Now that 2020 is upon us, it’s time to start planning for the new year and making changes in your business. Here’s how.
Episode 5 of Mind Your Own Business with Mike and Matt is now live! The topic is “F” Words – Fire and Failure featuring Bobby Derival of Home Care at its Best, and of course, Michael Gansl, Matt Plociak, and David Hoffman.
We couldn’t be more excited to share this new show with you, so listen, subscribe, and leave your feedback.
If indeed our ultimate goal is the time and freedom to live how and where we want, and since we know with certainty that our time is limited, I think it’s only fair to start my part of the discussion with the question every business owner/entrepreneur might be asking themselves – am I wealthier in this moment, then I’ll ever be in the future?
And I would expect the answer more often than not, to be NO – which definitely begs the question of planning for your exit, and the potential, and possibly eventual sale of the business.
Most business owners and entrepreneurs think that if they build a great business, the sale will take care of itself. My experience, and certainly from what we’ve heard here today, that would not appear to be true. Too often, a significant number of business owners who sell are not happy with the transaction.
As a business owner, you must take 100% responsibility for the direction you choose. You need to navigate your options wisely, and we all know that’s not so easy to do. Selling your business is as difficult as any other phase of business ownership – maybe even tougher! The business owner can be out of his or her depth, out of their comfort zone, confused, afraid, emotionally drained from being on a possible roller coaster – sell now, wait, sell later, accept one offer, reject another, don’t sell at all. The challenge is to understand your own priorities first and foremost, and keep that at the forefront of your being, no matter what happens around you. This is why selling your business is certainly not simple!
And although the premise is that planning for your exit should start from the moment you start your business, that philosophy may also work against you at certain times. It may very well hamper your approach – you may act too conservatively, you may act too rashly – so even knowing you must have an exit strategy from the get-go may actually be an issue. I’m not saying it is, or it will be, but I am reiterating that exiting and/or selling your business is not simple!!
Selling your business isn’t just a transaction that can be captured on a spreadsheet, it’s not just about getting a fair price. It’s very personal. It’s very emotional. You must have an exit or sell mindset before you exit or sell. You must be prepared on every level because your departure may address the very core of your being, your identity, and ultimately what you want from life. The last thing you want is to feel at a loss, feel lost, feel unsure of your legacy, be regretful, second guess yourself, and most importantly not know what to do with your newfound freedom.
I recently discovered a small but very powerful book of a hundred pages or so, “Before the Exit” by Dan Andrews, which actually gave me the idea for this presentation, and I highly recommend reading it. You can find it only as a Kindle version on Amazon, and it is well worth the $2.99 and no shipping!
Dan was a business owner and entrepreneur, and he and his partner sold their business. The book is about their journey, and the lessons learned. I found the book fascinating and as I said, very apropos for this panel discussion. Dan talks about several thought experiments/questions to consider and address when developing an exit strategy or selling the business. Some of them are intuitive, and some are not. You can decide that for yourself!
The first question is: What is the next level on your lifestyle ladder? This is the amount of money that would make a very meaningful, and actually an enormous difference in your lifestyle given your goals and how you want to live your life. It begs the question, should you sell your business if in the end, it really does not change your lifestyle. Now, I realize, you may not have a choice, but assuming you do, should you sell or not sell if the sale of your business will not completely change your life. I believe it is a great question to ask.
Other considerations are: How will you invest your cash? Will you develop a new skill set and become an investor? What will you do with your newfound time? Will you travel? The key here is asking yourself these questions, and planning as best as you can for the inevitable fact that you may become an entirely different person. You may no longer be defining yourself as your business. Who will you be now?
In planning for your exit or selling the business – hopefully, they are one and the same, you may also come to the question – are you exiting or selling because the business has outgrown you? Have you hit your ceiling? Are you still the right person for the job? Do you know how to continue to challenge yourself in your business? Can you see a path for yourself to the next level? If not, what do you need to do to gain the clarity to make the right decisions for your future.
Actually, this is a great lead into the next thought experiment that Dan posits, and one which I found was certainly not intuitive, and very much out of the box thinking – In planning for the sale of your business, suppose you determine how much money you’ll pay in taxes and professional fees if/when you sell your business. Now, think what you could do if you invest part of that money into your business – for argument sake, you hire a CEO, and you let this CEO run your business. After all, it may take some time to sell or exit the business. During that time, your CEO is running the business, your involved from afar, and you can do the other things you might want to do – start another business, go away for a month, maybe two. You may develop a new perspective on your business – finally having the opportunity to work “on it”, not just “in it”, and in essence, you may be creating a succession plan if indeed your CEO is up for the job! Even if the CEO does not work out, you still have the opportunity to see things differently, and start fresh again.
