For the last nine to 12 months I’ve been writing and saying business owners have their heads in the sand. One of my common lines is business owners think, “Recession, what recession? These good times won’t end.”
Now I don’t think the economy is in big trouble but the stock market’s violent correction is sure to spook some people (especially those who bought high and panicked, selling low).
But it should be a wake-up call to business owners who’ve been meaning to sell but just can’t let go, because the good times will continue to roll. Here’s some news, the economy goes in cycles. Always has, always will. It’s one of the only things I remember from all my economics classes (just kidding, it’s one of the few things).
If I was thinking of selling a business in the next two years, I’d be preparing it now (guess what? I have a book on the subject), moving before too many others decide to sell, and before the economy corrects itself, as it usually does after an election. It’s not that the economy will lower your profits but it may (will) spook buyers and banks. Plus, if interest rates go up values may go down.
In the last year or so numerous tech companies, including Google, Yelp, Amazon, and LinkedIn have been accused of unethical actions. (I was especially appalled by the Wall Street Journal’s report about how Yelp blackmailed small business owners by removing positive reviews if they didn’t advertise.)
There’s a lot of criticism of corporations and what they do. William McGurn recently wrote in the WSJ, “Progressivism is the fear that someone, somewhere might be making a profit.”
This is nothing new. Neither is the opposite end of the spectrum where some people think anything a business does is acceptable if they make a profit from it. Not pay overtime, okay. Keep an employee’s hours at 30 per week when 32 are required for benefits, okay. You get the point.
The bottom line is people not corporations make decisions. I’m sure business psychologists have analyzed this to death so my opinion might be taken as an “amateur’s opinion.” Here are my top three reasons:
They fear losing their job so they do what they think their boss will want, even though he or she also fears losing their job for the same reasons.
They want career advancement and feel they must take risks to show incredible growth and profit, and the heck with whoever gets in their way.
They just don’t get it and don’t understand their superiors have the same ambitions, motivations, and issues and are treating them the same ruthless way (they are treating their customers).
I know a lot of my business buyer clients see the above, have experienced the above, and decide to take control of the situation by buying a business. So they can do things the right way.
“Our growth depends not on how many experiences we devour, but on how many we digest.” Ralph W. Sockman
A few months ago Business Brokerage Press published a list of (longtime) business broker Tom West’s “Rules of Thumb.” I picked out my top seven, list them below, and offer some comments including how they may apply to all businesses.
“The reason for sale a seller initially provides is very seldom the real one.”
Oh so true, one of the top causes of skepticism with buyers, and applies to many things in our business and personal lives.
“The real selling price is half-way between what the seller thinks it’s worth and what the buyer thinks it is.”
Just like real estate (not in today’s hot Seattle market though where it’s the seller’s price or more), cars, and more.
“The figure the seller provides for annual sales is usually the best year the business had or even the figure the seller thinks the business is capable of doing.”
Optimism is good and often not accurate.
“The profit the business makes is what the seller dreamed up in his or her wildest dream.”
See the previous item’s comment.
“If the buyer’s wife is opposed to her husband buying a business, there will be no deal. The reverse is not true, a wife will buy a business regardless of her husband’s opinion.”
No need to even comment on this one.
“Every sale falls apart at least twice before it closes.”
Oh yeah! Especially when one party feels the upper hand (usually the seller) and starts nibbling for more and more concessions.
“By talking with every broker in town, one will discover that that they will all say that every other broker is not professional.”
I wonder how true this is. Maybe it’s not true in “we’re always nice” Seattle, but there are always industry insider opinions. I have heard many owners say they wouldn’t sell to certain competitors because they wouldn’t want those competitors taking care of “my customers,” so I guess this is a cross-industry rule.
“Whatever the problem, be part of the solution. Don’t just sit around raising questions and pointing out obstacles.” Tina Fey
Leverage Your Competitive Advantage
Writers or stories?A great story carries itself. But what about the other 99.9% (of stories)? A good writer makes a story come alive; also known as non-fiction. A great writer creates her own story; aka fiction. Many of the stories we know, love, and repeat would be nothing without a storyteller, i.e. a person.
Players or play?Every professional sports team, baseball, basketball, football, soccer, etc., has the same plays. So the outcome is decided by how well the players execute those plays. Or how they adjust when the other team does something to stymie the original play.
People or technology/strategy?These thoughts came to me after a visit to one of my banks’ ATM machines. Every time I go to one of their machines the first message tells me they are, “checking my preferences.” Then they ask if I want to use English or Spanish. You’d think that if they really were checking my preferences they’d know I want to use English.
When I get cash the screen shows two places to the right of the decimal. Yet the machine doesn’t give out coins, or even $1, $5, or $10 bills. So why have those places to the right of the decimal (other banks don’t)?
Because as with the first two examples, it’s the people. Someone writing code didn’t take off the decimal places or actually have the system remember my preferences.
It always comes down to the people, in your business and mine. Strategies are a lot easier to formulate than execute. As with sports, there are very few, in any, new strategies (they do change over time as technology – not just high tech – changes). But it takes the right people to implement the strategy
It’s a reason some owners decide to sell their business, they want to work in the business versus managing people. It’s the reason business buyers (should) put an emphasis on the people, as it’s really what they’re buying.
“The best way to know your faults is to notice which ones you accuse others of.”