Newsletter Archive

Question:  When choosing a business coach, what would you suggest are the most important characteristics to look for?

Answer:   There are a number of answers to this question from authorities and sources if you Google this question on the web.  Please allow me to share a story with you to offer what I feel is your most important consideration.

Imagine that you’re a high school basketball player. You’ve completed your freshman season.  It’s been a disappointing season since you were accustomed to winning.  Your team finished with just 6 wins and 12 losses.  You averaged 8 points a game and are the team’s second leading scorer.  The varsity team at your school failed to win a game, prolonging  a consecutive game losing streak that has now extended past 30 games.  The varsity coach invites players to continue to scrimmage after the season and you’re more than happy to continue playing.  You love basketball and want to improve.  In fact immediately after the last game in your disappointing season you recommitted to a promise you’d made to practice a minimum of an hour each day.

The new coach has a plan for the next season.  He begins to push his agenda immediately.  In these scrimmage sessions each evening after school as you and your teammates practice he preaches, shouts and scolds the team to “Pound the ball inside”  “Get the ball down low”  “Go to the hole”  “Drive when you get it down there!”    He’s adamant that his team will get the ball inside to his 6’4” center.  Each evening over and over he repeats his message.  He’s building his approach around one player, the center. He believes this person has the commitment, dedication and ability to turn the high school program around.

Your sophomore season is worse than the freshman season in terms of wins.  As a starter on the varsity your team wins just two games, but it breaks the better than two year victory drought that the team had slumbered through.  Your point production improves to 16 points a game.  That’s because the center the coach wanted to pound the ball into is you.  The team shows dramatic improvement in your junior season improving to 12 wins and 7 loses.  You lead the team and the entire conference in scoring – 24 points a game. 

Your coach leaves after your junior high school season, but his work has set the foundation for a turnaround in the team and your personal fortunes.  As a senior you again average more than 24 points a game and the team wins 16 games and loses only 5. 

My high school coach was named Gene Wick.  While his name is the same as mine he was not my father.  My father never played basketball and would have had no interest in the game had not I played it.  Yet this man, Gene Wick, had possibly as much influence on my life as my father did.  Why?  Because he believed in me! 

At the core of your decision to choose a coach is that coach’s belief in you.  That means that they must know the powerful influence that someone can have in the life of another.  They must recognize that believing in you and what you are capable of can profoundly influence your ability to achieve your dreams.  The example provided from my own life isn’t an isolated incident of people who have had deep affect on my life.  A sales manager, college teacher, my wife, brother and family members have all impacted my life by their faith and confidence in me. 

You would be a rare person to have not been influenced significantly by someone in your lifetime.  The insight here is that if you plan to hire a coach, it is critical that you find someone who will believe in you. 

That doesn’t mean that they shouldn’t also remain objective and be able to criticize you, because among the other critical elements I feel are important in coaching are discipline, accountability, assertiveness, asking questions, and experience. 

 A coach’s bottom line requirement is the ability to keep you accountable for your commitments. They need to ask questions to discover what you know and how you feel.  They are best if they help you discover the answers within you because then you will respond best to your own enlightenment.  In many cases they will help you uncover what you already know, you just forgot it somewhere in the deep recesses of your mind and heart. 

The final piece of the puzzle is the last element in our Gazelles 4-3-2-1 formula.  The 1 in the formula is: A coach is a catalyst.  Their work should catapult you to greatness, to achieve your potential.   They must stick with you through thick and thin and believe in you even when you’ve lost faith and find it difficult to do so yourself.  They need to kick your butt and pad your fanny when you need it most.

Having been a sales manager, general manager, owner and sales person, among other titles in my career I know of no other source that can stimulate higher achievement than a mentor, coach, or friend who believes in you and your capabilities.

The ability to look into our souls, to be able to love and believe in us despite the faults that we are all too familiar with, in my personal opinion, is the critical element to selecting a coach who can vault your performance to the pinnacle of achievement.

It is an honor to work with my clients.  It’s become second nature for me to believe in them and what they can achieve.   I sincerely hope that I will have the privilege to work with you someday.  If not, it is my sincerest wish that you discover someone who is capable of help to make your dreams come to fruition.   May you find as I have the best coach in the world.  

This week I met a former customer to discuss how his team was doing without having a coach facilitating their meetings.  While he indicated they’d maintained the cadence of accountability of meeting rhythms, he noticed a number of concerns he felt my presence would improve and wished to discuss working together again to help elevate his leadership team’s game. Here are some of the highlights from that discussion:

My customer asked not to have his name revealed in recounting one of the mistakes his company made.  We’ve worked together several times, starting with several Mastering the Rockefeller Habits 4 Decision Workshops, quarterly planning sessions and then last summer for six months to help them develop annual, and quarterly plans as well as develop the meeting rhythm cadence of accountability.  

