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Mistakes I have made buying and selling businesses

by Rick Baker
On Jul 18, 2012
Mistakes I've experienced, buying and selling businesses, more or less ranked in order from excruciating to awfully painful:
  1. Ignoring gut feel
  2. Not correcting over-valuation immediately 
  3. Believing accounting data & reports 
  4. Setting the wrong time expectations 
  5. Taking it personal
  6. Not getting to know key suppliers
  7. Not getting to know key clients
  8. Not getting to know key personnel
  9. Underestimating the cost to correct flawed operating systems
  10. Too much focus on EBITDA, not enough on cash flow
Now, I am committed to learning from my mistakes and helping others avoid some of the hardest knocks.

Tags:

Entrepreneur Thinking

Thought Tweet #479

by Rick Baker
On May 17, 2012

Thought Tweet #479 Planning is not a cookie-cutter process; planning must blend strategic thinking with strategic intuition.

 

The Thinking Behind The Tweet

In his 2007 book 'Strategic Intuition', William Duggan says his pilot course on strategic intuition begins with asking people to select the one statement, A or B, which best reflects how you think:

A: You achieve anything you want if you believe in yourself, set clear goals, and work hard.

B: You can achieve many things if you prepare for opportunity, see it, and act on it.

Tags:

Business Plan: Writing Plans | Entrepreneur Thinking | Thought Tweets

Your retirement and your stakeholders

by Rick Baker
On May 1, 2012

According to a recent poll1 of small-business owners, 24% have a succession plan for their retirement.

When asked about how the business would be handled at the time of retirement:

·         23% of the owners said they would simply close the business

·         20% of the owners said they would sell the business to a 3rd party

·         18% expected to transfer the business to a member of the family

·         12% said the business would be sold to a partner or employee

·         27% were not sure what would happen to the business 

It seems that 3-out-of-4 owners of small businesses either (1) see no need to set a succession plan or (2) see a need for a succession plan but don’t get around to creating it. About 1-out-of-4 owners intend to simply close the business so they do not see much need for a succession plan. About 1-out-of-4 owners don’t know what would happen to the business…apparently they can tolerate the ambiguity. The remaining 2-out-of-4 owners – 50% of owners – anticipate the formal transfer of their business either to a 3rd party, a family member, a partner, or an employee.

Putting this into a few perspectives:

 ·         For employees of small businesses: If you work at a small business then the odds are 1-to-1 [even money] that the owner of the business expects to sell or transfer the business to someone when he or she retires. And, the odds are 3-to-1 ‘against’ there being a plan in place to cover that sale or transfer. 

 ·         For clients of small businesses: If you buy products or services from a small business then the odds are 1-to-1 [even money] that the owner of the business expects to sell or transfer the business to someone when he or she retires. And, the odds are 3-to-1 ‘against’ there being a plan in place to cover that sale or transfer. 

 ·         For suppliers to small businesses: If you sell products or services to a small business then the odds are 1-to-1 [even money] that the owner of the business expects to sell or transfer the business to someone when he or she retires. And, the odds are 3-to-1 ‘against’ there being a plan in place to cover that sale or transfer.  

 

Footnote:

1.    TD Waterhouse’s early October 2011 Business Succession Poll of 609 small business owners

Tags:

Entrepreneur Thinking | Family Business and CFFB | Succession

Nurture + Demand = Progress

by Rick Baker
On Apr 17, 2012

"Moderation is the silken string running through the pearl-chain of all virtues.1"

Recently, I have spent considerable time thinking about moderation...thinking how often people violate the common sense called moderation, which we all know from firsthand experience and from watching others struggle without it.

So, when I read '21st Century Leadership'2, the heading "Become More Nurturing and More Demanding" captured my attention. That, according to the author, Dave Lefkowith, is the 2nd step to becoming a 21st Century Leader.

Many entrepreneurs and business leaders do need to step back and take a good look at how they go about:

  • Placing demands on their followers
  • Handling interpersonal activity with their followers
Spirited Leaders recommends moderation.
 
Like Lefkowith, we see a need for Leaders to be either more nurturing. When we think of nurturing we think of Transactional Analysis, 60-year-old behavioural psychology, which, in summary, states people behave like:
  • Parents,
  • Adults, &
  • Children
According to Transactional Analysis, most of us behave all three ways. We adjust our behaviour in reaction to other people and in reaction to differing situations. This is a big part of Spirited Leaders' philosophy - Business Only Contains 3 Things: People, Process, & Situations
 
When doing Parent behaviour we can be demanding or we can be nurturing. When in the Adult behaviour mode we are more logical and less emotional. And, in the Child mode we can act anywhere between most-accommodating to most-belligerent. 
 
This Parent-Adult-Child behaviour model makes it easy to explain exactly how business leaders, especially hands-on entrepreneurs, can go about Becoming More Nurturing and More Demanding. Actually, Spirited Leaders recommends: Becoming More Nurturing and Making Better Demands.

How to become More Nurturing: that's simple, just think of the best behaviour either of your parents [or parental figures] presented to you. That's your best example of a Nurturing Parent...ie, how to behave like a Transactional Behaving Nurturing Parent. Clearly, in the business environment, there are limitations to the amount of nurturing. Too much is a turn off: your followers are not Children. Too little is uncaring: at least, that's the way some or perhaps many of your followers will feel. 

