Entrepreneurial News®

Exit This Way

We helped two of our clients exit their businesses in 2022, and both of them seem to have turned out well.

One still holds 10% of the company stock, and his five kids have 90%, but if they disagree, a feature of the buyout is that they have to get at least 51%, and they need the 10%. We approved this deal. And the former owner has returned to his roots, which is product innovation. We’re doing some research for him to round up some grant funds.

In the other case, the owner sold to his two sons, and has no formal role, but he’s developing his photography business, which he’s had as a hobby for many years, and travelling, which he and his wife have put off for years. So, he’s likely to have another viable business to run, but he can do it around the travel and the travel fits with photography.

The point of these two vignettes is to exit the right way. Here are some other tips (most cribbed from Marshall Goldsmith writing in CEO Magazine):

  1. Continue caring about the long-term strategy of your company.
  2. Do not overstay your welcome as head of your company. You know when you’re burned out, and you’re not contributing to the success of the company.
  3. Do your best to develop great successors. Have the successors work in the family business.
  4. If you have an exciting future after your company, you’ll leave happy. Otherwise, you won’t. I know in both cases above, the former owners are happy.
  5. Plan your post-owner roles. What do you ‘really’ want to do? Take some time off to think about it, but not too much, lest you go stale in your thinking.
  6. Would a venture capitalist invest in your new venture? Did you write down a business plan? (Even if you didn’t do the biz plan for your first company.)
  7. Don’t forget the fun factor. Your next venture should be fun; otherwise it’s too much like work.

What Do You See in ’23?

There’s a lot of talk about a recession in 2023, but we’re not sure we buy it.

For starters, as my uncle Dave Loehwing, the long-time editor of Barron’s would say, ‘if you think you’re going to be in a recession, you will’, meaning that you would pull back from opportunities that you’d take if you were feeling more optimistic.

Personally, when I ran my first company through two recessions, we’d use the opportunity to ‘put the hammer down’ boost marketing expenditures and hire more sales representatives as my competitors were shedding theirs.

We also boosted our support for the sales reps, usually by giving them more pricing flexibility than our competitors did, usually with good results. Yeah, we had a series of people in Los Angeles that specialized in giving away the store in pursuit of market share, but we eventually curbed that.

We also found out that at times we were in danger of expanding too rapidly, when our plans worked too well.

We also did a major product introduction during one recession, which worked very well, because we were able to expand our margins, which helped keep the financial wheels on.

It might be necessary in 2023 to pay more attention to keeping the financial wheels on, because we understand that some of the big banks are pulling back in lending.

On the other hand, smaller banks, seeing what the bigger banks are doing, might see ’23 as an opportunity to pry quality customers away from their competition.

On the government front, it appears that the investment tax credit is dead for the moment, as is accelerated depreciation. Thank you, Fancy Nancy and Chucky Cheese.

Pay attention to what’s going on in your state government too, because they can whack you with state taxes. Not here in AZ, but we’re an anomaly.

We’re starting a new small business program at Solutions Forum which our San Diego licensee has tested and done well with, and launching a new division of our School, called the Small Business Success School, so you can see that we’re putting our money where our pen is.

And, lastly, pay attention to your personnel: keep the good ones, compensate them well, and counsel the less than stellar performers.

So, all in all, we’re keeping the hammer down, listening the customers and our licensees (a good idea came in from one of them this morning) and are optimistic about what we see in ’23.

Southwest’s PR Plan

When I was more of a marketing consultant than a business owner consultant, I used to do a lot of crisis consulting, because no one else was doing it.

So, in that vein, I’d like to offer Southwest Airlines some advice on how to deal with their meltdown over the last few days.

1. Bob Jordan and his team need to be all over the news explaining what happened, as painful as               it may be the admit some serious mistakes. Get out in front of the crisis.

2.Explain what they did with the $7 billion in COVID relief money that they got; did they fix                      operations, keep operations going (likely), go to St. Croix, what?

3. Offer free tickets to anywhere to any passenger that feels as though they or their family was                   inconvenienced by the mess of operations. Southwest has done this in the past.

