Bottom Line Business Insights : Maryland Business Lawyer & Attorney : Wagonheim Law Firm : Mergers & Acquisitions & Contractual Negotiation

Yesterday at 5:00, I found myself sitting in our conference room across from a very interesting gentleman. He was in his upper fifties, maybe 60, and carried himself as a professional. He explained that he had been in business for upwards of 40 years – that he had made some big mistakes, learned from them, moved on, and built a fairly successful business. 

He told me that the business that he had started had run its course and he wanted to start a new one, having learned from the mistakes of the old. In order to start the company, he decided to bring in 3 additional people. These people were friends of his, experienced in his industry, and possessed of the skill sets necessary to make the new venture run. My visitor had decided to divide 40% of the stock among them, retaining 60% for himself – enough, he felt, to keep control of the company.

He was convinced that giving out shares of the company was the only way to keep the group motivated, absent money to pay each person’s going rate. My visitor was wrong.

Recently, I wrote a piece in our e-mail series discussing the mistake of offering partnership at the outset of a business relationship. And whether the discussion concerns true partnership or co-ownership of a corporation or LLC, the fact of the matter is that co-ownership is a business marriage. And make no mistake, just like the real thing, a business divorce can be expensive and emotionally draining. 

For his part, my prospective client was asking his friends to invest their time and skill in a new business for little or no compensation. What he wanted was a way to show his friends that they would reap the benefits of their investment.   We explored a number of possible solutions, but what we decided upon was offering stock options.

People, you see, are unpredictable. Some may be highly skilled and great friends, but start working together and it’s a trainwreck. Different business philosophies, work ethic, or personalities can destroy a team that could not possibly look better on paper.   Stock options and a vesting schedule are two ways to put together an arrangement now which takes effect later. 

In this case, we could commit to an option to purchase stock in the company beginning in 3 years, discounted for each year the person had been with the company. Moreover, as incentives, other discounts to the purchase price could also apply, provided we took care not to trigger any unwanted tax consequences.

In other words, my prospective client could date before he got married. And in my experience, that’s a pretty good plan.

Questions? Comments? Concerns? Raise it for discussion on Facebook, Twitter, or LinkedIn.

For more information on our free e-mail series, click here.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

“There is a difference,” I was taught, “between ten years of experience and one year of experience repeated ten times.”   I thought about this the other day as I contemplated the calendar change to 2011 and the fact that next year will mark my 25th year in practice. 

Everyday it seems like I see too many examples of companies celebrating survival, rather than progress. We regularly receive letters adorned with “our 10^th anniversary” ribbon stickers and see businesses using the phrase “since 1956” or some such instead of an actual message.   When I was a young attorney (maybe for ego’s sake I should say “younger” attorney), I was hoping to be made partner when the management committee told me instead “we’ve decided that you have to wait 3 more years before we extend an offer of partnership.” 

Now, granted I was young – younger than any of the partners by a long shot – but I had just as many clients and generated more revenue than most.   “Why,” I asked, “does it matter how many more sunrises I see between now and an offer of partnership?” I urged them to give me something different such as a revenue, performance, or even billable hour target to hit. But no, to them it was time. To me, this made no sense.

One of the real values of seeing another sunrise is the ability to leave behind the mistakes and absurdities that had, no doubt, been a part of your yesterday. But equally as important, with the sunrise comes the opportunity to build on yesterday’s lessons. Sometimes that’s painful in business.

Print out your customer list. Not a list of your most active or largest. Print out a list of all of them. Don’t just read the names, ponder them. As to each, are they enthusiastic about your work or did you make a cringe inducing mistake? Were you late? Were you, perhaps, a bit less responsive than you should have been? Are they loyal to you or are they casting a wandering eye across the business landscape wondering if they can do better? 

I have yet to find a business owner who, in his heart of hearts, can honestly say that he did right by 100% of his customers 100% of the time. 

So here are the questions: What are you going to do about the failures? Are you committed to learning? Have you created a company culture open to improvement? Can you begin a lasting and productive dialogue about your failures? Have you ever conducted a bloodless autopsy – one with a mission of education rather than the identification of a scapegoat?

In other words, in 2011, what will you have learned by the sunrise?

Questions? Comments? Concerns? Raise it for discussion on Facebook, Twitter, or LinkedIn.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Guest Blogger: Adam Schechtman, VP of Business Development & Marketing, Eye Catching Creative

To brand or not to brand? That is the question so many small and mid-sized businesses tend to overlook in the early phases of their development. The problem is there’s a tendency to keep shuffling this linchpin of marketing success to the dark corners of the priority list. Then one day, we read an article or hear someone talking about a competitor and cringe in uneasiness because they did something we didn’t…built a solid brand.

