Almost since time began, the nimble small business has been axiomatic. Large corporations are like big ships, the common knowledge goes. They take a long time to change direction.
Owner Life & Legacy
I once had the thrill of interviewing Jerry West on management. He was “The Logo” for the NBA, although back then they didn’t advertise him as such. Only the Laker followers knew for sure. In 1989 the “Showtime” Lakers were coming off back-to-back championships. Pat Riley was a year away from his first of three Coach of the Year awards.
When it comes to careers, business owners are a minority of the population. In conversations this week, I mentioned the statistics several times, and each owner I was discussing it with was surprised that they had so few peers. According to the Small Business Administration (SBA), there are over 33,000,000 businesses in the US. Let’s discount those with zero employees. Many are shell companies or real estate holding entities. Also, those with fewer than 5 employees, true “Mom and Pop” businesses, are hard to distinguish from a job. The North American Industry Classification System (NAICS) Association, lists businesses with 5 to 99 employees at about 3,300,000, and 123,000 have 100 to 500 employees (the SBA’s largest “small business” classification.) Overall, that means about 1% of the country are private employers. Owners are a small minority, a very small minority, of the population. Even if we only count working adults (161,000,000) business owners represent only a little more than 2% of that population. So What? Where am I going with this, and how does it relate to our recent discussions of purpose in business exit planning? It’s an important issue to consider when discussing an owner’s identity after transition. Whether or not individual owners know the statistics of their “rare species” status in society, they instinctively understand that they are different. They are identified with their owner status in every aspect of their business and personal life. At a social event, when asked “What do you do?” they will often respond “I own a business.” It’s an immediate differentiator from describing a job. “I am a carpenter.” or “I work in systems engineering,” describes a function. “I am a business owner” describes a life role. When asked for further information, the owner frequently replies in the Imperial first person plural. “We build multi-family housing,” is never mistaken for a personal role in the company. No one takes that answer to mean that the speaker swings a hammer all day. Owners are a Minority We process much of our information subconsciously. If a man enters a business gathering, for example, and the others in the room are 75% female, he will know instinctively, without consciously counting, that this business meeting or organization is different from others he attends. Similarly, business owners accept their minority status without thinking about it. They expect that the vast majority of the people they meet socially, who attend their church, or who have kids that play sports with theirs, work for someone else. There are places where owners congregate, but otherwise, they don’t expect to meet many other owners in the normal course of daily activity. This can be an issue after they exit the business. You see, telling people “I’m retired” has no distinction. Roughly 98% of the other people who say that never built an organization. They didn’t take the same risks. Others didn’t deal with the same broad variety of issues and challenges. Most didn’t have to personally live with the impact of every daily decision they made, or watch others suffer the consequences of their bad calls. That is why so many former owners suffer from a lack of identity after they leave. Subconsciously, they expect to stand out from the other 98%. “I’m retired” carries no such distinction. This article was originally published by John F. Dini, CBEC, CExP, CEPA on
The Value Gap is one of the most used phrases in exit planning. Simply stated, it’s the difference between what a business owner would realize if he or she sold the company today, and what they need to embark on a financially secure “next act” after business ownership. Both amounts can be determined with some accuracy by professionals. A qualified appraiser will analyze a company, its prospects, differentiation, markets, and comparative businesses and develop a value for the business. A good financial planner will look at savings, expected income, anticipated lifestyle expenses, life expectancy, and inflation and develop a scenario for the amount needed to fund those expectations. Simple, right? Financial plan requirements minus net proceeds from the business transfer equals the value gap. Testing the Value Gap If it is so simple, why do so few business owners do it? Instead, they value their businesses by hearsay, misestimate their lifestyle needs by a substantial margin, and think “I’ll probably be fine.” In fact, fewer