To wrap it up, I hope I’ve adequately covered some of the important issues concerning the alternatives and emotional aspects involved in exiting and selling one’s business. I can’t exactly say when is the best time to exit or sell either. Obviously, you always want the best price for your investment of time, blood, sweat and tears! Should you do that when you are growing quickly, or slowly, or leveling out, or even tanking? Only the business owner can answer that, and again to emphasize once again, it’s not simple – how good or bad your business is, and the price you receive for it, may very well have to do more with factors way beyond your control – your competitors , the economy, the marketplace, government, etc.
I’m just sayin!
At the Voice of Reason Consulting, Matt and I are always focused on growing our clients’ businesses. So last Sunday I was especially interested in reading Adam Bryant’s Corner Office article with the headline, “Why Fast Growth Can Lead to Trouble”.
I thought this would be especially interesting to the folks who know our work.
Having found his way in the world of start-ups, Matthew Prince, chief executive of Cloudflare, a cyber security firm, states that working at a start-up is almost like a drug. “There’s something very powerful about going from an idea on a piece of paper to enough money in a bank account to fund it, to building a team.”
However, in the process of growing, it became clear to him and his partners that with fast and significant growth, “a company’s culture can start to suffer because there’s nothing foundational to keep you stable.”
According to Mr. Prince, an organization should not grow faster than doubling in any 12-month period. He reasons that if one succumbs to the constant pressure to grow faster, there may not be any culture-keepers left in the organization. If this happens, I believe a company without a meaningful culture will not achieve its goals.
As always, I welcome your comments – do you believe it is a significant problem to grow a company too quickly?
Since the tag line for Voice of Reason Consulting is “We Turn Business Owners into CEOs”, I was absolutely drawn to an article about “The Science of Pep Talks” by Daniel McGinn in the July-August 2017 issue of the Harvard Business Review.
McGinn postulates that the ability to deliver an energizing pep talk that spurs employees to better performance is a prerequisite for any business leader, and I believe is also a key factor in judging a CEO’s performance as the leader of his/her company.
Motivating people is both a science and an art! According to the science (MLT- motivating language theory) most winning formulas include three key elements: direction giving, expressions of empathy, and meaning making.
The Mayfields, a husband/wife research team from Texas A&M University describe “direction giving” as providing information about precisely how to do the task, giving easily understandable instructions, providing good definitions of tasks, and letting people know how their performance will be evaluated. “Empathetic language” is showing concern for the person as a human being, and includes praise, encouragement, gratitude, and acknowledgment of a task’s difficulty. “Meaning-making language” explains why a task is important. This involves linking the organization’s purpose or mission to listeners’ goals.
Bottom line, a good pep talk—whether delivered to one person or many—should include all three elements. It’s the job of the CEO to know the context and the audience in order to determine the right mix of these three elements. Once leaders and CEOs understand these three elements, they can learn to use them more skillfully.
I urge you to read the entire article and let me know what you think.
I’m always interested in how companies price their products and services. A long time ago, Matt Plociak my partner and I at our systems integration company Netlan, used to throw spaghetti against the wall to come up with pricing for our products and services. Well not really, but it was indeed always a challenge to figure out what was the best price to sell, and sometimes when we got no resistance, we thought we were pricing our products and services too low!
So, when I saw this headline Our 6 Must Reads On Pricing a Product from First Round Review I was definitely intrigued to read further.
The article relates the story about Johnny Carson who interviewed the legendary salesperson Zig Ziglar.
“They say you’re the world’s greatest salesman,” said Carson. “How about you sell me something — say this ashtray?”
“Before I can do that,” replied Ziglar, looking at the ashtray. “I’d have to know why you want it.” “I guess it’s well-made, it looks pretty nice, and it’s a good ashtray,” replied the talk show host.
“Alright,” responded Ziglar, “but you’ll have to tell me what you think it’s worth to you.” “I don’t know,” thought Carson, “I guess $20 would be about right.”
“Sold!” Ziglar exclaimed, smiling.
As a long time student of sales, this exchange really goes to the heart of selling a product or service – what is it worth to the buyer, and what is it worth it to the seller to sell at that price!
The folks at the Review dove into their pool of great people resources and asked them to discuss the six most impactful actions a startup can take to get their pricing right.
Here they are:
- Nail price before product. Period.
- Weave in price sensitivity into your feature preference surveys.
- Map how your product’s price correlates to a marketing- or sales-intensive strategy.
- Know how your product’s price impacts how and what you ship.
- Be selective about incentives and discounts.
- Design A/B tests on price with international users in mind.
I encourage you to read the entire article as well as all the links they make references to. It is a great primer for learning how to appropriately price your products and services. I can assure you it’s better than throwing spaghetti against the wall!!
