What Is the American Dream? Part Two

Last month I gave my insights regarding a ProPublica article about how people over 50 won’t be the decision maker when they leave their job.  (Update, IBM is in the midst of a lawsuit for firing up to 100,000 people, targeting older workers. And there seems to be damaging testimony supporting the lawsuit’s premise.) A past American Dreams was to get a job at a large company, work there for 40-45 years, and retire with a gold watch and a pension. But no more, for most people.

I may be dating myself, but I remember in one college class a discussion about how another American Dream was to start a business and sell it to Sears. In those days, Sears was dominant and bought a lot of small businesses. However, a lot of those acquisitions were after Sears became the firm’s top (by far) customer and had the supplier “over the barrel.”

So, what is the American Dream these days? Actually, it should be “dreams” not “dream” as there are many versions. In early 2019 the New York Times had an opinion piece titled, “The American Dream is Alive and Well” with the sub-title of, “Most people in this country say that they are living it – but what they mean by the phrase might surprise you.”

The opening is, “I am pleased to report that the American Dream is alive and well for an overwhelming majority of Americans.” Here’s some interesting statistics:

  • Only 16% said to achieve the American Dream you have to be wealthy.
  • Only 45% said it means having a better quality of life than your parents.
  • And only 49% said it entails having a successful career.

Most interesting, 84% of Republicans and independents and 88% of Democrats said freedom was essential to it and less than 20% in either party believe becoming wealthy is essential. Many said it is experiences, not a lot of money, that bring happiness. With my clients, business ownership tops the list of desired experiences (and then getting out of business for their next great adventure in life).

Overall, all races, all levels of income, and all generations (from under 22 to over 70) are optimistic at an over 70% level. Also interesting is the Times published this during the Trump administration, which hates the Times.

Let’s move on to a Fast Company article titled, “We make $325,000 a year and don’t feel we have enough.” Catchy title but a bit misleading. Three case studies about people making $97,000 (Canadian), $171,000, and $325,000 show close similarities. 

The lowest income couple saves or has “leftover” funds of 12-20% (and a lot of Canadian safety net taxes), the other two have 30-40%. So, when the highest income couple says they feel they don’t have enough it’s because $125,000 is going to some form of savings or investment. Not bad. 

So, what’s my point, or points? Here are three:

  • It’s not as bad as the headlines – and things haven’t been as bad (or as good) as the headlines forever. Realize there are always pockets of people in a tough position no matter how good times are. But publicizing the positive doesn’t sell papers, get clicks, or get viewers. Then factor in social media, which magnifies everything and makes people think things are bad on a macro level. But when they discuss their own situation, i.e. the micro level, we get the results shown in the Times study.
  • We have different objectives – I’m guessing this hasn’t changed too much over the years and now it’s easier to collect information and publicize it so we have a lot more data and therefore insights. Different people strive for different things like money, power, prestige, spirituality, low stress, material goods, etc. No right or wrong and I applaud those who use our safety nets as a helping hand up to achieve their version of the American Dream.
  • Business ownership – as per above, for many, and this includes all of my clients, owning a business is the experience they want. It can include financial benefits but also provides the experiences many want. Those experiences include being successful, helping customers, providing jobs, being creative, and more. As in part one of this two-part newsletter, page one of my book Buying A Business That Makes You Rich, there are numerous reasons besides money people want to buy/own a business.

Conclusion

There is still opportunity everywhere. While it’s not for everybody, business ownership is the vehicle many want to maximize that opportunity, have the experiences they desire, and have a fulfilling life.

The Best Lessons are From Dogs

I recently read Dave Barry’s latest book, Lessons From Lucy; The Simple Joys of an Old, Happy Dog. It’s funny, as one would expect from Dave Barry, insightful, poignant, and not exactly what I expected from him.

I’m not going to “steal his thunder” and give away all his lessons. Read the book (it’s a fast read and extremely entertaining). I will share one lesson, because it’s one of the few mantras I have in my business.

Don’t stop having fun. (And if you have stopped, start having fun again.)

On page one of my book, Buying A Business That Makes You Rich, I state that in addition to all the reasons people have for wanting their own business, fun needs to be at the top of the list. The same goes for a job, yet too many people slog through their days, collecting a paycheck (sometimes a very good paycheck) but not building a career or a lot of happiness.

It’s even more important in our personal lives (to have fun). We can’t go through life like the Puritans, feeling we have to suffer on earth to have everlasting life. But considering most of us spend 25-35% of our adult lives “on the job,” it’s crucial to be doing something you like if not love.

And guess what, when you’re having fun it carries over to your co-workers, customers, family members, and others, and, increases productivity. There’s a lot of money spent on advisors helping employees, and owners, get to the point of enjoying what they do and doing their jobs better. It’s often called culture and it’s a lot easier to destroy a culture than build a great one, which is one reason for all the experts providing great advice.

