employees and customer concentration. Maximizing business value for a Business Transition requires that the business not be overly reliant on any one customer, employee or supplier.
Module 9: Cash Generation. The objective of this module is to understand the ability of the business to generate cash. Cash flow, gross margin and profitability have great effect on the value of your company.
Module 10: Recurring Revenue. In this module our focus will be on the power of recurring revenue. One of the biggest factors in determining the value of your company is the extent to which a third party can see where your sales will come from in the future.
Module 11: Defensible Position. The objective of this module is to understand and implement methods to create defensible business positions. Warren Buffett is famous for investing in companies with a protective “moat” around them. The deeper and wider the moat, the harder it is for competitors to compete.
Module 12: Customer Satisfaction. The objective of this module we will be measurement and improvement of Customer Satisfaction. This attribute measures both the extent to which your customers are satisfied and your ability to assess customer satisfaction in a consistent and rigorous way.
Module 13: People Plan. The objective of this module is understanding organization structure, roles in the structure and people in the roles. Great companies have great people.
Module 14: Operating System. The objective of this module is to define the operating system for the business. The operating system defines the mission, vision and values of the company, standards of performance and quality.
The design of Business Transitions is real time implementation. Through each module, as the module is learned, implementation will occur. Implementation includes methods and techniques to evaluate and measure implementation progress and success. Each subsequent module will include a session on reporting progress on prior module implementations.
The final four modules of Business Transitions are oriented towards a holistic review of the overall implementation, progress and results to date and expectations for the future. Business Transitions is a continuous and repeatable process and to maximize results, the value drivers should be reassessed, analyzed and modified on a continuous basis. In this section, Business Transitions will also focus on next steps in the process of building value.
Module 15: Testing 123. The objective of this module is to create and implement testing and evaluation plans for the techniques, systems and methodologies learned and implemented throughout business transitions. We will look at systems in place and running, management team working in sync, operating system and culture in place and adhered to and that financial controls are in place and working.
Module 16: Due Diligence. The objective of this module is to learn and implement techniques for performing self-directed due diligence for the business. Due diligence is having complete business documentation in place for the business at all times, as well as, all systems, procedures, plans, records and studies.
Module 17: Transition Preparation. The objective of this module is preparation of materials for marketing the business to potential acquirors or investors for raising capital. Investors each have mandates and we will learn how to identify potential sources, how to reach them and how to effectively communicate with them.
Module 18: Transition Finalization. The objective of this module is preparation of materials and processes for finalizing the Business Transition. The transition may be marketing the business to potential acquirors or investors for raising capital to support growth or recapitalization needs; or it may an internal transition to the next family generation, management or to employees via an ESOP or similar type of program. Regardless, in this module the techniques, forms, support services and professionals that will need to be engaged will be reviewed and the process and techniques for qualifying and engaging with them will be covered.
This service is primarily available to the following industry sectors:
Technology has been advancing since the stone age when the first tools were created to help humankind perform their daily tasks. The first tools were made from stone. They were things like hammers, sharpened stones for cutting, and flattened stones for crushing and grinding. Technology continuously evolved from that point forward based upon human needs for a solution to a problem or objective. Whether it is material technology, electronic technology, computer technology, communications technology or information technology’; technology has continued its development from its first inception. And many times, one technology is born out of another technology, or the combination of several technologies to create a new technology.
For example, the first computers were purely mechanical; gears, levers and fully manual operation and were designed and built to specifically serve a single purpose. Computers evolved, combining electricity to power the gears and increase efficiency. Around that time, Alan Turing theorized the idea of a general-purpose machine able to compute most anything that may be computed. Evolution continues and mechanical gears give way to vacuum tubes which then give way to transistors; continuously shrinking the size while expanding the capabilities of the technology. Along this path, additional technologies are developed that enhance the capabilities of computers, including operating systems, programming languages, memory chips, faster and more powerful CPUs, disk drives, solid state drives; each continuing to advance in their capabilities; and in the near future, Quantum computing. Evolution continues and each of these core technologies improves becomes smaller, lighter, and more powerful.
