Categories
Management Pricing Product management

Is it time to raise prices?

I recently received a question from someone who was curious about how to raise prices. They have service customers paying a monthly fee going back almost 20 years. All their customers are on the same price plan – and they’ve had always been at that price. They were concerned that they could not raise prices without losing a bunch of customers – a legitimate concern since they hadn’t changed their pricing in close to 20 years.

There’s a couple things to look at here. First off, if you’ve had customers for 20 years, you’re probably not going to raise prices by such an egregious amount that you’re going to lose a bunch of them.

One possible exception to that – you’re seriously under charging now, losing money and what some might consider an egregious increase is actually what you need to get your margins right. However, this seems extremely unlikely after 20 years unless losing money on this product is a recent development. What I usually find when I see someone’s books is that they’re doing OK, but could be doing a lot better if their pricing made more sense.

While this conversation could have a lot of variables, the raise prices question comes up fairly often. Many times “How do I raise prices for existing clients” ends with “… who have been paying ‘nothing’ forever?”

Customers going back almost 20 years who were all on the same price plan, so the company didn’t know what to do. They were concerned that they could not raise prices, without losing a bunch of customers.

There’s a couple things to look at here. First off, if you’ve had customers for 20 years, you’re probably not going to raise prices by such an egregious amount that you’re going to lose a bunch of them unless you’re seriously under charging now and actually losing money.

If you’re still losing money after 20 years. it’s hard not to wonder what’s wrong with you, or whoever is funding you. I’m guessing that’s unlikely. I didn’t look at this company’s books, but if I had, I suspect that they’re doing okay. And could be doing a lot better if the pricing and their price structure, made more sense.

It’s a bad time to raise prices

The first reaction to get out of the way is that now is a universally bad time to raise prices. It’s COVID time. It’s October. It’s 2020. Winter is coming. My competitors haven’t raised prices recently. Sales are down. We can find many reasons why the time is bad to raise prices. Some of them may be true, but that doesn’t mean it’s a bad time.

Of course, raising prices for existing customers isn’t the same as raising them for new customers. While you’re focused primarily on pricing, keep in mind that “the price” is but a single component of “pricing”. Pricing includes volume, service delivery, packaging, price tiers, timeliness, value proposition, and other things.

How you sell this new pricing needs to be carefully thought out, particularly if it involves a restructuring of delivery, service structure, etc. Sometimes customers you’ve had for 20 years commonly have different needs and bought for different reasons than those who bought recently. Sometimes not. You should know.

A common thought is “What features can I add to the existing product so that I can raise the price for existing customers?” While that’s useful – do your existing customers want the new features you’re dreaming up to add to the product?

Negative margins? Nope.

The company with the question sells software as a service, but the conversation applies to almost any service that has a recurring service model. Sure, there are some exceptions to the “any service” thing, but there are an awful lot of parallels across industries.

First off… these customers don’t expect you to lose your shirt just so they can do whatever they do with your product / service. If they expect that, they’ll disappear when you make these changes and frankly – that’s a good thing. No one needs customers who buy a product with a negative profit margin. Sure, you might say “Well you know with the whole COVID thing, I can’t afford to get rid of customers.” Tell me, how many customers do you want if you’re losing money on each one? Do most businesses really want even one more customer that costs them more than they charge that customer? In almost every case – no. The exceptions are by design.

If I raise prices, I’ll lose customers

Almost everyone I talk to about these things feels this way when they prepare to raise prices. We know we might lose a few, but sometimes people get this wild idea that they’re going to lose 80% of their customers because of a price increase. Are you really providing that little value to your customers? I doubt it. I suspect you know your customers better than that. In my experience, it simply doesn’t work out that way. You’ll probably lose some but the math will probably work out with you doing less work and making more – even if the increase is small.

So how do prices get like this?

There are many reasons, including an addiction to coupons, not paying attention to margins, missing the impact of step costs as volume increases – among others. The two reasons I see most often are “we can’t do it now” and inattention. When I say inattention, I don’t mean anything specific. It’s as simple as not taking a regularly scheduled look at prices, costs, margins, etc – and then doing something about it when you find something wrong.

Back to the person who asked the question. They indicated that their customers had been paying $29 a month for between 15 and 20 years with zero price increases during that time. I don’t know how many customers they have – I didn’t ask because it doesn’t matter. I assume they are at least marginally profitable at that price level – or were until recently.

Given that customers have been paying $29 a month for 15 to 20 years, they either see $29 as a no-brainer value-wise or they are the type of person who never looks at their bank statements. If you have 1000 of them and 10% leave, you’ve lost $2900 a month. If you raise the price to a mere $32, you regain more than the $2900. But we’re not going to do that.

Stop the bleeding

First off, you have to keep things from getting any worse. Start by determining a fair price with a reasonable margin for new customers. If this is your entry level pricing – figure out what can be removed from it and remove it from that lowest tier. Do it now – before lunch. You should know what can be removed after 20 years.

Your entry price still needs to be a no-brainer, but it shouldn’t include every single thing you do. If you aren’t sure, ask whoever deals with customers all day. Sales, support, service – whoever. Ask them specifically. What portion of our services do our new customers rarely use or not need? Of the things that remain, are there any that create a significant hassle? Pull that one too. Your entry level customers should not have high support costs – and you should work on that next if they do.

Change that price and the explanation of accompanying services right now – before you do anything else. Once you do this, you know that whether you get 10, 100 or 1000 customers in the next month – it won’t be making things worse.

It doesn’t matter how the old price compares to the new one. It simply has to make sense to new customers. Maybe the old price was one percent of what the new price is. It doesn’t matter. What matters is that your new customers see value in what you deliver for that price.

The hard work

Before we worry about the old customers and their $29 price, we need to finish setting the new pricing. Get together with your team and see if you can group the customers you’ve gotten in the three years into a few segments. Don’t get complicated here. You can always do this again later – and you might.

