When Your Edge Gets Dull

College basketball coach Jay Wright recently announced he’s stepping down because he lost his edge. Keep in mind he’s one of the top coaches in the country and won two national championships in the last six years.

It’s great he noticed it, which not everybody does (notice). For example:

  • Business owners get to the point where it’s a good life, with good income, and pretty much go through the motions. These are the businesses sharp buyers want to acquire, fundamentally good with a lot of low hanging fruit of things to improve.
  • People who do the same thing over and over because, “That’s the way we’ve always done it.” This could be owners who haven’t grasped the use of data, advisors who aren’t up-to-speed on modern techniques, and, especially, aging politicians who hang on for no reason other than ego (the average age of the U.A. House and Senate is almost 65, an all-time record and the leaders are 80 and above).
  • Employers who didn’t (and haven’t) realize how important it is to take care of their employees. The employees who have realized there are plenty of other options out there so they’re not stuck in something they don’t want to do anymore.
  • There’s a flip side to the last point and it’s the people who never had an edge. A perfect example is from an article I recently saw about how a lot of recent college grads are working hospitality and retail because they can’t get better jobs (perhaps because their education was in something not needed in the market).

It’s hard to notice, and especially realize, you’ve lost your edge. When you do, it’s time to get out the sharpener whether it be a new job, your own business, getting out of your business, having a coach, etc.

“Start where you are. Use what you have. Do what you can.” Arthur Ashe

Create Don’t Just Add Value

We went for happy hour with friends recently (he gets this weekly memo) and because of his great management team he was wondering if he’s really adding value. 

I told him, don’t be worried about adding value (day-to-day) because what you’ve done is create value. The less important to the business an owner is the better. Plus, at the size of his firm, any likely buyer (private equity, etc.) will want a solid team and will discount the price if the owner is hard to replace.

I also shared what a client had told me about how great he feels because he’s empowering his people and helping them grow. It’s the reason why Seattle companies like Starbucks and Dick’s Drive-In pay for employees’ tuition and companies like Dick’s Costco promote from within for all their store managers.

When you build a team, the train keeps on rolling when one person leaves. You’ve increased expertise and given people a better future, whether in your firm or somewhere else. It’s tough. Often ego gets in the way, and we feel we must do a lot of things ourselves. It should be the opposite.

“I believe the second half of one’s life is meant to be better than the first half. The first half is finding out how you do it. And the second half is enjoying it.” Frances Lear

When You Love What You Do

One thing we learned from the pandemic mess is a lot of people realized they don’t have to stay in the job they’ve had for years as there are plenty of other opportunities. In that same thought vein:

  • There’s a new assistant pastor at our church and it’s obvious she loves what she’s doing. You can hear it in her voice and see it in her body language.
  • At Easter brunch a friend was espousing on how much she loved working for her employer and how it’s benefited her both financially and emotionally.
  • The April 18 Wall Street Journal had a special section titled, “People Who Hate Retirement And What The Rest of Us Can Learn From Them.”

One of the people featured in the “I hate retirement” article said retirement put a strain on the marriage as they were together a lot more than before. While I get laughs from my line (to prospective business sellers), “If your next great adventure in life is retirement does your spouse want you around 24/7?” Humorous yes, serious, a bigger yes.

I see business owners who can’t let go, they’ll die at their desk. An example is the 87-year-old owner who told me his 48-year-old son wasn’t mature enough to run the business, even though the son was in charge of sales (and more).

Other owners get to the point where after 20, 25, 30 or more years they don’t want to manage anymore, have their net worth on the line, etc. They need a new challenge, or just a break.

People in the corporate world get sick of it and want their own business. When there’s a match with a burned-out owner, we have a deal. Or, when the business is larger, when it’s a match with another company or private equity firm.

“People now listen to gossip as if that’s the truth, but they’ll read news in the newspaper and think it must be a lie.” Harvey Fierstein 

Want to Get the Answers You Want?

I recently got an email survey from our senior US Senator, Patty Murray. I’m sure she’ll use the results of the survey to state what her constituents want. However, there’s a catch here (or it wouldn’t be in this memo).

Every poll or survey results I’ve seen recently say the top issues people are concerned about include:

  • Crime
  • Inflation
  • The southern border

Think any of the above were on her survey? You’re right, none of them were on it. She’ll get the answers she wants to get. It’s an easy trap to get into. It’s called drinking your own Kool-Aid. 