The same evolution may be said of many technologies. Steam engines become internal combustion engines which evolve into electric engines. Airplanes engines evolve from internal combustion with propellers to jets and next, electric engines as well. Carbon steel evolves into stronger, lighter weight carbon fibers. The net result being that technology is not static, it continues to evolve and growth at the pace of human innovation.
Technology is part of existence of every business and its use and application is a function of everyone’s lives. Technology advances cover all disciplines and areas of science and industry. Focusing on computer and related technologies; in the business world, there are traditional uses of computer technology; word processing, spreadsheets, CRMs, websites, online ordering, and now virtual meetings. In engineering there is CAD, modeling, and simulation functionality. In manufacturing there are production control, numerical control and other process-oriented automation. In healthcare there are patient electronic medical records (EMR), virtual and remote reading of x-ray and other diagnostic results, and robotic and remote surgeries. Think of an industry and there is computer technology ready to support it and grow it. Technology, however, goes far beyond computers. Then there are the newer technologies today that are becoming essential parts and elements, both standalone and integrated into solutions for every industry and becoming essential for productivity and competitive position our global economy. Some of these include:
1. Internet of Things (“IOT”)
IOT is the concept that all devices may be connected via the internet to one another and to corporate data systems, providing data for analysis, reporting and measurement upon which decisions and actions may be taken in “real-time” to improve performance or outcomes, or prevent failures in a system. The information will also be used in planning and decision making for future events; all with the goal of optimizing performance, improving profitability, and increasing value. The impact on each business will be industry dependent and perhaps even somewhat unique to each organization. The end result is the same, however, gathering large amounts of data and transforming that data into information to enhance the value of the organization.
How will this affect an industry? Recognize that IOT is not only changing how business is conducted today, but also creating new business models for businesses. For example; by using IOT technology, the “pay per use” business model is a now a reality for many businesses and becoming an option for many more as IOT and the data generated becomes available.
2. Machine Learning
Machine learning, the ability of a computer to learn and teach itself based on data analysis of repeating patterns. Social media platforms use this technology to gain insights and understanding of their users, specifically; their connections, the types of articles and stories they read, or the amount of time a subject or topic engages them. The platform (machine in this case) applies that knowledge to further engage the user and increase their usage of the platform. The relevance, the longer the user engages, the more ads the user views and the greater the revenue of the social media platform.
Machine learning exists beyond social platforms and is changing the way businesses do business with both other businesses and consumers. Machine learning continues to occur on most mobile devices even when the device is not in use. By monitoring and mapping a user’s location and travels, the service provider is able to geotarget ads, offers and promotions to customers. All of this intended to increase revenue, profitability, and value.
3. Virtual Reality
Virtual Reality places you in the content Instead of just viewing content. This technology allows the user to experience and interact with contents in a virtual world. While it began in the gaming world, it is and will impact most every industry. This is made possible by advances in hardware and programming techniques.
Immediate impacts are appearing today due to the Covid pandemic. In real estate, the traditional open house or house tour is now available by some realtors via Virtual Reality. With this technology, home buyers are able to virtually walk through a home, turn on lights, open doors, turn on faucets, flush toilets; everything one would do in a home tour. The enhanced benefit, out of town buyers can tour properties and make purchase decisions without a physical visit. In the future, look for similar capabilities in retail, education, and numerous other industries.
4. Touch Commerce
Making purchases with the touch of your finger is now a reality. The merging of touchscreens with ecommerce point and click shopping facilitates the purchase of most anything with a single touch of a cell phone or tablet. Once a customer has integrated payment information, a single touch allows consumers to buy most anything and everything with a single touch of their screen.
This advancement in technology is huge for both customer convenience and of course the ecommerce companies that have integrated this into their platforms. Touch Commerce enabled transactions are growing by over 150% per year and this expected to increase as more companies implement the technology and customers become more comfortable and accepting of it.
