Make Yourself Dependent

We recently went out for dinner with some good friends and in our discussions the husband touched on how his customers tell him if he was to leave they don’t know what they’d do (he’s in sales of technical production equipment). In other words, he’s indispensable, at least in the short-term.

I often mention how business owners need to reduce and eliminate dependencies but there’s a flip side to it. Often we need to make ourselves a dependency. This can take many forms.

As described above, an employee with special skills, especially in small to lower middle market businesses, has job security. Not only is it expensive to replace someone, in today’s market it’s darn hard to find great people. Our friend has good job security.

When your company provides crucial services to your customers you’ve become a dependency to them. Without abusing it, it’s revenue security. It’s why repeat business and any “value-add” service is the top choice of business owners (and buyers).

On the other hand, if you are the reason one of your suppliers has customer concentration issues you have some leverage (as long as there are other suppliers). This one is easy to abuse. I remember in grad school learning about how Sears would become the highly-dominant customer of mid-sized businesses and use that to buy the company, and not at what the price would be if they weren’t so dominant.

While I “preach” about the evils of dependencies, if you’re the dependency it can be a good thing.

Getting the Deal Done Recap

On November 7, 2017 we* did our tenth annual Getting the Deal Done Breakfast Conference and had record attendance of about 180 people. Our guest speaker was Joe Fugere, founder and CEO of Tutta Bella Neapolitan Pizzeria.

Joe’s topic was, “Value Based Leadership.” Here are some of the main points I picked up from Joe.

  1. Tutta Bella has their 10 Point Pizza Guidelines and if any pizza doesn’t meet all 10 guidelines it isn’t served and is donated to food banks.
  2. Joe’s business recipe for success has three ingredients: Purpose, Values, and Vision. Purpose summarizes why a company exists and Tutta Bella’s is, “To nourish lives by sharing traditions, authentic food and love.”
  3. Values in our standards of behavior. Tutta Bella’s values are love, innovation, growth (of their people), community, and passion. As part of this they expect their people to, live our values, be our values, and create memorable experiences.
  4. Vision defines the optimal desired future state. Part of Tutta Bella’s vision is providing employees with clarity, giving professional and personal support via constant feedback and coaching, and giving their people a reason to be proud. Overall, their vision is, “To transcend conventional practices and expectations in casual dining so that our enterprise flourishes and is highly respected by employees, guests, and business peers.”
  5. The company is very community oriented. Each of their five stores picks a charity in their immediate community to support and companywide they have two organizations they support.

They live the above, not just say it. That becomes obvious when you hear Joe talk about it.

As per our standard operating procedure, the sponsors then presented a panel discussion. This year it wasn’t a case study to analyze but rather sticky situations in buy-sell deals (and with operating companies). The topics our group of experts covered included:

  • (Given Tutta Bella is such a people oriented company) what are the top people-employee-management issues?
  • The plusses and minuses of selling to management and employees.
  • Dealing with a C corporation when selling, especially if there’s real estate in the corporation.
  • How to handle shareholder squabbles and disputes.
  • What to do when there’s no management development, which usually means a huge owner dependency.
  • When is a quality of earnings report needed and what makes it a good one.
  • And it goes without saying Marc presented on tax law updates.

Another great event and we hope to see you at next years.

* We means Greg Russell with PRK Law; Kit Gerwels with Columbia Bank; Marc Hutchinson with Hutchinson and Walter CPA; John O’Dore with Chinook Capital Advisors; and me.


Treat People Fair and Reap the Benefits

About five years ago I worked on a buy-sell deal, representing the buyer. Time goes by and I get a call from the seller, asking for help with one of his other businesses.

I got the call because he respected the way I handled things. He knew my objective was a win-win deal. (This is an example of why I tell clients their legal bill is dependent on how well the attorneys play together – some play well and others always want “everything.”)

If on every assignment you treat everybody fair, your short and long-term results will be great.

Walk Like a New Yorker

While in New York City earlier this year we had dinner with one of our former exchange students. Alex recently moved to the New York area from Ecuador and we talked about his adapting to the city, which he’s been to before but not to live.

