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Recent evolutions in my life have focused my attention on the people I wish to spend time with.  In the last year I spent in radio a call from a representative of Jacques Werth’s High Probability Selling sparked my attention.  His system promised significant help with making phone contact with prospects, specifically cold calling.  His methods were good; however the greatest value I received from his process occurred in the conversion process.  There were specific prospects he recommended that you wanted to avoid at all costs.  They were the reason for major challenges in customer service.   These are prospects who have unresolved conflict.  His methods may be controversial and difficult to achieve in every business.  Despite this there is still reason today to be able to identify prospects who have unresolved conflicts that can make your customer service department miserable. Here are some insights into High Probability Selling’s methods and why it’s critical to avoid conflicted prospects:

People who have unresolved conflicts are the source of most if not all of your challenges in customer service.  I’m speaking to you about customers who are impossible to resolve issues with, not situations where you’ve made the mistake and need to correct an issue. 

Perhaps you’ve found customers who have issues that no one else has, or simply refuse to resolve things and constantly bring up new issues after previous ones have been resolved.  They are “the customer from Hell!” 

Wouldn’t it be great to give these customers to your competitors so they have to invest all their time resolving ongoing conflicts?  Wouldn’t it be great to avoid them altogether?

Jacques Werth’s (High Probability Selling) principle for a process called Trust and Respect, allow you to identify how these customers are before you start doing business with them.  It protects you from beginning to do business with them simply by recognizing the potential they have for wreaking havoc in your business.

Trust and Respect is a regression questioning process used by psychiatrists with patients to help them identify their issues and then begin to work on them to resolve them. 

Anyone who is good at selling, asking questions can, simply by probing and showing interest in their prospect discover whether or not the person in question has unresolved conflicts. 

Perhaps the biggest obstacle to overcome is knowing where you are going with the questions and the result you wish to achieve without being completely straightforward with your prospect.  As noted in the download: Attempting to conceal your personal agenda. If your personal agenda is anything except determining whether or not you trust and respect the prospect, the process will not work.  On the surface the questions appear to be relationship building, yet deeper and more personal than most salespeople would ask in building rapport with their prospect.

In my experience I’ve rarely found anyone who has had difficulty with the questions.  One reason is that people are so infrequently asked these questions. When asked sincerely and with a deep interest in the person you are speaking to, few object.  Indeed in most cases where someone does object, I’ve had one person ask, “What’s this have to do with the coaching process?” it may be the first sign that they prefer not to answer these questions simply because they have something they wish not to reveal. 

The entire principle is based on looking at the customers you’ve had in the past and realizing that if you ranked your best customers on a scale of 0-10 with 0 being no trust and respect, and 10 being the highest trust and respect imaginable, your best customers are those that you would give a ten and they would probably give you a ten as well.

While the questions dig deep and ask for insight into the prospect’s lives, the bonus is once you’ve completed the questions and discovered whether the person has an unresolved conflict (most don’t), you have gained a deeper sense of rapport and trust in your relationship than anyone who is competing for the business with you could achieve.  

Relationship building is a prime component in getting the sale.  By following this process you’ve immediately built a better relationship than your competition will be able to achieve unless they follow the same process.

Finally if you discover they have an unresolved conflict you can simply bow out of the sales process offering that you don’t feel their business would be a good match for yours.

Some questions in the process might be:  Where did you go to school?  Tell me how you decided to go there?  Who first noticed you were good at that?

Once you begin down the path of regression, getting the prospect to open up about things in their history, you slowly move them back in time until you get to pre adolescence.   At that point you ask questions about their relationships.  What was it like growing up in your family?  How did you get along with your brothers, sisters, your parents?   Give me an example of a conflict you might have had with your brother or sister, your parents.  How did it get resolved?  Who was the disciplinarian in your family?   Give me an example when you were younger what you might have been disciplined for? 

