The Bridge: Spring 2020

SUMMER 2020

INDUSTRY KNOWLEDGE FROM OAK STREET FUNDING ®

Effective Strategies to Fuel Growth

SPRING 2020

FEATURES

SPRING 2020

PUBLISHER Oak Street Funding EDITORIAL DIRECTOR Beth Saxen

6 | Three Effective Strategies to Fuel Growth

CONTRIBUTING WRITER Scott Flood ART DIRECTOR Aidreen Hart The Bridge is a newsletter produced by:

4 | Six strategies for acquisition planning

8 | Grow By Enhancing Customer Experiences

10 | Ten Tips for Creating a Growth-Oriented Team

Oak Street Funding 8888 Keystone Crossing, Suite 1700 Indianapolis, IN 46240 844-395-8241 Loans and lines of credit subject to approval.

Potential borrowers are responsible for their own diligence on acquisitions. CA residents: Loans made pursuant to a California Department of Business Oversight, Finance Lenders License (#6039829). The materials presented are for informational purposes only. They are not offered as and do not constitute an offer for a loan, professional or legal advice or legal opinion by Oak Street and should not be used as a substitute for obtaining professional or legal advice. The use of this paper, including sending an email, voice mail or any other communication to Oak Street, does not create a relationship of any kind between you and Oak Street. Š2020 by Oak Street Funding, LLC.

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LETTER FROM THE FOUNDER/CEO

As business owners and leaders, we are always focused on growing our companies. This was my focus when I founded Oak Street Funding® as a specialty lending company in 2003.

Oak Street Funding started out with me lending to one vertical — insurance businesses. Today, we are a national business with nearly one hundred employees, eight business verticals, and a portfolio exceeding $1B—and, growing at an annual rate of over 22%.

Over time, I have explored and come to understand many strategies for growth. Three of these strategies stand out in my mind — consciously building a strong management team and employee culture, being very intentional about growth and having specific actions to achieve strong financial performance. I will cover these in depth later in this issue and hope you can utilize some of these successful strategies to help grow your business.

This edition of the Bridge® will also explore growth from different standpoints, including how to strategically plan for an acquisition, build an empowering work environment for your employees and deepen client relationships by enhancing the customer experience.

Text START to (317) 854-5146 Stay up to date with industry-relevant content by subscribing to text messaging from Oak Street Funding.

At Oak Street Funding we are as focused on not only growing our business, but also building long-term relationships with our clients by providing customized loan solutions that can enable business growth. Having leveraged various types of capital to grow this business, I understand that oftentimes growth requires investing in your business for the long term to realize new opportunities. These investments can be used to upgrade technology or add employees to expand office space or acquire another company.

Whatever your capital needs may be, look to Oak Street Funding to be a partner in your plans for growth. We can help you get there.

Rick Dennen, Founder, President & CEO

844.395.8241 | www.oakstreetfunding.com

Oak Street Funding® Vision Statement To be the market leader in client experience for commercial financing by delivering unique and diverse product offerings through cutting edge technology and exceptional employees that drive an EXCELLENT client experience.

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Six strategies for acquisition planning Acquisitions can present an excellent way to grow your business practice quickly, gain valuable market share, and improve revenue and profitability.

You’ll dramatically increase the chances that your acquisition will be a success by incorporating these considerations into your strategic acquisition planning.

1. Know what to expect

2. Know what you want

An acquisition will have profound changes on your business and the way you operate. Developing a solid understanding of your strategic objectives before you begin your acquisition and planning strategy will reduce the potential for surprises and unhappy outcomes. A carefully planned acquisition can help your business achieve a variety of strategic objectives, among them:

Effective acquisition planning is a complex process that demands making the right moves at every step. Preparation is critical, and the most important element is self-knowledge.

A buyer with a well-prepared acquisition strategy is able to:

• Economies of scale • Greater staff efficiencies • Stronger business reputation • Broader scope of services • Greater client base

• Describe what an ideal acquisition looks like.

