All posts by Abraham

Report: Alternative Source Proteins, an attractive market for investors

Why protein substitutes became popular lately? Global consumers, nowadays, have an unprecedented concern about human health and environmental sustainability. This change in eating habits led to the emergence of movements like vegetarianism, veganism, and flexitarianism. Therefore, alternative source proteins became more appealing for customers, and also to entrepreneurs as it is an attractive market.

Excluding meat and dairy from the meal plan not only contributes to animal welfare. It also has several advantages for the health and environment. According to researchers, the consumption of red meat can be linked to digestive issues and heart illness. Due to these facts, the number of consumers eating plant-based is steadily growing. There are several companies already reacting to the change in the demand, offering different types of alternative proteins to the consumers, such as Nestlé and Sensient Natural Ingredients. Nevertheless, there are still countless attractive business opportunities for entrepreneurs in the expanding market.

How to substitute protein?

Meat: Using seitan (wheat gluten), mushrooms, rice, or soy-based products, such as tofu or tempeh, are popular meat substitutes. These products can replicate the taste, and also the texture of the meat.

Dairy: To substitute dairy, consumers can choose from a wide range of drinks made of rice, soya, almond, or coconut oil. Changing to these products facilitate leaving the milk-based product out from the diet permanently.

Eggs: Eliminating eggs from daily life does not mean stopping to bake. To replace eggs, it is possible to use tofu, tapioca starch, or fruits like mashed banana or applesauce.

Importance of plant-based alternatives

The segment of plant-based alternatives is expected to grow significantly in Europe and North America as well, which means an attractive opportunity for companies. Chilled meat substitute will remain the largest segment in value from the meat substitute categories, especially the subsegment of soy-based ready meals is going to expand.

The average prices of the segments slightly increased across the categories in the past, but it is forecasted to stabilize as the industry matures.

Key Drivers of Alternative Source Proteins

1. Price

Several customers choose to reduce meat consumption in order to save money, as the price of red meat is growing. The prices of alternative source proteins are also in the upper range; however, it is expected to decrease as the industry matures. In addition, the prices of the substitutes are still lower than red meat, and it is one of the main reasons for excluding meat from the diet.

2. Environment

Food production accounts for approximately 26% of the global greenhouse gas emissions, and its primary sources are livestock, fisheries, crop production, land use, and supply chains. Therefore, by using low-carbon alternatives, customers can contribute to reducing emissions of food production, which makes alternative protein sources more attractive.

3. Growing population and urbanization

The continuously growing population presents challenges for sustainable development. As the world continues to urbanize, the successful management of urban growth is highly important for lower-middle income countries. These nations will have to provide proper nutrition for the growing population. Producing new types of feed, such as plant-based food, a protein, can be the solution for their concern.

4. Alternative food price per Kg in Europe

The prices of meat alternatives differ between countries, while it is the highest on average in Italy, prices are lower in England and Germany. The retail landscape and consumer habits drive the variance in price mainly. Therefore, customers pay less in countries where the behavior is price-driven.

Who are the key players, and which were the best deals of this attractive market? If you want to know the answers to these questions and more, download our report.

Find out which other attractive market can be exciting for investors!

Download the full report “Alternative Source Proteins”

To find a complete and graphic view of the milestones of this trend and its global impact.

Confidentiality and the Virtual Data Room

Confidentiality during an M&A process is vital for the success of an operation. One of the Corporate Finance Industry success metric is the levels of transparency between buyers and sellers, making confidentiality a crucial in any operation. A good M&A advisor also supports the transparency and confidentiality of the process.

Confidentiality and transparency have their protagonism during many phases of the process; in this article, we will refer specifically to the Virtual Data Room.

Managing confidentiality during an M&A Operation:

Managing confidentiality during this process is a crucial aspect within an operation. Usually the sellers seeks for higher levels of confidentiality but this metric may vary depending on many factors.

For example, if the seller wants a high level of confidentiality he must reduce the amount of potential buyers he reaches, but this will slow down the selling process. Vise versa, if the seller seeks faster results he must amplify his selection of possible buyers, making it more difficult to control the confidentiality factor.

This may seem like a conflicting paradox for any seller because many business owners do not posses knowledge of the different techniques that can be applied to increase confidentiality during the M&A process.

What are some techniques we can refer to regarding confidentiality during an operation?

Creating a blind teaser: This document is designed to protect the identity of the company being sold when presented to potential investors. The teaser uncovers the situation of the company but not its name. If buyers show interest a confidentiality agreement is signed to protect such identity.

Signing an NDA: Confidentiality is crucial since day one. There will be a lot of agents involved in the process everyone that is exposed to this information must sign an NDA so the idea and intention is protected and safe.

Confidentiality Agreement: This document serves two purposes. The first one is to protect the selling company’s intentions regarding potential investors once they showed interest. The second one is that the signing of this document represent a clear intention of the buyer to proceed with a possible deal.