Discovering a conflict and how it worked through you may find that this person is still bitter or holds a grudge against the person they had the conflict with.  That’s your indication that they have an unresolved conflict.

At times you may find that they have unresolved conflicts with a brother, sister or parent, yet they realize it and have done all they can to resolve it and then simply accepted the situation as unresolvable and choose to avoid that person in their lives.  

When Jacques regressed me I recall offering a story of when I was preschool age and it was my turn to do the laundry with my mom.  I’d been able to get out of it being my turn, until my mom remembered my brother had done it last time.  Evidently this upset me very much because at a break in my cleaning my brother and my dirty clothes I went outside, approached my brother and told him mom had given me permission to slap him. When it was discovered what I did I was strapped pretty good. 

The lesson for me was strong never to hit anyone.  My brother and I were close, just a year and nine months apart.  We had many conflicts growing up, however he was particularly forgiving and forgetting.  We might have fights playing basketball or football, and five minutes later it was like nothing had happened.  We were best friends and wanted and needed each other to play with.

Jacques shared his story about an unresolved conflict.  A friend of his asked him to have dinner with a group of brothers who he was considering buying their scrap metal business.  Jacques used his trust and respect questions to ask the brothers about their history.   They revealed they’d worked for their father in his scrap metal business, always being promised that they would receive a share of the business when it achieved a certain level of profit.  Year after year it failed to do so.  They revealed how the scrap metal business was particularly cutthroat and it required doing several things dishonestly, including making the scale lighter when scrap metal came in, and heavier when it went out so that they could increase their prices and make a profit.  After many years working with their father the brothers discovered he’d been cheating them all along and the business had actually achieved profit standards but their father had lied to them about it.  That’s when they decided to start their own business.  Suddenly during the sharing one of the brothers said, “I know why you’re asking all these questions!” 

The meeting quickly ended, and upon escaping out of the restaurant, Jacques friend offered “I’m so glad I brought you with me.  I can’t believe I ever wanted to do business with those people.  I’m happy to have avoided that!”  

People with unresolved conflicts are impossible to please.  They are constantly using you, and anyone else they encounter to attempt to resolve a conflict they had in their childhood that remains unresolved.  They haven’t resolved it with them, and they are attempting to find resolution by being right with you.  

You cannot win that argument, because even if you gain resolution, they’ve not resolved their previous issues and they’ll be back again with a new issue to get you to prove them again right.

We make enough mistakes in our businesses of our own accountability that require us to take steps to justifiably resolve them with customers.   Choose who you wish to work with and you can avoid a lot of conflicts that should never be your battles to begin with.  Accept only those issues you are responsible for and you’ll have a much more peaceful and enjoyable business to run. 

For many businesses a customer who returns and frequents you consistently is the lifeblood of your company. While most of my customers work with me for a year or more, occasionally a customer leaves and returns.  One of those customers I discussed in my last newsletter Success Starts Where You Are.  Recently one of my former clients reconnected and we are just beginning the engagement process again.  What I find remarkable and hope you will too is the progress he made in the intervening period.  Most rewarding to me is discovering just how much of the principles he applied. The growth he achieved – 500% revenue improvement in the almost 5 years we’ve been apart, is remarkable.  Exploring what occurred and how he achieved it is the subject of this newsletter.

The remodeling business is very competitive.  One of the biggest challenges for Mike Jones and his company Harmony Remodeling was acquiring leads.  Mike has built a system to ensure he receives a steady stream of new inquiries for jobs in his area.  It’s a credit to him and to the principle of focus. What you focus on increases.  It’s why the One Thing concept is so powerful.  Mike’s dedication to his lead generation system   has made it one of his most consistent and dependable systems in his business. 

One of his biggest sources of leads is Angie’s List.  It’s extremely powerful for generating leads.   It can be a two edged sword. Customers can express their disappointment in his service on the Internet.  It’s one reason he focuses on customer service so intently.  Even prospects who are not customers can complain, pretending to have been customers.  They can express disappointment with a Harmony Remodeling quote that didn’t come in as low as they’d hoped.  It’s a challenge to balance these new opportunities knowing some customers can never be satisfied. 