than one owner in five has even documented any plan for their transition. Let’s take my favorite business owner, Bob of Bob’s Widgets Inc. Bob pays himself $120,000 a year and lives nicely on that amount. So he estimates that $10,000 a month should cover his lifestyle in retirement. To generate that, he needs $3,000,000 in savings with a 4% return. That means he has to sell his business for about $4,000,000, assuming 24% capital gains tax. His company sold $7,000,000 in widgets last year, with a $500,000 pre-tax bottom line, so he is sure it’s worth at least $4,000,000. (We’ll discuss this valuation in my next column.) But wait a minute. Is Bob really making $120,000 a year? He drives a Ford Super-Duty company truck that cost $85,000. The payment is about $1,500 a month. Insurance, maintenance and fuel are paid for by the company. Bob’s Widgets Inc. also pays for Bob’s $750 a month health insurance, his $1,200 monthly life insurance, and his $7,200 annual personal tax preparation bill. “Sellers Discretionary Expenses” Bob’s company expenses are not only common, but he doesn’t really take all that much in comparison to some owners. Any advisor can tell stories of company-paid second homes, family trips and other expenses far less business-related than Bob’s. Without going beyond what would be considered “normal” owner perks, we can add about $58,000 a year in post-tax spending to Bob’s lifestyle. At his 4% return assumption, that adds another $1,450,000 in post-tax proceeds from the business to his need for a liquid asset base. Even if Bob’s assumption of a lower capital gains rate is correct (which is not the case in 90% of small business sales) he actually needs a sale price of at least $6,000,000 just to maintain his current lifestyle. Even Bob knows that his company can’t sell for $6,000,000. Without getting an appraisal or a formal financial plan, Bob has just had his first lesson in planning for the Value Gap. This article was originally published by John F. Dini, CBEC, CExP, CEPA on
Dealing with COVID fatigue unites business owners. If that sounds strange to you, let me make my case. I’m not doing this to whine, but I want business owners who don’t have an existing support structure to know that they aren’t alone. I facilitate several peer groups of business owners. For decades, we’ve met monthly to discuss trends and issues in our businesses. It is typically a lively roundtable. Hiring, termination, customers, vendors, regulation, new initiatives, and finances present themselves at most, if not all meetings. The First Wave At the beginning of the pandemic, we increased our meeting frequency from monthly to weekly. It really helped with the news pummeling us every day. First, we had sanitation and control of infection. What should we do if an employee was diagnosed? What were the guidelines, or more accurately, the current guidelines regarding quarantine? How serious was this? Opinions ranged widely on the severity and need for action. Then came the lockdowns. Who decided that this was within the power of a mayor? Like so many regulations, it seemed to come without any discussion of the impact on small businesses. We never “blamed” the medical community. They were told to recommend the best way to slow the virus’ spread. They did. Our meetings became both strained and strange. We started living in two worlds. Some businesses were decimated, others were setting sales and profit records. The Light in the Tunnel Then came the relief bills. How did FFCRA work? Who has the poster? Will our employees all choose to go home at 2/3 pay? (Not very many did.) We traded policies and memos from HR advisors, CPAs, and law firms. Then the CARES act. BAM! $2 trillion flushed through the economy like a transfusion. We didn’t talk much about EIDL. The need to pay it back from PPP proceeds and running out of money early on focused us all on the Paycheck Protection Program. Of the 28 participants in the groups (myself included,) all 28 applied for and received PPP funds. We all shared application information and intelligence on which banks were handling it best. Again, we had concerns that the $600 unemployment bonus would dry up the recruiting market. It made things a bit more challenging, but not insurmountable. Most folks seem to prefer continuing employment. People who seek to milk the benefits to the last dollar aren’t the ones we wanted anyway. Of course, watching the collapse of the antiquated government infrastructure for unemployment may have influenced applicants as well. We traded information on remote working. How to keep employees engaged? Tips on contests, productivity tracking, and virtual technology. Those in essential industries never stopped working (see my post on
So you are thinking of selling your business… or someone you know is. Before you even look at an offer there are steps you should be taking. Check out the link to my LinkedIn video on the first step. Planning Well In Advance.
