Business Broker Blog

Chris Bond's Review of "Bossypants" by Tina Fey

In the spirit of the season - and because it's good to lighten up every now and again, agreed? - this month we take a turn toward the humorous with "Bossypants" by Tina Fey.  You may want to cry foul here, wondering how on earth Fey's collection of essays can be deemed a business book (in which case, perhaps we could call you "smartypants"!).  The fact of the matter is, the author has found a way in the past decade or so to turn self-deprecating humor not just into an art form but also into an executive producer role through which she oversees a 200-person television production.  Whatever you make of Fey's style or workplace sitcom "30 Rock," it's no mystery how this 275-page memoir became an New York Times best-seller; the wit here is as sharp as anything this side of Woody Allen's best writing (putting aside, of course, what you make of his style or, well, life choices).  And one look at the cover and you know you're dealing with a woman who knows a thing or two about making hay in a man's world.

Fey takes the reader through every phase of her life, featuring tales of upbringing that will make most 40-somethings smile and reflect.  (Her comment on fearing the reprisal at home when losing the top to one's Grizzly Adams thermos is a classic.)  More importantly, she shares lessons from her years in live theatre and television, most of which are applicable in any business environment.  Tips on decision making, hiring and managing a large staff are both fun and insightful and, if you currently employ a nut job, Fey has a few strategies for how - and how not - to deal with those types.  Lorne Michaels gets a great deal of the credit here for helping shape Fey's management style and, even if you stopped watching Saturday Night Live when Reagan was in office, it's clear that he is a mentor of great influence.
 
When you're out shopping this month, you may want to happen by a bookstore to sample the chapter from "Bossypants" called "Dear Internet," in which Fey answers some of her hate mail.  Her "replies" to those on the web who call her (among other things) and an ugly, overrated troll are brilliantly written with ferocious sarcasm.  Have you ever wanted to unload on a client or colleague but just couldn't?  Ever try that old trick of writing a letter to someone who's living all over you and then literally filing it away for 24 hours, allowing your cooler head to prevail?  Well, Fey doesn't do that here and the result is hilarious. And while the last third of the book goes a bit off the rails, revealing more about her marriage and daughter than the typical reader may find important, Fey's handling of the web-based, anonymous lunatic fringe is worth the $25 the book will set you back.  Of course, you could always just request it be placed for you under the year-end magical tree that may or may not have found its way into your home.
   
Merry reading!
 
Chris

Chris Bond's Review of "Walk Out Walk On:A Learning Journey into Communities Daring to Live the Future Now"

Hoping it's not copyright infringement to do so, I'll start by stealing a phrase from Monty Python: "And now for something completely different." Last month, our theme was "Drive"; this month we take a far slower pace: "Walk Out Walk On: A Learning Journey into Communities Daring to Live the Future Now."  If nothing else, Margaret Wheatley and Deborah Frieze's book will make you appreciate some aspects of your work and home life that you may currently take for granted. The authors take the reader into seven global communities as a demonstration of how people "work with what they have to create what they need." Take a look around - at your office, your company, your industry, your clients - and ask yourself if it's a good thing these days to endeavor to do more with less. If you're like most folks, you'll answer resoundingly in the affirmative. And if so, you may just get value out of reading this book.
 

The authors believe that people resist being changed, not change itself. The unifying theme among the communities they visited is that no matter the continent - and five are covered on these journeys - people want to be part of problem solving, not just be the unwitting recipient of the latest great idea. If you're reading this review (and it appears you are!), you're most certainly an expert in your professional field... and more power to you. And if you've ever had your home run ideas met with resistance, well, I have a book to recommend here. Because the lesson is, whether you're presenting a million-dollar proposal in a boardroom or suggesting a better way to build a wall in a third-world village, your audience will fight you if they're not part of the solution. Wheatley and Frieze challenge experts to acknowledge how frustrating it is to solve problems independently and to develop relationships with others who are also affected by these same problems. Bottom line: experts should be more curious.

