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Pause and Refocus

I clearly remember back in 2014 when I started my new journey to become a business coach and consultant I was excited, nervous, and a little unsure about the best way to start. I jumped in and then stopped. What happened? I had the opportunity to acquire a company and it made too much sense to pass up. Instead of jumping into coaching and consulting I dove into an acquisition and then the post-close transition. I’ve been through a few of these and absolutely love the challenges associated with these transitions. I had the opportunity to work with a great team of people at HPS Process Service & Investigations and I continue to be thrilled with the level of service they provide. They’ve been doing it for over 30 years and really know their stuff!

About six months after my first attempt to jump in  I was ready for my second attempt. This time I decided to focus on one industry and mainly focus on the consulting side. A lot of time and energy was spent on creating fantastic programs to help companies transform into something new. The only problem? The industry wasn’t ready to buy what I was selling. Someone very wise told me “It’s not very fun to go to a dance when no one will dance with you.” So true! At that point I decided to take a pause and focus more on my two existing companies HPS and Get Smarter Prep and spend more time with my kids. While this happened I would ponder on what I wanted to do next.

One of the best things about coaching is providing clarity on next steps to others. Sometimes, with a little reflection, you can get your own clarity. Sometimes it takes a lot of reflection. I realized that I was at the same place I started back in 2014, ready to jump in and work on business coaching and consulting. I am less nervous, not unsure about the best way to start, and very excited. Will I get diverted by a new opportunity? Maybe. But that’s the best part of life – living it!

Buying A Business – Part One

Over the last few years I have had the pleasure of going through two different searches to find and purchase a business. I’m not sure which was more exciting to me – the hunt or closing on the deal. I learned a lot from both searches and wanted to share my experiences, in case you are considering something similar.

What Do You Want To Be When You Grow Up?

For me, one of the hardest things about buying a business was trying to identify which type of business I wanted. Since I grew up in service-oriented companies, I naturally gravitated towards them. Beyond that, I wasn’t sure what I wanted. I went through the SIC directory to see if any specific type caught my eye, but it really didn’t help much, except to identify some industries that I wanted to stay away from. After a lot of time and headaches, I decided that not knowing exactly what I wanted was not a bad thing. Actually, for me, being open-minded helped me buy two of my businesses.

Release The Hounds

Finding the right business to buy is a combination of skill, persistence, and sometimes luck. Once you have narrowed down what you are (or are not) looking for, the really hard work begins. The first thing you should understand about “the search” is that you will probably have a lot of competition. Depending on the market you are searching, many times there are more buyers and sellers. It’s important for you to understand this dynamic in your market. If there are a lot of pursuers for a business, many times you will have to pay a premium for the business or be creative with your offer. If you know people who have recently bought a business in your market, ask them how the process went and what the competition was like. The more informed you are about your market, the better your chances. Here are a few options on how to find available businesses.

List Aggregators

An example of a list aggregator is BizBuySell. They provide lists of companies available for sale that you can filter by location, type, etc. If you register, you can also get updates emailed to you. I would sign up for these lists whether you are seriously looking or just thinking about starting a search. You should definitely understand that this is a volume game and that you and a gazillion others will be looking at the same information. However, there is a plethora of great information on these websites. Once you find an industry you are interested in, you can look at different locations outside your market and see how they are priced. This is helpful insight for you when you are contemplating offers.

Brokers

If you are serious about buying a business, you should absolutely reach out to the brokers in your market. Before you send your first email or make your first call, reach out to your network and find out who the best brokers are in town. You might also find out who you should shy away from. Once you have your short list, reach out to each of them and take the time to introduce yourself and begin developing a relationship. I highly recommend you meet them in person. I’ve always believed that you can build a relationship stronger and faster if you meet in person. Each brokerage will have a slightly different approach to working with clients. Some may offer to help you perform your search – for a fee. While I have not gone with this approach, I know others who have had great success with it. This is a decision you will need to make based on what you are looking for, how fast you want to find your business, and your budget.

Networking

If you are in a position to share the news that you are searching for a business, by all means do so. Leverage the network you have built over the years to help you find the business of your dreams. You may be surprised and find the business of your dreams through your network. I would leverage your connections and even look at groups on LinkedIn to identify opportunities. Think of searching for a business like fishing. The bigger the net, the more fish you will catch, and hopefully find one that is a keeper.

Law Of Large Numbers

I hate to be the one to tell you this, but it may take longer than a few days to find the business of your dreams. I’m also sorry to tell you that you may bid on the business of your dreams and lose – multiple times. I will tell you that if you are persistent, you will find more than one of these golden opportunities. I don’t know how many dream businesses I lost or even walked away from (actually, I do), but I picked myself up and kept working hard. Eventually, it paid off.

In my next post I will discuss what happens once your offer is accepted. The fun of due diligence and contract negotiations begins. You also will need to start developing key relationships with your trusted advisers. These are the critical people that will help you finalize your transaction and get you started on the right foot.

If you are thinking about starting the exciting adventure of buying a business, or in the middle of a search and would like to get some valuable feedback on the process, don’t hesitate to contact me. I would be happy to share my successes and failures with you.

