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September 2010

Getting in Touch with Your Producers

Nothing says “autumn” quite like biting into a crisp apple. In fact, now is the perfect time to find a variety of fresh fruit and vegetables, and there is no better place to take advantage of the fall harvest than at the Downtown Farmer's Market

Farmers MarketThis local treasure features more than 200 vendors and gives residents the chance to purchase fruit, vegetables, meat, baked goods and other healthy items directly from Iowa farmers. The popularity of farmers’ markets has increased nationally in recent years, and for good reason. The U.S. Department of Agriculture outlines their benefits:

  • Consumers are encouraged to try new, healthy food
  • Eating locally can be better for the environment as products do not travel as far
  • Food that is fresh and in season tastes better
  • Individuals are able to meet the farmers that have grown their food

As most of what we put on the table usually comes from the grocery store, this last point is especially important. Food is essential, and yet most of us don’t know where ours comes from. By visiting farmers' markets, we become closer to what we eat. We support local farmers and strengthen our communities.

In the same way our bodies are fueled by healthy food, our organizations are fueled by the individuals who work in operations and production. These are the people who produce the goods we provide, carry out the services we offer or make sure our workplaces run efficiently. Again, though these employees are vital to our businesses, we may not always be very connected with them.

Farmers’ markets and supporting local businesses in general are partly about building a sense of community, and Henry Mintzberg, professor of Management Studies at McGill University in Montreal and Harvard Business Review contributor, says that business leaders must do the same. “Community means caring about our work, our colleagues, and our place in the world, geographic and otherwise, and in turn being inspired by this caring,” Mintzberg explains.

He adds that it is important to bridge the gap between management and other employees in order to re-engage them and form a more collaborative business environment. Visit the employees who keep your organization running, see what they do and talk with them.

Still, simply talking is often not enough. Ken Blanchard, author of several best-selling leadership books including The One Minute Manager and chairman of Ken Blanchard Companies, and Terry Waghorn, executive consultant and author of The System, offer the following tips for communicating with employees:

  • Build a team – Remember that every member of your organization is important; and ensure that all departments work together.
  • Have a higher purpose – Your business exists to do more than just make money, so communicate your goals to employees and welcome their feedback.
  • Encourage open communication – Those who work in operations and production may have fewer chances to offer their opinion, so create these opportunities and always listen.
  • Provide positive reinforcement – You realize how vital these individuals are, so remind them that you and the organization appreciate their hard work.

Take the time to get to know the employees who help keep your business moving forward, and also take a trip to a farmers’ market this fall. The Downtown Farmers’ Market is open every Saturday from 7 a.m. until noon through the end of October, and smaller markets can be found all week throughout Des Moines. Get to know what fuels your body… and your business.

Don't let your competition call the shots

 

It's tempting and easy to get caught up in the "what's the other guy up to" game.  And today, with technology, it's pretty easy.  

You can track their ads, monitor their website, get your mom on their mailing list, subscribe to their e-newsletter with a gmail account...and not only will you know what they're doing but you will drive yourself insane.

Every time they zig, you zag.  Each time they run a special, you run a better one.  Or...they show up in the same places you do (networking events, publications, et cetera.) so you decide to get out of Dodge.

What's the problem with all of that?

THEY are deciding (by proxy) how you should market your company.  Not you.  You're playing their game and they are calling all the shots.  You're sitting in the back seat -- going along for the ride.  Pretty hard to take control from back there.

Want to play it smart?  

Build and follow your own marketing plan.  You define both the game and the rules.  And play it out to the best of your ability.  Sure...keep track of what the competition is up to. But don't let them pull you off track.

You focus on what makes your product/service relevant, unique and wallet worthy.  Do that and pretty soon your competition will be the one in the back seat, trying to keep up with you!

Drew

P.S.  This video is a TV spot from one of my all-time favorite ad series.  Enjoy!

 

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Focus Your Brand Compass to Sail Around the Competition

Bamburg compassImage via Wikipedia

I recently have consulted with two executives that left Fortune 500 companies in Chicago to consult in the area of business strategy.  They both share the belief that small and medium sized businesses leaders can consistently make better business decisions if they implement some big business management tools.

Fortunately, after several weeks of working with them on their own business development plans, they discovered that they had incompatible brand ideas.  Their differences were not necessarily obvious.  On the "brand compass," they were perhaps five degrees apart.  They made the wise decision to build seperate businesses.

If they stayed together, rather than branding themselves well, they risked getting pulled into the ocean current of indistinguishable competition.  Congratulations to them both!

Ironically, they will not be competitors!

Although their expertise, service, and benefits of both can be characterized as the same, they will focus on selling their services to very distinct groups. They may even wind up referring business to each other.