My customer indicated that since January they’ve worked through their meeting rhythms doing a good job of maintaining their discipline of daily huddles and weekly meetings.  Where he feels they’ve fallen down a bit is how stringent they are on their accountabilities and meeting their quarterly priorities.  He feels without Doug there to ask the tough questions they aren’t extending themselves to achieve any more than what they are comfortable doing.  He feels they are limiting their growth by not having another set of eyes to objectively rate both their effort and their achievement.  Another limiting factor is the collective intelligence time along with learning and education. 

The meetings lack some of the intensity and breakthroughs they had with a coach leading them.  They’ve not been conducting the learning and education portion of the meetings to impact their leadership skills. They’ve also not completed the elements of their One Page Strategic Plan and Strategy, components they all agreed in their Annual Planning meeting they needed to focus on in order to grow revenues in 2014.

The value of questioning your team’s accountability to their priorities and responsibilities is not lost on another of my customers who asked me to develop a series of questions to ask each time one of his leadership team members is falling short of meeting one of these objectives.  If you’d like help asking the right questions to discover why someone is falling short and how this failure will impact your business, request the free download below. 

Most impactful is an event that made my customer realize the importance of accountability and identifying and following systems.  The business is a construction company, and through the growth and development of the two owners they’ve also created several other businesses including a rental company. 

Recently they had a construction job out of state which required renting equipment to meet the job requirements.  The job was completed and when they reviewed the costs they discovered they’d lost money on the contract.  After reviewing receipts they discovered the primary cause of the loss was the expensive rental costs for equipment.  Apparently no one had taken time to review the rental bills to discover the rental company had overcharged them for their equipment.  Unfortunately when the bill came to the desk of the partner in charge of paying them he naturally assumed they’d been reviewed and approved and paid them before anyone could catch the gross overcharges. 

As owners of a rental company themselves they could easily see they were being charged one time rates versus rates usually charged for days, weeks and months for actual use of the equipment.  Yet no one had bothered to review the bills or monitor the invoices for excessive charges as they arrived. 

My customer estimated they overpaid in excess of $50K for the equipment rentals.

As a coach I’m not sure that even had I been working with them I’d have been able to help them with this issue.  However we have discussed and planned to identify the 7-9 Work Process Flow Charts.    These are your businesses critical systems that differentiate it from your competition and require you to identify accountabilities and metrics to ensure they are always running consistently and predictably.  Having these in place surely would have identified the overcharges by the person accountable when the invoices arrived, and alerted them to contact the rental company for appropriate charges.

$50,000 in overcharges on one job he noted is embarrassing!  To his credit he was more than willing to accept his portion of the blame for this occurring.   The positive from this is he realizes a lot of the margins they are challenged to achieve are correctable.  They simply need to be more disciplined and systematic in their approach. 

Most challenges like these are preventable when the right systems are in place.  Identifying the 7-9 crucial systems that your business relies on to perform to its highest level is essential to developing consistency and predictability in your business.  That’s how growth is achieved year over year.  Disciplined systems, operated by disciplined people. 

As Jim Collins states in Good to Great, "A culture of discipline is not just about action. It is about getting disciplined people...who engage in disciplined thought and...who then take disciplined action.”

Collins also said, “Everyone would like to be the best, but most organizations lack the discipline to figure out with egoless clarity what they can be the best at and the will to do whatever it takes to turn the potential into reality.”

Is your business struggling to achieve what it’s capable of?  The role of coaching is to provide accountability and questions, questions that you’re not asking.  Questions that explore the potential of your people, your strategy, your execution, and your cash decision making.  Mastering the Rockefeller Habits provides the disciplined tools and resources from best business practices and top thought leadership. 

Is it time for you to consider what it takes to achieve the greatness your business is capable of?

On April 29^th Mastering the Rockefeller Habits Four Decision Workshop will explore fundamental tools and resources to help you achieve greatness.  Plan now to attend.  Or request the flyer for more information.  

Watching my customers achieve a theme, their One Thing for the Quarter or year is an extremely rewarding part of being a Gazelles Coach/Consultant.   The pinnacle of that experience is watching your customer sell his business and be genuinely rewarded in the process for his tireless efforts and energy to do what is right for his employees and staff as well as himself. 

There are a lot of business owners in the baby boomer era reaching retirement age and looking soon to divest of the businesses they’ve created.  A recent article By Verne Harnish, “Growth Guy” (author of Mastering the Rockefeller Habits) in Fortune Magazine offers tips on the tricks buyers can play.  Entrepreneurs work years building up the value in their business only to give a big chunk of it away when it comes time to sell.  Why?  Savvy corporate acquisition teams have a prescribed method for wearing down the most seasoned entrepreneurs, backing them into a corner where they have to sell for a steep discount.

