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The 7 Attributes a Professional Intermediary Should Possess

The moral & ethical foundation that exists in successful societies is often sourced to religious teachings. The most common educational environment for teaching fundamental principles like you should not kill, steal, lie, or covet is the family. It is difficult to have the concepts resonate and become engrained into practice, if they are not taught at a young age by the most important mentors in all our lives, parents supplemented often by extended family (Siblings, Grandparents, Uncles, Aunts, etc.). I have been blessed during my life to have had family, friends, colleagues, clients, and collaborative partners of a broad spectrum of faiths who have consistently demonstrated integrity in their activities as role models and contributors in my life.

As an academic, I have studied many foundational religious texts in an effort to compare and contrast the teachings that are part of the lives of good people around the world. One area of teaching, that has intrigued me in educational research, originating from the Christian faith is the Seven Deadly Sins and Seven Heavenly Virtues (https://www.torch.ox.ac.uk/article/the-seven-deadly-sins-and-their-antidotes). As a positive person who believes lessons can be learned from all and embraces the possible, this article will focus on the positive virtues and how they should be an expectation by clients and incorporated into practice by a professional mergers & acquisitions intermediary. I have attempted to demonstrate these virtues personally as a deal making professional and weave them into the corporate culture of IBA as its President & CEO.

The first of the Seven Heavenly Virtues is Faith. Faith is defined in this context as the “Belief in Doing the Right Things”. What are the expectations parties should have of a M&A intermediary and each other in the facilitation of a transaction, if things are being done the right way? I believe they are as follows:

Communication – Information shared, whether in person, verbally, or in writing, should be timely, comprehensive, and honest.
Knowledge – The information and documentation necessary to make educated decisions should be provided. No material facts should be undisclosed.
Skill – Actions taken should be performed at a superior level of aptitude.
Resources – If a seller or buyer does not have the ability to make a decision from a foundation of knowledge, the intermediary facilitating the transaction should supply information or incorporate professionals who can address the deficiency. In a mergers & acquisitions context, this often takes the form of recommending both sides seek legal & accounting guidance to address shortcomings in knowledge prior to making decisions that will result in tax and other liability creation post transaction.

The second virtue is Hope. Hope is the outlook that a positive outcome will be achieved. In a business sale transaction, the intermediary is the trusted guide selected to lead the buyer & seller on a journey that will often take a path through difficult environments and terrain before reaching its final destination. It is important that a deal broker keep the parties focused on the ultimate goal, work the problems at hand, and not delve into areas of personal criticism of the parties or their professional advisors. It is not happenstance that positive phrases like “win-win” and “getting parties to yes” are articulated by mergers & acquisitions professionals in the process to describe navigating issue turbulence. If people are communicating a positive outcome is possible. When people stop talking, no progress can be made.

The third virtue a M&A intermediary should demonstrate in facilitating a transaction is Charity. Charity is defined as a willingness to help others in times of need. There is an old saying in professional negotiations, “An intermediary has two ears and one mouth. They should listen twice as much as they talk.” It is critical that a high caliber mergers & acquisitions intermediary be a good listener. Issues and concerns that are off the radar will not be addressed. Areas of concern festering in parties’ minds can be large or small, substantive or non-material. Examples from transactions of issues that I have addressed after listening to the parties have ranged from a seller’s desire to stay on company health insurance until Medicare eligibility is achieved post sale to a need for the selling owner to come back and executively manage the company when the buyer went overseas for a wedding post-acquisition to a carve out in a non-competition agreement to allow the seller to use their skills to help non-profit organizations (e.g., a carpenter helping to build homes for women leaving abusive environments).

The fourth virtue a M&A intermediary should personify is Fortitude. Fortitude in this context is defined as possessing the attitude of never giving up. A key to never giving up is to set appropriate expectations. Both buyer and seller in a business sale transaction are often unfamiliar with the intricacies of the process and the associated time periods for activities. A seller who believes a buyer will be located immediately or a transaction completed in a few weeks is not being realistic. Similarly, a seller that believes they will not need to help the buyer address needs of a lender during underwriting when they have the greatest depth of knowledge about the company or that the process will not be invasive and time consuming has not had their expectations properly set. Conversely, a buyer who demands immediate results from a seller who has a “day job” running the company while working on a deal is not living in the “real world”. A business sale is a marathon. It takes significant fortitude by the buyer, seller, and their professional advisors to get through the process. Walking off the journey at the 24-mile mark in frustration with hands on your hips and not finishing the entire 26.2 miles can often appear to be a way to end the pain, however digging deep and finding a strength of will and the necessary effort is likely better than the alternative of starting the race again. It should always be recognized that deal issues with one buyer frequently reemerge in negotiations with another (e.g., a customer concentration concern for a company likely is a concern for present ownership and will also be for their successor at the helm).

