Ready to Retire & Sell Your Business?
Between 1946 and 1964 Americans created 78 million new people, whom we now call Baby Boomers, or Boomers for short. Those 78 million people believed that the ticket to the American dream was to get a college education and work hard. And they did in record numbers, growing our college educated workforce from 6% to 24%. That created a tidal wave of applicants for corporate America that it just couldn’t absorb. So, Boomers did what Boomers do, continued their endless march for upward mobility by striking out on their own and starting their own businesses.
Today, the first wave of those Boomer business owners are turning 65 and getting ready to retire. They’ve worked hard for 20-30+ years to build their businesses, and they’re ready to have someone younger who wants the same things that they wanted when they started out, to buy their business so they can go enjoy the retirement they’ve always envisioned. Problem is, the next generation, Gen Xers, have very different values than Boomers.
Boomers are workaholics, who grew up as the first generation having a common experience of TV advertising to drive their transformation into consumers of bigger better best of everything. They own 50-60% of small businesses in America, and are consumers for each other’s products and services. Gen Xers on the other hand, grew up using debt for everything they buy, and see work as nothing more than a means to get the lifestyle they want. They are not interested in working long hard hours, and they don’t save so have no capital to buy a business. They see their personal happiness as their number one priority. They don’t equate what they do with who they are like Boomers.
The 48 million Gen Xers will have little interest in a brick & mortar operation that requires them to be on site or on call for most of the hours of the week. Since they have no capital, they will need financing to buy your business, so if your cash flow isn’t enough to support financing, you’ll also have a hard time selling it to a Gen Xer. If they do like your business, and can get financing for it, it’s still a buyer’s market; the market will be short by about 20,000 Gen Xers per year to buy the hundreds of thousands of Boomer businesses to be sold over the next 20 years.
To make things even more challenging, corporate America is catering specifically to the needs of Gen Xers by offering things like flexible hours, job sharing, working remotely, additional paid time off, and flexible benefits. These perks are tough for small businesses to match.
If you’re a Boomer who wants to sell your business in the next 10 years, what do you do? If you want to be one of the few who successfully markets their business, maximizes its value and minimizes taxes, it’s imperative that you have an exit plan.
What’s an exit plan? An exit plan is a strategy developed with the assistance of a team of professional advisors who are experts in their specific area such as wealth managers, attorneys, CPAs, insurance brokers, business brokers, business coaches, and business valuation experts. You’ll look at whether your best option is to sell your business to family members, company employees, or a 3rd party. Then your team of experts will help you create your strategy for what is likely the biggest and most important single transaction of your life. Don’t leave it to chance!
To learn more, attend our next seminar.
How Does Communication Impact Your Business Results?
Leaders and business owners often look at communication as a ‘soft skill’ that they don’t have time to develop. They simply don’t recognize the bottom line cost of poor communication. In a survey of 400 corporations, an estimated $37 billion is lost due to poor communication and misunderstanding. But leaders who DO focus on effective communication strategies in their business have 47% higher returns to shareholders, lower turnover and more highly engaged employees, according to the Holmes Report.
And these are the impacts of simple transactional communication. According to Judith Glaser, author of “Conversational Intelligence” there are three levels of communication. The higher levels of communication are based largely on development of trust. When we trust, and focus on solutions, we feel free to share and develop our ideas. If we don’t create an environment of trust and collaboration, the people with the best ideas will leave and go to companies that do.
“The single biggest illusion about communication, is that it has taken place”
– Judith Glaser
For entrepreneurs, effective communication can be the difference between failure and success. If you want your company to succeed, here are 5 ways to improve:
1. Email is for the exchange of information
There are many great tools for productivity and disseminating information to your team. Don’t confuse these tools with communication. Generating ideas, fast decision-making and team collaboration take real face to face interaction in an environment that supports sharing and trust.
2. Ensure your team knows the company brand purpose & vision
Every single employee at the Ritz Carlton knows the company’s vision, mission, cultural values and credo. Those values are baked into the daily operations of the company, so it is easy for employees to connect their actions to the higher purpose. If your team does not know where you’re going, they can’t follow you. If they don’t see the connection between what they are doing daily, and the overall goals and direction of the company, they become disengaged and unmotivated.