Since 2013 I’ve updated this piece about the underappreciated and forgotten boss of A Christmas Carol, Mr. Fezziwig. I hope that you enjoy it. Merry Christmas! Last week was the 180th anniversary of the publication of Charles Dickens’s A Christmas Carol (December 17, 1843). The immortal words of Ebenezer Scrooge are ingrained in the memory of the entire English-speaking world. I’d venture to guess that “Bah, Humbug!” can be correctly identified as to the source and speaker by over 99% of those reading this. The novella, serialized in five parts, was not a commercial success. Unhappy with the sales of his previous novel (Martin Chuzzlewit– no wonder!), he refused his normal fee from the publisher in favor of royalties on the proceeds, which proved disappointing. Critical reception was favorable, although it didn’t catch on in America until much later. The New York Times first published a review in 1863, 20 years after its publication in England. Like most of Dickens’ work, A Christmas Carol includes an indictment of the social inequalities of the Industrial Age; child labor, workhouses, and debtors’ prisons. It stands out, however, because of the lessons taught by its memorable ghosts, and the redemption of its main character in only 113 pages. During the Protestant Reformation in England and Scotland, Christmas had become a period of penance and reflection. A Christmas Carol is credited by many for leading the return to a celebratory holiday, focused on appreciation and thanks for family and friends. Modern Ebenezers Modern filmmakers have returned to the straight-ahead plot and uplifting storyline (not to mention the recurring royalties available year after year) with a frequency that helps stamp the legend in our psyche. Starting with the 1938 Reginald Owen version (originally released as “Scrooge”) and the 1951 Alistair Sim classic, the character of Ebenezer has been tackled by actors ranging from George C. Scott to Michael Caine (with the Muppets). Patrick Stewart, Kelsey Grammar, and Rich Little (in various celebrity impersonations) have taken a shot, as have Mickey Mouse, Mr. Magoo, the Smurfs, Barbie, Dora the Explorer, and the Flintstones. Let’s not forget the variants; Bill Murray in “Scrooged”, or Boris Karloff and Jim Carrey in their versions of “How the Grinch Stole Christmas.” In all, IMDB lists almost 200 filmed variants of the story. Unfortunately, the characterization of Scrooge has become ingrained in the minds of many as a stereotype of all bosses who dare to focus on margins and profit. How many employees identify their bosses with Fezziwig (Scrooge’s former employer,) who took pride in making his employees a happy group, even though Scrooge dismissed It as “only a little thing?” The Success of Mr. Fezziwig Instead of focusing on the things that allowed Fezziwig to spend lavishly on his employees (a motivated workforce, honesty, doing what’s right, profitability), we prefer to fantasize about a boss who expresses his sudden enlightenment by unexpectedly bestowing a dinner and an extra day off. Fezziwig is relegated to an afterthought, an overweight doting uncle with no visible reason for his success. Most of us are far more Fezziwigs than Scrooges. Oddly, if we celebrated the season of giving by presenting our employees with a list of all the “little things” we’ve done for them during the year, we’d be considered self-serving, and more akin to Ebenezer. We bow to the popular myth, give even more at the holidays, and hope it has some carryover of appreciation into the New Year. Just remember to remind your employees when you are being Mr. Fezziwig for the rest of the year. A Christmas turkey for Tiny Tim isn’t as important as being a good boss on the other 364 days. This article was originally published by John F. Dini, CBEC, CExP, CEPA on
Owner obstacles to the implementation of an exit plan are often unconscious, but they can be dramatic. Their attachment to the business can be difficult to break. An advisor spends a lot of time and energy developing the vision for life after ownership in the hopes that it is far more attractive to them than their current role in the business. Yet no matter how well developed that vision is, or how well defined the action steps are, it isn’t unusual to find owners who behave in a way that ultimately sabotages the plan. Sometimes their actions are even intentional, but more often they aren’t. The problems arise in two ways. “Death from Inattention” We always ask exit planning clients for two target dates. The first is when they want to be relieved of day-to-day operational responsibilities. The second is when they want to be completely free of any connection to the company. We tell a client that once we have achieved the first objective, the second may become more flexible. Freed of the task-based duties of running the business, an owner often becomes more strategic. He may start planning for new growth and value creation. She might go back to her role when the business first started, when she was the best salesperson or the designer of novel product offerings. Owners returning to their core skill set are usually a benefit to the business. The problem arises when they enjoy the lack of responsibility so much that they just become owners in absentia. There is no strategy. The company drifts along on the backs of the operations managers, but really doesn’t have a direction beyond “more of what we did yesterday.” There are no new initiatives. Companies are organic. They are either growing or shrinking. The lack of direction may take a while to have an impact, but eventually performance will suffer. Getting owners to re-engage after time away can be exceedingly difficult, but if they don’t, the transition is unlikely to accomplish their objectives. “Death from Over-Attention” The second obstacle to successfully implementing a transition occurs when owners have surrendered their task-based duties. In this case, they are unable to define their contribution in the absence of being “busy.” They begin looking for ways to contribute, often where their contribution isn’t needed. It’s not uncommon to begin demanding more accountability and greater detail than is really necessary. He or she pours over reports looking for errors, anomalies or declining