Stumbling economy? Keep it in perspective!

Posted on April 16, 2008 by Margaret Purvine

According to an item in today’s online Puget Sound Business Journal, Washington’s unemployment “jumped” from 4.5% to 4.9%.  Granted, any time a job is lost, it hurts.  Particularly if it’s your job!  I’ve been there and truly empathize.

However, we need to hang on to some perspective here.  According to Employment Security Commissioner Karen Lee,  ”March was the 18th month in a row that Washington’s unemployment was under 5 percent. It is a phenomenal record, despite the rise in unemployment.”  

Even more telling, if we trouble to remember it, is that an unemployment rate below 5% has long been considered full employment.  The current angst seems a little extreme given these numbers and these facts. 

 In Washington, we are better off than the nation as a whole.  Nationally, the rate jumped to 5.1% in February, from 4.8%.  Even that higher rate is close to that full employment level, although there are areas of real job challenge in the country.  I was born and raised in Michigan where the state’s economic health goes hand in hand with the auto industry.  So they are far closer to a real recession than we are in Washington.  During my last visit to Michigan, seeing so many lakefront mansions in Grosse Pointe for sale, and languishing on the market, was something of a shock. 

Yes, we are facing some real economic challenges in this country, but let’s remember history and count our blessings.  I finished my college education in 1975 and hit the job market with an unemployement rate fluctuating between 8 and 9%!  I am not relying solely on my memory here.  I got those numbers from The Federal Reserve Board – a chart showing civilian unemployment rates from 1974 – 2007.  (Ya gotta love the internet!) 

About 8 years later, when I had saved enough to by my first house, I managed to get an FHA mortgage at 13.5% and thought it was a great deal.  (It was, at the time.  By the mid 1980′s, many of my friends and colleagues had mortgages of 17% and higher!) 

We may have something of a bumpy economic road ahead of us, but let’s not lose sight of the actual numbers.  We can hang onto perspective, and a great deal more calm, if we use real information and logic, not just emotion.

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Bailouts – good or bad for the economy?

Posted on March 28, 2008 by Margaret Purvine

Everyone seems to be in an uproar over the economy.  It has reached the point where some concern is certainly warranted.  The pressure is on our government to take immediate steps.  But is this the right approach?  Should our government dive in with big bailouts and big government programs?  Running up more national debt is not going to help our economy.  It will hurt in any number of ways, including further weakening of the dollar.

Over lunch today, I listened to reports and discussions addressing this subject.  Most of it was focused specifically on the mortgage “crisis”.  There is much wailing and gnashing of teeth over the poor homeowners who can’t manage their increased mortgage payments and may be faced with losing their homes.  Although I feel real compassion for anyone in danger of losing his/her home, I think the current discussion is taking place without adquate context.  That context is this.  Only a very small percentage (around 2% is the number I heard on the news today) of homeowners find themselves in this bind.  The other 98% are meeting their obligations, in spite of adjustable rate mortgages adjusting upwards.  So the crisis is really overblown, at least when considering people losing homes.  You’d hardly know this, to listen to the average newscaster, not to mention the politicians.

So is it right for that responsible 98% to bear the cost for the 2% who overextended themselves?  Because that’s who will bear the cost if the government starts buying mortgages or bailing out homeowners – we, the taxpayers.  I don’t think so.

Should we find ways to offer information, guidance and other support to help struggling homeowners wend their way through the mortgage morass?  Sure!  I’m all for education, coaching, and guidance.  That’s a far better way to deal with the current crisis.  It’s cheaper and more effective in the long run, since a better educated consumer will be more responsible with their choices in future.  Perhaps we can prevent a repeat.

Lest you think me hardhearted or lacking in compassion, let me assure you that I don’t think we should be bailing out corporations, either.  I would much rather see our free market and strong capitalism function without government interference.  It works better that way, ensuring a strong economy for all of us!

