The Coach's Corner

The Impact of Private Equity Groups

September 23rd, 2019 // Tom Doescher //

Tom Doescher - Doescher Advisors

As I reflect back on my 50 years in the workforce, I can’t think of anything that has affected and impacted businesses, especially middle market businesses, more than private equity groups (PEGs). Most of you know this, but for those who may not, in its simplest form the sponsors of a PEG raise investment monies from pension funds, insurance companies, wealthy individuals, and others. The money is pooled and then invested in the purchase of companies, many owned by their founders. If you own a business, this has created a great avenue for liquidating your investment in your business. Some PEGs will do partial purchases, and a few will even invest without gaining voting control (under 50 percent ownership). For private company owners, it provides another type of buyer in addition to individuals, companies, or going public, which has its pitfalls.

In this blog, I would like to point out one change in commerce that’s a direct result of PEGs: the concept of subscriptions (customer commitments to regular monthly payments, often automatically renewed annually). Obviously, subscriptions existed before PEGs, but if you look at different business sectors, there are many new versions of “subscriptions” that exist today. Some are obvious, others are not.

  1. Many IT product companies have transitioned from selling you their product for $1 million to effectively leasing their product for $20k per month forever.
  2. My partner’s dentist sold out to a dental roll-up group owned by a PEG, and they now offer an annual fee that includes basic cleaning, X-rays, etc., which is automatically charged to a patient’s credit card.
  3. There are a number of businesses that already had an annual, multiyear, or automatic renewal provision — so they already had a subscription. For example, I work with a security firm that provides home and business security alarms and cameras that are in this category.
  4. There are businesses that are attempting to transform what I might call a service into a product that can be sold as a subscription with a monthly fee.
  5. One of my personal favorites has to do with my lifelong passion for alpine skiing. Two companies have created a partnership through the outright purchase of multiple ski resorts or some other “arrangement.” They offer “season lift passes” that allow you to ski at many different major ski resorts throughout North America. The price point is such that with only two trips, it’s worth the investment. So, me being me, I’m trying to figure out what’s going on. They’ve taken a weather-dependent business, snow skiing, and solidified and made the revenue stream less variable and more predictable. Skiers need to purchase the season pass before Thanksgiving. (How’s that for cash management?) In addition, they’ve substantially increased the price of daily lift passes, which makes the season pass even more valuable, or they get premium prices from those who opt for daily passes. Brilliant!!!

Why are the PEGs so focused on subscriptions? The simple answer is that they’re reducing variability in revenues and increasing profit predictability for the purpose of reselling their investment as quickly as possible for as much as possible.

Maybe you should take this concept and apply it to your business. If you do, I’m confident your company will be more valuable.

Are You Looking for Career Advice, or Do You Regularly Give Career Advice?

September 9th, 2019 // Tom Doescher //

Tom Doescher - Doescher Advisors

If your answer is yes, I would highly recommend reading Strategize to Win by Carla A. Harris, vice chair of Morgan Stanley. I try to be careful not to suggest too many books, but Harris provides some common-sense (or not so common) tips regarding jobs — or, as I like to say, careers. She’s a very good writer (or has a great ghost writer), which makes it a quick, easy read. You can tell she’s a consultant because she also offers some great checklists at the end of each chapter, and poses thoughtful rhetorical questions. Maybe the only caution would be that she’s a Wall Street investment banker, so for some her advice may not be as helpful. Here are my takeaways:

  1. Sadly (to me), she suggests people entering the workforce today should plan six to eight five-year modules at different companies. As a guy who spent 40 years at the same awesome firm, that’s hard to hear — but I understand.
  2. I think that much of Harris’s wisdom would be beneficial, even if you’re in a great place and intend to stay. In my experience, today’s workplace reminds me of a fast-forwarded video. There never seems to be enough time. Customers are more demanding than ever, and technology has sped up the way we receive and share information, but humans are still humans. Harris is very clear that you need to take charge of your own career.
  3. Harris is talking about the workforce (both leaders and associates), but I believe her advice applies to customer/client relationships, as well.
  4. Sorry to bring up introverts again, but Harris’s advice will encourage introverts to step out at times. Harris says she often hears people (probably introverts) erroneously say, “I don’t need to go out of my way to build relationships; I’ll let my work speak for itself.” This observation applies to both your company and your customers/clients.
  5. She also provides her spin on being a leader. According to Harris, a leader should have leverage; be efficient in communicating; be willing to act; be diverse; engage; and be responsible.