Over the years I’ve seen numerous studies about the reason employees think their customers buy (the product or service) is vastly different than the reasons the customers give about why they buy. Maybe talk to your customers sometimes, right?

Just look at what’s going on in the job market. A lot of employers found out their employees weren’t that happy when said employees left for new careers, spurred on by the Covid shutdown.

Be careful what you ask because if you ask the wrong questions the answers are meaningless.

“Good things happen slowly. Bad things happen fast.” Abigail Thomas

“I don’t know if that there are any short cuts to doing a good job. Sandra Day O’Connor

Projections, Projections, Do We Really Need Stinkin’ Projections?

I know they need to “check the box” and get projections. In this case, “they” being bankers. Recently one asked for three years of projections with the first two years by month and the third year annually. Just for fun, consider the following:

  • The folly of predicting winners in March Madness. Column in the Seattle Times said pick Kentucky, they’ve got it all. Oops, out in first round. The WSJ had a column saying pick the defending champs because most don’t pick them. Oops, out in second round. In conference tournaments one announcer said Iowa was so hot they’d go to the final four and another said Seton Hall would go deep as they were peaking at the right time. Oops, both out in the first round.
  • It’s early 2021, vaccines are available, and things are opening up. Would you, would anybody, have predicted future mask mandates after politicians proudly stated if we get vaccinated there’ll be no more masks? What about massive supply chain disruptions, employees taking control of the job market, or a war in Europe?
  • What about inflation? (Almost) nobody predicted that (I’d bet those who did predict inflation are those who have predicted inflation, a stock market crash, depression, etc. for the last 10 plus years, and are finally right). The Fed chief said it was transitory. The Seattle Times business columnist said the other day he was wrong when he said inflation had peaked in December.
  • Just read about all the SPACs. It seems few if any are hitting their projections.

Look, projections can be a good exercise and they set goals. But three years out? The one thing I can predict is in three years multiple things will have happened that nobody thought of.

“Until the lions have their own historians, the history of the hunt will always glorify the hunter.” Chinua Achebe

It’s All About Perspective

I’ve been listening to a very interesting podcast with a geologist named Randall Carlson. He’s discussing the changes in the earth over the last 15,000 years and he states there’s evidence there was a mile thick sheet of ice over the top half of the northern hemisphere. Then it seems an asteroid hit the earth, the ice started melting, and it was a 5,000-year process to finish melting.

Asteroids are a “thing” with Mr. Carlson. Given his field the changing earth, the history of it, etc. he’s super focused on if and when another asteroid of destruction size will collide with the earth. Most of us go about our days not thinking about meteors, comets, or asteroids. Not Mr. Carlson, he seems to get nervous when something in space comes within 100,000 miles of earth.

I’m talking to a business owner whose company’s earnings in 2020 and 2021 were 20% of 2019, yet he sees nothing but rainbows and opportunity. All is rosy. The asteroid only glanced his company. 

In both cases I’m reminded of old sayings (cliches) like, “Take your blinders off,” and, “Can’t see the forest for the trees.” When it comes to buying, selling, or growing a business:

  • Buyers will get excited about the big picture and at the same time play forensic mechanic on the workings of the company. Trust but verify and then verify again.
  • Owners, especially smart owners, will realize even if they have the best product in the world, they still need to work hard to get people to know about it and buy it.
  • Sellers believe they have a great business and sometimes don’t understand why all the questions. And one of my favorite sayings is, “Just when you think you’ve answered every possible question (about your business), the bank asks more.”

It’s a combination of optimism and skepticism that often leads to success. As in, I’ve got something good and realize it won’t sell itself.

“The future depends entirely on what each of us does every day; a movement is only people moving.” Gloria Steinem”

“It’s hard to be diamond in a rhinestone world.” Dolly Parton

You Want to Sell Your Business to Whom?

I can easily tell you some people who would never make it as a business owner.

  • The editorial columnist in the Seattle Times who wrote about lingering Covid, masks going away, and how scared he still is.
  • The news announcer on NPR who had to “warn” listeners they would hear gunshots from a firing range in the next segment.
  • The arts organizations executive directors who say they’ll still require masks after WA State removes the requirement.

Being a business owner and/or buyer requires guts, among other things like smarts, desire, and risk-taking. For business sellers, here are some things to be concerned with about any buyer.

