Monthly Archives: March 2012

[video post] Don’t get pushed around during negotiations

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Don’t Get Pushed Around During Negotiations If You are Temporarily Short on Cash, Time or Energy

A friend of mine, Jane, owns a service firm that really takes care of its clients. She was starting to feel the strain of high labor-related costs and overdependence on a few key people, so she invested in “productizing.” You know what I mean. She protected her intellectual property (IP), turned their process into a system, and obtained outside assistance from a merchandising company to package it all. Maybe you can imagine how she felt. Jane had invested a great deal of time and money and was now feeling rather low on money, energy and time.

I found myself speaking up because it seemed like Jane was giving in to more and more demands from prospective licensees and strategic alliance partners.  We have noticed that the same thing often happens to owners of companies who are negotiating with their first franchisees or joint venture partners.

It pays to do a little research about the offers being made by comparable companies.  When you review materials distributed at franchise expo exhibits you quickly see the value assigned to IP, great product, systems, procedures, marketing, expertise, and reputation.  It is reasonable to expect licensees, strategic alliance and joint venture partners, or franchisees to be entrepreneurial enough to do their part and share the risk.

I couldn’t help but wonder if the people Jane’s been negotiating with are trying to take advantage of the fact that she wishes that she had more cash, time, and energy.  Folks who take advantage and would demand more and more and more during initial negotiations probably won’t be win/win partners later.

When Jane got a good night’s sleep and took another look at her value proposition, she moved beyond being embarrassed that she is temporarily low on cash, time, and energy.  A FAIR deal wouldn’t involve her putting up more money anyway!

 

Aldonna R. Ambler, CMC, CSP has earned the right to be called THE GROWTH STRATEGIST®. She has won over 2 dozen national and statewide “entrepreneur of the year” awards for the resilient growth of her international businesses across 4 recessions.  Her midsized BtoB clients get on…and then stay on…the published lists of the fastest growing privately held companies. She owns and operates a suite of companies that help privately held midsized companies achieving accelerated growth with sustained profitability® through opportunity & resource analysis, 4 approaches to strategic planning, executive advisory services, growth financing, and targeted search.  2012 is Ambler’s 8th year hosting a weekly peer-to-peer-to-peer syndicated on line talk show that features interviews with CEOs/Presidents of midsized companies (typically between $20 and 200 Mil/yr) sharing success tips about the growth strategy-of-the-week. An archive of over 300 interviews is available at www.GrowthStrategistShow.com. She can be reached toll free at 1-888-Aldonna or at Aldonna@AMBLER.com.

[video post] Keep an Open Mind during M&A Discussions

Keep an Open Mind during M&A Negotiations

A prominent competitor approached our consulting firm saying that they were potentially interested in acquiring us.  At the time, we viewed ourselves as the acquirers rather than the acquired.  But we saw the situation as a learning opportunity so we met with the leaders of the larger firm. The process shined a light on holes in our strategic and staffing plans.  That didn’t feel very good at the time, but it was a huge favor.  The process also helped us understand the value of our innovation and I.P.  Very important partner level discussions were sparked for us by our interaction with the larger competitor. Although we turned down their acquisition offer we remained convinced that we hadn’t wasted one minute going through the process.  It was very illuminating.

A few current clients are led by Baby Boomer aged owners. We are encouraging them to engage in exploratory conversations with their counterparts in related companies.  Over the years we have discovered that a maximum of six conversations are needed to finalize a new relationship (merger, acquisition, joint venture, subcontracting, etc).  And we encourage our clients to have a minimum of two discussions so they remain open minded. The conversations serve multiple purposes…learning, surfacing opportunities, imaging the future taking a different form, etc. The conversations often start with a meeting over breakfast at a diner in a neutral location.  There is no reason to prematurely alert employees or customers to the fact that they are talking with one another.

For one of our clients, the initial diner conversations between complementary firms sounded like a merger might be possible, but the proposed terms that resulted looked more like an acquisition or asset purchase. The younger owners of one firm had jumped to the conclusion that the older owners of the other firm were ready to retire.  Talk about illuminating!  The acquisition won’t be happening this year, but the door has been left open to reconsider later.  In the meantime the “older owners” came away from the negotiations with renewed commitment to their business and determination to raise their prices, upgrade their technology platform, and fill a job vacancy. The fact that a competitor viewed them as “ready to retire” and “no longer viable” was the wakeup call they needed.

Are you initiating conversations with the leaders of complementary businesses to explore strategic alliances, joint ventures, acquisitions, mergers, or roll ups? And when you do meet with peers, are you staying open minded enough (not focusing on the punch line) so you can learn? Surprisingly, the process can surface ways to improve profitability, candidates for key positions, client or project opportunities, or growth financing.

