Unraveling the Seller’s Predicament

Selling a business isn’t always 100% about the price.  It is not like selling a house where typically the most important factor is who places the highest offer.  In the end, if the seller is to achieve the most optimal results, there are other variables that should be considered. 

The idea of selling to a competitor is one that seems attractive to many business owners.  After all, a competitor has the built-in advantage of understanding the business and thus can theoretically understand the value of the business better than an outsider.  But while this point is quite valid, selling to a competitor comes with its own problems.  Selling means disclosing a great deal of confidential information, and that could prove to be very risky if the deal were to fall apart.

A second avenue that sellers will often explore is selling to a financial buyer.  A financial buyer is likely not to be a competitor.  But on the downside, a financial buyer may be unwilling to pay the seller’s price.  It is important to remember that a financial buyer is considering buying the business with the intention of selling it for a profit within a few years.

The highest selling price may come from a strategic acquirer.  But this doesn’t necessarily mean selling to a strategic acquirer is the most prudent course of action for a seller.  A strategic acquirer may not have the best interests of the company at heart.  When a strategic acquirer takes ownership, key employees and management may be replaced.  The company may even be moved.  Many owners are unprepared for the shock that may come along with a strategic acquisition.

There are other potential buyers, many of whom are frequently overlooked, who may be the optimal fit for a given business.  It is possible that the best buyer for a company could be one of its employees.  However, this option comes with risks as well.  Key employees and management may leave if the deal falls through, as they now know that the company is for sale.

Finding overlooked buyers is what business brokers do best.  Matching the right buyer with the right business is both a science and an art.  Teaming with the right business broker or M&A advisor can open up a range of new avenues and help a seller reach the kind of buyer that is as close as possible to the perfect fit.

Copyright: Business Brokerage Press, Inc.

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Communicate Care for Positive Online Customer Experience

Creating a positive online customer experience has been catapulted into top priority status by the pandemic. We have written lately about a recent survey-based study titled “The New Reality: Understanding the Retail Consumer Experience During a Pandemic.” In it, Wharton Marketing Professor Thomas Robertson finds “about a 10% increase in problems from before the pandemic to the middle of May, with some decrease in loyalty. As the percentage of online sales was going up, many retailers weren’t ready for the onslaught and had trouble coping with it.”

Business can seize this opportunity to improve online customer experience to stand out in their field.

Online (dis)Engagement and Empathy

Communicating empathy is a fairly simple and extremely powerful way to improve online customer experience. In an article titled “How Should Companies Talk to Customers Online,” in MITSloan Management Review’s Creating Great Online Customer Experiences, marketing researchers Brent McFerran, Sarah Moore, and Grant Packard point out the shifting nature of business’ opportunity to interface with customers.

More and more consumers are engaging with customer service through digital channels, including websites, email, texts, live chat, and social media. In 2017, only half of customer experiences with companies involved face-to-face or live-voice-based interactions, and digital interactions are expected to represent two-thirds of customer experiences within the next few years. The vast majority of customer service interactions around the world begins in online channels. Despite the convenience and speed of such interactions, they lack some of the most important aspects of off-line customer service. In-person interactions are rich in nonverbal expressions and gestures, which can signal deep engagement, and an agent’s tone of voice can convey empathy and focus in phone conversations. Over time, these interpersonal touches help companies build and sustain relationships with customers.

The Research

Customer service scripts tend to emphasize the use of “we” (as in, “We–the company–are happy to help you!”) and “you” (as in, “We’re sorry you are experiencing difficulties.) To test whether this language is actually helpful, the authors surveyed over 500 customer service managers or agents, analyzed more than 1,000 customer service emails from 41 of the top 100 global online retailers, and conducted controlled experiments with 2,819 North American adult participants.

“You” Know Who “We” Are (and When We’re Lying)

Findings suggest something basically intuitive but alarmingly easy to lose sight of: customers are people. We’re wired for social interactions. Most of us instinctively understand–and strongly dislike–when communication is insincere.