  • Are they the right person for the business? Do they have the skills to grow it and the personality to relate to the customers and employees?
  • Money, as in can they afford the business and the corresponding bank loan, still have cash left to help grow the company, and can they manage finances? 
  • Do they have a team to help buy it and can they effectively utilize the existing management team?
  • Can they make decisions without getting analysis paralysis?
  • Does he or she ask good tough and insightful questions to show they grasp what’s going on (a buyer skating through diligence is a bad sign)?

Diligence goes both ways and it’s more than money that makes someone (or company) the best buyer.

“A bad rendition of you is better than a good rendition of somebody else.” Willie Dixon

Contrasts in Style

In the US, especially in Washington State, when there’s a government project everybody gets paid the absolute maximum wage, even if they’re inexperienced and not worth that wage. In Antigua, where we are now on our Rotary project, government projects seemingly pay everybody the absolute minimum, as in minimum wage.

We have a journeyman electrician helping us because he’s learning computer networking to add to his skills and abilities. He’s the one who told me about the wage situation, which is why is doesn’t do government work (we’re paying him 4X the minimum plus a bonus)

Learn from these government extreme policies, apply them to small business, and pay attention to the following.

  • Pay people what they’re worth and bonus them when they exceed expectations.
  • Create an atmosphere so people want to stay. If they’re good, and maybe even mediocre, they’re getting calls weekly or more often from recruiters. 
  • Watch out for the hiring bonus trap. A client has to be careful because the going rate for hiring bonuses is more than the bonus amount for current people in the same position (Yikes! See the bonus pool going up?).
  • One thing employees have learned from Covid is they can go do something else if they want to. It may not be your or your client’s, fault, it may be a desired life change (so do what you can do  to postpone this as much as possible).

Sometimes (often) we can learn a lot by traveling and helping others, as well as listening to them.

“Okay, that’s it, I’m out of here.” (The hilarious) Jan Martinka as she ended her talk at an Antigua awards ceremony and exited stage left.

PS People in Antigua have asked us what the hell is going on in Ukraine. It’s a tough question to answer.

When You’re in Over Your Head

We were in Antigua on our Rotary project in the schools although this year there were no students given there’s a ban on field trips in the Bellevue School District. So, we adults are doing a lot of the work the kids usually did.

I quickly realized I was in over my head when attaching RJ45 connectors to ethernet cables. I haven’t done it in over seven years, when I wired access points around my house. If I was the one responsible for cables we’d be in trouble. So, I figured out other things I can do (besides project management) and I found some of those things to help this incredibly successful project, which has made the lives of many people richer (including us).*

The same philosophy goes for many other things in life and business. Don’t do everything. Get experts  who can do whatever it is faster and better. Doesn’t matter if it’s menial tasks like attaching connectors to cables or strategy or advisory work. Get the best suited person for the task and concentrate on those things you do best (and better than others).

I find it a good sign when a business buyer says they want to focus on vision and growth. It’s also good when an owner says “I don’t know how to do that because we have people who do it for us.

“Those are the memories that make me a wealthy soul.” Bob Seger

Full Disclosure – It’s What Works

Headline in what I call the personal interest column in the Wall Street Journal on February 8, 2022, “Realtors Embrace Brutal Honestly. ‘Smells Like a Farmtown.’” The article is about how some realtors are mentioning the downside of their communities whether it’s smell, weather, terrain, or something else. 

Taking care of (potential) problems before they happen. After all, there are detriments to every house, neighborhood, and community. 

In our world of buy-sell deals we see a wide range of business-for-sale descriptions, including:

  1. Those that state nothing more than opportunity, potential, and growth. My favorite was a business losing over $200,000 per year for at least the last three years and when justifying the price, the broker said, “potential.”
  2. Some that are very basic, just lay out the facts and history, with very little embellishment. As in, here are the numbers, so make a decision. An example of this was a one paragraph description of the business with the P&L from the preceding year. And somebody paid this person to sell their business.
  3. And then there are the memorandums with complete information. If there’s customer concentration, mention it. Same for restrictive license agreements, a key employee dependency, or upcoming capital expenditures. A memorandum on a deal I was involved with a couple years ago covered the following topics to show honesty and reality (there are no perfect businesses):
  • Business weaknesses
  • Impediments to growth
  • Limitations on services
  • Buyer concerns

All the above were pretty mild and when you fully disclose, the rest or what you state is taken more seriously. And this applies to everything in life. Sooner or later weaknesses are discovered.

“Where is the knowledge we have lost in information.” T.S. Eliot