 

Aldonna R. Ambler, CMC, CSP has earned the right to be called THE GROWTH STRATEGIST®. She has won over 2 dozen national and statewide “entrepreneur of the year” awards for the resilient growth of her international businesses across 4 recessions.  Her midsized BtoB clients get on…and then stay on…the published lists of the fastest growing privately held companies. She owns and operates a suite of companies that help privately held midsized companies achieve accelerated growth with sustained profitability® through opportunity & resource analysis, 4 approaches to strategic planning, executive advisory services, growth financing, and targeted search.  2012 is Ambler’s 8th year hosting a weekly peer-to-peer-to-peer syndicated on line talk show that features interviews with CEOs/Presidents of midsized companies (typically between $20 and 200 Mil/yr) sharing success tips about the growth strategy-of-the-week. An archive of over 300 interviews is available at www.GrowthStrategistShow.com. She can be reached toll free at 1-888-Aldonna or at Aldonna@AMBLER.com.

[video post] Financial Privacy is a Benefit of Joint Ventures

Financial Privacy is a Benefit of Joint Ventures

If you will need a loan or line of credit, of course, you will be revealing your financial information to bankers, the EDA, the SBA, etc. But if you are launching your second or seventh venture, privacy about the details of your first company can be maintained.

Recently, a few of our growth strategy clients have been reluctant to even consider joint ventures because they assumed they would have to divulge all of their financial information.  In one case, the client further assumed that any potential joint venture partner would try to take advantage of them because they have been growing and generate a nice profit. “If anything goes wrong or money is needed, won’t they just conclude that WE would be the partner to step up?”

Over the years, I have become a fan of joint ventures over other arrangements in part because the focus remains on the future and on the specific venture.  Each participant agrees to invest. The investment in the joint venture can take many forms. Time. Money. Products. Services. Tangible assets. Influence or access. Distribution of proceeds, profit, or debt mirror the value of each participant’s investment.

I am in the process of launching my eighth enterprise at the moment.  It is different from previous launches in that it is an economic development initiative. If/when we get it off the ground, it would be one of New Jersey’s first public benefit corporations. Two companies have invested $50,000 each and we are asking the other participants to now step up.  Whether either of the first two companies is rolling in money or dead broke isn’t relevant. Companies that want to benefit from working together invest in proportion to what they want to see in return.  I have worked with over 50 corporate sponsors over the years, and have concluded that the same concept applies for them.

 

Aldonna R. Ambler, CMC, CSP has earned the right to be called THE GROWTH STRATEGIST®. She has won over 2 dozen national and statewide “entrepreneur of the year” awards for the resilient growth of her international businesses across 4 recessions.  Her midsized BtoB clients get on…and then stay on…the published lists of the fastest growing privately held companies. She owns and operates a suite of companies that help privately held midsized companies achieve accelerated growth with sustained profitability® through opportunity & resource analysis, 4 approaches to strategic planning, executive advisory services, growth financing, and targeted search.  2012 is Ambler’s 8th year hosting a weekly peer-to-peer-to-peer syndicated on line talk show that features interviews with CEOs/Presidents of midsized companies (typically between $20 and 200 Mil/yr) sharing success tips about the growth strategy-of-the-week. An archive of over 300 interviews is available at www.GrowthStrategistShow.com. She can be reached toll free at 1-888-Aldonna or at Aldonna@AMBLER.com. 

[video post] Launching another Enterprise When You Aren’t FLUSH With “Extra” Funds

Launching another Enterprise When You Aren’t FLUSH With “Extra” Funds

Is there any such thing as “extra funds” these days? Even the largest corporations are like squirrels hoarding their acorns after an infestation of gypsy moths that destroyed their beloved oak trees followed by several bad winters. Yes, it will involve more work and a bit more creativity, but there is money out there. Folks still want to make money.  In fact, many are still looking for ways to replace lost retirement funds.

First.  Think about real estate. Wait a minute.  Don’t run away from this blog. I know the housing market has been slammed. There are signs of slow improvement in the economy and housing prices are low. If you would relocate to launch your next enterprise, consider the fact that you might be able to get a comparable home at a lower price than your current residence and qualify for a larger loan than the actual mortgage.

Second. Think about the variety of banks. Although loan decisions are not as depicted in the classic movie IT’S A WONDERFUL LIFE, but character and knowing people still matters in local community banks. Some community banks are quietly growing by acquiring customers who were furious about the bail outs of the huge financial institutions.

Third. Consider the US Small Business Administration (SBA).  They have “low doc” loans and lower interest rates. You’ll need a decent business plan, of course, but don’t assume you are too large to approach them.  After all, this blog is about the launch of a new enterprise.

