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

Boring but Effective

We were relaxing on a Sunday night after a busy weekend and watching the end of Sunday Night Baseball. It was an exciting game, the visitors had a one run lead in the bottom of the ninth, runner on first, two outs, and the pitcher kept throwing over to first to keep the runner close, as he had previously attempted to steal on a pitch fouled off. Of course, the home town fans booed with every toss to first and the boos got louder with every throw.

Sure enough, the runner took off, the catcher fired a bullet to second, runner out, and game over. The announcers quickly pounced on the runner’s poor lead and jump, because of all the throws to first.

Throwing to first is a baseball basic when the runner is a threat to steal, and sometimes even when he’s not. Not popular when the opponent does it, very smart when your team does it.

The basics in running a business can get pretty boring and some employees may not like doing them, but they work.

  • Make enough calls and sales happen.
  • Put in the time to have accurate financial statements and management reports and you’ll know where you stand.
  • Put in the time on new products and you grow.
  • Delegate to your employees, they’ll grow and be more productive.

The basics of getting ready to exit can also seem boring, like repeated throws to first, but they pay off. It’s why I’ve made the process simple in If They Can Sell Pet Rocks Why Can’t You Sell Your Business (For What You Want)?)

If you’d like a complimentary copy for yourself or a client let me know.

“Education is what survives when what has been learned has been forgotten.” B.F. Skinner

 

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.

 

 

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

Projections are Useless

At the end of the third quarter of the February, 2017 Super Bowl the announcers were saying viewers should go online and vote for the game’s MVP. With the Falcons ahead by a few touchdowns I’m guessing all the early votes were for Falcon players. I said to my wife, “What if Tom Brady completes a gazillion passes in a row and the Patriots win?” Guess what happened?

Projecting a game’s MVP two-thirds of the way into the game is meaningless. Most business projections are meaningless, especially if over one year. Customers come and go, employees turnover, etc. One of my clients had a couple customers tell him near the end of Q3 they had over-ordered early in the year and there would be no more orders until January. The customers’ projections were off and therefore my client’s projections were off.

Yet I see businesses for sale put out nice five year projections. And guess what, they all show steady sales growth and escalating profit growth. When is the last time you saw a business grow at the same rate every year for five years?

Just like picking an MVP in the third quarter of a football game business projections are usually nothing more than an (optimistic) guessing game, and are usually off base, especially when for longer than 12 months.

“Behind every failure there is an opportunity someone wishes they missed.” Lily Tomlin

Dependencies Will Kill Your Valuation

As I write this, and as you read this, I’m in Antigua, West Indies on a Rotary service project, “Improving Education Through Technology.” This means installing computers, Wi-Fi networks, and training teachers on how to teach better (reach the kids) using technology.

This is our 12th project and it’s much like a small business. Our annual cash budget is over $100,000 and the total value including in-kind, donations, and discounts is about $250,000. It’s also like a small business in that it’s top heavy.  My friend Jeff Mason with the Bellevue School District’s Cisco Networking program, technology side, and me, business side, are true project dependencies.

If I couldn’t secure funding, write the Rotary matching grant application, deal with the bureaucracy, and the politics there would be no project. If Jeff wasn’t around to procure equipment, get it ready, pack it, load it, and train our team of students, who do the on-the-ground work, the project wouldn’t happen.

Compare this to a business, and not even micro-businesses doing hundreds of thousands a year in sales. Compare it to a business doing $1-10 million in sales where you can fill in the blank, “The owner is the only one who ________.” It could be she:

  • Can program the machine
  • Can finalize the bids
  • Has the customer relationships

Or a myriad of other tasks. The chances are these owners can’t go to New Zealand for a month and have the same business when they return.

Business owners need to get others to do what only they now do. It won’t happen on our project, and probably shouldn’t, but it needs to happen in a business if the owner wants the value to increase.

“No snowflake in an avalanche ever feels responsible.” Stanislaw Jerzy Lee