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.

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

Rotary and Business Buy-Sell – Part One

Recently I had a Rotary Global Grant approved for our ongoing work in Antigua. As I was writing the grant, I realized there are a lot of similarities between our project, the grant process, and our day-to-day work with clients buying and selling businesses. This newsletter will cover seven similarities of projects with business buyers and next month I do the same for business owners/sellers.

Objective – We must articulate, in detail, what our project hopes to accomplish to get a grant approved. In our case, it’s supply technology and train teachers on how to reach their students more effectively with technology (versus using a 3’x5’ rolling blackboard). A business buyer must know what types of businesses they don’t want, what skills they bring to the deal, their capital, and an attitude of being open to business types they’re not familiar with as many deals come in through the “side door.” And most importantly, a good personality to build a relationship with sellers.

Team – Last time we had 14 students (who setup the computer labs and Wi-Fi networks) and 10 adults. We get a lot done. Buyers need to build a team and it should include a transaction attorney, CPA, deal pro (me), banker, and other experts as needed for environmental, HR (a big one and getting bigger), etc.

Money – Our project gets donations from at least three Rotary clubs and a foundation tied to Antigua that loves not only what we do but that we actually get results. We then triple it with a Rotary Foundation grant. Business buyers need to get their capital put together before starting to search. How much capital will come from the buyer’s savings and investments, is the spouse on board with that amount of investment, if investors are needed will they be friends and family or professional investors? Once this is settled it makes sense to talk with bankers.

Timing – We run our project on tight timelines. Grant submission, approval, shipping by a certain date, travel when the students are on break, etc. Buying a business has timing and timelines also. You’d think most things would be concurrent not consecutive but that’s not the case. For example, many buyers won’t fully engage their attorney until they are absolutely positive their loan is approved. Customers and employees can’t be talked to until the agreement is finalized (and often signed in advance). It’s why I tell buyers if they found a business today it will easily take 90-120 days to meet, build a relationship, get information, analyze, work out a deal, financing, legal, etc. All while the seller is running the business.

Implementation – Once our grant is approved we start implementing. Actually, we start prior to that by securing computer and other equipment donations. We can’t use grant money until final approval and some years that meant buying things the day after approval. Buyers need to do the same. Often, they don’t. Life gets in the way and a story in Buying A Business That Makes You Rich demonstrates this. Michael would tell me, “I’ll get to it after my next game of golf.” I quickly figured out there is always a next game of golf. We talked, he got it, he moved at lightning speed thereafter.

Secure agreements – The Antigua Ministry of Education and others must sign a Memorandum of Understanding agreeing to their responsibilities. For a Caribbean country I’d say they’re pretty good. We did have a year where we didn’t do a project because the government was behind on their obligations and from what I hear, one out of 11 is really good in that part of the world. Buyers need agreements also. They’re with the bank, landlord (the landlord waiver is often a challenge and Jessica recently lost a deal because the landlord wouldn’t offer a long enough lease), vendors, employees, customers, and others.  

Administrivia – When I look at all the little things we have to do to get 24 people to and from Antigua, students hosted by local Rotarians, lodging, cars, activities, little supplies we don’t know we need until we get there, etc. I wonder how my friend Jeff at Newport High School and I do it while having work and families. The same with buyers when they get near the end. It’s why I have a form, edited by seven buyers who had recently closed on deals, of all the annoying little things that need to be done before (and just after) closing.

What I illustrate above shows many things have common ground and other than the use of technology, not much has changed in decades. Buyers and sellers go through the same paces they did 20, 40, 60 years, only they have more tools to help.

Are You a Hunter or a Trapper?

Over the weekend our 14-month-old puppy Coco caught another squirrel. Dogs do catch critters but there are some things you should know about Coco. She’s half-lab and half-husky, 85 pounds, not the fastest dog around by far, sort of a klutz, and she’s hilarious when she slinks towards the bird feeders, where the squirrels hang out and get fat. She thinks she’s sneaking up on them.

She makes up for h er lack of speed and grace with smarts. She doesn’t sit and wait for a squirrel (trapping); she moves to corner them (hunting). And she doesn’t bite them or eat them; she plays with them.

I have an old book by Lionel Haines, written well before my time in this business, and one of his best lines, for business buyers, is, 

“You must act like a hunter not a trapper.”

It is important for business buyers, especially individuals and small business owners, to get the word out and see as many opportunities as possible because it’s hard to find a match. The “perfect” type of business for a buyer may be too large or too small, it could have a serious owner dependency, or a customer concentration issue.

It’s also important for:

  • Job seekers – I hear from outplacement clients 70-90% of good jobs are never advertised or listed. You have to get out and find them.
  • Salespeople – Find customers and/or referral sources means not being just an order taker.
  • Business sellers – going after the pool of logical buyers in such a way word doesn’t get out the business is for sale.
  • Business startups – you must always be on the hunt.

