If cash is king they the queen is relationships and like in chess the queen is the most powerful piece in the game. It’s a relationship game and don’t forget it; nobody buys from or sells to someone they don’t like.
Take time to nurture your relationship with the seller. The process is a lot like dating. Most people don’t marry the first person they date. They have dates with some people they find out they like, some they find out they don’t like and some they love. The same is true when looking at businesses. You have to look at a lot of companies to find a good match.
Spending two hours in a first meeting with a seller and only talking about “the business” for 20 minutes is great. Rapport is being built around common interests, family, sports or business philosophy. The worst thing a buyer can do is try to dig deep into the companies financial situation or their trade secrets in the first 15 minutes.
Take your time, build a relationship and see if you can make something happen.
May 14, 2012
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John Martinka |
Business Buying |
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Cash, and cash flow, are king. I tell would be business buyers that the worst thing they can do is not have positive cash flow while searching because then they’ll be dipping into their investment pool and decreasing the size of their potential acquisition.
The same is true post-acquistion. Cash it the most precious commodity a business has. What too many buyers don’t realize (they may know it, they just don’t think about it) is that growth sucks cash. You pay your people this week, your rent thing month and your customers may pay you in 60 days. If you’re growing it means you are paying more people, buying more supplies and having more money tied up in accounts receivable (for 60 days). That is working capital (i.e. cash).
Pay attention to your capital, your cash flow and your cash needs. It will save you a lot of angst if you do so.
May 12, 2012
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John Martinka |
Business Buying |
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| A recent transaction has the parties confused over some of the language in the Purchase and Sale Agreement (not unusual). It reminds us that when someone doesn’t understand something the first reaction is usually, “No.”
Many years ago an attorney told me to make sure my clients always understood the language in a contract. He said that it didn’t matter that the attorneys understood it because any ambiguity will come back on the parties involved not the attorneys.
Let’s carry that wise advice to our day-to-day business and our lives in general. When there’s ambiguity or lack of understanding we are going to lean towards not doing anything. Whether it’s buying a car, some software or an appliance, if we’re not sure how it works or what the features are we won’t buy it.
In business we have to make sure that we, and our salespeople, realize that making things clear and easy to understand for our prospects and clients increases the chances of doing (more) business together. It’s when we start talking technical jargon that we confuse people and they lose interest.
“Truth isn’t always beauty but the hunger for it is.” Nadine Gordime |
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May 5, 2012
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John Martinka |
Business Buying, Exit Strategies, Increasing Value, Weekly Memo |
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I used the following visual a few times during talks last week and it went over well. My point is that business owners must know what their company’s value is, how to drive that value higher and have an exit strategy to increase the chances of getting that value out when it’s time to leave (sell).
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The owner whose business is in the upper left quadrant (+) is well positioned. They have an exit strategy, know their company’s current value, know where they want that value to be and have reached their destination.
Those in the upper right or lower left quadrants (~) are okay or neutral. They either have the value where they want it but have no plan or have a plan but haven’t achieved the value they want. In either case, they are on the right track.
It’s the owners in the lower right quadrant who need to work. Their value isn’t what it should be and they have no plan. They must work on driving their company to the upper left quadrant. If they don’t, they risk falling behind the pack and when the expected tsunami of business sales hits they could be forced to sell for much less than they hoped for.
“Progress is not created by contented people.” Frank Tyger
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May 4, 2012
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John Martinka |
Exit Strategies, Weekly Memo |
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The February 1, 2012 Wall Street Journal had a front page story about how many small businesses, including a lot of start-ups, can’t fund their business because their traditional source of collateral has disappeared. That source is home equity that they used for either a personal home equity loan or for business loan collateral.
The housing market collapse has far reaching tentacles. According to this article one of every three small business owners have tapped into their home equity for a loan. This list includes the founders of Wal-Mart and Samuel Adams Brewing. I know that almost every business acquisition loan I’ve seen has used home equity as secondary collateral.
SBA guaranteed bank loans can be the answer for some ongoing business but it’s tough to justify a loan to a new business. Start-up businesses are risky. That’s why most start-ups are financed by personal funds, friends, family, angel investors and (eventually for some) venture capital.
Maybe this is the reason the SBA is now looking at some programs to finance start-ups. Without home equity the job creation from small businesses is not as robust as it could be. It may be that many businesses will have working and growth capital problems until real estate market rebounds.
“‘As a matter of fact’ is an expression that precedes many an expression that isn’t.” Author Laurence J. Peter
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May 2, 2012
Posted by
John Martinka |
Business Buying, Increasing Value, Weekly Memo |
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| The New York Times small business blog on January 18, 2012 had a case study on franchises. A former International Franchise Association executive, now a franchise owner, said, ”In my time at the I.F.A., I learned that the No. 1 reason franchises fail is because their owners fail to market their own business.”
He’s wrong. It’s not just the top reason for franchise business; it’s the top reason for all businesses. I hear repeatedly from business owners, struggling and successful, that if someone who knew marketing bought their business the business would do much better.
Of course, they would like to be paid in advance for the success the buyer may achieve. From one-person professional service firms to $50 million in sales manufacturing businesses the one common factor for success is good marketing. That means it needs to be researched, planned, consistent and constant.
Whatever your business, you have to do all you can to keep your name in front of customers, past customers and prospective customers. Provide value before they become a customer and you’ll increase your chances of success.