FIve degrees apart matters a whole lot!

So, in areas other than "customer service," how can you set a course to sail out of the ocean current of indistinguishable competition?  How can you be five "relevant" degrees off course from your current competition?

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Make It Easy to Move the Piano

Steinway Welte-Mignon reproducing piano (1919)Image via Wikipedia

Sam Ewing said, "Hard work spotlights the character of people. Some turn up their sleeves, some turn up their noses and some don't turn up at all." Of course, those who "turn up their sleeves" receive most of the rewards in life. They produce. They get things done. They work hard. As managers, we know we can consistently count on them and are more willing to cut them some slack when they're in a bind.

In the workplace, there's really no substitute for getting things done. It's the bottom-line of organizational life. Don't we wish that everyone on our team consistently met production goals, project deadlines and job responsibilities?

Sure. But what if they don't?

Once not getting things done surfaces as an issue, it's awfully easy to begin to look for reasons, and to begin to find other problems -- either real or imagined. Next thing you know we've villainized the person and feel like giving up on them. We don't have to let that happen.

Here are three things a manager can do to make it easier for others to work hard and produce results:

  1. Identify mission-critical priorities. Help the under performer find the three to five things that most need to get done to achieve their goals. This provides focus, and focus helps achieve results.
  2. Set measurable goals. Make them clear and specific so there is no doubt on anyone's part what "results" and "success" will look like.
  3. Set mini-deadlines. Ensure that progress is being made, unlike a rocking horse which keeps moving but doesn't get anywhere.

It's been said, "Too many people are ready to carry the stool when the piano needs to be moved." Don't let someone get by with only picking up the stool. Make moving the piano easier.

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Find The Time For Change

3847359211_6334afa358 I facilitated a session at the Gathering of Games annual conference a few months ago that consisted of a panel of company leaders.  A participant in the session asked the question "How do you find the time to create change?"

This led to a lively discussion about purpose and leadership. And if those things are important to the organization, you find the time.

If you want different results in your organization, then you must find/make/create the time for the change that is needed to do so. In many cases it starts with leaders finding the time to create new conversations, setting the example, and making themselves available to the employees.  In the words of Nike "Just Do It!"

Flickr photo by m!

Securing Equity Investors

An assortment of United States coins, includin...Image via Wikipedia

Before you contact potential equity investors, if debt will be part of the company's capitalization plan, you should consider getting in touch with your bank or leasing company. You should have a plan outlining the company's basic business plan, which should include the pro forma financial projections that will be used in your presentation to possible investors.

The objective will be to gain indications of interest from the debt side of the capital equation.  Obtaining a conditional letter of commitment from a bank or leasing company and adding that letter to the company's offering documents will carry significant weight in the investment proposal.

For instance, if the bank requires more equity as a percentage of total capital, you will need to rework the numbers to accommodate the bank's request and resubmit that proposal.  If you are looking for $1.5 million of total capital with a proposal such as: "If I raise $500,000 in equity capital, will you loan me the balance?" The banker may say, "Your proposal would be considered generally unbankable, but if you raise $1,000,000 in equity we will loan you the $500,000 in debt." Your next step would be to immediately get the conditional signed letter of commitment from the lender and then rework the pro forma financial projections to reflect the revised debt to equity deal structure.

It is critical to emphasize the importance of obtaining the written and signed letter of commitment. If debt will be a large part of your plan, you should not proceed without one. In an investor's mind, a letter of commitment from a lender is like the Good Housekeeping Seal of Approval. In the eyes of the investor, the transaction has been validated and is further assurance of a successful project or venture. This will greatly increase the response rate from your investor pool and ultimately increase the probability of obtaining the full capitalization amount. 

- Steve Sink

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The secret to automation, doing it manually

Pepsi TruckImage by bsmith4815 via Flickr

My first career was in the mobile computing industry in the early 1980s. We automated business processes that route truck drivers performed many times a day for companies like Coca-Cola, Pepsi, Schwan's Ice Cream and many many others. For a 23-year-old old computer programmer straight out of college, this was an incredible experience.

Withing the first year, I had several thousand users running my code. One of the most important lessons I learned from those days was the truth that you cannot automate business processes that can't be manually performed. Further, if you cannot clearly define each step in the process, you will waste a lot of time and money getting to the automated solution. 

For the small business person starting or growing their business, this is a key lesson. When working with clients these days, I see too many that are buying automation services to solve issues they have yet to define. So here is the point:

Knowing you have a problem does not mean you can solve the problem.  With or without technology.

