Getting Change Means Tormenting Someone

Well, I can’t be your mentor without occasionally being your tormentor,” Dr. Sharon Fieldstone.

When I heard this it was a “stop the presses” moment because everybody who advises clients, manages people, raises kids, or just about anything else has to use tough love to get through to others. Tough love means you’re taking people out of their comfort zone, i.e., tormenting them. It could be:

  • Telling a business owner what their business is really worth.
  • Giving a “truthful” review to an employee (as in, you’re not getting a bonus…).
  • A banker saying, “No, we can’t lend you money because…”
  • Legal advice about what someone is doing is wrong and will get them into trouble.
  • Informing a business buyer the business they love is not a good deal (company has issues, the price is too high, etc.), so keep searching. 
  • Or, the flip side, telling a buyer to get moving before they lose the deal.
  • A CPA telling a client, “No, you can’t deduct your daughter’s college tuition” (or similar).

I’ll bet you can think of times someone did this to you or you did this to clients, employees, or family members. We can’t grow if we’re not held accountable.

Well, I can’t be your mentor without occasionally being your tormentor,” Dr. Sharon Fieldstone

“I am extraordinarily patient, provided I get my own way in the end.” Margaret Thatcher

Fear of the Unknown

Did you ever do something you haven’t done in a while and pay the price? Maybe an exercise routine that leaves you with sore muscles? Or having a meeting at a place known for their pastries, having one (which you rarely do), and paying the price? Yeah, I did the latter recently.

Or what about doing things you’ve never done before? Maybe it’s skydiving, or scuba diving, or entering a run or bike ride much longer than you’ve ever done before. Apprehension, right?

That’s how our clients feel when they decide to buy or sell a business, having never done it before. People who are good at providing professional services do more than just the tangible things. They’re good at handholding, supporting, listening, and asking questions. 

In Buying A Business That Makes You Rich I tell business buyers they absolutely will make a leap of faith and they want to do it off a chair, not the roof (we help lower the jump). Were all the right questions asked? Are they overpaying? What isn’t the seller telling them (that he or she should be disclosing)?

The same holds true for business sellers as they make a big change in life. Did they sell to the right buyer? Will their employees be valued and keep their jobs? What will be their next great adventure in life?

My point is, buying and selling a business (as well as starting one, operating one, growing one) is a lot smoother with the right team. And it adds value to the business when there’s both an internal (management) team and an external team of advisors.

“It is only through labor and painful effort, by grim energy and resolute courage, that we move on to better things.” Theodore Roosevelt

“We are rarely proud when we are along.” Voltaire

Simple is Best

When there’s water all over the bottom of a refrigerator it’s a sign something is wrong. Our Samsung refrigerator has a problem, and it seems, judging from YouTube videos, it’s been going on years and they haven’t fixed it.

Refrigerators use coolant, which changes from a liquid to gas and cools the air, which then has lower humidity. The excess water is to drain and be evaporated by the heat from the compressor. But in Samsung models (and others I’m sure) the water freezes in the drain tube, overflows, and guess what? There’s water in the frig.

The fix is simple. There’s an OEM part that hangs from the heat coil into the drain tube. It’s ½ to 1” long and doesn’t work well. The aftermarket part is about 3”, probably costs about 17¢ to make and sells for $7 on Amazon (and $14 at the parts store). It carries more heat to the drain tube and eliminates freezing.

A picture containing floor, wooden, wood, lumber

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A lot of things in life and business are simple, if we let them be simple.

  • Business sellers – simple decision, prepare your business for sale and exit with style, grace, and more money. Don’t prepare it and sell for less.
  • Business buyers – decide which leap of faith you’re going to make. A small leap on a mature, profitable, and fairly priced business or a big leap on a company treading water.
  • Operators – simply make decisions sooner and move on. Especially with people. From numerous client situations, whenever there’s a problem employee jettison them ASAP. Every owner I know in this situation said, “Why didn’t I do it sooner?”

And it was pretty simple to take the back panel off the inside of the refrigerator and hang this part on the coil. Plus, our appliance is now almost as clean as when it was new.

“The past is never where you think you left it.” (Writer) Katherine Anne Porter

“If you get dealt lemons in life, you should make lemon lavender mojitos!” Harriet Walter (as the character Deborah Welton)

Can You Find People to Manage in the Covid/Delta Era?

Ted Lasso this, Ted Lasso that, it doesn’t take much effort to find articles or podcasts on management based on Ted Lasso. So, I won’t write about him and will only provide some of my favorite Ted Lasso quotes at the end (those suitable for a family publication).