The fifth virtue a quality business broker should possess is Justice. Justice is the desire to be fair and equitable when dealing with others. The overarching corporate principle at IBA is the “Golden Rule” of do unto others as you would want them to do to you. We ask each buyer and seller in transactions facilitated by our firm to conceptually walk to the other side of the table periodically, look at the deal from the other parties’ side, and ask themselves if the situation was reversed would they be willing to do what the other party is asking financially and legally? The definition of a “fair deal” is one where each party feels they gave up a little too much. A knowledgeable, experienced intermediary should be able to provide recognizance on what is standard, common, and presently occurring in the marketplace.

The sixth virtue a professional mergers & acquisitions facilitator should have is “Prudence”. Prudence is defined as care and moderation with money in this context. Business sale transactions are expensive for both the buyer and seller. The expenditure only has benefit if the deal gets done. Empathy and assistive restraint should exist across the negotiating table related to the costs the other party is being asked to burden from taxes on sale to interest rates on debt to legal expense associated with properly structuring the deal and mitigating post transaction liability. One of my multiple decade frustrations in this business has been when attorneys seek to enhance their own financial benefit from a transaction by not doing the right thing (Faith) creating unnecessary confrontation and employing Prudence in the expenditure of the money of their clients. I cannot tell you how many times as a professional intermediary I have known at the start of a negotiation between lawyers where the middle ground was on an issue (Frequently, in representation, warranties, and indemnification) only to see thousands of dollars of expense accumulated for their clients attempting to achieve results they did not have an expectation of occurring. I have also witnessed attorneys who have charged based on the size of the deal not their work product to my disappointment. Fair compensation for labor is a principle I strongly support. Advantageous billing based on time & place circumstances is something I detest whether it is an auto repair shop that increases their rates for a stranded tourist because they will never see them again or an attorney who recognizes that the seller in a retirement sale transaction will never be needing their services in the future.

The final virtue a M&A intermediary should possess is Temperance. This relates to what they charge for their services. Hiring a professional to sell your business is a significant financial commitment. In a perfect world, the decision will result in a business seller achieving a strong market value for their company generated from a competitive group of buyers in a transaction facilitated with knowledge, experience, and high skill employing best practices. A top tier intermediary will complete a transaction for 10 – 20% more than an average business broker in a more timely transaction. There is also a higher probability of completing a sale and receiving more cash through selection of a transaction negotiator/facilitator with a track record of high performance. A willingness to take compensation as a success fee only if a completed transaction is achieved speaks volumes about a broker’s confidence in their ability. Questions should be asked about whether motivation is sincere when retainers and administrative fees are requested with little accountability with performance metrics.

IBA has been honored to be a part of the Pacific Northwest business brokerage community for approximately fifty years with nearly 4300 successfully, completed transactions on our resume in Washington, Oregon, Idaho, and Alaska. We have always wished our competition well and encouraged them to help us build the best possible reputation for the industry. We ask to be included in any entrepreneur’s interview process when selecting professional representation. If we cannot articulate successfully why IBA is a superior option to facilitate the sale of a privately held company, family business, or owner occupied commercial real estate, then we should not be asked to take on the project. Society is a better place when high expectations are set for its members in performance and efforts are made out of generosity. Small actions can be contagious. Start by smiling and saying “Please” and “Thank You” with the people you meet today.

Gregory Kovsky, the President & CEO of IBA since 2000, has personally facilitated over 300 transactions involving privately held companies. He is recognized nationally for his knowledge & experience as a “sell side” broker in the manufacturing, industrial, marine, construction, technology, and horticulture industries and a commonly published author and seminar speaker. Mr. Kovsky has held a real estate brokers license in one or more states since 1994 and has the ability to comprehensively represent entrepreneurs in the sale of their privately held companies and commercial real estate. He is honored to represent IBA as a member of the Seattle chapter of The Professional 50 along, Seth Rudin (Business Brokerage) & Charlie Magee (Franchise Brokerage), and have Joseph Hollcraft represent the firm in The Professional 50 chapter in Portland.