It doesn’t have to be that way.  In reality a sale can go extremely well when you’re prepared and follow the advice of good advisors.  In addition you can prepare your business for a high return by investing in the business now and making it more attractive to a prospective buyer.

In fact recent indicators (Why the value of your business is going up) show that average multiple being offered to business owners is trending upwards. 

The news is better for businesses with at least $3 million in annual revenue whose average multiple is now closing in on five times Earnings Before Interest Taxes, Depreciation and Amortization (EBITDA).

Here’s a real life example of a local business owner who sold his business to offer some insight and perspectives on how things can go well when you get a legitimate inquiry that turns into an opportunity to sell.  The purchaser, their company name and the company they purchased requested we keep their names  confideintial. Please forgive this inability to give you specific names.  It should not diminish the value of this example of following a positive process for selling your business. 

A former client of mine sold his business a few years ago and can give some insight and perspective on how things can go well when you get a legitimate inquiry that turns into an opportunity to sell. 

In order to respect his privacy and the non-disclosure agreement between him and the purchasing company we will keep his name and the purchasing company’s name private.  Let’s just call him Jim and the purchasing company ABC Corp.

Jim initially received an inquiry about two years prior to his business sale closing.  They had specific interest in his company since it was vertically niched to their industry. The persistence in their approach was consistent.  They would contact Jim and then go away for a month or two but would always come back with more questions.

During this time Jim worked with Positioning Systems Business Development and Coaching firm immersing the best practices and top thought leadership from Gazelles Mastering the Rockefeller Habits.  The focus on strategic planning and specifically a process called Strategic Discipline built a routine, structured, systematic pattern that had been lacking in the business.  The result was a cadence of accountability within their leadership team, committed to annual, quarterly, monthly, weekly, and daily huddles focused Priorities, Metrics and Meeting Rhythms. 

GROW YOUR BUSINESSES’ REPUTATION

One of the immediate benefits of the Quarterly Strategic Planning Process was a step up in customer service.  Jim’s company’s customer service rating showed a very significant improvement in the very first quarterly theme.   It was a remarkable effort that indicated how powerful focusing on One Thing can be.  An industry expert noticed the outstanding service which directly led to a prominent trade show display providing the catalyst for a 25% growth rate the subsequent year. This despite being in a mature industry segment.

ABC Corp., as a suitor, could see this reputation Jim’s company was building.  They were focused on how the company would add to their profit if purchased.  The opportunity in customer service excellence offered an area to achieve this significantly.  We’ll see how ABC Corp’s proprietary experience in their market helped them to significantly increase Jim’s company’s profit margin.

Now things began to get interesting.  Before agreeing to accept a letter of intent, Jim wanted to be sure of 2 things.  First, he wanted to understand the tax implications of any offer so he spent considerable time with his accountant to understand the tax liabilities.  This is an important matter to consider as the income tax can make a significant impact on how much money the seller actually receives.  Also, the taxes can vary a lot depending on whether the transaction is an asset purchase or a stock purchase.  So, make sure you understand this very well.

NO SURPRISES

The second thing Jim wanted to be sure of was that there were no surprises when it came time for due diligence.  Due diligence can be very time consuming and can open a can of worms if the purchaser finds something that would be detrimental to purchasing the company.  Keep in mind, that during due diligence you are legally required to divulge anything and everything about your company, even if it is negative.  So, Jim chose to discuss considerable detail with the purchaser about his company, especially those things that he thought might jeopardize the sale.  “Show the purchaser all your pimples.  Don’t hide anything,” says Jim.  In addition, he requested as much detail as possible about the terms of the purchase from ABC’s perspective.  Once these details were out in the open, then Jim felt comfortable that signing a letter of intent would in fact result in the sale being consummated without major problems.  Gathering these details also gave Jim information to discuss with his accountant and attorney.

Jim did not use the services of a broker.  He had been negotiating with two, however when ABC made what was a fair offer he backed out of looking at a broker.  ABC was right in the ballpark of what the brokers were estimating so he didn't feel he needed to work with a broker at that point.

Jim doesn’t recall a specific discussion of EBITDA, but of course they looked at some form of that.  “They always want to look at earnings before interest, taxes and amortization, also, depreciation.  So they definitely were looking at those types of numbers, but not exactly in that form.”

Looking back on the sale Jim still feels very good about it to this day.  The company has remained in the same location, many of the employees remaining and flourishing, although there was some minor attrition due to the changes and some corporate adjustments in functions.   Several of the company’s people have stepped into more responsibilities and the company is enjoying continued growth and success, allowing them to earn more responsibility and earning capacity.  It’s good to feel the employees he hired, nurtured, and trained are doing so well.