Those who read this memo regularly know I pull a lot of my content from the headlines so when I saw the Wall Street Journal’sAugust 16, 2021 Journal Report on The New Workplace it felt like a cornucopia of content. Hard to pass up a front-page headline of “Employees Are Back. Bosses, Don’t Blow It. Plus the other article headlines:

  • Don’t Kid Yourself: The Fear Is Here For a While
  • What Bosses Can Do to Reduce Anxiety for Returning Workers
  • Here Comes The Two-Tier Workplace
  • Ways to Bridge the Hybrid Communications Gap

On the same day I got an email from the Puget Sound Business Journal containing links to these articles:

  • Employer sentiments shifting on vaccine mandates
  • The tables have turned: How Covid changed the ideal job listing
  • What employers can do when workers refuse to get vaccinated
  • Delta variant has many companies rethinking their return

Pretty enlightening, isn’t it? For business operators, buyers, and sellers the labor market is, or should be, the number one issue. And maybe issues two, three, and four. In the last few weeks I’ve talked to business owners in the following industries about the labor shortage: restaurant, auto supplies distribution, food production, supplements, metal manufacturing, and many more. These shortages, and supply chain issues, many caused by labor shortages up the chain, are affecting all of us.

My pressure washer hose broke and it’s tough finding a replacement. Where I bought it has no parts and no new washers. Starbucks has had signs about limited food choices due to supplier issues. An owner told me in order to hire an inexperienced 18-year-old he had to pay her more than his current people and therefore their wages went up so they can make more than the new person. Yikes!

It goes back to one of my four rules for business owners/sellers: be able to attract and retain good people.

When asked how he takes his tea: “Well, usually I take it right back to the counter, because someone’s made a horrible mistake.” Ted Lasso (this is one of my favorites, especially for my tea loving friends).

“That right there, that’s a scone, OK? It’s like a muffin, except it sucks all of the spit out of your mouth.” Ted Lasso

“Be honest with me. It’s a prank, right? The tea? Like when us tourist folks aren’t around, y’all know it tastes like garbage?”

Be a Breath of Fresh Air

Surprised. Pleasantly surprised along with wonderment is how I’d describe my reaction when a lady I didn’t know came up to me gushing with thank you after thank you. Why I asked? She told me it was for my help in getting the business buy-sell deal done. The buyer, she said, was “A breath of fresh air.” She loved working for him.

This is not unusual (to have the buyer be a breath of fresh air). Here are a few more examples from a variety of clients:

  • Spending the first few days of ownership doing, “Management by walking around” to get to know the employees and small-group meetings. He said they told him the previous owner never did either.
  • Immediately learning the team’s skills and delegating. Did they sure liked that.
  • Taking routine tasks off management level peoples’ job description so they could concentrate on growth and productivity. 
  • Doing a survey of the management team to find out what they thought were the strengths and weaknesses. 
  • Sitting down and listening to the employees. Listening. Wow, what a concept.

But what if the owner doesn’t want to sell and let a buyer be the breath of fresh air? Here are some tips and realize when doing these things you’re really preparing the business so you can exit with style, grace, and more money.

  • Perform a “mock” due diligence. The best is to have an outside pair of eyes make the observations, ask the questions, etc. Next best is to have a group of managers do it. The worst is the owner doing it themselves because they’ll see and hear what they want to see and hear. This is a lot more than the numbers. It’s diving into customer relationships, employees, management, IT, suppliers and supply chain, etc. 
  • Work on eliminating dependencies, starting with any owner dependency, and moving on to customers, employee, supplier, the lease, a certain technology, etc. When the owner is the business, it reduces value the same way as if there’s 53% of sales to one customer or one supplier who in effect controls the business.
  • Exploit any growth opportunities. Don’t just take orders, reach out. I have a quote in my computer from my friend Keith Jackson with Industrial Revolution and it’s, “It’s amazing what happens when you pick up the phone and call your customers.” That’s being a breath of fresh air.
  • Take action. As another good friend, Rod Jones, says, “Have a Nike moment.” Every strategy advisor will tell you there’s no shortage of good strategies but there’s a lack of implementing.

Many years ago, a wise old business broker told me the unprepared business (and seller) will have it take twice as long to sell (vs. a prepared business) and sell for much less. He added, “Selling a business is like painting a house. All the hard work is in the preparation, the painting is the easy part.”

Was he right with his comments? You better believe it. In a just released survey by the International Business Brokers Association in conjunction with M&A Source we see the following from deals in Q2 2021:

  • About 2/3 of sold businesses in the survey did no exit planning. None.
  • About 20% did some exit planning, for less than a year, which includes simply talking to a broker.
  • Depending on the size of the business, anywhere from 45% to 71% sold because of an unsolicited offer.

About 20% did some exit planning for less than one year, which includes simply talking to a broker.

Depending on the size of the business, anywhere from 45% to 71% sold because of an unsolicited offer.

To summarize, they weren’t ready, they were probably thinking but not taking action, and when the situation arose, they jumped on it. Ready or not, here we come, was the mantra.

