Entrepreneurial Tips from Sara Blakely

Sara Blakely

Photo Attribution: Gillian Zoe Segal / CC BY-SA (https://creativecommons.org/licenses/by-sa/4.0)

A couple of decades ago, Sara Blakely was selling fax machines door-to-door. Today, she’s the billionaire founder of Spanx, with the occasional appearance on Shark Tank as a guest Shark, as well as most recently, a release of a Masterclass about her journey and her mindset and tactics to build a company in any field. We can’t cover everything she talked about in the 3.5 hours of classes, so we decided to pick three of our favorite ideas to share with you.

Build a Support System

Very early on in her entrepreneurial journey, Sara joined a small mastermind of business owners so that she would have people she could trust to bounce ideas off of. Many years later, she is still part of this group with the same members. Entrepreneurs need to have people they trust who can give them impartial, unemotional advice about their business as well as the way they are conducting their personal lives in relation to that business.

While this can be helpful in one-on-one situations, like a good relationship with a business coach, a banker (something we harp on all the time), or with an accountant or attorney, it might also be worthwhile to build up a small advisory board that can meet quarterly or biannually. You might look at financial statements, ask about marketing strategies or sales ideas, or simply pour out any challenges you have that you can’t share with your employees. You’ll be surprised at how many people in your network would jump at an opportunity to help you in this way.

Let Your “Why?” Define Everything

Sara heard “No” a lot early on. When she went to manufacturers she was dismissed as a nobody with no financial backing (she started Spanx with $5,000 and has managed to retain full control until the present day) but she persisted because she noticed that everyone in the supply and manufacturing chain were men. These men would never, ever wear undergarments for females. She firmly believed that her company would make products for women that considered the wants and needs of women, so she pushed through the Nos because she had a powerful Why.

This is a bridge many entrepreneurs have to cross not just early on but even late in the journey. We can be made to feel like we are crazy or delusional and if we have a powerful why that animates what we are doing we will work through those voices telling us to stop. If we don’t have a why, we can get stopped in our tracks.

Redefine Failure

When she was young, Sara’s dad would ask her and her brother at the end of each week, “What did you fail at this week?” If Sara had nothing to say, her father would be disappointed. When she did have a failure (or two) to share, he would give her a high-five and told her, “Congratulations!” By reframing what failure looked and felt like, Sara’s dad was removing the fear of failure. By recognizing what she wasn’t good at, owning that, and even admitting it to her dad, Sara was inoculated against some of the hardest trials of entrepreneurship: self-doubt and fear of failure.

This didn’t mean she avoided difficult things. It meant that she understood from a very early age that failure was a natural part of any successful journey. It is not to be feared but to be embraced, learned from, and when appropriate, celebrated.

We’ve got a few of our own entrepreneurial tips we’ve picked up along the way, not just from our buyers and sellers, but as brokers building our practices. We’ll be happy to share some with you anytime. Just give us a call!

Business Owners Must Act: Strategy, Finances, Marketing and Administration

Use a Crisis WiselyAny crisis can cause paralysis, and understandably so. People are focused on processing what is happening and they immediately think about the future and what could come in the days and weeks ahead.

Business owners don’t have that luxury to process and grieve: they have to act and do so decisively. Many business owners have done precisely that, but as the Coronavirus crisis threatens to linger even more strategic and surgical action can be taken by business owners across every aspect of their companies.

Here are a few ideas:

Strategy

Once the urgent questions of staff and their working conditions are dealt with, owners can coldly and soberly look at their options.

What does their business plan and forecast look like with a 15 day interruption? 30 days? 90 days? New products and services need to be brought online quickly that can be useful and desirable in the marketplace to counter the ones that are struggling or dying in this environment. A fresh SWOT analysis, updated for the current situation, can help offer direction over the next three to six months.

Finances

We’ve long touted the benefits of a quality banking relationship. This is one of those times such a relationship really shows its worth.