5. Artificial Intelligence (AI)
AI is software technology enabled by advances in processor chip technologies that equips computers with the capability to make decisions, similar to human thought and mimicking human decision-making processes and performance of complex tasks. AI is used today in functions including; speech recognition (e.g., Siri, Alexa, OK Google); medical diagnostics, weather prediction, streaming services (eg., Netflix, Amazon Prime Video to recommend future choices based on a user’s watch history), scheduling and routing, (e.g., train scheduling, airline routing, Google Maps route planning); capacity planning to maximize sales and revenue (e.g., airline seat costs, hotel room pricing) and in customer service solutions (e.g., appointment setting, chatbot support). All tasks that can and are being done with efficiency and with superior outcomes for the businesses that have implemented. Superior in terms of reduced costs, increase revenue, and increase profit and value.
Blockchain, in simple terms, is an electronic ledger that is shared among different users. It creates a full, complete, and unalterable ledger of all transactions regarding an asset. Today, blockchain is most commonly associated with cryptocurrencies, i.e., BitCoin and the like. The power of blockchain, however, is to think of it as a digital record of any asset. By digitizing the asset, it is easily and openly managed, tracked and maintained. The power of blockchain is in what is known as “smart contracts.” A smart contract is a self-enforcing agreement embedded in software code managed by a blockchain. The code contains a set of rules under which the parties to that smart contract agree to interact with each other. When the predefined rules are met, the agreement is executed, and all business operational and payment settlement rules are automatically enforced.
There are other technologies that represent the current state of technology, too many to name. The end result to keep in mind; customer acceptance typical equates to greater usage. Greater usage typically equates to greater sales revenue and greater revenue typically equates to greater earnings. Collectively, all of these equate to building value for the companies that adopt them and successfully implement them.
The future for technology is limited only by the creativity of human mind. Businesses must be open to these advances, understand them and build business models that integrate technologies that enhance and optimize the workflows and performance of the company while also adding value to the customer the company serves.
Adding value is the key to technology, from both internal and external looking company perspectives. From an internal perspective, will the technology improve workflow, improve efficiency, improve throughput or improve results? From an external perspective, will the technology provide a better customer experience? Technology for technology sake is interesting but does not typically build value. Companies must keep in mind that technology is a tool, just as the first shaped rocks were tools millions of years ago. For tools to be of value, they must add value by making the work of the company “easier” in some way. Easing being, as stated earlier; improved workflow, efficiency, throughput, results, customer experience…Technology adds value by meeting these objectives.
With the invention of the telegraph, the earliest mechanical communications device, the telecommunications industry began within the 1830s. Communication time was shortened from days to hours—similar to how modern mobile technology has shortened the time required to send large quantities of data from hours to seconds. The industry broadened with each invention: telephone, radio, television, fax, computer, mobile device. These technological advances changed how business is conducted, as well as how people live.
Historically, telecommunications required physical wires connecting homes and businesses. In modern society, technology has gone mobile. Now, wireless digital technology is becoming the primary type of communication.
The sector’s structure has also changed from only a few large players to a more decentralized system with decreased regulation and barriers to entry. Major public corporations function as the service providers, while smaller companies sell, maintain and service the equipment, such as routers, switches, and infrastructure, which enable this communication. Key points regarding the telecommunications industry: The telecommunications industry consists of companies that transmit data in words, numbers, voice, audio, or video around the world; The telecommunications industry consists of three basic sub-sectors: telecom system (the largest), medium services (next largest) and wireless communication; Telecom is growing less regarding voice and progressively about video, text, and data.
POTS lines, or Plain old telephone service, or more specifically, telephone calls continue to be the industry’s biggest revenue generator. Thanks, however, to advances in network technology, this is changing. Telecom growth is increasingly about video, text, and data, and less about voice. Broadband, or high-speed internet, delivering broadband information services and interactive entertainment, has made its way into homes and businesses around the world and that growth is expanding exponentially. The main broadband telecom technologies, fiber optics, coaxial cable, and Digital Subscriber Line (DSL), have ushered in a new era. And today, the fastest growth comes from services delivered over mobile networks.