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Buying Your First Business – Avoid the 3 biggest mistakes

Posted on March 11, 2008 by Dennis Purvine

I’ve helped a lot of clients buy businesses over the years.  I’ve also been brought in after the fact to help fix problems in the businesses.  Suffice it to say that I have observed many buy/sell transactions during my career.  Buying a business and becoming a business owner for the first time is a big deal, the culmination of a dream for many.  Since it matters so much, and entails so much investment of time and dollars, it’s important to make the best purchase decision possible and be well positioned for business success.

The flip side of success is failure.  So why do some of these purchases and dreams of business ownership head south?  I typically see 3 big mistakes new business purchasers make.  Avoid these and you will have a better chance of ultimate success.

  1. Paying too much.  Every business owner thinks his/her company is worth more than it really is.  This is completely understandable, particularly if the seller is the company founder.  It is his/her baby, something created from scratch and built up with passion and extremely hard work.  So, as obvious as this concept is, it constantly amazes me that many business buyers take the initial offering price and go with it.  Do your due diligence!  Research and negotiate.  Delve deeper into the financial information offered by the seller.  Maintain a healthy level of skepticism.  In the immortal words of Ronald Reagan, “Trust, but verify.”  You want to offer a fair price for the company, but if you pay way too much you risk burdening your new business with a debt load that could sink it.
  2. Buying a job, not a business.  This mistake is most common when employees buy the business from their former boss.  Running a business is not the same as working within that business.  From the time you begin considering the purchase of any business, you need to shift your mindset.  Think like a CEO and look at the business from that perspective or you will not be successful leading the company.
  3. Going it alone.  Sellers usually use a business broker, an attorney, or a business consultant to help them market their companies.  The buyer should also have appropriate assistance.  You are talking about spending a lot of money here, so don’t balk at spending some up front for expert help!  Viewed within the overall context of a business purchase, it’s a relatively small investment.  Don’t rely only on the seller’s attorney.  Have your own counsel.  Work with an experienced consultant to help you value the business, set a price, and negotiate the sale.  Remember Big Mistake #1.

Plan ahead, avoid these three mistakes, and your business purchase will set you up for success as an owner and CEO!

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Dennis, should I buy this business?

Posted on March 6, 2008 by Dennis Purvine

The title of today’s post is a question I have been asked many times over the years.  It generally comes from a client who already owns at least one business.  (Issues pertaining to buying one’s first business are quite different and will be addressed in another post.) 

I begin by asking a couple of critical questions.  First, does the company fit with your current business?  Consider the following:

  • Does the business produce a similar product or service?  In this case, it may make sense because you are essentially buying out part of your competition.
  • Is the customer base the same as yours?  This may indicate a good fit.
  • Does the company bring solid repeat customers with it, thus expanding your customer base?
  • Does the company make a complementary product?  One that fits logically with your offerings and expands your product set?

An acquisition will make more sense and have less risk if it fits with or complements your current business. 

The second big question is this.  What do you bring to the table that will make the company better and more profitable?  Additional profit is absolutely necessary to justify and recoup the purchase price, as well as support the debt usually incurred to make the purchase.

  • Do you have ideas to enhance the business that the current owner is not attempting at present?
  • Are there synergies with your business that will ultimately enhance results?  Economies of scale?
  • Can you bring a needed cash infusion to an otherwise good, but financially strapped company?
  • Do you bring additional industry knowledge, contacts, or management skill to the table?

Unless you can clearly articulate how you will make the company better and more profitable, don’t buy it.

Until you can answer these big, strategic questions, delving into the due diligence of analyzing the company doesn’t make much sense.  Once you have your strategic answers, however, you can proceed to look at the specifics of the business – its finances, market share, growth trends, management, etc.

Expanding your business through acquisitions is a great idea, as long as it makes sense strategically.

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Management ER: Can this employee be saved?

Posted on February 28, 2008 by Margaret Purvine

Years ago, I remember a column in a prominent women’s magazine, maybe Good Housekeeping, entitled “Can this marriage be saved?”  The story would be told from his point of view and hers, followed by analysis and counsel.  A bit sappy perhaps, but many people read it avidly.  I lost interest by the time I hit high school, but the title has stayed with me.