Check in on your payables and see if you can negotiate some longer terms (if you need them). The same spirit of compromise has to be there with your receivables, where the shoe is on the other foot. Where can you preserve long-standing relationships but still make sure you’re being fiscally responsible yourself? Are there any cuts you can make, temporary or permanent to current or forecasted spending?

Marketing

Strangely enough, a time when everyone is home and the internet is the biggest facilitator of daily life, it’s a great time to continue to be in front of your community and potential clients. Local ordinances may require that your physical doors be closed, but your digital doors need to stay open.

Three types of messages you need to be addressing via both email and social media channels:

  • Ways in which your specific customers are affected by shutdowns. Will they be able to continue to get your product or service? Will you be offering any assistance with payments?
  • Ways the local community can be helped. Share the names of your preferred vendors and/or ask your customers on various social media platforms to share businesses that need support and ways that they can be helped.
  • Offering some kind of free or low cost education in whatever you might be specialized in. Traditional cooking schools have moved their offerings online. Restaurants that never offered takeout before have quickly pivoted to add that aspect. You can use the opportunity to share valuable content that might normally be part of your paid services but is a chance to give back at a time when everyone is hurting while also being genuine guerrilla marketing: leading with value.

Admin

If you don’t have an operating manual for your business or it needs a massive update, there’s no time better than a government-mandated lockdown to get a project like that done. It’s a key part of any future exit so why not use this time wisely.

Also be patient with transitioning your team to remote work, especially if you’ve never worked remotely as a company. Your team will need time to adjust, though there are many free resources out there providing tips and strategies to get the most out of a remote working situation.

In all of these departments, and others, focus on solutions that look at the current crisis realistically, neither planning for the worst nor expecting the best, while knowing you’re already making progress in the fight because you’re not panicking, but preparing and pivoting.

We can help you take a look at your business to help make some suggestions on adjustments you can make during this period. Give us a call!

5 Signs You are Burning Out (and 10 Strategies to Fix It!)

Productivity

There’s a fair amount of content available these days on burnout. Far from our future of flying cars that The Jetsons promised us, we’re tapping out email responses while “making a visit” to the one place where most of us have to go at least once a day.

Alas, burnout is not just confined to employees. It’s something that can (and often does) persist in the ownership levels of business. How can you spot these signs of burnout and make the right adjustments? We’ll discuss that in the article below!

1) You’ve got health issues

We can all face the fact that health issues may predate your business ownership journey, but if they have recently appeared, very often there is a link to what is going on at work. This is your body’s way of pushing back on your insistence that you can keep going. Listen to your body.

But additionally:

  • It’s important to manage your diet and have some kind of minimum exercise routine. Your body can’t do everything by itself.
  • Consider taking some time off (as little as a week) to reset and institute some better habits for yourself. Your body and your business will thank you.

2) Your business performance is dropping

We’re not talking about the ebbs and flows of the market and economy. We are talking about the ecosystem of your business. You’re not accomplishing tasks that need to get done and you’re not maintaining or developing the relationships that your business needs to thrive.

You have to get re-centered, and you can do that by:

  • Having a clear set of goals. What does success look like for your business in the short, medium, and long term. Keep in mind that “making more money” is not really an acceptable answer. Be specific, not arbitrary, in setting your goals and you’ll be amazed at how much more attainable they become.
  • Having mentors and/or coaches in your life. We may start a business journey alone, but we’ll never complete it successfully that way. Are you willing to be humble enough to admit you need help, and to seek it out? You’ll be amazed at how insights from others can re-energize and refocus you.

3) You seem to always feel tired

Closely tied to the point above about health issues, proper sleep is a common trait of many top performers. Block out the time you need for a proper night’s rest.

Aid yourself in that way by making sure you are:

  • Delegating enough. Remember that anytime you are performing a task in which you are not the best person in the company at, you are costing your company money. Remove everything from your plate in which you are not the best in the company at performing.
  • Blocking out personal time. Schedule “do not disturb” parts of your day and week in which your mind and body have time to relax. Athletes know that the overworked muscle tears. It’s no different for the “sport” of business.

