Book Club #17: How to Win Friends and Influence People

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friendsDale Carnegie’s How to Win Friends and Influence People was the book that kickstarted the personal development genre that continues to grow every single year.  

While some have attacked some of Carnegie’s methods as “forced”, its continued selling power since 1936 speaks to the timelessness of the ideas between its pages.  

In this article, we’ll examine a few of our favorite ideas that are equally important in business and in our personal lives.

Smile

At the time Carnegie wrote this book he didn’t have access to the overwhelming number of studies that have been done over the years that back up his advice to simply smile.  

Smiling has been shown to improve mood, lower blood pressure, create a stronger immune function and lead to pain relief, among many other astonishing effects.

Furthermore, customers don’t usually register complaints along the lines of, “So and so smiled too much” or “was in too good of a mood.” Smiling is the simplest way to indicate to someone that you’re happy to be there with them.

Become genuinely interested in other people

Sometimes we get caught up in the regularity of business transactions and fail to take the time to get to know people on a personal level. But people prefer to do business with those they know and trust, and it’s sometimes surprising how little we may know about some of our most vital and important clients. It’s a good practice to try to learn something new about clients each time you meet with them.

Be a good listener

In a world filled with digital noise, listening is becoming more and more of a lost art and requires so much more attention than it did in Carnegie’s smartphone-free era. Listening to customers is the easiest way to ensure that you not only fulfill the obvious needs but uncover the not-so-obvious ones too.

Someone’s name is the sweetest sound in any language (to them)

The great failing of many of us is to fail to listen and pay attention when people introduce themselves (see “Be a good listener”). But beyond that, those who are “good with names” weren’t given some magic pill or genetic advantage.

They use strategies like Carnegie outlines in his book, like associating the name with a funny image, repeating it back to yourself silently several times after hearing it, and then using it at least once or twice in the conversation so as to imprint it.  

“Being good with names” takes work, but it’s work that is deeply appreciated and remembered, and will help you stand out in your business dealings.

Give honest appreciation

Mark Zuckerberg famously wrote a thank you note to someone each day of the year for a whole year in order to remind himself of all he was grateful for.  

While you don’t necessarily have to commit to something so significant, it’s important to ask yourself – when was the last time I thanked a colleague, an employee, a vendor, or a customer?  

Genuinely thanked them – taking the time to write them an email, or even better, a handwritten note, to share your appreciation? When you do it for no occasion at all it will be particularly impactful, and you will be influencing people to pass on that gratitude.

Five Sobering Questions to Ask Yourself Before Buying a Business

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fiveIn everything we do, often the sheer excitement of an event, experience or a purchase pushes out everything else, including good judgment.

That’s to be expected, and sometimes, can’t be avoided. But buying a business is such an important event that has the potential to affect so many other things in your life.

Because of that, it’s important to put euphoria and excitement in their proper places and ask some sobering questions of yourself on your business-buying journey.

1. Am I interested in this business solely for the cash flow or prestige?

Both cash flow and prestige are perfectly legitimate reasons to be interested in a business. Money is important, as can be the feeling of being affiliated with something of value or class.  

But on their own or even combined, they’re not enough to keep someone building a business in the medium to long-term. There needs to be at least one other thing that attracts you, be it a fascination with the industry, interest in the city in which a business is geographically sited, or a desire to challenge yourself with something new (just to name a few).

An additional reason beyond money and prestige will make sure that this new business adventure is a long-term play.

2. Do I really want to do this all day?

In his book Restaurant Man food mogul Joe Bastianich goes a long way to disabusing people of the “glamor” of the restaurant business by discussing the realities of the hours (18 a day), and the days you’ll work (weekends and holidays), and how much money you’ll make (20% blended margin even on the high end).  

He does this to discourage the dilettantes who like watching Food Network and think getting into the industry would be “fun.” If the business requires an active owner/operator, are you willing to sleep/breathe/dream about the business during a large part of your waking hours?

If not, you should probably pass.

3. Will demand exist in the coming years?

If you’re interested in growing a business, not just in maintaining cash flow based on a product that is headed for legacy country, you need to ensure that demand will continue to maintain, and even better, grow in the years ahead.  

Look at regulations, the competitive space, and your own costs of capital as part of a blended approach (that includes examining news and reports and talking with veterans of the industry) to get a solid answer to this question.