Recently, I heard from a client that he had fired a high level, long-term employee.  For some reason, the old column title popped into my brain.  I think it’s germain.  Let me tell you why.

When an employee’s performance slips, what should be the employer’s first thought?  Get rid of him/her?  Too often, that is the knee-jerk reaction of an inexperienced manager.  Of course, there are times when promptly “making the employee available to industry” is absolutely the right course of action.  But not always.  Not even most of the time.

So what’s an employer to do?  Take a step back and ask yourself a critical question first.  Can this employee be saved?

Finding and hiring good people is an expensive proposition.  The expense goes up with the level of employee you are trying to hire.  Add to that the cost of training an employee over time and the value of the institutional knowledge and experience he/she develops during the years spent with your company, and losing someone packs a financial wallop.  So, be aware of the  costs and be sure you can’t avoid the loss by addressing issues with the employee.

Consider the following:

  • Does the employee have a performance plan?  A clear understanding of the work expected of him/her?
  • Have you articulated your expectations clearly to your employee?  It is a constant surprise to me how frequently this isn’t done.  Employees are not mind-readers. 
  • Have you discussed your concerns about the employee’s performance privately with the employee, openly and honestly?  No one likes confrontation, but if you don’t clearly articulate your concerns and give the employee a chance to respond, you are doing the employee and your company a serious disservice.  (By the way, don’t forget to document these critical conversations!)
  • Did you provide all the tools and training necessary for the employee to accomplish the task? 
  • If the employee responds to your direction and counseling, will you and the rest of your team be able to continue working effectively with him/her?  The relationships can sometimes be strained beyond repair.

Ensuring that your employees have clear direction, defined jobs and tasks, and a full understanding of your expectations will go a long way to making your job as a manager easier and your company more successful.  Employees are your most expensive and valuable asset.  Make sure you take appropriate management action before resorting to firing one of them.

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The Word Cop is Listening – How’s your pronunciation?

Posted on February 26, 2008 by Margaret Purvine

Professionals have to be able to communicate, both in writing and in speech.  How we communicate gives an instant impression of our professional persona – good or bad – to colleagues, clients, and potential clients.  So how do you want to appear to these critical audiences?

I have quoted Professor Higgins, of My Fair Lady fame, before.  The basis of the entire plot of the play supports my premise here.  The professor makes a bet with a buddy that he can take a flower girl, with an abysmal accent and lousy English usage, and pass her off as a duchess at an Embassy ball simply by teaching her to speak properly.  In one of the great songs in the musical (lyrics by Alan Jay Lerner, one of my heroes – what a writer!), he laments the fact that Englishmen and women are instantly classified by their speech.  “This verbal class distinction, by now should be antique.”  I agree.

So let me take a few moments here to plead with my fellow English speakers, especially Americans, to take greater care with their speech.  Make a better, more positive impression in your professional life – our 21st century equivalent of that Embassy ball.

Let me help by offering a few of my pronunciation pet peeves.

  • Etcetera – Okay, be honest.  How many of you out there pronounce this as “ek – cetera”?  That second letter is a “t”, not a “k”, and the word is pronounced accordingly.  The most egregious offenders here tend to be the people who use the word the most.
  • “Moot” versus “Mute” – These words are different, with different meanings and different pronunciations.  The first is pronounced just the way it is spelled, with an “oo” sound, like the sound of a cow.  “Mute” is pronounced “myoot”.  I can’t count the number of times I have heard the words confused.  “That’s a mute point.”  Huh?  That’s a point you can’t hear because it is muted?  Bad pronunciation clouds meaning.
  • Nuclear – President Bush has made this one infamous.  His is the classic, very annoying and way too common mispronunciation:  “Nuculer”.  What is so difficult about this word?  It is “nu-cle-ar”. 
  • Realtor – This one is similar to “nuclear”.  The common mispronunciation is “re-la-tor”.  Wrong!  It is “real-tor”.  If actual Realtors had to pronounce the word correctly in order to be licensed, more than half would be out of work.  They are the worst offenders.

