Business Ownership with No Control

Posted on by JohnM

The January 21, 2020 Wall Street Journal had an article titled, “Sears Woes Overwhelm Spun-Off Hardware Stores.” It’s common knowledge Sears is in trouble, big trouble. What this article points out is independently owned Sears Hometown and Outlet Stores are in dire straits because Sears is, to put it bluntly, screwing them.

The stores don’t own the inventory, Sears owns it and they pay the store owners a commission. But Sears is not able to provide goods to sell due to their financial problems. And, they control the prices the stores can sell things for, which are higher prices than on the Sears website.

Arrangements like the above are commonplace. You think you’re in business for yourself but you’re a quasi-businessowner. It may be what you can sell, what you can charge, where you can market yourself, etc. No matter what, if the restrictions stifle what you can do, you should reconsider.

People who want to be in business, versus working for someone else, generally want control, independence, the ability to be creative, and more income (and equity). Pretty much in the above order – money is rarely mentioned first, second, or third.

If you’re thinking of owning a business, know what you want from the business and be very careful if you’re not in full control.

“There is always a well-known solution to every human problem – neat, plausible, and wrong.” H.L Mencken

Creativity in a Crisis

Posted on by JohnM

Once again, the phrase, “We live in interesting times” is being used.  There’s nothing but news about the coronavirus and at the same time marketing creativity is starting to flow. 

  • The Catering Company in Kirkland is offering ready-to-heat meal packages with reduced rates, no delivery charges, and emphasizing their food safety protocols.
  • Precor is running ads promoting the benefits of working out at home in the “clean, fresh air.” With many people scared to go anywhere, including the gym, they’re hitting a raw nerve their potential customers have.
  • An HVAC company is extolling the virtues of an air scrubber. Whether it works anywhere close to airplane filtration systems (hospital quality, removing 99.9% of contaminants) it sure sounds good. 
  • I received an email from HubStaff informing me their system helps track the accountability of employees working from home including automatic screenshots, website activity, and activity level based on keyboard and mouse usage. Given and owner told me she feels her working-at-home people get done about 70% compared to what they do in the office I’m sure there will be interest for this type of tracking software.
  • Pagliacci Pizza is marketing touch free pizza delivery. Order online, leave a tip online, and get it delivered at your door with no person-to-person contact.

To me the calm and quiet feels like Christmas and New Year’s with one exception. There still seems to be activity between business buyers and sellers. And, historically an economic slowdown has meant a vibrant buy-sell market as individual buyers fear losing their job (or they’ve lost it), owners say, “Not again, it’s time to retire,” and other owners see opportunity to grow (by acquisition).

“Nothing dates harder and faster and more strangely than the future.” (Author) Neil Galman

The Robots Are Taking Over

Posted on by JohnM

The title of this memo is a line one of my son’s likes to say regarding technology in cars, homes, and everywhere else. We see and hear about it every day. Robots in warehouses, manufacturing, Alexa and Google Home, toasters with Wi-Fi, AI doing medical diagnosis, and more.

I’m amazed at all the ideas for using technology where it hasn’t been used before. It works for customers in the Uber/Lyft industry but not so much for the cash-draining companies, so far. If you pay attention, you’ll see a lot of these ideas don’t make it. And it’s because some things need the human touch. Almost 40 years ago John Naisbett wrote Megatrends and stated the more high tech we get the more high touch we’ll want.

As I’m always asked about good and bad industries, I pay attention to this stuff. Walking through an airport it struck me that food will always need the human touch. Sure there’s automation but watching someone pushing a cart of food boxes through the airport made me realize people will always be involved with growing, moving, cooking, and especially eating food.

The key to a good business is to blend technology with people. A mechanic uses computer devices but still has to hook up the machine, turn the wrench, etc. Heating systems may be very automatic, but someone has to clean them, fix them, install them, and haul away the old ones.

What are you doing in your business to blend technology with people? Over the last two weeks I met an owner still doing the books on paper (no QuickBooks) and an owner who modernized the company, dramatically reducing overhead by using technology and its systems. 

The more you can integrate technology into the business the more time you’ll have to meet clients and prospective clients, which is how you grow most businesses.

“True terror is to wake up one morning and discover that your high school class is running the country.” Kurt Vonnegut

Taking Action as Best We Can

Posted on by JohnM

Last week I had six meetings, one presentation, and four group (associations, etc.) meetings cancel. This week I have one meeting (so far) and we’re going to get coffee and walk around downtown Kirkland while we discuss things. Trying not to go stir-crazy!

Quite a change in a very short amount of time and it will be like this for at least a couple more weeks. So, Jessica and I planned our short-term strategy and decided since in-person meetings will be rare that we will each try to make 20 calls per day. Just to stay in touch, see how others are doing, and see if we can be of any assistance.

