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


Ethics and Good Business

A client called me last week to discuss the following and keep in mind my recent post about how some firms don’t pay enough (good) attention to their people. He told me:

A key manager with one of our competitors called, she said her employer takes her for granted, doesn’t treat her with respect, and she wants to come and work for me. (This is what happens when you create the right culture.)

She also mentioned she was sure some of her customers would come with her because she has the relationship and there is no non-compete or no non-solicitation clause with her employer.

My clients question to me was, if and after he hired her, is it was ethical to go after her customers?

My reply was “That’s business.” They didn’t have her sign a non-solicitation agreement so if you do it positively and above board it’s okay. And I reminded him that after his second acquisition one of the firm’s employees left and did the same thing.

My example was, if she goes to her customers and says, “I’ve found a better opportunity for you and me with XYZ company and I’d like to talk to you about why I feel it’s better for you” it’s okay. If she goes and badmouths her previous employer it’s wrong, it won’t impress her customers, and it could damage his culture.

What do you think? Would you handle this any differently?

BTW, he has all his people sign a non-solicitation agreement.

“Truth exists; only likes are invented.” Georges Braque


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


Regulations and Micromanagement

Tom Douglas is perhaps Seattle’s most famous chef/restaurateur with 900 employees and 19 establishments, all within a 10-block radius of his original restaurant, the Dahlia Lounge. So, it was interesting when he told the Puget Sound Business Journal the Seattle City Council and the mayor don’t like business. He stated, “They are not thinking like businesspeople, and yet they want to run our businesses.”

He was referring to increased wage requirements (he supports higher wages but objects to different rules for different sized businesses), scheduling regulations, giving workers input on their schedules, sick pay rules, and more.

While it’s easy to say it’s regulations run amuck (it is), it’s a case of political micromanagement. Micromanagement is bad enough on its own but it’s bad when people with authority and smarts in one area (in this case getting elected and probably nothing else) think they know everything about every issue or situation (especially business).

It’s a good lesson for all businesses. People thrive when you let them fly or crash (pretty much) on their own. There’s a huge difference between being a mentor or coach and a dictator. If we assume Douglas is right (and he’s been pretty darn successful), then the politicians are hurting many small businesses.

I’ve told this story before (but it’s such a great example). A client’s actions were known to his employees as “drive-bys.” He would stand over someone, watch them, make a snarly, passive-aggressive comment, and walk away. No guidance, no input, and no encouragement. He’d find the 5% that wasn’t being done the way he wanted it done and ignore the 95% that was being done as it should be done (or better).

“Truth is, everybody is going to hurt you: You just gotta find the ones worth suffering for.” Bob Marley

Why Malls Ban Teenagers and Your Business

I heard an interesting tidbit on the radio recently. The story was how many shopping malls are banning teenagers who are at the mall without a parent or guardian. The kicker was these malls showed an increase in sales after initiating this policy.

The next thing I did was Google this and found numerous stories on this subject, going back to 2006. In these days of easily transmitted fake news it made sense to verify the story (just like buyers and sellers verify information during due diligence).

As we start 2017 it’s good policy to do like these malls, and that is:

Know who you want to do business with (and don’t do business with those who don’t meet your criteria).

Using Pareto’s Principle as a guideline, 20% of your customers will cause 80% of your grief. And I’m sure the 20% on the other end of the spectrum provide 80% of your joy (and maybe even profit).

No matter what your business you can easily target customers by:

  • Size (buying power) – For example, Porsche dealers aren’t going to do direct mail in low income neighborhoods. I’m not going to market to $50 million companies because I don’t have the people or processes to work in that market (just like I stay away from micro businesses, where the owner is the business).
  • Location – some of us can have national or international customers. Others reach the service stress point if the customers are more than an hour away.
  • Personality – as in personal relationships and buy-sell deals, being able to relate to customers goes a long way towards turning the 80-20 rule to the 95-5 rule. If you get along the chances of problems are minimized.

Know who you want to do business with, and don’t deviate from it.

“Beware of all enterprises that require new clothes.” Henry David Thoreau

Making a Sale in 2017

I was looking through a folder of articles I’ve cut from papers and magazines (and printed from online sites) and noticed some on selling. Not as in selling a business but selling your product or service.

It’s inevitable whenever I’m working with a business owner client the subject ends up on sales (often combined with marketing). It’s finding prospective clients, approaching them, finding out what their problems are, and offering a solution.

Too many people equate sales with 1960’s and 1970’s hard sell techniques dramatized by used car lots, carpet stores, etc. Books listing 173 closes for all situations are history, they’re dead.

Sales is relationship based and in the holiday season, the ultimate relationship season with friends and family, a good way to prepare for the start of 2017 is to get your marketing and sales plans implemented (marketing makes people aware of you, sales is what you do to determine if you can add value).

  • Who can you help?
  • What will you do for them?
  • Why are they better off with you than without you?
  • How will they know the difference?


Useful Technology

The compendium of technology. On one end one of the young tech writers for the Wall Street Journal always writes about how she wants an app for everything. Order this, order that, do the other thing. She grew up with technology and, I’m guessing, prefers this over personal interaction and relationships.