results in an attempt to prove added value. Another technique used to prove contribution is “seagull management”. An owner may look for opportunities to make decisions, but does it without consulting the managers who are in charge of the function. Because they have always known best, they still know best. What isn’t as obvious is that they are now are working in a vacuum, with little knowledge of what went before. The results are usually not ideal. A third way owners might evidence over attention is with a “break the rules” mentality. They offer exemptions from policy, or circumnavigate systems because they can. Exercising authority shows who is in charge, even if there is little apparent responsibility. Preventing the Owner Obstacles We call these “good” obstacles because they typically occur only after some level of initial success in the exit planning process. They are a direct result of relieving owners of the more mundane duties of management, and freeing them up for more effective leadership. Each is preventable with some preparation. Either issue can be forestalled by including the owner’s next level of responsibility in the planning process. If the owner resists retained responsibilities, then the future become plain. Plans can then include transfer of higher functions to the management team. If the owner insists on retaining a level of day-to-day control, the coaching process should include defined parameters about what reporting is really necessary, and how often it will be presented. In either case, owner obstacles occur when the owner is crossing the no man’s land between total focus on the business and the time when it isn’t a recipient of their attention at all. Like any no man’s land, it is unfamiliar territory, and some pathfinding is necessary. That is the exit planning coach’s job. This article was originally published by John F. Dini, CBEC, CExP, CEPA on
One of the most common concerns I hear about retirement is the fear of being bored. Given the weeks, months, and years ahead that need to be filled with something other than your job, it’s understandable. To make matters worse, many of us know a relative or friend who was aimless and miserable in retirement. In this article I’ll share some suggestions for how to occupy yourself, but before doing so let’s look at boredom from another angle. When you’ve spent decades being busy, having an afternoon with absolutely nothing to do can feel unsettling, especially if you were raised to value industriousness and productivity. While those internal notions about hard work may have served you well during your career, they can become a source of distress during retirement. It’s perfectly normal to have downtime once you’ve left your job, yet some people feel ill at ease during those periods. The key is to adopt a broader definition of what constitutes a good use of your time. Learn to welcome occasional idleness as a chance to recharge or reflect, or perhaps go one step further and embrace the Italian notion of “Dolce far Niente” which means “the sweetness of doing nothing.” When idle, people sometimes mislabel their discomfort as boredom. Boredom is the belief that there is nothing interesting to do. And yet unless you’re clinically depressed, there are probably lots of interesting options available to you. One caveat: you’ve got to be open to the idea that something other than your former work can be fulfilling. Let’s look at some possibilities . . . One strategy for finding compelling pursuits (shared by my friend G.C.) is to commit to trying something new each month, whether it’s taking an introductory class, trying a new restaurant, reading a new book, exploring a new neighborhood, or listening to a new podcast. You don’t have to stick with anything unless it’s satisfying, but you must do something new each month. An added benefit of this approach is that over time it’s a nice way to meet people (or reconnect with old friends you invite along). If you’re having difficulty finding new things to do, you might want to visit
I believe one of the most understood transition /exit planning areas for business owners is when the goal is to move it to children, or other close family members. Clients for whatever reason often think moving their business to a child or multiple heirs is just about creating an agreement, maybe including a trust, figure out the best tax strategy, and that’s it. Simple. Maybe once in a while it is simple but for the most part its the opposite, no matter the size of the value of the business. It’s not just business. To do it right to help insure that the next generation has the best chance of a successful future business and family “harmony”, requires the business owner, family and their advisors to spend the time looking at this future goal many unique viewpoints. Here are just a few questions more specific to a family transition /succession. It gets complicated, and emotional very quickly. What are the personal goals and objectives for the business succession? Do you wish to preserve family harmony? How important is that? What issues do you anticipate? Should children in the business and not in the business be “equalized”? Should children not in the business be given interests in the business? Is the business ready to be transitioned to the next generation? Is/are the “new owner or owners, ready? What if the business itself fails due to no fault of the child in the business? If you are relying on payments from your heirs, this could be a BIG problem. What if something happens to the child/successor? Do the inheritors really have the desire to grow and manage this business. What family dynamics, divorce, or other potential personal situations should be “risk mitigated”. The fact is it is a very delicate process when the buyer/donor, is related to the buyers/inheritors. To my mind the best way to approach this effort is with a collaborative team of pros, who all equally share in the input, and direction of the final plan. Everyone needs to have equal status in providing solutions, observations and recommendations. One more VERY important point: Be aware clients current trusted advisors may also think this is not overly complex and or may not want to not rock the boat and will go along with the idea it’s simple.