Maybe you have customers new to the industry and for them, the entry service level (and price) is ideal for them. What other natural groupings do you have? Your people will know if you don’t. Ask them questions and do not interrupt. Listen. Take notes. Say “tell me more” or “is there anything else” until they’re done. Let them empty their minds on the table. They’re on the front lines. They may not know your costs or margins, but they know your customers.

Discuss what those groups need of the service levels you offer. Don’t make things up. Use data and conversations to drive decisions. Review the decisions with the team to make sure the grouping of services to a particular customer segment makes sense.

Once you’re done with that, look at your numbers, whether they are in some fancy software or on a chalkboard in the shop. Figure out a price that makes sense for each tier. Not a price relative to the 20 year old price, or even a price that tries to “look right” when compared to the entry price. Make the price a good value that preserves your margins.

Update all your prices and service information to reflect all of this work. Ask for feedback as people buy. You’ll want to know why they chose tier A instead of tier B. What’s different about the customers who consistently choose A over B, and vice versa. The value… the economics must make sense – but the mix of services at that level must also make sense. You wouldn’t give a teenager a Tesla X on an icy winter morning. You also wouldn’t send them out without studded snow tires on their 15 year old sedan.

It’s time to raise prices. Finally.

Tell your existing customers the truth about your unsustainable pricing and what you’ve done about it. They’re going to figure it out eventually anyway. Explain your new tiers and tell them what you believe is a good process for identifying where they belong. Don’t get all sales pitchy. Tell them how it is, tell them when the old price disappears and tell them specifically what they need to do and when. Make it as easy as possible – then make it easier. You’re not punishing them for the last 20 years. You’re setting things up so you’ll be around to help them for the next 20.

Some people will not understand. They will leave. Thank them for their time with you and let them go. Don’t argue with them. It’s their decision. A small percentage will be angry. Let them be. You can’t change that about people. It’s their decision. Thank them and move on.

So you raised your prices and the world didn’t end, but you know the problem isn’t completely solved.

With the new pricing, the economics of your business will change. Pay attention. You may have to go through a price exercise like this more often. You may find that assumptions about you customers will change – or maybe they won’t. Either way, you need to stay on top of it.

Don’t do anything that’s not sustainable. It was a lot of work to get out of the mess you were in. Let’s not do it again if we can avoid it.

Explain the economics

Some will wonder why your prices are what they are. It’s their nature. Your costs are usually none of their business. People don’t buy stuff from you because your costs are $x or $y. They buy because they want or need something and the value is acceptable.

If you need to explain your prices – do it as a value proposition. For example “We charge $1200 per month for our service, while allows our customers to save an average of 47 work hours of labor (for example) per week.” Buy or don’t buy becomes simple math at that point.

Sometimes, this is harder than it sounds, but you may as well do it because they are absolutely going to do it – and they may miss something because they don’t know your service or the follow on benefits as well as you do. There are times when all of the benefits are simply not obvious. Make them obvious.

Even if they choose not to buy your stuff, make it easy for them to assess their decision. If you need 90 minutes on the phone and 13 finance questions to close a sale, find a way to make it easier to understand.

This doesn’t mean assume your customers are dumb or lazy. They are busy. They don’t have time to mess around with spreadsheets and deep research and thought about your service. Make it like the buffet. Lay it out in front of them so all they have to do is choose – even if the choice is “not now”.

Photo by Bertrand Borie on Unsplash

Categories
Entrepreneurs

Questions are better than answers

I’m always looking for great questions. “What exactly does a great question look like?”, you might ask. (Good question – ha!) Sometimes, you know right away, but a lot of times you don’t. It comes to you after you’ve spent two or three hours contemplating the answer, or digging into the data that hopefully contains the answer. Then… you turn a corner and think “Holy cow, -this- is why I was asked that question.” For that last type of question, it’s not often obvious until you’ve thought a while, grumbled a few times, and rooted around in the garden long enough to find that turnip.

Questions burn a little

Naturally, I have some examples of questions that have provoked a lot of thought for me. Some drove me to change my mind about something. Others clarified a decision I’d been struggling with. Some made me realize they needed to be asked because they made me defensive.

I recently heard a new one that I suspect will be valuable as I dig into it. It made me start thinking about it as soon as I heard it. The reverse of this one is also worth considering.

What you do believe about your market that most people don’t believe -and why?

Tuto Assad

This next one makes you think about how your business is structured and how (and how long) you leverage the work your firm does. And in some situations, it might burn a little.

“How much did you earn -last month- from work you finished 5 years ago?”

Perry Marshall

Questions provoke

Sometimes questions go a little further. They provoke thought, and perhaps rile you up and make you defensive.

What benefit/feature/system, if removed from your offering, would devastate your clients? Now reverse that. What aspect is missing from your offering that would devastate your clients if they lost it?

Unknown

Questions sometimes spawn more questions. This one has me wondering “How does that provoke your thinking about your products and services?” and “How does it change how you talk about what you offer?” I wonder what your clients would say and whether it would be different from what you’re thinking.

What one number, if changed, would dramatically improve your business in the next year – excluding increased sales?

Tim Francis

If your spouse had a heart attack or was in a car accident or similar and you had to care for them for two months, how would your business’ needs be attended to? How would the business bills get paid? Who would supervise current projects? Who would sell and organize the next new project and get it moving? 

The Rescue Interview

Some questions also make you work, like Tim’s. It’s easy to say “we’ll sell more” to solve a problem, but sometimes you can’t solve it that way. Questions designed to help you reach a conclusion that should be obvious, but provoke taking a look at a situation from a different angle.

The questions I find most effective are the ones that make me defensive at first. When a question finds your accomplishment, expertise, ability, motivation, and capabilities leaving something to be desired, it’s natural to be defensive at first – and it’s a good indication that you needed to hear it.

What do you *really* want?

This is one of my favorites because it gets people to discuss what they really want. It has nothing to do with the details of what you’re selling and goes straight to the person’s big picture needs. The answer seldom comes back reflecting the bullet points from your proposal or items on your invoice.