4. Why is the seller selling?

There’s nothing wrong with someone being “tired” – either in the sense of working in this particular business or industry or working in general. It will happen to all of us at some point. What we want to be wary of are sellers making decisions to sell for abrupt reasons.

Sometimes a family illness or personal emergency will precipitate just such an occurrence. This doesn’t mean a good transaction can’t take place.

It just means that because it was unexpected there are necessarily things that might have been missed, and both buyer and seller (but particularly the buyer, who will be left with the business when all is said and done) need to ensure that the business can indeed not just survive, but thrive with a new owner.

5. How much does the business depend on him/her?

At APEX we’re advocates of Michael Gerber’s famous phrase: “Work on your business, not in your business.”  This flows from a desire to transform a business from a handful of people who are relying on hustle and willpower to a well-oiled machine that relies on processes, not personalities.  

Ensure that the business isn’t overly reliant on the owner. If that’s the case, and the owner isn’t willing to make changes before the business sale to address the issues, consider negotiating a longer transition period or additional seller financing.

One of the reasons we exist is to help people navigate these and other key questions when preparing to make the life-changing decision of buying a business. We’re always here to answer your questions. Give us a call today at 913-383-2671!

Case Study #17: When an Earnout Wins for Everyone

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winwinIn 2004 Dan Green was a mortgage officer. He started blogging about important trends in the industry, focusing on giving timely, relevant, non-biased advice.  

He thought it would be a smart way to stay in touch with existing clients, as well as reach out to new ones.

The strategy worked…a little too well. He started to get leads from states he wasn’t licensed in and rather than let those leads go to waste, he started to sell them.

The blog and these partnership agreements eventually led to a company called The Mortgage Reports.

Differentiated from the beginning

With the traffic he was garnering Dan could easily have gone for the quick monetization path and sold advertising.

But he felt he couldn’t be unbiased if he had ads, so instead he built forms around themes.

For example, at the bottom of an article on a “low down payment mortgage,” there would be a link with the text, “Would you like to know more?” and if you clicked through and filled out your information, you could get a call from one of the partner companies within seconds.

Dan’s partners got highly qualified leads (the forms asked key questions) and Dan’s readers got help from sources they wanted.

So why sell?

The cash flow was good, and the overhead was insignificant: hosting fees, the occasional tech fix for the website, and the cost of writing articles, which Dan was doing by himself from his wealth of knowledge and experience in the industry.  

But the reality is that there’s a lot of regulation in that industry, as well as administrative work, which Dan didn’t love, so he started to think through exit possibilities.

One of his friends, an M&A professional, recommended doubling down and building out his infrastructure so as to sell for 10X or more, but Dan didn’t feel the energy to do that. He didn’t believe that he was the right guy to take the company to the next level.

Internal buyers

Why not ask the partners who are already buying our leads? Dan thought.  

After taking his books and turning them into a slide deck with projections into the future, he approached six of the partners already buying his leads.  

Three of them wanted a deeper conversation and Dan flew out to see all of them and make his presentation. He wanted to sell his vision for where the company could be and share his excitement for growth.

There were two challenges. At the time he was exploring an acquisition, the mortgage market seemed tenuous…everyone was waiting for some disaster. Secondly, the economic climate, in general, seemed gloomy. With those issues in mind, none of the potential buyers were willing to give Dan the upfront cash deal he wanted.

Believe your own hype

Dan really knew the industry and felt that his projections, while bullish, took into account all possibilities, and as such, he thought to offer an earnout to one of the three buyers who was best equipped to carry out a long-term vision for his company.  

He structured the earnout such that if the projections he made were accurate, that not only would he end up getting paid, but the buyer would do very well too.

The happy ending? The amount of the earnout ended up being 3-4X the amount of the original all-cash deal that Dan proffered.

Why did the earnout work in this case?

In a lot of the case studies we offer here at APEX we note that earnouts aren’t ideal. When asked why he thought this earnout wasn’t just successful, but spectacularly so, Dan responded by saying that he thought the buyer had put in genuine effort into not just buying the business, but growing it.  

Furthermore, the confidence and faith in his numbers and the actual state of the market, not just what the pundits projected, was rock solid.

Finally, Dan was willing to put his money where his mouth was. He didn’t offer the projections as “hope” but as pretty much facts!  

In the end, those three factors led to a win/win for everyone involved.

Whether you’re a buyer considering a business offering an earnout as part of the purchase or you’re a seller who doesn’t think he can sell in the traditional way, we’re here to help. We’ve dealt with hundreds of similar situations over the years and would love to put that expertise to work for you. Give us a call today at 913-383-2671!