When I reflect on my daily conversations with owners and associates, I realize that Harris addresses so many of the common challenges faced today. If she lived closer, I would probably figure out a way to meet her, and would use her as an advisor. She has obviously experienced many different “real life” business situations and has an ability to simplify a lot of facts into some practical, logical action steps.

Let me stick my neck out. If you engage in business (as an owner or associate), I would highly recommend reading this book.

Is Your Employee Turnover Too High?

August 26th, 2019 // Tom Doescher //

Tom Doescher - Doescher Advisors

In this historically low unemployment environment, many business owners are struggling to keep their people. According to the leadership coaching team Bliss & Associates, the cost of employee turnover averages 150 percent of the employee’s annual compensation. Wow!

In his book, The Dream Manager, Matthew Kelly offers some very practical advice. The book is a fictional story/fable, similar to Patrick Lencioni books, and it’s a powerful, quick, easy read. Kelly opens the book by quoting Thoreau: “Go confidently in the direction of your dreams. Live the life you have imagined!” He goes on to quote statistics on the high level of disengagement by employees in the workplace today.

Kelly states that people generally do not leave because of money. Remember Marcus Buckingham’s Gallup results and his 12 Questions, now reduced to 8? (You can get a PDF copy of both the 12 and 8 Questions in the Resource section of my website.)

Most of the book is about “dreams,” but the fictional company owner reluctantly agrees to a one-question employee survey, recommended by his COO. Here’s the question: Why do you think so many people come and go from our company? It’s a very simple, but powerful, question, and although the results are shocking, they’re relatively easily dealt with. However, as my mentor, Ken Kunkel, used to warn me, “Be careful what you ask for.” By that, he meant that if you ask, you need to be prepared to do something, and not just “receive and file” the advice. You’ll probably be surprised, and it may cost some money, but do the math. How many people left your company last year? What was their average compensation? Multiply that result times 150 percent, and that’s what it’s costing now, if you do nothing.

Most of the book involves a revolutionary idea that may be more than you’re willing to take on at this time. I would still encourage you to read it; it may stimulate an idea or two that you can implement.

If you’re concerned about your high turnover rate, I would highly recommend you and your leadership team read The Dream Manager.

If you’re a financial/wealth management advisor and you’re looking for ways to use your skills and give back to your community, I would also recommend you read this book.

Do You Want to be More Successful Developing New Business?

August 12th, 2019 // Tom Doescher //

Tom Doescher - Doescher Advisors

I just finished reading a fascinating book, Win Bigly, by Scott Adams. For those of you who read the daily comic strips, you’ll recognize Adams as the Dilbert cartoonist. If I haven’t lost you yet, guess who the book is about? President Trump.

Adams, a self-proclaimed ultra-liberal, was in a very tiny group that predicted Donald Trump’s victory in 2016. He says he took a lot of heat and abuse, especially from his liberal neighbors in California.

I would highly recommend the book, which was very entertaining, but not for that reason. Adams, who would say he’s a persuader as much as a writer, refers to President Trump as the Master Persuader — and possibly one of the best in human history. Reading along as Adams makes his case, it dawned on me that he’s describing the best marketing/new business/Hunters I’ve ever known.

As you read the book, assume you have two products to choose from: Hillary Clinton or Donald Trump. Which would you buy? The choice has almost nothing to do with their positions/platforms. Now, I’m sure I’ve offended many of you, but I suggest that you read Win Bigly as a “How to win that next big customer” playbook.