Just because you run a successful business doesn’t necessarily mean that you will exit from it successfully. Planning can increase the odds that you will transfer your business on terms you’re comfortable with. Yet very few business owners engage in proactive exit planning, failing to establish arrangements for a thoughtful transfer of ownership that protects their interests and the interests of other stakeholders including employees, vendors, and valued clients. As a psychologist who works with late career individuals, here are six obstacles I frequently see that make it harder for business owners to plan for their exit. Inertia Exiting from your business takes time and energy. Your advisors will make things as efficient as possible, but you will still need to devote considerable resources to the process. It’s not surprising that a busy owner would prefer to focus on running their business rather than adding another item to their agenda. Particularly if all is well it’s easy to say, “I’ll deal with exit planning when the time comes.” Allowing yourself and the business to coast along can be tempting, but you run the risk of not being ready when a good exit opportunity comes along. Related to inertia is the fear of making a mistake. Some owners worry that they will regret selling, so they opt not to prepare for their exit in any substantive way. Resistance to change Many business owners attribute their success to sticking with a winning formula. They’re not interested in making modifications that could make the business easier or more profitable to sell, nor are they comfortable knowing that a buyer might make big changes to their company, and thus they avoid exit planning. Others are wary of how their lives might change once they do exit. Will their scope of authority diminish during the buyout period? Will others still treat them with respect? As an owner, you need to consider how your roles might change (in your family, company, and community) once you leave work. How will it feel to relinquish some of those roles, and what new ones might you take on? Biased thinking If human beings were 100% rational, I’d be out of business. There are lots of ways that we can be our own worst enemy and shoot ourselves in the foot. Let me point out two very common human biases that can impact our planning for the future. Confirmation bias is our tendency to look for evidence that supports our beliefs, while discounting or ignoring evidence to the contrary. Think about how this might trip you up if you’re exiting your business. For example, when it comes to assessing the worth of your business, this bias might lead you to reject an objective valuation. If you’re considering appointing a successor, this bias could cloud your judgement regarding the ability of key staff or family members to take the helm. Another pothole to watch out for is the availability bias. That’s the tendency to make judgments about the likelihood of something based on how readily and vividly examples come to mind. Let’s imagine that in the past month, you ran into two friends who both said they were unhappy after selling their companies to private equity firms. Do you think you would be fully objective if your advisor raised the same idea in your next meeting? Loss of identity The thought of no longer working may sound appealing, but for many people it’s extremely unsettling because so much of who they are is wrapped up in their job. Reverend William Byron wrote, “if you are what you do, when you don’t, you aren’t.” Our personal identity can be threatened by the loss of our work role, particularly if we have not established and developed other aspects of ourselves outside of work. It’s analogous to diversification in financial matters. You’re better able to handle a downturn in the market if your portfolio is diversified. Similarly, you’ll be better positioned to deal with the loss of your work identity if you can tap into other sides of yourself. Recognizing your identity (beyond work) may seem daunting in the abstract, but I’ve found that most people can make progress if they spend some time looking for patterns in their historical experiences and relationships. Your personal history Speaking of history, our early family experiences can shape our assumptions and expectations about exiting work. For example, some people find it hard to envision stopping because they never had a role model of life after work; their parents worked until they got sick. Others saw friends or relatives who fared poorly in retirement, and they worry that the same fate will befall them. I hear from business owners all the time who attribute their parent’s death to retirement. They insist that they themselves have no intention to stop working, proclaiming “they’ll have to carry me out on a stretcher.” I admire their fortitude, but their decision to remain at work indefinitely may not be optimal for the company nor is it objective. Ask yourself, are you playing these historical tapes internally? If so, is it really in your best interest and that of your business? Uncertainty about the future Exit planning involves grappling with unknowns, decisions, and choices. What is the best option for transferring ownership? What will happen to your company when you’re no longer there? What will your life be like after the sale? How will you structure your time? These are huge questions, and without a crystal ball the uncertainties can feel overwhelming. Your advisors can be of great help, but don’t overlook the lessons you’ve learned from past transitions. Think about past inflection points in your life when you faced major uncertainty. How did you handle those situations? Did you learn something about making decisions in the face of the unknown? Can you apply that wisdom to your current circumstances? Eventually you will exit If you’re a business owner, in the future you won’t be. It’s just that simple. There is no escaping the reality that eventually you will exit from your business. If you wait to plan until it feels perfectly right, you might be waiting a long time. Don’t expect that this process will be without some misgivings, ambivalence, and uncertainty. Don’t allow yourself to be paralyzed by those psychological obstacles, and don’t feel as if you can’t talk about them. A trusted exit advisor can guide and support you as you navigate the emotional side of leaving your business. Larry Gard, Ph.D. is a psychologist and author of the book “Done with Work: A dozen perspectives on the decision to retire”. He provides pre-retirement coaching to late career professionals and business owners. For more information, please visit