While there are opportune moments for reflection for the reader, the authors do make one significant overstatement, namely that reading "Walk Out Walk On" as a conventional book can be overwhelming, even disorienting. Huh? While I can imagine actually taking even one of these journeys - even the one to Columbus, Ohio of all places - could cause one's world to be forever rocked, I find it hard to believe that this happens to the average person reading about it. I was affected by this book and love the different way the authors drive home the all-important message about people, problems, change and buy-in. But the only thing I found disorienting was the graphic description of the reuse of cow chips in India!
   
Good reading!
 
Chris

Chris Bond's Review of "Drive: The Surprising Truth About What Motivates Us"

Have you heard of "Drive: The Surprising Truth About What Motivates Us" by Daniel Pink? I had not until very recently and wished I had two years ago when it was initially released.  If you commit to adding this 230-page book to your collection, you're likely to learn quite a bit about yourself and those with whom you work and live.  Pink hammers the reader with remarkable examples of "what science knows and what business does."  And guess what?  Business often gets it wrong.  So here's a similar warning you heard with last month's review (of "Practically Radical"): Only read this book if you're up for taking an action step or six.
 
The author zeroes in on the core elements of a new way of thinking about motivation: autonomy (the desire to self direct); mastery (the urge to improve at something that matters); and purpose (the yearn to serve something larger than oneself).  Pink presents a compelling argument that as a people, we are no longer just driven to survive or seek baseline rewards.  Motivation 3.0, as he calls it, speaks to our third drive, our need "to learn, to create, to better our world."  Corny, you say?  Really?  Place your cynicism aside for the moment (you can do it!) and prepare to be surprised by study after study which show the bigger the reward (bonus, commission, what have you), the worse control groups perform, because carrot-and-stick management is, if not dead, on life support.  Apparently, we're all seeking something more than a year-end bonus or attaboy/attagirl Starbucks gift card.
 
Invariably, "Drive" causes the reader to take a hard look in the mirror and ask him/herself a key question: How happy am I doing what I'm doing?  The 10/2/11 edition of the Boston Sunday Globe once again confirmed what is becoming common knowledge, namely that 50% of adults are unhappy in their line of work and the vast majority of folks would change jobs if only they could.  Read this book to learn more about how organizations like Google and 3M demonstrate a true understanding of autonomy, mastery and purpose by allowing their people to tap the creativity we all knew as children and seeing what results.  And if you use Gmail and/or Post-its, well, you're experiencing the benefits of those cultures every day.
   
Good reading!
 
Chris

Chris Bond's Review of "Practically Radical"

 

 

Challenge is the theme this month.  As you think about wrapping up the third calendar quarter and putting summer behind you, maybe it's a great time for change.  If not, well, we're done here!  But if the timing is right, consider reading William C. Taylor's "Practically Radical: Not-So-Crazy Ways to Transform Your Company, Shake Up Your Industry, and Challenge Yourself." Taylor, the co-founder of Fast Company magazine, tirelessly researched this work over a number of years.  If you're a fan of miniaturized case studies presented several times in different ways (um, some among us need to hear things a few times!), you can't go wrong with Taylor's book.
 
If you're among the legions of folks who either attend leadership conferences or get a barrage of invitations encouraging you to do so, you might know the name Tony Hsieh.  As the CEO of the online retailer Zappos.com, the thirtysomething Hsieh (pronounced shay) is what Taylor calls "an executive role model."  Zappos aims to create a "wow" experience for those perusing its site for shoes, belts, etc. and that mission is accomplished in part by hiring the right people to staff the phones and warehouses.  And Taylor expertly tells the reader just how the company does this through something called The Offer: One week into a new hire's intense four-week on-boarding program, Zappos offers each trainee the week's pay plus a $2,000 bonus to quit!  Do this math: At $11/hour, one is offered roughly a month's pay to go away.  Why, you ask?  Because the company wants each employee to truly commit to its culture and, frankly, it's a dirt-cheap way to avoid a bad hire.  If you take the bonus, you never belonged.  And how many trainees accept The Offer?  According to Taylor, fewer than 3 percent.  Now that's a brilliant hiring strategy.
 