4. Offer to pay for any alternative routes that Southwest can put passengers on, along with hotels              and meals for those who can’t be alternatively routed. I thought I heard a Southwest                                spokesperson say this, but I haven’t seen a repeat of the offer. It’s standard practice for airlines              to make such an offer, so Southwest should do it, or more.

5. Over the next few months, explain what Southwest is doing to fix the procedures that caused                  the problem. Part of the problem is in Soutwest’s route layout, which is point to point, rather                than hub and spoke, which may not be fixable, but Southwest executives need to explain this to           the travelling public.

6. Run big ads in all the media (print in all your markets, radio and television) you can find with               the apology and the fixes.

There are probably more things that Southwest could do, but the above ideas are ones that we’ve advocated to clients before, and they work.


What Did We Learn in 2022?

Actually, probably not very much.

It seems to us that most of my small business clients spent the year going pell mell trying to keep up with demand and not alienating customers.

So, as a rule, small business didn’t have a lot of time for reflection on what to do differently. Our business, being countercyclical, just kinda went along.

We wrote about a lot of different topics, looking at our category list in our posts to Entrepreneurial News, which increased its circulation again.

I had a couple of clients who introduced new product lines and followed our advice and did well with them.

But, by and large, everyone was keepin’ on.

My associate in San Diego, Peter Bellanova, found a segment of business that isn’t doing as well, the businesses from just above zero sales to about $1 million per year, so we’re going to see what we can do to help. Peter started his Solutions Forum group and individual consulting in this segment in late 2022, and we’re going to start in early 2023. If anyone wants to emulate us, call me at 480-200-5678 and we’ll tell you what the program is in broad general terms. We won’t get specific until you become one of our licensees.

So, we wish you a prosperous 2023, and we’ll be here if you need us, as we’ve been since 2003.


How Not To Run A Credit Card Company

Back in the day, I was a controller of six small divisions of Ford Credit, one of which was Consumer Loans.

Our philosophy was lend money to support the sales of Ford cars, trucks and even tractors and farm implements.

And we made very good money doing it: rates were high in the states in which we operated, such as Arizona, and even with higher losses because of aggressive lending policies, we had the highest returns on equity in Ford.

So, here’s Synchrony, a credit card company operating out of Florida and favored by dentists and doctors for lending for procedures.

I wanted to reopen my Synchrony account to pay for some dental work I recently had done. Submitted all the paperwork digitally, answered all the questions, and they just couldn’t bring themselves to reopen my closed account. And I have a mid-700 credit score.

The Synchrony policy strikes me as nutso. Their simple answer would be to update my account and provide the credit. That’s what my other three credit card companies would probably do.

But no go with Synchrony, so they lose $700 in earning balances, and wind up with a blog criticizing their lending practices. One wonders how many other profit making opportunities they’ve forgone.

Ah well, can’t cure stupid.

NFIB Iffy on Recession

Chad Heinrich (no relation) the Arizona state director of NFIB (National Federation of Independent Business), said today in a public relations release from National NFIB that the chances of a recession are iffy nationally.

As we sit in our little paradise down here in Arizona, we seem to be doing better than the average NFIB state.

None of our Solutions Forum clients has laid off anyone but they have replaced some subpar performers.

The personnel shuffling can’t have been too bad, because no one has said anything about being hauled in front of the state Labor Commission.

And we have been vocal in advising our members on how to counterract the recession by outmanueversing the competiton. It’s a strategy that’s time proven, although sometimes it takes a strong stomach to go against the grain. You might not get invited to the Chamber bash, but then you might be speaking at it. Oddly enough, or maybe not, no one has asked us to speak at their Christmas bash, but that’s ok.

So, it’s still head down for the balance of this year!

Hire and Promote Right

A couple of posts ago, we wrote that the ‘Quiet Quitters’ should be weeded out before year end, which is now.

We see from all sorts of layoffs among big companies that they’re taking the message to heart.

And many of the larger companies are concerned about a recession.

Frankly, down here in our little paradise of Arizona, we don’t see it. But that’s a topic for another blog.

Having slimmed down your workforce, how should you hire new people?

First, don’t be in a rush to hire. Get the right people. Even though the labor market is tight, and you might have to pay a little more, get your hiring right the first time.