• Show how that acquisition will fit into the business.

• Deliver a clear, compelling message about why they want to purchase a seller’s business.

• Explain how they’ll on-board and service a seller’s customers.

• Detail how they’ll scale up services to match the demand of the added client base.

• More depth of staff • Higher return on investment 4

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3. Do your due diligence

5. Seek diversity

The timeless warning, “let the buyer beware,” is valuable advice for the acquisition planning process. Sellers may have a variety of legitimate reasons for wanting to turn their business over to someone else. It may be as simple as retirement or succession planning. Or it may involve something that’s hidden, such as a scandal that might resurface and affect your profitability or reputation.

A key benefit of a strategic acquisition plan is that it can make your business more diverse. Most of us learned the wisdom of the “don’t put all your eggs in one basket” message long before we began our careers. Applying the same concept to your business is wise. Adding different, but complimentary, products or services that fit within your current competitive skill set provides the same risk management benefits as diversifying an investment portfolio. If the bulk of your clients and those of the business you’re considering can be characterized as part of the same group, you’re making the same mistake a novice investor makes when he sinks 95 percent of his funds into a single stock.

If the business appears to be a good fit with your strategic objectives, work with your accountant, attorney, and other trusted business advisors to perform a thorough analysis of the business, including: • Assess the staff to better understand their background and experience.

• Review the client lists for revenue streams and length of relationships.

• Ask for bank statements and compare deposits to recorded revenues.

• Use tax returns to validate revenue reports.

• Examine ratios, margins, and non-operating expenses.

• Study revenue trends and identify where revenue streams may be vulnerable.

4. Get the timing right Timing is everything when it comes to acquisition planning. Try to buy at the wrong time, and you might end up hurting your business. What are the signs that now may be a good time to pursue an acquisition?

• You have a really strong brand reputation • You’re flush with cash • Your team is hungry • You have a winning strategy • You can’t meet demand • Your system is efficient

6. Be a competitive buyer As acquisition activity heats up, the buyers who are poised to move first stand a significantly better chance of capturing the right deals. Develop your strategic acquisition plan and remember that a profitable merger or acquisition should dovetail nicely into your existing business plan and should never distract from, damage or take away from the business you’ve already worked hard to build. Do your groundwork ahead of time so you can position yourself as the ideal buyer as soon as an opportunity presents itself: • Perform in-depth market analysis and take a good, hard look at any upcoming opportunities even if you’re not ready to move forward.

• Investigate financing options and make sure you pre-qualify before drafting a bid.

• When you find a target, find out as much as you can about the seller’s needs and true motivation for selling.

• Once you’ve decided to pursue the business, move forward quickly with a fair opening bid to limit competition. 

• You’re ready to move up

Develop your strategic acquisition plan and remember that a profitable merger or acquisition should dovetail nicely into your existing business plan.

844.395.8241 | www.oakstreetfunding.com

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Three Effective Strategies to Fuel Growth

by Rick Dennen, President & CEO

As a business owner since 2003, I understand the desire to always be growing your business. And, while it’s satisfying to know your business has become financially larger and stronger under your leadership, there are also practical benefits. A growing business is generally a more profitable business, and when the time eventually comes to sell, a larger, healthier company will command a higher price.

While there are many factors that fed into Oak Street Funding’s growth, I believe three particularly powerful strategies fueled that growth and continue to do so today. Applying these strategies to your own business, whether you’re a start-up or an established company, may help you reach the next level.

Culture counts Consciously building a strong management team and company culture can lead to growth. I know some business owners dismiss culture as something that is touchy-feely, with little or no value, but I believe culture is a key component for growth.

A successful business is made up of people working together to achieve common goals. This cannot happen unless everyone understands why and how they work together and everyone is on the same page regarding the overarching goals of the company.

An engaged and motivated workforce provides outstanding customer service which can attract new customers and bolster client retention.

A key part of Oak Street Funding’s culture is encouraging our employees to give back to the communities we serve.

