When City Slickers Go Camping

I was reminded of the Billy Crystal movie City Slickers when I saw the following, which would be funny if these people weren’t damaging our planet:

  • A Seattle Times article on how the Cascade wilderness areas are being trashed (organic and inorganic waste) by city people deciding to get outdoors during the pandemic but not knowing how to act (as in, carry out their waste).
  • A neighbor who loves the isolated outdoors said a deep-woods campground that usually has half of their 30 campsites available was filled with large RVs the last time he went there.
  • A recent Wall Street Journal human interest article about city dwellers experiences in the outdoors. The two best stories are about the young lady who didn’t bring a sleeping bag because it was hot out, camped in a valley, and said she had never been so cold in her life and another lady who was appalled by campsite restrooms (an outhouse I’m assuming) and drove over a mile to a gas station to relieve herself.

So what does this have to do with business? The analogy is there are a lot of people who get into business with the same amount of preparation as the city slickers described above. I get calls regularly from people wanting to get into business (often starting one) and it’s usually to create a job using their skills versus growing a business (I refer these people to the local SBA/SCORE office so they can get a mentor and counseling). 

Advice: 

  • Know why you want to do what you’re going to do.
  • Get the right help to succeed.
  • Realize getting into business (or exiting) isn’t easy. 
  • Plan.
  • Make a decision; analysis paralysis doesn’t help anybody.

Things always look better and easier from the outside. Just like, “the grass is always greener on the other side.” It’s only looks easy, better, or greener when you don’t do the things you’re supposed to do and do them correctly. Doing it the right way takes more time and effort, and it’s worth it.

If You Don’t Have Time to Do It Right, When Will You Have Time to Do It Over” John Wooden

Lowest Common Denominator

Realize what I give as examples below represents at least part of our customer/client base, which is why we can’t assume too much about people, good or bad – too many people just don’t pay attention. It’s also why my wife proofreads my memos and newsletters; because if I start using industry jargon and she doesn’t understand it I know I have to change the language so all readers will get my points, not just those in my industry.

On September 15 I was watching the NBC Nightly News while working out. They did an imitation Jay Leno bit with “people on the street” interviews. The question was, “How many people in the US have died of COVID-19 so far?” The answer is below; see if you know it without cheating, using Google, or asking someone.  Here are three of the answers:

  • Close to 100,000.
  • Tens of thousands.
  • They said it was 100,000 but took that back and it’s about 1,900.

A couple days later I had a routine doctor’s appointment and got to talking to the nurse. I asked if her hands got dried out because she was putting on sanitizer every few minutes. She said, yes, they do, we try to be careful, and then shared a story about a patient. She also works in the ICU and said the guy, with heart issues and diabetes, went to Sturgis, had a good time, came home with COVID, gave it to his neighbor, ended up in the ICU, and died.

Look, for everybody like those mentioned above there are at least an equal number who know what the heck is going on and what to do. The problem is, you can’t automatically tell the two types apart until you engage in a dialogue, ask questions, and get to know them. When you get to know them you build trust and a relationship, which is when a win-win arrangement is achieved.

“There are three sides to every story: you side, my side, and the truth.” Robert Evans

I Didn’t Sign Up for This

We’re doing online training with our adorable puppy Coco and it reinforces our feelings we lucked out and got a great dog. We see and hear the other dogs and their owners on the training and feel fortunate.

One lady was quite frustrated with her puppy and said, “This is not what I signed up for.” My guess is she got a puppy, like a lot of people got dogs, because of the Covid pandemic. I’d bet she thought a puppy/dog would be like her cats (she referenced her cats).

As mentioned, our puppy is very well behaved and I don’t think it’s just luck, or us. One of the trainers we interviewed asked a few questions about our household, the puppy, and our other dog, Dobre, an 11-year-old Lab mix. She said Coco is emulating the older dog, who is laidback. She even emulates him when it comes to chasing tennis balls, which is a lot of fun when they chase the same ball.

A puppy learning from an older dog is like life; it’s great to have a mentor/coach/advisor. It speeds up the learning process and allows us to be more efficient. The most important aspect is having a coach or mentor is to have them to point out what not to do. Been there – done that is a powerful teaching tool.

And while I advise and coach clients, I’m not referring to only business situations. A business owner should be mentoring their employees, helping them grow, even if they grow out of the job. Parents nurture their kids to make them productive adults. Coaches help athletes, dancers, actors, musicians, and more. 

Get someone to help when you need it. Be that help when you can.