3. Stay flat
In a flat company team members are free to communicate with anyone, without fear of stepping on toes or reprisals. As the business leader, do your best to keep an open door policy. Set aside specific hours to close the door to work on projects or have private conversations. Fluid communications allows for much greater flow and exchange of ideas, delivering better results in less time.
4. Make communication part of your rhythm
Set up regular schedules for meetings and conversations. Have regular weekly or even daily huddle team meetings. Have regular weekly phone calls with the sales team if they are in the field. Even if you don’t think you have much to talk about, once you get the conversation started, you’ll often be surprised at what happens. Even if you are a company of 2 people, regular communication makes a difference.
5. Communication is a two way street
Introduce the WIFLE (What I Feel Like Expressing) process to your team. Your employees need to feel heard. They need to be given permission to express what is on their mind, without interruption, judgment or reprisal. Regular use of the technique can cut meeting time in half and uncover problems and opportunities you didn’t even know existed.
If you need to learn more about how to do a WIFLE, just let me know.
Why Set Goals?
I spent the day yesterday with some of Orange County’s smartest small business owners. Why are they the smartest? Because they took nearly an entire day to step out of their business to work ON their business. They set goals and created their action plan for the next quarter. And because they do this every quarter, they will always beat their competition.
In the process, they also learned how to be better business owners, and that is even more important. As Jim Rohn said, “Work harder on yourself than you do on your business”.
In his book, “What They Don’t Teach You at Harvard Business School,” Mark McCormak made an interesting discovery about a graduating MBA class. Within the group, 3% had written goals, 13% had thought of some goals and the balance were just thrilled to be out of school (I am sure you remember those feelings).
The interesting part was what happened ten years later. The group that had non-written goals were making TWICE in the field compared to the 84% of those who had none. The group with written goals was making TEN TIMES what the other 97% were making on average.
Writing your goals down is critical to achieving them. It does several things. First, it makes them real. When you can visually see something, and keep it visual (not locked away inside your computer) it becomes more real and you’re that much closer to making it a reality.
Second, it tells your brain that your goals are important to you through your Reticular Activating System (RAS). Your RAS is the filter through which nearly all information enters your brain, it controls your attention. For survival purposes, it responds to your name and anything that looks like a threat. It also alerts you to anything new or out of the ordinary. The great thing about it is that it works automatically – but you do have to tell it about your goals, by writing them down, and reading them regularly. Detail out the steps necessary to accomplish them. Then your RAS will recognize them as important, and it will go to work for you, allowing through anything that looks like it could help you achieve your goals.
Write down ALL your goals you have for the next year. Then, find someone to share them with and have them check up on you monthly to see if you are making progress. Have them hold you accountable, and give yourself rewards for completion.
TIP: Make milestones and chip away at each goal a little everyday so the overall picture doesn’t seem so overwhelming, and you get positive rewards more frequently.
Follow these simple steps, and it won’t be long before you are making TEN TIMES more than your competition.
Don’t miss the next opportunity to step out of your business for a day to set goals for your business!
What are KPIs and why do I need them?
Key Performance Indicators (KPIs) are the scoreboard for your business. They’ll tell you where you are winning and where you need to improve. Imagine going to a basketball game where there was no scoreboard. Just two teams playing basketball. You’d be outraged and demand the score be displayed. Yet, like many other business owners, you run your business, your livelihood, your retirement strategy, without a scoreboard.
Why are KPIs Used
As a Business Owner, you sometimes feel overwhelmed and distracted with all of the daily activities and tasks. Yet you must make important decisions, quickly, with great consequences, and often with limited information on hand. Without the right KPIs to guide you, you tend to focus too much on the tactical daily issues and neglect the strategic decisions that have critical impact on your success. You can’t manage or grow what you don’t measure.
What KPIs Should be Used For
KPIs will communicate and inform – your team, suppliers, and customers, about the business situation. They act as a diagnostic to tell you the health of your business in many different areas. They are a source of learning – which marketing, which programs are working or not working. And they guide your decisions and help you define what action to take next.
