The Business Transition Blog

My New Year’s Resolutions (Goals for 2015) #1

I’m going to check my email less often. Here’s why

Check your email only 3 times per day.

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The Habits You Want To Develop in 2015

First we make our habits, then our habits make us – or break us.

Our habits have the potential to be our servants or our masters. Growing up, you didn’t know that. But now you know it to be true.

Your good habits, the ones that others admire in you and you use to your benefit are ones that you might wish you could expand and improve upon. Your bad habits, those that get you into trouble, are hard on your health, cause rifts with other people or stand in the way of your progress, are the ones you wish you could eliminate.

When I first read, Think And Grow Rich by Napoleon Hill, I was struck by six magic words: “We become what we think about.” Over the years I’ve tried to use that to my advantage. I felt that if I could control what I think about, I could control what I become. Choosing my habit of thinking; thoughts of positive expectancy, optimism, persistence, buoyancy, resilience and determination, took me a long way from where I had started.

That meant reading good literature and books that were enlightening and inspiring. It meant listening to books on tape (now Mp3s) and attending seminars with top thinkers and successful people.

Here’s a question for you: Is your future smaller than or bigger than your past? When you look ahead, do you see bigger and better opportunities, or diminishing returns? Are you ramping up, or slowing down?

As you look forward to a new year, consider what habits you’d like to address. Which ones expand your future and which ones cause it to contract? Which habits reinforce what you want, vs. what you don’t want?

What do you do every day, without effort, that helps you to succeed? Remember when you didn’t do that? What did you have to do to make it a habit? In most cases, it was determination, persistence and repetition.

What do you do every day, without effort, that causes you not to succeed at something? What habits prevent you from losing weight, getting fit, improving relationships, building your business to its potential?

If you want a different future than the trajectory you’re on, much of it will be determined by your daily habits. If it’s true that we become what we think about, what are the dominant thoughts in your mind? Which ones are your masters and which are your servants? As we head into 2015, take back control and decide the habits that will expand and create an even better year for you.

Make The Necessary Changes Happen

Here’s my latest article in PROFIT Magazine on using proven Change Process to transition your business.

Please join me for a free educational webinar

If the thought of slowing down or transitioning your business has crossed your mind and you’re looking for information about why and how you should get started, please join me.

If you’re an advisor and deal with business owners who are or should be considering the transition of their business and you’d like to engage them in that conversation, please join me.

If you are the spouse or child of a business owner and believe it’s time for him/her to start thinking (and talking about) transitioning themselves and their business, please join me.

This webinar will:

  • ask 8 key questions that every business owner should be considering,
  • outline the 5 most common reasons business owners are hesitant to address such an important issue, (and what to do about them)
  • explain why talking with your lawyer and accountant is important but won’t get you where you want to go,
  • provide 7 steps you can take right now to enhance the value and strength of your business,
  • explain why only 1 in 5 businesses will get sold and how to increase your chance of success
  • explain how you can leverage your time, making it worth thousands of dollars per hour if it’s not too late.

Date: June 12, 2014

Time: 11:00 a.m. – 12:00 noon.

More information, please go here and here to register.

Thanks,

Wayne

Retirement? Don’t Do It! (At least not in the traditional sense.)

Here’s an article I wrote recently for PROFITGuide.com.

The Positive Power of Gaps – We still need to be active, engaged and have a purpose as we continue to age and look for ways to slow down.

When Should You Cut Your Losses?

Here’s an article I wrote for PROFITGuide.com

An interesting example of good vs. bad decision-making from Thinking Fast and Slow by Daniel Kahneman.

Keep Your Eye On the Ball

Performance is a critical component as you prepare your business for sale or transition and as the owner you are responsible for identifying the performance measures that a new buyer will be looking for and upon which they will judge the value of your business. It’s also your responsibility to keep your eye on the ball and not let performance slip because you’re distracted. That’s one of the reasons you need to start the transition process a few years before you plan to sell, so that you already have the track record and supporting systems in place to manage and sustain a consistently high level of performance.

Reflect on these questions:
• If I were a prospective purchaser of this business, what performance measures would I look for to indicate this was a successful company?
• How many months or years of performance would be necessary to show a positive trend?
• What systems are in place to track performance and enable quick response time if something goes wrong?
• What expectations have I communicated to my management team to let them know my goals and priorities as I prepare for my exit?
• How do I know if these expectations are being filtered down through the company?

