American Business Brokers & Advisor Founder & President PROFESSIONAL INTERMEDIARY & MARKET MAKER FOR PRIVATELY HELD COMPANIES Advisor • Consultant • Speaker Market Valuations Involved in Closing 500+Business Transactions & Over $500 Million Author of ‘The Art of Buying and Selling a Convenience Store’
The Number One Reason New Businesses Fail The Importance of Due Diligence
“Businesses are like relationships — they’re easy to get into but really hard to get out of.”
T here are 1,001 ways to run a business picked up on some of the key reasons why new businesses fail and how to prevent their failure. One reason is a lack of due diligence on the part of the new business owner. Many of my readers may know what I’m talking about. But just in case, here’s an example of what I mean. Say you want to buy a hot dog stand, but you don’t know anything about hot dog stands. All you know is you want to own one more than you want to invest in your current business. You’ll probably have some questions about how to run a hot dog stand for the current owner. What are the fixed costs? What do the day-to-day responsibilities look like? So on and so forth. This Q and A session is your due diligence — it’s doing your homework, and familiarizing yourself with what you’re getting into. poorly. I should know — in all my experience, I’ve had my fair share of business flops! But, through all my successes and failures, I’ve
a brand new Arby’s on it. It cost just under $1 million. After eight years and losing $250,000, we finally started to make a little money. So what did we do wrong? We never researched the business, the location, or really anything, and we ended up paying $250,000 worth of “tuition.” Tuition is what I call the money you lose while learning how to run a business efficiently. Every new business owner will have to pay some amount of tuition, but smart new business owners will try to minimize that cost by doing their due diligence. I’ve owned 10 different national franchises over the course of my career, and, after that Arby’s debacle, I do my homework when I decide to buy a business. That usually involves calling other franchise owners who aren’t in my territory and asking them about the positive and negative aspects of the business. That being said, some of the best business deals I’ve ever made are the ones I never made. Humans are emotional creatures. In the heat of the moment, I’ll think my idea for my next business venture is foolproof. But even then, I’ll write it down on a piece of paper and sleep on it. Many times I’ll wake up, wonder what I was thinking, and ultimately save myself lots of time and money. Businesses are like relationships — they’re easy to get into but really hard to get out of. Don’t let your emotions overtake your common sense and don’t take any business venture at face value. If you do your due diligence, you might just save your money and your business.
So what happens when you don’t do your due diligence to the extent necessary to successfully
run your business? Well, I learned the answer from firsthand experience. Back in the 1980s, my business partner and I wanted to get into the restaurant business. We had never owned a restaurant before, and we knew absolutely nothing about the industry. I was in the oil business, and my partner was a lawyer. It was a recipe for disaster. We ended up buying a piece of property in a St. Louis suburb and building
Ring, Ring — It’s a Robot
What You Can Do to Protect Yourself From Phone Scams and Robocalls Two of the most common scams are phone scams and robocalls. These calls are incredibly annoying and can trick you out of valuable information if you’re not careful. While it might seem like these scams are inescapable, there are some precautions you can take to avoid their traps. that the number works and that they should try again. Once your number is confirmed as active, it often gets put on an “active number” list that can then be sold to other scammers who market in these types of phone numbers. If you can’t verify who is calling without picking up, don’t answer. Let it go to voicemail. If it’s important, the person will leave a legitimate message and you can respond afterward.
Give them the silent treatment. One thing you can do to avoid these fraudulent, time-wasting calls is to simply hang up. If possible, it is best to not answer at all. It’s always good to have a list of numbers you can reference, so you never have to guess who is calling. Think of it as going one step beyond caller ID.
Put up some deterrents. You can even go a step further and block the calls. Many phone service providers offer call-blocking options, including AT&T, Sprint, T-Mobile, and Verizon. You can sign up for this service in-store or on your service provider’s website. Each service costs about $4 per month. There are also a number of call-blocking apps available on Android and Apple devices, but if you subscribe to a blocking service through your phone provider, these apps are unnecessary. Finally, you can sign up for the Federal Trade Commission’s “Do Not Call” program (DoNotCall.gov). While the Do Not Call program can help cut back on calls, this list is largely ignored by scammers. If you’re getting a ridiculous number of robocalls every day, signing up can offer you some brief respite. Thankfully, Congress is already attempting to fix this problem by making it harder for scammers to call you. But until they are able to pass tough, effective legislation, it is up to us as consumers to remain vigilant and do what we can to keep our personal and financial data safe and secure.