I, on the other hand, like technology that can help me, not just to use for the sake of using it. Uber is a great example. It’s fast, reasonable, reliable, and a much better experience than your typical taxi. Especially when going to or from a major airport like in New York, Seattle, etc.

But what about behind the scenes stuff? A few months ago we bought an electronic device from Costco. The device has some issues, it needs to be sent back, they need a copy of the receipt, and who knows where the thermal paper receipt ended up.

So, on my next trip to Costco I go to the membership desk, they scan my card, find the purchase, and print off the receipt. Efficiency and really good customer service. Technology that isn’t just cute, as in, “Device, order flowers for my wife” without knowing if you’re getting a great arrangement or something you could have got from the grocery store.

All businesses use technology. The question is, how are you using technology to benefit your company, your employees, and especially your customers? The easier you make it for them to buy from you the more sales you’ll have.

In my case, I populate my website and blog with a lot of information (mobile friendly site too!). If my prospective clients are like me they’ll think, “If he gives me this much value for free just think how much I’ll get if I hire him.”a

“If a man harbors any sort of far, it makes him landlord to a ghost.”


Everything is Local

The little things around us have a big impact.

What triggered this train of thought was two things.

On November 4 710ESPN sports announcer Danny O’Neil spoke to my Rotary Club. He mentioned how sports can bring a community together. Most issues, including politics, are put on the back-burner when we’re all cheering for our team.

Last year our local weekly paper, The Kirkland Reporter, had a front-page picture of the mayor and county council person cutting a ribbon to open a new ballot drop off box (we have 100% voting by mail or drop off in Washington, no day-of at the polls).

The latter reminded me of all my Rotary trips to Antigua where they will do a ribbon cutting, ceremony, grand opening of any and everything. Filled with a lot of speeches, of course. They celebrate the little things, together.

I know we have issues in this country, many people are poor, suffering, etc. But no matter what the politicians say to exaggerate things, life is pretty good when the majority of people have the time and energy to follow sports, entertainment, have small ceremonies, and similar. It’s a lot better than dodging bombs and bullets, living under authoritarian dictators, or face daily, severe, lack-of-food circumstances.

“November always seemed to me the Norway of the year.” Emily Dickinson

Negative Endorsements

With the election just past (yeah!) it made me realize we vote for a lot of things on which we really shouldn’t be voting. Judges are my top example. Who follows judge races? Who tracks their history, knowledge, opinions, etc.?

So, my first step is the voter pamphlet. I’ll glance at who they are, their background, etc. Then I look to see who’s endorsing them. If the endorsements are from people or groups I don’t like, the candidate doesn’t get my vote.

I’ve always wondered how this plays out in business (and life). We really don’t know how endorsements from someone held in negative regard helps or hurts us. I remember when I was starting in this business someone wrote a scathing newsletter about my friend Ted Leverette. The upside was someone called him, hired him and said something like, “I’ve met the author. If that person thinks this way about you I’m sure you’re a great resource.”

In other areas of negative reinforcement:

Business buyers – I tell them to first eliminate what they don’t want, which is usually restaurants, retails, and franchises. The easiest way to shorten the playing field.

Business sellers – Many will not want to sell to entities that just want to flip the business in five years. They want a buyer who will preserve their legacy. So any history of buying and then soon selling will cause them to flee.

Customers – We learn how to eliminate bad customers even though occasionally a bad one sneaks through. Experience teaches us the only thing worse than no customer is a bad customer.


“Get your facts first, then you can distort them as you please.” Mark Twain


Business Buyers and Sellers Have Prisons to Escape

The following picture is in my book If They Can Sell Pet Rocks Why Can’t You Sell Your Business (For What You Want)? It shows how after awhile someone’s business can become a prison (and they need to plan so they can exit with style, grace, and more money).


This next picture, or one like it, should be in my book Buying A Business That Makes You Rich next to the above picture.* Why? Because these buildings are also prisons. They trap the people who commute daily and then do the same old same old thing every day for decades.


Some of these people should be taking the initiative and getting control of their life. This means make the leap of faith and become a business owner. And buying a business is the best way to do this, and the easiest to finance.
We’re living in an interesting time (although all times are interesting in one way or another). As in my article, ” Making a Splash,” there’s a plethora of businesses hitting the market as the baby boomer generation is large, entrepreneurial, and aging. And many of these are profitable companies (and of course many aren’t and some have the proverbial lipstick on a pig).
For someone stuck in their urban or suburban jungle what more could they ask for but a solid supply of businesses, an active market, and low interest rates?
So what does it take to be a qualified buyer, in addition to the willingness to make the leap of faith?
  • Management skills so you can manage people, processes, money, and systems.
  • Enough capital to make your down payment (in today’s market, for an individual or small business owner, it’s 10-15% of the price and/or about 2-3 times the salary the buyer is used to receiving.
  • A good personality, so you can relate to the seller and his or her employees, customers, etc.
“What to know what God thinks of money? Look at the people he gave it to.” Dorothy Parker