Fourth.  Think about private investors. If your enterprise will net more than 10%, you’ll beat the results of many mutual funds.

Fifth. Review how much money you and your family really need to live on over the next year. Could you forego some of your salary so that a business partner or a franchisor would be willing to fund your start up?

Sixth. Don’t forget the economic development authority (EDA) in each state. They are charged with growing the economy, supporting enterprises with the potential to bring jobs to their states. Like the banks and the SBA, you’ll need a decent business plan.

Seventh.  Think about investment funds, angel networks, and even venture capital firms.  They aren’t seeing as many proposals these days, so you will not necessarily be shoved to the bottom on a long list. If your enterprise involves an exciting target market, an innovative technology, or international possibilities you have a better chance of a positive reception. Look for states that have favorable tax laws related to capital gains.  Private investors are less likely to go in with you if they will be hit with a huge tax obligation later.

Aldonna R. Ambler, CMC, CSP has earned the right to be called THE GROWTH STRATEGIST®. She has won over 2 dozen national and statewide “entrepreneur of the year” awards for the resilient growth of her international businesses across 4 recessions.  Her midsized BtoB clients get on…and then stay on…the published lists of the fastest growing privately held companies. She owns and operates a suite of companies that help privately held midsized companies achieve accelerated growth with sustained profitability® through opportunity & resource analysis, 4 approaches to strategic planning, executive advisory services, growth financing, and targeted search.  2012 is Ambler’s 8th year hosting a weekly peer-to-peer-to-peer syndicated on line talk show that features interviews with CEOs/Presidents of midsized companies (typically between $20 and 200 Mil/yr) sharing success tips about the growth strategy-of-the-week. An archive of over 300 interviews is available at www.GrowthStrategistShow.com. She can be reached toll free at 1-888-Aldonna or at Aldonna@AMBLER.com.

Don’t Give Up on Geographic Expansion if You Aren’t Feeling Wealthy

Several of our B2B clients are convinced that organic growth is THE only way to go as they expand into other locations. These companies establish research budgets to identify places with the best potential and surface people within their industry who know the target towns and want to be their employees.  The corporate headquarters owns the physical assets of the branches (buildings, equipment and inventory), provides administrative services (accounting, human resources, legal), pays for the overhead, and supports marketing. Corporate headquarters also provides reasonable base salaries for the new branch managers, business plans, and incentives based on generating gross profit.

Several other B2B clients swear by geographic expansion through acquisition. Instead of trying to find completely new areas and guess at the potential, they look for underserved towns. Instead of looking for people who view themselves as employees, they look for people who have exhibited some entrepreneurial traits.  Those local entrepreneurs usually have established customer bases and gained positive reputations, but hit plateaus. Having a larger corporation fund inventory, marketing, and administrative costs provides the boost the entrepreneurs need to keep growing. The entrepreneur trades some of his/her independence for the money paid for physical assets and a head start in the town.  But the past few years has brought financial challenges for even the most experienced executives of privately held midsized companies.  What can you do if you want to expand geographically but cannot afford to do organic growth or acquisitions?

The relationship between local and corporate leaders is at the top of the list of success factors when it comes to geographic expansion so it’s important not to waste time wondering whether the relationship will be called a joint venture, a merger, an equity deal or franchising.  We have found that once the parties involved have a non disclosure/non-compete agreement signed, it helps to assign responsibilities for each line item in the financial statement…one row at a time.  The discussion that flows from such a process is absolutely fascinating…and the resulting summaries of responsibilities provide sufficient information for your attorney(s) to tell you the type of deal involved.

We are currently helping a few clients with this process.  With one company, their new branch in the northeast will involve a joint venture and their new branch in the southeast will involve an equity deal.                

 

Aldonna R. Ambler, CMC, CSP has earned the right to be called THE GROWTH STRATEGIST™. She has won over 2 dozen national and statewide “entrepreneur of the year” awards for the resilient growth of her international businesses across 4 recessions.  Her midsized BtoB clients get on…and then stay on…the published lists of the fastest growing privately held companies. She owns and operates a suite of companies that help privately held midsized companies achieve accelerated growth with sustained profitability® through opportunity & resource analysis, 4 approaches to strategic planning, executive advisory services, growth financing, and targeted search.  2012 is Ambler’s 8th year hosting a weekly peer-to-peer-to-peer syndicated on line talk show that features interviews with CEOs/Presidents of midsized companies (typically between $20 and 200 Mil/yr) sharing success tips about the growth strategy-of-the-week. An archive of over 300 interviews is available at www.GrowthStrategistShow.com. She can be reached toll free at 1-888-Aldonna or at Aldonna@AMBLER.com.

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