In some cases, answering and then hanging up can actually do more harm than good. Answering the phone gives the scammers confirmation
Illogical Like Us
MARKETING CAMPAIGNS THAT SHOULDN’T WORK, BUT DO
If I tried to sell you a cup of coffee for $5 when you knew full well that you could make yourself a cup of coffee at home for mere pennies, would you do it? It sounds crazy, but perfectly sane people do it every day when they opt to get their morning brew from Starbucks, Dunkin’, or their favorite local coffee shop. We take this occurrence for granted, but it’s worth pondering why something so illogical would work as a business model. Many people believe customers buy products for logical reasons. They couldn’t be more wrong. Sometimes, maximizing sales works less like science and more like magic. In Rory Sutherland’s new book “Alchemy: The Dark Art and Curious Science of Creating Magic in Brands, Business, and Life,” he writes that people often buy a product because of what it represents, rather than what it is. In order to successfully market a product, it can’t hurt to know a few ways to turn perceived meaning into profit. Take Ikea, for example. Why would you buy a piece of furniture that you have to build yourself when you could buy a similar piece already built? It would certainly save you some effort, but Ikea’s founder Ingvar Kamprad
found that the effort of putting your furniture together actually added to its perceived value. We love the product more for having helped make it. This has since been labeled the “Ikea effect.” Sometimes people value some level of control over convenience. Take Wikipedia, for example. One reason it’s so prolific and successful is because each page can be edited by users, not just certified experts. There is a level of control users can enjoy on Wikipedia more so than with other sites. And that’s how one website got users to write thousands of pages of content for free. People don’t always look for what’s simple or convenient. We don’t make sense like that. So, if your business isn’t taking off or your products aren’t flying off the shelves, maybe stop looking for a solution that makes sense, and instead, try to find one as illogical as us.
How to Get Out of a Business WITHOUT LOSING YOUR SHIRT OR SANITY
Whenever you start a business, always have a buy/sell agreement. If you’re unfamiliar with the idea, let me explain. All partnerships start out with two or more parties deciding they want to get together to either buy or start a business. Each party brings something different to the partnership: One partner may have the funds for the venture, and the other may have the operational skills necessary to run the business and will do so on a day-to-day basis. But what happens if one of the partners wants to get out of the partnership? Or if one of them is not contributing their fair share to the business? Or gets a divorce? Or dies? What if the business fails, and both of you experience financial loss? Each partner is entitled to half the profits in the business, so how do you address this conundrum? Here’s where a buy/sell agreement will come in handy. Basically, it’s a legally binding agreement that describes how a partner’s share of the business may be reassigned if, for some reason, they leave the business. Let’s say your partner dies, and their spouse inherits their interest in the
business but knows nothing about running the day-to-day operations like your partner did. If there’s a stipulation in your buy/sell agreement you drew up before you entered into business with one another, you can settle the problem without a lot of stress or hurt feelings. Too many times, business partners get so excited about the novelty of starting a business that they forget to address this crucial step in the process. Even if you’re going into business with your spouse or your best friend, planning for situations that seem impossible will keep you from getting blindsided down the road. Without a buy/sell agreement, getting out of a business with a good friend or a relative can destroy those relationships — and relationships, like businesses, are easier to get into than they are to get out of. So do your business partner and yourself a favor, and write up a buy/sell agreement.
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INSIDE P.O. Box 810 Effingham, IL 62401 1 2 How Doing Your Homework Can Save Your Business How to Best Protect Yourself From Scam Calls
Marketing Campaigns that Shouldn’t Work, But Do The All-Important Buy/ Sell Agreement Selling Your Business
What Interns Offer
O ften utilized as file organizers, envelope lickers, and coffee fetchers, college interns are usually at the lowliest rung on the corporate ladder. But, as some of the world’s most successful companies have proven, these young team members can be incredibly valuable to your business. If you haven’t considered offering internship positions before, the following benefits might just convince you. Proactive Recruiting In today’s competitive job market, recruiting a recent college graduate with relevant experience feels like finding a unicorn. But a coveted hire doesn’t have to be one in a million. An effective internship program can give you the opportunity to bring college interns on to your staff who could potentially become full-time employees. And luckily, unlike regular hires, you aren’t making a long-term, expensive commitment to your interns. During their internships, you can test whether or not they will be a great fit for your company before offering them a permanent position. And if an intern impresses you enough to hire them on after graduation, you can rest assured knowing they will already be familiar with their job by then.
There’s a reason top companies like Facebook and Chevron invest heavily in their internship programs. By bringing in young, innovative minds, you open up your business to fresh, unique solutions. Interns have spearheaded effective social media campaigns, modernized standard operating procedures, and even designed apps to help their businesses run smoother. In a world where remaining relevant is key to growth, businesses can’t afford to be out of touch with the next generation of consumers. So, while interns will likely do much of the grunt work at your business, don’t be afraid to hand them more responsibilities. Bring them into strategy meetings, ask for their thoughts, and treat them as valued parts of the team. Do this and you’ll be in step with some of the biggest players in the business world.
What Interns Can Offer
These Young Minds Will Help Your Business Thrive
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