Data Room: If the deal has gone up to the point that there is the need to create a Data Room it means that we are near to the closing of an operation. In other words we are in a sensible point in which confidentiality is vital. That’s why Data Rooms are designed to protect information since they create a virtual space in which the seller will deliver all the documentation necessary to the potential buyer to proceed with the operation.

Defining the Virtual Data Room

A virtual data room (VDR) is a virtual space where the seller uploads all the necessary documentation of the company so the buyer can have access to it and advance in the process. This transaction of information is extremely delicate and must be made only when there is a trust-worthy and robust relationship between both parties, meaning that there is already the will to invest and close a deal.

The transaction of this information is made through unique online software design to prevent any disclosure of the documentation and keep-safe all the uploaded data. The software must be a high-quality product that provides confidence, security, and safety to both parties involved in the operation.

Imagine how hard it can be for a business owner to expose the essence of their company to someone. Leaving aside the emotional factors that make this operation hard, this part of the process must have all the requirements to ensure safety within the parties.

In every scenario, work-ethic and professionalism must be applied, but when referring to VDR’s we can assure that one of the best options in the market is EthosData. We invite you to take a look at their high-end Service that guarantees safety when taking care of your documentation.

In ONEtoONE we are characterized by the level of transparency, confidentiality, and professionalism with which we handle our clients’ operations. One of our best allies is the trust we generate through our work. Therefore, we encourage you to contact us if you are looking for advisory on buying or selling your company.

Whether Buying or Selling a Company: Pick the Right Advisor

Pick the Right M&A advisor By PAUL HAGER, Partner of ONEtoONE Corporate Finance

Have you bought, or sold, a business lately? If you did, how do you know if you received optimal value on the deal? Did you ask an M&A advisor? It can take years before the value gained can be objectively measured, or even whether the result was a business success. Recent McKinsey and Harvard research shows that nearly 90% of all M&A deals fail to deliver the value expected, or achieve their M&A goals. How can this be?

Well-known, high-profile deals like Daimler-Benz-Chrysler; Time Warner-AOL; Quaker Oats-Snapple; Sears-Kmart; Google-Motorola; Sprint-Nextel, are extreme examples of deals not meeting expectations. A number of factors lead to poor M&A results. These include: simply paying too much; fundamental cultural mismatch; massive infrastructure incompatibilities; significant redundancies; or no product synergy, whatsoever (i.e., the marriage simply wasn’t ever going to generate products customers would consider more valuable).

As someone who has bought companies as a Fortune 500 investment committee member, and as a valuation and investment advisor for M&A clients, I’ve found the team you select to be your investment advisor plays a significant role in the amount of value created in the deal. I hope my thoughts might help you pick the right investment advisor, and significantly increase the likelihood of you achieving your M&A goals. I’ve listed characteristics I think exist in all exceptional advisors. An exceptional investment advisor:

1) Asks “Why?”.

You’ve likely heard of Simon Sinek’s Golden Circle paradigm or Paul Ambruso’s use of the “5 Whys” to discern the root cause of success and failure. The “5 Why” approach was derived from Taiichi Ohno’s 1960s Toyota Production System methodology. Its purpose is to identify inefficiencies, waste, inconsistencies in manufacturing. Most importantly, the technique can help people discover and objectively assess assumptions, biases, facts, priorities of any endeavor – personal or professional. In our case, buying or selling a business. The “5 Why” method states that clear insight leads to the best decision, and that insight is likely to come only after you’ve assessed answers to five iterations of “Why?”. For example, your investment advisor might ask, “Why do you want to buy a business?, Why do you think buying another company will lead to greater innovation?, Why do you think this type of research capability will lead to needed innovation? And, so on. Asking “Why” throughout the M&A process leads to clearer understanding of why a certain type of company or investors would be the best match. An exceptional advisor asks “Why” to constantly validate assumptions, eliminate wasted effort, explore new deal options, and sustain deal focus.

2) Understands your business

As an M&A advisor, there is no adequate substitute for deep understanding of a client’s operations and industry sector. Having empirical insight into current and future industry trends, enabling technologies, and inter-dependent industries dramatically heightens the value ceiling. An exceptional investment advisor will use this insight, and that of her other industry experts, to develop a set of optimal investment candidates for each client.

3) Spearfishes

Last year, a friend of mine told me of her exciting trip to Bora Bora (How nice is that?) She said the restaurant would take their dinner order the day before, so that snorkelers could search for the exact type and number of fish needed for their guests’ dinners. No waste in effort, time, or resources (fish not on the menu appreciated that). The diver knew the depth and location to find the type and size of desired fish. An exceptional investment advisor will find those investors and companies that most value a specific client’s offering. Through use of the “5 Whys” and other analytic methods (e.g., Porter’s 5 Forces) to build a well-defined target profile, the advisor will quickly identify superior matches for each client.