As I’m writing this a friend emailed me and asked for a couple copies of If They Can Sell Pet Rocks Why Can’t You Sell Your Business (For What You Want?) for friends of this thinking of exiting. I’ll make the same offer to those of you reading this. If you’d like a complimentary copy of it (or any of my books) for yourself, a friend, or client let me know and I’ll get one to you.

Realize what I write above is not easy. It takes time, effort, leadership, and buy-in. To quote 2021’s favorite seer, Ted Lasso, “Takin’ on a challenge is a lot like riding a horse. If you’re comfortable while you’re doin’ it, you’re probably doin’ it wrong.” But it’s worth it.

When They Ask About Fees…

We all run into a lot of different people in our day-to-day business. After a while we get triggers as to how things might go. For example:

  • When someone wants to dive deep on fees in the first call it means we will never work together. Never. Recently one guy brought up fees three times in a 15-minute introductory Zoom call with the last mention being a question about if I would take my fee in equity (in a company they haven’t bought, much less identified yet).
  • I meet someone, I give them a copy of one of my books, we meet again or talk within a week, and they say they’ve finished my book and really liked it. Bottom line, 90% chance we’ll work together.
  • If someone asks a lot of questions about how we work together, the process, timing, etc. it also means there’s a good chance we’ll work together. Being inquisitive means seriousness.
  • On the flip side, if excuses start to flow and the message changes, guess what? (Especially for business buyers) they’ve changed their mind, i.e., they got cold feet, so they come up with alternatives like, “I might be getting a promotion” or “We have to decide where we want to live” or “My spouse isn’t sure this is the right time.”

I bet most of you reading this have similar “signs of action (or no action)” in your memory banks. After a while it gets easier to figure out who to concentrate on helping.

“Some things are just too coincidental to be a coincidence.” Yogi Berra

We spend our time looking for security and hate it when we get it.” John Steinbeck

A School Lunch is Better Than No Lunch

I was a cafeteria monitor for at least my senior year in high school (maybe my junior year also). It wasn’t a bad job. We made sure kids didn’t act like kids, food wasn’t thrown, the lines moved along, and the finished trays didn’t back up on the conveyor back to the kitchen. The benefit, monitors got as much food as we wanted, and we had a great team of cooks who served 2,700 kids a day (it was a closed campus) and growing boys need a lot of food.

I hadn’t thought about this in way-too-many years until I saw a headline in the Wall Street Journal on July 26 that said, “Supply Chains Pinch School Menus.” Food suppliers to schools are having a tough time getting food and other supplies, they don’t have enough workers, and transportation is an issue.

Just like almost every other business these days. It’s tough operating a business when you don’t know when you’ll get materials, will you have enough employees, will your customers want what you have if they can’t get other things needed to make their product or do their business. The article mentioned one company “gambling” on stockpiling fruit without knowing what the schools would be ordering.

It also changes due diligence for business buyers. They must now look at the supply chain, the suppliers, how they get the product, etc. For a while the top worry was easily employee availability and if supply chain worries haven’t overtaken that worry, they’re a close second. Another example in the article was about suppliers backing out on their customers. Tip to owners (especially soon-to-be sellers), have multiple suppliers and always be in contact with them.

For buyers, it’s be cautious and investigate the heck out of the supply chain.

“We can understand things better. We can never understand things fully.” (Physicist) David Deutsch

Overpacking in Life and Business

We recently took a long-weekend trip to Denver to see a client and relax for a few days. I noticed something I often notice in airports and it’s most people overpack. It’s summer, there aren’t too many places to go where it’s not warm (meaning no parka to pack), and I can’t see how people need more than a carryon size suitcase plus a backpack for their computer, headphones, book, etc. Face it, most people go places where there are stores and wash machines.

Of course, most of us overpack in life and business also. Too much stuff around our houses, too many clothes in the closet, too large a list of things-to-do around the house, etc. And in business, it’s just as bad or worse. 

Business owners and sellers overpack as follows:

  • They make things too complicated, often for employees and for customers (ordering and reaching someone for service should be easy not hard).
  • They don’t invest in up-to-date technology or processes. Business buyers like it when there’s low hanging fruit, meaning easy upgrades that save time and money and I can’t remember the last time a sold business had all current hardware and software.
  • Micromanaging, which slows down productivity and employee growth.
  • Making the business, or a critical part of it, dependent on the owner. This is a big one and, as I wrote a few months ago, an owner told me a large firm “beat me up on price” because they said the business was too dependent on him.:

Business buyers also overpack:

  • Dreaming there’s a perfect business out there. Wake up, there are no perfect businesses or perfect deals.
  • Getting analysis-paralysis. As I say in the preface to Buying A Business That Makes You Rich, buying a business requires a leap of faith and you want to make it off a chair not the roof. But you’re still making a leap, so make a decision.
  • Not realizing it is work. It takes effort to locate, analyze, and structure a deal on a mature, profitable (and fairly priced) business. It’s pretty darn easy to buy a crappy business or grossly overpay.