Second, use Indeed and Zip Recruiter to provide a supply of candidates. We did a hiring project for one of our clients earlier this year, listed the positions on both sites, offered another $1 per hour and got all of the people we needed, and then some.

I advised my client to ask a certain set of questions over and above what I and Z do, to further refine the search. He did, it was slower, but as far as I know, all the people are still working for him, 9 months later in a tight job market in a hot economy.

Firing people is expensive: you’ve got severance costs in pay and benefits, possible lawyer costs if they go to the labor commission lost money invested in training costs,  and you’ve got to spend time and a little money to replace the people, if you think you need to, and train them.

So, get hiring right the first time! Don’t be in a rush to hire the first warm body that answers the ad!

Tim Cook’s Oops

Fox News has been playing Hilary Vaughn’s attempt to get a short comment from Tim Cook, the CEO of Apple.

IMHO, Cook’s refusal to talk to her is a major public relations OOP.

Tim resolutely ignores her, which is his first mistake. As a favored rep for Fox News, she’s highly influential, and asks good, not ‘gotcha’ questions. So, talk to her.

Hilary probably wanted to ask about the cessation of the Air Drop program in China, which is a highly effective method for the Chinese rioters to communicate. Second mistake. There are probably a lot of Apple customers among the rioters, who want to use Air Drop.

Apple probably stopped Air Drop in China to avoid angering the Chinese government, who might toss Apple out of China.

But, Tim, if that happens, you say, ‘We’re with the people of China and we’re turning Air Drop back on.’ There are lot more customers beyond the Chinese government. The government isn’t too popular with the people at the moment. So, the turn on is a calculated risk worth taking.

If the Chinese government threatens to ban the sale of Apple products, you say ‘We’ll find a way to get Apple products into the hands of our loyal customers.’ Can you spell ‘black market’?

The moral of this story is put and keep your customers first.

Tim blew the chance to score a major public relations victory for Apple. No guts, no air medal, Tim.

Bravo, Shell!

Saw an ad for Shell, the big Anglo-Dutch energy producer, announcing that they were going to be building electric vehicle charging stations in their US gas stations, which I’m sure will be welcome news to the folks who drive electric vehicles.

They don’t have many locations yet; the example shown is in Fulham Road, which I believe is in the Atlanta, Georgia suburbs. The chargers are located where Shell has fast food operations, so the pitch is that you can get your car at least partially charged while having a burger.

Shell has plans to put at least one charger in each of its gas stations. A classic case of serving the customer in whatever he/she wants to buy.

Note to Shell: I have a former client who owns five Shell stations in Arizona, so if I can help with the rollout in Arizona, I’d be pleased to do it.

So, Bravo Shell for thinking of all its customer energy needs.

People, People, People

Some wags have said that businesses would run better without people to gum up the works.

Many techies have spent many hours on projects to either eliminate people or reduce them.

However, businesses who have top quality people and treat them well perform better.

We have some courses on people in our revised curriculum of the American School of Entrepreneurship, and we expect them to sell well. As soon as we get the website done, we’ll post them. The content is done, but not in all cases recorded.

But, in the short run, there are some steps you as the owner can take to improve effectiveness:

  1. If you have ‘quiet quitters’ somewhere in your organization, have your supervisors or you pull them aside and find out why they’re not motivated.
  2. Go through all your personnel and decide who’s cutting it and who isn’t. You should have standards (Key Personnel Indicators) for each of your positions. Talk to the subpar performers to see if you can improve their performance.
  3. Take a look at the training you give supervisory personnel, by talking to the people they supervise. Maybe you don’t have any formal supervisory training. We have this in the works. It’s mostly common sense, but you’d be surprised at how much this is ignored.
  4. While you’re reviewing personnel, do a 360 anonymous survey of what they think of the company, where it’s going, and even you. You might be surprised.
  5. Do some ‘Ask Me Anything’ Friday afternoon roundtables. Again, useful information should be gleaned.
  6. Pass out some awards for superior performance. Don’t just dwell on the negative.

As I review what I’ve written, I like it. So, we’ll probably record it for the School.