4) Leverages global reach and local insight

In searching for their client’s best investment candidates, it is sometimes more efficient and expeditious for advisors to contact corporate, institutional, and private investors with whom they regularly do business – “the usual suspects.” Because of established trust and understanding regarding these investors’ preferences and capabilities, advisors will work within their established networks. That’s understandable. But, the best strategic partner, the one that may most value the client’s offering is often not within any investor’s direct set of contacts. The best advisor is one who will leverage an expansive global investor network that connects multiple industries. Investors who most value your offering may be in Singapore, Prague, Estonia, or Shanghai. An exceptional investment advisor will leverage access to trusted M&A colleagues with deep understanding of financial markets, industries, and companies in each region of the world – allowing them to open discussions with new investors and corporate networks that promise to hold greatest interest in the deal.

5) Takes business, personally

If the human body is 60% water, I surmise at least 60% of a company’s value is its people. Or maybe, applying the Pareto Principal, 80% of a corporation’s value is its people. A good investment advisor is constantly mindful that M&A success depends on people to embrace and support implementation – before and after the deal. Having been an entrepreneur, and having worked to grow small businesses for nearly twenty years, finding a phenomenal, successful M&A match helps to improve the lives of people in each company. Or, it should. Cultural rifts and redundancy layoffs can destroy the deal, its value, and peoples’ lives. Applying the previous four facets helps create and expand deal value. An exceptional investment advisor knows that business is personal, and that the company’s greatest value asset must be supported, nurtured, and challenged. A successful M&A deal will do that.

There are many exemplary investment banks and advisory groups around the world. Whether it be a top-tier large firm, or one with a boutique focus, these firms have phenomenal analytic research, and deal-making talent. I know this from my own experience.

My only suggestion is that you chose an investment advisor who also possesses the five qualities mentioned above. If you do, I am confident you’ll capture exceptional value in your deal.

If you are looking to optimize the value of your investment within an operation, I encourage you to evaluate ONEtoONE Corporate Finance: a firm dedicated to provided the highest value services to their clients through transparency and professionalism. For more information click the button below.

Business merger as a defense to crisis

Business merger as a defense to crisis By SIMÓN RESTREPO, Partner of ONEtoONE Corporate Finance Colombia

We are currently living in one of the greatest crises in history. The coronavirus has paralyzed and closed most of the businesses, partially or totally, generating disruptions in supply chains, millions in losses, and layoffs on a global scale. In the United States alone, around 40 million people have lost their jobs, which will generate a domino effect on consumption and credit. A situation that strongly affects the cash flow and balance sheet of companies is increasingly facing challenges of efficiency and profitability to ensure their survival in the face of the crisis.

An alternative to strengthen troubled companies is to merge them with others by looking for synergies. Synergy is when the sum of the parts is higher than the elements themselves if we put it in a numerical example, 1+1 would typically be 2, but when there are synergies, 1+1 is greater than 2. In business terms, it would be when the merger of two companies generates a much better result in value and performance than only the sum of the individual companies. Let’s look at a hypothetical example:

Two manufacturing companies produce cookies. The following is their profit and loss statement:

As we can see, Cookies Gama’s gross margin was 32% and Beta 28% before the merger. Gama has better margins because it has higher production volumes, has better use of its installed capacity, and access to raw materials at lower costs.

After the merger, without capturing productive synergies, the combined companies have a gross margin of 31%, and by capturing synergies, this margin improves by 3% to 34%.

In the next step, we will present how much the administration and sales expenses weigh before the merger and after the merger.

As one can see, before the merger, Cookies Gama had sales and administration expenses of 22% and Cookies Beta of 25%. Still, after the merger, with synergies, the new company Gama Beta has total expenses of 19%.

What kind of synergies can be achieved in consolidation processes?

Productive: It may be that, when merging two companies, two production plants are no longer required, but only one of the existing ones, or a larger one. There may also be equipment that is used in the processes of both companies.
Purchasing: By having higher production volumes, and using the best negotiation practices that Cookies Gama had, substantial savings are achieved in the negotiation with suppliers. It is not the same to buy 100 tons of sugar per year to buy 150.
Cross-selling: Cookies Beta is strong selling in supermarkets, while Gama is healthy in small shops. After the merger, some Gama references can be sold in supermarkets and some Beta recommendations in small shops, using the same vendors and vehicles for transportation. This synergy is not reflected in the previous example to make it a bit more acid, but it is feasible.
Elimination of duplicate positions: Previously, each company had its board of directors, tax inspector, general manager, human resources manager, and production manager. In the post-merger scenario, only one person will remain in each position, and only the best employees will be selected to work in the new company. This is even though the process of dismissing some employees within the merger process may generate non-recurring extraordinary expenses.
Elimination of duplicate expenses: Before the merger, each company had its guild subscription, paid ERP software fees, and the chamber of commerce renewal fees annually, now some of these expenses can be consolidated.
Transfer of Know-How: Normally, some companies are more reliable in administrative processes, others in commercial or productive operations. By combining two companies, it is possible to adopt the best practices of each company, and as a result, a better-managed company is achieved.
Value creation: Larger and more profitable companies can be sold better and are more attractive to large players active in the world of mergers and acquisitions, also for Private Equity funds. This results in achieving higher EBITDA, better margins, and much higher sales; now, the company becomes a valuable acquisition target. Before the merger, Gama had a hypothetical value of 8 times the EBITDA, ($2500 x 8 = $20,000), and Beta had a value of 6 times the EBITDA ($390 x 6 = $2340), both companies had a combined EBITDA of $2890, after the synergies materialized, the combined company has a value of $5560 x 8 times EBITDA = $44,480, therefore a value of $44,480 – $22,340 = $22,140 was generated.