Contributed by Gregory Kovsky

The Distinctions Between Professional Networks and Leads Groups

There are some important distinctions between professional networks (like the Pro50) and leads groups. To me, leads groups – by their very design – have several shortcomings/flaws.

To begin with, pretty much anyone can join a leads group. As long as there isn’t another professional in your category, you can join the group by paying their monthly fee. There’s no mechanism to ensure a member is good at what they do. Additionally, there’s no “theme” to the group. Members often come from a variety of unrelated industries and professions.

A second shortcoming is that – since the purpose of the leads group is to give and get leads – many people join in hopes of getting leads, but rarely give any leads. They often don’t do much to build their own book of business. The consequence of this is that generally only 2 or 3 members pass along leads, while the rest are passive – hoping to get leads from others.

And a third flaw is the premise that members will give one another leads/opportunities simply because they’re sitting at the same table. We all know it doesn’t work like that. We only give leads to people we like and trust.

In contrast, professional networks only consider members who have a good reputation. Therefore, everyone in the network can be trusted to do quality work.

Secondly, the purpose of a professional network is to find the best solution for a client, rather than to simply give and get leads for the sake of “scoring points”. In a targeted network, it’s far more likely that you’ll find a good solution to your client’s problem, so giving and getting leads occurs naturally.

And the third distinction is that there are generally several professionals within any given category. This affords you the opportunity to find the one or two professionals you “click with” in each category, thereby increasing the likelihood of doing business together.

And there’s one more interesting distinction/advantage of a selective professional network. It becomes a great resource. When you send clients to the network website, they can easily identify and screen the additional professionals they need.

Contributed by Michael Beck

How Great Leaders Bring Out the Best in People

Great leaders bring out the best in people. In fact, that’s what makes them a great leader. They bring out the best in their team, they bring out the best in their organization, they bring out the best in their vendors, and they bring out the best in their customers. The art of leadership is learning how to bring out people’s best.

Here are five things a leader must do if he or she wants to be truly effective:

1. Treat People Like People
If you really want to bring out the best in people, you need to treat them like…well…people, rather than things. When we interact with people without compassion, empathy, or understanding, we’re relating to them as things.

The consequence of treating people like things is that you’ll get compliance, but not commitment. In contrast, when leaders regard people as people, they recognize that everyone – regardless of position or title – has hopes and dreams, needs and desires, goals and aspirations, fears and stress, and strengths and weaknesses.

A leader who regards people as people adopts an attitude of being of service to them. He or she helps them to be their best, to correct mistakes for the future, and is empathetic towards them and the feelings they have.

Leaders who treat people like people bring out the best in them.

2. Treat Adults Like Adults
If you want to bring out the best in people, you also need to treat adults like adults. Unfortunately, leaders often fall into the habit or pattern of treating adults like children. What constitutes treating adults like children?

When a leader micromanages people, he or she is treating them like children. When a leader doesn’t trust his or her team to follow through and act responsibly, he or she is treating them as children. When we micromanage people, it demonstrates a lack of respect and trust. It sends the message that we don’t trust them to do what needs to be done and don’t trust their judgment.

Why would a leader treat an adult like a child? The most prevalent reason stems from the flawed perspective that if people aren’t told what to do, they will do the least amount of work possible, doing just enough to keep from losing their job.

In order to treat people like adults, we need to eliminate the false perception that people will do as little as possible if left to their own initiative. Most people truly want to do the best job possible and take pride in the work they do.

An effective leader ensures that people have the right tools, the appropriate skills, and the proper judgment to do their job effectively. Then, the leader can confidently delegate tasks and hold people accountable for getting their work done accurately and in a timely manner.

Leaders who treat adults like adults bring out the best in them.

3. Earn Trust and Respect
The importance of earning the trust of the people you lead is well accepted yet still remains an issue. Trust is earned through having integrity and is absolutely essential for keeping people engaged. A leader who lacks the trust of others has a difficult time influencing and inspiring them. It’s not simply a matter of being honest, nor is it a matter of not being dishonest. Our integrity is reflected in what we do and who we are. People assess us by our words and actions over time (although a single negative event can change that opinion instantly). We don’t earn trust by how we act during major events, but rather how we act in everyday situations. Our words and actions will carry more weight and have greater impact if we’ve earned the trust (and respect) of others in advance.