If we were getting together a year from today, what would have to happen during that year, looking back on it, for you to feel satisfied with your progress?

Dan Sullivan

More than a question

Not everything has to be a question. Sometimes a simple comment can change how you do things even if it isn’t stated in the form of a question. A couple of my favorites:

Leaders who don’t listen will eventually be surrounded by people who have nothing to say.

Andy Stanley

The day that the business doesn’t need you day to day is the day that you own a business.  Until then, you run a business.

Bryan Miles

Photo by Sharon McCutcheon on Unsplash

Categories
customer retention

What do your customers believe?

As we slowly move toward whatever the next normal, think about how your customers navigate this week or next. Perhaps more than ever, it seems like an ideal time to lock yourself in your office and do the things you’ve always done better than they’re being done today. While I’m all about continuous improvement, hunkering down may not get your business from the before times to the after times, much less through the during times. For consumer-facing business, listening is as important as ever – thus the image. Noting the image above, restricted traffic in Glacier National Park after Labor Day is not a thing anyone has seen before. These days, normal is not a thing. Being good at adjusting is a valuable skill.

It doesn’t care what we think

It doesn’t really matter whether you believe about the pandemic because the virus and the impacts of it don’t care. The economy doesn’t care what you think about it. Customers (mostly) don’t care what you think about it.

What matters is your execution: What you do to deal with the what’s going on today, which I call the “during time”. Even though it’s a slightly different during time than May / June, which was considerably different from March / April – despite all of them being part of during time.

Customer behavior in the during times will continue to adjust. Think about how behavior of restaurant customers has ebbed and flowed over the past few months. My guess is that these changes will continue until there’s a widely-trusted vaccine – but that doesn’t really matter.

One thing that matters

What does matter is how the during times alter the behavior of those who spend money at your business. Let’s say you have a restaurant. I’d say there’s a good bet that demand for your outside seating has outstripped the outside seating you have.

That’s a good place to start even if you don’t have a restaurant because it’s easy to think about. Here in Montana, our smoky 93 degree days are probably gone for the year.. maybe. Our friends in Oregon may send us more smoke because they’re a sharing kind of folks.

Our recent cool overnight temperature are a little reminder that winter is coming. Depending on what phase we’re, some restaurants are surviving (or at least coping) thanks to carryout and outdoor seating. The reason for expanded outdoor seating is primarily sunshine and ventilation. What has to be done to take ventilation issues off the table as winter approaches?

There have been a number of studies about in-building airflow. They might be right. They might be wrong. By its very nature, scientific research starts as inaccurate because data / testing / research is sparse, then it zigs and zags toward a conclusion as data / testing / research increases. It’s similar to how businesses (generally) get better at what they do as they zero in on the right product/service formula for their market.

What do customers believe?

Ventilation studies don’t care what we believe. What matters is what restaurant customers believe. Whether your restaurant is setup for maximum outdoor seating and no inside seating, or the opposite doesn’t really matter as long as the health department is happy with the setup.

The gotcha is that customers also have a choice. They’ve probably sent a message already, by either showing up as if nothing has changed, or by just telling you (or “demanding”) outside seating, or more outside seating, or even by leaving because there isn’t outdoor seating.

For businesses dealing with those customers, it’s something you have to address before the weather turns. I am sure there are a number of companies willing to upgrade your ventilation system to eliminate any concerns about ventilation. Even if you spend 100 grand to neutralize the air so that every cubic foot of air through your place gets nuked or at least satisfactorily sanitized… it doesn’t matter.

What matters is what your customers think about it. They might be “Facebook doctors” or they might be a world-class scientist. Their concerns might be irrational, or spot on.

All that matters is “Do they believe in whatever you did?” based on their beliefs.

As with any sales job, you have to think how they think. You have to choose to have the conversation with specific subgroups of those people. You can’t talk to the millennials in the same way (mostly) that you talk to the boomers or the way you talk to the greatest generation.

For now, we’re all figuring it out as we go along – regardless of what we believe. Start the conversation on those terms.

Categories
Employee Training Getting new customers Sales

A scruffy old boat and missed opportunities

Recently, I bought a $300 boat. I hear you laughing. Yes, I know the joke about the favorite two days of a boat owner’s life (the day they buy it and the day they sell it). This isn’t a story about a boat as much as it is about thinking about every person who walks in the door of your business (virtually or for real).

This scruffy old boat is a 1988 Bayliner, even though none of this is really about the boat. It’s about the lens that you view someone through when they enter your business and how important it is that your entire staff is trained to use that lens.

So I bought this boat at this ridiculous price because a friend had to get rid of it and was unable to sell it for a year for various reasons. As you’d expect, a $300 boat needs a little bit of work. Given a full schedule and a serious lack of boat mechanic chops, I decided to take it to a boat shop.

It’s a sizable shop. Clearly successful, well-funded, nice showroom, plenty of inventory, employees all over the place, etc. So I drop off the boat and tell them what’s going on. They say they’ll be able to get to it early the following week, which is fine. The eight day wait isn’t surprising since every mechanic shop (of any kind) that I’ve talked to over the last month is backed up for weeks.

Educate the newbie

That was the first missed opportunity. It’s the first time I’ve ever been in this business and they know.

How? Why? Because they took my name, phone number, address, and email at the Service Desk. Everyone in the building has a computer in front of them. With that information, their system should know that I’ve never called, bought or rented anything there, etc. Yet, they missed an opportunity. The showroom and parts department is not crowded with customers for obvious reasons (it’s Monday 10am).

No one confirms that it’s my first visit – so what if I’m standing at the service desk. No conversation about the things they carry that I can pickup any time rather than order and wait online. No curiosity about what other boating I do (kayaking is not boating, IMO). No brief tour to make sure I know what resources are available to me there – even if I only have a couple of minutes.

