Ron: Many small and mid-sized companies don’t have the time or expertise to focus on strategy in any real depth – there’s a gap between small-business needs and traditional financing and advisory services. That’s where the trusted advisor comes in – the central element of the Next Street model. We bring this model to business owners who are focused and committed, with a strong operational track record and detailed knowledge of their industry. We’re not there every day, but the Next Street model is high-touch.

Jon: Every business faces a wide range of important choices, from finance and strategy to talent and marketing. As they grow, those choices and opportunities multiply. The most successful businesses realize they can’t be all things to all people. The critical element is to focus and execute on the top three to five decisions and actions that can truly move the needle on performance.

That takes the commitment and skill to analyze the trade-offs involved, both economic and others. It also requires the confidence that the options have been thoroughly analyzed and that the resulting decisions are sound. Second-guessing undercuts successful execution.

Jon: The major financial decisions usually relate to business performance, capital investment decisions, and growth strategies. Strategically, the central issue is where and how to compete which markets they participate in, how they position themselves, how they’re priced, how they’re differentiated, how they grow. Where do they make the money, why do they make it, and how do they grow those categories?

Ron: Marketing also plays a big part in how they position themselves, including – among many other elements – branding, advertising, and web presence. And, of course, organizationally it’s the leadership team, clarity of roles and responsibilities, and accountability for performance, implementation and execution, among others.

Jon: Here’s what we ask: Where is the pain? What are the three to four things that the business owner and the management team worry about, that keep them up at night? Usually, the owners can point to an immediate need that they want help with right away. They might say, “We’re trying to evaluate this real estate opportunity,” or “We’re making more revenue but less profit, we can’t figure out why,” or “We have these vacancies that we can’t fill.” Our process starts with building a fact base, and we often find that the pain is symptomatic of a broader strategic need.

There are certain truisms in business: not all opportunities, customers, products, regions, are created equal. They have different price points, different costs, different capital requirements. Many business owners have a hundred different opportunities on the table. But companies are often making decisions on a one-off, ad hoc basis. They’re reactive as opposed to proactive. They come to us, they partner with us, so they can take the next step, move to the next level. Those decisions need to be evaluated on key criteria. Somebody needs to guide and manage that process.

Ron: It’s usually capital that first brings potential clients to us: not enough capital or not the right kind of capital. Often, these businesses have fully leveraged the capital that they currently have access to at their traditional financial institution. They need more growth capital to move ahead – they’re stuck.

Entrepreneurs are often immersed in day-to-day operations and have blinders on for everything else. For example, we’ll ask them to identify the five lines of business that make them the most money. Ninety-nine percent of the time, when we do our analysis, they may be right on three of the five. That might be a good analysis based on intuition and experience alone, but it’s just not good enough. Often, they’re chasing after top-line dollars – which may not be the best strategy.

We’ve seen very clearly that profitability is concentrated in most businesses -- our companies do best when we work together to create targeted strategies for them to grow the highest-value opportunities. We like to narrow it down to the top three to five with numbers behind it, so they can make informed choices.

Jon: It’s important to keep in mind that these companies are fundamentally very strong. We work with successful, proven, operating businesses that have weathered economic cycles, are strongly motivated to continue growing and to continue creating jobs. Our business owners are successful. They know how to run their businesses, and they have great operational instincts.

Jon: The most important principle here is that everything we do is highly customized. We do have a proven process and methodology for building strategy. Typically, we build a fact base, develop and analyze options, and make recommendations. But again, every company is unique, and every opportunity is unique, and we tailor everything to the client.

Next Street is very hands-on and analytical. We believe that it’s critical to look at everything – internally and externally, creating a fully integrated picture of what’s happening inside the company and outside in the market. Building the fact base is getting a granular view of the business: price point, cost to serve, capital investments required, customer analysis, competitor analysis, forecasting, and so on.

Ron: We often see business owners come to us after they’ve been working on these issues for up to nine months. With our analysis of revenue, cost, and profit drivers, we can show them, “Here’s where and how you can grow. It’s your pricing model that drives profitability, your growth margins – all of those pieces that show where you are or are not making your money.” Most entrepreneurs are very savvy – they usually get it right away.

Jon: We see that most businesses do need a written plan, a living document with facts, options, and recommendations. Many small business owners know all this in their gut, they may understand it, but they haven’t looked at the commonalities. Some don’t have a multi-year financial forecast. They may have a financial budget that just builds on last year’s plan. And a lot of business owners don’t know what their business is worth. Next Street brings a macro view; the client brings a more hands-on micro view, including knowledge of their industry from the inside out.

Ron: Finance is key and we’ve noticed some patterns here. First, when the issue is inadequate capital from their current financial institution, it’s often due to a lack of clear communication. In many cases, this happens because they don’t have a clear, fact based strategy for using the growth capital. So once we have identified the growth model we incorporate the financial structure to execute the plan.

We’ve also stepped in to work with clients and their financial institutions to assist in restructuring or acquiring growth capital. For example, if the bank’s not willing to extend credit for acquisition of real estate to a client of many years, to my mind it means that the bank is not confident in the client’s growth strategy. Or perhaps the bank is looking exclusively at previous history. So here’s where strategic planning becomes absolutely indispensable to sourcing and customizing capital. And this is why we don’t finance a company unless we’ve done the strategic work. It’s the only way to really understand and address the capital needs – whether the business needs a new capital source, or can benefit from a kind of mediator with its current financial institution.

Ron: The trusted advisor is extremely valuable to entrepreneurs because they can leverage this model. There’s a point person – a partner – on every account. That’s where the foundation of the trusted advisor relationship is forged. A managing associate works closely with both the partner and the client to coordinate the team’s input into building the fact base and conducting the analysis. Then there’s an associate supporting that managing associate, depending on the client’s needs.

As the strategic plan is developed, and ultimately executed, the partner is continually evaluating the strategy. And here’s where the business owner can leverage the entire team, pulling in as needed our team members specializing in talent management, real estate, marketing, and many other strategic areas. For example, if we define a talent management issue they’re having with their chief financial officer, we’ll bring in our talent managing associate. We may even do some interviews while moving ahead with other critical work. Because we get under the facts of the business, we’ve done the groundwork to move on several paths at once. We think you have to holistically serve this customer base.

Jon: One of the most successful and effective ways for inner city small businesses to grow is by expanding – moving to the next level. They may have a winning model that they can expand through replication in new regions.

Ron: For example, we’ve been working with a service business with a winning business model that actually revolutionized their industry. As a result, they had a pretty significant share of the local market. They were unsure about where and how to grow. When they came to Next Street, they were considering adding different kinds of services, among other options. But they really hadn’t explored them in any detail with any rigor.

Jon: Our team worked with the business’s owners to build a detailed, comprehensive fact base. Then we developed a long list of growth options through interviews, research, and analysis. We prioritized a short list of opportunities based on customized evaluation criteria, and then recommended five core opportunities for priority focus and execution.

Ron: Ultimately, the business owners agreed that regional expansion was their best option, and we developed a growth plan for them, which they’re now executing. They’ve been able to utilize advice and services that they never had access to before. And they are successfully driving profitability and growth.