4) You never feel caught up

We all have to-do lists that will always be added to. That’s not the question. The question is that nagging concern that you’ve forgotten something and that it will lead to a catastrophe in your business. 

Fight this feeling by:

  • Having systems in place. Systems don’t only reduce your to-do list, they also make your business more likely to sell.
  • Say “No” more. People often mistake saying “no” as something negative, but the reality is that we are finite beings with finite amounts of time. Saying “no” means saying “yes” to the other commitments you already have. Failing to appropriately say “no” means multiplying your to-do list beyond your control.

5) You dread work

The whole point of “being your own boss” was to ensure you didn’t hate work, right? So this is an unacceptable place to be. Dreading work can be a prelude to disaster in your business.

So, first:

  • Go back to why you started or bought the business and ask yourself if you are aligned with that. If not, why not?
  • Celebrate victories. We often don’t remind ourselves of those important milestones: getting or keeping a key client, hitting a revenue high, or introducing a new product or service. Celebration is healthy for you and healthy for your team.

Burnout is a danger, but it is not a necessary rite of passage. Indeed you too can be a successful business owner without burning out! Be wary of these warning signs and take the necessary countermeasures and you will be glad you did!

Continued Success in a Mature Market

Continued Success in a Mature MarketA lot of business press focuses on the “next big thing,” or unicorns that roam around (or more often than not, get killed) the rarefied air of Silicon Valley. But you won’t often hear about those “boring” businesses that quietly bring in significant incomes for the owners and employees, because these businesses are in mature, established markets. And while it’s true that longevity (simply outlasting your competitors) is a big part of that success, we’ve identified five key factors that we see in businesses in mature markets that go on to have excellent exits.

Product/Service Quality

While you don’t have to be the best in the world at what you do, or even the best in the country, you certainly need to be among the best in your region or city. This means that people have a reason to talk about you in superlatives when recommending others who might need what you provide.

Customer Service

While there’s always talk about automation and delegation when it comes to customer service, it’s important to make sure your team is as empowered as you, the business owner, when it comes to customer satisfaction. Most business owners, when dealing with a disgruntled customer, want to please that customer within reason. If those in charge of customer service feel that level of ownership and accountability, customers will feel it come through in every interaction (and will rave about it to others).

Clean Processes and Documentation

We say it all the time, but that’s because we can’t ever say it enough: have clean books, pay your taxes, and document how the business works. This doesn’t just make a business attractive for acquisition, it’s a simple method of “housecleaning” that makes businesses more efficient and enables them to create best practices. No employee was ever stressed out about having clear processes with which to do his/her job.

Staff Development

Those same employees need to know, more than ever, that they aren’t just economic ciphers or cogs in a machine. They want to continue to develop personally or professionally. The most successful companies invest in their people as they would invest in equipment or infrastructure. Everyone always talks about wanting to hire the best. These successful companies are actually willing to pay for the best, and that includes benefits that go beyond salary.

Roadmap

We are champions of annual meetings for employees and one of those reasons is the ability to share the roadmap with them. Where are we going? How are we going to get there? If people feel included in a vision and desire to help achieve a goal, they are going to perform better than if they are kept in the dark. Making sure everyone knows what the short, mid-term, and long-range goals of a company are empowers them to contribute every step of the way.

Use the Net Promoter Score to Increase the Value of Your Business

Ten out of TenWe’ve seen the question posed so often after completing a transaction that we know the words by heart: “How likely is it that you would recommend this company to a friend or colleague?”  Unless you had a strongly positive or strongly negative experience, you’ll usually just click past this online or walk past the various happy to sad faces waiting for your judgment at airport security or in bathrooms.

Everywhere, it seems, there’s an opportunity for us to give feedback. But why does this matter for selling a business? Because you’ll be able to give a seller real data, not projections.

