From the “You can’t make this up” files

Conversation between business buyer and business broker:

Buyer – “I have a few questions about the financial statements, especially the few items related to the owner’s “other company?”

Broker – “I’m not sure we can get answers. The financial statements are “cloudy.”

Buyer – “What do you mean “cloudy?”

Broker – “I’m not sure they’re accurate.”

Buyer – “Well, the bank needs the answers.”

Broker – “I’m not sure you’ll be able to get a bank loan given these statements.”

Really? Not just about a broker not pre-screening a business to see if it’s worth taking on as a client but how can anybody take on a client, customer, buyer to buy your business, or seller to sell you a business without any “pre-flight checkup” like pilots do?

You can’t be, or even appear to be, that desperate. As I’ve said for years, the only thing worse than no client/customer/deal is a bad one. They always come back to haunt you.

Peace of Mind? Priceless

Ten and one-half years of owning an iPhone and a freak accident gave me my first broken screen. I had the phone in my jacket pocket, put it over the back of an office chair with a fancy metal design around the back, got out of the meeting, grabbed my phone, and found a beautiful design radiating up my screen.

Replacing an iPhone screen is not cheap. So I bought a tempered glass screen cover with a lifetime guarantee. Pretty cheap compared to this happening again. One could say it’s a form of insurance.

One could say many things we do in life are a form of insurance. We have our attorneys do things to keep us in compliance and out of trouble. Our accountants make sure the IRS or, heaven forbid, the State DOR doesn’t come after us. A good banker keeps you not track versus just lending money (to anybody).

And of course, people like me in an advisory business give our clients peace of mind, ask the right questions, let clients know when they have the right answers, etc.

The cost of a bad contract, erroneous taxes, or a bad business decision is huge. The cost of someone who’s seen the situation hundreds of times and knows what to do, and not do, is virtually priceless.

It’s why we all have businesses.

“If you don’t have a seat at the table, you’re probably on the menu.” Elizabeth Warren

 

Depth Not Dependency

At the start of the 2018 baseball season you might not have believed it when you saw a record number of games snowed out across the Midwest. The Seattle Mariners got off to a decent start is and that’s pretty good when you consider four starters (all proven good hitters) were each on the disabled list for 10 days or more.

They’re winning, and hitting well, because they’re lineup has depth. And depth is something too many businesses ignore. Yes, a lot of owners’ love being in control, but it doesn’t add value.

Maybe I’m sensitive to this because recently I’ve run into a lot of businesses that sound great until you find out what the owner does, which often is way too much. One was described by his number two as, “a very active president” but it’s another that deserves mentioning.

When the owner said he could only be reached at 8:00 pm or later it caught my attention. He has what appears to be a very successful business, but my comment upon learning more was, “He has a high-paying, long-hours job” and the business has a dependency, which is him.

During the day he visited job sites, ran a machine, met customers, etc. At night (8-11 pm he said) he did bids, bookkeeping, and other office work. Yes, he made good money but how could someone replace him? No sane buyer would pay for the company based on the current profits knowing they’ll have to hire a full-time employee to replace some of what the seller does.

The point of business is to have people below your pay grade do work you shouldn’t be doing. As they grow and get experience they should delegate the same way to others. This is what’s called depth, not a dependency.

“Isn’t it nice to think that tomorrow is a new day with no mistakes in it yet?” Novelist Lucy Maud

 

Life Emulates TV or is It Vice Versa?

One of our family members is a fanatic watcher of The Office. He says he’s seen each episode dozens of time (perhaps a little hyperbole here). The Office and Dilbert are similar in that they both have a clueless boss, a sneaky co-worker, the paranoid person, and the nice “mom type” person.

Just like real life. In big business and small business. It’s called culture and it’s what CEOs and owners. are concerned about, or at least should be. It’s part of government too, as we’re seeing with all the stories of harassment, of all types (in government and in large firms).

There’s stuff going on at Google, the Seattle Times just had an article on the non-advancement of women at Microsoft, I look across the lake to Seattle and see any and every unsuccessful group blaming others (and the Seattle government jumping on the cause and looking for money to help them), and across the country the news always seems to have something about strippers, porn stars, and prostitutes.

Do you think it’s any wonder why so many people think about owning their own business?

When you own the business, you can create (or fix) the culture so it’s done your way. The large corporate/government politics and similar can go away. It’s one reason a lot of people choose to work for a small business even though the total comp package may not be the same as at a large corporation. Because whether you’re an owner or an employee there can be a lot more important things than the money.