I see this often with CRM systems. Business people know they need to keep track of customer information and leverage it to market. They will rush out and buy a CRM system, move all their data into the system and then stop.  Only then do they decide what they plan to do with the system and specifically how they will do it.  Many find only too late that the purchased the wrong system and must start over.  If they have the money to do it twice!

When you are looking at automation to solve a business process, practice what Apple and IDEO do.  Rapidly build prototypes out of what ever you have.  If you have paper and pencil, draw out the process with all possible branches and paths.  Then think up ten different scenarios that use the process and walk through the written process to test that it works.  Ask others in the know what they thing about the process.  Will it work?  What did I forget?  Ask your customers, if the process relates to them.  Next, try to build a quick automated tool using something you know like excel to further test the process.  You will not be able to build a complete long term solution but it will help you work through the issues once the process is on a computer. 

Only after you are sure what the process is and that it will solve the problem, should you invest in new technology. 

What processes have you automated that worked great?  That did not work at all?

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An Offer You Can't Reuse

Godfather I admit it: I have a strange relationship with most IT (information technology) departments. Yes, I started out as a COBOL programmer many years ago, so I understand the mindset. Still, the more I get involved with IT staffs on projects, and especially CIOs (chief information officers), the more I'm left scratching my head.

Let me ask my readers this: who drives the projects within your organization? Is it IT and the CIO, or is it the business side of the house (those departments whose activities generate revenue)?

Often, I see IT departments run like an organized crime family, calling the shots on what gets done and what doesn't. However, what is the business VALUE they provide in the projects they choose to pursue? Often, when requirements are driven by the IT department, you run into a lot more fluff in your projects than necessary. As the MicroFocus blog indicated recently:

Industry analysts estimate that around 80% of all software rewrite costs can be avoided at the requirements stage*, and that the majority of eventual project failures are caused by poor requirements practises. Another major cause for concern is the number of rarely- or never-used features in new software applications – according to some studies, as much as 45% of newly developed features are never used**. Eliminating these problems is therefore a key priority for CIOs operating in straitened economic conditions and having to focus on maximising value from every dollar they spend.

This means that when figuring out the scope of the project, if the requirements are left unchecked, about half of what is implemented is useless. This begs the question of why business departments allow IT to get away with dictating what projects get attention in the organization.

I think the answer lies in a post Oliver Mallassi published a couple of weeks ago. In sharing his own software project horror story, he hints at one of the major misconceptions which many IT departments perpetuate: FEAR.

"Do it our way and nobody gets hurt."

"We're the only ones who really understand how things work."

"Don't you trust us?"

Mallassi quotes one of my favorite authors, Tom DeMarco, in diagnosing the fear. Do people get to say what's on their mind? Are decisions based on power plays rather than common sense? Does the CIO make you kiss his pinky ring when you walk into his office?  (Okay, I threw that last one in myself.)

If business does not start challenging IT departments, they may find themselves with numerous projects which are behind, are over budget, and are laden with features which will never add value to the bottom line.  IT is a service provider and a partner, NOT a driver.

The Discount Airlines Get It

JetBlue aircraft parked at their gates.Image via Wikipedia

I've consistently said, "Lower prices aren't always what customers want."

Many companies blindly take the lower prices path, believing that customers will flock to them and remain loyal as long as they have the lowest price point in the market. They mistakenly believe that they can get away with providing poor service, or no service, because customers understand that they get what they pay for. What customers tend to want, however, is lower prices and service that is more than they expected.

An article this week in USA Today provides a great case study. The three airlines that rank highest in service were discount airlines: Jetblue, Southwest and Frontier. Customers have found that the lower priced airlines are also providing better service than their big competitors. In this case, travelers might expect less frills and a worse service experience on the cut-rate airlines, but the discount airlines are providing a cheaper ticket and service above what customers expect. For the larger airlines, the challenge is now even greater. How are they going to provide service for which customers are willing to pay a little extra when the low-cost competitor is already providing a higher level of service for less money?

Customers are often willing to pay a little more for a better service experience, but not if the competitor is already providing a better service experience for less!

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Why cheating on taxes can be expensive even if you are never caught.

Seal of the United States Internal Revenue Ser...Image via Wikipedia

Everybody has heard the old lawyer joke (though it works for accountants too): A recently-departed lawyer checks in at the pearly gates for his interview with St. Peter. The attorney asks "why did you take me so soon? I'm only 45?" St. Peter says "You must be mistaken. From the amount of time you billed, you have to be at least 70."

Old paperwork can catch you at the door of paradise when you run a business, too. Some businesses go for years and years reporting all of their income to the IRS, except for the big chunks they leave off the tax returns. It seems like a sweet deal until it's time to sell the business. 

