Business # 6 – Cash Cow

Posted by on Mar 28, 2013 in Blog, Featured | 0 comments

With 5 businesses in play, friends, family and associates knew I was taking over businesses for retiring owners.  Business #6 was subsequently referred to me by a friend.  It was smaller in every way than the other businesses, but it was an easy tuck-in.  This business had a niche of improving the lighting and electrical for apartments converting to condominiums.  It did not require a lot of overhead and the profit matrix was good, 60-20-5-15.  The critical drawback was that it only had a few large customers, which significantly increased the risk.  If any of these customers fell through the company was not well-positioned to transition to other work.

Understanding the risk, I presented the owner with my offer.  It was low, but I felt it was fair.  I could see the owner was certainly hoping for more, but except for price, I made it very easy for him to sell.  I already had 5 businesses and I did not need his business, so I was very firm on the price.  The owner relented and we signed the deal at 50% down, 50% financed for 5 years.  An added perk, similar to Business #3, was that the seller continued to work for the business.  This made for a seamless transition.  Like many small business owners, the seller tried to make it on his own.  In reality he was more proficient at being a manager and estimator, not a business owner.

The seller and I enjoyed a positive relationship and during the good times the seller and I took a trip to Mexico where he speared a huge tuna seen in this picture.

tuna

Yellowfin tuna caught off the coast of Puerto Vallarta, Mx

Bill, bill, bill!  That was the mantra as we milked the cash cow.  We worked hard and fast, but after 5 years the housing market had changed.  Apartments were no longer converting to condos and the customers dried up.  New markets were hard to come by.  We were bidding on projects, but the margins were slim and fiercly competitive.  No one knew the housing collapse would be so dramatic, but I knew the boom would not last forever.  I was lucky the business was paid for and the employees could be relocated to my other offices or find good jobs elsewhere.  I offered this business no life support; it just slowly faded away.

Keys To Success

  • Understand the risks
  • Hold firm and do not over pay when you know risks are present
  • Milk the cow as long as you can
  • Be prepared to scale back when the window of opportunity closes
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Have You Gone Tribal?

Posted by on Mar 21, 2013 in Blog, Featured, Leadership | 0 comments

A few months ago I was in a little bit of a funk.  I was bored at work and was not really sure what my next move was going to be.  My co-worker, Dan recommended the book Tribes: We Need You to Lead Us , by Seth Godin.  It had been a while since I read a book, so I thought I would give it a whirl.  It turned out that this book gave me a huge boost in confidence and creativity.  It actually spurred me to start this blog.

The basis for the book is that our world is built around tribes.  Tribes are a group of people linked by a common interest.  This could come in the form of a country club, a large corporation, a blogging community, or a political party.  A core part of a tribe is communication. Tribes talks about how technology has lowered the cost of communication and provided unprecedented power to tribes of all forms.   Who knew 5,000 knitting-loving people could unite themselves online and trade ideas?

Tribes is not your typical book on management or leadership.  It’s really a call to action.  It provides no step-by-step tutorials and does not even have chapters. Godin does not build up a framework, nor does he try to explain anything in detail.  It is full of small sections of anecdotes on how to utilize tribes to do great things.

Godin explains that the world is in need of leaders and that you can be one of them.  People often associate leadership with a title or an elevated status, but technology and changing cultural norms have made it possible for anyone to lead.  The author also notes that people in elevated roles want to keep things the same, sponsor the status quo, because that serves them the best.  The only problem is that the status quo is not enough to win these days.  People want new and they want it now.  If you want to win you must be part of the tribes that are bringing forth new ideas.  Some of these tribes you will follow and some you will lead.

The one thing that stuck with me from the book is the notion that most people with good ideas are paralysed by fear-  fear of failure, rejection and the unknown.  Godin succinctly explains that fear is usually not based in reality.  The worst case scenario is you find out that there is not a tribe willing to follow your cause.  I overcame my fear and started a group to promote innovation at work.  The group is growing and has started to create some buzz among managers and executives.  It took surprisingly little work, just a little initiative and the willpower to overcome my fear.

I found this book to be highly motivating and worth the read. It is short, however, I believe it contains many little nuggets about leading a tribe that I will carry forward.

 

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Business # 5 – When It Rains It Pours

Posted by on Mar 14, 2013 in Blog, Featured | 0 comments

I no sooner get Business #4 in the fold, when the business broker tells me he has a similar company for sale about 60 miles away.  What can I say, but let’s take a look.

