Oops – There Goes Your Workforce

On October 14, 2021 Washington’s Governor announced he expects 8% of the State’s employees to not have jobs on Monday, October 18 because those people are not vaccinated (and the vaccine mandate takes effect then). He also said he doesn’t expect any disruption of State services.

If you (or a client, friend, business you frequent) lost 8% of your employees all at once what would happen? Let’s see:

  • It’s hard to find a business not looking for employees. Almost every store has signs out saying, “We’re hiring.” Lose 8% and reduce hours?
  • Delays in product delivery or services are already slow because the “People supply chain” is damaged. Lose 8% and really irritate customers (the owner of one of our favorite restaurants told us the labor shortage has made customers nasty because service is slower than normal).
  • There’s only so much overtime people want to work, and employers want to pay for. Lose 8% and to fill those hours with existing people means payroll jumps 50% for those hours.

And the list goes on (and on).

There’s a lot of money out there. A lot of money for buy-sell deals, venture capital, home improvements, and more. It appears the State has so much money they’re keeping workers that aren’t really needed. Maybe this is a solution to the shortage of workers in the private sector.

“Stupidity is always amazing, no matter how used to it you become.” Jean Cocteau

“Nothing is as dangerous for the state as those who would govern kingdoms with maxims found in books.” Cardinal Richelieu

Rotary and Business Buy-Sell – Part Two

This is the counter article to what I wrote in July, about business buyers and my Rotary projects given we 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.

Objective – We must articulate, in detail, what our project hopes to accomplish to get a grant approved. In our case, it’s supplying technology and training teachers on how to reach their students more effectively with said technology (versus using a 3’x5’ rolling blackboard). A business seller must know if the proceeds from the sale are enough for their next great adventure in life, what that next great adventure is, and what they want from a buyer, which is usually to sell to someone who will take care of their employees and preserve their legacy (and pay them).

Team – Last time we had 14 students (who setup the computer labs and Wi-Fi networks) and 10 adults. We get a lot done. Sellers need to build a team and it should include a financial advisor, transaction attorney, CPA, deal pro, and other experts as needed. Others could include a Quality of Earnings pro, and environmental consultant, and an HR pro to make sure all employee issues are in compliance with local, state, and federal laws.

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 get results. We then triple it with a Rotary Foundation grant. Sellers not only need to know the price but the net after tax and fees (it’s not what you get, it’s what you keep). And then it’s when the seller gets the money. Upfront, over time, and/or get more if the business grows (an earnout).

Timing – We run our project on tight timelines. Grant submission, approval, shipping by a certain date, travel when the students are on break, etc. Unfortunately, too many owners aren’t on a timeline. They wake up one day, flip the (proverbial) switch and say, “I’m selling.” As in my book, If They Can Sell Pet Rocks Why Can’t You Sell Your Business (For What You Want?) the more preparation an owner puts into their business the more they’ll get for it.

Implementation – Once our grant is approved, we start implementing. Actually,s 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. The same goes for sellers, once committed, take action. If all the prep was done right it will go faster and smoother. And the chances of seller remorse decrease exponentially (versus the owner who shops the business with no skin in the game to see what the market says it’s worth).

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. What do sellers need? A good management team that will sign employment agreements with the buyer (if asked), a landlord willing to give a long-term lease, loyal customers (with or without contracts) who don’t shop price, and, ta-da for 2021, suppliers who can actually supply.

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. Because sellers are running a business – and running it as if not selling is so important – they need to lean on their intermediary, lawyer, and accountant to do the things those pros do regularly, even if it costs a little more.

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 ago, only they have more tools to help.

If It’s on the Internet it Must (Not) Be True

When It’s Time to Just Do It

On the edge of TMI, I had an MRI on my wrist recently and then started doing what we all do, an Internet search for treatments for a torn wrist ligament. What I found scared the heck out of me as numerous (respected) sites had information saying there’s an 18-month recovery from surgery, no driving for a few weeks, and even office work is off limits for 2-3 weeks.

Then I spoke to the doctor and he said 4-6 weeks in a cast, and six weeks of rehab. And I could drive, type, workout, etc. right away, it’s just that my wrist will be stabilized. Once again, just because it’s on the Internet doesn’t make it true and correct. Often, it’s facts, what facts?

So gossip, old wives tales, and the Internet info all come into play in my, and many of your, daily dealings. For me it’s things like:

Business (soon-to-be) sellers: My buddies at the club told me what my business is worth so that’s what I want.  Prepare my business, why? My business isn’t like all the others, so the common valuation methods don’t apply (it’s worth more).

Business buyers: I’ll pay X times earnings for that business. Without knowing if there are 3 customers or 300, a lot of cap ex needed versus all assets having a long useful life, or if it’s the owner and only the owner doing the important functions. Another one, actually paying attention to insights from people who have never done a deal.

Operators: We’ve always done it the way we’re doing it so why change? Answer: a new owner who spent $50 a month on a software application that congregates invoices for one upload to the customer instead of manually entering 350-400 invoices every month.

And one final tip to owners who are even thinking of selling within the next few years – this from a wise old business broker – give hints to your employees that you will retire someday, say the one-week vacation would have been better if it was a month, and when at “that age” let them know your plans. FYI, a consulting client from about 10 years ago was at “that age” and the employees were wondering how long he’d be around. I had him share his plans, which were to be there at least five more years and the restlessness stopped.

“A good storyteller is a person who has a good memory and hopes other people haven’t.” (Humorist) Irvin. S. Cobb

“In order to get on living, one must try to escape the death involved in perfectionism.” Hannah Arendt

When It’s Time to Just Do It

Many years ago, a client told me, “The best time to get out of your business (sell it) is one year before you’re burned out.” Great advice and it applies to more than getting out of a business but it’s not really something you can effectively do, is it?