Origin of the Question

This question has its origin in Fred Reichheld and his book The Ultimate Question.

Fred is a loyalty expert who found the answer to this question of recommendation provided important insights on the customer experience and ultimately, loyalty. The number, which Reichheld eventually called “Net Promoter Score,” often accurately predicts how often a customer will purchase and repurchase from you and refer other clients to you.

A score of 9 or 10 means that customer is a promoter.

They love what you do and tell others about it. Now, just because someone is a 9 or a 10 doesn’t mean that they will take the time to answer in an online survey. That’s why you have to ask the question in multiple channels until you obtain an answer that can go into your CRM and/or database. When you do, you no longer have projections but hard data.

A score of 7 or 8 means a customer is “passively satisfied” or neutral.

While you might think a 7 or 8 out of 10 isn’t bad (and in other circumstances, it might be not so bad) in the Net Promoter Universe, this is a person who can either take or leave your services. It doesn’t mean that every 7 or 8 can be moved to 9 or 10, but if you aren’t even asking the question, you don’t even have the opportunity to move them up.

A score of 6 and below means that the customer is a detractor of yours.

Worse that the “passive satisfaction” of a 7 or 8, this customer tells others that he/she wasn’t happy with your work and attempts to steer others away from you.

Questions like the one at the heart of Net Promoter Score are treasures in that they give you an opportunity to have a deeper conversation with your customers. Those who are neutral or detractors are actually giving you opportunities to learn. Because you’re asking them indirectly about their experience — not “how was your experience” but rather “would you recommend us” — you are giving them permission to share what they think can be improved.

This essentially free information (free because how much does it cost you to ask a single question of a customer who has already bought from you?) can lead to great changes in your business and possibly an increase in the 9s and 10s in your customer base.

Not only has your business become more valuable with this information in the short and medium term, but in the long term a buyer can see that you’ve been actively soliciting customers for feedback and have built a culture that isn’t afraid to ask customers directly how to improve.

Cautionary Tale #5: “I’m an Owner – You’re an Operator”

One of the key pieces of advice we give to all our new owners is: “Don’t change too much too quickly.” In fact, you should guard against any kind of changes in those early days. You should be soaking up everything you can about the business, learning why it’s gotten so successful such that a person like you has come along to buy it in the first place. But as you might guess, not everyone takes our advice.

A recent cautionary tale came in the form of a business that was open for sixty years. It only took eighteen months for the new owners to put it out of business.

Attitude

CautionAs brokers, we can dispense business advice but often we have to give life advice as well. We could see that the two incoming owners had a “know-it-all attitude”. You can gently try to offer some correctives, but at the end of the day, it’s their life and their business to do with as they wish. But from the get-go, the outgoing owners and the entire company saw that attitude on display.

It started in the morning. The owners would be in at around 7:30 each morning, usually slightly before any other staff arrived. This allowed them some quiet time to do work before the office got busy, but it also allowed them to demonstrate to their team that they took this at least as seriously as everyone else did.

Not so with the new owners. They made sure to get to the gym — not an early morning session — but one that allowed them to roll into the office around 10 or 11. When they did arrive, they didn’t ask for training or orientation, they were just happy to assume the title of management without earning the mantle of leadership.

A perfect example happened when the new owner called out to a staff member to come into their office. When the employee came in, he was handed a sheet of paper: “Please fax this to so-and-so.” After the employee left, the old owner leaned over and said, “We usually do those sorts of things, no need to bother the staff.” Without skipping a beat, the new (and soon to be former) owner replied, “That’s the difference between you and me.  I’m an owner – you’re an operator.”

Departures and Decline

As I’m sure you can guess, that sort of attitude wasn’t confined to private remarks in an office, but leaked out to how the staff was treated, and before long, people started leaving. The front line staff were the first to go, almost all of them left within 90 days. Some months after that, the management team followed suit. As the cash flow dried up, the new owners couldn’t take a salary and worse, had to take high interest loans (without their bank’s knowledge or permission) to stay afloat. From that point forward the death spiral accelerated and before long they had crashed, largely because of their own hubris.