We talked about the crowds and the pace and I said, “You have to learn to walk like a New Yorker.”

This is a metaphor for adapting to any circumstance in life or business. In my business, relationships are key to success for my clients and me. I like to say, “While cash is king, the queen is relationships and like in chess, the queen is the most powerful piece on the board.”

You don’t get the job you want if you can’t relate to the boss or hiring manager. I can’t get a client if we don’t relate and my clients can’t buy or sell a business if they can’t relate to people on the other side.

I recently heard from two owners who told me how important it was to sell their business to the right person. One specifically mentioned his loyal employees and how he wanted them to keep their jobs.

Everybody reading this relies on relationships to be successful so I’m preaching to the choir. So just in case you forgot….

“Sincerity is the key to success. Once you can fake that, you’ve got it made.” Groucho Marx

What Drives Business Sellers

I was recently asked if money was the top issue for business sellers (once they’re motivated to sell). My answer was it’s one of the top three, which are (in alphabetical order):

  • Employees
  • Legacy (including taking care of customers)
  • Money

Every owner/seller has different priorities, like we all do when it comes to business and life. There are reasons we stay at our job, leave our job (usually it’s the boss not the company), start, keep, buy, or sell a company.

It’s a rare business owner who doesn’t mention how important the employees keeping their jobs is to the deal. It’s why in all my books (including the upcoming, Company Growth by Acquisition Makes Dollars & Sense) have a diagram of the three-legged stool demonstrating how the buyer, seller, and the employees all want job retention but fear one of the other parties will kick a stool leg out.

Customers are almost as key. I’ve had owners tell me how they don’t want their competitors serving “my customers.” This is legacy. The business grows, the customers are happy, and the employees are happy.

Money is obviously important and at the same time I’ve worked on numerous deals where the seller sells for less (than they could have or less than other offers) because it’s the right buyer. The flip side also happens, buyers pay a little more because they know what they can do with the business and don’t want to lose the deal over money. As a private equity person told me years ago, “If we pay four times EBITDA and it doesn’t grow it’s a bad deal. If we pay seven times and it grows like we want it to, it’s a great deal.”

If you have any other important priorities for sellers let me know.

“If your dreams do not scare you, they are not big enough.” Ellen Johnson Sirleaf


It’s Not About Perfection

I was speaking with a business owner who told me he recently talked to a business buyer. The buyer had a list of questions and if the answers weren’t what he wanted the conversation was over. This before meeting the owner, impressing the owner with his skills, or seeing the business.

The owner “missed” on one question, the conversation was immediately over, and my comment was, “If that’s one of his criteria he’ll be searching for a long time.” I went on to ask if the buyer was Mr. X, it was, and I told the owner this buyer’s been out there for a couple years.

No wonder it’s taking so long. He has rigid criteria and he’s not concerned with building a relationship. I’ve been in the buy-sell world for 25 years and I can say with extreme confidence, the tighter the (individual not corporate) buyer’s criteria the less chance of a deal and the less emphasis on the relationship the less chance of a deal.

There are no perfect businesses and no perfect deals. What the above buyer wants is perfection when he should be looking for opportunity.

It’s All About Perspective

A friend told me how he visited Bozeman, MT and his brother-in-law complained about how (fast growing) Bozeman is becoming “too crowded.” One of my sons went to school in Bozeman, we’ve been there each of the last 8-10 summers, and, believe me, Bozeman is not at all that “crowded.”

It’s a matter of perspective, isn’t it? If you’re used to it taking five minutes to go across town and now it takes seven or eight you’re frustrated.

I find myself wondering about how some things that seem to change faster than we’re used to as we live in a time where change happens with more velocity than ever before. Social media is one area where it’s snuck up on traditional businesses.

Two years ago, I did a little here and a little there. Now, on the advice of PR and marketing friends, I have something going out daily (not all via the same mediums). People tell me about things they saw on LinkedIn, and posting good, solid content there is extremely important (which is why I ignore any posts with a picture of a motivated saying or similar; come on, show your expertise via content not your copy and paste abilities).