The level of trust and respect given a leader by his or her team determines—to a great degree—the lengths people are willing to go for them. A leader who has earned a high degree of trust and respect creates a loyal team. A leader who has earned trust and respect gains the ability to greatly influence the actions and performance of his or her team. And a leader who has earned trust and respect will be more easily and more quickly forgiven for mistakes they make. And we all make mistakes…

Respect, like integrity, is one of those things that no one argues against. Yet not every leader earns the respect of his or her team. If a leader wants to be influential and bring out the best in people, he or she needs to have the respect of those they lead. There is a big difference between compliance and commitment.

We earn respect by showing respect and we demonstrate respect by how we interact with others. We show respect to people when we give them our full attention. It demonstrates that we care about their ideas and concerns and that we feel what they have to say is valuable. People can also feel they’re not respected when they’re spoken to in a manner that either minimizes them or makes them feel they and their ideas are being dismissed.

Leaders who earn the trust and respect of people bring out the best in them.

4. Show Appreciation and Recognition
In order to bring out the best in people, people need to feel valued. And in order for people to feel valued, a leader must show appreciation for their efforts and recognize them for their accomplishments. Being taken for granted is disheartening and demotivating, but it frequently happens in the business world, nevertheless.

Some leaders adopt the attitude that people are paid to do a job and therefore the payment of a salary is sufficient appreciation and recognition for their work. While it’s true that people have an obligation to do good work in exchange for fair pay, people are still people. They have emotions, pride, fears, self-esteem, and a desire to please.

Recognition is typically offered as a reward and acknowledgement for an accomplishment. Public recognition boosts a person’s stature within an organization and enhances their self-esteem.

Appreciation, on the other hand, is generally shown in response to the effort someone makes, rather than an accomplishment. Sincere appreciation is generally spontaneous and heartfelt – given from one person to another. When we show appreciation for someone’s efforts, it communicates that we respect and value them.

Leaders who show sincere appreciation for people bring out the best in them.

5. Develop Compelling Strategic Initiatives
When leaders develop a strategic initiative that incorporates a compelling reason, it tends to bring out the best in people. People do their best when they’re inspired by and aligned with the work they’re doing. When people are working on an initiative that matters to them, they’re engaged and enthused.

When an initiative matters to people, they invest their discretionary effort in developing creative solutions and overcoming the inevitable obstacles that present themselves.

People will give (and be) their best for something they believe in. Accomplishing a meaningful initiative is personally and professionally fulfilling. Effective leaders provide a reason to accomplish something. They understand that an initiative without a “why” is simply a goal – and no one gives their all for a simple goal. A good strategy addresses an issue or problem and provides a direction for the company. It also provides a compelling reason for the initiative (a cause, a philosophy, a passion), creating a desire to achieve it.

Leaders who help people stretch and use their creative abilities bring out the best in them.

Contributed by Michael Beck

G.O.A.T.

GOAT, (Greatest of All Time). This old expression was recently revitalized because of Simone Biles’ dominance in the world of gymnastics. We hear the expression tagged to other great athletes like Tom Brady, Serena Williams, Muhammad Ali, Tiger Woods, and Michael Jordan.

Have you ever asked yourself, “How did these exceptional athletes become the GOAT in their sport?” They have extraordinary skill, focus, and dedication. However, they all share one other common trait that is often overlooked.

Every one of them acquired the help of a coach, to refine their skills from good to exceptional. Professional athletes accepted coaching as a logical and necessary part of becoming extraordinary and advancing in their field.

When we look at business leaders, especially individual entrepreneurs, we experience a very different reaction to the idea of acquiring the help of a coach. Recently we asked over a hundred small and medium-sized business owners if they had ever utilized a business coach. With very few exceptions, the response was an overwhelming NO.

When we asked why they had not utilized a business coach, we received comments such as ’Waste of time… I’ll give up control… ‘I know more about my business than any coach I know… ‘what if I spend a lot of money and get nothing for it… ‘It would be embarrassing to hire a coach to run my business… ‘How can a coach help improve my business when they know nothing about it?

The Role of the Coach

Looking back over these conversations it is obvious that business owners often misunderstand the role of the coach. Tiger Woods has never had a coach that could beat him in a round of golf. Tom Brady has never had a passing coach with his talent or accuracy. Simone Biles has never had a floor events coach with her skill set. The role of the coach has never been to be better than the professional business owner or athlete. The coach’s role is to help refine and sharpen the skills the business owner already possesses.

