Lessons from the latest PR Disaster at Facebook

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FacebookIn all likelihood, you’ve already heard about the far-reaching Cambridge Analytica/Facebook scandal. In case you haven’t, here’s a brief summary:

Cambridge Analytica, a British political consulting firm, used a personality quiz application on Facebook, presented as “for academic purposes,” in order to gain access to over 50 million user profiles since 2015. It did this in a perfectly legal manner, as Facebook’s user agreement freely gave access to the profiles of the friends of everyone who took the “personality quiz.”

While this news may seem to be “Facebook’s problem” it really underlines some themes all of us need to be clear on at our own businesses, with our employees and clients.

Privacy and Security

While Facebook took some consolation in pointing out that this was “not a hack”, many users were displeased. Elon Musk deleted his and his company’s Facebook accounts and started the #deletefacebook trend on Twitter.  Facebook has never truly taken user privacy seriously, and worse, they didn’t make it easy for users to protect that privacy.

Unlike the old days of paper shredders, data is more sturdy. Once it gets out into cyberspace, it’s very hard to retrieve and “shred.”  Therefore, it’s important to make sure that, whether in paper or digital format, data of your employees and clients is carefully safeguarded, and if necessary, periodically destroyed.  

Do you have these policies in place at your company? If not, there’s no time like the present.

Ethics

Cambridge Analytica, in the wake of this scandal, has been able to claim, rightfully, that nothing they did was illegal. Users had waived privacy rights (or simply, as 99.9% of us do, clicked past the terms of service without reading) not just by using Facebook, but by taking the survey.  

Facebook makes money precisely by selling their deep, rich data to companies like Cambridge Analytica. So, it becomes clear that “Is it legal?” is an insufficient question in our fast-moving world of data portability. The question has to be “Is it moral?”

While some might rightfully note that the question of morality should have always been in our minds, the fast-moving world of the Internet has gone a long way toward blurring the legal/moral line. It’s times like this we can slow down, take stock and recalibrate.  

Questions of “Is it legal vs Is it moral” only make sense in a company that has stated values. If you and your employees believe that clients are to be protected, not exploited, then you’ll pay more attention to gray areas like this.

Even better, your clients will always appreciate and respect “opt-in” possibilities for whatever you might choose to do, whether it’s a survey, a study, or a simple analysis of what they’ve done over time.  

Increasing pressure on government may see more regulation before too long. But rather than wait for that regulation to hit your company, start a discussion and have policies in place that can be adapted, rather than be created, when the changes from above may come

Apologies Necessary

While some observers have pointed out that this debacle is a setback to Mark Zuckerberg’s not-subtle presidential aspirations, he did manage to utter the phrase “We made mistakes” which tone-deaf “leaders” like those at Equifax and United failed to do when their companies publicly stumbled.  

Nobody likes mistakes, but almost all of us hate denial of mistakes or a failure to apologize. Walk through “disaster” scenarios at your own office and have templates of press releases or responses ready to go.

That way, if something terrible happens, you’re ready for it and don’t have to do the critical thinking under pressure.

Case Study #16: Doubling Down on the Value of You

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Doubling downIn 2011 Dan Bradbury was building a company called Business Growth Systems that taught marketing to small business owners.

They would hold seminars explaining how to build infrastructure to create and track demand for products and services. 

Often those seminars served as funnels into individual client work, in which he and his staff served as a hybrid agency, helping these businesses create that infrastructure hands-on.  

He was creating a profitable company and experiencing great growth when he had a serious biking accident. The seven months he spent in rehabilitation included re-learning how to use a computer, among many things.

But with all that time he’d spent in traction, he realized two things:

  1. The company was too dependent upon him.
  2. He never wanted to put his family in this kind of position again.

So, he set about finding a way to rectify this.

Research

Dan asked a friend who had experience in M&A to take a look at his business to see how sellable it was. The answer, after a cursory examination, was “no chance.” The business was entirely dependent upon Dan and Dan’s friend advised him to acquire a similar competitor and then replace himself. Then the business would be sellable.

Merger

Dan started making the rounds, and many knew that he and his business were “wounded” because of his accident and injury, but he found a fellow owner who was willing to go in on an “option” type deal. Dan would guarantee that upon a sale, this owner would receive at least X. It wasn’t a conventional type of deal, and it very much set the tone for the type of deal they would get in the end.

Leaning in

Dan and his new partner saw that they both had a good income stream relating to an emailing software platform and really started to develop that stream. At the same time, Dan remembered that there was a company that offered a competing platform.

This company had often tried to recruit Dan to leave his business and move to America with his family. In addition, they had been in an aggressive growth phase in the US but didn’t seem to make any headway in the UK (where Dan was based).

While all this time Dan had been working on making his business not reliant on him, at this moment he chose to make a possible deal all about him and the contingent possibilities. He reached out to the US company and basically said, “You can have me and my company. You’ll have an entree into the UK market, and I and my team will help you grow it.” The acquisition was framed less as a financial one and more of a strategic one.

Closing the deal

As the men in suits started doing the math, it became clear that they were interested in how quickly Dan and his team could reconfigure and start selling their software.  

If that downtime was low, the acquisition could be accretive, and hence, pay for itself. While Dan assured them this downtime would be low, they wanted to de-risk the deal as well, and the offer was ⅓ cash, ⅓ stock, and ⅓ earnout.  The earnout was tied to the number of new customers acquired for their software (and was uncapped).