What they should NOT be used for is controlling. It’s tempting to try to control employees and others using KPIs. I’m not saying don’t use them with employees, but use the right ones, and use them for continual learning and improvement, not to control how many times a day they use the restroom.
How To Implement KPI’s
Step 1: Define your strategy
- Strategy reflects the company Vision, Mission and Values – do you have yours well-defined?
- Set goals
- What are your most important business objectives?
- What “drivers” are critical to success?
- What impacts driver results?
- Which can align team members on strategic issues?
- Which can identify barriers to growth?
Step 2: Audit Existing Measures
- Assess strategic fit of your existing KPIs
- Identify what data is available
- Review measurement processes
- Review Accuracy
- Review Timeliness
- Identify gaps
Step 3: Develop New Measures
- Bridge the gaps identified in Step 2
- Measures must reflect performance and progress of business
- They are quantifiable
- They are actionable
- They are comparable with another number
- Last year
What are the trends? Look at your KPIs over time to see more deeply what they’re trying to tell you. A measurement by itself with no comparison is not as revealing.
Step 4: Analyze and Report
- Make it easy to read
- Create a one page summary
- Include visuals & graphs
Step 5: Continuous Improvements
- Set priorities based on strategy
- Ensure your goals are SMART
- Assign accountability!
- Track improvement
- Set new goals!
Start today by listing the key drivers in your business. If you’re not sure, start measuring the 5 Ways numbers: 1) Lead generation – where are your leads coming from; 2) Conversion – how many do you turn into customers; 3) Average dollar sale of each transaction; 4) Number of transactions – how many times does a customer buy; and 5) profit margin, gross and net. Sign up for a workshop to learn more.
This article provides an overview of the five steps of setting KPIs. Look for more details on each step coming up in the next posts.
How often do you ask yourself if you’re paying for marketing that doesn’t work?
In my sessions with business owners, I will sometimes ask if they would hire an employee for $40,000 a year and then never check to see if they accomplished anything or even showed up to work. They usually look at me as if I have two heads, and say “Of course not!” Then I ask, why they do just that with their marketing budget? Then the look changes to mild guilt.
Obviously, your marketing budget may be significantly more, or a lot less, but the principle remains the same. Our marketing spends are often determined by what we have done in the past, or what we feel is affordable. I spoke to a business owner who told me they stopped advertising in a directory completely after having run the equivalent of a full-page ad for an extensive time. When I asked why, they said it was too expensive. I asked what type of results they had gotten, and if they received any type of reporting. The business owner indicated the reporting was excellent, but they were too busy to ever look at the reports.
“If you can’t read the scoreboard then you don’t know the score. If you don’t know the score, you can’t tell the winners from the losers.” Warren Buffet
I’m not promoting one advertising medium over another as they all have their strengths and applications. I am saying that unless you want the equivalent of a $40,000 employee that does not show up, it is imperative that we test and measure the results from our marketing to make informed decisions on what to increase, decrease, add and subtract. Here are a few simple concepts to start the process.
Define your purpose for the marketing investment:
If the purpose of the marketing is to drive revenues and profits, then the measurements of success need to reflect that. If the purpose is something else, like create brand awareness or educate, then adjust your measurements accordingly.
Track your leads and record the prospect’s data:
At the very minimum always ask the prospect some version of “How did you hear about us?” Collect their information and put it in a database. The goal is to know how many leads (and ultimately how much profit) per week or month are coming from each marketing medium and be able to continue to contact those leads. I know from my mystery shopping this is a huge leak in the pipeline for most businesses.
Know your key numbers:
Marketing is simply a matter of buying clients for less than their lifetime values. Many businesses will not break even until after a new client makes more than two purchases. A chiropractor and a hair salon are two good examples where loyal clients have many transactions over a period of years. The two key numbers are acquisition cost (cost of gaining a new client) and lifetime value (how much in total the average new client will spend as your client). The key to making marketing an investment is to keep the acquisition cost as low as possible while driving the lifetime value as high as possible. How much do customers from each lead source spend with you? Do you know your numbers?