Perhaps being an operator so that you could learn how to be an owner of that business might have been in order?

Whether you consider yourself an owner or an operator, you’d be wise to pay attention in those early days at the helm of a new business. Continue to write down and note exciting ideas you may have for change and growth, but wait until you have a real sense of the business, instead of relying on perhaps your (too healthy) sense of self, before making any changes at all.

You bought the business for a reason. Give yourself time to understand the business completely.

Case Study #29: Replacing Yourself

Replacing YourselfSome years ago, Jim Brown started a software company called TerrAlign. This Sales Territory Management Software designed the best possible territories for sales representatives. They started in pharmaceuticals, but quickly entered into the consumer goods and medical products sectors as well. They would eventually be acquired by a fellow software company, but that couldn’t have happened if Jim hadn’t started the process of replacing himself.

Enter Ken

Ken Kramer had helped design some of the earliest versions of TerrAlign’s software and kept having good interactions with them as a vendor. So when the opportunity came for him to join the company, he took it, and started in partnerships and marketing. He was soon promoted to sales and marketing, and not long after that, was one of three employees that Jim chose to replace his functions as an owner/operator.

This is, of course, the best case scenario: promotion from within of those who have risen through the ranks on merit. They’ve had a chance to build relationships across the company which will only make taking on the new responsibilities easier.

Creative Tension

But, while an owner may be willing to delegate tasks, he might not be willing to let go of profits and cash flow. Ken wanted to use profits to invest and grow the company, while Jim focused on maintaining profitability. Ken had negotiated shadow equity as part of his promotion into the job of president, so while he was frustrated with Jim’s desire to keep things status quo, he knew that circumstances could always change.

Soon enough the ground started to shift. A competitor was acquired after it had been taken private by a VC some time prior. This changed the competitive landscape and led to MapAnything making an acquisition offer. MapAnything was also a software company, but focused on route optimization, so it was a sensible companion product for TerrAlign’s core competencies.

Transition

Ken led the transaction team, though he says if he had to do it all over he would have brought in help (like a banker or broker) to cut his learning cycle down and help him make better decisions. It also (naturally) took away his time from helping to run the business. In the end, his focus was on making sure the TerrAlign team all kept their jobs or had opportunities for new positions post-sale. The terms of the sale weren’t made public, but 1-3X revenue is a normal multiplier for slow-growth software companies.

What Ken couldn’t expect or predict was Salesforce acquiring MapAnything just a few months later. Most of the team was surprised, but given that it wasn’t their company anymore, they could hardly do anything other than try to continue on with Salesforce, which many of them chose to do.

Key Takeaways

  • As we’ve said before, apart from having a solid manual in place of how to run the business, demonstrating that the company can run without you by having a president in place makes it very easy for an acquirer to make an offer.
  • Even if you’ve had the foresight to plan for your own succession, you also have to plan for an acquisition. Jim had brought in Ken to do the former, but stifled him as he tried to do the latter, by growing the company aggressively.
  • Consider getting a broker (we’re a bit biased). As we saw with Ken, we help make the process easier, more educational, and often  more profitable.

Remote Work and the Business of the Future

Remote WorkEven five years ago, most people would not have known a single person who worked remotely. Now, many people know at least one person who has either a location independent job or business, or who has some kind of flexible work arrangement with their employer.

It’s clear that remote work is not a passing fad but a trend that will only grow as technology includes more of our world in building prosperity. That means employers need to realize that remote work is very much the future and figure out how to adapt their businesses to accommodate that.

Nothing Replaces In-Person Interaction

There are some companies that are entirely remote, like Automattic, the company that powers WordPress, and as a result, powers a third of all websites on the public internet (including ours!) They’ve discovered that whatever the joys are of location independence, there’s nothing to replace the camaraderie that comes with in-person interaction. This might mean annual, or even semi-annual or quarterly retreats, whether it be for certain divisions or for the entire company.