Managers were once asked in a survey, “Why don’t employees do what they’re supposed to do?” The most common answer was, “They don’t know what they are supposed to do.”
Too often we make assumptions that employees can read our minds, or through some process of osmosis they understand our specific expectations of what to do, how to do it and what the priorities are. This is tough enough in normal day to day business, but if you expect them to guess what you are thinking and then adjust to the new nuances of a transition plan or your intentions to exit the business, give your head a shake. That’s a naïve assumption.

Use these steps to manage performance:
• Define the key performance indicators that a new owner of your business would look at as part of their due diligence and as part of establishing value. This might include:
o Revenue trends,
o Profit trends,
o Dividends to shareholders,
o Cash flow,
o Employee retention,
o Customer retention,
o Diversity of customers versus dependence on a couple large customers,
o Quality control systems.
• Set specific goals in each area:
o Increase sales by 15% each year;
o Increase profits by 20% each year;
o Increase dividends to shareholders by 20% each year;
o Do an employee survey to establish a benchmark and get feedback on areas for improvement, set specific goals to improve and survey again every 12 months;
o Reduce our dependence on ABC Company by targeting sales in other industries and getting their business to represent a maximum of 15% of our revenue over the next 36 months.
• Communicate those goals to your management team and discuss strategies for making them happen. Assign them ownership of the goals and set up a suitable reward system for reaching them.
• Get your management team to tell you how they plan to reach the goals, how they will measure their progress and how they will communicate the goals to their employees.

If you do it right, the race to sell your company is a marathon, not a sprint. Give yourself enough time to set a goal, prepare, practice, test for efficacy, adjust, practice, test and fine-tune. Once you have performance systems and measurements in place that show consistent, sustainable, positive trends managed by your team, you are in a much better position to sell your business. In the mean time, you’ll also be increasing your personal income and ability to pull money from the business without hindering its growth.
Stay focused and keep your eye on the ball.

Succession Planning – Leveraging Your Assets

You’ve heard company promotions assert that “People are our most important asset.” You may have said it yourself. If there is any truth to that statement, then as you transition or sell your business, “people” – your employees – will play an integral role in running your business while you slow down, or adding value to your asking price when you sell.
For that reason, and because of recent trends, Succession Planning is more important to you now than ever before. William Rothwell’s research indicates a number of trends that make Succession Planning more urgent today:

1. The need for speed;
2. A seller’s market for skills;
3. Reduced loyalty among employers and workers;
4. The importance of intellectual capital and knowledge management;
5. The importance of values and competencies;
6. Managing a special issue: CEO succession.

Because of these trends, the ignorance of which could cripple a company when things go wrong, you need to be prepared. Even at this stage – especially at this stage as you prepare your business for transition — you need a plan that will address the challenge of recruiting, selecting, hiring, training, coaching, developing, and above all, retaining great employees.

INTERNAL BLEEDING
There are four typical and easily identifiable stages employees go through when they join and work with a company. If we assess their engagement level and their proficiency and put it on a chart, it would look like this:

Q 1 – Entry Level
• Highly engaged and motivated individuals
• Keen to learn and do well
• Not yet proficient, competent or productive
• Low performance
• Cost you money – an investment Q 2 – Stars
• Continue to be highly engaged and motivated
• Have learned skills and knowledge
• Have developed good habits
• Proficient, competent and productive
• High performance
• Always looking for ways to be better
• Make you money – return on investment

Q 2 – Stars
• Continue to be highly engaged and motivated
• Have learned skills and knowledge
• Have developed good habits
• Proficient, competent and productive
• High performance
• Always looking for ways to be better
• Make you money – return on investment

Q3 – Falling Stars
• No longer engaged
• Stopped learning new skills and knowledge
• Barely competent – not bad enough to terminate but not good enough to keep.
• Beginning to develop bad habits
• Not as productive
• Make money some days, cost you on others.

Q 4 – Deadwood or Toxic Dumps
• Not engaged
• Behind the times
• Incompetent – should be terminated
• Bad habits
• Unproductive
• Toxic – bad example to all and dragging others down.
• Cost you a lot of money – money down the toilet. Q3 – Falling Stars
• No longer engaged
• Stopped learning new skills and knowledge
• Barely competent – not bad enough to terminate but not good enough to keep.
• Beginning to develop bad habits
• Not as productive
• Make money some days, cost you on others.