Many prospective buyers to want to see the tax returns when they are looking to purchase a business. Sometimes tax returns are the only financial statements a small business has. If the tax returns make it look like the business is barely scraping by, the buyer cuts his offer. It's at least awkward to explain why the business is so much more profitable than the IRS ever knew.

Awkward? It can be downright dangerous. The owner of AJ's Green Dry Cleaners and Laundromat in Palo Alto, Calif., showed his prospective buyer the "real" books, which had $194,000 or so more sales than the tax returns showed. That didn't score many points with the prospective buyer, who turned out to be an undercover IRS agent. The dry cleaner will have to spend 10 months cleaning up in a federal prison

Federal and state governments continue to get better at tracking down tax evasion, and prospective buyers can be forgiven for wondering why they should trust somebody willing to lie to the IRS.  Paying taxes is painful, sure, but it's the best way to go in the long run.

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Are you brave enough to walk away from business?

armr_drewmclellan  I know you read the headline and thought "in this economy, are you crazy?"  

But I'm not.  I'm dead serious.  Do you/Can you walk away from business when it's not right for your organization?

That's what branding is all about.  Walking away from business.

The wrong kinds of business.  The wrong kinds of clients.  The wrong kinds of growth.

When you brand the right way -- you boldly proclaim what you stand for AND by default, what you don't stand for.

I think that's one of the reasons why so many companies either brand very superficially (our people are our difference or our quality sets us apart) or they don't brand at all.

Business leaders and owners focus on the bottom line.  I've got no argument with that.  But many of them are unwilling to say "thanks, but no thanks" to business that's a bad fit. Short term gain, for long term pain.   Branded companies are specialists, not generalists.  They don't have to be.  Their brand attracts the right kind of business.  If they let it.

Every business has a sweet spot.  An ideal client profile.  Every time they connect with this kind of client, everyone wins.  There's success, profit and everyone feels good.

A good brand attracts your sweet spot kind of client.  But you have to be willing to say no to the wrong ones, to make room for the right ones.

Are you brave enough?

 

~Drew

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Copyright & Blogging for Business: Part II

Every day, technology makes it easier to distribute and reproduce information – and Photo consequently, to violate copyright laws.  My last post began a discussion on copyright issues that crop up in the context of blogging or otherwise using online media for business purposes.  That post focused largely on the fair use doctrine.  Let’s move on to consider a couple other notes on copyright. 

First, a clarification regarding my earlier post.  When describing fair use factors, I said courts consider the nature of the copyrighted work, and mentioned the general rule that “Bloggers may repeat facts or ideas contained in someone else’s online content, but may not copy the particular way in which the original author expressed that information.”  Be sure to read this extra commentary as stating a general rule of copyright protection in the first instance – not as a limitation on the fair use inquiry.  The pure “fact-copying” rule can’t literally be applied in the context of fair use. (That’s impossible -- if we reach fair use, we know the work’s protected.  Fair use focuses on whether there’s a defense for an otherwise infringing use.)  The “fact-copying” rule is relevant to the fair-use equation simply in understanding the “nature of the work” fair-use factor flows from that basic rule of copyrightability.  Remember the existence of copyright protection stands separately from, and necessarily precedes, the fair-use inquiry.  Bottom line:  the law favors dissemination of factual, informational, and scholarly information, so fair use narrows as the expression becomes more creative or imaginative.  (Thanks to Professor Eric Johnson for pointing out I could have been a bit clearer about that!) 

Internet ≠ public domain.  Find an article online you want to republish onto your company’s Facebook fan page?  Assume that’s OK just because you found it on an unrestricted website?  Many people mistakenly believe that if something is published on the Internet, there’s no copyright protection.  In fact, work isn’t in the public domain just because it’s posted online.  (The assumption might make intuitive sense, but “public domain” has a specific legal meaning.  Yeah.  The “lack of intuition” thing happens a lot in law.)  The internet offers one (well, many) form(s) of publication.  Just because technology allows others to more freely access a work doesn’t entitle others to freely copy, display, adapt, or distribute that work. 

Assume it’s protected.  Unless the copyright owner clearly relinquishes his or her rights, it’s best to assume it’s protected.  Copyright protects any original authorship that’s fixed in a tangible form.  A work doesn’t have to be registered with the Copyright Office to be protected (but registration does offer benefits to the owner). It doesn’t have to include a copyright notice to have copyright protection (the law used to require this, and although it doesn’t anymore, it’s still a good idea to include a notice).  Want to re-post a picture, but can’t figure out who owns it?  Copyright protects even anonymous works.

