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

Deal of All Kinds Get Disrupted

In the business news at the end of January were stories about how the Walgreens deal to buy Rite Aid had the price drop because Walgreens, as per a government edict, can’t take over as many Rite Aid stores as planned (someone will have to find a buyer for those other stores).

Things happen all the time to derail deals, and not just buy-sell deals.

Jobs – a good friend was in the job market, had “the perfect” job lined up, an offer was out, and, boom, the parent company did a reorg and froze all hiring.

Customers – a friend’s company went through hell when some changes at their top customer put the emphasis on price and nothing else. They lost a big contract or two, for very little money, even though the customer’s people who use the product hate the competitor, say they have poor quality, and don’t deliver on time. I guess the number crunchers won this round.

Buy-sell – A few years ago I went through a stretch where three deals disintegrated after signing a letter of intent (LOI). It had been a long time since even one went south after there was a signed LOI (when the Great Recession hit six weeks before closing is all I can remember). Two of these deals had legitimate reasons for not happening, i.e. something happened that changed the company.

The other one (and one from about 1.5 years ago) went bad for the reason most good businesses don’t get a deal done with a good buyer, and the reason is trust, or the lack thereof. The deal from three years ago had a seller who wouldn’t sign a contract representing and warrantying what he had told the buyer about the business was true and correct. At this point any trust evaporated.

The more recent one was more complicated but it centered around the perception the seller wasn’t interested in the buyer’s success. When the seller wouldn’t take interest, or offer much help prior to closing it became evident once he had his money he’d be hard to track down.

Things happen, and if there’s trust those things are overcome. As in a case from about 10 years ago when the selling business had a sales decline (the seller took his eye off the ball) and he did what he had to do to keep the buyer on board. In this case, it was hiring him to learn the business while it was being “fixed” and prior to closing.

“Democracy is the theory that the common people know what they want, and deserve to get it – good and hard.” H.L. Mencken

 

Taking Things for Granted

Last month I had eye surgery and a blurry eye makes you realize how we take sight, hearing, health, and other things for granted. Ask anybody who’s been hit by the nasty viruses going around this winter and I’m sure you’ll get an earful.

So, what do we (most people) take for granted in our businesses? Usually it’s the people and often it’s not intentional, it’s just that we get focused on our machines, our product, the margins and forget about who runs the machines, buys the product, etc. While I could create a long list of situations where the owner berated their people, here are a few more interesting examples.

Last year I visited a manufacturing business and noticed the employees eating their lunches in their cars. I wondered why, moved on to my meeting, and then, on a tour of the plant, realized why they were in their cars. The lunchroom needed a pressure washer and large amounts of disinfectant.

Many years ago, client Keith Jackson with Industrial Revolution, in response to my question about how his marketing was going, told me, “It’s amazing what happens when you actually pick up the phone and call your customers.” The previous owner took orders; Keith took interest in his customers.

A past client had trouble keeping good vendors. He lost two primary vendors (the second had replaced the first). Selling more of their product and accepting their assistance would have preserved the relationship.

The above said, many, many employers do take care of their employees and their customers. Things like great benefit plans, super coffee machines, beer Friday, and more create an atmosphere that encourages people to stay – and contribute.

Next week’s memo will cover what can happen when you don’t make employees feel appreciated.

“All looks yellow to the jaundiced eye.” Alexander Pope

 

Slow, Fast, or Manageable Growth?

In mid-2016 the Wall Street Journal published an article titled, “Demand Swells for Chickens That Grow More Slowly.” The gist of the article is companies (Whole Foods, Starbucks, and others) believe customers will pay more for products from birds that grow slower (than those full of hormones and other additives).
This is a great analogy to businesses and their growth. Do you want a business with slow, fast, or rocket ship growth? Naïve people instantly thing they would want rocket ship growth, not realizing the pitfalls. Smart people, smart business buyers, understand slow and steady is the best if the company can achieve fast growth with better leadership, marketing, and direction.
See a (suddenly) fast growing company and a buyer will wonder if that grow is sustainable. Did she push harder right before selling? Did he cut deals to increase sales? Is it a spike or a trend? Buyers are skeptical and rightfully so. And after perusing the Internet business listings they feel they’ve seen just about every outrageous claim about a lousy business (to make it appear to be a good, solid company).
So, what are the top pitfalls to a super-fast growing company. Here are three:
  1. Growth sucks cash. The faster you grow the more cash you need because you pay your people weekly, your rent monthly, and your customers may pay you in 45-60 days. I’m in retail you say and I get paid at the time of the sale. Well, what about all the inventory you now need to keep up with demand?
  2. People, good people, are scarce in today’s economy. A business owner recently told me he could sell a lot more product if he had the people to handle the load. Raising the minimum wage level doesn’t raise the skill level. Good people are hard to find and not delivering to your customer is a kiss of death.
  3. Without proper leadership, management, and attention to detail the company can spin out of control. For example, it’s a lot harder to manage the logistic of 22 crews in the field versus eight. A manufacturing company I worked with took on every piece of business they could find, only to see their margins deteriorate as their employees were overworked and stressed.
Manageable growth is what you want as it tends to be more profitable growth.
“When action is needed, optimism, even of the mildly delusional variety, may be a great thing.” Daniel Kahneman

Huge Risks? What’s Your Comfort Zone

Last year in Inc. Magazine entrepreneur and columnist Norm Brodsky wrote a column on risk versus reward. As he put it (for one of his businesses), “We have an unexpected shot…. – but it comes with huge risks. How do we decide?”

Every month, week, and day we face business decisions and all have some amount of risk, from minuscule to huge.

Small risk: When we pick up the phone we could hear “no” or we have a great call (on the way to a new client or customer). Some focus too much on the possibility of a no.

One of our Partner On-Call franchisees had telephone phobia. He was a super person, very smart, outgoing, charming, and deadly afraid of the phone. He told me he’d stare at the phone for 15-20 minutes, finally pick it up, dial, and have a great conversation. He’d then repeat the process (starting with the long look at the device). All of this just in case someone said no (I kept telling him the other party can’t reach through the phone line and punch him).

Medium risk: Implementing a growth plan (strategy) may distract us from our normal day-to-day activities. However, if our strategy is right it will sail us past where we are now and create better activities.

High risk: One of the ultimate risks is when a business owner decides to sell or to buy another company. There are the normal risks of an acquisition including culture and process integration. However, the benefits can be huge, if it’s the right target and done correctly. The goal is to have 2+2=22. You don’t do it just for bragging rights.

Selling your business is also fraught with risk. Is the owner truly ready? Will it sell for enough money (for the seller’s-next great adventure in life)? Will he get paid? What will she do post-sale? I’ve learned the top risk (and top reward) is making sure you sell to the right buyer. Most owners prefer a buyer who will take care of their employees, customers, and legacy over a little more money (from the wrong buyer).

“You can get much farther with a kind word and a gun than you can with a kind word alone.” Al Capone