My days are twice as long and I have twice as many problems to contend with. But I’m loving it. William Burris, business owner (above) |
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April 30, 2012
Posted by
John Martinka |
Increasing Value, Weekly Memo |
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In wrote this while on the island of Antigua in the country of Antigua and Barbuda for our annual Rotary service project. We’re working in the schools installing computer labs, giving all third grade students their own illustrated dictionary, setting up a video teleconferencing system (so the teachers on Barbuda can get proper training). We are also working with a community center and teaching ladies how to sew so they can make school uniforms and support themselves. I say “we” because it’s a team of two-dozen including 14 Bellevue students in the Cisco tech program. It’s the students who set up the computer labs and the video system.
As I’m here it’s hard not to notice the differences between our day-to-day lives and the day-to-day lives here in Antigua. Here are some observations.
- The day before we left The Seattle Times (February 16, 2012) had an article on the resurgence of manufacturing jobs. While only 10% of jobs in the US, manufacturing is leading the recovery. Here they wish they had 10% of their economy in manufacturing; it is a true service based economy with an emphasis on tourism. A few years ago I asked how much of their food is grown here (there is some very fertile land). The answer was maybe 30% because too many people think working in agriculture is beneath them.
- We’re in the middle of a hullabaloo over church, state and birth control. In Antigua there is very little separation of church and state. It’s a very religious country (overwhelmingly Christian but many varieties of churches). Even secular events will be held in a church or in conjunction with a church service.
- There truly is “Island time.” Meeting times are pretty loose. A couple years ago I asked a restaurant owner how this affected her business. She said it was annoying at best and caused lost income at worst. A 7:00 pm reservation for eight may mean two people at 7:10 and the rest filtering in over the next 45 minutes. This would drive most of us nuts. Especially those of us who feel compelled to make a courtesy call when we’re running a few minutes late. In Philadelphia it would cause angst. My “Partner” On-Call associate told me that in Philly, “When you arrive on time you’re late.”
- We have educational issues in the US. A crisis in some places, mediocrity in others and fantastic schools elsewhere. Here, it’s a struggle, which is why we’ve been working in the schools for five years. As with the US we’ve seen some very dedicated and hard-working teachers (and administrators). We’ve also seen teachers who considered it an imposition to come in and give their students dictionaries (because, in one case, it interrupted the teacher’s reading of a romance novel). They struggle with kids skipping school, especially on Friday, and the parental involvement (from what I’ve heard) often makes our parental involvement seem fantastic.
- The people here are very hard working. It’s just that there isn’t the same level of opportunity that we have. We’ve been inundated with the 1% and 99% slogans. Here there truly is a big difference in economic conditions. We deal with the local Rotarians and society here has recognized it is an honor and privilege to be asked to join an organization like Rotary. This ties back to my first point; those who have got out of the tourism service job cycle have substantially improved their lives (and do a lot to give back).
- Finally, everybody is very appreciative. We’ve been stopped in public places every year as people thank us for what we’re doing (we’re on TV every year as this project is a huge deal). In Antigua, the Rotary clubs are the big fish in a small pond.
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April 28, 2012
Posted by
John Martinka |
Increasing Value, Weekly Memo |
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The “You’re the Boss” blog in the January 18 New York Times featured “How to Diagnose What’s Wrong With Your Business” by Jay Goltz. Mr. Goltz said to concentrate on 10 issues in three categories:
- Marketing
- Management
- Accounting and Finance
I wrote a comment on this blog saying that I agree with these three points. In fact, I tell business owners thinking of exiting that the above three areas are the three most important things they can work on in their business. My advice, in simplified form, is:
Do some marketing. Before starting, do your homework and document everything you do. Be able to show the actions taken and the results achieved (your metrics of success).
I use the phrase, “Have systems and processes” and this really means management. Manage the people, processes and systems and how your people fit into your systems
Have good accounting systems, monitor your accounts for accuracy, use quality management reports and have a budget and projections. Doing this puts you in the front of the crowd.
The strategies for business aren’t that complicated. It’s the implementation that trips up people.
“Coming together is a beginning. Keeping together is progress. Working together is success.” Henry Ford |
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April 27, 2012
Posted by
John Martinka |
Increasing Value, Weekly Memo |
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| I recently participated in a focus group for a company with which I have a business referral relationship. They received tremendous value from the session and I walked away with some good insights.
One of my top lessons from this was realizing that we all take for granted what our clients and customers think of us, the value we provide and the way we do business. I remember reading about a study where employees ranked what they felt their customers thought was important about the firm’s products and services. The company then had a market research go to the customers with the same question(s). The customers’ impression was almost 180o different than that of the employees.
This session reinforced that none of us should assume what people want. When we stop talking and ask questions we find out the true wants and needs. If we don’t ask we run the risk of hitting the bulls-eye but having it be on the wrong target.
“The secret to being boring is to say everything.” Voltaire |
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April 27, 2012
Posted by
John Martinka |
Increasing Value, Weekly Memo |
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While watching the TV show, “Bar Rescue” the other day the host told the owners of a bar/restaurant (who wanted to increase their business from tourists) that the best thing they could do was attract and please the locals because the word will spread and the locals will refer the visitors to their favorite places.
On a conference call the other day the following was said, “Make getting referrals as much a part of your day as returning phone calls.”
A speaker recently had a slide that said when it comes to getting customers, “We are relentless.”
The bottom line is whether a consulting firm like mine, a restaurant, a manufacturer, training firm, store or anything else our number one priority has to be to get new customers. We do that by providing exceptional value so that our customers will send us their friends and family. We also can’t be afraid to ask for whom we can help.
April 26, 2012
Posted by
John Martinka |
Increasing Value |
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