At about 260 pages, "Practically Radical" is loaded with these types of insights, including inspirational ideas from fine organizations like the Girl Scouts of the USA (clarity of the mission) to the Swatch Group of Switzerland (reversing a slide toward irrelevance). It is a terrific book with but one flaw, that being the author's countless use of every variation of "game changer" one can imagine.  But don't let that prevent you from picking up "Practically Radical."  Summer's over, kids.  Rewrite a bad policy.  Tap into your key resources to solve a nagging problem.  Change the ga... I mean, challenge yourself!
   
Good reading!
 
Chris

 

Chris Bond's Review of "Launch: How to Quickly Propel Your Business Beyond the Competition".

 

 

Good reading!

  

Chris Bond's Review of "Switch: How to change Things when Change is Hard"

Do you find it hard to change?  Your habits, your manners, your style?  If so, you may want to pick up this month's selection, "Switch: How to Change Things When Change is Hard."  This is Chip and Dan Heath's follow-up to their page-turning debut, "Made to Stick" and, while their latest is not quite as "sticky" as their first, it is still an outstanding book for anyone - a manager, parent, global citizen - who has a desire to understand direction and motivation on the path to change.
 
The heart of the book centers on this analogy: your emotional side is an elephant and your rational side is its rider.  Most people reading this - perhaps not you! - have overeaten, procrastinated, and/or dialed up their ex at midnight.  The Heath brothers argue that "any time the six-ton elephant and the rider disagree about which direction to go, the rider is going to lose."  It is for this reason we do things we later regret.  When out of the blue you blast someone at the office because he/she is driving you nuts, you now know who to blame - it's the damn elephant's fault!  Then again, if you're looking for someone or something to blame for your missteps in life, this probably isn't the kind of book you'd be seen reading.
 
Let's say you're trying to affect change in others, e.g. your clients or employees.  One of the more powerful case studies the authors use centers on Dr. Donald Berwick, CEO of the Institute for Healthcare Improvement.  In 2004, Berwick, frustrated by high medical defect rates that lead to thousands of patients dying unnecessarily every year, challenged a room full of hospital administrators to save 100,000 lives.  And he set an exact timetable: by June 14, 2006 at 9AM the goal was to be met.  The result: 122,300 lives saved from preventable mistakes.  You can read the book to understand how the good doctor was able to rally the troops and shape the path toward change, but you can note here that he started by saying, "Some is not a number, soon is not a time."  It was his exact goal-setting approach that caused the switch.  If you need to make changes, pick up Switch. 
Good reading!
 
Chris

Decision - To Sell or Not to Sell

In the last article titled “Value the Company “, we discussed the  fundamentals of business valuation and examined one methodology for arriving at a ballpark value for your business.

Now that you have that ballpark value, you need to decide whether or not you should go forward with the sales process.

 In this article we’re going to discuss several factors that one must consider before selling the company.

Before we do anything else, let’s look at some reasons that people sell their business:

• Retirement – more people are reaching retirement age than at any point in US history and many of them are business owners.

• Burn out – this is a perfectly valid reason to sell. Many people suffer burn out doing the same thing, in the same business, dealing with the same customers that they need to do something else.

• Dreadful Ds – Death, disability, divorce. These unfortunate events can happen at any time and that’s why you should always have your business prepared to sell.

• Diversify Assets – In many cases the business owner has most of their wealth tied up in the business. Selling the business allows them to diversify their assets.

• Other Interests – Some business owners have other businesses that they would rather focus their time and energy on. And some would rather sell their current business and pursue other interests – in the business world or otherwise.

Now let’s take a look at the reasons that companies don’t sell:

• Selling Price too High – this is the NO. 1 reason that businesses don’t sell. If your selling price is 20% or more than the value that your adjusted cash flow and risk assessment suggested then it’s probably not a good idea to put your business on the market. If your company’s out there and it doesn’t sell, you’re wasting a  lot of time and effort and it will leak out eventually that you’re trying to sell.

• If you absolutely need the inflated selling price then you should work to get your cash flow and risk assessment into line with that price expectation.

• Of course, you need to determine if you can achieve that value increase.
• What are the obstacles? If you’re nearing retirement age, do you have the energy? If you don’t have the energy, or the demand for your product or service is decreasing, then you’re better off lowering the price and selling.

Let’s look at some other reasons that businesses don’t sell:

• Financial statements are not accessible or unclear. We addressed this in the 1st article – Analyze the Company. You should have a software program to generate financial statements and your accountant should provide you with financial statements at least yearly. If you have other businesses, always keep your financials separate for each business.

