Ten tips on how to grow a utility business
There are still plenty of opportunities to grow a utilities business, as long as the board doesn’t lose track of some fundamental guiding principles. Here, Greig Brown runs through them.
Earlier this year, a group of seasoned support services entrepreneurs launched a £92 million fund, Aliter Capital I (“Aliter”) for investment in small and mid-sized support services businesses including the utilities segment. In March 2017, Aliter also established Ipsum Group, a utilities and infrastructure services consolidator.
Here are Aliter and Ipsum’s top tips for leaders looking to successfully grow their utilities business in today’s environment.
1. Innovation is key
Never has there been more demand for technical innovation in the utilities space. Utility companies are now heavily incentivised (and penalised) to deliver efficiency savings, improve customer service and find new innovative ways to manage their networks as we move towards a low-carbon economy. Successful businesses will align their strategy to meet the needs of their clients through innovation and by embracing new technologies, systems and processes. It is also key to recruit and develop the right people and to create an environment where they can develop and implement new ideas.
2. Consider consolidation and broaden service offering
The utilities sector is highly fragmented and the drive for enhanced technological capability represents a strong driver for making acquisitions. Consider expanding your range of services and geographic footprint through acquiring additive businesses. The utilities sector has a demand for multiple services and the supply chain needs to develop value-adding solutions. Businesses should consider expanding their range of services and bundled solutions to support growth. By developing a multi-skilled workforce across a range of activities and sectors there is a real competitive advantage to be gained.
3. Move from a regional to a national mindset
The ability to support clients’ assets across a wide geography is key to winning large contracts within the utilities market. There are numerous similarities across the large utilities asset owners within the UK, so geographic expansion to support growth is a key strategic opportunity. Becoming a national player and working with multiple utilities companies is value enhancing.
4. Build a deep talent pool
As you grow, you’ll need more and more good people to help drive your business forward. Ideally most of them should be home grown, so make sure you are investing in training and development. But mix things up now and again with fresh perspectives and specific skills from external recruits.
5. Balance freedom and control
You need to give good people the freedom to get on and run their part of the business. Delegate profit and loss responsibility as far down the business as you can; but make sure there are clear boundaries – strategies, policies, rules and budgets that people must work within.
6. Develop a clear strategy – but keep things flexible
Understand the dynamics in your markets and keep a close eye on your competitors. Compete in growth markets where you can build a winning position and become an important part of your customers’ lives. Make sure you’ve got a clear strategic business plan and detailed budgets. But don’t be rigid – if the world changes tomorrow, make sure you have the flexibility to respond.
7. Build a brand
It may be subliminal, but a strong positive brand with a clear set of values will yield significant benefits. Customers and prospects will feel more confident about dealing with you. The best people will want to come and work for you. And, when it comes to exit time, it’ll help maximise the multiple.
8. Make sure you’ve got a convincing growth story
If you’re looking to realise the value in your business, you’ll need a really convincing growth story. You’ll need to be able to show a track record of consistent growth – at the top and bottom lines. You’ll need to be able to show that you can win major contracts – and maybe also that you can find and complete sensible acquisitions. Looking forward, you’ll need to be able to demonstrate a strong order book, with visible, longer-term revenues, that your business is scalable – and that you’re well-positioned in markets that will keep on delivering growth opportunities. You should also be able to demonstrate strong and long standing customer relationships that have been cultivated over the years.
9. Keep a clean business
Make sure that all key business risks are identified, managed and mitigated and that you don’t have any time-bomb liabilities. Don’t let poor record keeping and documentation trip you up – contract documentation, personnel records, health and safety records, property leases and titles and insurance documentation all needs to be easily accessible and up to date.
10. Cash, cash, cash
It’s advice that’s probably as old as business itself, “revenue is vanity, profit is sanity but cash is king”. Just make sure you’re converting your profit to cash, that your cash conversion ratios are where they need to be and that you understand intimately the working capital needs of your business.
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