How is the shareholding of the new entity divided between Cookies Gama and Beta? That depends mainly on the negotiation process. It is not necessarily distributed in proportion to the value before the acquisition process. A good investment banker will help the owners of Cookies Beta to enjoy a part of the synergies.

An excellent example of exploiting synergies was the acquisition of Gillette by P&G (Procter & Gamble) in 2005, where the companies expected a combined cost reduction of $1.2 billion and an increase in sales of up to $700 million over the long term as a result of the merger between two industry leaders¹.

In Colombia, an example of a successful business merger occurred in 2005 and 2006 when eight cement companies in the country (including Nare cement, Cementos del Valle, and Cementos del Caribe) merged (around the Caribbean cement). This merger took place using a share exchange in which Cementos Argos took a 70% stake in the new company under the name of Grupo Argos². This merger put Argos on the path to international expansion: it is one of the largest producers in Latin America and the southern United States (El Tiempo). This strategy has not been the only one in the Antioquia business group (GEA), where bank mergers such as Bancolombia, Corfinsura, and Conavi have taken advantage of synergies and economies of scale, positioning Bancolombia as the largest bank in the country with operations throughout the region. In addition to the mergers in the food sector between Noel and Zenú and Nacional de Chocolates, which in turn positions Nutresa (formerly the national chocolate group) as one of the most successful multi-latinas in the food sector³.

Not everything is smooth within the business merger processes. Negative synergies can also occur. For example, in 1998, Chrysler and Daimler (Mercedes Benz) merged, seeking to improve the competitiveness of both companies, but this merger never succeeded.

Some of the reasons for the business merger were the following:

Chrysler’s top executives in the United States had much larger compensation packages than German executives, even though Chrysler was much less profitable.
An attempt was made to combine two companies in countries with very different languages and cultures. Culture is an intangible that plays a fundamental role that can erode a merger process.
The Germans never wanted to share the know-how used to produce the famous Mercedes at competitive prices with the Americans out of mistrust, even though they owned Chrysler.
Rising fuel prices in the late 1990s strongly affected Chrysler’s sales.
Daimler did not perform proper due diligence before the acquisition; if they had, they could have avoided costly mistakes at the time of the acquisition.

Written by Simón Restrepo Barth, Professor of Finance, Member of the Boards of Directors, Investment Banker, Partner of ONEtoONE Corporate Finance Master in Finance from Universidad de Los Andes and a certificate in advanced valuation with high honors in NYU|STERN.

Entrepreneurs are Heroes too

During the COVID-19 crisis, we see many figures being applauded by their incredible efforts and recognizable work. We want to extend this prize to our fellow entrepreneurs who are sometimes left in the shadows of stereotypes, and their efforts may not be as recognized as they should.

The real question is, what makes an entrepreneur a Hero? Why should we consider them essential players during this crisis? And why do they deserve such nomination?

Heroes are individuals who, through certain qualities, focus their energy on creating a positive impact and momentum in a particular aspect of humanity that needs special attention. That being said, it is fair to say that entrepreneurs fit in such a role. Let see why.

Understanding the heroic role of the entrepreneur

In order for us to fully uncover the heroic mask entrepreneurs carry during their journey, we must understand three basic concepts:

The origin of their dreams.
The evolution of their dreams.
The “iceberg” effect.

Let’s take a quick look at them so that we can understand this idea better.

The origin of their dreams

This is one of the most fundamental concepts to analyze since here is where the image of the entrepreneur unjustly suffers the must.

Entrepreneurs are commonly misjudged when starting a company; most people think they do it for individual and superficial motivations such as financial success or egocentric reasons. Taking into account that these are motivational drives every human being succumb to naturally, successful entrepreneurs always have a higher purpose behind their actions.

Stereotypes blindside such deeper purposes, but it is essential to make an effort and look beyond the superficial. This theory is better explained in the next point: the evolution of the entrepreneur’s dream.

The evolution of the dream of entrepreneurs

When we talk about a dream evolving into something, we’re saying that the original intention of an entrepreneur already became a reality, actions were executed, a project was built, and decisions were taken. In other words, a company was established.

A well-structured company has two positive effects on society, which are the following:

It supports the backbone of the economy and becomes part of a chain of command design to sustain a country or community.
It generates jobs and productivity for a certain amount of individuals in need of such dynamics.

The first point is of extreme importance, because if it wasn’t for entrepreneurs and business owners the economic consequences could be catastrophic, since the system needs of organisms that are productive enough to maintain an uprising community.

Entrepreneurs also provide a sense of purpose for employees. Meaning that, for many, having a job creates stability and peace of mind (two crucial factors for the contribution of a happy life). Great companies also aim to create a growth margin for their employees, giving them space and time to develop a better version of themselves daily.