We are humans, after all, despite all the talk of self-driving cars and refrigerators that will tell Amazon what needs to be ordered. Whatever steps you take towards allowing remote work, remember that employees need to be together at least occasionally to build the camaraderie that every functioning team needs to perform. Technology doesn’t change human nature.

There are Savings All Around

Just as employers no longer need to take as much office space to accommodate remote workers who no longer need it, so too workers no longer need to spend money on commuting or on business attire expected to be worn in the office. The savings can be reinvested in other areas to help the company grow.

Resilience and Diversity Develop

It’s no secret that remote work requires more discipline than the in-office equivalent. No one is “supervising” you and the couch and television, should you be working from home, can issue never ending siren songs for you to join them.

Remote workers will develop more discipline or lose their jobs. This means your staff who go remote will get an upgrade you can’t get in an on-location employee. The newly developed skills of time management and task focus will spill over into other areas of their work and provide you, after a trial period for the first-time remote worker, with a more resilient team member.

For you as the employer it also means you have more avenues to find potential employees. There are many workers distributed around the world now who are willing to take less pay for equivalent positions in the United States. This is because they’re remote and working in a country in which 50% of the salary they would normally command lets them live at 150% of the lifestyle they did in the United States. This seems too good to be true, but websites like Dynamite Jobs consistently feature Inc. 5000 companies hiring remotely, and sometimes hiring the lower-priced of two candidates because of this gap.

Pay More Attention, Not Less

While it’s true that “out of sight is out of mind,” it’s important to remember that however resilient remote workers may be, they can still feel isolated and lonely. Ultimately unable to reap the rewards of personal and managerial development that can come from a traditional workplace. This requires employers to lead the way in setting aside time to catch up apart from regular virtual work meetings and to make sure their team members know they have an open door to communicate. Remote employees, like on-site employees, want to be valued. Thoughtful and intentional communication is one of the best ways to show you value them.

An Exit Interview for Sellers

Exit Interview for the SellerIn the due diligence process, a lot of documents and statements have to be delivered. What are sometimes forgotten are those crucial discussions about the heart and soul of a business. The information that is difficult to put into even the best owner’s manuals of the most systematized businesses. It’s also true that not all buyers and sellers develop the kind of rapport where an easy discussion about challenges and mistakes can organically happen.

In this article, we’ll offer four possible questions you could ask in a hypothetical exit interview for an outgoing seller as you undertake to replace him or her. The hope is that you can learn key lessons that will help you take the business you are buying to the next level.

What would you have done differently?

Very rarely will this question result in a quick, “Nothing.”  There are people who are either extremely intentional with what they did and proceeded along that line or those who are totally blind to self reflection. Most sellers will take a deep breath, exhale, and pause to think or just as quickly say, “Lots of things.”

The goal of this is not necessarily to capture every single thing that the seller could have done differently. Hopefully you will see a pattern that can help you avoid those potholes or make improvements that the seller couldn’t have. These discussions can also lead to broader philosophical conversations about the business. It’s an opportunity to introduce key questions for the buyer to fire his/her imagination and problem solving skills.

One of our sellers told the incoming buyer that he’d had personality and management style differences with one of the staff. This caused her to resign. But that the seller found her to be remarkably professional and dedicated to clients. He thought she would probably come back to the firm knowing there had been a change of ownership. He happened to be right and the employee returned to the benefit of the buyer, herself, and their clients.

What skill(s) do you wish you had that would have made a difference?

Some skills people are born with. But many can be acquired with diligence and patience.

If a seller confesses a weakness in a skill set that you also share, that doesn’t mean you’re doomed. Obviously, he/she didn’t possess that skill but still managed to build a sell-able business. But it does offer you additional insights and guidance from someone who has been in the position you are aspiring to. It gives you a head start so that rather than realize, “I need to be able to work better in the early evening, when a number of clients check in with us” a few months into the sale, you are told ahead of time by someone who has been doing it for years.