In all cases, our modified responses with “I” pronouns significantly outperformed the “we” pronouns that real service agents were using. Relative to using “we,” the benefit of using “I” stems from the fact that customers perceive the employee to be (a) more empathetic and (b) more agentic, or acting on the customer’s behalf.

When two people are communicating with each other, “I” suggests a personal focus on the issue at hand. Specifically, our research on customer service finds that saying “I” signals that the agent is feeling and acting on the customer’s behalf. For example, telling a customer “I am working on that” conveys a greater sense of ownership than “We are working on that,” which can imply a diffusion of responsibility. Similarly, “I understand the issue” shows more empathy than “We understand the issue.”

Ultimately, customers need to know that the agents with whom they are interacting care and are working on their behalf. Research has consistently shown that customer perceptions of empathy and agency drive satisfaction, sales, and profits,9 and our studies show that “I” fosters these perceptions to a significantly greater degree than “we.

We also resent feeling like we’re being blamed. The use of “you” can backfire.

Sometimes, using the word “you” can actually have a negative effect on company and customer outcomes. For example, we found that saying to a customer, “Sorry your product was defective,” rather than “Sorry the product was defective,” resulted in decreased satisfaction and purchase intentions. This result was driven in part by perceptions that the employee wasn’t being accountable (that is, lacked agency), potentially shifting the responsibility or blame toward the customer.

Key Lessons

The takeaway: service employees should be coached to communicate from a personal perspective that implies real, live, human care. “There are simple language changes that any company can implement,” conclude McFerran, Moore, and Packard. “By making these changes to customer service language, organizations can create more meaningful interactions with their customers — and improve the bottom line.”

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Buying a Distressed Business 

It is safe to state that Howard Brownstein, President of The Brownstein Corporation, is a true expert in providing turnaround management and advisory services to companies, as well as their stakeholders.  Brownstein serves as an independent corporate board member for both publicly held as well as privately-owned companies and nonprofits.  During his career, he has been named a Board Leadership Fellow by the National Association of Corporate Directors (NACD) and served as Board Chair and President of its Philadelphia Chapter.  He also serves as Vice Chair of the ABA Corporate Governance Committee and has been named a Fellow of the American Bar Foundation.  He has been a speaker at many of the world’s top universities including Harvard Business School and Wharton.  Brownstein received his J.D. and M.B.A. degrees from the University of Pennsylvania.

Mr. Brownstein is considered to be one of the world’s top experts in distressed businesses.  He believes it is essential to remember that not all distressed businesses are, in fact, the same.  There is simply no way to know how bad things are for a given distressed business until one begins to “look under the hood,” and get a full view of what problems may lurk underneath. 

Brownstein firmly believes that distressed businesses can represent a real and often overlooked opportunity for buyers.  The recent economic downturn brought about by COVID-19 means that there will likely be a great deal more distressed businesses on the market in the coming months or even in the next couple of years. 

Why is a Given Business Distressed? 

Before you consider purchasing a distressed business, you absolutely must understand the core reasons for the distresses.  Without a proper and detailed understanding of why the business entered a state of distress in the first place, it is impossible to clearly articulate why the business will potentially be valuable in the future.  It is essential to be able to convey “what went wrong” and how the problems can be fixed.

Brownstein points out that while there are many reasons for a business to enter distress, two symptoms top the list.  The first is cash flow issues and the second issue relates to management.  Often it turns out that the management was simply not rigorous enough.  He also notes that companies will tend to gravitate to external issues as a way to explain away their failure.

Of course, no two distressed businesses are failing from 100% identical causes.  Brownstein suggests a series of questions that you need to ask when you begin exploring a distressed business.

  1. What is the business’ potential value?
  2. Is there something of value under the problems?
  3. Under better or different circumstances, could the business be viable?

These are all questions that your business broker or M&A advisor can assist with.  It’s important to gain a clear understanding of the business’ past, present and future. 

Copyright: Business Brokerage Press, Inc.

