Dirty Secrets of Small Business Adam Sonnhalter

In This Episode

Whether you’re currently contemplating starting or buying a business or if you already own a business, one question you might be asking yourself is if you’re cut out to be a business owner.  Depending who you talk to you might hear things like “people are born to be entrepreneurs” or something similar.  Don’t always believe the hype!



During the show we talked about different pathways to entrepreneurship and business ownership.  While there are some folks who have almost always been their own bosses, most folks discover somewhere along the way that they’re just not that employable.  Don’t worry it should be a t-shirt we have to wear!  So the question becomes how do you know if you’re one of these folks who should be an owner vs. an employee?  Here are a couple of questions to ponder:



* Clock Watcher: are you someone who works hard but when it’s quitting time it’s quitting time? If that’s the case, chances are you’re a very valuable employee for your organization.  As business owners know, there is no time clock when it comes to business ownership as the business will always be on your mind.

* Need Supervision: do you act the same or differently when someone is watching vs. not watching you? You may hear it called something like being “self motivated” or “self directed”.  If you’re a self starter but could use a little supervision to get things done, chances are business ownership isn’t necessarily for you.  One of the beauties of owning your own business is that you don’t have to listen to other folks tell you what to do, but if you need some supervision it might be best if you stay as an employee.

* Failure vs. Learning: are you living in fear of failure or making mistakes? Or do you take more of the Thomas Edison approach that each failure is really a learning experience and gaining knowledge about what doesn’t work?  Most business owners, even ones with decades of experience, make mistakes/learn lessons daily.  The best ones not only learn from their own mistakes but those of others as well.  If you prefer to try things vs. being afraid they won’t work out then chances are you’re more likely to succeed as a business owner.

* Help: is asking for help something you avoid or embrace? One of the dirty secrets of owning a small business is that folks figure you have all the answers.  When in reality your job isn’t to have all the answers, but instead to know how to get the answers.  This usually starts with taking a humility pill to admit you don’t know everything and ask for help.

* Permission or Forgiveness: are you the kind of person who follows all of the rules? Or do you understand that all rules aren’t created equally. Some rules are hard and fast but most are just guidelines or suggestions. So do you like to ask for permission or forgiveness?  Are you willing to learn to ask for forgiveness?  If this statement made you uncomfortable then chances are you should stay with the safety of your job.



We talked about these and other items to help you figure out if you’re the business owner type or not.  If you’re still not sure, perhaps it’s time to make the leap.

People, Companies and Resources We Mentioned in the Show



* The Office (https://www.imdb.com/title/tt0386676/)

In This Episode

If you’ve owned your business for several years, chances are someone at some point has talked to you about a business valuation.  Either someone has asked you directly what your company is worth or the idea of your company’s value has come up in conversation.  The question we address in today’s show is just how valuable is a business valuation?



Like many things in life and business the answer is it depends.  It depends on what you use the valuation for.  If it’s for something like getting key man life insurance or for a buy/sell agreement with your business partner then a valuation can often be helpful.  But if it’s something you want to use to sell your business, it might not be as helpful as you might think.



During the show today we shared several stories about valuations and how they were helpful in some instances but when it comes to to actually buying or selling a business, they can be pretty useless.  You as a small business owner will likely be speaking with folks who live in a theoretical or hypothetical world which can be really frustrating for those of us who live in the real world.



At the end of the day what a real buyer and real seller care about is how much cash flow does the business provide on a regular and predictable basis.  You’ll likely hear terms like Seller Discretionary Earnings (“SDE”) or Owner Discretionary Cash Flow (“ODCF”) which are nothing more than the cash generating ability of your business.



So if you’re contemplating selling your business, you’ll likely have someone suggest that you get a valuation performed on your business.  Just take it as a point of reference because at the end of the day the true Fair Market Value for any business requires a willing buyer and a willing seller.  Just because someone runs a bunch of numbers through a spreadsheet to come up with a “value” for your business doesn’t mean a deal will get done at that level.

People, Companies and Resources We Mentioned in the Show



* Spardata (https://spardata.com)

In This Episode

Most people’s only experience with firing someone is watching Donald Trump say “You’re fired” on the TV shows The Apprentice.  If you’re one of those people you may think it’s no big deal.  I mean the person is being terminated for a reason, right?



Even if there is a good reason it is still difficult in a small business because you likely know a lot about this person.  Chances are if they are a long-term employee they will feel almost like part of the family.  So you want to do it the right way and like many things you’re doing for the first time it can be hard to know if you’re doing it the right way or not.



During the show today we covered some of the nuts and bolts for terminating someone.  As you might imagine, a big part of the process is trying to take as much emotion out of it as possible.  Easier said than done.  We focus on a couple of key points:



* What’s Best for the Organization: this is always a great question to ask when trying to make a tough decision in your business and you want to try to take as much emotion out of the decision as possible. In the case of terminating someone it helps to ensure you keep the other folks who are impacted in mind.  That includes everyone from your other employees to customers and vendors.  Will the termination of this employee make the organization better or worse?

