In terms of valuation, tomes have been written about how to value companies.  In the waste, environmental, and industrial space most buyers use a multiple of EBITDA to express value.  Many things come in to play in valuation but the rule of thumb is simply this:  value is in the eye of the beholder.  The more ‘beholders’ you have, meaning buyers, the better off a seller will be. 

The tougher question is “is it a good time to sell”.  Macro trends like the housing crisis, ongoing high un-employment, and economic turmoil tend to get into business owners’ minds and keep them from marketing their businesses for sale.  But that’s not always the best choice.  Many so-called M&A companies, particularly those that run seminars for business owners, try to sway business owners to sell using the ‘baby boom retirement’ card.  They say that baby boomers will all retire and that there will be a glut of businesses on the market driving the value of all businesses down.  Supply and demand right?  These types of ‘m&a’ firms seem to have a business model predicated not so much on serving the individual business owner but rather on how many business owners they can sign up.

Macro trends like these though are real for certain.  But most small to mid-market companies should be looking at micro trends to decide if it’s a good time to sell.  By micro-trends I mean simply this:  what’s happening to my business, what’s happening in my region, how do I compare against competition, how is my business performing. 

In short, timing the market is difficult to impossible to do.  Just ask stock pickers.  It’s easy to see a trend when it’s already happened.  Monday morning quarterbacking.  So the most important advice for business owners on timing?  Simply this:  if you are trending up, it is a good time to consider selling.

Jon had an idea that he thought would help his Stuart’s company.  It was a complicated idea, to be sure, one involving corporate structures that could potentially drive certain tax benefits and increase the enterprise value of a portion of the business.  Jon whipped off a quick email to Stuart, knowing that Stuart’s company was at that very moment exploring corporate structure.

I seriously do-not-care. A captain of industry in the making.

Now to understand Stuart, you must know that he is the ultimate company man.  He’s tried and true, unwavering in his commitment to his company.  Over the years he had risen to a position of respect, not just title, and he was in direct command of 60% of the company’s operations.

Here’s the reply that Jon received from Stuart:  “Thanks for the idea.  That falls under our corporate and tax groups into which I have very little visibility”.

Translation:  It’s not my job, man.

Are you kidding me?

Jon was stupefied.  If the response had been “I don’t have visibility into that but I’ll run your idea by Mr. X who is heading up that project” that would have been one thing.

Here’s how it sounded to me:  Post office commercial “It ain’t my money, I seriously do not care”.

In those days expense reports were filled out by hand or in a spreadsheet template.   If you are of an age where you have not experienced people smoking in offices, the IBM Selectric, and two martini lunches, it is likely that you have also missed out also on the cloying, somewhat vague concept of ‘expense accounts’ from another nearby era.  Let’s put it this way:  expense reports need to be checked for, -ahem- , correctness.

So once a week this Admin was reviewing the expenses of a number of salespeople for me.  Soon after she began her routine my phone began to ring with complaints.  It was my mistake really, because I hadn’t been specific enough in what the scope and role for Admin of the Century (when you read that ‘Admin of the Century’, imagine it being said by an announcer with a deeply sonorous tone).

What I told her to do was to check them for accuracy and compliance against our travel policy.  What I wanted her to do was look for substantive anomalies to the travel policy.  There is a difference.

She began holding back expense reports for missing receipts for small amounts, Coca-cola’s bought in a gas station while a guy was filling up after four hours of windshield time, and dinners that exceeded the suggested travel policy limit.

I spoke to her about what we wanted to accomplish but she just didn’t seem to get it.  It was all or nothing with her.  I was asking her to use her head, not a policy, and she could not empathize:  the policy was the policy in her mind.  Arrrgh.  I wrote the policy so, I was pretty clear on what it said, actually.

When you broke it down, it was pretty simple.  She was majoring in the minors.  None of the ‘out of policy’ things really amounted to a hill of beans, and I knew it.  Of course there were corrections that needed to be made, dubious expenses that indeed were not approved – but those were the exception.  They were hard to miss.

So I took a different path and asked her to document and track for six weeks anything that she caught that could not be justified.  The guy that bought the Coke for himself actually never got to eat lunch that day – I wasn’t going to hassle him over a fifty-cent Coke.  The guy who ate the big dinner had been on the road for multiple days – when you looked at  the entire trip he spent less than the suggested ‘per-diem’.

At the end of the experiment she came into my office with the numbers.  If you annualized what she had ‘found’ it was insignificant.  She finally got the point:  don’t major in the minors.

That’s right.  You read it correctly.  I don’t get mad.  Find it ponderous do I? Yes.  But anger inducing, no.

You have to read this book. In it you will find a story about "Too many Daves".

I consistently introduce myself as “David”, and consistently get called “Dave”.  Now it may seem a small thing to you, but I am not a Dave.  I do know some Dave’s and they are definitely of the Dave variety.  I am not.  I am David.  And on the occasions where people bother to ask, I re-affirm that, and am appreciative of the concern.