Here are a few of Adams’ observations:

  1. Trump is the most persuasive human he has ever observed. (Editorial comment: Keep in mind that Adams vehemently disagrees with most, if not all, of President Trump’s positions.)
  2. When they were done criticizing Trump for the “error” of saying he would build one big solid “wall,” the critics had convinced themselves that border security was a higher priority than they had thought coming into the conversation. The reason the wall imagery was good persuasion is that it was both simple to understand and memorable.
  3. A big opening demand in a negotiation will form a mental anchor that will bias negotiations toward that high offer.
  4. Humans think they’re rational, and they think they understand their reality. But they’re wrong on both counts. The main theme of this book is that humans are not rational.
  5. Humans literally make decisions first and then create elaborate rationalizations for them after the fact.
  6. Trump is so persuasive, policies don’t matter. People voted for him even though his policies were murky and changing.
  7. Visual persuasion is stronger than oral persuasion. Trump always paid attention to the colors and symbols associated with his brand — his shirt was always white and his tie colors were always from the American flag.
  8. What you might not realize is that each of us is “marketing” all the time. (Editorial comment: For those of you who know me well, you know I struggle with “business casual” dress. Show me a great new business developer and I bet they look sharp.)
  9. If you want to make a good first impression, don’t jokingly complain about the traffic on the way over. Try to work into the initial conversation some positive thoughts and images. (Editorial comment: People love to be around the “sharp” new business developer because they always share a positive, uplifting, inspiring story.)

My challenge to you is:

  1. After reading the book, evaluate your sales process, including handouts and pitch.
  2. Is it a bunch of facts and details?
  3. Does it appeal to your customers’ emotions? Is there a WOW factor?
  4. Would you buy anything from you?
  5. Do people like being around you or do they hide when they see you coming?

I would love for you to send me stories of instances where your company has applied the principles in Win Bigly and has won new business.

As the business world has truly become global,

July 29th, 2019 // Tom Doescher //

Tom Doescher - Doescher Advisors

even fairly small, privately owned businesses have become globally active. Therefore, it’s important that they’re tuned in to cultural differences in those countries where they do business. To save money (or make more), it’s critical that they avoid the mistakes made by many multinational companies — and me. In his book, Driven by Difference, David Livermore provides practical tips for companies with diverse customers and/or a diverse workforce, or what he calls “cultural intelligence.” He refers to a Google internal employment survey that discovered teams that were both diverse and inclusive were also the best at innovation.

When I purchased the book, I thought it would be about diversity in the workplace, which it is. But it’s much more. If you’re looking to improve innovation and even marketing in your company, I would highly recommend Driven by Difference. As I’ve done with other books, I’ll whet your appetite with several excerpts:

  1. “Priming” is the process of presenting a particular stimulus to make people feel and act in a certain way. For example, in supermarkets around the world, freshly cut flowers are the first thing you see, priming you to think freshness from the moment you enter the store.
  2. There’s insufficient evidence to support any conclusion that one national culture is consistently more innovative than another.
  3. The gut can be a shockingly reliable mechanism for decision-making, but it’s subject to enormous error when the cultural context changes.
  4. Most of us start life with a pretty insulated view of  the world.
  5. Most innovators are intense observers.
  6. Mark Zuckerberg has Facebook engineers prove that what they’re coding works on old, low-end flip phones to simulate the conditions in most of the world.
  7. There’s evidence that many people do their best independent thinking outside the office.
  8. Culturally intelligent innovation comes from a climate of trust, where differences are perceived as an asset rather than a liability.
  9. A.G. Lafley, CEO of P&G, which is considered a very innovative company, insists on in-home visits with consumers when he travels internationally. He doesn’t want to make decisions based solely on market research done by consultants or his R&D teams.

Those are some highlights, but Livermore presents lots of really interesting, practical stories.

Again, the underpinnings of the book are diversity, but there are some great reminders of the importance of really listening to and understanding our customers.

The Advisor’s Corner

Tom DoescherYou’ll find stories from the trenches, business lessons, and pertinent questions to help you find inspiration, professional growth, and leadership savvy.

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