Balance: Equally Important to Personal and Organizational Health

It is important to be aware of your health during any month of the year, but as September is National Cholesterol Education Month, now is the perfect time to take steps to be more heart-healthy. High cholesterol increases the risk for cardiovascular disease, the leading cause of death in the United States. For the more than 65 million Americans living with high cholesterol, diet and exercise are important factors to be reviewed with a physician.   Scale 2 Balance Blog

 

But lowering your cholesterol doesn’t have to be about completely altering your lifestyle. Physicians advise raising HDL, or “good” cholesterol, levels and lowering LDL, or “bad” cholesterol, levels. The key is achieving a sustainable balance between them. Changing habits can be difficult, but the American Heart Association offers these simple tips for taking that first step:

  

§  Exercise for 30 minutes more days than not

 

§  Eat less meat – replace with beans for protein

 

§  Substitute egg whites for whole eggs

 

§  Lower dairy fats and saturated fat in meats

 

§  Eat more fruits, vegetables and whole grains

 

§  Decrease your sodium intake


Similar to improving our personal well-being, creating a “healthier” business may involve making a few changes that complement one another. Again, the prospect can seem daunting, but it isn’t necessary, or always wise, to overhaul your organization to increase success.

 

Just as we strive to lower bad and raise good cholesterol, when enhancing our business we need to do more than simply remove or modify what isn’t working. We must also look at what is strongest in our organizations and put more energy into these practices or ideas.

 

A survey completed by global consulting firm McKinsey & Co. found that businesses that change and grow effectively have something in common. A corresponding article in Forbes reporting the findings explains, “A focus on strengths and achievements, not just problems, throughout the entire transformation process is strongly tied to success.”

 

In other words, to inspire positive change in your organization, there’s no need to throw everything out and start over. Change a few inefficiencies here and there. Take a critical look at old practices. And remember to search within the organization for opportunities to innovate.

 

McKinsey offers the following advice for creating a healthier organization:

 

§  Set clear targets – If your goals are understood by everyone, it is more likely that they will be achieved.

§  Create a strong and apparent structure – Have a plan and ensure that employees’ roles complement one another.

§  Maintain energy and involvement throughout the organization – Your employees are your best asset for positive change so engage them and inspire enthusiasm.

§  Exercise strong leadership – If you have conviction during a transformation, your team also will feel confident.

Whether you want to become more heart-healthy or your business needs a boost, balance is always central to change. Cut out some fatty foods, but eat more of your favorite fruit. Alter a process that is outdated, but listen more closely to your employees’ great ideas. You’ll be moving down a more positive -- and healthy -- path before you know it.

Knowing Isn't Doing

Somewhere Only We KnowImage by P.J.M. *extremely slow on flickr :( sorry* via Flickr

How many books have you read giving you the knowledge you need to do something, but you haven't done it? How many seminars have you attended, giving you the skills you need to make a change in your behavior, but you haven't changed? Knowing isn't doing.

I bet, as a leader, you know the importance of praising positive performance. And even though you notice instances when praise is warranted, you don't always do it. Knowing isn't doing.

In your personal life, you know how important it is -- if you want to lose weight or just be healthy -- to not snack after dinner. Yet, how often do you find yourself at the refrigerator at 9 p.m., searching for a little something to satisfy your sweet tooth? Knowing isn't doing.

Think about John Lancaster. In 1601, John Lancaster figured out on his first East India Company trading voyage from London to the East Indies that if he regularly gave his sailors lemon juice, he could keep them from dying of scurvy. Do you think his news was eagerly embraced by other trading company captains and scurvy was then eliminated? No. It was centuries before knowing became doing, and lemons and limes made scurvy a scourge of the past.

Or, think about Ethna Reid, founder of the Exemplary Center for Reading Instruction (ECRI) in Salt Lake. Her decades of research have proven what the best teachers do in their classrooms that raise students' performance scores 2 or 3 grade levels in a year. We know, but do we do? No. Low-performing schools all over the country still struggle to improve student test scores.

Good ideas (knowing) aren't necessarily adopted (done).

Q. What's one thing you know you need to do, or need to do differently? As a leader? With your team? For your organization?

Q. What's it going to take to actually follow through and start doing? Whose support do you need? Who do you need to tell about your decision to take action? How will you hold yourself accountable to continue the "doing" when the going gets tough?

Walter Bagehot said, "One of the greatest pains to human nature is the pain of a new idea." I'm not sure I totally agree with that. I think we love ideas; we love the "knowing." It's the "doing" that we hate, the changing. I challenge you to pick one thing that you know and do it until it becomes your new norm.

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Frustration is Alive!