But it seems a lost art, doesn’t it?  Active listening when one is being introduced generally will tell us whether we should be calling someone Elizabeth, Eliza, Beth, Liz, Liza or Lizzy.  I can’t imagine being introduced to someone and instantly changing their name.  Yes I realize it’s the same name, it’s just more casual, perhaps more familiar.  And on the upside it somehow lumps all Daves together as a congenial bunch of good guys that everybody likes.  Everybody knows a Dave.

But how I know you’re listening to me is whether you get my name right.  And although I don’t get mad, because, as I said, I am an easy-going guy, I do notice.

Think about active listening when you’re being introduced to someone new.  Don’t hesitate to ask someone what name or title they prefer.  But keep in mind it’s likely that they have already told you.  Were you listening?

Here are some things to consider before selling:

1. What would I do next if I sold my business.  Sounds simple but it isn’t.  You have to have a plan that includes more than golf seven days a week.  Most entrepreneurs need to stay busy.  Have a plan.
2. How has my business trended recently.  If your business is trending up, it’s a good time to consider selling, particularly if you’re doing better than comparable companies.  Companies that are doing well today get a lot of attention.
3. How am I organized and should I change that.  There are significant tax differentiations between an S and C Corporation.

Seek out professional advice.  Good M&A firms won’t just try to sign you, they’ll try to understand you, your business, and will provide you objective advice about selling.  There have been many times when I’ve told prospective clients not to sell for a variety of reasons.  Because for a business owner with such a big decision, timing can be everything.

Hard to argue with the talent...

When is it that Charlie crossed the fine line from a healthy sense of self-worth and ego into complete narcissism?  The heck if I know.  But in it there is a good lesson for sales people.

And that is this:  when you’re good at what you do a little ‘aw shucks’ won’t hurt you but any ‘rock-star from Mars’ stuff will kill you.

I sat across the table at dinner one time from a friend of mine.  In conversation I blithely stated that I didn’t have an ego about something or other in the conversation.  And he corrected me immediately by pointing out I have a huge ego.  And when I stopped to think about it, he was right.  And so I laughed and agreed with him.

Ego is not a bad thing.  Particularly if you’re in sales.  It’s a part of what drives you to be successful.  You need to be resilient because you get a lot of no’s in this line of work.  You’ve got to have a healthy sense of self to not be deterred and to pick yourself up and keep going.  And in the midst of it you should be able to laugh at yourself and the absurdity of it all.

But don’t cross that line into ‘rock-star’ mode.  It’s a turn off.  It’s a disaster.  It alienates people who might otherwise support and help you.

And when Charlie comes down from his Charlie manic high, he might realize that.

Now he is in a national business, with a hundred-fifty or so people reporting to him and he is amazed that people just don’t immediately do what he tells them.  He is ill-equipped from a skills standpoint to handle something so large and unwieldy and has little experience in recruiting, training, compensation, and a myriad of other so-called ‘corporate’ skills he will need to be successful.  Some things you just can’t learn on the job– but this is a laundry list of inadequacy.

One of the key problems Chuck faces is learning how to make a connection from his initiatives to the success of the people that he’s trying to get to implement them.

As a small business owner he simply never had to do that.  He came up with ideas, deployed them, and that was that.

In his new role things are not that simple.  Here’s what he needs to do to be successful.

• Don’t over reference the past.  It’s great that you were successful in the industry.  Don’t over rely on that.  People tire of hearing how things were so great in your old town/business/region.  All that matters is now.
• Get local input.  It’s great to have industry experience but there are nuances to most localized types of services businesses.  Local people understand the lay of the land.  Fail to connect to that, and you will fail.
• Create a vision.  Utilize the local knowledge to create a vision of success that will get results.  Inject the right amount of change/method/results without accepting that all cows are indeed sacred.  Don’t try to go from A to M.  Too much change all at once brings  on revolt.
• Paint the participants into the vision.  Show people how getting from point A to point B with this joint plan will benefit them (WIFM – what’s in it for me).
• Create measurements.  No measurements = sure failure.  Make the measurements simple.
• Don’t disappear.  Nothing is worse than too many initiatives with no measurement and follow-up.  There must be consequences for both success and failure.
• Reward success.  The good consequence is success.  Reward it three ways through status, opportunity, and money.
• Learn from failure.  Sounds trite and a lot easier to say than do.  There still must be consequences for failure – but unless it was through blatant disregard, never apply negative consequences through status or opportunity.

Failure to create the link is failure to be successful at positive change.

C'mon, you know who they are....

The Roadblock shows up in many forms.  Administrators trained to keep vendors from their boss.  Mid-level managers fearful of being exposed for a lack of imagination.  Project participants bent on protecting their turf.

You get the point.