Dan hesitated. He knew about all the stories around failed earnouts but his WHY? was powerful and at this point, he had no real BATNA (best alternative to a negotiated agreement) and hence didn’t have a strong negotiating position. Alas, with the finish line simply pushed back a bit further, he took the deal.

The story ends happily. Not only did Dan deliver the original amount promised to Nick, his business partner, but Nick made 80% more than that number. They both did have to work harder in order to do that, but that’s always what earnouts are aimed to do…to squeeze that last possible drop of motivation from an owner who very well may be mentally “done.”

Considerations

Never wait for an accident to make your company less dependent on you. Taking the time to do this will benefit you, your family and friends, your employees, and your bottom line.

If a traumatic life event causes you to reconsider everything, remember that going in with an attitude of “I have to sell” weakens your negotiating position, and may force you to take the first offer that comes by (which may not be the best one).

Finally, don’t be afraid to dangle yourself as a possible asset in the sale. Sometimes, given the right alignment of goals, that’s exactly what a buyer might want to hear.

Remember to speak with an Apex Business Advisor for assistance in preparing your business for sale. We know the right people to help you systematize and add even more value to what you’re already doing.

Considerations When Forming a Business with Multiple Partners

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PartnersIn a previous article we discussed things to ponder when considering a business partnership. In this article, we’re going to deepen and broaden the conversation by considering the question from the aspect of bringing on multiple partners.  

Partnerships continue to rise, according to IRS data, as do the profits from those partnerships, so this topic deserves our consideration, even if our gut initially tells us “No.”

Why

You need to start with why and ask yourself if you really need business partners. Would those partners provide an accelerant for what you’re doing? Are they necessary for you to do the business at all?  

Further things to think about include:

  • Do you share the same vision for the business?
    Lifestyle business or a growth business?  Does everyone have the same answer to that?  If not, there’s going to be a problem.
  • Do you have the same enthusiasm and energy for the business?
    To invest time, money, and mental energy, this can’t simply be a “would be good to do” but something more like a “have to do.”  Make sure you’re selecting people who share the passion for what you’re building, not just because they have the right resume.
  • Do you have complementary skills?
    If you’re going to explore bringing on multiple partners, make sure that your skill sets complement one another. Naturally, there will be some overlap, but there’s no point in having five Operations people and no Salespeople, or vice versa. The right people on the bus aren’t just defined by personality, but by what they bring to the table. When there’s overlap, it might make sense to pick the best one of multiple choices.
  • Do you get along? Do you have any track record of working together on anything in the past?
    This is key. Without this personal experience, you’re simply taking a guess.

What

We’ve all witnessed partnerships fall apart, sometimes spectacularly and publicly. These situations can often be traced to things that were never said or addressed.

When you first begin ideating about starting a company together, make sure everything is on the table. Spell out rights and responsibilities. Give special attention to what happens when someone leaves and how that happens.

By highlighting from the beginning that an agreement isn’t about when things go right, but how to smartly handle the business when things go wrong, people are free to objectively share all of their concerns.

Be clear on how decisions are made and who makes them, as well as how profits are to be paid out. Do your best to create an environment for open, honest discussion, leaving as little as possible unsaid or unplanned.

Speaking of partners, we’re always looking for the right people to join our team here at Apex. If you know someone who might be a good fit for us, send them this article or connect them with us via email!

Delegation Isn’t Sufficient: You Have to Trust, As Well

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delegateDelegation.

It’s one of the surest and most necessary components of the growth of any business, yet it’s sometimes looked at too simplistically.  

“You get to do this now,” only works if your colleague or employee knows he/she has your trust. Without that trust, what you delegate can be undermined from day one.

Delegating Well

In order to delegate, you must first prepare. Write down tasks and competencies without any particular person in mind so as to help you avoid biases or avoid writing things down.  

If you think “he already knows that” what happens when “he” leaves?  (You’ll also find this task of writing down things to delegate will spark other ways you can improve the way your business runs.)

Once you’ve prepared to delegate, have a meeting in which you walk through all aspects of what you’re assigning them, and more importantly, let them know that you will not be there to watch over their shoulder, but rather trust them to make decisions (and make mistakes!)

You made mistakes when you started working on this particular task/issue/skill set, so will they. Give them permission to make mistakes as part of the learning process and they will tell you when something happens rather than try to hide it from you. It’s yet another way to foster extreme ownership.

Keep the lines open

Make sure to check in at regular intervals to make sure your delegate has everything he/she needs. Sometimes they just need an opportunity to chat about something that they considered innocuous but that you could use to give them great insight.  

Often, when they ask you how you would do something, reverse first: “I can answer that, but first I want to hear your instincts and thoughts.” It signals your confidence in them, but more importantly, it gives you the opportunity to say, “Yes, and…” or “That’s exactly what I would say/do,” which is a great boost to his/her confidence and mindset. Remind them of your trust and confidence (and mean it).  

Use it as a building block

Successful delegation is a two-way street. It should free you up to do more of the work that you do best, and it should give your delegate an opportunity to grow in skill and ability. Both of you then have the chance to offer each other more opportunities for growth. Delegation is a machine for growth, but trust is the oil that makes it run.  

As a business owner, you create more enterprise value by proving to a potential buyer that the business operates successfully as a team rather than depending solely on the owner.