Small business and residential markets are arguably the toughest. With numerous players within the market, competition is generally driven by price, with in certain instances, belief in the service of the provider which is usually associated with name recognition. Success is driven largely by heavy investment in efficient systems and building brand image. The corporate market, however, remains the industry’s favorite. Large corporate customers, who are concerned mostly about the quality and reliability of their telephone calls and data delivery, tend to be less price-sensitive than residential and small business customers. Large corporations tend to spend heavily on infrastructure to support their distributed operations. They also readily spend for premium services, such as; security, private or virtual private networks and video-conferencing.
Telecom operators also generate revenue by providing network property to alternative telecom corporations that require it, and by wholesaling circuits to serious network users such as internet service suppliers and corporations. Interconnected and wholesale markets favor those players with extensive networks.
Key Telecommunications trade Segments. There are three sub-sectors of telecommunications industry (in declining order by size): communication system, telecom services and wireless communication.
The major segments inside these sub-sectors include: Wireless communications; Communications equipment; Processing systems and products; Long-distance carriers; Domestic telecom services; Foreign telecom services; Diversified communication services
As more and more communication and computing strategies shift to mobile devices and cloud-based technologies, the fastest growing space in the world is wireless communication. This industry is the expected cornerstone of the continued world expansion of the telecommunications industry. Even in developed countries, there is still enough room for growth. The Federal Communications Commission (FCC), in 2018, reported that about one-fifth of the American rural population still has limited to no access to broadband networks.
Looking ahead, the biggest challenge for the industry is to meet the needs of consumers and companies for faster data connections, higher resolutions, faster video streaming and ample multimedia applications. Meeting customer’s needs for ever faster, stable, and reliable connections for consuming and creating content requires significant capital expenditure. Companies that can meet these needs are experiencing excellent revenue and profitability growth.
It’s hard not to conclude that size matters in telecommunications. It is a capital-intensive business. Rivals must be of sufficient size, measured on revenue, earnings and cash flow, to cover the costs of expanding and upgrading networks and services that rapidly become obsolete. Transmission systems require frequent replacement, as often as every two years. Large companies that have extensive networks, including networks that extend directly to end customer premises, depend less and spend less on interconnection services and costs with other companies to complete their service to the end destinations. In turn, smaller players must pay more for the interconnection to finish the job. For smaller operators hoping to one day achieve massive growth, the financial challenges of continuous investment to keep up with rapid technological changes and the depreciation of their current technology investments can be enormous.
The Internet, initially referred to as the World-Wide-Web, and today also known as; the net, the web, and the cloud, changed the world of computers and communications. The internet has a worldwide broadcasting function, an information dissemination mechanism, and a medium for collaboration and interaction between people and computers regardless of geographic location. Inventions including the telegraph, telephone, radio and computer laid the foundation for the web and its’ unprecedented integration of functions. Because of the internet and its penetration into society, e-mail addresses and website URLs flow off the tongue of most people in the world.
Today, the Internet has become a broad information infrastructure, the first version of what is commonly referred to as a national (or world or galaxy) information infrastructure. Its history is complex, involving many aspects-technology, organization, and community. As we increasingly tend to use online tools to complete e-commerce, information acquisition, and business and community operations, its influence not only involves the field of computer communication technology, but also affects the entire society.
Published research and scientific papers on the subject of computer interconnection networks that share information through the network became the basis of the Defense Funding Research Projects Agency (DARPA) project and on October 29, 1969, the first electronic message was sent between two computers via ARPANET, and the Internet was born.
In October 1972, DARPA demonstrated the new networking technology ARPANET to the public. In addition, in 1972, the first “hot” web application email was introduced. The first email was between two people. Based on great success and recognition, the utility quickly expanded to include email lists, replies, forwarding, and filing. The rapid acceptance, adoption, and growth of email as an application are the harbingers of the kind of activity, we see on the Internet today.
The internet flourished, enabled by the extensive development of LANS, PCs and workstations in the 1980s. Ethernet technology, developed at Xerox PARC in 1973 is the main network technology. As the Internet grew in size and scale, host names called URLs (Uniform Resource Locators) were created to replace numeric addresses, making it easier to use. Since then, the commercialization of the Internet has grown and evolved. Commercialization includes competitive network services, applications enabled by underlying web technology, and development of commercial products that implement Internet technology.