If business owners want to take their businesses to the next level, then they need to think like professional athletes. Acquiring the help of a business coach is a recognition of success and not an admission of failure. Recognizing the value of a coach is a demonstration of confidence and control. True failure is allowing fear and doubt to limit one’s professional development.

Overcoming the intangible fears that a business owner has about hiring a coach can be challenging. Once you get past the jargon, three mental barriers represent the bulk of the problem: fear of losing control, fear that asking for help represents failure, and fear that business colleagues will think less of you.

To overcome these concerns, you cannot simply ignore them or brush them aside. If you do, they will remain as background noise in your brain and be fodder for more insecurity and anxiety. The best approach is to observe these fears without self-judgment and then address them head-on.

Loss of Control

If concerns about the loss of control are an issue, then ask yourself how you would lose control. You own the company; the role of a coach is to grow your professional expertise while expanding your business control. Real coaches ask you questions and empower you; they don’t direct or control you. The coach is your resource, not the other way around.

Perception of Failure or Incompetence

If your issue is fear that acquiring a coach could represent failure, then start with the question, ‘Why? Why would acquiring the help of a business coach represent failure? The fact that you have nurtured and developed a functioning enterprise demonstrates success, not failure. Your desire to take your enterprise to the next level represents advanced business acumen. And you are in good company with many other elite business leaders (Steve Jobs, Richard Branson, and Oprah Winfrey to name a few) who attest to the power of a business coach.

If you have self-doubt that other business colleagues will think less of you for acquiring a business coach, then ask yourself two questions: 1) “Who would do so or care?”; 2) “Do you care if an ill-informed business associate has this opinion?” Imagining that someone would think less of you is probably a projection of your doubt; it’s unlikely that anyone will care. Hiring a coach demonstrates foresight to help you address every business owner’s concerns. Your reputation will probably benefit from the decision.

Cost and Risk

When a business owner does consider acquiring the services of a coach, the one quantifiable concern is cost vs. measurable results. The easy way to reconcile this balance is to acquire the services of a business coach who will provide a written ROI guarantee of success. The challenge is finding a coaching service that will provide such an agreement. If you do a little online research, you will quickly learn that written coaching guarantees are rarely offered.

In theory and practice, the avoidance of guaranteeing success does not make sense. Many parameters of a business — be it manufacturing, retail, service, or professional practice — are easily measurable. They include business structure, product/service to be provided, method of delivery, cost of goods/service, marketplace awareness/visibility, pricing, overhead costs, revenue generation, and resulting profit or loss.

The value of the business coach is to help the business owner refine and sharpen each aspect of the business. This refinement and continual improvement differentiate an extraordinary business from an ordinary one. Improvement of these business elements, along with ones that are harder to quantify like employee satisfaction, will lead directly or indirectly to improved revenue and profitability of the business itself.

We can define important aspects of a business and use the resulting growth of revenue and profitability as meaningful tools of measurement. So why don’t business coaches offer a written guarantee of success?

The Written Guarantee

When we talk to business coaches about the idea of providing clients with a written guarantee, we hear statements such as… ‘I cannot depend on my clients to do what I recommend… ‘Many of the improvements I help clients make are not quantifiable… ‘My clients would look for ways to avoid paying me… ‘There is no way to define the boundaries of a guarantee… ‘What if their business became obsolete or another pandemic ruined their business?

Typically, the reasons for not providing a coaching performance guarantee are about the behavior of the client and not the coach. In reality, not providing a performance guarantee is an issue with the coach. It is easy to establish goals and measurements. It is easy to establish performance expectations for both the business owner and the coach; financial measurements provide the parameters for success. And it is not difficult to construct a guarantee around these parameters and the business owner’s activity to achieve them. Business coaches might avoid performance guarantees because they are uncertain of their ability to empower the business owner. Some coaches do not have the coaching business experience and knowledge to confidently coach a business owner. Some coaches simply do not understand the key factors that drive profitability in a business. In some cases, a business coach might understand revenue drivers but lacks the experience to advance the right business strategies needed to improve profitability. It is easy to hang out a shingle as a business coach. It’s harder to bring true value to the coaching engagement and business owner.

If you are a business owner looking to become the “GOAT” in your marketplace, getting a solid business coach who provides a written ROI guarantee of success is a major step in the right direction.