* Be Decisive: chances are if you’ve been thinking about it and talking about this person a lot, that’s a good sign that perhaps it’s time to cut ties. So make a decision and move forward.  It’s unlikely you’re going to have a successful reclamation project where whatever was driving you nuts about this person will suddenly go away.  The sooner you do it the better.

* Be Brief: let the person know they are being terminated but don’t feel the need to go into great detail for why they are being terminated. Let them know the next steps in the process including things like paperwork you need them to sign, any potential severance package, outplacement services, etc.  The sooner their last day the better, no need for a 2-week notice.

* Be Prepared: be ready to operate as if this person isn’t part of the business any more. If they are involved in key portions of the business (e.g. delivering your product/service, billing/collections, etc.) be sure someone else is ready to go so the process is relatively seamless from a day-to-day business standpoint.  Your key people should be made aware ahead of time before you terminate the employee.  Also be sure to have someone in the meeting with you aside from the person being terminated.  They don’t need to say anything, just be there as a witness and perhaps some moral support.



While it never gets easier to terminate someone, you will get better at it the more experience you get.  The most important part is that you’ll get better at recognizing when you need to move on from someone more quickly.

People, Companies and Resources We Mentioned in the Show



* Donald Trump (https://en.wikipedia.org/wiki/Donald_Trump)

* The Apprentice (https://en.wikipedia.org/wiki/The_Apprentice_(American_TV_series))

* Major League (https://en.wikipedia.org/wiki/Major_League_(film))

* Terminator (https://en.wikipedia.org/wiki/The_Terminator)

* I Love Lucy (https://en.wikipedia.org/wiki/I_Love_Lucy)

* Jerry Maguire (a href="https://en.wikipedia.

In This Episode

Many folks are confused why business owners have trouble stepping back and selling or transitioning their business to the next generation of ownership.  We have found in our decades of working with small business owners transitioning to the next phase in their life that one of the biggest items holding them back from exiting their business is finding ways to stay relevant.



This is a battle that many business owners fight in private, mostly in their own minds.  Folks on the outside look and say why wouldn’t you want to just step away from always being the center of attention in your business.  Like many things, it’s hard to just quit cold turkey.  So if you’re a business owner considering transitioning away from your business but you aren’t sure how to step away from your business and find relevance, then today’s show is for you.



This maintaining relevance thing isn’t just for business owners.  How else do you explain folks like Tom Brady and LeBron James who continue to perform at a championship level well past their supposed primes?  The good news about being a business owner is you usually don’t have to maintain a professional athlete’s physique.  But just like those professional athletes, you’ll want to come to grips with the fact that your days as a business owner are numbered and you should be spending some time and effort preparing yourself for what comes next.



A good place to start is figuring out what it is you like about running your current business.  It could be something as simple as having a place to go every day.  Chances are there are other things you enjoy about owning your business which likely includes the people side of things (think employees, customers, and vendors).  So how do you replace all of those interactions with people.



One option we discussed during the show are ROMEO groups.  Even if you don’t know what these are, we can almost guarantee you’ve seen some of them.  ROMEO stands for Retired Old Men Eating Out!  Stop by your local coffee shop or McDonald’s on a weekday morning and you’ll likely see a table of folks sipping coffee and chatting about everything from the news of the day or the good old days.  If you go out at lunch or the afternoon you might want to check the local golf course or watering hole and you’re likely to find another group of “retirees”.  If you’re like most business owners we know, groups like this sound miserable and are a big motivator to keep running your business.



How about volunteering?  Start with things you’re involved in now from a volunteer standpoint and see if there is more you can do.  Adam talked about his involvement with Rotary and also shared how his dad got involved with SCORE which has allowed him to share much of his knowledge and experience with future generations of business owners.



Next up is family.  Perhaps you have some grandkids you’d like to see.  Or make up for some lost time with your spouse and kids.  That all sounds great in theory but you better check with them first.  Believe it or not, most of those folks aren’t sitting around holding their breath waiting for your to retire.  In fact most spouses hate it when their spouse is now available and “in the way” of the routines they’ve set for themselves.



Same thing goes for traveling or just sitting around watching day-time TV.  The lack of a clear idea of what you’re going to do after stepping away from the business is one of the biggest reasons owners have trouble stepping away.  Much like the athletes we discussed, it’s hard to find the rush and excitement you get from running a business in other walks of life.  But there are still plenty of ways for you to maintain your relevance.  It just takes a little digging to figure things out!

People, Companies and Resources We Mentioned in the Show



* Tom Brady (a href="https://en.wikipedia.