Like marketing in general, branding is easy to lose focus on, especially when we have experienced some degree of success. If you agree that today’s markets have changed and the way businesses DO business has changed, then it’s time to recalibrate some of your own marketing efforts. That means its back to basics! Like the “butterfly effect,” small improvements in your branding strategy can have a tremendous impact on growth over time.

We know from marketing 101 that your brand is your identity. Beyond the visual or physical makeup… name, logo, advertising, a brand is quite simply the psychological impact you have on customers. Branding is so important because people buy emotionally and then logic steps in to support their buying decision. Your brand is essentially a part of the ongoing relationship you have with customers. It is a compilation of messages that differentiate (or don’t differentiate) your business, product or service from everyone else who plays in the same space as you do. Take a second look at the competition of today. If someone stands out, why do they stand out? Who doesn’t stand out? Which category does your company fall into and who might be able to help you to improve on that position?

From your email address to your website, to how the phone is answered to the relevance of your marketing materials, your brand must be professional, consistent and CURRENT.  What the company stands for and what you’re offering should be different and clear. When is the last time you really dissected how you are perceived in the market and what your market position truly is? One easy way is to run a survey using existing customers or even some customers that you lost. Resources like SurveyMonkey.com are fantastic, free, e-survey questionnaire tools that are easy to use and easy on the budget.  So let me ask you… what perception do your customers have of your business? What does your presence in the market “feel” like to customers and professional peers (aka competitors) and more importantly… are you being felt?

Adam Schechtman is an entrepreneur and co-owner of Eye Catching Creative, providing virtual, on-call design, advertising and marketing solutions to budget-conscious small and mid-sized businesses. With more than 15 years in marketing, business development and sales, he is also the former owner of Achieve Senior Home Care and former co-owner/franchiser of Advance Realty Solutions. Adam holds an MBA in marketing from Johns Hopkins University. Visit www.eyecatchingcreative.com for more information.

Questions? Comments? Concerns? Raise it for discussion on Facebook, Twitter, or LinkedIn.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

“I got a phone call this morning from one of our oldest customers. He fired us. After 20 years, he fired us. Said he doesn’t know us anymore. I think I know why.” 

The speaker recounted his phone conversation to his account reps, saying “we used to do business with a handshake, face-to-face. Now it’s a phone call, a fax, ‘get back to you later,’ with another fax, probably.” 

This United Airlines commercial was originally aired before e-mail and the advent of social media. First aired twenty years ago, in 1990, it still resonates. So many businesses are started by an entrepreneur, skilled in the producing the product or service that spawned the company. Customers came because of the skill and stayed because of the attention. As the owner of a small business, the founder could track every project and knew every client. When someone was upset; he knew it.

Growth has a way of making that kind of personal attention obsolete. Time passes and a founder looks around to realize that whole projects are being performed for customers he never met.   And what about the ones he knew – the ones who built his business or who inspired him to go into business in the first place? Chances are, they’ve been delegated. Delegated to talented people, to be sure, but delegated just the same. 

Sooner or later, the thought has to occur to these customers – your old friends -- that if they mean little enough to your company that they can be delegated, your company means little enough to them that they can go elsewhere.  

Looking ahead to 2011, most business owners set targets for growth -- more revenue, more customers, bigger projects, better distribution. But how many set goals reflecting stronger relationships, customer retention, and expressions of gratitude? 

Many years ago, I read a book in which the author urged business owners to “pay attention to the ‘fine’s.’” He meant that people rarely voice their complaints. When asked about service or the particular product they purchased, even when dissatisfied, they’d normally respond that things were “fine.” Not every customer can be counted on for enthusiasm. After all, there isn’t an infinite amount of enthusiasm to go around. But the silence and the “fine’s” speak volumes to those with a keen enough ear and enough focus to notice. 

So what are you doing to focus on client retention, rather than just growth? Studies indicate that a new client is 7 times more expensive in terms of marketing and advertising dollars than existing clients. The point is that it is much cheaper and more efficient to keep the clients you have than spend every ounce of energy trying to bring new prospects in the door. 

If you do not already track trends in returning business, 2011 is an ideal time to start. After all, nothing speaks to customer satisfaction more than repeat business. Even more than tracking it, look for the things that increase the pace of returning business over time. 