Sometimes, owners were too blind to hire their weaknesses, convinced of the “up by your bootstraps, do it yourself” attitude that parades as humility but is actually (and ironically) a very subtle form of pride. If an owner identifies a skill he/she wishes that you had, that’s a great sign. If something is missing, however, you can begin to brainstorm how to deal with it, including perhaps delegation to an existing employee or a new hire.

Can you share some war stories of experiences with clients or employees?  How you handled it well and/or how it might have been handled differently?

This is perhaps the most controversial question you might ask and one that is taboo in our “we are all scared of lawsuits” society. And the seller is always free to refuse to answer. But this again is part of the honest, goodwill effort for a smart transaction to occur and for a business to continue to grow, and indeed, thrive.

The new owner should be warned about a problematic client or an employee who created a bad atmosphere at the office. Likewise, the owner should be proud to share some times when a big risk was taken in client or employee relations and it ended up very positively for all involved.

We know of a client who had made personal deliveries to their clients on Mother’s Day. Some of those mothers were key factors in his company’s success. While it had been noted in the operating manual as a key part of marketing operations, it was important to share the reactions from those grateful clients. Many had probably never received Mother’s Day flowers from any business they had ever worked with (much less, the seller was told, even their own children!) This personal context is valuable and should be saved and shared.

Who is the most important staff member in the company at the moment? Why?

All sellers dread the loss of staff during a transition period. Sometimes the staff leave for no reason directly related to the incoming owner. A sale just signals a “change” in life and that can trigger a number of things related to their own career trajectory and plans, leading them to believe that perhaps it’s time for a change for them too. Where you have to hope to make the opposite case is with the most important member of the team.

Find out from the owner who this person is, what makes him/her tick, and what’s his/her “why” in relation to the company. After the acquisition, have a heart-to-heart conversation with this person as soon as possible and find out what his/her vision for the future of the company is, and if there are any ways you can incorporate that vision into yours. If so, you’ve just guaranteed a major factor of success for yourself in any business endeavor: retention of key staff.

We have other exit interview questions we’ve developed over the years to help you successfully acquire a new business. Ask us about them today.

Cautionary Tale #4: Waiting for the Next Best Offer

WaitingSome time ago, we had a seller who had a wildly profitable business in medical equipment. He was one of the first to market, and as such had a great competitive advantage and enviable cash flow. In fact, when we first took on his business, he had several serious offers, one as high as $12M.

Unfortunately he was always looking to trade up. Instead of seeing the offer for what it was, which was more than fair given the circumstances, he kept thinking he could get more. He never really got serious with any of these offers. Despite having engaged with us as brokers, he also hated the idea of paying a commission, and so was looking to make his own deals so he wouldn’t have to pay us. We can tell you from experience that doesn’t usually work out well for the seller.

And then…reality happens

The market knows. That’s why it’s the market. Any time someone is making a lot of money, competitors are going to be attracted to the opportunity.  Competitors mean slimmer margins and the end of complacency.

Worse, the technology improved and what he was selling was no longer the newest/best. He hadn’t prepared properly for the upcoming changes and got a bit left behind. When he did end up selling some time later, it wasn’t for the $14M that he wanted or the $12M that he could have had if he had taken our advice. It was for less than $4M. That’s not shabby, for sure, but it was $8M less than he could have had.

To review:

  • When you hire a broker, you’re hiring a professional who has a vested interest in helping you sell your company. Yes, we will get paid for doing so, but that’s part of the deal. If you want to sell on your own, you’re welcome to try, but it’s going to be a lot more work than you expect, and not nearly worth what you think it will be in “savings” of your time or money.
  • Be aware that sometimes you’re making money hand over fist not because you’re special, but because you’ve hit optimum market conditions. Unless you’re going to dig in and make a career of it, it’s wise to take great offers when they come your way instead of chasing the mythical “next best offer.”