Sure enough, it was similar in many ways–adjacent industry,comparable sales volume, retiring owner, good profit metric. A husband and wife team were running the company.  I hit it off with the wife who was taking the lead on selling their company.  The fact that I just completed a similar deal with the same broker fast tracked the negotiations.  The wife had so much confidence in my abilities she wanted 10 year terms instead of 5 with only 33% down.  This looked like another gold nugget, so we did the deal.

I did not even make it through the 8 weeks of training when I knew I had some serious challenges.  While the wife was a gem, her husband was a grenade.  He put up one obstacle after another and I didn’t know if he was trying to sell his business or tank it.  I knew I had moved to fast, but I did not have enough face time with the husband to make a smooth transition.  In addition to this, the morale of the employees was toxic.  Like me, they loved the wife, but deeply resented the husband. The brunt of this resentment soon transferred to me.

Soon the employees put on a power play to let them do things their way or else they would leave.  They were disgruntled with the situation and each other.  They did not communicate or work well together as a team.  The result was poor customer service.  On top of that, they wanted a raise and did not want the pressure of being highly billable.  I had no choice but to remove the most experienced field person.

To make things worse, I caught the husband cheating on his non-compete clause.  He was doing work on the side and not billing it through the company.  He was also bad-mouthing our new manager and causing uncertainty among our customers.  Through the strong relationship with his wife, I was able renegotiate the original deal to a much more favorable price with her promise to ride herd on her husband.  This experience was tough.  I am so glad this was Business #5 and not Business #2.

This business has been a thorn in my side since the day I purchased it.  Luckily business #4 eased the pain by providing man power and technical expertise during critical times, such as hiring a new manager.  I talked to my mentor about the poor state of the deal.  He certainly understood.  He has had many ventures go south.  He posed the same question Jack Welsh, CEO of G.E., used to ask.  Are we going to fix it?  Sell it?  Or close it?  It is really that simple.  I of course thought I could fix the business, but it really took a toll on me and the other companies.

Keys to Success

  • Fools rush in
  • Get the pulse of the company, employee morale can be harder to change than you think
  • Do not deal with dishonest owners
  • If you screw up,  “fix it, sell it or close it” sooner rather than later
  • Some deals will go bad, have an exit strategy

 

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Do You Act Rich or Live Rich?

Posted by on Mar 7, 2013 in Blog, Featured | 0 comments

Do you act rich or live rich?  Most people associate the rich with living rich, spending million of dollars on lavish things while they rest poolside at their mansion.  While it’s easy to imagine this, most rich people, at least the self-made types, know the value of a buck.  While acting rich won’t make you rich, it puts you on the necessary path.
Kyle James, at Money blog partner site of U.S. News & World Report provides these 5 frugal habits of the rich.
Drive a modest car. Let Facebook founder Mark Zuckerberg, who drives a modest $30,000 Acura TSX entry-level sedan, be your role model on this one.

Ryan’s Take:

This status symbol has never really resonated with me.  Why pile a bunch of miles on something that will soon be worth nothing?  If you can afford some type of collector’s car that will hold its value, go for it.

Ken’s Take:

Cars lose value so fast I agree with Mr. Zuckerberg.  Buy one that works for you, take care of it, and keep it for 10 years.

Buy a modest home.  Warren Buffett famously still lives in the Omaha, Neb., home he bought back in 1958 for $31,500.

Ryan’s Take:

A house should not be seen as an investment.  It’s a lifestyle.  If you would like to have some security for that lifestyle, buy a home that you can pay off as soon as possible.

Ken’s Take:

I believe in the midst of all your business deals, owning your home outright is a great goal.

Don’t carry wads of cash. …follow the example of oil mogul T. Boone Pickens, who famously shops with a grocery list and only carries the amount of cash he needs to make purchases.

Ryan’s Take:

Only old people like T. Boone Pickens use cash.  Who needs more than 20 bucks in their wallet?

Ken’s Take:

Cash disappears, so don’t carry a ton.  When you need it, carry big bills for emergency situations.  You are less likely to break large bills for trivial things.

Have an action mentality. Almost all self-made millionaires have one thing in common: They are people of action. They don’t sit around feeling sorry for themselves waiting for something good to happen to them, as opposed to the people who I would say have the “lottery mentality.”

Ryan’s Take:

This is an area I am really trying to work on.  I recently read a book called Tribes, which I will talk about in a future post, that really invigorated this part of my life.

Ken’s Take:

This one is what separates the men from the boys.  When the going gets rough, can you make a come back?

What do you think this list is missing?  Leave a comment and let us know.

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