– Friends since high school or before – Teammates – Golf buddies – Successful businessmen – In mid 60’s thinking about retirement – Planning golf resort retirement together One got really proactive with his health as a client of Retirement Wellness Strategies during the course of preparing to sell his business Offered the same to friends They didn’t see the need, maybe later 2 years later all are retired or selling businesses or very close 2 died in the past two weeks They never once had a post-retirement resort golf experience Are you or your clients skipping the self-care and doctor visits and those healthy changes until you have more time? Will you truly have more time? Active planning the health (alongside the wealth) is beyond worth it! Most leaders do skip that self-care, especially during the stresses of the process to sell a business. Prolonged stress, high blood pressure, high cholesterol, interrupted sleep, rocky relationships, more time at the desk and in meetings, rushed meals, and more increase risks during this critical time. Most of these health conditions and risks have no symptoms so go unnoticed without monitoring. Do you want your transitions to complete rapidly and with the seller intact? Then include the health planning component – physical, mental, emotional, spiritual, social.
Pre-retirement coaching is designed to help late career professionals and business owners sort through the head and heart side of the retirement transition. For those who have never availed themselves of coaching, the process might seem like a black box. How does coaching help a person get from point A to point B? This chart presents one example of how coaching addressed a client’s key objectives . . .
Popular
What's Trending
As an advisor, your role is to help clients prepare to exit their business, yet many people resist thinking about the future because it involves so many unknowns, decisions, and choices. And emotions typically complicate matters further, sometimes derailing the process altogether. Here are some questions that can help you establish rapport with your clients, learn more about their concerns, and move the conversation forward. How are you feeling about your work/profession/business these days? Which aspects of work are you still enjoying, and which are you ready to leave behind? Do you envision retiring from work at some point, or are you contemplating an encore career? What part of planning for your future feels most challenging? How do you imagine your life in retirement will be different from how it is now? What process are you using to figure out what you’ll do next after you retire? What would you like to see happen with your business long term? What options have you considered for the transfer of your business? What steps have you taken to make your business more attractive to a potential buyer? What are your concerns about transitioning your firm to new ownership? What would be your ideal scenario for transitioning out of your company? What topic(s) have we touched on today that we should put on our agenda to revisit? So, what happens after you pose a few of these questions and your clients open up about emotional matters? Remember, the most helpful thing you can do is to listen attentively. You’ve created a valuable opportunity for them to talk about things they may not share with other advisors. Here are some tips for managing the conversation when clients raise emotionally loaded topics: Don’t try to “fix things” by immediately offering suggestions. Doing so sends the message that you’re uncomfortable hearing their concern. You can offer suggestions but do so later. Don’t say anything that conveys the message that their feeling or concern is unwarranted. “There’s really no need to feel that way” or “I’m sure it will be just fine” may sound reassuring to you but could be experienced as dismissive by your client. Don’t immediately offer a logical counterpoint to your client’s emotion. Remember, feelings don’t have to make sense; they’re “as is”. Put another way, if feelings made sense, they would be thoughts. People report concerns and characterize their feelings differently from one another, so it’s in your best interest to seek amplification and clarification by inquiring as follows . . . “I want to make sure that I understand exactly what you mean by ___. Can you tell me more?” “People sometimes mean slightly different things when they talk about ___. What does ___ mean for you?” “Before I suggest anything, I’d like to learn more about it from your perspective.” It’s possible that during early conversations your client may hint at mixed feelings about exiting their business. That’s perfectly normal, but you need to bring it out into the open. You want to foster an atmosphere such that your client keeps you apprised about where they’re at. If they keep their ambivalence to themselves, it has greater potential to blindside you and complicate the sale. You can say: “In my experience, it’s normal to have some mixed emotions about selling. Those thoughts may not always be top of mind, but when they do pop up let’s be sure to talk about them. Believe it or not, they can help inform our process and alert us to aspects of the sale that are important to you.” You may also find that your client is overly risk averse. If so, consider saying the following: “Our work together won’t be comprehensive if we only plan for what could go wrong. That’s just half the equation. It’s fine to be conservative and err on the side of caution, but to be truly realistic we should also consider a range of possibilities both good and bad.” Author’s Note: The concepts in this article are derived from Robert Leahy’s book, Overcoming Resistance in Cognitive Therapy. New York: Guilford