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For Happy Online Customers, Deliver Meaningful Benefits

We recently wrote about customer frustrations with online shopping experiences and the related opportunity for businesses to foster delight. In a survey-based study titled “The New Reality: Understanding the Retail Consumer Experience During a Pandemic,” Wharton Marketing Professor Thomas Robertson finds “about a 10% increase in problems from before the pandemic to the middle of May, with some decrease in loyalty. As the percentage of online sales was going up, many retailers weren’t ready for the onslaught and had trouble coping with it.”

Actually Rewarding Rewards Programs

Specifically, Robertson identifies poorly executed customer loyalty programs as a source of annoyance. In another article titled “Why Personalization Matters for Consumer Privacy,” McKinsey partners Phyllis Rothschild, Julien Boudet, and Gadi BenMark take a deep look at customer attitudes towards data use and personalized reward programs. (That article is part of a compilation from MITSloan Management Review called Creating Great Online Customer Experience.)

Their main takeaway: “By understanding what people value, companies can do more to create trust.”

While privacy concerns are different than service concerns, there are instructive parallels for understanding how customers decide what is or isn’t worth their time and money. To find out, Rothschild, Boudet, and BenMark conducted a survey of 1,012 U.S. consumers between the ages of 18 and 70 who had made an online purchase in the last six months.

Levels of concern diminish as the benefits of personalization go up, the McKinsey researchers find. That might sound obvious, but personalization is hard to get right. You need to actually understand something about the person you’re rewarding. To deliver meaningful benefits, businesses need to make sure the advantages they’re offering are important to their customers.

What do online shoppers want?

“Not surprisingly, receiving individualized pricing in the form of discounts for a product or service that consumers really wanted was among the most favored benefits for data use, with 57% expressing excitement,” according to Rothschild, Boudet, and BenMark, “Coming in second, with 55% expressing excitement, was receiving a free product or service that consumers wanted but felt was too indulgent or not high enough in priority to purchase themselves. Interestingly, receiving dedicated concierge services and personalized advice came in at the bottom of the list of customer delights (less than 25% excitement each).”

Furthermore, younger shoppers, shoppers who live in urban areas, and shoppers who spend more time on social media were more comfortable with online purchasing and rewards programs. Depending on your business’ demographics, you may need a closer look to really know what your customers will appreciate in a loyalty program.

Understanding and Communication are Key

Rothschild, Boudet, and BenMark conclude with two pieces of advice:

  1. Understand your consumers’ preferences “Companies need to analyze consumer preferences to develop a clear understanding of what benefits each demographic values the most. By delivering on those benefits through personalized offers, companies can mitigate some consumer concerns. This requires companies to invest in deep consumer research, ongoing testing of the effectiveness of offers, and advanced analytics to provide deeper levels of insight.”
  2. Communicate and educate “Companies that do this best focus on communicating in simple terms, clearly defining the benefits, and being transparent about the types of data collected and how it is secured. They often communicate this information within the typical user’s onboarding or sign-up experience.”

 

 

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New Mexico Economic Development Department Regional Representatives Support Local Business and Community Development

The Economic Development Department has a complete network of economic development experts around the state that are uniquely qualified to assist local governments and community organizations as New Mexico works toward a sustainable recovery.

Economic Development Cabinet Secretary Alicia J. Keyes said the Community, Business & Rural Development program was created by the Legislature to provide the EDD with an expert assigned to each regional economic planning district. When first created, each regional representative had an office in Santa Fe.

Today, there are six Community, Business & Rural Development employees at EDD, working full-time throughout the state. They are known as regional representatives, and are located statewide, with EDD staffers living in Las Cruces, Roswell, Mora, Albuquerque, Bernalillo, and Santa Fe. They assist businesses and communities in a broad variety of economic development needs, providing local support and knowledge within their designated regions.

“The regional reps are EDD’s boots-on-the-ground in all corners of the state,” Cabinet Secretary Keyes said. “They know their communities, they are trusted in their communities, and they are an especially important resource to businesses and local organizations during the health emergency, helping to provide information and assistance as we move forward.”

