Archive for April, 2010

Avoid these 5 mistakes when trying to sell your business

Thursday, April 29th, 2010
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There are many things you need to do when planning to sell your business. There are also things to avoid and here are 5 things to avoid so you successfully sell your business.

1. Talking when you shouldn’t.
This may sound obvious but when you sell a business it’s more important to listen and ask questions than continually talk to try and “sell” the business. Often there is more information in hearing the type of questions being or not being asked and the follow up comments. If you are the only one talking that means there is little interest or other negative perceptions that need to be removed so the buyer is comfortable moving forward.

2. Failing to use common sense.
Selling a business rarely happens to the first buyer that comes along. There is a need to reveal information but only after the buyer provides enough information to show they are suitable buyers. This is one of the main reasons to use a broker to sell your business. They are trained and have the emotional detachment to ask appropriate questions to know not only if the buyer is truly serious but more important, qualified to be able to buy, finance, manage and run the business.

3. Poor communication and not listening.
A motivated buyer who is serious about buying your business will ask a series of questions. Often it can be the same question but asked a different way. They are looking to hear a consistent answer and therefore develop confidence in buying the business. For example, an important question could be how many hours do you, as the owner, work in the business? The same question a different way, how many hours each day do you work and is that Monday through Friday or do you work on the weekend? Or another approach, does your spouse work in the business and if so, how many hours do they work and are these hours when you work?

4. Giving worldly advice on subjects or matters not relevant to the transaction.
Politics, sport, religion and how best to run a business are not conversation topics to have with people you want to sell or buy something from. Respect the sole reason that is bringing you together with the buyer. Absolutely keep it friendly and honest.

5. Failing to get expert advice or assistance when it is required.
If you do your own tax returns, file your own legal papers, do your own financial planning, do your own negotiations, are a sales and marketing guru and have plenty of time to waste by people who don’t mind wasting your time; then selling your business without expert help may be a good option…until something goes wrong.

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Google Acquires Widget Developer Labpixies

Tuesday, April 27th, 2010

Google has acquired widget developer Labpixies, which developed some of the first gadgets for Google’s personalized homepage iGoogle. It also develops apps for Android and iPhone.

“Over the years, we worked closely together on a variety of projects, including the launch of a number of global OpenSocial based gadgets. Recently, we decided that we could do more if we were part of the same team…” says Don Loeb of Google’s iGoogle team.

“We are looking forward to working with Labpixies to develop great web apps and leverage their knowledge and expertise to help developers and improve the ecosystem overall,” he adds.

Labpixies - Top iGoogle Gadgets - Company acquired by Google

“We both felt the time was right to come together,” says Labpixies in its announcement. “We started LabPixies to create a truly personalized online experience and develop fun widgets that people find useful every day. Working at Google will help us scale to more users as well as giving our team greater opportunities. Google and LabPixies teams have worked on many projects together including the launch of global OpenSocial based gadgets. The acquisition is an opportunity to learn from each other to bring more apps to users, help developers and improve the overall developer ecosystem.”

The Labpixies team will be based out of Google’s Tel Aviv office, and will anchor the company’s iGoogle efforts across Europe, the Middle East, and Africa.

This is only the latest in a string of acquisitions from Google. Other recent acquisitions include Agnilux, Plink, Aardvark, and Episodic.

Facebook’s Plans to Take Over the Web

Tuesday, April 27th, 2010

So, earlier in the week, we talked about how absorbed the web is going to get by Facebook. Based on Facebook’s announcements at F8 today, that is most certainly the goal of the company, and given the tremendous adoption of Facebook by users in general, and by important partners with content, get ready to get more absorbed.

There were three major announcements made during the keynote. These were:

1. The Open Graph

2. Social Plug-ins

3. Graph API

Essentially, Facebook thinks connections are going to become the new links. This will theoretically happen through what they’re calling the Open Graph. Zuckerberg explains this:

Facebook has focused mostly on mapping out the part of the graph around people and their relationships.

At the same time, other sites and services have been mapping out other parts of the graph so you can get relevant information about different types of things. For example, Yelp maps out the best local businesses and Pandora maps out which songs are related to each other.

All of these connections are important parts of the social graph, but until now it hasn’t been possible to easily share the connections you make on sites like Yelp or Pandora with your friends on Facebook. And you haven’t been able to bring your friends from Facebook to share experiences on these sites or personalize them to you.

Facebook's Open Graph

The announcement of the social plug-ins will play a significant role in making the connections involved in this Open Graph. These include a “like” button for the web, which the company as already deemed the most important of the plug-ins. When you stick a like button on your site, that connection will be integrated with Facebook through the Graph API. The activity will go the news feed, but it will also go to other relevant places in your Facebook profile.

Taylor shared examples from partners IMDB, Pandora, and ESPN. If you “like” a band on Pandora, that will go to the appropriate bands-you-like section on Facebook. On IMDB, every movie page will have a like button, so if you “like” a movie, it will be reflected in your movies section in your Facebook profile. It goes both ways though. You’re not just sending stuff back to Facebook. For example, there will be “like” buttons associated with athletes on their profile pages on ESPN.com. If you “like” one of these athletes, you can get updates about them from ESPN, via Facebook. Expect a lot of interesting two-way things to happen with the Graph API, as more and more developers are able to harness its power.

Other plug-ins include boxes for activity feeds and recommendations you can stick on your site. You can check out Facebook’s social plug-ins here.

