Job Security for the Ineffective

Business seller: “We implemented our plan, hit a speed bump, regrouped, profits are lower than per the plan, but pay me for the business as if all went well.”
Business buyer: “You’re (expletive deleted) crazy.”
You could substitute business owner telling a customer the price went up because of an operations issue no fault of the customers and get the same response.
The above was triggered by a flyer we received in the mail recently from Sound Transit. They’re hosting community meetings to discuss their $50 billion, yes, that’s a B, train project over the next 25 years. For a 19th and early 20th century technology in a time when Google, Audi, and others have logged millions of miles in self-driving vehicles. This from a group that:
  • In a 1996 tax and bond package promised light rail from the airport to the University District and virtually guaranteed it would be done in 10 years and within budget (no additional taxes the County Exec said).
  • In 2008 “rebooted” the project for a shorter run (only to the stadium), another eight years, and with a new budget (a lot more money).
  • A 2016 announcement they finished on-time and on budget.
Don’t you wish you could do that? “We rebooted your project and it will cost you more than you contracted for, it will take longer, but we’ll meet our new timeline and budget.” No, actually you don’t wish it, as your ethics don’t allow you to lie.
Back to the beginning, I do see a lot of business marketed with the premise of, “Ignore what happened last year, you’ll do a lot better.”
Advice: run your business to show a lot of profit, do so consistently, and you won’t have to struggle with ethics and integrity when it comes time to sell. You won’t have to “add-back” (to profit) phony items plus your salary to inflate the net income. And while you’re at it, don’t sell it when it’s not ready if you want “full price.”
“Success loves a witness, but failure can’t exist without one.” Junot Diaz

Spring has Sprung

It’s a different mindset when walking through our front patio and entryway or when sitting on the deck when there are bright flowers in the pots. The sun is out, fruit and other trees are blossoming, and there’s a lush green everywhere.
Now when I look at the weather at our cabin I see snow this past weekend and realize how nice this weather was (and will be later this week), especially after a winter of record setting rain.
In Seattle one doesn’t have to notice these things to realize when it’s an early-spring, bright, and sunny day. All you have to do is pay attention to the traffic patterns in the afternoon. Rush hour is earlier, and there are more people walking their dogs, running, and biking. The gym is less crowded, as are many offices. At least judging from the lack of calls or emails after mid-afternoon (I had no more than five business emails after 3 pm last Wednesday).
Now a curmudgeon would whine about all the lost productivity. I say, enjoy it while you can, there’s always time to catch up. I’ll bet productivity goes up after people take time to enjoy the post-winter weather.
“It’s not enough to be busy. So are the ants. The question is, What are you busy about?” Henry David Thoreau 

What’s Your Succession Plan? I Hope It’s Better than United Airlines Plan

On March 14 was the day United Continental Airlines CEO Oscar Munoz eturned to work after he had a heart attack and heart transplant last October. As the Wall Street Journal stated on March 7, 2016:
“Mr. Munoz’s illness has shaken a company that was already under stress.”
What would happen to your company if you needed a heart transplant? What about months of chemo or dialysis?
United has taken heat for not disclosing Mr. Munoz’s health issues, not announcing the heart attack for four days, and for not being prepared with a succession plan.
Guess what, they’re not alone. Most businesses aren’t at all prepared for succession, sale, or even the owner taking a four-week vacation (with no cell or Internet service).
This is exactly what business buyers look for, a catastrophic event. The three D’s are divorce, death, and disability but anything that delivers a haymaker to the owner is spelled “opportunity.”
One of my client’s top customers has an owner in his 80’s who states he’ll never retire and doesn’t plan on dying. Think there’s a succession plan there? Think he’s read my book, If They Can Sell Pet Rocks Why Can’t You Sell Your Business (For What You Want)?
Do yourself or your clients a favor and get it. Then do as my client Rod Jones says and have a Nike moment. Instead of planning on when to read it, “Just Do It.”

