Predicting future success is risky.  Mostly, investors define value based on historical data of cash flows with analysis of market trends, comparable values, management ability, and forecasts with macro-economic indicators to balance findings.

These metrics don’t dig deep enough.    Buyers camouflage real forecast with obsession for EBITDA growth defining value heavily weighted on multiples of cash flow.  Of course this is important!  But, we often obsess on quarterly cash flow growth without understanding an organization’s ability to build sustainable growth.

These are other indicators of future growth and value:

  • What is really behind customer relationships and pipeline? Customer mix?  Understanding contract relationships with terms and volume speaks to contrasts of customer trust or vulnerability.   What levels of senior management involvement exist indicates value of relationships.  Data on churn exposes trends.  Variance reporting on pipeline management measuring changes in timing and revenue indicates depth of commitment to managing future.  Does assessment of ability for expansion into new markets exist?
  • What about product pipeline? Is analysis available measuring life cycle of current products?  Take a historical view of new product innovations and delivery and compare that to expectations for new products post transaction.  Analyze not just on product delivery, but on innovation and creativity around product packaging and promotion.
  • What are pricing trends of products or bundles for service offerings? Pricing is a marketing tool.  How have companies managed and reported change in pricing and demonstrated creativity with pricing a competitive weapon.  Leveraging price creating longer term commitment in customer relationships demonstrates ability to deliver future value.  Can the company demonstrate deeper understanding managing product mix in volume and gross margin trends in relationship to pricing?
  • Simply understanding R&D spending (operating, capex) and investment in marketing/product development is an indicator of ability to sustain growth. If EBITDA trends are up, but investment in these areas are in decline or lower % of revenue, we see an indicator that future growth trends will not be sustained or lacks a roadmap for new product or packaging innovation.

Change is rapid and competition fierce.  Managing the future without adherence to product development and innovation throughout the cycle will eventually result in value decline.  BOD’s and Management not investing in growth will result over time in irrefutable decline and loss in value.

The “Red Zone” in football represents the final 20 yards to score.  Length of a football field is 100 yards. It’s that last 20 yards where competition is fiercest and defenses stiffen.

Researching teams most efficient scoring touchdowns in the “Red Zone” offer a sharp contrast between winners and losers.  In 2015, the best team scoring touchdowns from the Red Zone was the Carolina Panthers.  Carolina finished with a league best 15 wins and one loss and a 69.4% red zone touchdown scoring proficiency.  The team with the lowest proficiency (38.3%), the Cleveland Browns, finished with an NFL league worst record of 3 wins – 13 losses.

No doubt your business manages a rigorous sales pipeline.  And, that final closing section bears resemblance to football’s “Selling Red Zone.”  The final 20 yards in selling is no time to relax!  Nearest the goal line, obstacles are raised and competition toughest.   Fighting to gain turf positioning for success is great; but scoring is the only reward.

Several Closing techniques exist.   One area to consider is scheduling a face to face meeting to validate your position with the most senior decision-making levels.   Don’t assume success, fight till the very end.

A study of Hall of Fame players and coaches from Championship teams offers one correlation.  Since it takes 5 years minimum after retirement for Hall of Fame eligibility, we researched 1950 through 2000 and randomly selected a sample of 20 teams from Baseball and Football.

19 of 20 teams produced at least 3 Hall of Fame players.  The only outlier is the 1990 Cincinnati Reds, with only one.  Three teams stood out.  The 1960 and 65 champion Green Bay Packers (11) and 1955 and 1965 Brooklyn and Los Angeles Dodgers (8) produced multiple Hall of Fame players.  Millennial age fans of the Cleveland Browns would be surprised to learn that 9 Hall of Famers came from their 1950 and 1955 NFL Champion teams.

Possibly more profound is the preponderance of Hall of Fame coaches from this study group.  Of 20 teams, 15 were led by current Hall of Fame inductees.  That list of leaders includes Vince Lombardi, Paul Brown, Chuck Noll from football and Casey Stengel, Walter Alston, and Earl Weaver from baseball.

The list of player Hall of Famers from our study group included the likes of Dimaggio, Clemente, Koufax, Graham, Starr, Bradshaw, Payton, Unitas, Robinson, Groza, Hornung, Bench, and other greats.  More than 100 Hall of Fame inductees hail from these rosters.

It may be worth considering if our organization breeds a culture of individual and team excellence.