“Sometimes I’ll start a sentence and I don’t even know where it’s going. I just hope I find it along the way.” Michael Scott on The Office

Using experts – It Pays

There are a lot of things I can do around my house. Paint, install doors, fix some electrical and plumbing issues, etc. There are some things I can’t or won’t do including building things needing a permit (new elevated deck), a kitchen or bathroom remodel, etc. The latter items are when I use an expert.

I got to thinking about this during some recent sports injury rehab on my leg. I had tried chiropractic, massage, stretching, cupping, and foam rolling. All gave short-term temporary relief but no long-term fix. Finally, I met a sports medicine therapist. He put me on an exercise program to build up the muscles supporting the injured area. And, it worked. Quickly!

Everybody reading this has an area of expertise. The trick is getting others to know about it. I think about most of the people I’ve used and its word of mouth. Personal and business friends have provided quality referrals, much better than I can get from any phone app.

Doesn’t matter if you’re an expert at making things, fixing things, providing advice, or something else. If people don’t know about your value proposition it’s a useless skill. So as with all businesses, it comes down to marketing. The more people who know what you do and how well you do it the better. You can’t be bashful about getting the word out.

“Whatever you do, kid, always do it with style.” George M. Cohan

Flip the Switch

Recently I got an e-newsletter from my friend Allan VanderHamm with Berntson Porter.

Allan is their valuation and exit planning expert and the newsletter was titled, “How Does Exit Planning Protect Business Value?” My response to Allan was:

One of my lines is, “Owners don’t wake up, flip the switch, and say I want to sell in 2, 3 or 5 years. They flip the switch and say, it’s time to get out (now).”

The newsletter told the story of two owners of similar businesses and how one owner worked very hard, “in the business” and the other sought and acted on advice and worked, “on the business.” The latter owner built a team, converted to S Corp status, and did something near and dear to my heart, grew by acquisition (one of my top reasons to consider growth by acquisition – along with 18 others in my book Company Growth By Acquisition Makes Dollars & Sense – covers how the larger the company the more it will sell for, all else being equal (because the multiple of profit gets higher as businesses get larger).

Planning is important, as is timing. I recently had discussions with a client who would like to sell to one of his three competitors (given his industry, these are the only logical buyers). We talked about where the business is, where it will be (this year is shaping up to be a very good year for him), and the time of the year (it’s a seasonal industry and now through September is the busy season).

While he has a feeling of urgency to move on to his next great adventure in life, it makes sense to do a few things within the business, go full speed ahead to maximize revenue and profits, and be able to present a great story in six months.

The above is a mini-version of a planning story. It does take time and effort to shift from, “what we do now” to “what we need to do to make the business more attractive.” And it can be threatening to an owner who wants to be in control of everything, because one thing that makes a business more attractive, and adds value, is a self-sufficient management team. A solid team means there’s a greatly reduced likelihood of a dependency on the owner.

The last point about owner dependencies is one of my top four things an owner can do to increase value, make the business more attractive to buyers, and have a better business along the way. The other three things are:

  • Show you can grow, don’t just say it or say we tried to keep the business where it is.
  • Have solid financial systems and accurate financial statements. (One of the first things I do when I see financial statements is check if the year-to-date income on the P&L is the same as the year-to-date income on the balance sheet. You’d be surprised how often it isn’t the same.)
  • Demonstrate you can attract and retain good employees (especially in our currently tight labor market).

Conclusion

The 80-20 might even be the 90-10 rule when it comes to owners flipping the switch. It is tough to manage a business, be in control, and implement (a new) strategy. So, it all catches up on the owner, they flip the switch, and say now’s the time. Finally, this is completely different than the owners who are coasting by design, as in, I’m making good money so why would I want to work harder to make more? It’s the same end point but via different routes.

Football and Business – Cut To Thrive

For sports fans, and especially reporters, spring is a busy time of the year. Baseball season is starting, March Madness, NFL free agency and draft, and the winter leagues heading to the playoffs.

Football fans feel angst when because of (primarily) salary cap issues teams let fan favorites go; Richard Sherman in Seattle, Jordy Nelson in Green Bay, and many others (both of those mentioned probably in their respective team’s Hall of Fame). It’s tough on all, including management.

And we need to have the same attitude in our business. Just because someone’s been with us for a long time doesn’t make them untouchable. Salespeople know this by the size of their commission. Others, not so easily aware.

Football legend Vince Lombardi had three keys to staying on top. Two were psychological and the other was pragmatic:

“There is a tendency to stay with the players that won the championship – even if he isn’t as good as he was. And it’s the very human thing to do. However, there is no room for that type of emotion. Football is a hardheaded cold business. No matter what a player did last year, he must go if he can’t do it this year.”