For five decades, the southern United States has been an attractive location for automakers to open plants thanks to generous tax breaks and cheaper, non-union labor. However, after decades of failing to unionize automakers in the South, the United Auto Workers dealt a serious blow to that model by winning a landslide union victory at Volkswagen. In an effort to fight back, three southern states have gotten creative: they passed laws barring companies from receiving state grants, loans and tax incentives if the company voluntarily recognizes a union or voluntarily provides unions with employee information. The laws also allow the government to claw back incentive payments after they were made. While these laws are very similar, each law has unique nuances. If you are in an impacted state, you should seek local counsel. In 2023, Tennessee was the first state to pass such a law. This year, Georgia and Alabama followed suit. So why this push? In 2023, the American Legislative Exchange Council (“ALEC”), a nonprofit organization of conservative state legislators and private sector representatives who draft and share model legislation for distribution among state governments, adopted Tennessee’s law as model legislation. In fact, the primary sponsor of Tennessee’s bill was recognized as an ALEC Policy Champion in March 2023. ALEC’s push comes as voluntary recognition of unions gains popularity as an alternative to fighting unions. We recently saw this with the high-profile Ben & Jerry’s voluntary recognition. Will this Southern strategy work to push back against growing union successes? Time will tell. Brody and Associates regularly advises its clients on all labor management issues, including union-related matters, and provides union-free training. If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.454.0560.
Almost since time began, the nimble small business has been axiomatic. Large corporations are like big ships, the common knowledge goes. They take a long time to change direction.
I once had the thrill of interviewing Jerry West on management. He was “The Logo” for the NBA, although back then they didn’t advertise him as such. Only the Laker followers knew for sure. In 1989 the “Showtime” Lakers were coming off back-to-back championships. Pat Riley was a year away from his first of three Coach of the Year awards.
Can you Offer Too Many SKUs to Your Customers? The short answer is YES! A SKU, or Stock Keeping Unit, defines each different product version that you sell and keep inventory of. There may be different SKUs of the same overall item based on size, color, capacity (think computer or cellphone memory), features, and many other parameters. For build to forecast businesses, that number of variations can quickly explode and become difficult to manage. Your customers are busy and want ordering simplified. Of course, they may need (or want) more than one variation of a product. That is reasonable and a common aspect of business – one size does not fit all! But there is a point where too offering too many SKUs is not value added either for your customer or your business. In his April 30, 2013 article “Successful Retailers Learn That Fewer Choices Trigger More Sales” in Forbes, Carmine Gallo discusses his experience and a study about “choice overload” by other authors. He writes about a retailer that “has discovered that giving a customer more than three choices at one time actually overwhelms customers and makes them frustrated…when the customer is faced with too many choices at once, it leaves the customer confused and less likely to buy from any of the choices!” Choice overload is well-documented in consumer studies but can apply in B2B as well. While customer satisfaction is important, another key concern is the often-hidden costs associated with a business offering and managing a large number of SKUs for a given product type. These costs include holding inventory, S&OP (Sales and Operations Planning) team time, small production runs, and scrapping inventory. Holding inventory takes up space, which may come with a cost or utilize racks that could be used for other products. Scheduled inventory counts take up employee time and may result in blackout periods when the warehouse is not shipping product. The more SKUs there are, including extra SKUS, the greater the potential impact. The Sales team’s forecasting and the Operations team’s purchasing reviews that are part of the S&OP process can occupy more of their valuable time if they need to consider these times. If small orders or forecasts require a new production run, this could be costly and create excess inventory. Whether from this new production or past builds, eventually it will make sense to write off and scrap old inventory, another cost impact to the company. How do you know which SKUs to focus on if you wish to look at reducing your total number of SKUs? Start by examining SKUs that have: Low historic sales over a period of time Small variations