We can say that the creation of a company provides both economic benefits to society and gives purpose and direction to individuals. Remember, all this came from the genuine intention of a single person who made it through by building a company.

But there still something missing. We have to understand the effort entrepreneurs invest in the development of their dreams, the risks, and the sacrifices. For this, we will refer to what we call the “iceberg theory.”

Explaining the ice-berg theory

The iceberg theory is simple; people often see the results but not the efforts behind them. Entrepreneurs are often considered lucky, with many disregarding the financial risks they assume, the continued loneliness they experience, the hard decisions they must take, the emotional struggle, and the general cost of following their passion, knowing that at any moment they can lose it all.

With constant worries on his/her mind, our Hero must always be prepared for the next challenge, despite being under significant decision-making stress.

“The world is changing very fast. Big will not beat small anymore. It will be the fast beating the slow“ R.Murdoch

At the same time, the phone rings all day, every day. Emails never stop. Requests continuously arrive from the entire field force (authorities, banks, clients, suppliers, employees, unions, etc.) requiring urgent actions. He/she also deserves to disconnect and relax, but the reality is that he/she cannot afford it. Being a Hero means putting your life aside to improve the lives of others.

Entrepreneurs holding the weight of the world

Today, during these difficult times, entrepreneurs are more heroes than ever. Their responsibility, stress, endurance, and resilience demands have increased significantly. Entrepreneurs have to be able to manage change than at any other time before. Believe it or not, business owners have an everyday battle they have to fight to maintain their organization stable.

In other words, they fight to maintain jobs, productivity, and all the benefits they were producing before the crisis. Today, we wanted to recognize their work and effort; this time, the applause goes to all of them.

The world after the coronavirus: 20 changes

The world after the coronavirus: 20 changes By ENRIQUE QUEMADA, Chairman of ONEtoONE Corporate Finance

The sudden collapse of activity (a lockdown decided by the States) in all the countries of the Planet is producing a double impact on demand and supply that will have non-reversible effects.

The magnitude will generate changes in the economy, our behavior, our companies, and our way of understanding politics and society. Here are some of them.

20 changes the world will embrace after the Covid19

1. The European economy will become like the Japanese, as a result of a substantial financial effort to sustain the countries of Southern Europe, which will suffer tremendous rates of unemployment, deficit, and public debt. Deflation will be the risk that Europe’s rulers will have to fight. Germany will seize this great opportunity to tackle the situation with a pan-European vision. They will take the lead and help with strong public spending, mutualization of debts, and authorization of liquidity injections so that the architecture of the Union can reverse its decline. Europe will be hurt but more united after the coronavirus crisis.

2. The United States will embrace Keynesian policies, with colossal public debt and strong creation of money that will end up causing high inflation. The crisis will accelerate the decline of the American empire.

As there is more and more creation of dollars, people begin to change their behavior, establishing inflationary psychology, creating a feedback loop of depreciation, inflation, and money printing.

The US creates money by printing Treasury bonds, and only have to pay the cost of the paper. For these little pieces of paper produced from nothing, the rest of the world pays real money, earned with sweat and effort.

Other countries buy these bonds because most international trade is in dollars, making them indispensable to the global economy. In essence, 7.2 billion people depend on the US dollar to finance their international trade. It allows the 330 million Americans to run deficits far higher than any other country comfortably.

Other countries will get fed up with financing the US deficit by buying their government bonds while losing value with the likely depreciation of the dollar. The current monetary system will be broken, and the dollar will lose its role as a reserve currency.

For eighty years, the US, having the reserve currency, has been able to finance a lifestyle beyond its means. But, clumsily, it is turning the dollar into a weapon fining those who trade with its enemies (Iran, Russia, Venezuela), and thereby losing trust and respect of the rest of the world.

Its allies (France, Germany, and the United Kingdom) have created an alternative to paying in dollars: INSTEX, so they can trade with Iran while avoiding American sanctions. China and Russia will join in to create an alternative channel of international payments that will diminish the global role of the dollar.

3. Three large blocks will be consolidated in the world: China, the United States, and Europe. Both production and trade will be regionalized, returning to the places of consumption, with the help of robotics, 3D printing, and 4.0 productivity. The fear of further breaks in supply chains after the trade war and the Covid-19 will act as a catalyst.We entered in 2020 with 81% of the assembly and 64% of the components in the Technology sector worldwide made in China. Europe and the United States will transfer some of the manufacturing to their regions. China will react by strengthening its advantages of artificial intelligence in sectors such as health, purchasing, transport, payments, etc.

4. China will increase the weight of private consumption and services in its GDP, with higher local production of consumer goods that will compete with Europeans and Americans.The gap between the United States and China will widen. There will be a decoupling in the supply chains that will end the Chinese economic miracle, and their growth will stabilize around 3.5% of GDP.

5. OPEC’s members and developing countries will be the big losers, because of the fall in the price of raw materials and the flight of capital to developed countries. As the graph shows, the fall in the GDP of countries linked to raw materials is brutal.

