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

Common Sense Isn’t All That Common

The Fourth of July is a day when seemingly normal people lose their common sense and blow off fingers, damage eyes, and do other mayhem to their bodies (and homes) for the thrill of setting off explosive devices.

But it’s not restricted to fireworks, it’s common in all forms of life including business. Just look at the recent escapades at Uber. Smart people, a dynamic idea (which disrupted the heck out of the taxi and shuttle industries), and no common sense when it came to company culture.

Riding so high on their idea, I’m sure given all the money (investors money) they had in spite of consistent losses let many of their people feel they could do no wrong. But obviously, they did a lot wrong in the office, especially with their treatment of women.

As many smart people have proclaimed over the centuries, common sense isn’t all that common. The above are just two examples and good warnings about how we need to ask ourselves, “Does this make sense?” when faced with a decision on something new. It could be a growth strategy, buying a business, selling one, or something personal (look at all the homebuyers these days who waive inspections so they can outbid the 37 other buyers for a house).

If you’re a business owner or have clients who own a business some of the best common sense advice to those thinking of selling in the next few years is to do the things necessary to increase the company’s value and make it more attractive to buyers (hint, the best common sense advice is for them to read my book If They Can Sell Pet Rocks Why Can’t You Sell Your Business (For What You Want)?)

Above all, have common sense and keep all your fingers intact every July 4.

“That which distinguishes this day from all others is that then both orators and artillerymen shoot blank cartridges.” John Burroughs

 

 

 

It’s Always the Basics

Recently I had to give a presentation about my business, what I do, etc. About the same time, I was at the point in the writing of my upcoming book (on Growth by Acquisition) about what it takes to get a deal successfully done.

Many of my points are from the buy-sell world but also apply to other areas, finding a job, growing a business, and life in general. In this case it reminded me of my basic three points of getting the deal done.

Motivation – the buyer and seller have to be motivated. A job seeker needs a company motivated to hire for a position, and a hiring company needs someone motivated for their job. A business needs potential customers motivated to have their problem solved.

Relationship – a client recently told me he just didn’t feel good about a service provider he recently met. Good service providers screen prospective clients to make sure it’s a fit. We must have a good relationship with anybody with whom we’re going to do business. Every time I go to one of the big box hardware stores I get so disappointed with the people there and their inattentive pointing to an aisle I go to the other one the next time (and repeat over and over).

Education – in the buy-sell world it’s important everybody understand some basics including you will get frustrated, there will be deal fatigue, and there are set ranges of value so just because an owner sees a $500 million firm sold for 10 times EBITDA doesn’t mean their $5-10 million business will get the same multiple.

But in sales, education is the most important thing a salesperson can do. If they don’t educate the customer on how their product or service can solve the customers problem why will the customer buy? They won’t. They will either live with the problem or find another solution. And, the best way to educate is to ask questions so the customer realizes how serious the problem is.

When in doubt, go back to the basics.

“I don’t care what you say about me. Just be sure to spell my name wrong.” Barbara Streisand

If Only It Was So Easy

On May 25, 2017, the Wall Street Journal’s tech column was about how almost all of us have personal information exposed online, much more than we realize. The June 1 column had more on how to reduce information exposure.

It’s shocking how much of what we do on a daily basis, because of our use of technology, is available to so many companies and people within those companies. And how it’s used to bombard us with targeted messages, or, in worst case scenarios, how others can use it to terrorize people.

I mention these articles because it’s not nearly so easy for the rest of us. Here are three situations where it would be incredibly valuable to have more information than we normally get.

Job search – wouldn’t it be nice if prospective employees knew about the company’s culture before accepting the job? Yes, I know there are websites like Glass Door but just like Amazon reviews you don’t know if you’re getting phony reviews glorifying the company or product or if someone ripped something to shreds because one screw was missing, the color was slightly different than expected, etc.

A friend feels she recently dodged a bullet during an interview. Here’s what happened. When arriving at the company the first person she met said, “Oh, you’re here to interview for my job.” They talked for a while and the topics included why the person was leaving.