I’ve told clients to keep moving forward so as not to lose momentum. It’s what we need to do along with supporting small businesses as best we can (as in, get take-away food while restaurants are closed).

Life Goes On

Posted on by JohnM

As business (and life) have visibly come to a standstill there’s still activity. In the last few days I’ve talked to or emailed with four people in my industry and all have said they have things going on, just not as many in-person meetings.

I do think buy-sell deals will be delayed as buyers (and banks) see if the virus is having any effect on the business’s performance. In a meeting last Saturday, we all agreed Americans are quick to panic, hence the run on toilet paper and other items, and also quick to get back to normal.

I plan to have us do what we normally do, albeit with a lot more of our conversations on the phone.

Staying Safe Is the Motto of the Day, Week, Month

Posted on by JohnM

I’d be remiss to not write this memo about the Coronavirus and yet I’m not going to go into whether it’s just the flu (like some say), over or under reaction, or if people should wear masks to bed. I do know the virus has a longer than normal life of being alive, spreads super-fast through our easily traveled and networked world, and that’s what’s concerning people So, let’s cover what it’s doing to people like you and me, i.e. business owners and executives. 

Part One

The headlines tell us the airline industry, cruise industry, and therefore related businesses like hotels and suppliers are having problems. But what about small businesses, that I really feel for? Here are a few examples:

  • Restaurants – we went out with friends last weekend and a restaurant I’d expect to be full on a Saturday night was maybe at 75%. The Jersey Mike’s sub shop in Kirkland was on social media reminding people they were open (so come on in). Pagliacci Pizza sent an email out about their health and cleanliness policies, i.e. come in for some pizza, we’re okay.
  • Catering – this is an industry hit hard. Two owners told me about all the events being cancelled (one is more concerned about her employees not getting hours and pay than anything else). KIRO7 did a segment on how devastating it is for caterers. My Rotary club, like many others, has canceled at least three meetings. I feel sorry for the staff who won’t be working those days.
  • Product companies – a client is worried about the big industry trade show at which they exhibit because many of their customers are from overseas, and probably won’t attend, and see her new products.
  • A good friend owns a video production company. All their jobs in March and April sans one cancelled in the last couple weeks. Wow!

Alternatively, I was in five retail places over the weekend and they sure didn’t seem to be suffering from a lack of shoppers and a person on a call Monday said he was calling from a jammed packed coffee shop.

Part Two

All over the media is the recommendation from government to have employees work from home, if they can. Easier said than done I say, having had a home office for over 20 years. It takes time to realize you’re “at work.” I used to have a quarterly breakfast with a business friend and when he started working from home he told me how hard it was to stay away from the refrigerator.

Last week a business owner said she has some people working from home and estimates they get done about 70% of what they get done in the office. And, we’ll find out if having certain people work from home improves or damages culture.

Details, Details, Details, and Ambiguity

Posted on by JohnM

The attorney looked at the audience and said, “Make sure you understand everything in your agreements. If there are any ambiguities, they will come back on you, not your attorney.” This was many years ago when said attorney and I were on a panel together.

Wise words, aren’t they? I will never forget them. I thought of this the other day when an exit planning client told me about a dispute over a distribution agreement with another company. And, it seems the other party also ignored this advice, thus a mess.

Without giving away any details, my client signed an agreement that gives the other side an out. The other party signed it including a clause that gives additional control to my client. How does this happen you may ask? Here’s how.

  • My client got to the point where he told his lawyer he didn’t want to spend any more money on legal fees. The lawyer had mentioned the out clause, but the client was mentally more concerned with fees than anything else. However, the lawyer should have said something like, “There’s no charge for this conversation as you need to realize the other side can get out of the agreement at any time, leaving you with expenses and no recourse.”
  • The other party said, when it was pointed out there was a clause giving my client ownership of the brand (versus distribution rights), “An employee of ours put that in there and we didn’t notice it.”

In both cases, not paying attention to the details, not noticing ambiguity, and being cost conscious versus results conscious. In the buy-sell world there are more details, more intricacies, and lot more words to read and understand than in the above example. 

In all cases, don’t ignore the advice above.

“A little alarm now and then keeps life from stagnation.” (Author) Fanny Burney

Even Adults Need Adult Supervision

Posted on by JohnM

Running a small business is easy. Having a small business as an absentee owner is a piece of cake. The employees can operate the business without adult, i.e. owner, supervision. 

The above are all myths of small business and here’s an example:

In the mid-1990’s at a Chamber of Commerce meeting I met the owner of a new auto service center in Kirkland. We hit it off, started taking our cars there (as did numerous family members and friends), got great service, honest pricing, etc. They did little things right like saying you’ll need brakes in about six months versus wanting to do them immediately. Or giving the car a once-over look for no charge.