The war for market share between Saudi Arabia and Russia will cause irreparable damage to the shale gas business in the United States.

6. New ways of international collaboration between countries will emerge in the face of the failure of global coordination that we have witnessed and to react to future crises. The United States will lose its world leadership; Europe and China will gain prominence.

7. Investment in public goods and services will grow. Even so, the gap between rich and poor will widen further, fuelling populism.

Less-educated workers will be disadvantaged in the new wave of digitalization and teleworking.

8. Religiousness will increase in the world after the coronavirus. People have seen their tremendous fragility. Many will come down from their deification and understand that they are only temporary creatures.

9. Less office space will be rented, and the price of rent will go down. Professionals have become accustomed to communication via video conferencing, and remote work with flexible schedules will grow.

10. Citizens will have learned to consume less. Online shopping will become natural in a new, much more digital society. The losers will be the chain stores, and shopping centers will become leisure platforms.

11. Online university education and masters will grow in popularity, boosted by augmented reality and 5G. Education will reconfigure towards skills.

12. Companies will hire fewer employees and outsource more FreeLancers. The number of freelancers will grow because professionals will be wary of job security and will have discovered the value of flexibility.

13. Private Equity will redirect its investment towards health, food, and technology-related companies. The shared economy will lose strength after the coronavirus.

14. Companies will sell foreign subsidiaries and non-strategic holdings to capture liquidity. Proximity suppliers will be sought, and just-in-time supply models will be renounced.

Companies with strong balance sheets and multi-channel distribution capacity will take advantage of the distress of competitors to drive intense business concentration and become regional champions. Investors will invest in these companies boosting their market capitalization.

15. Following the bubble of IPOs of loss-making companies at ludicrous prices, investors will bet on companies that generate profits. Many of the Unicorns will deflate and go bankrupt after the coronavirus.

As the graph shows, 77% of the companies that went public in 2019 were losing money:

16. Political leaders have used the pandemic to increase their power. Politicians will lose face, and experts will gain importance. Citizens will be frustrated by the inability and demagoguery of their leaders and will demand more expertise from governments after the coronavirus. Almost all current leaders will lose the next election. Politics will polarise towards the extremes.

17. The world will become more socialist after the coronavirus. There will be a reversal of capitalism and individualism that have dominated our society in recent decades. Governments will take a more significant role in the economy, increasing regulation, and intervention. The limitation of freedoms will increase.

18. Professionals will seek to enjoy themselves more, work less, and savor life’s little pleasures.

19. There will be a resurgence of start-ups because lockdown and boredom encourage creativity, and because many of their employers will go bankrupt. Workers will have discovered that there is less security in their jobs than they thought.

20. We are entering the 2020 crisis with debts that are considerably higher than the 2007 debt bubble. It will be the last rush of the super debt cycle that began after the Second World War.

The massive liquidity injections by governments will exacerbate the over-leveraging of already heavily indebted economies, culminating in an inevitable major recession within a few years with the bursting of the burgeoning debt bubble.

As in all crises, there will be winners and losers, but this pandemic will increase global solidarity, individual religiosity, and flexibility in the professional world. It will make us better people within a world that will create new supranational bodies and will again seek collaboration between countries.

Who is your target customer?

How to identify your target customer? You must choose which type of customers you want to serve. Wishing to help everyone is a mistake, just like it would be to cover all the needs in your customer segment, or trying to imitate every new idea. Many companies are living a “herding behavior,” following the leader´s steps and comfortable in vulgarity.

Reflect on which customer segment your company has the more potential to create a unique offer that covers a type of unattended need. Once discovered, be willing to renounce on the other types of customers that don´t have such a need for that service.

Insurance company Progressive discovered a poorly-served collective. Those with alcohol abuse or risk behavior history had great difficulty in being accepted by insurance companies. They tackled this collective, which had few alternatives, and which, in turn, allowed them to charge higher premiums. Thanks to their ability to handle information, they were able to identify segments within this collection that didn’t pose such risk, like drivers with drinking history but also parents with small kids.

To add real value, you must step in the customers´ shoes and understand their behavior. Try to understand the psychological reasons behind their purchases. You must feel how they feel. Don’t project your feelings to the market. Think about their concerns, needs, preferences, thoughts, hopes, relationships, and daily routines. For this, it’s essential to see them in action:

How are your customers?
What are their personalities like?
Whom do they identify with?
What are their hopes?
How do they see themselves?

Try to think as customers do. Don’t focus only on the features of the product or service, but on the benefit to the customers, on how they perceive it, on the psychological value. What do customers really value? What touches their core?

Customers buy solutions

See your customers as strategic assets and innovate around them, not around your products or services. Instead of thinking about the product used by the customers, think about the problems they have to address. Customers don´t buy a drill, they buy a hole. They don´t buy a service, but a solution.

It requires empathy to understand the feelings of a type of user and their frustrations. That’s why many business models have been born out of users’ frustrations.