It appears the interviewer overheard at least some of the conversation, didn’t say anything, and then told the recruiter how she didn’t like that conversation. She didn’t get the job and feels relieved about it as it appears (not verified) there’s a culture of backstabbing. Being the fly on the wall before accepting the job would be like having all the online data others have on us.

Vendors and customers – we can do credit checks, background checks, etc. but just think if as (B2B) customers we knew in advance how vendors treat their customers, if their billing is timely and accurate, if delivery schedules are met, and more. Yes, we can do reference checks but, as with the abovementioned job interview, we’re really not seeing inside the company.

“What a great business this would be if it wasn’t for the customers” is an old saying that really means how great it would be without the bad customers. It’s why we should all screen customers and not just take the order (this refers to ongoing relationship business not transactional business like buying a sandwich, although retail sees enough bad customers also).

During a recent meeting, someone was talking about how they were firing a customer. The customer wanted discounts, complimentary work, and unreasonable timelines (as if the service providing firm doesn’t have other customers). My usual policy is at least two meetings before I’ll even propose how we can work together. And, there’s a lot of discussion about life so we can get to know each other (and it works as I only have clients who are nice people).

Business Buy-Sell – my initial disclaimer is it’s rare when there’s a major surprise post-sale. In fact, I’d say there are more good surprises (opportunities, meaning poor processes, unexploited markets, weak sales efforts, etc.) than bad surprises.

While a buyer can sense what the culture is as he or she gets to know the seller, what happens day-to-day can be different. Plus, culture can take many forms and here are three types buyers look out for:

  • The micro-manager owner who has a hard time giving others responsibility. The buyer worries the employees are so used to this they won’t accept delegation as they’re fearful of making a mistake.
  • The lean and mean culture with people working long and hard hours “getting the job done,” which doesn’t allow for innovation, creativity, or strategy changes. Often it’s as simple as one more employee that solves the issue but the problem is the seller expects to be paid based on the profits from a burn-out culture.
  • Coasting, aka lazy, being the name of the game can be a concern and I’ve had a few deals collapse as the buyer passed on the company because he figured it would be too tough to get the employee base to give up their easy job style and work harder to grow the company.

Conclusion

I used the term “fly on the wall” and it’s what technology has allowed companies to do to us, which is why there’s a market for ad-blocker programs and similar. As I mentioned, wouldn’t it be nice to have these insights in our daily lives. Since we don’t, it comes down to good old fashion research, investigation, and gut feel.

 

 

The Freedom to Fail and Succeed

Recently it was Memorial Day, a day to honor those who died defending our country (although many confuse it with Veterans Day, which is to honor all military veterans).

One of the things the United States is known for is freedom. Freedom of the press, freedom of ideas, and the freedom to succeed or fail. I’ve been involved with four startup businesses and two have failed (much better than the published numbers of 65-80% of startups fail). Two were before I was 25 years old and the one that failed got me a great job in the industry because I made my mark by showing I was competent.

The majority of people around the world don’t have opportunity to fail, or succeed. Think of Russia, the Middle East, Africa, and more. If you’re not in the upper class or close to the dictator you don’t stand a chance to do much of anything.

There is nothing wrong with taking a chance and failing. Some of our greatest inventions and companies came from people who failed. Remember Thomas Edison’s quote, “I have not failed. I’ve just found 10,000 ways that don’t work.” Steve Jobs was booted out of Apple at one point.

An old cliché is, if you don’t take a chance you can’t succeed. But you also can’t fail and learn the lessons associated with it, and those lessons can help you ultimately succeed.

Be thankful for those who have given us the chance to fail and succeed.

“Patriotism is supporting your country all the time, and your government when it deserves it.” Mark Twain 

Fake News is Not New

The new buzzwords of 2016-17 are “Fake News” and “Alternative Facts”. Hey, this is nothing new. Politicians, and others, have used an alternate reality of information for centuries. Let’s ignore the politicians and look at three common examples.