Contributed by Jack Gruber

Creating and Maintaining a Successful Sales Organization

When building a top-performing sales organization, it’s easy to say, “Surround yourself with the right people, and the results will take care of themselves.” While it is true you’ll need competent, motivated performers working together to construct the foundations of sales success, there are other critical factors to nail down – sooner than later!

So, what are some essential building blocks to include in your sales organization blueprint? Here are the cornerstones:

Cornerstone #1: Understanding the Importance of a Sales Department

While arguments can be made for the importance of every department in a business, the bottom line is this: without sales, there is no revenue; and without revenue, there IS no business! Certainly, then, the importance of a sales department cannot be understated. But being a revenue linchpin in the company also brings great responsibility – to get things right, make things work, and to perform as a team to maximize sales.

Do your sales leaders, managers, and frontline reps feel the weight of this reality? If not, performance and sales results may falter regardless of how strongly the other cornerstones are constructed.

Cornerstone #2: Establishing the Principles of Your Sales Organization

Before you can seek to define and execute sales organization structure best practices, it is critical to establish the guiding principles of your sales organization. This can (and should) include alignment with the company’s overarching values, vision, and mission. Never forget that your sales teams are the frontline ambassadors for your brand. Regardless of what your company’s marketing collateral says about its ideals, your sales reps can reinforce that foundation or make it crumble in their day-to-day interactions.

When communicating your principles internally, be sure to emphasize teamwork and respect. Even one disruptive outlier in your organization can cause frustration, disharmony, and chaos. Consider using a team-oriented mantra and ensure each team member embodies its spirit daily and with each customer interface.

Cornerstone #3: Building the Structure of Your Sales Organization for Maximum Performance

Just as a building’s strength depends on proper materials and construction, it is just as critical that your sales department’s organizational structure be well-designed and built to withstand forces, both external and internal. While your people are perhaps the most vital components – impacting culture, morale, sales results, and revenue – even the most competent sales performers cannot thrive in a poorly designed work environment.

So, make sure your sales department organizational structure makes sense with properly aligned responsibilities and territories that are matched to the skills of your sales team members.

Cornerstone #4: Using Metrics and Accountability to Drive Motivation and Results

Even the most functional sales structure is not sustainable if sales reps are not equipped to succeed, are adequately motivated, and are held accountable to maximize results. Of course, this starts by letting them know what is expected of them. Establish reasonable “stretch” goals and use appropriate key performance indicators, or KPIs, to measure progress and success. When possible, KPIs for the sales department should include leading and lagging indicators; this will help your team make necessary corrections in real-time to maximize employee performance.

Of course, performance accountability is essential to sustainable success. By identifying weak points in your sales department’s organizational structure, you can shore up deficiencies by delivering additional training, implementing new resources, and changing territories and responsibilities to match individual strengths. If necessary (usually as a last resort), you can always replace poor performers with new sales talent.

The Bottom Line:

A well-designed, carefully constructed and effectively managed sales organization can help your company improve decision-making, enhance sales team performance, and boost revenue and profit. Your sales organization’s blueprint should start with the cornerstones noted here, but there are many critical details and dimensions to be laid out as well.

As a fractional sales leader serving as an Outsourced Chief Sales Officer, I can help you establish sales organization structure best practices and draft a blueprint for sustainable sales success. Email me at abrummer@salesxceleration.com or call me at (425) 686-5911 today to learn more.

Contributed by Anton Brummer

Inflation: How-To Prepare and Protect Your Small Business

How does inflation impact a business, and how can you build an inflation-proof business by making critical changes to boost revenue? The reasons and the remedies might surprise you, but they can be critical to preparing for inflation and surviving its impact. In fact, how your company reacts to small business inflation can become a sustainable competitive advantage! Here’s how:

Is inflation ever normal? In less turbulent economic conditions, inflation is a normal and manageable fact of business life. In short, small business inflation can be defined as:

A continual rise in the pricing of goods and services.

Of course, inflation impacts buying power for the consumer, too. When inflationary price increases across the economic landscape are small and expected, preparing for inflation is somewhat easily accomplished in one (or both) of two ways:

Raising prices of products and services to cover the cost of goods and cost of operations
Cutting source material and/or operating costs

It’s when unexpectedly high inflation prevails that businesses often lack the confidence and agility to respond.

How Does Inflation Impact a Business?