Dropbox Case Study

Dropbox is an example. It was founded in April 2007 by Drew Houston, a 27-year-old man. The idea came to him while on a bus when he realized he had forgotten his pen drive. He decided to program service for synchronizing and sharing files between computers on the Internet. This way, he could always have access to the latest version of documents.

Every job has a functional, emotional, and social dimension. You must decide who will and who won’t be your customers. Ask yourself: ç

Who are my direct customers?
Who are my final customers?
What issues do they have?
What can I do to address these issues?
How do these customers use existing products to satisfy their needs?
What can make me different in a way that makes these customers interested?

Making customers your fans

After knowing who is your target customer, you have to make them your fans, you must give an overabundance of the feature they value the most. Focus your efforts on attracting and engaging fans – those who can be most interested and most loyal. They will help you spread the message among their peers. Turn them into your army.

It´s about closing the space between problem and solution, between what is and what could be, between the existing experience for users and the one they could have. But be careful, you must solve real problems, not ones created by you.

Maybe you can create a new class of customers that didn´t exist before like FedEx did when they developed a new market for those who wanted their packages to arrive in just one day, guaranteed.

Net jets found that business travelers had two options in two extremes, either they traveled on a commercial plane, enduring all the discomforts of an airport, or they had a corporate aircraft, with the enormous costs this implied. They understood that there could be a middle-ground formula, allowing executives to rent a private plane whenever they needed it.

After analyzing what the customers want and your capabilities, you must look at competitors and alternatives to see if there is something that will make you different in the eyes of those customers.

Naturally, the strategy is to satisfy the customer and gain a profit while doing so, that´s why you must ask yourself if the customer is willing to pay the price you have to charge for it to be profitable for the company. Thus, it’s about creating value for your customers and being capable of capturing value for yourself as well.

Next steps after knowing who your target customer is

Knowing who is your target customer is vital, and that is a great first step. Though, you must think that the strategic management of a company has many other areas that business owners must pay attention too as well.

It is about a collective approach towards dominating all the areas of your company through the right strategy, depending on your goals, industry, and many other factors.

Our CEO has written an excellent book that will help you get a glance and overview of how to achieve this. Fill out the quick form and download it today.

Download for free the bestselling book: "FIT: STRATEGY, VALUE, AND PRICE"

Please fill out the form and enjoy the book written by our Chairman, Enrique Quemada.

How to build a more profitable company through the FIT strategy and may other elements.

Discover the eight elements of the business puzzle, and all they contain, to build a valuable company.

Learn how to execute your strategy and maximize the price of your company as never before.

How to manage change

The big question is how to manage change? Well, it is not a matter of time; it’s a matter of commitment.

If you want to provoke change, create a proper culture. Instead of taking control, give it away. For you to create an appropriate culture, you must reduce control systems. Control is achieved when people control themselves.

Don’t give orders, but ask questions like: What would you do? What do you suggest? It’s not an easy task, but you must control your tendency towards giving orders or transmitting messages that undermine the dignity and responsibility of your subordinates.

Don’t just preach and hope a proper culture will develop itself; you must cultivate it and implement schemes that bestow authority and allow each employee to feel entitled. You must be very clear on whose responsible for avoiding the employee’s tendency towards delegating decisions to upper levels. Give the authority to decide to those who receive information, instead of moving data towards the authority, move the authority towards the information.

How to manage change formula

There’s a natural resistance to change that makes many strategies fail. To create change in your organization, you must apply the following formula:

Amount of change = Dissatisfaction + Vision + Process – Cost of change

Dissatisfaction: to create the change, you must produce an atmosphere of dissatisfaction with the current situation and generate feelings of need for change. On occasion, setting a sense of urgency works.

Vision: a compelling vision is an excellent ally for change. An ambitious challenge bonds the team together and stimulates it to reach the goal.

Don’t try to convince others on the need for change with numbers and statistics; do it with visual evidence as visuals are compelling. Make the team personally experience the pain that the current way of operating makes the client feel.

Process: Involve your employees in the decision. The change will be seen as the enemy when you suggest it to your team but will be embraced as an opportunity if your team proposes it. They’re the ones who must set their own goals, so they’ll commit themselves, and you can demand their completion on the dates set for each challenge.

Don’t try to change everything all at once. Break down your ultimate goal into smaller, specific, and achievable objectives. You can’t eat an elephant all at once, but you can do it piece by piece. Start with a leg. Use metrics and short-term milestones to gauge progress.

Cost of change: to create the change, you must first understand the points of resistance: What do people lose with this change? It’s natural for there to be resistance because you’re taking them out of their comfort zone. People are comfortable with what’s familiar, and anything new makes them anxious.

When you have everybody on board, you must create small victories, point them out, and celebrate them. Small goals lead to small victories, which in turn trigger a virtuous circle of behavior. Above all, you must over-communicate.

One piece of the puzzle

Managing your work crew and employees is one of the essential pillars of the strategy of your company. Nevertheless, it is necessary to acknowledge that it doesn’t end here. As the world is continuously changing, managers have to know how to manage change.

