Deceit

It’s a game, a deceitful game. According to a July 7, 2017 Wall Street Journal article, television networks play a game to disguise possible poor ratings. Here’s an excerpt from the article:

“In a game largely sanctioned by TV-ratings firm Nielsen, television networks try to hide their shows’ poor performances on any given night by forgetting how to spell.

That explains the appearance of “NBC Nitely News,” which apparently aired on the Friday of Memorial Day weekend, when a lot of people were away from their TVs.”

It appears all networks do this and have no problem justifying it. But they’re not the only ones playing games. I see or hear about things like this all the time.

  • People I know in the job market find a lot of misleading job descriptions. And to be fair, we know there are a lot of embellished resumes out there.
  • In the small-business buy-sell world there are a lot of misleading games. Using middle-market or public company price-earnings ratios when valuing a small business (or when trying to get a listing) is one.* Trying to convince a buyer owner salary is the same as profit so it appears there are higher profits is another, and much more common.

I’m sure you see or hear of things like this all the time whether it’s pricing in a store or the advertised deal that seems “too good to be true.” You really have to be careful of what you’re being told.

* For those into numbers, according to the PeerComps database, which is small-business buy-sell deals financed by SBA loans, the average price-earnings ratio (the multiple of earnings) is about four, with a coefficient of variation of just over 25%. This means small-businesses typically sell for three to five times EBITDA (earnings before interest, taxes, depreciation, and amortization). Other databases show middle-market firms sell for 6.5-7.0 times EBITDA (I don’t have info on the variance). For reference, at this time the PE ratio for S&P 500 companies averages about 25 and for major bank stocks it’s about 15.

“The practice of deception is not particularly exacting, it is a facility most of can acquire.”  John le Carre

Do What You Do Best

I recently met a business owner whose business was slammed by the Great Recession. It got to the point where family members had to lend the firm money. Their bank then pulled their line of credit so they’re now with a factor, at a very high interest rate.

I’ve been around long enough to know banks usually subordinate owner debt, meaning it’s considered equity, and well behind any bank loans when it comes to repayment. However, this owner said no, his bank doesn’t do that.

In the car after the meeting I called a banker friend with his bank, told her the story, and said, “I bet his banker is in a branch and isn’t a business banker.” Sure enough, that was it, and she said they subordinate debt all the time (so this was an opportunity for her).

This story brings up a good point – you can’t be everything to everyone. The branch banker should have brought in a business banker (and should be glad the client didn’t find this out from another bank). I don’t help startups, other than consulting practices. Business attorneys don’t do family and divorce law. You get the point.

Know what you do well and do more of it. A client of mine, in the market to grow by acquisition, gave me a tip for others (this will be in my upcoming book on growth by acquisition). He said it’s important to take stock of what you do and do well, and know what you offer the marketplace. Only then can you best serve your customers and know what kind of companies you should acquire, including what kind of operational issues you can target and improve.

A good tip for all of us is to know what we do well, i.e. our competitive advantage, don’t worry about what we don’t do, and grow by leveraging our competitive advantage.

“Any man more righteous than his neighbors constitutes a majority of one.” Henry David Thoreau

Go With Your Gut Feel

I recently read an article in an industry newsletter about key factors in getting a buy-sell deal done and it struck me it was applicable to most, if not all, of our businesses.

The statement catching my attention was,

“If you ever get a knot in your stomach during the negotiations that is the time to throw in the towel….”

So true, so true. I have told (buy-sell) clients for years that if their gut tells them something’s wrong it’s time to get away, no matter how good a match the other appears to be on the surface.

Headline: THIS APPLIES TO ALL BUSINESS AND LIFE SITUATIONS

When you feel something isn’t clicking, you’re going off kilter, or there’s a basic uneasiness, then it’s time to get out. Doesn’t matter if it’s (on paper) a great business to buy, (on paper) a great buyer for your business, a seemingly great customer, or anything else – go with your gut feel.

A buyer client told me recently he didn’t trust a business broker/intermediary. I told him to forget it, move on and work with the other ones. I’ve not pursued clients because the feeling wasn’t right. As Alan Weiss says, “You can always make another dollar but you can’t make more time.” And a bad client or customer sucks time (and energy).

God gave us the intuition to sense what’s right and wrong. Don’t ignore it based on the superficial.

“Most human beings have an almost infinite capacity for taking things for granted.” Aldous Huxley

The personal touch wins

I recently had the pleasure of needing tech support a couple times. In my opinion, an online chat is the worst way to get help (for the customer). For the company, it may be the best because, it seems, each support person can handle multiple people at the same time, versus only one via telephone.

But I think it’s a waste of resources. I will bet the old, “Dollars to donuts” it takes more time to bounce between customers and their issues than to concentrate on one at a time. I now realize it’s best to call and talk to someone, especially since most firms allow you to enter your phone number for a call back while keeping your place in the queue. (I feel this way despite the fact that in our changing times many people prefer technology over the phone, a great example being recent studies showing 86% of millennials prefer to do job interviews by text.)

It’s why we must balance our client/customer load. One of my favorite questions to ask audiences is, “What’s worse, having the capacity to make one million widgets a year and only selling 250,000 (other than having the capacity to make two million)?” The answer is, selling one million and only having the capacity to make 250,000.

John Naisbett was right, the more we get high tech the more we’ll need high touch. At some point a sale has to be made, and we all can’t sell like Amazon because we don’t have simple products, we have value.

“If everybody is thinking alike, then somebody isn’t thinking.” George S. Patton

Complicated Doesn’t Get Customers

Computers get faster, more powerful, more streamlined, and at the same time the programs get more complicated, meaning they more and more become resource hogs. I can’t figure out why, after all these years, Microsoft Office has about one gigabyte of updates every couple weeks.

I guess it’s why Moore’s Law about how technology and its transistors double (in speed and capacity) every two years makes sense – it has to. Software programs keep gumming up the machines.

There’s a lesson here and that lesson is don’t fall into the complication trap. There’s a reason salespeople have been taught for decades (maybe a century or more?) to KISS, Keep It Simple Stupid.

I don’t care if you give advice, make, distribute, or retail a product, or provide a hands-on service, make it as simple and easy as possible for your customers. The easier it is for your customers or clients to understand the value you can provide the better.

We all have value propositions, or what marketing people call a USP, unique selling proposition. When you convey it in the fewest words you win. Don’t make your prospects have to think too much, or they (we) will find reasons not to buy.