HIDDEN OPPORTUNITY

If there was one area Jim had reluctance addressing at times it was the cost to his customers of ongoing customer service.  Early on as a consultant we worked to get his customers to pay on time for support.  We often discussed increasing the fee structure for their monthly support; however Jim felt uncomfortable raising this structure perhaps out of fear of losing customers and revenue.    As it turns out with their growing reputation he could have doubled his support fees and not had much attrition.

In fact ABC did exactly that the following year providing a substantial profit base for the business.  Jim’s company had previously relied on new software sales to generate most of its profit each year. 

That doesn’t diminish at all how Jim feels about his sale.  The comfort of completing it quickly, offering his employees the opportunity to keep their jobs and be providing greater opportunity, only is minimized by the rewarding feeling of having built something that someone else saw as having significant value to others.

Considering selling your business in the near future From Verne Harnish’s Fortune article, here are some of their dirty tricks to watch for from buyers.

PROMISES, PROMISES

The first step is counterintuitive, which is why it’s so effective. The buyer offers the entrepreneur an insanely large price for the business and suggests the deal can close in weeks. 

The offer--always expressed as some multiple of EBITDA, to condition the entrepreneur to become overly sensitive to expenditures--will be a price that is 50% to 200% more than what even the entrepreneur thinks the business is worth.  It looks like the deal of the century.

Why would buyers do this? To get entrepreneurs to drop their guard.  Nothing builds a temporary relationship faster than offering a premium price for the business. I say “temporary,” because entrepreneurs are not likely to stick around after the sale.

It also gets entrepreneurs and their spouses dreaming about the life they’ll lead after the sale – the houses, boats, and vacations – and planning for what they’ll do once they have a boatload of money. 

More importantly, buyers do this to entice sellers to sign an exclusivity agreement that prevents them from talking with other potential buyers for six months during the due diligence period – which they promise will go quickly.  Entrepreneurs will usually sign on the dotted line, relieved that they are going to get a great price—even if it is ultimately half of what’s offered--and not have to deal with other buyers--which is extremely time consuming.  But that’s the beginning of their downfall.

POWER PLAYS

Once the document is signed, buyers will drag out due diligence for months, while promising that everything should be wrapped up shortly.  If I had a nickel for every time an entrepreneur heard “It’s just a couple weeks more” we could all retire.

And as due diligence gets dragged out, because the buyer tied the selling price to some multiple of EBIDTA, the CEO starts putting off key expenditures that she would otherwise make to keep the business humming along – a key hire or media purchase or training session.

PSYCHOLIGICAL WARFARE

To make matters worse, the buyer starts disrupting the entrepreneur’s rhythms and life through the infamous “emergency meeting.” The evening before an entrepreneur departs for a family vacation or major trade show, the M&A team will call to say that there’s been a problem with the deal and demand that he or she show up for a meeting the next day to straighten things out.

Afraid to derail the deal, the frazzled entrepreneur will cancel plans at the last minute. As a result, both the family and business team will start leaning on the owner to get the deal done.  The pressure will continue to mount.

DIMINISHED PERFORMANCE

With the entrepreneur mentally checked out of the business in anticipation of the sale and worn out from missing vacations and the grind of due diligence—and the business suffering from a cutback in critical expenditures to pump up EBITDA—the business unsurprisingly suffers a temporary slump.  It’s all part of the buyer’s game plan.

The corporate buyer wants the company’s performance to suffer a little so it can use it as a giant sledgehammer to drive down the price at the 59th minute of the eleventh hour. 

Beat up by the entire process, the entrepreneur will begrudgingly give in to all kinds of last minute demands and concessions affecting the final price of the business. 

BIDDING WARS

So what do you do to avoid this scenario—and still unload your business? First, enlist a good business broker (This is no time for amateur hour) to set up an auction for you. Don’t let a single potential buyer call the shots.  One friend identified 23 strategic buyers, of which 7 came to the table to bid for the business.

As noted, Jim didn’t have this type of conversation with a broker.  He didn’t understand what the offer would be.  However he did get an evaluation and the broker and ABC, ended up being in the same ballpark.  

If a serious prospect wants an exclusivity agreement, limit it to  30 days and require a big deposit—say $250,000—that will be forfeited if the deal isn’t completed in that window.  And have “the box” of materials prepared in advance so you are bulletproof during due diligence.

Last, as best you can, insulate yourself from the transaction. Have your CFO or another trusted executive work with your broker as a go-between with the buyer, so you don’t get distracted from leading your team. Push back against last-minute demands for meetings. You want to be calm and thinking clearly every time you negotiate—and not fresh out of a fight with your spouse about cancelling the family vacation.

Overall, keep your head in the game and keep running the business as if the deal isn’t going to happen up until the moment you cash the final check!!

FREE DOWNLOAD

Aspiring to sell your business?  Click here to download Gazelles White Paper “Begin with the end in Mind: Sell your Business the Right Way” which includes a list of key players to have on your team and strategies to help you sell.

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