Stock Market Prediction For Monday September 1...Image by Metrix X via Flickr

Is the economy going to improve or not? Will I have a job tomorrow or not? Will I get social security or not? Should I put money in the stock market or not? Is it time to stuff money under my mattress or not?

These are the types of questions that permeate the conversations of today. There is so much unpredictability in our environment that people are really feeling the impact of the unknown.  It is just like waiting for the results of tests from the doctor's office - it can drive people crazy.

The unknown lowers company productivity and profits. These are times when leaders and companies need to accelerate their communication and face the unknown head on. No one can control or predict the future and the focus should be on what can be controlled.

This is a time to rally the troops and get everyone focused on what is right in front of them.  Keeping employees busy on internal improvements, training and giving input on changes is a great way to keep frustration at a minimum.

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Selling the Family Owned Business

Art/workImage by toddwshaffer via Flickr

Having a family owned business is the dream of most parents and one that most of us can only wish for.  Family businesses have served as the backbone of our economy for many years.  Consider the following statistics reported by Maine's Institute for Family-Owned Business:

Some 35 percent of Fortune 500 companies are family controlled. Family businesses account for 50 percent of U.S. gross domestic product.  They generate 60 percent of the country's employment and 78 percent of all new job creation.

Due to the large number of family-owned businesses and the important role they play in the economy, there is a tremendous amount of interest in this special segment. Numerous surveys have been conducted to better understand them to improve their chances for success. One of the best surveys is the Mass Mutual Family Business Survey. This survey does an excellent analysis of the planning, growth and succession issues.  Some of the significant findings were:

1. Nine out of 10 heads of the businesses believe their business will be family controlled in five years.

2. Fourty percent of the heads expect a change of leadership in five years.

3. Ten percent of the businesses are controlled by two or more family CEO’s.

4. Five percenet are headed by females and 25 percent of the current CEOs felt that the next CEO would be a female.

5. Twenty-five percent of the CEOs have no estate plan.

6. Only 30 percent have a business plan.

7. Twenty percent of the heads indicate that 80 percent of their worth is based on the value of the business.

Like any business, members of a family-owned business face the challenge of perpetuating its success. The business, if successful, has provided a comfortable life style for its members creating a form of dependency for the members. As long as the business continues to provide the expected life style for its dependents, the business will continue to function as an orderly business. 

Problems usually arise when the lifestyle is threatened. 

The threat may come from internal and external forces or a combination of the two. Given that only one in three family businesses succeeds in making it from the first to the second generation, it's clear they have their own inherent risks.

Each succeeding generation has its own ideas about taking the company forward Or if, indeed, it wants to join the family business at all.

Successful transition has always been crucial to the continued success of family businesses. Many of the concepts that have bound the family businesses have eroded and new sources of potential conflicts have arisen. The sense of duty and obligation to join the family business has weakened, while the sense of entitlement has grown.

"There's always a decent greed factor out there, whether it's between father and son or between established business executives," said Tom Holly, a tax partner with PricewaterhouseCoopers' Private Company Services practice, which works with a number of family-owned businesses. "But I think there's a substantial entitlement discrepancy between the first and second generations," he said.

At the same time, Holly said, "I'm not seeing the second generation as actively involved in the business as they were 15 to 20 years ago."

One of the biggest mistakes that the controlling owners of a family business can make is not having a definitive transition strategy. It has been widely assumed that the failure of family businesses to survive was due to a lack of planning. In actuality, more recent research suggests four factors that correlate with success or failure:

1. Failed leadership

2. The inability to agree on personal, family succession and the goals for the business

3. Unresolved conflicts

4. Failure, by all parties, to communicate

In short, the owners fail to put the same time and effort into planning and structuring for an internal transition as they would into a sale of the business to an outsider. This failure typically provides the seeds for serious family conflicts.

The same issues that would apply to the sale to an outsider must be addressed and clearly defined:

Financial Issues

How will the owners be able to take cash out of the business?  Often, the business does not generate enough cash to support the new head and pay the retiring owners.

Valuation

Sale prices are often diluted for tax reasons for family members. Outside buyers will pay the fair-market value. 

Capability of Future Generations

Successful transitions to future generations typically require strict guidelines in writing (i.e. MBA, working for a Fortune 500, et cetera) and an authoritative independent screening and evaluation process.

Strategic Issues

A long-range clear vision that can be passed to succeeding generations keeps the future owners focused.

Flexibility

The business must have a Plan B that allows for the sale if and when required.

Personal Issues

The head of the business must recognize when it is time to retire. This can often be the most difficult to address for the controlling owner and other family members. It is usually best handled by an independent authority.

The sale of a family-owned business can be initiated by competition, internal forces, the economy, lack of a successor and a hundred or more other reasons. 