As a long time student of sales I am especially interested in developing compensation plans to motivate and inspire salespeople to become high producers. That being said, I was delighted to receive my weekly Business Insights newsletter from the Stanford Graduate School of Business that summarized a new study, coauthored by Kathryn Shaw of Stanford Graduate School of Business, and Ann Bartel of Columbia Business School and Brianna Cardiff-Hicks of Cornerstone Research that sheds light on encouraging high producers to become good leaders.
This particular study looked at a high-powered law firm founded in the 1990s, and grew rapidly for over fifteen years relying almost entirely on an eat-what-you-kill system.
In its purest from, eat-what-you-kill means basing the size of a person’s paycheck almost entirely on how much business that person brings in. Shaw and her colleagues wanted to see what happened when this law firm switched from an almost pure eat-what-you-kill approach to one that rewards work that benefits the firm as a whole.
My partner Matt Plociak is a firm believer that money, and that being on full commission should motivate salespeople or in this case, even lawyers should be compensated an eat-what-you-kill basis.
So the question in this study of the law firm is whether the shift from eat-what-you-kill improved the long-run strength of the firm by having the senior attorneys invest more effort on the organization as a whole. The belief by some of our colleagues is that at some point, even fast-growing companies need more than big producers. They need leaders who will invest time and effort on the big picture. They need people who can bring out the best in employees, communicate a vision, or build the firm’s public reputation. And this necessarily, begs the question as to how to structure incentives that focus on the big picture, and still generate increasing revenues.
The data collected in this study may not be totally conclusive enough to offer a definitive judgment, but it does indicate that the law firm did make better use of their junior associates who had been underutilized under the old system, which ultimately resulted in a win-win for all the attorneys in the firm.
To be sure, Shaw says, companies of all types still want ambitious go-getters who dream of big paychecks, but encouraging people to work for the good of the whole organization can be a winning strategy for everyone. I’m curious as to what you think. I look forward to your comments.
A few weeks ago, my partner Matt Plociak and I got together with two of our former Netlan employees, Rick Freedman and Charles Bernard who respectively for many years are very successful business owners and consultants in technology and sales.
Of course, it was great to see them, and since we share so many similar beliefs about marketing, sales, consulting, entrepreneurship, and business, we started to talk about the books that have inspired us, and lo and behold, we each had a reading list and assignments for our next get together.
First on my list was “Never Split the Difference: Negotiating As If Your Life Depended On It” by Chris Voss. Chris is a former FBI lead international kidnapping negotiator and is the CEO and Founder of the Black Swan Group, a consultancy that brings the lessons learned in hostage negotiation to business people who need to negotiate, persuade, or influence, which sounds like just about everyone.
I’m finding the book a fascinating and very informative read, and most recently I read A Black Swan Group blog entry by Derek Gaunt, on “Why It’s Important to Embrace No’”.
As a Sandler Sales disciple, I am very familiar with “Going for the No”, and I use it as a technique quite often in my approach to sales. I was very impressed to learn that “Going for the No” is actually used in hostage negotiation as well.
Derek’s point is that although No in any difficult conversation may be interpreted as an insurmountable obstacle, it is in fact the first step towards, collaboration, compliance or acceptance.
The folks at the Black Swan group believe that No is used for protection, or rejection, and it usually represents confusion and fear on some level. “Another interesting psychological aspect of accepting the No, is that it triggers reciprocity. Once people feel that they have protected themselves, they are often more willing to listen. They are not worried about what they have exposed themselves to by making an unintended commitment in saying Yes.”
So if hostage negotiators have no fear of No, and actually embrace it as a means to get to Yes, one can only wonder how effective it might be in the worlds of sales and business. I know it works, do you?
With all the talk about jobs swirling about, I was very interested in this article, How to Prepare for an Automated Future by Claire Cain Miller which appeared in the NY Times, The Upshot, May 4, 2017.
Given the considerable concern for jobs in the future, Claire Cain Miller postulates that the logical response might include educating people differently so they would work actually alongside machines and robots.
In a recent survey of 1048 technology and education workers who were asked if they thought new schooling will emerge in the next decade to successfully train workers for the future, two-thirds said yes and the rest said no.
Here are some of the highlights of their responses to the survey:
- People still need to learn skills, but they will do that continuously over their careers. In school, the most important thing they can learn is how to learn.
- Schools will also need to teach traits that machines can’t yet easily replicate, like creativity, critical thinking, emotional intelligence, adaptability and collaboration.
- About two-thirds of the respondents thought changing education fast enough to outpace machines could be done in the next decade; while the rest thought that education reform takes too much time, money and political will, and that automation is moving too quickly.
- Many survey respondents said a degree was not enough — or not always the best choice, especially given its price tag. Many of them expect more emphasis on certificates or badges, earned from online courses or workshops, even for college graduates.
- Employers will also place more value on on-the-job learning, such as apprenticeships or on-demand trainings at workplaces.
So, what do you think? How can we prepare for jobs in the future? I welcome your responses.