Three Key Questions When Considering the Leap to Business Ownership

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three questionsThere are so many questions you might ask yourself when thinking about becoming a business owner.

In fact, we’ve addressed many of those concerns in previous articles, here and here.

But today we wanted to focus on three important ones that have to be answered.

Where will I get the money?

We’ve discussed various ways to get the money for buying a business in the past.

While it’s always best to just have a large amount of cash laying around, most of us are more likely to pull from multiple sources, including retirement accounts and SBA loans.

Exploring and understanding this step well (including a solid relationship with a banker) will give you the range of purchasing power you have. In addition, you’ll have a snapshot of the variety of businesses you could consider in that price range.

Do I buy a franchise or an existing business?

This has just as much to do with personality as anything else. Are you the sort of person who wants to follow a proven system or do you want to experiment, make mistakes (and find successes) through your own initiatives and trial and error?

Franchising offers the appeal of trial-tested methods, whereas your own business offers you flexibility and nimbleness that can’t exist at the level of a national brand.

Are the books in order?

On the broker side of the business, there’s nothing more unfortunate (or less surprising) than finding that a business doesn’t have its books in order. “Good enough” has been the standard for so many years, with no forethought of a future in which a buyer might want more than a box of receipts and incoherent financials.

A business with a solid and reliable set of books, not just for the current year, but for many years back in its history, tells you a lot about how the business is run and the priorities of the ownership and staff.

The books will show you where the opportunities and the weaknesses are. These are the medical records of that business. We try to avoid listing or representing a business that can’t supply historical financials or has troublesome tax issues. Make no mistake… you should be extra cautious when considering buying a business with those issues too.

Do you have follow up questions for any of the questions that we listed above, or any questions on any part of the buying process?  Give us a call at 913-383-2671. We’d love to help!

Book Club #16: Built to Sell, by John Warrilow

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built to sellWe’ve already spoken about a John Warrilow book before, namely The Automatic Customer, which is all about how creating subscription streams of income is something incumbent upon (and doable for!) most businesses today.

But before he wrote that, he wrote a book called Built to Sell, which uses the story-telling devices used in The E-Myth and The Goal to drive home precisely what’s needed to build a company that can be sold.

We’ve said it here numerous times before – many businesses don’t sell, and many aren’t even eligible for sale, because the owners haven’t put in the work to build something that can be turned over to a complete stranger. But that’s precisely what’s required. It starts with getting rid of YOU.

Get out of your own way

Of course, you’re a big reason that the company has gotten to whatever level of success it currently enjoys. But for it to grow, and for you to be able to sell it one day, it can’t depend on you.

This means you can’t be synonymous with the business, and you have to have teachable processes in place, as well as products and services that can be sold and delivered by other employees.

Of course, you’re going to be one of the best, perhaps the best in your firm, in all of these areas, but that’s not the point. A potential buyer will be scared if he/she sees your name over all the sales, processes, and management. On the other side of things, how will you keep employees long-term if you never allow them to take on the big tasks you keep reserving for yourself?

Diversify your clients and your offerings

Warrilow really hammers home the idea of avoiding dependency on a single client. Any client who is responsible for an outsized portion of your revenues has implicit control over the direction of your company, yet they have no real risk. Warrilow recommends that no client should be responsible for more than 15% of revenues.

There are many other ideas he discusses, but two, in particular, we should focus on are:

  • Avoiding price wars by doing one thing better than everyone else.
    If you’re a florist, perhaps you do wedding flowers particularly well and charge an excellent, non-customizable price. By creating a standard offering, you maximize efficiency in your workflows and also create a rallying point for your sales team. It’s also a great funnel for other services.
  • Generate recurring revenue by creating products your customers need to repurchase.
    This is a theme he would fully develop in    The Automatic Customer, but it’s something that works well. Go back to our florist. Instead of offering one-off purchases only, what if she went to hotels and other places that always want flowers in their lobbies and offered a subscription service? It removes a sales cycle, guarantees a service for the client, and generates count-it-every-month income for the business.

The subtitle of the book is creating a business that can thrive without you. Note the word “thrive.”  If you know your business slows down or sags a bit while you’re away, you haven’t put in enough work into building your company to sell.  

Keep in mind, you don’t have to sell…BUT if you build to sell, not only will your life become easier, but your employees will make more money, and your company’s foundation will be more stable.