My world is buy-sell, so I emphasize this to buyer clients. Know what you want, go after it, keep in touch with brokers, network like crazy, and don’t be afraid to pick up the phone.

“Mother Nature, in her infinite wisdom, has instilled within each of us a powerful biological instinct to reproduce; this is her way of assuring that the human race, come what may, will never have any disposable income.” Dave Barry

Are You a Hunter or a Trapper?Are You a Hunter or a Trapper?Are You a Hunter or a Trapper?“You know you’re getting old when you get that one candle on the cake. It’s like, ‘See if you can blow this out.’”

Businesspeople Aren’t Like Politicians; Thank Goodness

You only have to read the headlines to realize there’s very little political collaboration these days. And that’s within the two parties as well as between them. The ends of the spectrums are the noisiest and yet all surveys say most people aren’t radical left or radical right.

Could you see if our businesses were like that? We wouldn’t be in business. The buy-sell industry is very collaborative. Business buyers and sellers must get along and collaborate, as must their attorneys, CPAs, and intermediaries. Most do a pretty good job of it. But what about within a business?

Employees rule! There’s a war on talent these days. Employees have more choices and as per the June 14 Wall Street Journal (and other publications) workers are quitting their jobs at a higher rate than any time since the year 2000 and April 2021 saw a record number of people quit, almost 4 million. 

Attracting and, especially, retaining good people is more important than ever. Covid still scares some of them, younger workers in particular. Many of those used to working from home like it, for at least a couple days a week. Employers have to be flexible or their employees will go somewhere else.

It reminds me of the dot com boom when fired employees went out and played until they had 30 days of severance pay left and then went and found a new job with better pay and better benefits. When speaking at outplacement agencies it was tough to get the agency’s clients to pay attention to entrepreneurship because jobs were so plentiful.

For business buyers the seller’s employee age range, the availability of good workers, and the flexibility they can offer people should be on the top of the due diligence list. And if business owners/sellers think it’s not their issue they’ll be in for a surprise.

“Experience is not what happens to a man, it is what a man does with what happens to him.” Aldous Huxley

Businesspeople Aren’t Like Politicians; Thank GoodnessBusinesspeople Aren’t Like Politicians; Thank GoodnessBusinesspeople Aren’t Like Politicians; Thank GoodnessBusinesspeople Aren’t Like Politicians; Thank GoodnessBusinesspeople Aren’t Like Politicians; Thank Goodness

You Can do Better than the Government (any Government)

This weekend I received a postcard from the WA State Department of Health encouraging me to get a Covid vaccine. Funny because I got vaccinated four months ago. It looked like this card was mailed to just about everybody in the State, meaning, no filters applied so pay for mailings to those already vaccinated. Realize this is from the State that I believe led the nation in per capita unemployment fraud due to out-of-date technology. 

Our little company has a CRM that can track a lot of things including who opened a message, who clicked a link in it, and can exclude categories when sending a message (as in, exclude those on the vaccinated list when putting together a reminder mailing). But enough railing on government inefficiencies, which we know are plentiful.

Our use of a CRM for more than just a database is something many business buyers bring to the table. They look at creating efficiencies, and often it’s investing in easy-to-use technology. When I think of how much time our CRM saves us on just excluding people when sending something it’s worth the price of the annual subscription.

Business buyers do a lot more than upgrade technology. As in a recent deal, they bring a breath of fresh air to the business. What are some of those things? Here are a few examples.

  • Outsource mundane functions with a prime example being HR. Don’t have in-house people try to keep up on all the everchanging rules, hire people who do this all the time.
  • Get to know the people. I’ve seen it done with individual conversations, with group sessions, and/or by using surveys. A recent buyer had a situation where the seller transitioning him was gone right after (a delayed) closing. He told me it gave him time to walk around and meet the staff. I commented, “I’ll bet it’s been a long time since there was ‘management by walking around.’”
  • Do little things like, and these are real examples, get paper towel holders, get a new printer that doesn’t take a frustratingly long time to spool jobs, buy a quantity of rubber stamps so shipping department employees don’t have to run around to get the only one, have company lunch-provided days, and, this is a good one, beer Fridays once a month (after work).

None of the above is complicated, it’s common sense. Yes, the joke line is common sense isn’t all that common but what really happens is owners get in a rut. It worked that way for 20 years so let’s keep doing it the same.

“If you wish to forget anything on the spot, make a note that this thing is to be remembered.” Edgar Allan Poe

“I’ve never put much store by honesty. I mean, how can you trust a word whose first letter you don’t even pronounce?” (Writer) Lorrie Moore