Q1 Employees are hired and they enter the four quadrants in the upper left. They’re excited. This is their first day on the job. But initially, even though they might have trade or professional skills, their proficiency isn’t high. You hope these will be your future stars. But initially, they are still untested and a cost or investment to the organization until they become more proficient. Too many people in this category are expensive and may indicate high turnover.

Q2 After a while, depending upon their ability to learn quickly and the complexity of the job, they become both highly engaged and highly proficient. They join Quadrant Two. These are your super stars. They are great. They are responsible and accountable. They do whatever it takes to get their job done. You want to do everything in your power to keep people in this corner. You want to train, coach, support, and promote them, and show them that you care about their professional advancement.

Q3 However, over time in most organizations, some of these people will become disengaged and for a myriad of reasons they lose their motivation. As a result, they are still proficient, but not as engaged. They’ve slipped almost unnoticed into Quadrant Three.
Quadrant Three people know how to play the game and how to work just hard enough to stay under the radar. But at the coffee machine they are busy recruiting people from Q1 and Q2 to their way of thinking. These disgruntled employees spend more time with your new recruits than you or your managers do. The Q3ers are toxic. They reduce morale, lower quality, forget to do machine maintenance, treat customers – inside and outside — as a nuisance, and have high absenteeism. They may or may not be deliberately malicious, but they are no longer an asset; they are becoming a liability.

Q4 After a while, some people just give up and slip into Q4. They stop even putting on the appearance of caring. They don’t take training or stay abreast of issues in their field. They get sloppy. And over time they lose their proficiency as well as their engagement. They have clearly become liabilities. Why are they still working for you?!
This is such a common phenomenon it almost seems pre-ordained. We have described this as “Internal Bleeding.” In our work with clients, we have found that ten to 15 percent of a company’s payroll is often pure waste and could be redirected to improve their bottom line.

Keeping deadwood in your organization is not good for anyone – including the employee. It costs the company now, it will cost you when you sell the company, it negatively affects your good employees, and it is disrespectful of the employee who is not being coached to find more meaningful employment. Implementing a prevention program and dealing with deadwood in your company may well be one of the most important steps you take in preparing your business for transition.

COMPLACENCY – THE KILLER OF NECESSARY CHANGE

Almost everyone was caught off guard by the economic storm of 2008. While there were red flags that are obvious now with 20-20 hindsight, even some economists were still predicting growth just a few months before the maelstrom. Some people were prescient, wary enough to pull out of their stock investments sooner and avoided major losses. Most were not.
Imagine some of the meetings that must have taken place before this big economic crash. It’s June, 2008 and a meeting has been called in the boardroom. Large, ornately framed portraits of the founding fathers adorn the dark walls. The room smells of money. Old money. Permanence. Success. It’s a well established, profitable company.

Today’s meeting has been called by a nervous vice-president. Conversation between the sales manager, comptroller, operations manager, and manufacturing manager is percolating around the coffee pot. “I’m concerned about the trends I’m seeing in some of your reports”, opens the VP.
“We’re down a bit from last year, but I’m not too worried,” the sales manager responds. “My people tell me they have a lot of orders waiting to close in the fall. You know it always slows down a bit in the summer.”
“I’m not concerned at this point either,” echoes the manufacturing manager. “I’ve spoken to our suppliers and they’re seeing a slight dip but I know one of them just invested half a million in new equipment and is planning to increase hiring in the next couple of months.”
“I hear you,” muses the comptroller, looking thoughtful and slightly guarded. “I’ve heard some buzz in our association meetings, but the general feeling is cautious optimism.”
“I just hope it gets a little easier for us to hire people,” complains the operations manager. “If I could hire twenty good engineers, I’d do it right now. In fact, I’m interviewing three this afternoon that look pretty good.”
The VP listened, but wasn’t convinced. The evidence of a pending calamity was not yet clear but her intuition told her something didn’t add up. She had a choice to make. She would have had no idea that her decision to push or not to push her concern forward would have such an immediate and profound impact on her business.

I’m sure this scenario played out in a similar fashion in thousands of businesses around the world. If someone raised concerns about where the economy and therefore the business was going, someone else was equally prepared to smile, pacify him or her, and negate the concern for a need to change. Complacency may well have been the biggest weakness facing businesspeople as they blindly stumbled into the toughest economy since the 1930s.
Complacency and inertia lead to a lack of urgency. Our behavior continues as before unless something interrupts the pattern. Sometimes we all need a wakeup call. Otherwise, committees continue to hold endless meetings without outcomes or expectations. Administrators continue to work on meaningless reports. Even when we look at the facts and wonder if a change is required, our natural tendency will be to overlook clues that may be obvious to an objective outsider. In Joel Barker’s research into paradigms, he learned that we see what we expect to see and will tend to deny or even be physically blind to the evidence to the contrary.