Early internet businesses were mainly suppliers of basic network products; email, messaging, ecommerce; and service providers that provided connectivity and basic Internet services. The Internet has now become a “utility” service, where those early products and services exist and continue to be of great importance, but where current business opportunities are focused on the use of the global infrastructure to support other commercial services. Many of the latest developments in technology provide increasingly integrated and complex services, enabling transactions and information flow with less friction, built on the foundation of existing Internet data communications.
The Internet industry is made up of companies that provide various products and services online mainly through their websites and mobile applications. All sectors of the global economy are represented on, and most some level or form of business on the internet.
Although some participants must continue to invest in their operations to remain competitive, the industry is not very capital intensive. Many companies have substantial cash flows that can be used for capital expenditures, acquisitions and stock buybacks.
Companies in the Internet industry operate in a fiercely competitive environment and their technology is changing with each passing day. Barriers to entry vary depending on the specific market served. Internet companies operate on the global stage, and the results usually depend on the performance of overseas markets and currency exchange rates. In addition, the weakness of the retail economy or low online advertising spending may hinder the performance of many participants. Nonetheless, the long-term prospects of the industry are encouraging. Increasing global Internet usage, overseas expansion and the continued popularity of online advertising will further benefit companies in this industry. As a result, many industry players seem to be in an advantageous position in an attractive market.
Important measures that companies should consider when examining their value is revenue growth, percentage of recurring revenue, lifetime value of a customer and customer acquisition costs. The performance of a particular market and the company’s share of that market are important drivers of revenue growth and correspondingly a company’s value. Factors such as subscriber growth and transaction volume also affect revenue and value.
The profitability of industry participants may vary greatly, depending on the market they serve and the operating cost structure. Return on equity is an important indicator that companies should consider. Companies with strong competitive advantages and competent management are more likely to deliver a strong profit margin and obtain a higher return on equity. Earnings may be the most important driver of company value, and industry participants with strong earnings growth over a longer period are likely to achieve the greatest value.
Given the dynamic nature of the Internet industry, companies must innovate to remain competitive. This only means providing new products and services to customers. However, industry participants must also position themselves to benefit from technological development and the creation or expansion of markets. For example, in the field of search engines, the mobile and video markets are promising. New applications may continue to be introduced in these areas.
Acquisitions and Partnerships
Acquisitions and strategic partnerships are common for companies in the Internet industry. These initiatives enable participants to better serve customers and gain market share. Acquiring competitors can reduce competitive pressure, while purchasing new technologies can enable companies to better serve their own markets and enter new markets. Ideally, these activities can diversify the company’s revenue sources and ultimately prove to increase revenue. Smaller companies may even find themselves the target of acquisitions. In short, Internet companies may continue to make acquisitions and reach partnership agreements, although their timing and scope are uncertain.
In a challenging economic period, industry participants can take a variety of measures to improve performance. It is a strategy to divest underperforming non-core businesses. The restructuring of the company’s business is another matter. In addition, many companies have begun to take measures to improve their cost structure during difficult times.
The Internet has undergone great changes in the fifty plus years since its birth. The internet was conceived in the time-sharing era, but it has always existed in the era of personal computers, client servers, peer-to-peer computing, network computers and today, data centers and server farms enabling cloud computing. It was designed before LAN existed, but it has adapted to new network technologies. It was conceived to support a series of functions from file sharing and remote login to resource sharing and collaboration, and gave birth to e-mail, and today a global infrastructure for commerce, media and communications.
Although the Internet is a network of names and geographic locations, it is a computer creature, not a traditional network in the telephone or television industry. The internet is a dynamic infrastructure and it continue to change and develop at the speed of not just the computer industry any longer, but the needs of all industries to support all means of communications, information sharing, data reporting, transaction processing, audio communications, video streaming and media. It will need to change in the future to support emerging technologies such as; Internet of Things (IOT), mobile transaction processing, and expanded use of desktop video conferencing.