Unfortunately, the owner died a couple years ago. His wife sold the business to a technology executive who bought it as a passive investment. I hope the wife got paid in full at closing.

We started noticing little things like the phone not being answered and messages not returned. Our only needs were oil changes, the (recently promoted) service manager knew us, and all was good (for us). But obviously not for other customers and definitely not for the employees. It went from a family-business culture to one where the manager said to my wife, “It’s now just a job. I work my hours and go home.”

Guess what? Now the phone isn’t answered at all, the blinds are down, and the doors are locked. About five years ago I started using the term “adult supervision” to describe what an owner needs to bring to the business. This business used to have adult supervision and thus the employees were happy, the customers were happy, and the business thrived.

Don’t think this only applies to very small, consumer businesses like a garage. I’ve seen business with sales of $5-15 million suffer similar issues when the owner decided to take his or her eye off the ball, spend more time vacationing than working, or just clipped coupons (taking a huge salary or distribution as the business grew stagnate).

“The universe if full of magical things patiently waiting for our wits to grow sharper.” (Author) Eden Phillpotts

Show Urgency or Lose the Game

Posted on by JohnM

It’s 2020. Another year, another decade. Doesn’t seem that long-ago people were worried about the world collapsing on 1-1-2000 because of computer clocks, does it?

As Jessica and I talked last week about getting back in the swing of things after the holiday break, one word we used a lot was urgency. Urgency on our marketing, urgency with our clients, and just keeping things moving.

Seattle football fans know the Seahawks would have had a home game in the playoffs if they had shown some urgency on the one yard line instead of getting a delay of game penalty. 

Urgency doesn’t mean rushing into things without a strategy or good tactics. To me it means when the starters gun goes off you move at the appropriate pace. By this I mean, in marketing you can move fast. Making changes to your processes or culture are done at a different pace so you don’t trip and fall. It’s different for all of us.

Think about three areas in your business where you can pick up the pace. And then move on them now, not next month or next quarter.

“Few things are harder to put with than the annoyance of a good example.” Mark Twain

When Selling – Take Action

Posted on by JohnM

We recently spent a long weekend cleaning out our family cabin, which recently sold. As we thought about all we did over the years, we realized it was about a five-year project, which ties very well to what business owners should do when planning their exit.

It was about five years ago when we made an effort to get rid of junk. The cabin’s been in the family for almost 60 years and my dad was a hoarder. If one tool was good, three of the same were better. We got rid of five winches, and I don’t recall seeing one in use for decades. We estimated at least one ton of stuff went to the dump.

In my ACTION Plan* ™ to sell a business the “A” stands for arrange all the affairs of the company. Like with our cabin, it starts with cleaning. Cleaning the facility so it looks like you care. Cleaning up the books so they paint a true picture of the company’s performance. Making everything (operations, finance, marketing, etc.) look as presentable as possible to a pair of (skeptical) buyer eyes.

Once we decided to sell it was a full effort to “have it ready.” This meant quasi-staging (there’s only so much you can do in 700 square feet). This meant getting rid of glasses, plates, area rugs, furniture, and anything else that made the place look cluttered or smaller (it’s small already). We cut and trimmed the grass a lot more often, touched up the paint, removed an old storage building, and kept it clean and tidy.

What we learned is no matter what you do, a buyer will find things you didn’t do. And believe me, a home inspector will find even more of those things. Just like business buyers approach companies with a skeptical eye. And the bank looks at it with a completely different set of eyes, given they really want to get paid back. (Given we don’t live near the cabin, we really didn’t have the time to get to the little things, like we all should at our homes and owners should do in their business).

The “C” in my ACTION plan stands for counsel the company, its people, and processes. This means keep everything up-to-speed, like we did with the cabin once we put it on the market. In a business this means pay attention to the non-financial factors. Its customers, employees, suppliers, market conditions, and anything else that influences the numbers. 

I learned some interesting lessons selling a cabin in a soft market, from 2000 miles away, and not having the ability to be there enough to manage the little things. Given owners are around their business daily it’s not a good excuse to not pay attention to the things making a business more attractive to a buyer.

“Don’t ever think you’ve succeeded. Always try to do better – otherwise, drop dead.” Arturo Toscanini

* Arrange all the affairs of the company 

Coach and counsel the company; its people, process and systems

Transmit and teach all the good “things” about your firm

 (and those “things” are)

Intricacies that make your company special 

Operations and management systems in place that will make a transition smooth 

Numbers, all the financials in understandable form, straightforward with no “tricks”