“In politics, stupidity is not a handicap.” Napoleon Bonaparte

Change Must Come from Within

It’s no secret the Seattle City Council makes good old-fashioned liberal Democrats look like the old John Birch Society or the Tea Party. So when Danny Westneat, a liberal Democrat, writes his October 14, 2020 Seattle Times column about how things are getting out of hand (with the homeless taking over parks) it seems a tipping point might be close.

Just like in a business, any change, positive or negative, must come within to be meaningful. When the employees lead the effort, it has a better chance of sticking. Think about this when it comes to making changes in your business, especially as you’re thinking of exit planning (which not enough business owners do). And if you or anyone you know need guidance, ask me for a free copy of my book If They Can Sell Pet Rocks Why Can’t You Sell Your Business (For What You Want?).

Nothing is as Good or Bad as Proclaimed

Disclaimer: the title has nothing to do with current events like Covid, the recession, racial injustice, any political party, or similar. While not about sports it may have something to do with your favorite team, especially if they’re bad.

What caught my attention was a front-page article in the Wall Street Journal’s weekend Exchange section on August 22 titled, “Why Aren’t There Enough Paper Towels? The lede was, “A decadeslong effort to eke out more profit by keeping inventory low left many manufacturers unprepared when Covid-19 struck. And production is unlikely to ramp up significantly anytime soon.”

The article “blamed” the just-in-time inventory system, i.e. lean manufacturing, which means only having enough on-hand to last until the next shipment arrives. When you operate like this it’s tough to increase output when there’s a spike in sales. The same applies to the manufacturing operations. If your machines are cranking out all they can operating 24/7, you can’t quickly increase production (this is how the paper towel plants were operating).

On the other end of the spectrum I talked to the owner of a manufacturing operation doing about $20 million in sales who told me they constantly struggle with productivity and therefore profitability. He said, “It must be me.” I won’t argue with him, at least until I know more because often it is a people issue, and more often than not an owner issue.

Georgia-Pacific increased production by 25% by reducing the number of products made, which reduced the amount of equipment changeover. The owner I spoke with can probably increase productivity with a manufacturing process expert advising him. Just-in-time isn’t a panacea and operational inefficiencies can be improved.

The above is what planning is for.

  • What if sales go down 10-20-30%? Banks call this a stress test. 
  • What if sales go up 20-30-60%? Can you handle the production, the cash and credit needs, the stress on your people, and even finding enough people?

Most businesses don’t do this. Even more owners don’t plan for their exit. Nobody predicted Covid and very few were ready for its effects whether good or bad.

Nothing is as Good or Bad as ProclaimedNothing is as Good or Bad as Proclaimed“Nine tenths of the ills from which intelligent people suffer spring from their intellect.” Marcel

Passion Needs Planning

Over the summer, California experienced electricity brownouts and power outages when demand peaked. The reported reason why is because the State forced power companies to invest in renewable power sources and not traditional sources (fossil fuel or nuclear) so when the sun went down and power consumption was still high the systems crashed.

I believe climate change is real and has been greatly amplified by all the CO2 we put into the air. That said, I found it ironic that California recently banned the sale of gas engines by 2035 without a  mandated increase in power generation because with 11% of the US’s vehicles in California it could get interesting (let’s hope the batteries dramatically improve, there are hydrogen powered cars, etc.).

This is basic planning. It requires forethought, not just passion. And it’s what separates good businesses from the not-so-good. Selling more than you can deliver on time is usually worse than not selling enough. Not having a plan to buy or sell a business is also disastrous. 

Inflate the Swimming Toys Not Your Assets

On August 24 my phone buzzed with a news flash from The Wall Street Journal. It said the New York Attorney General is investigating the Trump Organization to see if the Organization and President Trump inflated his assets in financial documents. The reason is supposedly “to secure favorable loans and tax benefits.”

I’m not going to take sides but rather ask a few questions and tie this to what I see daily with the buying and selling of businesses. The questions:

How could this happen? His assets are mostly real estate and it’s easy to appraise real estate.

Why did this need to (supposedly) happen? In my world it means the deal doesn’t qualify on its own.

Why didn’t the bank(s) verify? This one seems easy. They wanted to make loans to a prominent borrower.

This can’t (easily) happen with business buyers. Yes, they can inflate their resume, like they do for jobs, and that’s why relationship is so important. A good seller will sniff out a buyer giving a line of baloney (and I really don’t mean baloney).

A business buyer can’t inflate their liquid assets because they’ll need to use those funds. They can’t inflate their real estate assets because banks will get an appraisal. In other words, the bankers in my world are a lot more thorough, aren’t desperate, or swayed by a big name.