There are many other aspects to take into consideration when building up your strategy for a valuable company. We invite you to download for free the bestseller book written by our Chairman, Enrique Quemada, which will guide you through the most critical points of a solid strategy.

How to build a more profitable company through the FIT strategy and may other elements.

Discover the eight elements of the business puzzle, and all they contain, to build a valuable company.

Learn how to execute your strategy and maximize the price of your company as never before.

Download for free the bestselling book: "FIT: STRATEGY, VALUE, AND PRICE"

Please fill out the form and enjoy the book written by our Chairman, Enrique Quemada.

Entrepreneurs are our heroes

Many entrepreneurs wage daily battles, spend endless sleepless nights, feel misunderstood by their employees and their close ones.

Entrepreneurs are often considered lucky, with many disregarding the financial risks they assume, the continued loneliness they experience, the hard decisions they must take, the emotional struggles, and the general cost of following their passion, knowing that in a moment they can lose it all.

An entrepreneur in his 40’s started having severe panic attacks; he visited a doctor after an attack that forced him to stop his car and walk home. The doctor recommended he take a leave of absence, but his company needed him, and he kept on pushing until the anxiety medication kicked in. He knew this was not sustainable, so he hired us to sell the business. We got him a high valuation from a Private Equity that was consolidating the space, and he was able to walk away after the closing with enough money to retire and not stress anymore.

Employees can get to go home and forget about work, most of his friends go on vacation and don’t have to think about work, but that is not an option for him.

“For an entrepreneur disconnecting is not an option”

He can never forget about work and worries. Decisions are always in his mind; the phone rings all day every day, and emails don’t ever stop, he wants to disconnect and relax, but the reality is that he can’t.

Therefore, it can be one of the different reasons that motivates an entrepreneur to sell a business.

How can entrepreneurs make his effort worth it:

A good strategy is the best friend of an entrepreneur. Knowing how to manage your business will bring you two important things:

Al though worries and work won’t stop at least, the entrepreneur will gain a sense of direction, control, and progress once he manages to dominate all the areas of his company. Resulting in a feeling of satisfaction that will reduce the personal impacts all the sacrifices are causing.
A good strategy leads to higher benefits and value. In other words, it leads to the supreme objective of any entrepreneur: to see their business grow.

If you are in this, you have to go big. Your efforts have to pay out your sacrifices, and your success has to be your relief. Please, download this book written by our Chairman, Enrique Quemada, and learn the whole scope on how to manage your business to success strategically.

Download for free the bestselling book: “FIT: STRATEGY, VALUE, AND PRICE”

Please fill out the form and enjoy the book written by our Chairman, Enrique Quemada

How to build a more profitable company through the FIT strategy and may other elements.

Discover the eight elements of the business puzzle, and all they contain, to build a valuable company.

Learn how to execute your strategy and maximize the price of your company as never before.

Having a clear profitability model

Having a clear profitability model is very important. It explains how a company makes money while creating value for the client at the same time. The business model should not only help you to serve your client distinctively, but it must also pursue that the company gains a high return for shareholders.

The DuPont formula helps you to make decisions on strategy and the business model because it combines the three components for creating value: margin, efficiency (asset rotation), and indebtedness (balance structure).

ROE = Margin * Asset Rotation * Balance Structure

This translates into:

ROE = (Profit / Sales) * (Sales/Assets) * (Assets/Equity)

3 elements of a clear profitability model

You must understand which of these three elements is your true engine for creating value, and know-how you must compete. You must identify your profitability model and be coherent with it. Some companies compete through their high sales margins (Google). Others, through asset rotation (Walmart) or leverage, by using little capital and substantial debt (Banks).

Margin (Profit / Sales): tells how much money I make as profit for each dollar I earn. It’s the result of income minus expenses. Anything that lowers costs and increases income improves the margin.

Efficiency (Asset rotation): allows you to know how much money you make for each dollar in your balance. Some companies make money by rotating merchandise several times a year. If you have a low margin for each product unit you sell but sell it many times, you end up making a lot of money. This is what happens in supermarkets.

Balance structure (Assets/Equity): allows you to make money with a smaller investment since the cost of debt is lower to the cost of capital.

Return on equity (ROE) is the result of the income model (how much it charges and how it charges it), the cost structure, the margin per customer, and the speed of use of resources.

Does it end with having a clear model?

Having a solid business model is just one of the eight blocks of the success puzzle, according to the book FIT: Strategy, Value, and Prize written by our Chairman, Enrique Quemada.

If you want to know how to build an excellent strategy for successfully managing your company, be sure to get into the following topics:

Having a solid mission, vision, and set of values.
How to design a leadership strategy for your company.
Create the right working culture in your business.
How to execute your strategy.

These topics and more are all available in the downloadable e-book below.

Download for free the bestselling book: "FIT: STRATEGY, VALUE, AND PRICE"

Please fill out the form and enjoy the book written by our Chairman, Enrique Quemada

How to build a more profitable company through the FIT strategy and may other elements.

Discover the eight elements of the business puzzle, and all they contain, to build a valuable company.

Learn how to execute your strategy and maximize the price of your company as never before.