In the following eight days until they look at the boat I was not contacted. I wouldn’t expect the service department to contact me as they’d already told me what to expect. Again, they have all my contact info. No postcard, email, or fruit bouquet (yes, the fruit would be overkill).

Another missed opportunity.

Once again, a motorhead

After 10 days, I called to see what was going on. The service department guy said the boat needed a starter and it’d be $1200. I was proud that I didn’t laugh.

I’m not much of a motorhead anymore but I wasn’t born yesterday so $1200 to replace a starter seemed a bit off. I asked the service guy and found that it was two hours to remove and replace the starter (WHAT?), another three quarters of an hour to test it, then another 90 min for possible follow up diagnosis (because something else is probably wrong).

Still, I asked for an estimate to fix the starter. The starter and solenoid were just short of $400 which seemed a bit rich for a starter, but there are good, better, and best marine starters if you look around. This one just happened to be the best – which is probably not ideal for a 32 year old boat. I told him I’d pick it up.

I mosey in to pick up the boat today, wait 20 minutes (after paying) for somebody to grab it out of the locked yard even though I called in advance to advise them that I was coming and they said they’d pull it around, then the service guy asked them to pull it out, then I had to come in and ask again.

The service guy gave me the estimate because it included part numbers. I thought that was nice of him as having the numbers will save me some time when I put on my motorhead hat. He agreed that it was nuts to spend $1200 to put a starter on a scruffy 32 year old boat. So I’ll be doing that next week when the $72 part arrives.

Look for signals, ask questions

I wonder if I will ever hear from them again. Multiple opportunities were missed. Will it continue?

The question to ask yourself is when somebody sends us a signal that they are interested in what we do, what happens? Sure, the context matters. It isn’t as if I would have wanted a 40 minute tour of the facility, or to get a 20 minute call from the owner.

Still, it’s September in Montana. Winter is right around the corner, at least from the boat’s perspective. There was comment about whether they offer winterization or winter boat storage. Who knows?

There was also no “here’s a list of the other services we offer that are useful to owners of older boats”, “So, do you own any other boats?”, or even “Got any other boating questions?” Remember, I told them that I just bought it, yet there was no “Dude, is his your first boat? If so, here’s our handy booklet of all the stuff someone should know (and what parts we’re happy to help with)”

None of that.

You might think that somebody who brings a 32 year old boat in for service doesn’t deserve those questions because they’ve already sent a signal that if they’re going to buy a $300 boat, they’re probably not going to buy a $40,000 boat (much less a $400,000 boat).

But you’d be wrong and I have receipts.

See, this place also sells campers. I happen to be in the market for one, but they don’t know that because they didn’t ask. But that isn’t why you’d be wrong.

Treat all of them like buyers

Back in the mid ’80s, I was fresh out of college, working my first job in the big city, and money was super tight. Of course, this means I visited Forest Lane Porsche in Dallas one Saturday afternoon. An older sales guy walks over to greet me as I step out of my 1980 fire engine orange Buick Century.

He didn’t look at me like “Crud, another one of those guys.” He didn’t make a snide remark. He treated me like I was getting ready to buy the most expensive car on the lot. At the time, it struck me that he treated me like he thought he was going to sell me a car that day.

So after we talked a little bit about the cars and I told him that I was a fan of the cars and was burning a little time on a Saturday afternoon. He said, “That’s cool. I’ll be here when you come back.”

THAT caught my attention. Normally when a wet behind the ears 23 year old admits to a salesperson that they wasted their time, that isn’t the kind of response you get. Maybe the kind ones will say nothing, turn on their heel and head back into the building until an actual buyer shows up.

So I asked him why. “Look, I pulled up in the parking lot in this ridiculous orange Buick. I’m young. You know I’m not buying a Porsche today or even next week. Why did you just say what you said?”

And he gave me the sales lesson of all time: “I treat everybody that comes on this lot like they’re gonna buy the most expensive car on a lot because I have no way to know that they’re not.”

Knowing I had another question coming, he continued: “I learned this lesson by accidentally being nice to a guy who came onto the lot in an old beat up pickup truck. He stepped out of that truck in muddy galoshes and overalls. He looked like he’d been working the fields all day. That guy wrote me a check for six figures for a car that day – the first time I met him. I didn’t take anybody for granted after that. Everyone who visits this lot looks like a customer to me.

A couple of years later, there was a story in the paper about that guy, who was retiring from the dealership. It turned out he’d been their most prolific salesperson for years. Not at all surprising.

Imagine if your team did the same. You might sell a camper or something.

Categories
Business model E-myth Entrepreneurs Leadership

Selling your boomer business

I recently received a note from someone who read “Boomer Business For Sale“. They had some questions about different aspects of selling their business, and I suspect they aren’t alone, so let’s address them here. The premise of the original discussion was that there are roughly 60,000 boomers who are getting ready to retire who are also business owners, and that either someone is going to buy those businesses, or they’re going to disappear. I see this happen with increasing frequency and find it such a waste. These businesses aren’t disappearing because they’re unprofitable. They’re disappearing because they can’t find a new owner.

Recently I saw where a beloved 57 year old butcher shop in Missoula closed. A butcher shop doesn’t stay open that long if it isn’t doing things right – yet… no buyer.

If substantial numbers of these boomer owned businesses disappear, it’ll have an impact on the towns where they live, the people they employ, the people whose businesses they buy supplies and equipment from, the accountants, bankers and attorneys they use – and the revenue that feeds in other businesses.

Ideally, we (as a whole) would benefit if we could reduce the number of businesses that close rather than changing hands. Ideally, we (as a whole) would benefit if we could reduce the number of businesses that close rather than changing hands.

How do I find a buyer?

One of the questions I was asked was about how to market the business that’s for sale. In a word, carefully. Your first thought might be a business broker. In my experience, they should be your last resort because most of them put too many obstacles between you and the prospective buyer.