And, in my market of sub $10 million deals, realize relationships rule. Nobody will buy from or sell to someone they don’t like (which also means they don’t trust them). Unpack the ego, get rid of excess baggage, use your team, and get the deal done.

“Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose.” Steve Jobs

“You can lead a man to congress, but you can’t make him think.” Milton Berle

Under My Thumb

It’s not only the title of an old Rolling Stones song but the mantra of some business owners. I recently witnessed this twice and the corresponding uplift when a buyer took over each business. Here’s a great story about how the culture can be changed, quickly – the owner of the coffee shop next to a client’s business said he noticed how happier the employees are since the buyer took over. Wow!

This was about the same time another client told me about how the staff had a very unflattering nickname for the previous owner, which was a play on his name. Is it any surprise there are survey results and articles about how about one-third of employees plan to look for a new job?

I recently changed my phrase for what makes a business buyer qualified (besides money). A good business buyer should be able to manage, to some varying degree, people, processes, money, and enthusiasm (the latter recently added). As per the above vignettes, the enthusiasm part just might be the most important.

Business owners, sellers, and buyers should not assume all is well in paradise (the company). It’s a very employee friendly market and jobs are plentiful. It’s true most people don’t like change but when the grass appears greener on the other side of the fence, they’ll be more tempted than ever to make a move, knowing there are a lot of other options. Buyers especially be careful and perform more due diligence than ever.

Bottom line, in today’s world the overbearing owner who treats people like numbers, servants, or a piece of meat is in for a shock. I know that in the above two stories there were key employees on the verge of leaving until the new owner came into play (key employees usually meet the buyer during due diligence and these employees did meet the buyer).

“Total liberty to the wolves is death to the lambs.” (Philosopher) Isaiah Berlin

It’s not only the title of an old Rolling Stones song but the mantra of some business owners. I recently witnessed this twice and the corresponding uplift when a buyer took over each business. Here’s a great story about how the culture can be changed, quickly – the owner of the coffee shop next to a client’s business said he noticed how happier the employees are since the buyer took over. Wow!

This was about the same time another client told me about how the staff had a very unflattering nickname for the previous owner, which was a play on his name. Is it any surprise there are survey results and articles about how about one-third of employees plan to look for a new job?

I recently changed my phrase for what makes a business buyer qualified (besides money). A good business buyer should be able to manage, to some varying degree, people, processes, money, and enthusiasm (the latter recently added). As per the above vignettes, the enthusiasm part just might be the most important.

Business owners, sellers, and buyers should not assume all is well in paradise (the company). It’s a very employee friendly market and jobs are plentiful. It’s true most people don’t like change but when the grass appears greener on the other side of the fence, they’ll be more tempted than ever to make a move, knowing there are a lot of other options. Buyers especially be careful and perform more due diligence than ever.

Bottom line, in today’s world the overbearing owner who treats people like numbers, servants, or a piece of meat is in for a shock. I know that in the above two stories there were key employees on the verge of leaving until the new owner came into play (key employees usually meet the buyer during due diligence and these employees did meet the buyer).

“Total liberty to the wolves is death to the lambs.” (Philosopher) Isaiah Berlin

“To be or not to be. That’s not really a question.” Jean-Luc Godard

“To be or not to be. That’s not really a question.” Jean-Luc Godard

Do the Frogs Really Boil?

There’s an old story, about how if you put a frog in boiling water, it will hop out but if you put it in cool water, slowly raise the temperature it will stay in the water and eventually die. I don’t know if it’s true or not, but I get the concept because when my electric shaver blades get dull, I don’t notice it until they’re really dull. The change from day-to-day, week-to-week is so small it’s not noticeable.

The same thing in business, old practices (habits) are hard to change. Take the company that manually entered about 400 transactions into an online portal for payment. The new owner found a $50 a month software package that did all of them at once, using information already in the system.

Or what about the companies still writing and mailing checks when most vendors make it easy to pay online (and many take credit cards). One client manages credit card payments to get an extra 45 days of working capital, plus the points or cash-back.

It’s why I say new owners of a business are often “A Breath of Fresh Air” and it’s not just culture. They often are more in-tune with technology and employees love it when they have tools to be more productive. Heck, many years ago a client doubled his (newly owned) business in two years and he said the main driver was an online ordering system to book jobs versus phone calls (and phone tag).

A good idea is to look around your business and notice all the things you’re doing the same way you’ve done them “forever.” I’ll bet there are some tools out there to make mundane processes less burdensome. 

“One of the symptoms of an approaching nervous breakdown is the belief that one’s work is terribly important.” (Philosopher) Bertrand Russell