• You are the Business – Any business is difficult to sell if the business owner is so important that the business can’t function without him or her. The ideal situation is when the owner is not important to the functioning of the business.

Now that we’ve discussed the different reasons business owners sell their businesses and also the major reasons that businesses don’t sell, let’s examine your financial needs.

If you’re burned out in this particular industry, or you want to pursue other interests, and assuming you’re not of retirement age, do you have a plan for your next career?

Do you have a post sale plan?

In a previous article you learned how to arrive at a ballpark value for your business. Would that selling price meet your financial needs?

Are your documents in order? These include your financial statements, contracts, agreements, etc.

Do you have trained employees that can run the business in your stead? Will they stay on after the transfer?

These are some of the things that you must consider. Of course, there are others depending on your particular situation.

To view the video of this article click Decision to Sell.

 

Valuing your Business - a Simple Method

In a previous article we discussed the 1st step in the business sales process – ANALYZE THE COMPANY.  In this article we’re going to discuss determining an approximate VALUE for your business.

There are about 9 methods of valuing a business that professional appraisers use. Most of them are used for special situations mainly in larger companies.
You only need 1 method to ballpark the value of a business. Before we get into details, let’s discuss some valuation fundamentals.

Valuing a business is mostly about RISK & CASH FLOW. The higher the CASH FLOW, the higher the value; the lower the RISK, the higher the value.
Expressed as an equation: VALUE = CASH FLOW/RISK.
Value is directly proportional to CASH FLOW and indirectly proportional to RISK.

What is CASH FLOW? In smaller companies (revenues <$3 million) we use Sellers Discretionary Earnings (SDE).

SDE = Net Operating Income + Owners Salary + Adjustments.

Adjustments are any expenses taken that are not absolutely necessary to the operation of the business.  Examples of adjustments are auto expenses, meals & entertainment, depreciation, excess salary, non-recurring expenses, etc.
The adjustment must be reasonable and verifiable - Too many adjustments can raise a red flag.

Now that we’ve determined the CASH FLOW, we need to determine the RISK.
In a previous article – ANALYZE COMPANY – we examined aspects of the business that affected value – these are the things that affect RISK.
In the eyes of a prospective buyer the company’s performance should be transferrable and sustainable. If the business can’t function without you, then the business is not transferrable or sustainable.

The simple equation that we use for ballparking value is:
 VALUE = SDE * MULTIPLIER
The multiplier represents the degree of risk and is typically between 1.5 and 3 for smaller companies (<$3 Million). The lower the number, the higher the risk.
Now that you have estimated RISK from an analysis of your company and determined your company’s SDE, you’re ready to determine an approximation of your company’s value.

Larger companies (revenues >$3 million) use EBITDA instead of SDE.  EBITDA  is Earnings Before Interest, Taxes, Depreciation and Amortization.
EBITDA is simply SDE minus a reasonable owner’s salary. The multiplier using EBITDA is usually between 3 and 5.

In this Article we’ve just scratched the surface of business valuation. In no way does it take the place of a professional valuation. But it should give you an appreciation of some valuation fundamentals and also a method of ballparking your company’s value. 

To view the video of this article click Value your Business

Sell your Business - Functions that affect Business Value

Selling a business is a process and in our Selling Your Business series we’re going to examine each step in the process that an experienced broker/advisor uses. There are basically 7 steps in the business sale process and in this article we’ll discuss step 1 in the process.

The first thing we need to do is determine an approximate value for the business. Consequently, the first step in the ”Selling your Business” process is to completely ANALYZE THE COMPANY. So follow along as we examine those functions that affect business value:

1. The first thing we’ll look at is your MISSION statement – do you have one? What is it? How has it defined your company?

2. Define your PRODUCTS & SERVICES – how many do you have? What are the top sellers? If a Service – special educ/licenses required? Resell – provide installation, training & support?

3. How many CUSTOMERS do you have?– are they one time or repeat customers? If applicable, do you have a customer contract? How many customers represent 50% of total revenue?