For starters, don’t put a “For Sale” sign out front. More often than not, tells people “We’re about to close”, which will give some customers the idea that they should look elsewhere before it’s too late. That’s not going to help you in the short term, and it’s not going to help whoever buys your business. If you find a buyer, they’re going to have to win some portion of that business back – and if you have a piece of the future, you’d prefer they didn’t have to do that.

You’ll encounter three types of prospective buyers. Some are buying a job and an income. While that’s fine, many of them will have little / no experience running a business. They will almost certainly want you to owner finance. While there’s nothing wrong with owner financing (in fact, it’s a great way to get your asking price), you’re going to be more concerned offering financing to someone who doesn’t know what it feels like to cut payroll checks, lose sleep over business issues, and deal with grumpy customers – while still keeping them

Other buyers are typically looking for an investment. Not private equity, but experienced business people who want to add to their business portfolio. They own businesses for a living.

Finally, there are competitors and complimentary businesses (the ones two or three towns down the road are good candidates). An in-town candidate is OK, but revealing your sale plans to an in-town competitor can create problems.

Don’t forget competitors

Of all the competitors and complimentary businesses in your market, which of them deserve your business? Which of them are good enough to take your business on and not embarrass you? Why? If you see your best customer in the grocery store six months from now, are you going to be happy to see them, or are you going to turn and go down another aisle?

If you sell to a competitor, you want to sell to the one who isn’t going to make you change aisles. Even though the check is cleared and you’re completely uninvolved in the business, you’re part of that community, and you don’t want to be embarrassed by the buyer’s behavior.

I’d look first at investors, as well as competitors who do what you do, but not in your community. Maybe they have a similar service three towns down the road and they’re looking to grow their business. You could have an intermediary (banker/lawyer) contact them to keep your identity under wraps at first. They don’t need to know whose business it is to examine your financials – which they should ask for very early in the conversation.

Training the new owner

If you’re actively working in the business, you’ll have to train someone to take over that job. In a business where the work is physically demanding, you might be tempted to limit candidates to people who are physically capable and willing to take on that work. If you do that, it’ll reduce the size of your pool of potential buyers.

Unless you are selling to a competitor who doesn’t need to be trained, training will come to come at the worst possible time. You’ve mentally decided to get out (and were there for months before selling), and now, you’re obligated to train this new person. Your sale isn’t really, truly final until that work is done.

The new owner may not even know that they like it yet. Perhaps they’ve done it for someone else for 15 years, and they think that’s what they want to do but they don’t know until they actually run / own it. What if it takes longer than expected? If you walk away, it could damage the business. If you have a fee for additional training in your sales deal (you should), then that still commits you to even more time.

This all started because you were ready to retire. Now you’re spending time training this person and may have to silence the “I should have kept it”, “They don’t get it”. “Will they ever learn?” thoughts. Prepare for this.

Are you really ready to retire?

The idea is that this group of 60,000 Boomer business owners is ready to retire. Are you really? Do you know what’s going to occupy your time once you cash out?

I’ve had conversations with a number of people who retired and were thrilled that they fished, hiked, and golfed every day for three months.. until they got bored. Some people don’t get bored with it. Some might cut back to every other day. Still, some are not cut out for 100% leisure.

A better question might be “Are you ready to sell, or is this about getting out of working every day?” In a business where the work is physical, it’s easy to understand the desire to back off at some point. Our bodies start telling us that they aren’t 29 anymore. Maybe climbing ladders isn’t as easy or fun as it used to be.

You don’t have to go from “I own it / work in it every day” to “I have nothing to do with it.” There are other choices.

Maybe a competitor is better?

Selling to a competitor or complimentary business should be an easier exit. Someone who is already successful and in a similar business is more likely to be able to organize the resources needed to buy you out since they’re already successful and have clientele in that market.

Somebody who owns a competitive / complimentary business is more likely to stick with it. They know what they’re getting. So if you do get to a point where you agree for at least a partial owner finance, a competitor / complimentary business is a better choice.

Don’t get me wrong, there are highly motivated, sharp people out there who are looking for an income and a job, and they’ll have bigger dreams than just buying a job. Maybe they’re going to buy yours first, then buy two or three more, and maybe make an empire out of it. You’ll know when you meet one of them – and you’ll know who is real and who is blowing smoke.

The real pain of selling

If you ask business owners who’ve sold their business, they’ll probably mention that due diligence was a pain. Someone doing proper research isn’t intentionally making it a hassle, but it’s a lot of preparation to satisfy due diligence questions. Be prepared for that before you say “It’s for sale.” Ask your banker, attorney & someone you know who has sold / bought a business recently about the processes. Prepare in advance, as it’s not fun to do that work under deadline when you have a buyer at the door, checkbook in hand. The last thing you really need is to feel the pressure of “I’ve got to produce all these documents and all these numbers under a deadline before they go buy something else.”

All this information should be available if your managerial accounting & business metrics are under control, but they usually aren’t.

Consider being an owner

This whole selling a business thing is complicated, isn’t it? Now you know why a lot of businesses simply close. Selling a business is work. It’s usually worth it, but it isn’t easy. And yet, it’s possible to avoid a fair bit of the work we’re discussing.

Some of you have been running a business for a long time. Some have been working for / in the business, as well as owning it. Running it and working for it are not the same. If you have to get in the truck every day and go out to a job site, or open the computer and stick your face in a spreadsheet or programming tool in order for your business to get paid, you’re working for the business, even if you own it.

It doesn’t have to stay that way. If you’re not sure about the pain of stepping away, consider finding someone to take on the physical part of the job. In that mode, you’re hiring skilled people for a specific job (as opposed to “business owner”).

For now, let them do the work. Do nothing but manage that business. Once you see what it takes to manage the business day by day – while doing nothing else – then you can easily identify the skills needed to bring on a manager. Perhaps you look for a manager who is interested in owning the business, perhaps in partnership with the person you hired for the “skilled position”.

Test your team – and yourself

At some point, you should have systems and processes setup so that the skilled person is handling whatever “working for the business” work that generates revenue, and your manager is… managing. Get things to the point where you can take off for three weeks and disappear (or so they think – if you need that at first).