Sporadic Marketing = Disaster

Recently I volunteered to teach my class at the local SBA office. I do it two to three times a year and it’s titled, “Dynamically Growing a Consulting Business.”
A week out I told the SBA admin I thought we should cancel because there were only three registrations (I want at least 10 as it’s a very interactive class). We ended up with 18, which has been about average over the last few years. Here’s why it was at three and then 18.
  • The previous admin seems to have gone MIA and no active marketing had been done. Only passive marketing, a listing on the website. Their other recent classes also experienced low attendance.
  • They did two email blasts to their list and picked up 15 people in one week.
FYI, it was a great class with smart people who willingly commented, questioned, and taught me a couple things!
The point of the above is, as I mention in my class, marketing must be consistent and repetitious. I get the hardcopy quarterly newsletter from Zachary Scott without fail. My friend Dan Weedin has his Extra Points newsletter in my inbox every Monday morning.
Consistent: Whether your marketing plan has you doing something daily, weekly, monthly, quarterly, or on a different schedule you must do it religiously. Don’t let me see your blog and find the latest entry was nine months ago. Don’t call it your monthly newsletter if you’re only sending six a year. If your goal is to make two phone calls a day then make two every day.
Repetitious: Know your schedule, what works for you. A very technical newsletter is fine to send four to six times a year. Something short, like this memo, needs more frequency. (And my opinion is don’t send me a teaser paragraph with a link as I’m too busy to click on links based on 22 words).
Finally, I don’t pay attention to how many people open this, click on my website, etc. I know even if people don’t open or read it every week they notice it. Many have told me they appreciate getting it and see my name whether or not they get a chance to read every issue.
“The trouble with telling a good story is that it invariably reminds the other fellow of a dull one.” Sid Caesar

Technology vs. Relationships; Guess Which Wins

If you’ve read my books, articles, newsletters, or blog posts you know I stress, heavily stress, the buying and selling of a small business is a relationship game.

In my rules of buying and selling, I state, “If cash is king, relationships are the queen and like in chess, the queen is the most powerful piece on the board.”

Based on feedback, readers get my point. So why don’t (all) my clients? The following is something a client sent me, after skipping the step of meeting with the seller to discuss valuation ranges and deal structures.

Well, one thing that I learned from this is that we should always present a value/preliminary offer in person.  Based on your notes, he clearly did not understand our intention in laying out the factors that could impact value.  

Technology makes it too easy to take shortcuts. Email, voicemail, texting, etc. are great for some things, but not for sensitive issues, issues where body language and inflection can play a huge part. Or when it’s possible to misunderstand the context or ultimate objective.

Someone recently told me they flew from Seattle to LA for one meeting. A meeting less than 30 minutes, but they secured the business. It would have been easy to call or write but the in person visit added so much value it’s unbelievable.

Weather the Storm

Over a recent weekend the Seattle area had a massive wind and rain storm featuring hurricane shaped funnels (not hurricane strength winds), falling trees, power outages, and more. At a family event Sunday night the discussion turned to emergency preparedness. Between the four or five families represented we maybe have one fully stocked emergency kit (water, food, supplies, generator, etc.).
It got me thinking about how many businesses are prepared for a catastrophe. Not the kind risk management (insurance) people work with but something threatening the life of the business.
Five years ago one of my clients bought a business, and paid very little in cash plus an earnout, because the surviving spouse held onto the business for too long, without taking care of it.
Another client took the time to prepare the business and multiplied her price threefold (or more). And it wasn’t rocket science; it was knowing what to do and then doing the blocking and tackling, every day.
But let’s backup from both of these examples and go over what preparing a business for sale really means, even if you’re not thinking of selling, which is:
If a catastrophic event hits you, the business is not decimated!
Because you have the systems and people in place you can survive the storm. Want more? Get my book If They Can Sell Pet Rocks Why Can’t You Sell Your Business (For What You Want)? It’s the survival kit for the storm that could hit you and your business (or your client’s business).
“Rivers know this: There is no hurry. We shall get there some day.” A. A. Milne

Large Companies; Bizarre Actions

You run a business, make sales, advise clients, and in general are in-touch with what’s going on every day. You know who your good customers are, know what you don’t want, and know how to price your product so you can make a profit.
So does it surprise you when large companies do things so bizarre you wonder if anyone provides common sense to their decisions? Look at the following.
I’m booking an airline flight. A coach ticket was about $500, first class about $1,500, first class using miles was 90,000 miles, and first class with money plus miles was $400 plus 124,000 miles.
The hotel was $175 cash, 20,000 points, or $225 plus 10,000 points.
Really? I can get a flight for fewer miles than cash plus miles. I can get the hotel for less cash than the amount of cash plus points. I booked the flight over the phone and I could visualize the agent rolling her eyes when she read me the options.
If you or I offered “deals” like the above to our customers and clients they’d question our sanity and look for someone else with whom to work.
This is another episode from the “You can’t make this stuff up” book.
“The only reason we ask other people how their weekend was is so we can tell them about our own weekend.” Chuck Palahniuk

It’s Time to Fertilize Your Business

As I write this from home I’m looking out the window at blossoming trees, grass seeming to grow as I watch it, and weeds taking over our garden.