The problem is most business owners don’t wake up and start lowering the business’ dimmer switch so in three years they’re ready to exit with style, grace, and more money. The wake up, flip the switch, and say, “It’s time to sell, the sooner the better (and please overpay me).”

But what about non-owners, those working for someone else? Getting out for them is usually because:

  • They see no career advancement.
  • Are burned out doing the same thing over and over and over.
  • They have come to hate their employer (this was my dad).
  • It’s stale, they’re not in control, they’re taken for granted.

So it’s time to change careers and that may mean a new job, starting a business, getting a franchise, or buying a company (if the latter, it’s time to read my book Buying A Business That Makes You Rich).

And back to owners. Wanting to exit with style, grace, and more money means paying attention to basics, which I repeat regularly because most people don’t pay attention to them.

  • Grow, don’t just talk about.
  • Get your financial systems up to the A+ level.
  • Make the owner dispensable, ASAP, and reduce all other dependencies.
  • Attract and retain great people.

For another shameless plug, see more about these things in If They Can Sell Pet Rocks Why Can’t You Sell Your Business (For What You Want?).

“The best way to find out if you can trust someone is to trust them.” Ernest Hemingway

“Pessimism is an excuse for not trying and a guarantee to a personal failure.” Bill Clinton

Details, Details, Those Darn Details

When is 25% ownership in a small, privately held business not really 25% ownership?

When you try to sell your shares.

I got a newsletter from a BVWire (a valuation and buy-sell deal compilation company) and one of the articles dealt with the complicated issue of minority ownership in a business. While not boring you with the details of the case, the bottom line was a court decided the firm’s operating agreement specified the sale of shares called for fair market compensation of the assets of the business but not the interest (ownership) in the business.

So, some 25% owner in Oregon is not going to be happy because he, she, or the attorney didn’t catch this qualifier. Details are important and think of all the things we must do regularly where lack of details can confuse or derail things.

Communication – I just read another newsletter about properly addressing an audience (and the same applies to an audience of one, two, or three not only a room full). You must direct your message to whom you’re speaking. Talking to employees about needing to grow faster when they’re already working 50-60-hour weeks doesn’t cut it.

Agreements – I work in the buy-sell world where there are always discussions over the same issues (wordings). The same is true in employee agreements, vendor agreements, etc.

Life – Don’t be specific with kids and they’ll find any little loophole. You sure wouldn’t want your contractor missing a few things or your home to be like an oceanside condo in Florida (collapsed). And just think of all the little details musicians, artists, athletes, and others pay attention to. Or maybe you’ll be like a good friend of ours who didn’t pay attention to community property laws when getting married and got burned big time during the divorce. (One of them had a lot of assets at the time of the marriage and the other was in debt. Guess who got 55%?)

It’s always the little things that take the most time and effort.

“Never marry a man you wouldn’t want to be divorced from.” Nora Ephron

“Success is a lousy teacher. It seduces smart people into thinking they can‘t lose.” Bill Gates

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

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

Description automatically generated

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?”

When They Ask About Fees…

We all run into a lot of different people in our day-to-day business. After a while we get triggers as to how things might go. For example:

  • When someone wants to dive deep on fees in the first call it means we will never work together. Never. Recently one guy brought up fees three times in a 15-minute introductory Zoom call with the last mention being a question about if I would take my fee in equity (in a company they haven’t bought, much less identified yet).
  • I meet someone, I give them a copy of one of my books, we meet again or talk within a week, and they say they’ve finished my book and really liked it. Bottom line, 90% chance we’ll work together.
  • If someone asks a lot of questions about how we work together, the process, timing, etc. it also means there’s a good chance we’ll work together. Being inquisitive means seriousness.
  • On the flip side, if excuses start to flow and the message changes, guess what? (Especially for business buyers) they’ve changed their mind, i.e., they got cold feet, so they come up with alternatives like, “I might be getting a promotion” or “We have to decide where we want to live” or “My spouse isn’t sure this is the right time.”

I bet most of you reading this have similar “signs of action (or no action)” in your memory banks. After a while it gets easier to figure out who to concentrate on helping.

“Some things are just too coincidental to be a coincidence.” Yogi Berra

We spend our time looking for security and hate it when we get it.” John Steinbeck

A School Lunch is Better Than No Lunch

I was a cafeteria monitor for at least my senior year in high school (maybe my junior year also). It wasn’t a bad job. We made sure kids didn’t act like kids, food wasn’t thrown, the lines moved along, and the finished trays didn’t back up on the conveyor back to the kitchen. The benefit, monitors got as much food as we wanted, and we had a great team of cooks who served 2,700 kids a day (it was a closed campus) and growing boys need a lot of food.

I hadn’t thought about this in way-too-many years until I saw a headline in the Wall Street Journal on July 26 that said, “Supply Chains Pinch School Menus.” Food suppliers to schools are having a tough time getting food and other supplies, they don’t have enough workers, and transportation is an issue.

Just like almost every other business these days. It’s tough operating a business when you don’t know when you’ll get materials, will you have enough employees, will your customers want what you have if they can’t get other things needed to make their product or do their business. The article mentioned one company “gambling” on stockpiling fruit without knowing what the schools would be ordering.

It also changes due diligence for business buyers. They must now look at the supply chain, the suppliers, how they get the product, etc. For a while the top worry was easily employee availability and if supply chain worries haven’t overtaken that worry, they’re a close second. Another example in the article was about suppliers backing out on their customers. Tip to owners (especially soon-to-be sellers), have multiple suppliers and always be in contact with them.

For buyers, it’s be cautious and investigate the heck out of the supply chain.

“We can understand things better. We can never understand things fully.” (Physicist) David Deutsch