Not just employees. Cutting customers or vendors is just as important. Bad customers can make your life miserable, and just aren’t worth it. Vendors not keeping current on products, always late on shipments, etc. will have your team screaming.

It’s tough because it affects others’ lives. In our case, it’s not athletes making $5-15 million a year. But it has to be done so it doesn’t detrimentally affect your or my life.

Find People Who Accept Advice

The NFL combine is going on in Indianapolis as I write this. It’s where the best college players gather with team representatives to show off their skills. They sprint, lift, run obstacle courses, and are interviewed by coaches. One veteran reporter wrote, when asked how important this event is for coaches to evaluate talent levels:

The coaches know who can play. Now they want to know who can be coached.

Isn’t that business (and life) in general? When we hire someone we want someone who can be coached. We don’t want a know-it-all, we want someone who will be a team player.

It’s just as important when seeking new clients. In the class I teach at the SBA on growing a consulting business one of my favorite lines is, “The only thing worse than no client is a bad client.” When we solve a customer’s problem we want them to participate, heed our advice, and implement it. Being stubborn doesn’t work.

It doesn’t matter if you’re selling highly technical components for an end product, providing advice, or repairing critical equipment. It’s a lot easier when your client is “coachable.”

“Common sense and a sense of humor are the same thing.” Clive James

 

Get More Done By Doing Less

On January 13, 2018 the Wall Street Journal published an article by Morten T. Hansen titled, “The Key to Success? Doing Less.” It’s in the vein of the book “Rest” by Alex Soojung-Kim Pang and the book “When” by Daniel Pink (last month’s newsletter). The second level headline of the article includes the line, “most top performers…have one thing in common: they accept fewer tasks and obsess over them.”

Hansen starts by discussing the “Natalie Question,” as in how Natalie did it, it being about how, “Natalie bested me at work – and went home each day at 6pm.” “Bested me” meant her work was better than his and “her analysis contained crisper insights, more compelling thoughts.” All while working a lot fewer hours.

Here are a few things I gleaned from the article.

  • Find the simplest solution, as per Occam’s razor (the simplest answer or path is usually the best one). He gives an example of how a boss had him distill a presentation down to one slide, yes, one slide.
  • Say no and/or start classifying work around its value versus internal and goals (as value is what we all need to offer). Make others realize they should not want you spread too thin so what you do gets done great.
  • The previous point is important because by having a narrow scope productivity goes up about 25%.
  • Don’t focus on activity, focus on results. He gives the example of a engineer who was always too busy given he wanted to get his reports in on time. What he didn’t realize was those reports weren’t needed or required anymore (he missed the memo I guess, as he was too busy writing reports). Or, don’t worry about how many phone calls you made, concentrate on how many appointment you made.

So how does this affect your and my world? First, don’t make work or let others make work (either make it for you or do it themselves so they can’t get to what’s important). As New Yorker’s like to say, get to the point.”

I mentioned how this philosophy is similar to what’s in the book Rest. I know when I focus and set my mind to something it gets done sooner and the result is better. It’s the same with business buyers and sellers. If they concentrate on what they need to do as part of the process, deals get done more often and quicker.

Conclusion     

This seems to be a popular topic as I’ve mentioned two books and this article. I also just received a newsletter from my CRM provider titled, “3 Ways to Be More Productive At Work In 2018.” The three ways mentioned are remove distractions, start time blocking, and say no. As we’ve moved to a faster paced world where technology is omnipresent, there appears to be a lot of research going into getting things done versus being busy. John Naisbitt was absolutely right, the more high tech we get the more high touch we need. And one thing high touch means is not feeling we have to do more just because we have 24/7 access to work via our phones, tablets, etc. (we need to do it right and with urgency).

Break Through the Noise

I had my annual client breakfast in February. My guest speaker was Aaron Blank, owner of The Fearey Group, a Seattle PR firm (www.feareygroup.com). His topic was, “How to break through the noise in a world of communication chaos.

His presentation was extremely well received by the group of diverse-business owners (manufacturing, service, software, distribution, blue-collar, white-collar, etc.). Aaron mentioned how important it is to embrace your influencers, build your brand, how SEO and PR are intertwined these days, and gave some great tips on technology projects to make the job easier.

He finished with five tips. You’ll notice how four of the five are constantly mentioned or used in this memo.

  1. Use video, including live video such as Facebook Live.
  2. Blog, blog, blog, and have guest posts and blog for others.
  3. Publicize any news (about your firm and you).
  4. Reporters still matter but you have to target them and show them value.
  5. Build a large network.

His bonus tip might be the best of all – Keep it short and simple.

“The world is full of magic things, patiently waiting for our senses to grow sharper.” W. B. Yeats