The team specializes in areas such as passing and using the Local Economic Development Act (LEDA) which primarily provides brick and mortar funding for job creation; community infrastructure financing assisted by FUNDIT; starting and maintaining Business Retention & Expansion (BRE) programs; workforce training through the Job Training Incentive Program (JTIP); the LEADS grant program, which funds projects with quick impacts; assisting communities in locating new companies with the support of the New Mexico Partnership; help resolving state regulatory issues; and improving access to other EDD programs such as MainStreet, Arts & Cultural Districts, and the Frontier & Native American Communities Initiative.

Learn more about the Community, Business & Rural Development program administered by the N.M. Economic Development Department, including full contact information for each region and links to other community and business resources.

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How Should Your Company Deal with an Orphaned Product?

Keeping a product or service around that isn’t pulling its weight might prove to not be a very good idea.  You may have invested a good deal of time and resources into its development, but if that product or service is no longer contributing to your bottom line, it might be time to cut it loose.  Even if your product is pulling its weight, but doesn’t fit into your overall core business, then you should still consider getting rid of this “orphaned product.”  Let’s take a look at some of the reasons you might want to keep or remove an orphan product from your company.

There are four main reasons why a company might want to divest itself of a product line or service completely:

  1. An orphaned product line can be a distraction that takes away from core business operations. 
  2. Funds allocated to an orphaned product could be used instead to build the core business or make improvements that are not in the current budget. 
  3. Another good reason to remove an orphaned product from your lineup is that, while it could ultimately be profitable with increased resources, the funds would be better allocated elsewhere.
  4. Your orphaned product could be profitable.  Some buyers, companies and private equity groups are looking for product lines they can use to augment their existing ones.  In fact, some buyers may even want to build a new business around a given product line.

Of course, it isn’t always as simple as “pulling the plug” and moving on.  It is important to step back and consider the negative impacts of jettisoning an orphaned product, such as the fact that the product line could have key employees attached to it.  Or there could be company culture issues related to removing the product, such as causing disruption within your company.  You must also consider if the orphaned product could ultimately play a role in the sale of your company.

At the end of the day, an acquiring company may feel that the orphaned product line is a great fit for their existing distribution chain.  Additionally, your offering might fit into a new product line that the acquiring company has launched.  It is important that you evaluate every aspect of an orphaned product before making the decision to remove it from your company. 

Understanding the needs and goals of your most likely buyers should play a role in your decision making.  Working with an experienced business broker is an easy way to increase your chances of making the right decision.

Copyright: Business Brokerage Press, Inc.

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The post How Should Your Company Deal with an Orphaned Product? appeared first on Deal Studio – Automate, accelerate and elevate your deal making.

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Challenge and Opportunity in Online Customer Experience

A recent study by Wharton’s Jay H. Baker Retailing Center and WisePlum suggests rising consumer frustration with retail as shopping shifts online. The survey-based study, “The New Reality: Understanding the Retail Consumer Experience During a Pandemic,” finds mounting customer impatience and decreased loyalty. In a Knowledge@Wharton interview, the study’s co-author, Marketing Professor Thomas Robertson, says these findings are related to underprepared online shopping and loyalty program customer experience and the tech that underpins it.

The Challenge

We have written before about the importance of (and some ways to) deepen customer relations during this time. But Robertson raises an excellent point. “Loyalty programs will not compensate for poor service or a poor product. They will just add cost,” he says. “You have to have the IT in place. Point of sales data, for example, has to be in place for you to be able to use loyalty programs. And if you’re transitioning to online, you have to be ready for it. You have to design integrated online-offline programs.”

As health concerns ferry more and more commerce online, customers’ expectations for a positive virtual shopping experience are on the rise. But businesses have struggled to meet these expectation.

“It’s about a 10% increase in problems from before the pandemic to the middle of May, with some decrease in loyalty. And there is a difference,” says Robertson. “Before, when consumers had problems, the focus was in-store. They would have problems not being able to find things, or they would complain about the messiness of stores or that the salespeople were not helpful. As we got to May, all of this had changed, and what people were now sensitive about was having to pay for shipping to return things, that you needed a receipt to return things, and that the website was difficult to navigate. This seemed to suggest that as the percentage of online sales was going up, many retailers weren’t quite ready for the onslaught and had some trouble coping with it.”