The availability of universal networks (i.e., the Internet) and portable forms of powerful and affordable computing and communications (eg., laptop computers, tablets, PDAs, cellular phones) are making mobile computing and communications the default paradigm. This development will bring us new applications and expand the capabilities and functionality of existing applications. It is being developed to allow more complex forms of pricing and cost recovery, which can be a painful requirement in this business world. It is changing to adapt to another generation of basic network technology with different characteristics and requirements. New access modes and new service forms will give birth to new applications, thereby promoting the further development of the network itself.
For as long as there have been companies and businesses, there have been business services and professional service businesses to provide services and support to them. The service industry or industry includes a wide range of markets. Businesses that do not engage in raw material extraction or manufacturing belong to the service category. Examples include law firms, staffing firms, engineering services, consulting services and computer system design to company headquarters to temporary help companies, call centers and gatekeepers. If one can think of a service that is used by a business, there is a business service provider to provide that service.
When economists report employment data, they are referring to industries experiencing growth or decline. In recent years, professional and business services have received attention because it adds significant amounts employment. Being a large and broad industry, business services can be segmented into three area: professional and technical services, company management, and administration and waste management.
Employment growth in the 1990s can primarily be attributed to the business services sector. While the industry experience exceptional growth in the 1990’s is not immune to economic cycles. The 2000-2003 relatively mild economic recession particularly impacted the professional and business services sector. Although the overall economy fell by only 2.7%, professional and business services fell by 6.4%. The impact to the business services industry was greater at this time, is that this period included the market correction for the high-tech industry, also known as the burst of the internet bubble.
The Great Recession beginning towards the end of 2007, effected the professional and business services industry more than the overall economy. Overall, the industry lost over 35% of its jobs by 2009. Since the economic recover from that recession, sector growth rate has once again exceeded the overall economy.
With the growth of the stable middle class and high-income families, the demand for services is rising. The economic sector gradually no longer pays attention to material needs. For consumers, this has led to a growing demand for services such as healthcare, education, training and expanded forms of recreation and entertainment.
In business, the company recognizes that service providers can handle many activities more efficiently. Outsourcing services allow companies to focus on core business activities that drive their success. These are known as the essential activities of the professional services sector and include accounting, finance, service delivery, sales and marketing, technology, quality, product and management, human resources, finance, and product development.
The digital world has also embraced service-based growth through disruptive technologies and location-independent business operations. Companies provide their services locally, nationally and globally as being local is no longer a limiting factor. An accountant in a rural community for example, can grow a national client base through an online business. Technology has expanded the category via what is now referred to as Gig Workers, enabled virtually all professional, technical, and other Business Services and Professional Services providers to offer their skills independently and directly on a national level, adding additional pressure to an already competitive market.
Technology is driving major changes in the service industry, and traditional roles (such as taxi services) have been replaced by Lyft, Uber, and other options that connect large numbers of part-time employees to specific markets. Airbnb opened the rental market to individual owners by cutting management companies and allowing a large audience to stay in direct contact with owners.
As new technologies disrupt markets and provide more opportunities for individuals and contractors, many areas of the service economy are changing people’s perceptions of employment and labor. The benefits of traditional employment are usually lost, but the entire service industry is open to more individuals, and technology ultimately promotes growth that was once considered a locked-in market. The New York City taxi medal was once highly valued and became the controller of the market. However, the launch of Lyft and Uber opened the door to commercial driving for all those who meet the minimum qualifications. The entire market has now changed, and many people are using private transportation to make money in the market.
According to the Bureau of Labor Statistics, another factor in the growth of the service industry is the continued complexity of the business. Companies that provide consulting services help small businesses deal with legal changes, emerging technologies, and marketing challenges by allowing them to acquire skills and knowledge that they do not have internally. The service industry is benefiting from improved service marketing because companies will communicate their messages more effectively driving growth of the industry.
Over the next ten years later, the traditional professional service industry will undergo fundamental changes. The nature of the work and the skills required to perform the work in the future will change due to; changing needs of customers, expectations of employees, fast paced technological development and other external factors. Ultimately, these factors and leading tech