Enough for now!  I am sure I will have more to share in future.  Please share your pronunciation pet peeves!

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Good Grammar Lives! Kudos from the Word Cop

Posted on February 14, 2008 by Margaret Purvine

I’ve aired plenty of beefs about crimes against the English language.  There’s certainly no shortage of material for ranting.  Today, however, I have a rave.  It’s a rare thing from me, so enjoy it.

My kudos today go to a local grocery chain, Quality Food Centers (QFC).  They’ve had their challenges in recent years, enduring two acquisitions by big grocery chains, Kroger being the most recent.  So the stores, at least the ones near me, had deteriorated quite a bit.  Simply put, QFC’s mission and market didn’t match Kroger’s idea of what they should be.  At least, this is what I have observed from the outside as a customer.

This situation has begun to turn around.  The stores are being refurbished, remodeled, and upgraded.  They are going more upscale, probably to compete with stores the like of Central Market.  I, for one customer, welcome the change. 

Last night, after a brutally busy day, I stopped by my local QFC to do some emergency shopping.  Some things you just can’t do without, and we were without.  I dragged my tired body around the store, locating most of what I needed and figured the heck with the rest.  Somewhat numb, I approached the checkout stand.

The stand right in front of me appeared to be closing, but the cashier gestured to come on.  She would take care of me.  I noticed that it was the express lane, and stated that I had more than 12 items.  She still indicated she would be happy to take care of me.  Then I really looked at the sign and stopped dead.

“Express Lane.  12 items or fewer.”

I don’t know how many times I have groaned over the ubiquitous signs with their equally ubiquitous errors in grammar – 12 items or less.  Wrong, wrong, wrong!

I turned to the cashier and congratulated her and the store for getting it right!  She looked at me as if I was somewhat addled, and proceeded to add up my grocery tab.  All right, maybe she was tired, too.

No matter.  Congratulations to the QFC management for removing one of the smaller annoyances that clutter my life.  There is no better signal of the store’s re-emergence as a Quality Food Center, at least to me.

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Position Matters – leading effective meetings

Posted on February 12, 2008 by Margaret Purvine

Have you ever been stuck in one of those interminable meetings that go nowhere?  Ever had one of your own meetings get bogged down and sidetracked? 

Many years ago (I won’t say how many), very early in my IBM career, I learned a valuable lesson in how to ensure my meetings were good ones.  In other words, we got things done and finished promptly.  Here’s my  “Aha!” moment.

 I was a systems engineer (SE) for IBM.  In that position, not only was I the technical half of a sales team, I was also responsible for making sure big computer systems we sold got installed properly and that my customers were satisfied with me and their IBM investment.  Tall order!

 When preparing for a large installation, it was up to me to gather all the various players involved in the project and go through a process called Systems Assurance.  These were big meetings with potentially big consequences.  They were attended by the marketing representative who sold the system in the first place, the marketing manager, the field engineering staff – customer engineers, managers, specialists – who performed the physical installation of the hardware, the SE specialists handling software issues, and the systems engineering manager (my boss!).  As the assigned “account SE”, running the systems assurance meeting was my job. 

Systems Assurance involved filling out a detailed questionnaire about the implementation plan and the progress we were making, with each item rated as either “acceptable” or “action required”.  From the “action required” items, an action plan was developed.  All managers present had to sign off on the results.

For my first big systems assurance meeting, I did a considerable amount of preparation.  I filled out the forms, answering the questions as I felt they should be answered, and developing a proposed action plan from my “action required” items.  Doing this in advance would, I reasoned, make the meeting go faster.  In this, I was mostly correct.

At the meeting itself, we had about a dozen people around the table, most with extensive experience and/or management titles.  Feeling a little intimidated, I started the meeting.  I took everyone through the questionnaires, my answers, and proposed plans.  There were a couple of tough moments and the meeting took too long, but on the whole everything went okay.  Not perfect, but not bad for a first time out.