4. How many SUPPLIERS do you have? Do you have backups for your primary suppliers? Do you have exclusive rights with any of your suppliers? What kind of relationship do you have with your suppliers. Do you have contracts with them?

5. Are your SYSTEMS & PROCEDURES  efficient & documented? – Are they automated? Do they run smoothly?

6. Are your FINANCIAL STATEMENTS ready and available?– Do you use quickbooks , Peachtree or other accounting SW?  Does your accountant provide financial statements? Are they compiled, reviewed or audited? Are you on the cash or accruel method of accounting?

7. Identify your PERSONNEL – How many employees do you have? Do you have an Organization  chart? Do you have Key employees who are very important to the business? Do you have Non-compete agreements? What benefits do you provide?

8. MARKETING & SALES – What marketing venues do you use? – direct mail? Internet? E-mail? Do you employ Salespeople or use sales rep firm? What is your target market area? Is it local, regional, or global?

9. GROWTH – Is the business growing, declining, or flat? Why?
10. What is the INDUSTRY  SECTOR – manufacturing, distribution , business service? What is the SIC code?

11. COMPETITION – Who are your competitors? What challenges do they present? How do you compare?

12. LEASES – Do you have a lease?  Is it transferable? Is it in writing? What kind of a relationship do you have with the landlord?

13. OTHER – Are there other functions that are particular to your business? What are they? How would they affect value?
This concludes the discussion of STEP 1 in the business sale process. In the next article we’ll discuss STEP 2 in the process which is to determine an approximate value for the business.

To view the video of this article click Analyze the Company

Chris Bond's Book Review: "The Facebook Effect"

Recently released in paperback is "The Facebook Effect" by David Kirkpatrick.  I realize you may be thinking, "I know this story... I saw the movie!" but bear in mind Kirkpatrick's is "The Inside Story of the Company that is Connecting the World."  And while "The Social Network" was a highly entertaining piece of cinema, its creators are none-too-ashamed to admit they took quite a bit of creative license to produce it.  In Kirkpatrick's work, truly an inside story, the author gained direct access to nearly all of the players crucial in the launch and meteoric rise of Facebook.  (Noticeably absent in interviews is co-founder Eduardo Saverin, portrayed so sympathetically in the movie yet is shown here as not having had much impact outside of his contribution of initial funding.)  If you are curious about the back story of Facebook, from a Harvard dorm room to Palo Alto, and want to learn more about its global impact on daily communication, this book should be on your reading list.

Perhaps the biggest takeaway for the reader is how Kirkpatrick paints the picture of the evolution of CEO Mark Zuckerberg.  It turns out there's a bit more to the company's founder than the image of a kid programming in jeans and a t-shirt.  There are brilliant stories of high-stakes negotiations held with venture capitalists, Viacom, Yahoo, Microsoft, The Washington Post and others.  Zuckerberg's steely nerve, bolstered with the help of the villainous Sean Parker (of Napster fame), is on display countless times here.  And while the reader may be understandably turned off by the locker room nature of some of these tales - and they are typically male-dominated - plenty of positive light is shone on Sheryl Sandberg, whom Zuckerberg plucked from Google to be his #2.  No "yes woman," Sandberg is clearly the one who's most willing to tell the boss when he's out of line, even advising Zuckerberg to take CEO lessons (which he does).

Another important character in these proceedings is co-founder Dustin Moskovitz, a Harvard roommate of Zuckerberg's who was willing to do anything to help with the launch of Facebook.  And while the reader might be distracted by Kirkpatrick's obvious man-crush on Moskovitz, the stories of the co-founder's boundless commitment are inspirational to say the least.  (The story of him, in an effort to impress Zuckerberg, giving up a Harvard weekend to learn the programming language PERL, only to have his mentor say, "Dude, the site's not written in PERL," is a classic!)  And regardless what formula one uses in the valuation of Facebook, Moskovitz (who's no longer with the company but still an ally) may a billionaire in his own right; his dedication in the early days is something the reader can certainly appreciate.  Could you use a little inspiration from fearless twenty-somethings?  If the answer is yes, "The Facebook Effect" will set you back a mere $16 (and that's the airport bookstore price!).

Good reading!

Chris

Chris Bond

Murphy Business & Financial Corp.

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