Preparing for inflation and executing steps for protection against inflation first requires understanding how inflation impacts businesses. Again, in stable economic times, inflation is less troublesome for business owners. In fact, research shows that inflation barely registers as a concern for most. But when inflation spikes, worry grows.

Specific Small Business Inflation Challenges

Inflation certainly brings its share of big-picture concerns. It can also manifest with specific challenges which may include:

Higher costs of goods as suppliers raise prices
Supply chain disruptions as normal supplier staffing, and operations are affected
Higher operating costs via increased overhead throughout the company
Tighter margins if prices for the company’s goods and services lag behind price increases by suppliers
Higher interest rates for new debt
Customer dissatisfaction and/or defection
Reduced sales or market share, especially if the company’s goods or services are seen as non-essential in the marketplace
Painful cost cutting, including operating costs – which may require staff or benefit reductions

How Inflation Impacts Businesses … Positively

Although inflation is often seen (rightly so) in a negative light, it can spawn some positive outcomes as well. These include:

Existing debt becoming more economical compared to new debt
Margins on current inventory improving if prices increase on sold goods
Higher profits if increased prices and reduced costs more than account for cost of inflation
Identification of areas for performance improvement and cost reduction opportunities throughout the business operation

How to Respond to and Protect Against Inflation by Focusing on Sales

After cutting costs and raising prices, what can the small business owner do to turn inflation’s business impact into a competitive advantage? One way is to focus on sales. Here are some strategic and tactical ways to make sure your sales operation can be more effective, efficient, and profitable in response to inflationary influences:

Enhance Your Sales Plan

A new economic landscape can change industries and marketplaces almost overnight. Is your Sales Plan still relevant? If you’re not sure, take steps to:

Leverage business intelligence to increase your sales growth rate
Create the sales organization that fits your sales objectives
Build the proper compensation model to drive desired behavior
Hire the needed sales resources

Improve Your Sales Process

Does your current sales process still work in the altered competitive landscape? If not, be sure to:

Include customized sales cycle steps that fit your company and industry
Produce predictable sales forecasting
Create rules of engagement that are understood by everyone
Implement sales force automation to streamline your processes

Execute and Grow Sales

Beyond strategy and processes, empower your sales operation by:

Managing your sales team and holding them accountable
Precisely defining goals for sales and business growth potential
Creating/utilizing forecast and pipeline management tools
Developing sales metrics to measure key sales objectives and daily activities

For a clearer picture of how inflation impacts businesses and how to “inflation-proof” your business, contact me today to learn more.

Contributed by John Lee

3 Keys to Identifying a “Key” Employee

Key employee incentive planning and management team development are important issues to business owners at all stages of the business life cycle. Employees, through the training they receive, the processes they follow and the skills they bring to the table, often represent a critical (and sometimes the only) defining factor in the transferable value of the business. Whether you intend to stay in your business until age 100, or exit as soon as possible and never look back, your employees can be essential to the success of those plans for the future.

The term “key employee” can mean different things to different people. Before you head down the path of identifying key employees in your business and creating plans for the future that include them, either directly or indirectly, you may want to take stock of the entire employee group and spend some time thinking about which of those employees are truly “key” to your future. A true key employee has three critical qualities.

He or she has a direct and significant impact on the value of the business. The employee’s role in the company, responsibilities and decisions impact sales, profitability, growth, product development or another critical value driver in the business.
His or her combination of skills and experience would be very difficult to replace. The employee has a unique capability that increases the value that he/she brings to your organization – something your competitors wish they had. It wouldn’t just be inconvenient or uncomfortable if you lost this employee. It would damage your business.
He or she will participate in a meaningful way in the strategic future of the company. The employee has a vision for the future, brings ideas to the table, and solves problems creatively.

As a result of these characteristics, the loss of a key employee will result in financial loss to the company and will delay the owner’s exit from the business.

True key employees realize their own value and are willing to contribute that value to your business in order to help it grow and succeed. What do they want in exchange? Well, that depends. As an owner, it is your job to recruit, motivate, reward and retain these key employees. Opportunities for advancement, formalized incentive planning and retention measures may play a role in how successfully you leverage a key employee’s value. And if an employee is important to you but is not actually “key,” you may still want to include that employee in a meaningful way in the future of your business, but the tools you use will change.

We can talk with you about the unique characteristics of your key employees. We’d like to help you develop a customized strategy to integrate the value of your key employees into your successful future.

Contributed by Jeffrey T. Sleeper