The Opportunity

The takeaway, according to Robertson? “Service recovery is absolutely critical.”

There are some significant bright sides to this story. By smoothing out kinks in your online systems, you can really differentiate your business. There is also a tremendous opportunity in “transforming disappointment into delight.”

In Creating Great Online Customer Experience, a compilation of research by MIT Sloan Management Review (available for download here), Stefan Thomke writes about creating the kind of customer experience that stays with someone:

“When employees are taught to be in tune with the customer’s emotions, they can notice changes in emotional state and respond quickly. As their alacrity accelerates the shift from disappointment to delight, the intervention creates a sudden contrast that makes experiences sticky.  Magicians, who constantly think about the audience experience, understand the emotional value of rapid shifts from disappointment and confusion to happy resolution. They have developed techniques to change people’s emotional states. Momentary disappointment at failure to “catch” the magician quickly transforms into delight in his excellence. Disappointment to delight: Magicians know that this emotional transition will wow audiences more than a constant flow of technically perfect tricks. The former creates memorable moments, while the latter may cause eyes to glaze over.”

In upcoming posts, we’ll share more tips on online customer experience. Stay tuned!

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Selling a business remains an alternative to shutting down

Once again, Teya Vitu has written a thoughtful and timely piece for Santa Fe’s small business community in today’s Santa Fe New Mexican.

This is the year just about every business owner is wondering, how long can I last?

The coronavirus drags on with no sense of when a mask-free, mass-gathering-restored normal will resume.

Businesses have failed. More businesses will fail. But do businesses with a fuzzy horizon need to shut down forever?

Not at all, insists Michael Greene, owner of Sam Goldenberg & Associates, a Santa Fe business brokerage that matches sellers and buyers of businesses.

A business can be sold.

“There are buyers actively looking,” Greene said.

The first trick to selling a business is not waiting until the last few weeks, when all the value of the business may have evaporated.

“Whatever your reason is, come in sooner,” Greene said. “Most owners wait too long.”

Read the full article at Selling a business remains an alternative to shutting down and follow Teya Vitu to stay on top of Santa Fe’s business news.

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Buying an Established Franchise? Here are the typical under contract steps

Each franchise has its own process for qualifying and onboarding a prospective franchisee. Sometimes it’s rigorous with multiple interviews, steps, forms to be filled out, and documents to be provided. Other times, it’s comparatively relaxed. The degree of scrutiny a candidate undergoes largely depends on the type of business. Nonetheless, many will follow a format similar to the steps presented below.

STEP #1: Initial Call

During the first call with the franchise’s corporate representative, the buyer candidate can expect a high-level conversation about their background, professional experience, and goals for owning a business. The franchise representative will usually take this opportunity to review the financial investment parameters with the candidate.

If the call goes well, the candidate will be invited to complete a detailed personal profile and provide personal financial records.

STEP #2: Personal Profile Review and Background Check

Once they’ve received the completed profile, validated a candidate’s financial capabilities, and run a background check, the corporate office will schedule a more in-depth conversation. During this call, they will discuss with the candidate whether their particular franchise could help them achieve their goals, how a typical office or store operates, what the industry outlook is, and what kind of supporting and training corporate provides its franchise members.

STEP #3: Review of the Franchise Disclosure Document (FDD)

The FDD contains a complete and detailed summary of everything needed to know about the franchise in question, including a comprehensive summary of how its offices perform, growth benchmarks, expansion opportunities, and more.

STEP #4: Validation with Current Franchisees

Some franchises offer qualified candidates the opportunity to speak with other franchisees. This peer-to-peer interaction allows a candidate to hear from someone in their shoes what the challenges and opportunities are of owning and operating such a business.

STEP #5: Discovery Day

Once you have been pre-qualified and have familiarized yourself with the FDD, you may be invited to attend a Discovery Day at the Franchise’s corporate headquarters.