We support this philosophy by giving employees paid time off to volunteer and allowing our employees to decide 6

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what causes we’ll support. So it’s no surprise we attract people with caring, supportive personalities who work well with our clients and each other and that Oak Street Funding has been named a Best Place to Work in Indiana for eight consecutive years.

Culture is critical.

Manage like you’re selling tomorrow A second and equally important strategy is to run your business every day as if it will be sold tomorrow. I have first-hand experience with Oak Street Funding being sold three times

“A successful business is made up of people working together to achieve common goals.” with the shortest time frame being 30 days. Each time we sold it was like starting a new company—new capital, new board, new objectives, new strategy—three times in 12 years.

And while each sale had different circumstances, each resulted in positive outcomes for our company, shareholders and employees.

If you strategically manage your business as though you’re planning to sell it at any moment, it will inform what actions you take. As a result, you will focus on making the most of its value. Not its emotional value to you as a founder or owner, but the true value in the sense of what a prospective buyer would pay for it.

844.395.8241 | www.oakstreetfunding.com

When you start valuing your business by what potential buyers think about it, you begin to focus on the factors that mean more to them. How would a buyer view your offices, management team, processes, technology, margins, profitability, efficiency, and client base? You may be proud of what you’ve accomplished, but will that pride translate into a maximum selling price?

Looking at your business from this strategic vantage point will help you to determine what to improve in order to make your business more marketable.

And, when you invest time and money to evaluate and improve the way your business operates, revenue results usually follow. Plus you’ll be more enthusiastic, and your energy will motivate your team. I walk into work every day with this strategy in mind.

It informs my leadership process and guides the decisions I make.

Wisely leverage debt If you would like to expand or transform your business you will likely need to invest some additional capital. This could mean borrowing —which means taking on debt. If you are conservative by nature and your attitude toward borrowing may spill over into your business life— making you debt averse. Aversion to debt can result in not taking out a loan—even when it is economically advantageous. Are you comfortable with risk or do you make an effort to avoid risk as much as possible? Your degree of risk aversion can play into

the decision to take on debt to grow.

There is unquestionably some wisdom in avoiding debt, particularly for individuals. However, when it comes to business borrowing, “debt” is not the most accurate term. A better choice is “leverage” because it describes the role borrowing can play in your business. Essentially, when your business borrows, you are leveraging other people’s money to achieve a purpose that will increase the value of your business.

When the idea of borrowing is unappealing, businesses may often look to another option for extra capital— equity financing. Equity financing consists of giving up part of the ownership in the business by assuming new partners or selling shares to new investors. Are you prepared for new decision makers at the table setting strategy for your company?

As with most things in life there are pros and cons to both utilizing leverage and equity financing. If you do decide to borrow, find a lender who truly understands your business and the industry. Anyone can lend you money, but you will be better served with a lender that is deeply familiar with your industry, looks to build long term relationships and can structure financing that will best support your objectives.

As business leaders and owners we have incredibly full plates but taking the time to incorporate these strategies into your business planning can lead to growth and its many benefits. 

Rick Dennen is the Founder and CEO of Oak Street Funding a specialty lending company. Rick founded Oak Street Funding in 2003 with one vertical—insurance businesses — and has grown the company into a national business with nearly one hundred employees, eight business verticals, and a portfolio exceeding $1B.

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Grow By Enhancing Customer Experiences A 5% boost in customer retention increases profits

25-95%

89%

of companies believe customer experience drives customer loyalty (invespcro.com) and retention. (invespcro.com)

(Bain & Company, quoted at forbes.com)

Customers are

$

It costs

5 times

$

as much to attract a new client than to retain an existing one.

$ $ $

(forbes.com)

5.2x more likely to purchase

from companies with a great customer experience.

(5thlevelweb.com)

Increasing emotional engagement by implementing, for example, a Client Delight program can drive a

5% uplift

in annual revenue

5%

You have a

60-70%

greater likelihood of selling something to an existing client compared to just

5-20%

to a prospect.