“Wine is sunlight, held together by water.” Galileo Galilei 

Stereotypes Can Be Deadly

We were having a cup of coffee and some breakfast at a great little coffee shop-bakery-café in Bozeman, MT before going on a hike. Next to us were three ladies, also dressed for a day in the outdoors. and I couldn’t help but overhear one of them say:

“People from cities really don’t understand the environment. And getting off the ship on an Alaska cruise to spend two hours in shops looking at tchotchkes isn’t getting into the environment.”

A stereotype of city people and I’ll admit many city people aren’t all that knowledgeable about the outdoors. Our fishing guide, who we use every summer, loves to tell (everybody) about the lady from New York city who asked (when seeing a minnow put on a hook), “Do fish really eat other fish?” *Realize fishing guides love to tell the same stories and jokes no matter how many times you’ve heard them, so we just pretend they’re new.*

But knowledge and caring are two different things. Most people, city or rural, don’t want chemicals dumped in their water or on their land. Most want to breathe clean air. Very few if any want their local resources, whether a lake or river in the wilderness or the Hudson river in New York, to be like a man-made lake in Novosibirsk, Russia nicknamed the “Siberian Maldives” because of its turquoise color. Unfortunately, the color is a chemical reaction from ash runoff from a power plant’s industrial dump site.**

So what stereotypes do you have? Some I hear include:

  • You can’t buy this business because you don’t have direct industry experience. (False, very false and tied to the misnomer “Nobody else can run my business because it’s so special.”)
  • I’m starting an advisory business but don’t have any references or testimonials. (Sure you do. You just did the work for another company.)
  • My business can’t grow. (Yes it can, maybe it’s you.)
  • I have to do menial tasks like payroll, HR, reviewing every bid/proposal, etc. (No, owners don’t have to do those things way below their paygrade, you have to trust others and get over being a control freak.)

So, what stereotypes are holding you back from growing, starting a new business, buying one, selling yours and moving on to your next great adventure in life, or anything else?

“Knowing what must be done does away with fear.” Rosa Parks

Stereotypes Can Be Deadly** This lake has become an Instagram phenom and even though people are warned not to go in the water they do. One man who floated on the lake (on a floatie) said, “The next morning, my legs turned slightly red and itched for two days; the water tastes a bit sour, looks like chalk.”

Buyer Fever – An Example

We all get it, actually many times. It could be something simple like a gym membership (those 20 pounds will melt off), a bit more involved like a car (I sure look cool in this red car), or even a house (wow, what a kitchen).

When buyer fever hits about a business it can be trouble. I’ve seen my share of buyers with the fever, and it usually comes back to haunt them. Buyers with the fever will pay too much, do incomplete due diligence, or ignore blemishes.

Saw an extreme case recently. The buyer loved, and I mean loved, the service. So he bought the business. Never mind he didn’t have the license to run it, meaning he had to hire someone with that license and was therefore at the mercy of that employee staying. Never mind he grossly overpaid. He got to own the business whose services he was infatuated with.

Love of a product or service is never a good reason to buy a business, which is why it’s called buyer fever. When emotion overtakes logic, it leads to trouble.

Are You Overly Enamored?

Some friends have a daughter in her early 30’s who has a decent but not high paying job, is attractive and outgoing, and still lives at home. When I stated the daughter needs a boyfriend the mom said, “Oh, I know, but she’s so fussy.” Maybe, and maybe mom’s rose-colored glasses are on. I would seem to me it’s hard to attract a good boyfriend when you’re still living at home.

We all get enamored with things we’re close to. (We think) our house is worth more than the market says it is, so is our car, and what about the following three business things?

  • Business owners often make the abovementioned mom seem realistic. They rarely see warts; they only see something special. The owner can’t take a vacation, it’s a sign of how important he is. One customer is 52% of sales, or three are 80% of sales, it’s a sign of how much they love us. Or the owners who saysomething like, “I know how businesses are valued but we’re not like other companies, so those rules don’t apply to us.” Sure.
  • What about service providers who get hung up on their methodology? Anybody familiar with Alan Weiss knows he tells advisors to forget their seven-step process for this or the eleven-step system for that. In other words, don’t fall in love with your methodology, figure out what your client’s problem is and fix it.
  • Finally, there are business buyers, who, for this discussion, fall into three groups. The first are those I wrote about a few weeks ago, who get buyer fever and can see no wrong in the company they’re in love with, i.e. they must have it, at any cost. Second, are those so captivated by their own (supposed) abilities they think they can fix any underperforming company (of course, this isn’t all that common). Finally, we have the buyers who throw away the rose-colored glasses and put on their darkest sunglasses, blacking out every business because it’s not sexy enough, perfect, can’t grow fast enough (without needing capital), intellectually stimulating, etc.