Buyers for the business can usually be put into categories: 

1. Strategic Buyers: Will buy for strategic reasons and will usually pay the most.  Typically, these are firms seeking market share or find it cheaper to buy a business rather than compete with it.  

2. Financial Buyers: Will buy only if the numbers make sense to them. (i.e. a private equity company). They can take a majority or minority position in the company, serve on the board of directors and help the company grow the business.  The downside is that the family will have to give up some control and perhaps the company if it gets out of the covenants.  

3. Industry Buyers: They know the business because they are in the business.

4. Hire an outside professional manager and allow them to run the company.

5. Inside Buyers: Employees or family members and are often the most difficult to deal with and will pay the least amount.

The buying process for buyers 1 through 3 typically follows a very predictable pattern (i.e. Sign a CA (Confidentially Agreement), meet the owner(s), ask questions, request information, make an offer, conduct due diligence, secure financing, complete purchase agreement and close on the sale.) No. 4 does not require a sale but it does require surrendering control. The buying/selling process for the family owned business can differ remarkably because of the following reason or combination of reasons: 

1. There can be multiple family members competing with each other for the purchase.

2. The controlling owner can be placed under severe emotional stress to choose sides.

3. The selling price can be seriously reduced because a family member may not have sufficient funds. 


Even though lack of planning may not be the major cause of a family business' mortality, exploring all the options can surely go a long way to sustaining the legacy and providing an opportunity for subsequent generations to preserve the wealth.

- Steve Sink

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Plug-In Customer Service

Electricity Pylon, crossing linesImage via Wikipedia

Several years ago I was a regular customer at Barnes & Noble's store on University. I would frequent the coffee shop, browse books and meet colleagues there. I spent a lot of time and money there while I was a loyal and frequent customer. One afternoon I was at a table with my laptop plugged in. One of the store's employees came by and made a show of unplugging my computer from the wall.

"We have to pay for the electricity! It's not yours!" she said in a chastising tone.

I packed up my laptop and didn't go back. I began frequenting places where I could get electricity with my coffee.

I was never sure if mine was an isolated incident by a disgruntled employee or a really poor corporate policy. After reading a recent article by Katherine Rosman's in the Wall Street Journal, I tend to think it's the latter. Rosman's article talked about the increasing need for people to plug-in their many gadgets. Some companies look at it as stealing or a safety issue while others look at it as a service opportunity. She relates the story of one business traveler who went to a department store and made a deal with the sales clerk. He bought an entire outfit if the clerk would let him plug in his phone.

Sometimes, good service is simply meeting a need other than what you're selling.

On Sept. 3, I attended the Central Iowa Bloggers get together at Panera on University in West Des Moines. There are always bloggers hanging out there (and buying coffee, pastries, breakfast, lunch, et cetera.

There are plenty of outlets.

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Failing Communication


Drake D+ OK, let's get a few things straight.  I've been teaching at Drake for over 10 years.  I love the school.  I earned my MBA there.  My wife earned both of her degrees there.  I have some amazing colleagues in the College of Business and Public Administration.  My students have been fun, challenging, outstanding up-and-coming professionals.  Even stepping onto campus energizes me.  I believe in the school, its mission, and its existence.  While the rest of you Iowa and Iowa State fans hold your silly rivalry, I laugh in all your faces.  I bleed Bulldog Blue.

So the whole D+ ad campaign bothers me.  Not just bothers me... it irritates me to my core.  I loathe it with the same loathing that my project management students feel toward my multiple choice final.  Yes, the campaign is effective.  Inquiries are up.  Student visits are up.  It's getting attention.  And as most marketing types would attest:  ALL attention is good attention, right?  Well, not if you believe what the mainstream media is saying.  The internet was littered with stories this week.

The marketing spokespeople sent out an email message yesterday to faculty and staff defending the campaign and sharing all of the positive statistics.  The message is clearly reaching prospective students.  But existing students, faculty, and alumni are NOT happy.

But this post isn't really about bashing my alma mater/employer.  This, too, shall pass.  No, what I want to point out with this marketing fiasco is what can happen on your PROJECTS if you don't think through your communication plans.  At the beginning of every project (and when I say "beginning" I mean when your project is still just somebody's idealistic brain-fart), the project manager needs to start creating a project communication plan.  You need to think about every audience:  business partners, software users, suppliers, customers (internal and external), IT support, industry watcher, and (sigh) marketing.  Then build a communication plan around the messages, frequency, and channel/medium each member of your audience needs.  Finally, weigh your communication plan against those stakeholders who will see it, but for whom the message is NOT intended.  That last one may send you back to the drawing board, but it will be worth it.  The conventional wisdom in project management circles is that a project manager's time will be spent communicating... between 70-90% of the time.