Use the information you collect to make educated decisions:
Once we record the information over time, we will know the acquisition cost for each marketing method as well as the number of new clients driven by each technique. You will likely notice a significant difference in the lifetime value of clients from different method. Build the information over time and use it to determine how to allocate your budget.
There are entire books written about these concepts and others. The real key is to start systematically recording your information now to increase your revenues and build your decision-making database.
Whatever you do, make sure you’re getting a great return on your investment from that $40,000 employee!
Learn more about marketing and other business results generators at GrowthClub June 20th.
Time – Can You Ever Get Enough?
Whether you own a business or work for someone who does, you have probably experienced the “never enough time” phenomenon. When I worked in the high-tech world, we never had enough time to do it right, but always plenty of time to go back and fix it later. This practice was also known as using the customers for beta testing.
If we want our businesses, and ourselves to thrive, then we must focus on two things: 1) doing the right things, and 2) doing things right. Stephen Covey, in his book “The 7 Habits of Highly Effective People” offers a powerful tool, the Urgency vs. Importance matrix to achieve both goals.
In this matrix, Quadrant 2, is a set of activities in a business, or your life, that are Not Urgent, but are Important. This quadrant is the Zone. The Zone is that place where you set aside all the busy work of the day and focus on the things that are truly important for your long-term success. These are activities like planning, strategy, learning and cultivating relationships.
So how do we get in The Zone? First and foremost, you make a conscious decision to get there. It will not happen naturally, because these tasks are not urgent, they are not in your face demanding attention!
When was the last time your most important client called you up and demanded that you get to work on your cash flow forecast? Probably never, but when was the last time a client complained that you didn’t have the right parts in stock, or that her order was a week late? Did you take the time to tell her that earlier this year you failed to budget for parts stock, or that you failed to plan to replace that aging equipment?
This is one of the hardest things for my clients to see. They are constantly in the “urgency” quadrant, specifically because they don’t spend enough time in the zone. Every day I hear about how overwhelmed they are, because of all the urgent daily demands. Getting in the Zone takes practice to become a habit. Here are some tips for how to do so.
Put it on your calendar on a regular basis
Scheduling time for planning activities is probably the best and maybe the only way to ensure that they get done. You should spend 20% of your time in Zone activities, but that doesn’t necessarily have to be weekly. It could be on a monthly or quarterly basis. One way is to allocate 4 hours per week to planning (medium-long term, not short-term), plus 8 hours per month, plus 16 hours per quarter, perhaps in an off-site session like GrowthClub.
Establish a system for accountability
Accountability will help you reinforce the need and the habit. It can be a coach, an accountability partner, a mastermind group, a partner, a spouse or anyone that you will feel accountable to for following through. Be sure that they know to ask you when and how you are allocating your time. Be sure that you have deliverables to them for the output of your planning, then review and discuss it with them. HINT: if you’re not willing to do this, you’re not committed to achieving the goal.
Break up the work and the time into proper-sized chunks
Some people work best in 30-45 minute bursts, other prefer 2 hour chunks of time. Pay attention to your own attention span and work style. Then allocate the most efficient periods of time for you to get your Zone work done. Break up the work into properly sized chunks so that you can accomplish something meaningful in each time period. Know yourself, and when you set aside your Zone time, make sure the chunks of time will be most effective for you.
Pick the right time of day for your Zone activities
In every business and for every person, there are times of day or days of the week that are better or worse than others. If you know that Monday mornings are always crazy, don’t allocate any Zone time for Mondays. You also know your own daily flow, so be sure to schedule your Zone time at a time of day that is best for the type of thinking you will be doing – creative out of the box brainstorming or detailed number-crunching.
If you want long-term success in your business and life, it takes this kind of intentional disciplined planning. Success rarely happens by mistake. Be sure that you are always planning for success, not just this week, but for the next decade.
If you want to really learn how to get into the Zone, come to my TimeWise workshop Friday March 17, 2016 11:30 – 1:30.