But if we are certain that predictable events will occur, we can prepare for them. The better prepared we are, the better equipped we are to face whatever challenges exist – many of which are, in reality, predictable.
• You will get older.
• You will at some point become less capable of running your business.
• You will one day sell your business – on purpose, or by default.

It’s peculiar that well-intentioned, intelligent, successful individuals can be caught off guard by the simple and inevitable reality of change. Yet many entrepreneurs resemble deer in the headlights when they consider their retirement. They procrastinate, deny the inevitable, and suppress reality rather than prepare for the change that is coming.

It’s difficult to accept our own mortality. But if we don’t, our family will have to.
John Kotter said “Never underestimate the magnitude of the forces that reinforce complacency and that help maintain the status quo.”

Mentoring Your Successor

To succeed in your business, someone must succeed you.

As the owner of your business you have a unique opportunity to mentor others who will eventually take over your business. And who could possibly do it better? Who else knows the history, the ups and downs, the major breakthroughs, the battles won and lost, and the rationale for choosing that very interesting logo?

When you transition your business to enable you to slow down, or prepare it for sale, you’ll want to see your mark left on the business. It’s your baby and you want to be remembered for your personal contribution to its success. The corporate history book should tell your story.

To assure that continuity, you need to share that wisdom and lessons learned with someone you feel can continue the journey on your behalf. Once you’ve identified that individual, you can begin a process of mentorship that will provide a strong foundation for going forward.

You may find your chosen one to be a less than enthusiastic mentee; the proud son who believes he knows more than his ‘ancient’ father; the MBA graduate taking over from the founder with high school education; or the senior employee who has known for years that she could run the business better than the current owner — if only she had a chance. How do you pass on your wisdom without being considered an irrelevant old traditionalist stuck in the past? There are many stories in which the next generation, in an act of defiance and independence goes off on their own path, only to get their comeuppance in the end. Oddly, there’s something comforting in those stories for those of us on the north side of fifty.

It’s true that the younger generation will have ideas and methods that you would never consider but which have merit. And to give them credit, they will have learned things in those courses that could create efficiencies in your marketing, operations or finance departments. But if they are smart, they will also want to understand how the company evolved to where it is now. So make a point to acknowledge the value they bring to the business; their unique abilities and contributions that enable you to consider them for the honour of taking over the business. But if you have chosen your successor well, they should also acknowledge the wisdom that comes from real experience versus the pages of a case study.

Here are some suggestions for beginning a mentoring process with your mentee, if it hasn’t already been established, or to potentially enhance it if you have already begun:

· Be clear in your own objectives and expectations. How confident are you that you have chosen the right successor? If you are unsure, how will you test and measure her capabilities? You may wish to just observe for a while before taking her into your confidence and then establishing hurdles that need to be overcome in order to finally earn the role. What is your timeline? What are the stages that, once met, lead to the next level? Recognizing that she is not you and never will be, what is the measure of success? Once the measure is set, make sure it’s not a moving target that can never be attained. A good mentorship relationship is built on trust not misdirection.

· Be clear in your communications. Tell him that you believe that he has the potential to be the next leader and that you’d like to begin the process of developing him for the position. Give timelines. Set clear expectations. Assess his capabilities. What are his strengths and weaknesses? What development programs can be used to accentuate his strengths and minimize the impact of his weaknesses? In which areas can you be the best mentor and in which areas does he need help from others? Ask him what he feels are your strengths and areas in which he can learn from you. If he’s overlooked areas that you know you can help with, state them clearly and more importantly why they are important to the future success of the business.

· Make time for spontaneous mentoring as well as more regular meetings. Look for teachable moments and opportunities to use real-life lessons to drive home an important principle.

· Show him or her how to succeed. Accentuate the positive. Don’t set traps in order to create a teachable moment. Build trust. Be available. Like a grandparent, show unconditional positive regard. Be tough and stick to your standards. Expect the best and don’t settle for less. Marcus Aurelius said, “A man will rise to greatness if greatness is expected of him.”

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