STEP #6: Approval

After Discovery Day, a representative from the franchise’s corporation will typically notify you of your approval status. If both the candidate and the franchise representatives agree that this would be a mutually beneficial relationship, the franchise representative greenlights the process to proceed with the acquisition.

At this stage, their legal department will need to review and approve the Asset Purchase Agreement that you have developed with the business Seller. Their approval allows the Buyer and the Seller to formally execute this document.

Either at Closing or beforehand, the candidate will be required to execute a Franchise Agreement.

STEP #6: The Transfer Fee

When an established franchise business changes hands, the Buyer is expected to pay a transfer fee to the franchise corporation. Whether the Buyer pays all of this fee; it’s split between the Buyer and Seller; or the Seller covers this fee in its entirety is something to be worked out and mutually agreed upon between the Buyer and Seller parties.

Step #7: Training at the Corporate Offices

Some, but certainly not all franchises, require its members to undergo extensive on-site training lasting a week or longer. Mostly commonly, this is a prerequisite for closing, but there are some franchises that allow the training to take place after closing. Your franchise representative and the FDD will inform you the training protocols required by the franchise you’re looking at.

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Considering a Franchise? Why it could be a great fit

Franchises are popular choice among budding entrepreneurs for a variety of reasons. Established franchises even more so. The reasons behind their appeal are numerous.

Name Recognition

Topping the list is the ability to take advantage of the name recognition of brand that is already out there, known and trusted in the community.

Take home healthcare, for instance. How comfortable would a prospective customer feel entrusting the care of their mother to a start-up agency without much of a track record to go off of? The building trades can also run into similar problems. Would a customer feel at ease investing over $30,000 to upgrade their kitchen without knowing the quality of the products, the type of warranty to support the workmanship, or if the business will even be around in another few years to honor whatever warranties they do offer? A franchise allows budding business owners to side-step these pitfalls.

When a budding business owner buys an established franchise, not only do they take advantage of the power of the franchise brand, but they capitalize on that particular business’ existing relationships and good name in the community.

Built-In Advertising & Marketing

Most franchises take care of your marketing and advertising as well as have out-of-the-box logos, marketing collateral, and other identity. Figuring out what marketing works and what doesn’t is one less thing you have to worry about. Plus, you’re benefitting not only from brand’s reputation in your local community but from across the United States as well. When tourists are visiting your town or new residents are moving in, you have built-in name recognition.

Training & Support – As Long As You Need It

You, and quite often your staff, enjoy ongoing benefits from the training, support, and coaching provided by the corporate office. Usually, it’s a mix of in-person training and online modules that keep you fresh and inspired.

Likewise, many franchises offer members optimized, state-of-the-art operational systems that get you up and going faster and provide you with the tools to keep your business performing at a high-level. There’s no need to re-invent the wheel.

Many franchisees enjoy the ability to tap other franchise owners, find out what their experimenting with, how they dealt with an issue you just encountered, and more. You have a built-in support network.

Collective Bargaining Power

In many instances, you’re also getting to capitalize on the franchise’s collective bargaining power and ability to secure favorable vendor relationships. These cost-savings that you pass along to consumers give you a competitive advantage in your market place.

But a Franchise Isn’t Always Right for Everyone

But a franchise isn’t the right fit for every buyer. Some chafe at the restrictions that the corporate office places on how a franchisee runs their business. After all, the power of the franchise brand is built on consistency, and “innovation” and “experimentation” are not always welcomed.

Depending on the franchise, sometimes the initial fees can be substantial. Investments in leasehold improvements, signage, and technology may be required. In certain instances, buildouts to the space are required, which not only take time but money. When you buy an established franchise, however, you often get to take advantage of the Seller’s investment and leapfrog right in to a steady stream of income.

Some consider the royalty, marketing, and other regular ongoing fees a burdensome operational expense. From time to time, the franchise may require for you to pay for a “refresh,” meaning an upgrade to your place of business in order to conform to their latest look and amenities.

While some may argue that these investments are the cost of doing business and what a smart entrepreneur would want to do regardless, the franchise options is simply not for everyone.

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