Perhaps, like those executives in the United Airlines commercial, you can forgo e-mail, faxes and phone calls, and, just once in a while, put in the time to travel even great distances for a handshake.

Questions? Comments? Concerns? Raise it for discussion on Facebook, Twitter, or LinkedIn.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Not long ago, Duke University Men's Basketball Head Coach Mike Krzyzewski and the Duke athletic department developed a list of nine principles that defined Duke athletics.  Coach K described these principles as "the things that are essential to who we are." 

The nine principles were revealed to a gathered crowd of 850 student-atheletes, coaches and administrators in Cameron Indoor Stadium by former Duke student-athletes who represent great success stories in their respective fields.  The words selected by Duke to define Duke were: (1) education; (2) respect; (3) integrity; (4) diversity; (5) sportsmanship; (6) commitment; (7) loyalty; (8) accountability; and (9) excellence.

As I read Coach K's description of Duke's guiding principles, I could not help but focus upon the applicability of the same methodology and mindset to my own small business and those I am fortunate enough to counsel.  I wondered whether one could gather a roomful of often cynical employees around a conference table, discuss values, and have it actually mean something tangible. 

In other words, I wondered "what were the keys to a successful company vision?"

Tony Gattari, an Australian corporate consultant wrote in Good Ezines that successful corporate visions share three attributes:

1. It's infectious.  Just like a disease, a vision is at its most contagious when it is alive and active in the host.
    
2. It  comes from within.  Rather than having management swoop in and tack a poster in the lunchroom or spend $1,000 at Successories, the vision is tied to the employees and created from the real passions and desires of the company's leadership.
    
3. It goes beyond the company's 4 walls.  A company with a successful corporate vision extends that vision to vendors, colleagues, customers, and the business community at large -- not in an evangelical way, but rather simply by the way the company interacts with the outside world. 

In the privacy of their own homes and hearts, people often find themselves doing some soul-searching in December in contemplation of resolutions for the coming year.  Perhaps, and maybe even especially, in these economic times, December may be a good time for some corporate soul searching as well. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Two months ago, our copier vendor called to tell us that our lease was almost up.  The purpose of the call was obvious -- they wanted to sell us a new copier.  The result of the call was a business lesson that we will use to guide us over the life of our firm. 

The end of our copier lease left us with three options:

1. Pay off the lease
2. Upgrade to a new copier
3. Explore our options. 

Paying off the lease would require one final payment equivalent to about 8 of our normal, monthly payments.  By month nine, absent an unexpected mechanical meltdown, we would be home free.

Our vendor (we'll call them Oldco) clearly wanted us to choose the second option.  They were offering a lease on a newer, faster copier for a slightly lower monthly cost.  The problem was, we had no problem with the old copier.  It was fast enough, scanned well, and a slight upgrade in speed, with perhaps a better stapler, did nothing for my bottom line. 

Our choice came down to either keeping the current copier or exploring our options.  Upgrading machines with no discernable benefit made no sense. 

Our search for other options took us to Advance Business Systems.  We invited both Advance and Oldco to make a presentation.  (Not that we're offering a million dollar copier contract, but whatever the money is, it's important to us.)  Our Oldco salesman walked into the presentation with the company's president and showed us some very nice brochures on the copier upgrade.  We could slightly reduce our monthly payments while increasing the speed of our copying and scanning.  (And maybe add a hole punch...I mean who's to say?)

Advance, on the other hand, scheduled a meeting at their showroom after asking us detailed questions about how we run our practice.  At their office, we were ushered into a conference room where we were given a demonstration of how their copier could integrate with our practice management software while helping us achieve the kind of document control system we had envisioned. 

The companies provided a stark contrast.  Oldco sold copiers.  Advance sold a document management solution that happened to work through copiers.  What became apparent was that somewhere in its development, Advance had decided that anyone could sell copiers and that anyone can claim to have reliable service.  To avoid becoming a commodity, Advance had to identify how it fit into its customers' development.   It had to figure out how it was more important than the other guy and then make that distinction apparent to its customers.  

Therein lies the lesson. 

When I now look at companies, I find myself asking:  "Are they Oldco or are they Advance?"  I've asked that of my own.  In so asking, I think I've found my answer and charted the road we, as a law firm, have to travel to ensure that we never become a commodity.  

My law firm's answer to that challenge as well as my request for feedback concerning other companies and the roads they've chosen, form the basis for future posts.

• Email This
• Print
• Comments
• Trackbacks
• Share Link