After the meeting, one of my colleagues remained to talk to me about the meeting, since it was my first systems assurance meeting in the lead position.  He told me the meeting had gone fairly well, but he had some advice for me to use the next time around. 

“You are leading this meeting.  So sit at the head of the table.”

Aha!  Such a simple thing.  But how brilliant!  This had simply not occured to me.  Never one with the strongest sense of self confidence, I had selected a seat in the conference room somewhere in the middle of the long table.

Next time, I put my mentor’s advice to the test.  I walked in, strode to the head of the table, and took command.  This didn’t confer instant leadership status – one’s words and actions really do that – but it sure helped.  It also helped me to think like the person running the show.  A small distinction, perhaps, but one that can really help when you are learning and not completely confident. 

Think about this the next time you have to run a big meeting.  Start by assuming the leader’s position in the room and see if that assumption seeps into your soul.  You may be surprised by the response you get.

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Disaster Recovery – Reflections on the floods of December 2007

Posted on January 26, 2008 by Margaret Purvine

Like most Washingtonians, we listened to the torrential rain hitting our roof hour after hour, periodically checking vulnerable areas of our property for rising waters.  For the second time in our memory, the intrepid Dennis dug trenches in the pouring rain at midnight, helping to channel water away from one of our doors.  He wasn’t able to avoid the flood completely, but his efforts did minimize it, containing the inside lake solely to the garage.

Also like fellow Washingtonians, we listened to the news.  Stories of loss, homes, belongings, the accumulation of a lifetime of memories, and in the worst case, loss of lives, were heartrending and touched us all.  We can all identify with our neighbors who lost so much and, as is common in this wonderful country we live in, individuals and organizations jumped in to help. 

As business owners, we were particularly touched by seeing the work of lifetimes spent building successful businesses wiped out in minutes.  A mudslide inundating a popular restaurant.  Stores with carpets now brown with slimy silt and stock ruined.  Grocery stores with fresh and frozen inventory ruined by power outages.  Third generation family dairy farms with their herds wiped out.  Somehow, this story was the hardest to hear and see.  These aren’t just cows!  They are the living core of a business, generating a living for the farmers and food for all of the rest of us. 

How do you bounce back from this?  As business consultants, how would we advise our clients in the face of losses this great?  Every business is different, but there is a basic core of business principles that cross the lines between industries and types of businesses.  We believe the initial focus should be on gathering information and possible sources of assistance and making a plan to move forward.  Then take action.  Each small step will help heal the soul as the work begins to heal and rebuild the business.

Here are some initial steps to consider.

Talk to your advisory team.  Every small business owner should have an advisory team consisting of at least a CPA, business attorney, business consultant or advisor, banker and commercial insurance agent.  This is the time to tap that resource for support and guidance.  In this case, start with the insurance agent.  He/she can advise you on your coverage and how to report the loss.  Your business consultant can help with ideas, contacts, and the wisdom of prior experience.  A consultant can also provide guidance and focus at a difficult time.  Your attorney can provide similar guidance, but with a focus on the potential legal issues. 

Document, document, document.  It is tempting to dive in and start cleaning, but it is critical to document the loss first.  Take pictures.  Take videos.  Make detailed lists of equipment, inventory and other items lost.

Read the small print in your insurance policy.  It is best to do this when you get the insurance in the first place, but many of us don’t do it or, if we do, we don’t remember the details.  You need those details now to find out just how much of your loss is covered.  Most policies don’t cover floods unless you have obtained separate flood insurance from the government.

Is your loss the result of a natural disaster or someone else’s act or negligence?  Although too many in our current litigious society think lawsuit first, it is still something that may be appropriate in some circumstances.  Consult your attorney.

Consider a temporary location.  Is it possible for your business to get started sooner in alternate quarters and operate at a level sufficient to begin generating dollars?  If so, start planning for that.  Talk to a commercial real estate agent.  Make lists of equipment and supplies required.