The above are why we have experts in various fields including real estate, auto sales, business buy-sell, business improvement, tax, insurance, legal, and other areas.

“Time is an illusion. Lunchtime doubly so.” Douglas Adams

When You’re In Over Your Head…

AB InBev, which makes one out of every four beers sold worldwide and owns hundreds of brands is selling assets in Australia, Asia, and Central America. Why? Because an acquisition spree got them to the size they are but also saddled them with massive amounts of debt And there’s a lesson here for small businesses and individuals.

Many things can derail a business’s value (customer concentration, owner dependency, etc.) and there’s nothing wrong with manageable debt. But the beer market is struggling, both in emerging and mature markets, and that threw AB InBev’s debt coverage out of whack, i.e. not enough profits to cover debt payments the way they wanted to.

Growth is great. We all want to grow. Business buyers especially want to grow. But growth for growth’s sake can throw things off kilter. It doesn’t matter if it’s beer, widgets, aerospace, or something else, manageable growth with attention paid to margins and cash flow is what you want.

The key is to understand what you do best and do more of it. When you want to expand your product or service offerings make sure there’s a market. Don’t be trying to sell beer when customers are moving to other beverages.

And, whether personal or business, manage your debt, your cash flow, and your growth so you don’t fall off the cliff.

“Insanity is a relative. It depends on who has who locked in what cage.” Ray Bradbury

 

Are You Ready for a Storm Surge?

I was watching a fascinating video on the Weather Channel app about Tropical Storm/Hurricane Barry in Louisiana. The scene started with what looked like a grassy country road or trail, soon it looked wet, then a small creek about one foot wide was visible, and before you knew it, a torrent of water was flowing, filled with debris.

These surges come so quickly and it’s one reason people get trapped; they think they have time when they don’t. The same can happen in business. I’ve had a few times when it seemed I could do no wrong when it came to getting clients. New client here, new client there, new client everywhere. Then the work needed to be done all starts hitting at the same time.

For us it means putting in a little more time, doing less marketing, postponing admin work, etc. What about for businesses making or selling a product or labor-intensive service (fixing furnaces, installing systems, etc.) when they experience (usually short-term) hockey stick growth? Here are three traps to watch out for:

  1. Growth sucks cash and it’s why a couple huge orders can deplete the checking account. We just met with an owner who told us how they bought the rights to sell a new product line from a struggling competitor. First step, stock up on inventory because customers were frustrated about everything being “out of stock.” This means a lot of cash out the door. Then, there’s a royalty on sales, which is a great way to buy something but means less margin until it’s paid off.
  2. Who’s going to do the work? Simple story, over the last two years I’ve seen 8-10 electrical contracting businesses either on the market or I’ve talked to owners thinking of selling. Every one of them said they could do a lot more business (double in many cases) if only they had the people. Fast growth, big orders, and similar can create a short-term labor shortage, force overtime and its increased cost, or cause delivery delays. Watch out when large opportunities appear in your sales pipeline.
  3. A question I’ve asked numerous audiences is, “What’s worse, having the capacity to make one million widgets and only selling 250,000 (other than having the capacity for two million)?” The answer is, having the capacity to make 250,000 and selling one million. Your processes and systems will get strained. This assumes the business even has processes and systems, which most small business have in only a rudimentary form. What is really common is when the process is mostly in the owner’s head and there’s a bottleneck because there’s only so much one person can do.

The solutions aren’t easy but are doable. From lining up credit before it’s needed to instilling a culture that attracts good people to working on process improvement all will help if done in advance.

“There is never enough time to do all the nothing you want.” (Cartoonist) Bill Waterson

When the Fever Hits

The fever can hit anybody over just about anything. It’s called “Buyer Fever” when we want something so much we throw logic out the window. It could be a car, a house, a job, an employee to hire, a spouse, and in my day-to-day world, a business (or to get out of a business).

Recently we were referred to a business owner who had the fever and desperately wanted out. Why? Because a couple years prior he got buyer fever and desperately wanted in. He loved the company’s services so much he had to have the company.

Unfortunately, the fever got in the way of logic and due diligence. The business seller had the experience, and more importantly, the required licenses to operate the business. The buyer had to hire someone with those licenses (there goes $100,000 out the door the seller didn’t have to pay).

Let’s be realistic, you have to have the desire for what you’re buying and in the case of businesses there’s a huge difference between, “I can see myself going to work there every day, adding value, and enjoying it” and, “I must have this, at (just about) any price.”