It’s a bit different on the seller side. Can inventory values be inflated, sure, but if the deal says the lower of cost or market the value can’t be more than the cost. And dead inventory is not hard to determine. All you have to do it look at purchase dates and if it’s been around too long it’s not very salable.

Fixed asset values are a little trickier and I tell buyers and sellers the buyer’s real concern should be when the assets will have to be replaced (their remaining useful life) not the exact, current value. “Anticipated capital expenditures” is the key phrase. 

Cash flow is, however, the tricky one. Small business accounting tends to make cash flow a moving target anyway and a lot of owners “manage by checkbook.” Meaning, when there’s money in the bank we’re doing fine.

It’s when we get into my term AAA, adjustments, assumptions, and add-backs (click here for more on this), that it starts to resemble the asset inflation mentioned above. There are three situations driving this:

  • Either CPA driven or owner driven there’s an incessant need to reduce taxes. This is why owners will buy a new truck or piece of equipment they don’t need. I find it ironic when CPAs tell an owner to buy something they don’t need to save on taxes. I’d sooner have ~70% of after-tax cash than 0% plus something really not needed.
  • Owners blend their personal and business checkbooks. The reasoning is the same as in point one.
  • When it comes time to sell there’s the desire to get as much as possible (understandably). If the true value is not enough the numbers get manipulated. For example, the owner who brags at his or her club how important and indispensable they are to the business is suddenly an unneeded detriment to the business (so their salary is really profit). Or we’re not sure the marketing worked so let’s add it back to profit (because we won’t do it again).

Conclusion

Inflate the Swimming Toys Not Your AssetsI don’t know what really happens with mega-banks and mega-loans as in the opening paragraph other than greed rules. The borrowers want the money, the banker was the bonus, the bank wants a “name” customer. I do know it’s a lot more ethics and sanity in my day-to-day world, and I’m glad about that. 

The Phone Doesn’t Right Just Because You Want it To

A good friend of ours told me his sales team made their first sale ever to a non-affiliated customer. He was hired earlier this year to build a sales team and plan a sales effort because for the last 20 years the only sales were to other firms under the same ownership umbrella.

The salespeople at this company were order takers. And I’m guessing lazy order takers at that. When I taught a class at the local SBA/SCORE office on growing a consulting business I always told a story about a fairly new consultant who loved the computer and felt because he sent out a newsletter once a month the phone would ring. Yeah, sure it would, from telemarketers. 

“It’s amazing what happens when you actually pick up the phone and call your customers” was said to me by Keith Jackson with Industrial Revolution, www.industrialrev.com, in response to my question about how his marketing was going about six months after buying the company. I’ve used this statement before and it’s such a good line I can’t help using it again (I know it verbatim because I wrote it down when I heard it and I use it regularly). And, I know Keith is reading this. 

Some tips:

  • Want to increase sales? Have your people (and/or you) reach out to prospective customers and referral sources. As you grow it increases your chances of exiting with style, grace, and more money.
  • Want to buy a business? It’s contact sport; the more contacts you make (who get to know you) the better your chances. It’s hard to find a mature, profitable, and fairly priced business so be active.
  • Want to sell your business? You and/or your intermediary had better be active with the marketing (not just the advertising). Calls to your/their network, their database of buyers, and others will accelerate the process.

In this day and age of text, email, LinkedIn, and Facebook personal, one-on-one contact is still the best for B2B, advisory, and many other businesses.

“If the phone doesn’t ring it’s me.” Jimmy Buffett

Coasting – Downhill

A business owner told me his sales were X dollars – put in whatever figure you want, $100,000, $1,000,000 or $10,000,000. His actual sales were:

  • 2017 – 90% of X
  • 2018 – 75% of X
  • 2019 – 65% of X
  • 2020 – on track for 50% of X 

The abovementioned owner is coasting and the business is going downhill. And once on the slope it’s tough to recover. I’m sure there’s not a lot of calling to customers, much less prospective customers. I can’t imagine there’s much marketing at all.

What’s compounding this is he has no idea of what’s really going on. Yet all it takes is paying attention to the financial statements. He doesn’t need to have management reports, although they would add a lot of value and clarity.

Business buyers want one of two things:

  • A well-oiled machine with room to grow.
  • An underperforming business in a solid industry (coasting).

What they rarely want is a damaged beyond-repair business. Whether you’re an owner or advise owners, keep these points in mind. Coasting (downhill) doesn’t let you exit with style, grace, and more money.

“If liberty means anything at all it means the right to tell people what they do not what to hear.” George Orwell