(Loyalty Deciphered – Capgenmini Digital Transformation Institute)

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(invespcro.com) www.oakstreetfunding.com | 844.395.8241

Capital.

Partnership.

Resources.

You’ve worked hard to build your business. Really hard.

As you continue to move forward, doesn’t it make sense to work with an experienced lending partner with the capital you need to support your business today, and your successes tomorrow.

Oak Street Funding — we’ll get you there.

Call us at 844-395-8241 or visit oakstreetfunding.com to learn more.

10 Tips for Creating a Growth-Oriented Team Business owners find themselves pulled in many different directions, without enough time in the day to complete the endless to-do list. Building a team with a growth mindset to support daily activities and ongoing customer needs is crucial to maximize business growth.

Think Big Picture

Evaluate Current Team

Before hiring, take time to look at your overall business strategy:

Objectively assess your current team, including skill sets and strengths, industry and functional experience, as well as employee interests and passions. Uncover your staff’s shortfalls so you can fill gaps. Use what you learn to update or develop new job descriptions.

Where

do you see the company growing in the next year, five years or decade?

Is

your goal to acquire another business or simply grow your own?

What

customer needs can your business serve?

Determining your goals will ensure you make the right hiring decisions for creating great teams.

Eliminate Underperformers If certain employees are not performing to expectations, or are not a good fit, you may be better off letting them go to make room for more growthminded employees. Your business may not be for everyone, and you can help your underperformers find success in a different career. Remember to treat them with respect and compassion as you transition them out of your business. How you treat someone leaving is as important as how you treat someone coming on board.

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Producers or Servicers?

If your goal is to increase your business, you’ll need to hire a producer accustomed to bringing in new clients. If your objective is improving the service to existing clients, you’re better off hiring someone focused on retention. You’ll need a mix of both types of employees to grow your business.

Think about what is the right mix of growth and retention for your business model.

www.oakstreetfunding.com | 844.395.8241

Recruit Creatively Create job descriptions that talk about the professional growth opportunities and sell the position’s benefits, rather than simply listing the skill requirements or responsibilities. You are competing against other businesses as well as other job opportunities, so make sure your business and the job sound appealing to potential candidates. Use social media, such as LinkedIn, to creatively recruit for talent.

Train Thoroughly Every new hire should participate in an employee onboarding process, allowing them to understand their responsibilities and functions within the business. Invest in training and development. Encourage all your employees to attend regular continuing education programs to update their skill sets. Connect new or younger team members with mentors in your network or organization who can help them succeed.

Review Carefully Once you have attracted candidates for your position, evaluate them carefully to make sure they will be a good fit with your business culture and will integrate well with the rest of the team. Creating a cohesive team can be challenging, so make your hiring decision using an interview panel approach and ensure everyone is rating the candidates based on pre-set criteria needed for the role.

Deliver Feedback Providing regular feedback to your employees improves employee engagement and increases productivity and efficiency.

Having an open feedback loop will ensure your employees feel valued and appreciated, which will make them more likely to deliver higher performance and help grow your business.

Provide Technology

Find Funding

Have the right technology in place to allow new hires to perform their jobs successfully, while enabling them to stay current and motivated using the latest tools to grow your business. Younger candidates may decide which employer to choose based on factors such as work environment and available technological resources. Regularly ask employees if there is anything you can provide to enhance their productivity and keep them engaged.

Concerned about the financial resources needed to bring on new employees or purchase new technology for creating growth-oriented teams? Look for a working capital loan to help invest in your business. With low interest rates and affordable payments, you’ll free up cash flow for other growth needs. Plus, the right new hires and upgraded technology will soon contribute to the bottom line, providing a satisfying return on your investment. 

844.395.8241 | www.oakstreetfunding.com

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Our Exchanges allow you to review each other’s information and request details to begin the acquisition process. You can also sign up to receive alerts as new listings become available.

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