Determine what funds will be required to get back in operation.  Know how much you need.  Then determine potential sources and go after them.

Apply for State or Federal emergency grants or loans.  Disaster declarations free up public funds to help those who face serious losses.  This may take a while, but find out what the process is.  If you are still feeling overwhelmed (and who wouldn’t be), get some help.  Again, tap your advisors.  They may be able to help handle this task, taking it off your shoulders.  However, don’t wait and don’t rely solely on state or federal aid.  It is a wonderful thing that our government does, helping citizens who have suffered so much loss.  But remember that the strength of this country is the strength, ingenuity and self reliance of its citizens.

Be open to receiving help.  There are many sources of help available to you, both personal and professional.  Use them!  Your neighbors outside of the immediate disaster area just need to know what to do and how best to help.  There are many business professionals touched by what we have seen who want to lend a hand.  But you need to ask.  Since networking is the lifeblood of those of us who work in advisory roles, if we can’t provide the exact help needed, we probably know someone else who can.

Put a recovery plan in place and begin executing the plan.  If you establish goals for your business recovery and organize the big tasks ahead, you stand a much better chance of success.

Look forward, not back.  Regret, loss, grief, worry – all these are tough to deal with and can weigh you down and hold you back.  Learn from any past errors and make changes to avoid repeating them, but don’t dwell on them unnecessarily.  Look forward.  Rebuilding is a positive thing.  Believe us when we say, all of us in the business community are cheering for you and stand ready to lend a hand.

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Management 101 – Is poor management costing you employees?

Posted on January 26, 2008 by Margaret Purvine

The importance of good first line management to an organization is frequently given short shrift, in my experience.  This is particularly true with small companies that may have limited training budgets.  This may not be the best place for penny pinching, however.  Consider the potential cost of ham-handed people management first.

That cost can be huge.  First of all, in our litigious society, it is important to avoid stepping into a very large legal pile out of carelessness.  We often tell the story (a true story, although we have changed the names to protect the innocent) of walking into a client’s main office for a meeting.  The receptionist, about 8 months pregnant, greeted us and said our client would be with us in a moment.

The client finally came out and we went into his office.  As we began our meeting, we asked about the receptionist.  Did our client have temporary help lined up to cover for her during her maternity leave?  Our client replied, “I’m going to fire that (expletive deleted) today.”  Taking care to close the client’s office door, we suggested, strongly, that our client discuss this with his attorney first.  The attorney, summoned immediately via telephone, said he would be happy to take the case – the receptionist’s.  It would be a slam dunk.

My point?  One potential cost of clumsy or uninformed management is the cost of a lawsuit. 

Sure, lawsuits are expensive, but I think the higher potential cost of poor first line management is employee turnover.  It’s not that easy to find and hire great talent.  So we urge our clients to consider how they manage them.  Make an investment of time and dollars – for books, training, or coaching - to improve your own management skills.  Promoting one of your employees into a supervisory or management slot?  Make sure to help him/her make that transition.  It’s not that easy to give up doing the work and start getting the work done through others.   

I was lucky to have the benefit of management training in a large corporation.  We called new manager school “charm school”.  Joking aside, it was great training.  It included direct input from our employees, too.  We worked individually with instructors to go over the results of those employee surveys.  In addition to the numeric ratings, we also had employee comments, retyped so we couldn’t identify the source.  These comments could be bruising, but ultimately helpful to our growth as people managers.  (In an attempt to protect myself, I talked to my employees beforehand, encouraging them to offer candid, but constructive comments.  They did.  Whew!)

Can’t afford fancy management school for your new supervisory staff?  There are other ways to help them grow in their new management positions.  If you are experienced, take some of your own time to work with them.  Meet with your supervisors regularly and discuss issues as a group.  This will help you establish consistent management process and style as you train.  Work with a skilled consultant who can help train your team. 

Scale your management development to your organization and budget, but don’t skip it!  Poor managers are expensive in more ways than one!

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