Basically, the gist of the entire thing is that Facebook is taking over the web, and sites will be afraid not to take part. Facebook is injecting itself into every part of the web possible. As far as I can tell, this Open Graph is essentially a web itself. While it may not become THE web, it may increasingly become the one that matters.

Are we headed toward a point that if you are not somehow connected to Facebook you are not connected to the world at large? By the way, this is not going to do anything to slow Facebook’s growth down.

Outsourcing Support Functions……Sort of

Sunday, April 11th, 2010

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The outsourcing craze continues in the US and, for the most part, I’m a supporter of it IF you can maintain or improve quality while lowering costs. Unfortunately, that is not always the case but that is a subject for a different article (just call customer service for any of your credit card or loan accounts).

Functions that are not considered a part of the company’s core competency are typically prime for outsourcing. This includes corporate overhead functions. Corporate overhead (i.e. headquarters or non operational functions) can include but is not limited to Human Resources, Legal, Information Technology, Internal Audit, and Corporate Accounting. These groups function for the overall good of the company and, in theory, their costs need to be spread out to operational units since they are the beneficiaries of these services.

Allocation of corporate overhead can be a hot topic at period, quarter, and year end if you have any sort of P&L responsibilities. There are few things that can irritate a business unit manager more than seeing arbitrarily allocated corporate overhead, usually based on headcount or a percentage of total sales, as an expense line item that takes away from their bottom line profitability, especially when they didn’t received any services.

For example, let’s say there was a huge legal issue at one plant or location that required half of the legal department’s time for the year. Common sense would say to assign half of the legal costs to that plant for the year. Through arbitrary allocation, however, other locations would bear a disproportionate share of the legal costs and the location with the legal issues would get a huge expense break in comparison to the legal services they directly consumed. Doesn’t seem right does it!?

Sound activity based costing methods would properly assign those costs directly to the location that consumed the services. I am full supporter of activity based allocations but there is one thing it does not evaluate, value. The costs may be properly assigned but were the services of any value? Could they have received these services at a lower cost or greater benefit elsewhere?

If you’ve read other articles of mine you know that I’m a stickler for metrics and measuring performance and I firmly believe that you can’t manage what you don’t measure. That being said, overhead functions need to be held accountable for their services just like the operational units are.

Let’s stick with the legal scenario. Have the legal department complete annual budget and determine internal hourly rate based on staffing. The goal being that you internally bill out all of your time to the businesses so, at the end of the year, the legal cost center is zero or if you bill more than budget, you actually have income (albeit internal). Inform businesses of your hourly rate and they will be charged directly for legal services if used. The businesses will also have option to use outside legal services instead of being forced to use in house services.

There are two important performance dynamics this scenario creates:

One, the in-house legal department is forced to create value or the businesses will go elsewhere. Their metric is the costs that remain in their cost center at period end. If they provide value and bill hours, their cost center will be zero or negative. If not, costs will remain and they will be forced explain themselves to senior management. This also forces them to market themselves to the businesses like a real, for profit, law firm would.

Two, it puts decision making back in the hands of operations. Now they can choose their legal services. In some instances, a local resource may make more sense or internal corporate expertise is the best route. In others, they may feel the in house source is incompetent or simply unresponsive and they’d like to send a message to headquarters. If managed properly, there are many different benefits that could arise:

1. A newly efficient and effective in house legal department that delivers value consistently    to the business units,
2. Determine that outsourcing legal services is best based on cost/benefit, and
3. Determine your “star” performers based on business requests and chargeability, and eliminate subpar performers

A hybrid of in sourcing and outsourcing may be an effective way to increase your business performance and is definitely something worth considering in your business.

http://www.derrickstrand.com

Employee Satisfaction vs. Employee Turnover – Influencing the Right Metric

Thursday, April 1st, 2010

I recently read an article in my favorite business magazine on the value of employee exit interviews. It went into great detail on the benefits of gathering data from

 Derrick Strand

Derrick Strand

departing employees. It talked about maintaining confidentiality, asking open-ended high impact questions, the proper timing of the actual interviews, etc.

I agreed with its content and recommendations but view it as only addressing the back end or “lagging portion” of the employee management process.

When I say “lagging” I mean gathering information and data on things that have already happened. For example, information on financial statements are lagging indicators. They provide information on activity in the past. Although valuable moving forward, it’s too late to make changes or adjustments in the period it is reporting on.

In the case of the exit interview, the information is “lagging” related to these employees since they have already decided to leave the company. In most cases, the exit interview is way too late in the process to save a valuable employee. The majority of businesses today manage based on lagging indicators.

Best in class companies, however, excel in using leading indicators to drive performance. A better leading question is, “Could we have identified the employee’s issues earlier in the process and kept them?”

Leading indicators are measures/metrics that warn you in advance of potential issues. A good real life example of a leading indicator would be the “low fuel” light that appears in your car when you are low on gas. This light triggers you to take action prior to running out of gas. An exit interview in this scenario would involve asking questions after you ran out of gas. Although it is valuable information, it was not helpful in preventing it from occurring in the first place.

An effective management review process includes a good mix of leading and lagging indicators. Creating leading indicators for the employee management process involves effectively evaluating employee satisfaction.  If you see employee satisfaction trending down, that should create a sense of urgency to solve the satisfaction issues prior to it becoming a turnover issue.

The point I want to make is that improving employee satisfaction (leading) will drive improvement in employee turnover (lagging) rates. If you manage the leading indicators effectively, the lagging indicators will take care of themselves.

Regards,

Derrick Strand

804-814-9921

dstrand@derrickstrand.com

www.derrickstrand.com