  • How did used car salespeople get a bad reputation? (I should say salesmen as when the reputation was earned it was almost all men.) From telling car buyers all kinds of things about the car they were trying to sell, ignoring the car’s actual condition. Technology, starting with Carfax (remember fax machines?) did a lot to level the playing field.
  • Look at the Gallup list of least respected professions and you’ll see insurance sales people just above car salespeople, third from the bottom, with members of Congress being in the cellar. Now, I know from previous reading people don’t like insurance people in general, but think their insurance agent is pretty good. Is this because it’s a product we know we need to pay for but hope to never use? Is it the horror stories some agents tell to “sell” us on more coverage? Tough to really know but I’m guessing a lot of people feel forced into paying a lot of money for insurance and wonder why.
  • Now let’s look at my primary industry, the buying and selling of businesses. Business buyers often focus on one blemish in a business and try to magnify it to make a good business look weak, and get a better price. On the other side, sellers tend to inflate their bottom line via every trick available. They try to tell buyer’s their salary, for their job as CEO, isn’t necessary and is therefore profit (and the business is therefore worth more). They’ll also do the same with the cost of their benefits, cell phone, and anything else they think a buyer will fall for. Yet, I’ve never seen a bank or a (legitimate) business appraiser fall for this. They all put back in a fair market salary for the job the owner does.

Bottom line, all industries, even those well respected like clergy, bankers, teachers, doctors, and others have used things we now call fake news or alternative facts for a long time.

“Is it the truth?” First item of Rotary Internationals Four-Way Test

Know What You’re Going to Say – And Say It

On May 10 I was on a panel at the monthly Association for Corporate Growth meeting titled, “Deal Warriors of the Lower Middle Market.” My co-panelists were Lisa Forrest, Greg Russell, Todd Marker, and John O’Dore.

I realized after about two remarks my regular lines, quips, and stories are new to others, no matter how familiar I am with those lines. Statements that make me a “unconscious competent” get laughs and applause from others.

It goes to show how important words are. When used properly they create a full-color, HD picture. Good salespeople don’t just talk, they say the right things and ask the right questions. They know the correct words and how to use them.

No matter what business you’re in, communication is what makes you successful. Think about what you say and concentrate on:

  • Stories of past client/customer experiences. We all remember stories, more than anything else we hear or read. I know my story on the panel about the advisor who didn’t understand transactions but still was “helping” a client went over huge.
  • Statistics that make a point (as to why your product or services make sense). Statistics that are legitimate but show they are legitimate (sorry, but today you must, given all the “fake news,” as per President Reagan, “trust but verify”).
  • Examples of results you’ve generated. Stories tell how things happened, results are what happened. In my book If They Can Sell Pet Rocks Why Can’t You Sell Your Business (For What You Want)? I open with a story about George, how we prepared his business for sale, and how he sold it with more cash at closing than the total offer before we started working together.

Time spent on saying the right thing is critical whether you sell your services, machined parts, food, construction supplies, or anything else.

“To overpraise is a subtle form of disrespect.” Mary Gaitskill

 

 

When Rookies Wing It

Every competent attorney will tell you they want another competent attorney on the other side of a deal, whether it’s a buy-sell deal, contract negotiation, family law, etc. They don’t want a litigator working on business transaction or a business attorney doing divorce law.

I write this based on having the experience of a recent conversation with a rookie in my industry. He didn’t understand how things are done, the process, and especially the qualifications both buyer and seller must have. If he’s like this consistently he’ll do his clients a disservice.

My business is not much different that most businesses in that we want a satisfied buyer and satisfied seller (in my business we want them equally, and a little bit, unhappy as that’s when a deal happens). So do people in real estate, retail, manufacturing, and other industries. When perceived equal value is provided and received both sides are happy.

So, what’s my point here? It behooves us all to be competent professionals whose goal is to get the work done efficiently and at a fair cost. If something is over your head, get help. Better yet, don’t take the assignment.

The person mentioned above was new to his business and came from a different industry. He needed a mentor or coach. Contrast this to the class I teach at the local SBA office on, “Dynamically Growing a Consulting Business.” The students are experts in what they do, they need help marketing and securing clients. Big difference. Be an expert first, get clients second.