More realism – business buyer fever doesn’t happen that often. Most buyers are overly fussy and skeptical. With my clients I can only think of a few over the last 20 plus years. But I know it’s out there because every year I meet multiple owners who got buyer fever and are digging themselves out of it. It’s usually a good business bought the wrong way (meaning they paid too much).

It will be a hard lesson for the above owner, hard as in money-losing. Given it’s a specialty, licensed service I referred him to an industry expert because it needs work. Maybe the owner should have asked “The Magic Question,” described in the video below.

“Beauty is always transient, which is why it is so interesting. Ugliness lasts longer.” Stephen Bayley

 

What Is the American Dream? Part One

During the 2018-19 holidays ProPublica published an article titled, “If You’re Over 50, Chances Are the Decision to Leave a Job Won’t be Yours.*Let’s start with some highlights from the article:

  • While there are stories about individuals and their situations, most of the facts come from a study started in 1992 that’s been tracking 20,000 people, especially when they hit age 50.
  • By 2016, 56% of these people had been laid off or left under such circumstances it was evident they were pushed out (forced retirement).
  • Only 10% of them earn as much as they did before they lost their job with most suffering big money losses.
  • In 2018 there were 20.7 million people laid off. Older, more experienced people have their experience held against them and one-third of those in their 50’s lose two or more jobs.
  • While layoffs hit all age groups, those over 50 suffer the most as they don’t get hired as often or as fast as younger job seekers.
  • There is less government oversight to prevent age discrimination. (I’ve written about this before as my dad was part of a group layoff of people over 50 and they won a class action lawsuit to get their jobs back. The company lost a group of loyal, I’ll do-what-it-takes employees for bitter, I’ll go-through-the-motions employees).

There are a lot more statistics in the article, but you get the drift. So, what are the alternatives? Given what our business focuses on, the buying and selling of businesses, you can bet that’s one of the alternatives, but not the only one.

First, it’s easy to say, “Take control of your life and get your own business.” But it’s not that easy and it’s not for everybody. It takes capital (or other household income), the right skills, and guts. The last point isn’t meant to diminish people who don’t have the desire or fortitude to own their own business. As I write in Buying A Business That Makes You Rich, my mother was a college level teacher who couldn’t imagine anything riskier than a government paycheck every month. She just didn’t have the risk tolerance.

An option besides business ownership is to work for a small to mid-sized business. While the pay and benefits don’t always match what one can get from a large corporation, there’s a lot more flexibility and good people are highly valued. I’m not just saying this; I see it. Owners regularly tell me about the long-tenured employees they have (caveat: if many of those long-tenured employees are in their sixties buyers get scared about too much institutional knowledge walking out the door in the near future, which is why all businesses need expertise spread out over all age ranges).

When it comes to business ownership, there are three, and only three, ways to get into business. You can start a company (and this includes consulting or advisory work), buy a franchise, or buy a (mature, profitable, and fairly priced) business. Buying a business is for those people who:

  • Are fed up with working for someone else.
  • Don’t have the creative juices to come up with an idea for a new company.
  • Have honed their management skills so, to varying degrees, they can manage people, processes, money, and systems, with an emphasis on people.
  • Have the money, or access to it, to fund a down payment (the bank and the seller will finance the rest of the deal).

Then it’s a matter of why, as in, what do I want to get out of business ownership? Many people think money is the prime motivator, and it is for some, especially those tied to private equity, search funds, or similar. But from asking hundreds and hundreds of audiences, here are the reasons I hear the most (and they’re on page one of my book):

  • Control
  • Reap the benefits of my smart and hard work
  • Independence
  • Decision authority
  • Flexibility
  • Income potential
  • Equity or net worth
  • Creativity
  • So I can be the boss

To give away my punch line, the top reason should be to have fun. To enjoy what you’re doing – it’s your business after all – because of all the above reasons.

Notice the common thread in the above; control, independence, decision authority, be the boss, and creativity (to solve customer problems not as in starting a business) are all about the same. Business buyers want to do things their way, pure and simple. No big boss in Pittsburgh micro-managing their numbers every week. No corporate ladder peers (or employees) doing whatever it takes to advance, with no thoughts of ethics or integrity. No risk that once you’re making “too much” money you’ll be replaced with someone half your age and one-third your salary (see above).

Conclusion

For most people, the concept of working the same job for 40 years or more is a foreign concept. If you’re not in government or quasi-government (think Boeing) you’re going to have multiple jobs. Some by your choice and some by your employer’s choice. Heck, friends in their 50’s at Microsoft feel (know) their days are numbered. For some, business ownership is a way out of this trap.

Next, I’ll cover what exactly is the American Dream and how it’s been changing over the years.

* Thanks to Jeff Levy for making me aware of the ProPublica article.