In This Episode

It’s rare that a small business owner wakes up one morning and decides it’s time to transition their business to the next generation.  It’s something they usually think about for a while, likely many years before they are finally ready.  But once they decide they often want it to happen yesterday.  But before the current owner leaves they want to make sure the next generation knows everything they need to know about the business.  So how do you figure out where to start?



If this describes you at this point, take a deep breath and slow down.  As you’ve heard us discuss before, your primary role as owner and CEO is to Plan Direct and Control the business.  So this is what you want to be teaching the next generation.  Unfortunately too many owners focus more on the delivery of the Products and Services of the business vs. the Planning Directing and Controlling part.



When we coach families on transitioning their business to the next generation we use our 7 Keys to Success framework to guide the discussion.  This helps to keep things focused on the most important aspects of the business.  Chances are the next generation is pretty knowledgeable and might even be better at the delivery of the company’s Products and Services than the current ownership at this point.  It’s all that “business” stuff that is really important.  Enter MVP’s 7 Keys.



The goal is to get the next generation to master these 7 Keys.  Usually one of the 7 needs a little more love and attention than others but the key is to get started on mastering all of them.  The numbers are pretty important so things like the Profit Plan and Cash Flow Forecasting are key to understand and bring some calmness and clarity to the organization.  It’s also key to understand how business is generated and how the Marketing Plan can drive increased sales and profitability.  And the next generation can’t do it all on their own so what kind of people need to be added to the Organization to provide them the kind of support necessary to be successful.



And that’s all before we even talk about structuring and paying for the buy out of the business which is likely going to be funded in part or in whole by the current generation.  Wouldn’t you feel better as the soon to be prior owner if you knew the next generation was running the business in a way that will guarantee your future payments and keep you from having to jump back into the business?

People, Companies and Resources We Mentioned in the Show



* MVP’s 7 Keys to Success (https://maximumvp.com/7-keys-to-success/)

* Spock of Star Trek of Mind Meld (https://www.startrek.com/database_article/mind-meld-vulcan)

In This Episode

If you’ve ever been involved with the buying or selling of a business, chances are you’ve heard of a term called seller’s remorse.  Even if you haven’t been involved in a deal it’s likely you’ve heard about it or seen it.  And it doesn’t matter how large or small a deal is, it can happen to anyone…even a billionaire.



The simplest definition of seller’s remorse is the person who was planning to sell the business no longer wants to sell it.  And there are a variety of reasons why that might be the case, most of which aren’t logical but emotional.  That’s why one of the first questions we ask any business owner who is contemplating the sale of their business is what are you planning to do next.  When we hear a response that includes something to the effect of, “I just want to retire and fill in the blank.”  It could be that they want to travel, spend more time with family, volunteer, or something else.  This is usually a big red flag that this person really has no idea what they’re going to do when they aren’t running this business any more.



Here are a few things to look for to better understand what might be causing the seller’s remorse and how to overcome it:



* Price: so many folks assume that a deal doesn’t happen because the price wasn’t right. More accurately stated, it’s not the price the seller was looking for.  As we’ve discovered in the small business market, typically what a seller things their company is worth has little to do with the actual operations and profitability of the business and has more to do with things like how much money and time have been invested in the business, how much money they owe to lenders, or some magical number they feel they need to retire.  So while price is important, it isn’t everything and often isn’t even the main thing resulting in seller’s remorse.

* Now What?: we see it all the time with small business owners who talk about wanting to sell or transition their business to the next generation but that potential seller isn’t sure what they’re going to do next. That “R” word of retirement and what does it really look like?  For an entrepreneur who has been working since their teenage years and after running this and perhaps other businesses for decades, it’s hard to quit cold turkey.  If the potential seller doesn’t have an idea what they’re going to do next then beware because this deal is unlikely to happen…unless you make the owner an offer they can’t refuse!

* Who: this might sound silly, especially to those people who have never worked in or with a small business owner, but maybe the seller isn’t fond of the potential buyers. This business that the seller has built over the years becomes like a child that they birthed and grew and now they’re looking to hand it over to someone else.  That someone else has to be the right person who will continue to care for the business and its employees, customer, and vendors in a way the current owner has over the years.

* Unfinished Business: a lot of times the potential seller doesn’t even really want to sell. Instead they’re going through this process because they’ve “advised” by those around them that they should sell at some point.  And while the current owner might agree in principle, they really aren’t ready to sell because they feel they have more to accomplish with the business.  You see, there are certain things that don’t apply to small business owners.  Things like a “retirement age” and it’s usually because the owner is enjoying owning and running the business day-to-day.

* Sacred Cows: kind of related to having the right buyer, it’s often the case that the seller has some sacred cows in the business. Often it relates to certain employees or other folks they want “taken care of” after they leave.  It can often go as far as the seller trying to negotiate it into the deal.  As you mig