So to prevent a project failure (or at least a D+), make sure you are communicating effectively with ALL of your stakeholders... not just the ones to whom you THINK you're communicating.

Carpe Factum!

Make the Call. After All, You Made the Commitment.

Commitment Sheet Growing a business is about customers telling others about you.  It is truly your choice what most of them will say.  Try these customer comments on for size:

  • They promised to call me back and never did.
  • They promised to be here between 1 and 3 p.m., but showed up during dinner.
  • They took 30 minutes to bring the food and it was cold. I complained to the manager but I could tell she did not care.
  • They can't find my order or remember my call.

Okay, not what you want to hear about your company. When you or an employee tells a customer just about anything, you are opening yourself up for comment. How you finish will drive the direction of most comments positive or negative. 

On the other hand, when a company does what they say they will do, especially in fixing and issue, the comments are quite different:

  • Well, they had an issue but they took care of it. The manager even called me back to make sure everything was fine. 
  • The loaner car they gave me was nicer than my car.
  • They have the nicest staff.
  • The repair person even fixed an issue I had with a product I did not buy from them. I will never go anywhere else.

Now I am sure none of you business owners have ever made a commitment to a customer that you did not follow through on. But but perhaps your employees aren't quite as efficient? Make up a bunch of paper pads with the form to the right and give each of your employees a notepad. When they make a future commitment, make it mandatory they write down the commitment and follow up. Keep all the slips. Call the customers later and recheck that they are happy. 

I recently asked the manager of my local grocery store about a product I could not find.  He committed to stock the product in the store. A month later the product was still not there. I approached him and asked about the product. He told me he forgot. He apologized.  I don't shop there any more.

Which way do you want it in your business? What do you do to make sure the customer is taken care of?

Wait for the starter pistol

It's a red exclamation mark created for the us...Image via Wikipedia

Once the decision is made to step up social media efforts, one potential impediment is impatience. It's well-intended and comes from excitement for change and forward movement.

It appears in a little different form with every organization. Sometimes the excitement is aimed at driving up community numbers as quickly as possible. Others' zeal comes through wanting to share information about a promotion or campaign launch before all necessary pieces are in place. Resist the urge to open the doors to the store to the public before the walls are painted and shelves filled.

Don't get me wrong, I love the enthusiasm! Social media is serving as this amazing catalyst for much greater organizational change and in some cases sweeping cultural change for a company. Certainly cause for excitement.

However, if your audience comes in with their navy pinstripe suit and leans against the freshly painted white walls, they are not going to be very motivated to return. When your ducks are all in a row - the Facebook page is visually consistent with the rest of the online presence, the editorial calendar is in place, the campaign is ready to be announced publicly to supporters and the media, social media policy is finalized and easy to locate, the ask is prepared and all necessary tools to complete the task are in place - then you are ready for the starter pistol.

The thought of methodical planning when it came to social media approach, particularly early on among some social media professionals, was blastphemy. It was assumed taking a careful and thoughtful approach to social media was archaic and would cause the initiative to grind to a hault or fizzle. I say go with the proverbial gut check.

There are no social media rules to play by that everyone must adhere to. It is possible to engage with people in a manner that is thoughtfully planned and still flexible, purposeful without being forced, careful and yet open. It is possible to participate effectively on the social Web in a way that protects the equity you spent years and sizable budgets building among your clients, members, consumers and in your brand.

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Your tax refund may vanish in two weeks

Twas the night before...(Explored)Image by Insight Imaging: John A Ryan Photography (Having a via Flickr

Thousands of small businesses will lose a big refund in the next few weeks without even knowing it.  Don't let your business be one of them.

One of the recent "stimulus" bills allows taxpayers to carry back their 2008 or 2009 tax losses five years, instead of the normal two years.  Such taxpayers have to elect to do so no later than six months after the original due date for their returns.  That's Oct. 15 for individuals, who might have losses from their Schedule C business, or for a partnership or S corproation.  The deadline is Sept. 15 -- two weeks from today -- for calendar year C corporations.

Even these deadlines are extensions.  The election was originally to be made on the original tax returns for the years, but the IRS has allowed a six-month grace period.  You can find the details here.

Many taxpayers will get a bigger refund by carrying their loss back for more than two years.  An obvious example would be somebody who had a lot of income in 2004, 2005, and 2006, broke even in 2007 and 2008, and had a terrible 2009. 

So if you had a losing 2008 or 2009, see your tax advisor about whether you made the five-year carryback election, and if not, whether you should.  In this economy, you need all the "stimulus" you can find.

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