Because you still own the place you’ll want to have internal controls in place. These inform you and your manager that everything is where it should be, running as it should be, etc. Combined with a few metrics, you can watch the business from afar.

What metrics? Think about a few pieces of info from each department that would allow you to sleep comfortably knowing your team has everything under control. Even if you don’t see them as “departments”, they still exist. Finance and Sales exist even in the smallest of companies. You already know what metrics are important. Now consider what’s important at a distance.

Finance: What’s AR look like? What’s your free cash look like? Are any payments overdue? Are we current on tax filings?

Sales: What was revenue last week? Last month? How many bookings do we have for the next 30 / 60 days?

Even though you could get the numbers yourself, a regular report from your manager that provides these figures and advises what they’re doing about them will be useful for non-distracted time away from the business and quality sleep.

Still uncomfortable? Still can’t sleep? Maybe the wrong manager. Maybe insufficient systems or metrics. Get with the manager and get to the bottom of what’s uncomfortable and have them patch that hole.

One thing to avoid, unless there’s no choice – avoid getting back into the weeds. Guide your manager through the weeds. Have them guide their team through the weeds. Don’t get into them yourself.

You have options

For the short term, ownership can be an easier option. You can be involved with the business when they need your expertise, while stepping off for a while to determine what your future looks like. All the while, you can take a distribution from the business, even though it may be lower than what you were taking before.

You’ll still have all the equity until you decide to consider your next step, like selling the business to your manager and lead “do-er”, or selling it to someone else.

The unanticipated reward is that a business that no longer requires you to be there every day is worth more and is easier to sell. Until that day comes, it’ll be easier on your mind and your back.

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Categories
Productivity

Distracted & Unproductive

Been getting a lot done lately? If so, maybe you can skip the rest of this. Maybe productivity isn’t an issue for you these days, but for some, it’s a challenge. I see plenty of discussions online and hear them on phone calls and around town – commenting about having trouble getting things done. Certainly there are plenty of distractions. It’s an election year, there’s COVID, the economy, and anything else you wish to add to the list that’s on your mind.

Over the last decade or so, the one thing that I found that seems to help people, at least the ones who say that they’re turning things around or have turned things around – is having a routine. Any routine.

Thankfully, this isn’t one of those “Get up at 4:30am and do these 11 things and your life will be perfect” discussions.

The key is not my routine or someone else’s routine. It’s the one that works for you. I know some people who plan their week on Sunday evening. Others tell me they do it on Monday morning or Friday afternoon. It doesn’t really matter when. What matters is that it gets done.

Once you have one, try it, stick to it, refine it over time as you learn things that improve it. It’s OK if it isn’t perfect at first. Adjust it to correct the things that aren’t working quite right and remove things that don’t work at all. It doesn’t have to be perfect today or even next month. It doesn’t need to account for every minute of every day or for every task you have lined up next week. If you let it become a chore, it isn’t going to help. Maybe you start with “These are the three things I MUST get done next week, in priority order.”

If that simple routine provides some structure & organization to your week & helps you get more of each day’s most important things done, that’s a good start. Even if you manage to more consistently complete (or make good progress) on the week’s (or day’s) one big thing, then a lot of the other things are more likely to fall into place as the week progresses. You might end up realizing that you have time to deal with things that you can’t normally commit to.

I find it helps to think my way through the week before it gets started. My calendar intentionally doesn’t have many appointments. I try to keep all of them on the same day so that I can minimize random / unscheduled phone time.

If I can schedule all my calls for the same day, it works great. This may not work for you. It reduces the number of interruptions of my focused work. Sometimes I have to take an unexpected phone call, but I work to avoid them.

Your situation may be different. You may have to pay special attention to how you deal with those calls and find a process to consistently re-engage with the interrupted work. All of this can become part of your routines. Perhaps you work out a post-call, merge back onto the work highway routine that includes scheduling a follow up, or noting expectations etc that came out of the call.

I do these things to keep me on the rails & deal with interruptions, distractions, or emergencies that may come up… even to guide me back to the focus work that was interrupted.

Having a master list of things I’m planning to complete that week, prioritized helps me immensely. Figure out a routine that gets you started right and if necessary, that gets your day back on track so you get a better shot at completing the highest priority work before anything else.

Maybe you don’t check email or voice mail before getting the day’s most important task done. Not everybody can do that, but if you can, you’re more likely to get that first important thing of the day knocked out. If you can say nothing else about your week – being able to get that most important thing done is significant. That’s a big step.

No one likes to look up and see that it’s six o’clock, and feel like you didn’t get anything done that day. Maybe establishing a routine to start, re-engage and end the day will help you get more of the right things done. Give it a shot.

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Categories
Entrepreneurs Management

Are you keeping up?

Are you keeping up? Gotten a bunch done over the last few months? No? What’s wrong with you? It’s not much of a stretch to think it may have riled up your imposter syndrome or maybe a small bit of regret at your lack of productivity vs. “the hustlers”. Take a look at what some people have done. If you make the mistake of adopting it as your standard of what you should have done during that period, then surely you should’ve done more. Taylor Swift created an entire album over a 16 week period.

What’s YOUR story?

Seriously, it’s OK. You don’t know what’s behind their curtain. It’s not the same as yours. You can work on that, but it isn’t the point.

If you read this somewhat often, you may wonder how you’ll get that week’s suggestion done (when pertinent). You might still be working on implementing something from a month ago. How are you going to keep up? Thing is, that isn’t the goal of this for either of us.

Have patience

When these things are discussed, my thought process is “I ran across this and/or I do this and it works. If you’re in a similar situation, it might help.” Perhaps you’ll use the info. Maybe you’ll implement some of these things in the future when you’re ready or when they’re pertinent.