We identified in our first meeting having a better disqualification process for Harmony Remodeling will save a great deal of time and allow Mike to focus on his best potential customers.   Another part of this process is clarifying Harmony Remodeling’s strategy. Who are his best customers?  When the phone rings Mike will be ready with the right questions to quickly discover whether the prospect is a good fit for Harmony Remodeling’s niche.

People in any business are an important part of the equation.  A benchmark that has been effective to help Mike select the right team members including subcontractors is his Core Values.  Mike developed these just as we were closing our last engagement.  He’s found that having these set of guidelines helps him to identify whether employees and subcontractors have the same ideals.  If they don’t, the probability of their serving the customer in the same manner Harmony Remodeling would is greatly diminished.  Core Values help him institute standards in the relationships he has with his customers and production staff. 

Hiring a foreman to work in the field has given Mike freedom to spend time in his office to work ON the business.  With his foreman, they've developed an estimating process that keeps them on track.  It still needs some tweaking and adjustments. The company needs to improve profit margins; however they’ve discovered when they follow the system it consistently bring projects in on time with the profit they’d estimated.  It’s another example of the critical impact system development and work process flow charts can have on a business.   Estimating accurately is paramount to achieve bottom line profit and assure customers are satisfied.  Mike and his foreman pride themselves in doing this proficiently making significant strides in improving the system in the six months since Mike hired him. 

One of Gazelles fundamental principles for creating Core Values and Purpose is whether or not you’d be willing to fire someone who broke these ideals. 

Mike shared a letter he’d prepared but never sent to his father-in-law.  His father-in-law had previously been his foreman.  Mike was having issues with how he represented Harmony Remodeling with customers.  Honoring the customer is steeped into Mike’s belief system, and it’s critical to Harmony Remodeling’s reputation.  His father-in-law’s refusal to abide by this resulted in a major conflict.  Mike never sent the email.  His father-in-law resigned before he needed to.  That opened the door for Mike to find and hire his new foreman, Bo, someone who believes and lives the Harmony Remodeling cultural ideals.

When I asked Mike the biggest lesson he learned in between our coaching engagements he asked his wife to respond.  Jennie indicated unconditional respect for customers.  When things don’t go as expected; a customer’s tile, cabinets, or appliance don’t look right for example, instead of getting bent out of shape and playing the blame game (many contractors do), Mike steps back and takes care of the homeowner at all costs.   Mike continues to refine and develop this into his core purpose.  It started as respect for the customer.  He’s expanded it to the idea of unconditional respect.  Getting his team of employees and subcontractors involved in this mentality is an ongoing quest.

Mike feels the coaching process provides a different point of view.  It helps to have someone looking over his shoulder to keep him more objective.  An example of this is the balance between winning a job and growing profit margin.  Is closing 60% at 20% profit better than closing 45% at 35% margin?  We’ll be looking at this as we work together.

From working together previously he finds he looks at challenges now simply as the lack of a system.  This allows him to remain unemotional and unattached to any issue.  He focuses on looking at the system first for a solution.  Frequently an issue can be resolved by creating a system to prevent the problem from recurring.

When Mike first started working with me he’d written a date down: December 2010.  That’s was when he planned to finish the 21 E-Myth Modules the program designated for completing E-Myth Mastery.  He’d always intended to come back he said.  He recognizes there’s a lot more to building his business then when he started.  He’s excited to learn how to grow and improve and reach the ideal brand and reputation for Harmony Remodeling that he’s dreamed of attaining. 

Looking to build your business?  Consider giving Positioning Systems a call or plan on attending the Mastering the Rockefeller Habits Four Decision Workshop November 12^th in Cedar Rapids, IA.  

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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