There are only four ways to deal with a Roadblock:

• Tunneling.  In this scenario, you tunnel under the Roadblock to see what it’s made of.  As much as any person can tell you that it is not, buying is an emotional decision.  It doesn’t matter what you’re buying.  It could be an idea, a product, a candidate or a service.  As soulless as the coldest buyer could be there is always a way to build rapport.  It may take time but it can be done.  Appeal to ego, find common ground, focus on the concepts that make the buyer look better.  Many times this means handling things between and within constituent groups that your buyer can’t communicate or fix.
• Construction.  Another way around a Roadblock is to construct roads or bridges around it or over it.  This means getting to other people in the organization that have both real power and a stake in what you’re trying to accomplish.  That may mean finding influencers on the same level as your Roadblock to take you around it or someone higher up in the organization that you need to build a bridge to.
• Demolition.  This scenario is my favorite.   If you’re outside of the organization, some level of the construction phase is required first or may happen simultaneously.  Think of this as detonating an information explosive in the right place.  In other words, use data and information to overwhelmingly build your case and well, for a lack of better term, demolish your Roadblock. 
• Ozymandias.  Sometimes you just can’t win.  Right now that is.  Doesn’t mean that you won’t win in the future.  The Ozymandias effect is this:  eventually all Roadblocks crumble.  No matter how stoutly they’ve been built or appear, eventually they crumble.  They get promoted to the level of their incompetence, they are shown to be less valuable to an organization, they get sent to Phoenix to manage the smallest branch in the country – whatever.  They often get let go.

Remember that organizations house Roadblocks purposefully – and people in the organization understand that.  The Roadblock can look massive from the outside but once you’ve gone under, over, around or through it, it’s a much smaller obstacle from the inside looking out.

None of us had any idea how the man had gotten there.  With our collective experience and wisdom (he said poking fun at himself and others) it was a mystery.  We knew immediately he was devoid of the necessary leadership, skills, and experience that we needed.  In personality he was not the guy either.  But it was too late.  Installed by an impatient board, it was go time. 

Buy it at Amazon!

And so the Captain blithely embarked on the Deadship Lollipop and promptly proceeded to take great care in re-arranging the deck chairs.  The band played on as we rammed the iceberg at full speed and steadily took on water. 

You get the point.  I promise to back down on the sailing metaphors. 

Rather than enumerate the Captain’s many ill-chosen projects, personnel decisions, and fundamental disconnection to the actual business itself, I’d like to point out a book that everyone in a leadership position needs to read called “The Five Temptations of the CEO”. 

The book rather succinctly defines conflicting choices between the good and the bad.  They need no explanation, so here they are: 

• Choose trust over invulnerability
• Choose conflict over harmony
• Choose clarity over certainty
• Choose accountability over popularity
• Choose results over status

Captain clueless failed on every single one of these measures.  He didn’t trust his lieutenants (the senior management team) and set himself apart.  In conflict and harmony, he chose the wrong times and initiatives for both.  He had no clarity of vision, nevermind any amount of certainty.  He was more concerned with how he looked than accountability and results. 

Listen, none of us is perfect.  But you do need to measure yourself against a standard.  These juxtaposed concepts can be used by anybody at any level in any organization. 

Captain Clueless finally sailed off on his own dinghy. 

And that was and is the final ship metaphor.

Enter the GE Profile Refrigerator. 

I bought it three years ago.  It was top of the line and set me back $2700.  But it had a decent rating and the right size, features, and functions for my family, so I thought I might as well buy quality. 

But it messed with the man’s food.  The temperature became wily moving up and down, things were melting and heating and occasionally re-cooling or freezing. 

Then came the news that I had to plow $900 into it to keep it going.  A full 33% of the original cost.  Ouch.  

So what ever happened to quality of brand? 

The offending object of today's post.....

When I was a kid Sears had this down pat.  There was Sears good, better and best.  Your expectations of the product kind of went with what you paid.  But today brand and price have little to do with quality and total cost of ownership. 

And forget about the manufacturer.  GE won’t even respond to my emails.  I’m not even sure what I’m looking for from them, other than money, that is. 

I won’t even bother to go down the customer service aspects of this ‘experience’ (if you can call it that) and rail on the fact that no one at GE cares.  I can only imagine if they even tried to care it would make their appliances cost more and then you’d have a bad product with bad customer service.  As opposed to bad product and no customer service. 

I guess I could look up disgruntled consumer sites and throw in the model number (PCF25PGTBB) and the components I had problems with (Replace fan WR60X10307 $614, replace Control board WR49X10152 $287) but the only reason I would do it is to help others avoid a problem.  But by now GE probably doesn’t even make this model.  I suppose I will forsake all GE appliances and tell all my friends, family, acquaintances that I would never buy GE. 

But it feels kind of pointless.  Why? 

Because quality is unrelated to brand and probably unrelated to model and likely unrelated to maker. 

In other words? 

They don’t make ‘em like they used to.