Some of the things we discuss each week can’t be done quickly. No one, least of all me, expects you to do them all. Pick the things that make the most sense for where your business is at that moment (if you have time at that moment). Once you start one, keep at it. Don’t take your eye off the ball when seven more weeks of suggestions float by and you haven’t touched them. They don’t matter until they do.

Start fewer things and finish more. There will always be time to start something else once your current tasks are done. You aren’t the only one dealing with occasional chaos.

Many large businesses have the same problems yours has. Maybe the scale of the problem is different – but relative to them, the problems are the same, more or less.

They aren’t perfect either

Let me give you an example. There’s a software as a service (SaaS) vendor we use. As a SaaS vendor, the presumption might be that it’s a reasonably “modern” business that has its act together.

They didn’t bill us for 13 months. Yes… THIRTEEN MONTHS.

This is a large company compared to most small businesses. Yet simple things like getting an invoice out every month somehow failed them for 13 months (and not for the first time). Statements? Nope. Never. Not once in five years.

We were allowed to catch up with those invoices over several months since the lack of them was their fault. Eventually, everything got back to normal.

Before long, they were bought by a public company. Presumption: well-organized company. I mean, by definition, a public company has to have accounting under control, right?

16 months goes by. Still no statements. Most months, we get an invoice. At first, cashing our invoice check takes months, then things smooth out. Because we’re working on a new contract, they recently figured out that three invoices from last fall had not been paid. In fact, the checks had been stopped because they weren’t cashed after several months. We thought they were lost and eventually forgot about them (see, it happens).

They can’t start the new contract until those invoices are paid. We hadn’t received notice about them & soon they were forgotten. $40K of accounts receivable doesn’t typically get ignored when they go unpaid. Neither you or I would do that, but… it happens. We worked it out so everything’s fine. We really like the vendor & they provide quality service.

Stay focused

I tell that story because we’ve almost all had invoicing / follow up issues. You might’ve thought “we’re such a mess I’m never going to be able to do this right” etc.

Yet, the things you beat yourself up about are the same things a publicly held company sometimes does. It happens.

Maybe next week’s suggestion helps. Read them, think about (if) they can apply to your business – but don’t lose sleep over them.

Do the best you can. Improve consistently. Slow is OK, just keep improving.

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Categories
Entrepreneurs Leadership Management

React, respond or rebuild

What’s on your agenda these days? Whether your business is scraping by or flush with cash, you’re probably spending a little bit of time thinking about the future. Which future would that be? Next month, post-tourist season, post-COVID, or some other future? You might be thinking about how to react to this or that, or how you’ll do business until COVID is over, or something else more specific to your business and how things may have changed since mid-March.

React vs respond

The difference between react and respond has been on my mind a lot lately. The challenges businesses face don’t change all that much, until they do.

Remote work is a great example of this. For decades, “managers” insisted remote work couldn’t be done at their business. Suddenly, in the space of weeks, remote work somehow became possible. To be sure, it’s a challenge when you have a house full of kids, but a lot of people have made their way through that maze to a productive place.

When someone who manages people working (most) desk jobs says “We can’t do remote work”, it’s usually a reflex reaction to a perceived threat – the loss of control (as if they have ‘control’). Control is rarely what anyone thinks it is, if it exists at all. “How will I know if they’re working?” is another decades-old symptom of this.

Getting back on track, when you react, it’s typically a reflex. A reflex action logically gives control to whatever stimulated that reaction. While there can be a measured reaction, for the purposes of this discussion, I’m calling a reaction something you do that’s driven by instinct or reflex. In other words, the fight or flight amygdala is driving based on a perceived fear, even if you aren’t escaping physical danger.

When you respond, it’s something planned, measured, and (hopefully) well considered – again, defined for purposes of this discussion.

The future’s on our minds

The future might be on your mind. Is your business facing challenges that could kill it in the next quarter? The next five years? The next 20 years? Your company’s ability to deal with the speed of change might be involved, or it might be something simple like a technology you depend on that’s likely to be displaced over the next decade.

You might not care about that when it comes to forecasting next quarter’s revenue, but it could definitely impact the valuation of your business for sale in a decade. It’s easy to wave that off today when you’re worried about making your nut this month. Trouble is, these things can’t be planned for or implemented overnight. They require consideration well in advance, particular for the large number of business owners who view the sale of their business as the source of funds for their retirement.

Assumptions vary in quality

The quality of your consideration before a response occurs is everything. A lot of our consideration during this process is based on assumptions. Your assumptions might be good, true, dated, false, dogma-driven, ego-driven, and so on.

Question every single assumption that drives your plan / direction for the future. It’s painful when you find one is no longer true, but it’s better to learn that today than five years from now.

Is something still profitable? Prove it to yourself. Is something not profitable? Prove it. What should you stop doing? Does the data back up these assumptions?

Take everything down to bare metal. Make it prove itself true or false, valuable or not.

Once you arrive at what you think are your truths about the business / market going forward, it’s time to assess your current solutions and decide if they get to come along as you move toward the future.

What about rebuild?

One thing we haven’t discussed is rebuild. Going back to the assumption discussion, what if all your assumptions, experience, and knowledge are signaling a future much different from today? What’s your next step? It might be rebuild.

A rebuild is a form of response, and it’s also a longer term effort requiring even more consideration about what is, what no longer is, what never was, and what your forecast as what will be.

This thought process can be useful when things get tough, really bad, or perhaps a little weird and you’re trying to figure out how to move ahead given your forecast of whatever you think life looks like around the next curve.

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Categories
Entrepreneurs Management

Sick & tired? Might be time for a turning point.

I was listening to a podcast a few weeks ago where a guy was talking about looking back at the turning points in his life (and no, he wasn’t 22). He also discussed this with some peers, discussing the high and low points in their lives and the turning points they had experienced during those periods. When you have discussions on a single subject with multiple people, patterns tend to appear. One of the things he noticed was that all of the positive or high-impact turning points occurred as he reached a point where he was fed up with an uncomfortable or unpleasant situation.