It strikes me our businesses are a lot like my yard. The things we don’t care about, weeds, don’t need fertilizer or care. The things we do care about, flowers, vegetables, and grass, need constant care.

In our businesses we have to pay attention to our:

  • Customers, or they leave to do business with a competitor.
  • Employees, or they goof off, get bored, leave, etc.
  • Culture, or productivity drops, the good people, who have many options, leave so we are left with a “C” level team.
  • Equipment, or it breaks, makes bad a product, or slows down.
  • Marketing, this being as or more important than any of the above because if we don’t do it we don’t need to worry about our customers, employees, culture, equipment, or anything else.

The owner of a $20MM company recently told me he feels there’s a tremendous amount of resources available to help him and other owners. The problem often is we (individually and collectively) are often too stubborn to think we need or to ask for help.

One resource is my book If They Can Sell Pet Rocks Why Can’t You Sell Your Business (For What You Want)? (At www.amazon.com.)

Value is in the Eye of the Beholder

When we get too attached to something it becomes more valuable in our eyes than in the eyes of others.
  • My house has to be worth more than the others around here.
  • My car is in great shape and hasn’t depreciated as much as others like it.
  • My business is special, it’s not like others, and it’s worth more than conventional wisdom holds.
The last one is my world so it was refreshing when recently I dealt with a dispassionate seller. The investors had very little to do with the day-to-day operations and the decision to sell was purely a business decision with little to no emotion involved.
Compare this to the typical small to mid-sized business sale. Owners love their baby. They’ve given birth to it, nurtured it, received a good to great living from it, and have a lot of pride in it. Of course they expect everybody to see it the same way (and pay more for it).
These feelings run the gauntlet of business type, size, and profitability. From companies making well into seven figures to businesses losing money (years ago an owner told me he’d been losing $200,000 a year for the last few years, all he wanted was someone to pay him to cover his losses, and felt they would because there was so much potential in the business).
Sometimes it happens (people grossly overpaying) but I like to say there are sanity checks in my market. Whereas a private equity firm will just write a check if they really want the deal small business owners and individual buyers don’t have that kind of money, wouldn’t do it anyway, and their bank will add more sanity with their debt coverage ratios.
This is why an outside pair of eyes can let an owner know whether or not they’re realistic.
“The problem with stereotypes is not that they are untrue, but that they are incomplete. They make one story become the only story.” Novelist Chimanada Ngozi Adichie

Beat Them, then Join Them

Not sure if it was their long-term strategy or not but with Amazon entering the bookstore business…. Amazon starts selling books, cheap. They destroy Borders, cripple Barnes & Noble, and eliminate the weaker of the independent stores (the strong ones are still very much around).
Then they start selling other items, create new (online) industries with companies like Zappos, diapers.com, etc., buy some of those companies, and have big retailers like Wal-Mart on the defensive.
Now Amazon is reported to be considering up to 400 brick and mortar stores to sell books, take returns, and be a safe pick-up place for online orders. Again, not sure if they planned it this way (probably not).
Now let’s jump across the world to the Middle East where the Saudis seem to have outsmarted a lot of smart people, at least for now. They kept pumping oil as prices declined causing great stress to Venezuela, Russia, and the fracking industry.
What’s the difference, besides size, between these huge operations and our businesses? It seems they quickly adapted to changing market conditions. Small businesses have the opportunity to be nimble but too often we get caught up in the day-to-day. Sometimes it’s necessary, the last week of January I got caught putting out a lot of fires (I prefer to start them).
Often it’s because we can’t let go. When it comes time to sell the business not letting go means more buyer scrutiny and often a lower price. Buyers like companies with no bottlenecks, especially when the bottleneck is a dependency on the owner and they’ll pay more for this type of business.
Ask yourself, “What am I doing that’s below my pay grade and someone else could do as well, or close to as well?” Then delegate that task and concentrate on strategy, like Amazon and the Saudis.
“Speak when you are angry and you will make the best speech you will ever regret.” Ambrose Bierce