“You never see further than your headlights, but you can make the whole trip that way.” E.L. Doctorow

Forget Startups – Buy a Business

Fast Company recently had an article titled, “Forget Startups Just Buy a Small Business from a Retiring Entrepreneur.” The first sentence was, “Sure, you may want to found the next “Uber for [insert service here],” but that’s not the only entrepreneurial path you can walk.”

They gave eight tips on how to best make an acquisition and I’ll comment on three of them (one of the others being “perform due diligence,” which even partially competent buyers automatically do some of).

But first, let me take issue with one of the facts mentioned. Using statistics from BizBuySell.com the article stated the median price of businesses at the end of 2016 rose 8% from 2015 to $216,000. Let’s face it:

If someone buys a business for $216,000 they are buying a job, and a mediocre job at that.

For reference, the average price of my clients deals over the last year or so was about $3 million, and every one offered the buzzword buyers use and want, “scalability.” The micro deals from the BizBuySell.com stats mean the buyer/owner will spend their time working “in” the business not “on” the business, and that means a rut that’s hard to get out of.

Now for the top three points in the article.

Figure out how to appeal to the owner. Or, as I’ve preached for years, build a relationship because nobody will buy from or sell to someone they don’t like. The article makes a great point, “Prospective individual buyers may have an edge; many retirees want to sell to someone with similar values, hopes, and dreams. It’s their baby and they want to bring their grandkids by it in 5-10 years and tell them how this very successful business used to be theirs.

Be ready to add value–even to a successful business. I like their line, “If you’re merely keeping the lights on, then you have a boss: the bank.” Bill saw who he could immediately add value by turning the website from a brochure to an ordering system. Matt started promptly following up on leads (amazing what people coasting don’t do). Richard but in a sales system and culture, which attracted customers and high-quality employees.

Have a 100-day plan. I mention this one because I stress it to buyers and sellers. Don’t fall into the following endless loop the day after closing:

  • Buyer: Tell me what I need to learn.
  • Seller: What do you want to know?
  • Repeat

It’s why I give my clients an outline of a transaction plan and encourage them to formulate their own details with the other party. The transition often gets overlooked as the rush to close gets frantic (and overwhelming with administrivia). Three key transition points:

  • Initially the buyer should shadow the seller to see what he does on a daily basis.
  • After three to four weeks the seller should disappear for a week to let the staff know the buyer really is in charge.
  • Make sure the transition agreement covers the seller being around for annual events that don’t fall within the contracted time. This could be trade shows, contract renewals, annual closing of the books, or other things specific to the business.

Entrepreneurism isn’t for everybody and if it is for you, and especially if you don’t have an idea for the next greatest thing (or don’t want to put in 80 hour plus weeks), consider buying a business. It’s faster, cheaper, and easier to finance. You trade your capital for immediate cash flow, i.e. you get a paycheck on payday just like everybody else.

And in closing, a great line from the Fast Company article, “If you’re buying a company because you want to be your own boss but don’t plan on making any changes once you take over, keep your day job.”

Estimates and Misclassifying Will Hurt You

It’s March and that means college basketball tournaments aka, March Madness. It’s your typical tournament in that all the number one and two seeds won their first games and by the end of the second round a number one, two number twos, and a number three had been upset. Also, the “experts” proclaimed some teams had been seeded lower than they should have been and therefore got games too tough too early.

Recently I wrote a very well received post about how projections are mostly meaningless. The same applies here but we should give credit to those seeding these teams as 75% of the “Sweet Sixteen” are where they’re supposed to be. Of course, even the experts brackets were busted by these and other upsets.

Those teams upsetting the much higher seeds got hot at the right time and these factors the same in our day-to-day businesses. Think about how often a “for sure” client doesn’t become a client. Or how the longshot customer buys from you without (what you perceive to be) too much effort.

We all misclassify the likelihood of someone doing business with us (both ways) and every so often we get “hot” at the right time, say the right thing, etc. That’s life, and it’s part of what makes life and business interesting. Of course, if, like sports teams, we practice what we do (and practice correctly), we reduce the chances of upsets and increase the chances of getting hot.

“The man who says his wife can’t take a joke forgets that she took him.” Oscar Wilde