1.
No Man’s Land
Doug Tatum
Chairman, Newport Board Group

2.
No Man’s Land: Adolescent Stage of Business
When your business is too big to be small and too small to be big…

3.
No Man’s Land
The Small and Shrinking Middle Market
All in Economy
Firms
Employee Size
2000
2010
Count Change
Establishment
Change
1-19
10,582,370
18,915,551
79%
60%
20-99
650,221
659,685
2%
-3%
100-249
73,499
71,518
-3%
-6%
250-499
20,916
20,100
-4%
-15%
500-999
9,504
8,954
-6%
-25%
1000+
9,244
9,047
-2%
-35%
Totals
11,345,754
19,684,855

4.
Average Growth Comparisons (2006-2010)
Based on average company in existence over all of the past five years.
On average, over the past five years, companies in No Man’s Land:
- added 8-times as many new jobs…
- grew at a rate almost 4-times faster…
- expanded 3-times more often…
…than the average US business establishment.

5.
Contribution to US Employment Growth (2006-2010)
Based on average of all companies over past five years.
Companies in No Mans Land account for less than 3% of business
establishments, yet they contributed 30% of new jobs added by
all US businesses.

6.
YourEconomy.org

7.
Meeting the Growth Challenge:
A Map through No Man’s Land--
The Four Ms
Realign with your Market
Hire your Senior
Management
Understand your Model
Raise your Money

8.
The Market Transition

9.
Alignment
The company is small and
the entrepreneur is in control

10.
Meeting the Growth Challenge:
A Map through No Man’s Land—
Market Mis-alignment
Company
Simplicity
Customer
EARLY STAGE/
SIMPLE
EARLY STAGE/
SIMPLE
Multiple Customers
Company
RAPID GROWTH/
SIMPLE?
Complexity
Market Mis-alignment is the natural progression of
Entrepreneurial Control

11.
Blind Spot #3: Value Proposition
85%
7%
source: Newport Navigator
CEOs say their employees can clearly state their
company’s value proposition
Leadership teams can articulate a common
value proposition

12.
Meeting the Growth Challenge:
A Map through No Man’s Land-The Market Navigation Rule
The business as a whole must become good at doing
what the Entrepreneur did well with customers in order
to successfully re-create Market Alignment
.

13.
The Management Transition

14.
Blind Spot #2: Accountability
86%
20%
source: Inc. Navigator
CEOs believe that everyone
is held accountable for
performance
Leadership teams agree

15.
Meeting the Growth Challenge:
A Map through No Man’s Land-The Management Navigation Rule
The founder must hire at the top first, not the
middle, to successfully navigate through No
Man’s Land

16.
The Transition in the Economic Model

17.
Meeting the Growth Challenge:
A Map through No Man’s Land-The Model
.

18.
The Transition in the Economic Model
Know your Profit Zones

19.
The Case of the Freight Forwarding Industry
Pre-tax Profit % by Five Year Average Firm Size
$<
50
0k
$5
00
k1m
$1
il
m
il$5
m
ill
$5
-1
0m
$1
0m
il
il20
$2
m
il
0m
il50
$5
m
0m
il
il10
0m
$1
00
il
m
il p
lu
s
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
Pre-tax Profit %

20.
EBITDA and Adjusted EBITDA
Revenue
Evolution Capital: Case Study I

21.
EBITDA and Adjusted EBITDA
Revenue
Evolution Capital Case Study II

22.
Meeting the Growth Challenge:
A Map through No Man’s Land-The Model Navigation Rule
The business’s value proposition must be scalable (profitable
at a higher volume) to successfully navigate No Man’s Land

23.
The Money Transition

24.
Illustration of “Capital Funding Gap”
Capital Funding Sources and Risks for Small and Emerging Businesses
Funding Level
Business Category
Emerging
Emerging
Growth
Growth
Businesses
Businesses
$1 million
“CAPITAL NO MAN’S LAND”
“CAPITAL NO MAN’S LAND”
-Limited Cash Flow-Limited Cash Flow-
0
(“Too big to be small; too small to be big”)
(“Too big to be small; too small to be big”)
Start-up and Other
Start-up and Other
Small Businesses
Small Businesses
Business Risks
Investment Bankers
Investment Bankers
(IPO Market/Private Placements)
(IPO Market/Private Placements)
Commercial Bankers
Commercial Bankers
Private Equity Groups
Private Equity Groups
Venture Capitalists
Venture Capitalists
SBICs/SBA Loans
SBICs/SBA Loans
BUSINESSES IN
BUSINESSES IN
$250,000
Capital Sources
Lower
Risk
Very Limited Access to Capital
Very Limited Access to Capital
(Angels/Factors)
(Angels/Factors)
High Cost of Account && Collateral
High Cost of Account Collateral
Management
Management
Business Borrowing Exceeds Personal Assets
Business Borrowing Exceeds Personal Assets
Investment by Family && Friends
Investment by Family Friends
Loans Based on Personal Assets:
Loans Based on Personal Assets:
Banks/Home Equity/Credit Cards/SBICs/SBA
Banks/Home Equity/Credit Cards/SBICs/SBA
Higher
Risk

25.
Private Equity Faces New Challenges and
New Opportunities
Employee
Size
2010
# of
Firms
# of
% of Total
Companies Firms already
Public &
Financed
Private
Capital
Backed 2010
1 in 5 are PE
Ready:
% Bought out
1 in 10 are PE
Ready:
% Bought out
100-249
71,518
3017
4%
21%
42%
250-499
20,100
1337
7%
33%
67%
500-999
8954
928
10%
52%
104%
1000+
9047
2055
23%
114%
227%

26.
Add-Ons as a Percentage of Buyout Deals

27.
Number of Secondary Buyouts and
Secondary Buyouts as a Percentage of Total
Buyouts

28.
Meeting the Growth Challenge:
A Map through No Man’s Land-The Money
.

29.
Meeting the Growth Challenge:
A Map through No Man’s Land-The Money Navigation Rule
The key to raising money is reducing real
and perceived risk of the company
.

30.
Invitation
Get Radically Objective About Your Business

31.
Blind Spot #1: Team Alignment
92%
2%
source: Inc. Navigator
CEOs say their teams agree with
and can clearly communicate
their strategy
Leadership teams can list the same
strategic priorities

32.
General Thoughts and Conclusions
Think Strategically
Act Strategically

33.
No Man’s Land Q&A