When we’re dealing with these uncomfortable, unpleasant situations, we often end up taking steps and making efforts that cause us to operate outside of our comfort zone. At the time, it can feel awful. Later, we usually wonder why we thought it was such a big deal. This stuff happens when we get sick and tired of a situation, whatever that situation might be.

The conversation described made me think about the turning points I’ve had – and the situation a lot of business owners are going through right now.

Decisions are turning points

Some of my turning points also came when I was sick and tired of an uncomfortable and/or unpleasant situation, but the most significant came when our family had made a major decision and my work was essential to our ability to make it happen.

In particular, I think back to an older gentleman I met in Jackson Hole in 1995, as we were just starting to figure out the financial and work–related details that moving back to the mountains would mean. He shoved me into the deep end with a simple comment: “Bring your own job because we don’t have enough of them here.” He moved to Jackson in the early ’60s with a station wagon full of kids and $200 in his pocket and had seen a lot in the next 35 years so I took him at his word. That conversation and our goals drove the acquisition of two software companies that set the entrepreneurial angle of my software career in motion.

What situations made you uncomfortable in the past? Perhaps there are parallels to now, perhaps not. Even if you aren’t uncomfortable, does your career or business need a turning point? If you’re not uncomfortable, but perhaps are concerned, what changes could happen over the next six months that would require a turning point?

The time to think about these things and plan for them is before you need to. What could force a turning point in your business or career? How would you re-leverage what you do, what you know – and your network?

It isn’t always about you, however. Others are facing these things even if you aren’t. How can you help, advise, or provide opportunity for someone who has reached a turning point? There are a lot of folks out of work right now. Six months ago, finding good people was difficult. Today, not so much. Do you know business owners who are having a tough time of it? Perhaps a partnership makes sense with the right business.

Pivots are similar

I mention concerns because sometimes we see things coming before they arrive, but they aren’t necessarily significant turning points like a career change or a change of market. Often times, the approach of dips in the economy send familiar signals before they hit arrive, even if the reason for the dip is different than in the past.

Experienced business owners have a pretty good idea what’s coming because they’ve struggled through these and survived in the past – even if it was ugly. Sometimes, we recognize them because we didn’t seem them coming the last time. Each time, we generally get a little better at recognizing them, and see the signs a little earlier. Hopefully, we react a little differently based on what we tried last time, what worked, and what didn’t.

Sometimes the moves are smaller – like restaurants going big on takeout and breweries transforming their parking lots into dispersed seating. With cool fall weather only a few months away, they’re probably already thinking about how they’ll handle that outdoor seating in cool (and then cold) weather. These might not be big turning points, but they will be a bit of a pivot within existing businesses.

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Categories
Business culture Business model Customer relationships Management

Why their survival mindset matters

What’s your state of mind these days? Talk to a handful of business owners about how COVID and other cascading effects are impacting them and you’ll likely not get many identical answers. Seems like everyone’s fishing a different eddy in the economy right now. Some are hauling it in, while others are trying to figure out how to survive another pay cycle – and there are a pile of folks at different places between those two spots.

Are you aware of the state of mind of your prospects these days? Not February’s… today’s. What about your customers? You probably had a good grasp of this back in February, but July (like March through June) is different. Maybe their different isn’t yours, but it’s probably different from whatever normal was for them six months ago.

Do you communicate frequently (or at least regularly) with the customers and prospects in your market? Have you reviewed any of these materials? If you have automated email sequences going out, are they talking to your clients with the mindset of you in the old normal?

Even if you don’t have scheduled emails, what about ads that have to be prepped in advance? For most trade publications, you’re at or getting close to deadline for issues your market will see in four to six weeks, perhaps longer. Are those ads wash, rinse, repeat what you were submitting six months ago? Is that OK? (I don’t know – you should.)

Even if you do nothing in advance, do you have document templates, email templates, pre-printed anything, or similar that go out without a second thought?

If any of these things are in use (scheduled, ad-hoc, template based, etc)… have you reviewed them? Do they make sense this month? Do they make sense for coming months? Is it OK to have the same conversation you were having when you first wrote those things? Again, I’m not judging… I’m suggesting that you consider the state, mindset, and voice of your communications.

Be sure you have an idea what their current concerns are before launching a marketing campaign that ignores today’s reality and your market’s level of certainty. Resonating with their mindset, as usual, is critical to making your communications effective and profitable.

Understand that this isn’t solely about marketing but extends to onboarding, customer service, finance, and ultimately – every interaction you have with your customers and prospects.

What’s the big deal?

One consideration is that many businesses have staffed down. What could be impacted by customers with fewer staff?

Onboarding, if you have any. It will affect training, implementation and related processes. If these don’t progress smoothly, it will be easier than ever to ask for a refund / return.

Finance – What if the normal accounts payable person is gone and someone else is doing double duty? They may be new to everything in that department. They may have no idea what’s necessary to keep their company humming along as it relates to what you supply. The last AP staffer learned that over time. This one may not be there yet. The same goes for your suppliers.

You need to have more patience, communicate more often, simplify anything you can simplify (from their perspective), and make it easier than ever to work with you. Companies with downsized staffs or those doing everything from a survival mindset don’t have the time and energy for complex hassles. Anything you do to make it easy to do business with you will pay dividends.

In fact, every touchpoint with your customers at every stage of their life cycle could use a review. You may find that in some departments of your company every single customer interaction needs to be simpler than ever, easier than ever, and as frictionless as possible.

Even those who aren’t struggling will benefit. Some departments may not need changes. Thing is, you won’t know until you take a look, discuss with your team, and perhaps make that part of your next conversation with customers.

The more you know about how they’re impacted, how they’re adapting, how their “now” looks – the better you’ll be able to serve them and the more likely they’ll be able to keep you around as a vendor.

If your prospects & customers are focused on Maslow’s hierarchy of needs (or similar needs from a business perspective), then products, processes, services and vendors that feel like luxuries, hassles, or complications will be easy to discard. Take steps to avoid being one of them.

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