between SKUs that customers do not value Older technology or model when newer option SKUs are available This requires a true partnership between Sales and Operations. It starts with educating both teams on the costs involved – neither group may be aware of the money and time impact to the company. Periodic (such as quarterly) reviews of SKUs that meet the above descriptions should become a fixed part of the calendar. A review of the data and other available for sale options should result in the identification of SKUs which may not be needed. At that point, it is helpful to have a customer friendly EOL (End of Life) Notice process by which you inform customers of last time buy requirements for this SKU and alternates available. It is usually best to provide some time for the last time buy in the interest of customer satisfaction, although that may not always be necessary. At a company that designed and sold electronics, a robust SKU rationalization process was implemented to help address these issues. A representative from the Operations team analyzed SKUs that met a version of the above criteria and suggested candidates for the EOL process. Next, a member of the Sales team reviewed them and, where appropriate, issued product change or EOL notices to customers, providing them time for last time buy orders when needed. These steps helped reduce the work involved in maintaining these SKUs while not leading to any customer complaints. A final note – sometimes it makes sense to continue offering low selling SKUs – to support customers buying other items (hopefully in larger quantities). It may be worthwhile to encourage them to keep coming back to you for all of their product needs and this may be a way to accomplish that. But it helps to understand that this is truly the case and not assume that this customer would not be equally happy with another, more popular, SKU. Steven Lustig is founder and CEO of Lustig Global Consulting and an experienced Supply Chain Executive. He is a recognized thought leader in supply chain and risk mitigation, and serves on the Boards of Directors for Loh Medical and Atlanta Technology Angels.
When it comes to careers, business owners are a minority of the population. In conversations this week, I mentioned the statistics several times, and each owner I was discussing it with was surprised that they had so few peers. According to the Small Business Administration (SBA), there are over 33,000,000 businesses in the US. Let’s discount those with zero employees. Many are shell companies or real estate holding entities. Also, those with fewer than 5 employees, true “Mom and Pop” businesses, are hard to distinguish from a job. The North American Industry Classification System (NAICS) Association, lists businesses with 5 to 99 employees at about 3,300,000, and 123,000 have 100 to 500 employees (the SBA’s largest “small business” classification.) Overall, that means about 1% of the country are private employers. Owners are a small minority, a very small minority, of the population. Even if we only count working adults (161,000,000) business owners represent only a little more than 2% of that population. So What? Where am I going with this, and how does it relate to our recent discussions of purpose in business exit planning? It’s an important issue to consider when discussing an owner’s identity after transition. Whether or not individual owners know the statistics of their “rare species” status in society, they instinctively understand that they are different. They are identified with their owner status in every aspect of their business and personal life. At a social event, when asked “What do you do?” they will often respond “I own a business.” It’s an immediate differentiator from describing a job. “I am a carpenter.” or “I work in systems engineering,” describes a function. “I am a business owner” describes a life role. When asked for further information, the owner frequently replies in the Imperial first person plural. “We build multi-family housing,” is never mistaken for a personal role in the company. No one takes that answer to mean that the speaker swings a hammer all day. Owners are a Minority We process much of our information subconsciously. If a man enters a business gathering, for example, and the others in the room are 75% female, he will know instinctively, without consciously counting, that this business meeting or organization is different from others he attends. Similarly, business owners accept their minority status without thinking about it. They expect that the vast majority of the people they meet socially, who attend their church, or who have kids that play sports with theirs, work for someone else. There are places where owners congregate, but otherwise, they don’t expect to meet many other owners in the normal course of daily activity. This can be an issue after they exit the business. You see, telling people “I’m retired” has no distinction. Roughly 98% of the other people who say that never built an organization. They didn’t take the same risks. Others didn’t deal with the same broad variety of issues and challenges. Most didn’t have to personally live with the impact of every daily decision they made, or watch others suffer the consequences of their bad calls. That is why so many former owners suffer from a lack of identity after they leave. Subconsciously, they expect to stand out from the other 98%. “I’m retired” carries no such distinction. This article was originally published by John F. Dini, CBEC, CExP, CEPA on
Previous
Next
Explore the Knowledge Exchange
Make XPX Part of Your Business Plans
Explore
Learn
Account
Connect
Help & Support
© 2024 XPX Global LLC. Privacy Policy Norms & Principles Site Map Terms of Use
© 2024 XPX Global LLC. All Rights Reserved.