It’s unusual for me to meet someone who hasn’t seen my blog, videos, LinkedIn articles, Twitter feeds as well as the usual and customary, my website. I see a lot of other non-tech (traditional) small businesses emphasizing this also, because that’s where the customers and referral sources are.

On the flip side, my recent Getting the Deal Done Breakfast Conference had record attendance of about 180 people (high touch). Of course, all the marketing was electronic (high tech).

What Scares You?

On Halloween I asked: What’s scary to you? Only you can answer it but we’re not talking about eating too much candy tonight, ISIS, North Korea, Trump, Hillary, or anything similar.

What’s scary to a lot a people?

Business buyers: It’s the leap of faith they need to take to be in business. It’s understandable because business ownership is not for everybody. As I say in my book, Buying A Business That Makes You Rich, some people are like my mother, who taught college math and couldn’t imagine anything riskier than a school paycheck every month. Others groom themselves to take the plunge, and they love it.

Business sellers: Selling their baby is super-frightening. These owner’s put in so much time, effort, and love into it they can’t imagine someone else taking it over. Of course, these are the people who often are forced into selling (the three D’s, divorce, death, and disability corner them at some point) because they didn’t plan for and make an orderly exit.

Salespeople, advisors, and similar: Making phone calls. When teaching my class at the SBA on growing a consulting business I tell the story of one of our Partner On-Call franchisees who told me he’d stare at the phone for 10 minutes, finally pick it up, have a great call, and stare at it again for 10 minutes. His version of the move Ground Hog Day.

Salespeople, etc.: Asking for the order, because you just might hear no.

All of us: Doing the things we know we need to do. In other words, having the discipline to do things that aren’t much fun. Often because as in the prior two items, there’s risk.

So, put on a costume and scare the heck out of whichever things listed above frighten you. You’ll be glad you did.

“Living in the past is for cowards.” Mike Ditka


Preconceived Notions Are Dangerous

Regarding my upcoming book, Company Growth by Acquisition Makes Dollars & Sense, a good friend asked me why I bothered having a print edition, implying most book sales are now electronic. I answered it was because most of the sales for my two existing books are the print versions.

And, according to the Association of American Publishers, as recently noted in the Wall Street Journal, last year printed book sales grew by 4.5% while e-book sales declined by 17%. Maybe there’s a reason why Amazon is now opening brick and mortar stores. Could it be for all those printed books people are buying?

Preconceived notions can be dangerous. No, they’re usually dangerous.

  • I’ve heard people question why they should do a marketing action because, “It didn’t work for someone I know,” ignoring the fact it’s worked for most other people.
  • Business buyers constantly make judgments about target companies with only high-level information. I tell them to ask (about everything).
  • Salespeople wonder if they should call prospects, so they don’t.

This isn’t like fake news, it’s rushing to judgment, and because of it we make mistakes or miss out on opportunities.

“The other day I was thinking, ‘I just over-think things.’ And then I thought, ‘Do I though?’ ’’ Demetri Martin

Are You Listening?

The big news in the NFL earlier this year was the best player in the NFL, Aaron Rodgers, was injured and will be out at least eight weeks. I was listening to a press conference as his coach described how they weren’t going to go after a veteran quarterback to replace him, how he had two and three years invested in the quarterbacks on the roster, and felt comfortable moving forward with them.

Then a reporter asked him if he would try to sign Colin Kaepernick. The room took a sudden chill as the coach glared at the reporter and said, “Didn’t you just hear my answer to the previous question….?”

A brilliant example of when people are so busy thinking of what they’re going to say they don’t listen to whomever they’re speaking with. At a recent conference, we discussed building a relationship, as soon as possible, when you meet someone. And a great way to do this is to listen and ask intelligent questions related to what the other person says.

A great illustration of this is when, after a 15-minute conversation where the other person talks for over 13 minutes, they tell you how you really understand their situation or their business. It’s why I tell business buyers and sellers they have to get to know, and like, the person on the other side of the transaction. And you start the process by listening.

“Silence is the ultimate weapon of power.” Charles de Gaulle