How to make Better Demands: defining this is more challenging. Here's a question that might help. When you became an Adult, did either of your Parents ever, from time to time, still treat you like a Child? I mean, after you became an Adult, did either of your Parents continue to give you advice about money?, how to raise children?, how much to drink?, how fast to drive?...etc? If this never happened to you...then you are one of the lucky few. If this did happen to you - how did you feel? Being an adult - getting advice from your Parent - how di that feel? Remember that feeling when you place a demand on one of your followers. That's the safe way to be.

Summing up:

Make sure you maintain some desire to be Nurturing. That will be of most value when your followers are struggling at work tasks and are bringing the results of tough [after-hours] personal situations to your workplace.

Aim for more open, Adult-to-Adult behaviour; set boundaries on your emotions before and during interactions with your followers. As trust builds, present more Adult-to-Adult demands on your followers.

And, allow a bit of the Child within you to generate and enjoy workplace humour.

 

PS: Dave Lefkowith's Ten Steps to Becoming a 21st Century Leader: 

  1. Broaden Your Style
  2. Become More Nurturing and More Demanding
  3. Become Less Predictable
  4. Focus Like a Maniac on Opportunity
  5. Create "Opportunity Laboratories" for Top Prospects
  6. Celebrate (the Right Type of) Failure
  7. Anticipate and Address Emerging Issues
  8. Create an Explicit Stakeholder Management Strategy
  9. Touch Individuals Deep within Your Organization
  10. Create Brutally Direct Self-Development Mechanisms


Footnote:

  1. Thomas Fuller, 'The Holy State and the Profane State', (1642)
  2. Dave Lefkowith, '21st Century Leadership', (2001)

Tags:

Emotions & Feelings @ Work | Entrepreneur Thinking | Leaders' Thoughts | Personalities @ Work

Tom Deans visits our Centre For Family Business (CFFB)

by Rick Baker
On Apr 5, 2012

"To Gift or Not To Gift", that was the question...at CFFB's March breakfast.

At our breakfast event, Tom Deans explained why gifting a family business is generally not the best course of action. And Grant Robinson, of event sponsor BDO, provided some opposing thoughts...creating a friendly debate on the topic of family-business transition, succession, and exit.

Tom described himself as a contrarian who tends to challenge people. He has owned and operated a family business. And he explained, he sold it at the right time and at the right price. He planned ahead. He spent the better part of 5 years 'working his plan', then he sold his family business.  Tom Deans has entrepreneurship in his blood. His great grandfather ran an East Coast tire distribution business. His grandfather was a chemist, who founded what became a $100,000,000 publicly-traded enterprise. Tom's father created a plastics business, the largest employer in Orangeville. 

Tom's ancestors never, ever 'gifted' their businesses...they sold them!

Tom recommended all owners of family businesses consider that option: rather than gift family businesses to relatives, sell the family business. That's the gist of Tom's message to the owners of family businesses. In his book, 'Every Family's Business', Tom provides 12 important questions...designed to help families consider the best course of action for business 'transition or exit'.

Quoting Tom, "I am offering, in a way, permission for business owners to take care of themselves."

Tom understands the feelings of guilt family business owners can experience when they think about selling their businesses. He cautions, those feelings are often followed by business failure. The fact is most family businesses do not survive for generations. For a family business to survive for generations, each generation must sacrifice something...just as the founder did before them. Gifting the business to the next generation often results in business failure and loss of the wealth that existed in the business and the family before the gifting. 

Tom explained...

"This issue is very important in Canada because we have never had so many aging business owners."

"Banks are doing due diligence on how well prepared family businesses are for transition."

Summing up Tom Deans' contrarian view, using his words:

  • "A family business is a set of ideas and values that you pass on to your kids."
  • "Pursue the longevity of wealth and family...but not the business itself."
  • "Teach your children to love commerce: to love business...not to love a business."
 Well said Tom!
 
..and, thank you Grant & BDO for sponsoring this entertaining and educational CFFB event.

Tags:

Entrepreneur Thinking | Family Business and CFFB | Succession

Getting Present

by Rick Baker
On Feb 17, 2012

Often, we start meetings with a 'getting present' chat. Either we take turns answering a non-business question or sharing with one another how we feel...personal, but not intrusive.

We find getting present questions are a great way to start group sessions and workshops.

Getting present questions:

  • help People get comfortable
  • help People with one another connect
  • help People focus
All of these are very important things to do.
 
Why is it important to help People get comfortable?
 
 
Why is it important to help People connect with one another?
 
Answer: Some People are natural Connectors. Most People are not; most People benefit when Situations allow them to relax and exchange warm-up communication. 
 
Why is it important to help People focus?
 
Answer: Most People find it tough to concentrate; most People spend a lot of time thinking about the past, for example - the last task they were working on; most People spend a lot of time thinking about the future, for example - the work they will complete later in the day; few People are able to concentrate and Focus on the present. 
 
So, Leaders must help People be comfortable, get connected, and get Focused.
 
Tactics like getting present questions help Leaders get this important work done.
 
Leaders can obtain quick & straightforward help in these areas.
 
For example, if you want to understand more about 'getting present' and 'focusing on Now', check out:

Copyright © 2012. W.F.C (Rick) Baker. All Rights Reserved.