 

Power Of The Group

I have been a member of a peer group for over seven years and I can say that making the decision to join was one of the best decisions I have ever made. The benefits I have received from the groups I have belonged to have been instrumental in my personal growth and success. I know this sounds like it may be an overly dramatic statement, but I firmly believe that I would not be where I am today without these experiences and my groups pushing me.

Peer groups or mastermind groups, as they are also called, have been around for a long time. I’m going to describe my group, but it is important to understand there are many different variations that are equally successful. I would define our group as being medium in size with eight members. You can go a little smaller, but if you get too small (4-5 members) you may have issues with having enough members show up to have a quality meeting. You can count on having 1-2 people having a conflict and not being able to attend. I believe you need at least 4 members in attendance to have a quality meeting. There are some groups that are much larger (16-18 members), which can work effectively, but you need to weigh size of the group against the amount of time you are meeting and what you are trying to accomplish. If you have too many members, some may not have time to participate and that is one of the critical parts of the group – everyone participates. We meet monthly for three hours, which is just about the perfect frequency and amount of time for our size.

Our monthly meetings are broken up into three sections:

  • Social – we take a little time to have open discussions about current events or other general topics
  • Updates – each member gives a very brief update on how things are going in their business and personal lives
  • Process Issues – members can bring up a pressing issue that they need help with

You may have perked up when you saw that we talk about our personal lives. We absolutely do this. We recognized early that our business and personal lives are intertwined and one affects the other. I should mention that we each signed a non-disclosure agreement and what is said in the group, stays in the group. While there is a great amount of trust built up over time, this agreement helps new members in the group feel comfortable sharing information. My favorite part of our meetings is when we process issues. This is where you see the power of a peer group happening. The member gives you an overview of their situation, what the issue is, and what they are looking for in a solution. The rest of the group gets to ask clarifying questions to make sure they fully understand the situation. Then, each of the members give a possible solution to resolve the issue or at least move it in the right direction. Think about this for a second. If you had the opportunity to present one of your most difficult challenges to a group and get multiple solutions to consider, how would that improve your chances to succeed? When you see it in action it is incredibly powerful.

There are other important aspects of our group that I think are critical to its success. I mentioned earlier that everyone participates. Whether you have an issue to present or you are giving solutions to a member’s issue, each member is expected to be completely engaged.  It is not uncommon to walk out of a 3-hour meeting feeling exhilarated and drained at the same time. We challenge each other. We create an atmosphere of trust, which allows us to confront each other when we think a member may be taking “the easy way out”. We hold each other accountable. If you bring up an issue and you receive multiple solutions or action steps from the other members, we are going to expect that you do something and we are going to ask you about it at the next meeting. If you know you are going to have to report on your progress, the chances of something happening are much higher.

As you can tell, peer groups are something I am very passionate about. I would not trade the bonds and relationships I have created with my group’s members. I firmly believe that by being involved in a well-constructed peer group you will greatly enhance your level of success.  And if you are stuck in your current situation, a peer group is one of the best ways to get movement. If you want to hear more about my experiences with peer groups or would like to create or join an existing group, please contact me. I am here to help you.

“The whole is greater than the sum of its parts.” Aristotle

Hey Lenders, Is Winter Coming???

One of my favorite shows recently has been the HBO series Game of Thrones. One of the sayings from the series is “Winter is coming.” This is a dire warning to all that the current favorable conditions are ending and you need to prepare for the inevitable struggle of a long, harsh winter. During the CFSA conference last week it struck me that this saying could apply to the payday loan industry and its anticipation of new rules coming from the CFPB. While it may be a stretch to say that the landscape after the rules are implemented will be as foreboding as what is portrayed in the Game of Thrones, the sentiment shared by the operators in the industry certainly is not one of excitement and understanding.

One of the questions repeated by operators in the industry is why there are new rules being created when there are already existing laws in each state? Historically there have been comments that the numbers of complaints from consumers about payday lenders to the state agencies are very low. If consumer satisfaction is high, why the need for more rules? Maybe to help clarify this, the CFPB created a mechanism for consumers to make complaints directly to them – not only for payday lenders, but other industries (credit cards, private student loans, mortgages, bank accounts and services, credit reporting, consumer loans, money transfers, & debt collection). Based on a presentation given by the CFPB at the CFSA conference, the bureaus started collecting complaints on 11/6/2013. As of 1/31/2015 they had received 538,300 complaints covering the named industries. The payday loan industry had over 7,100 of these complaints. My rough math says that is about 1.32% of all the complaints. Out of the nine groups they are compiling data on, the payday loan group had 1.32%. One of the attendees stated, “This seems really low”.   Obviously with complaints this low there must be a problem…. just not sure it is with the operators.

As I was walking between workshops I overheard one operator tell another that she was shutting her business down due to her bank kicking her out with no notice and no past issues. Another victim of Operation Chokepoint? Apparently, she could not find a replacement bank. While recent news has been positive that this “initiative” has been halted, are the banks opening their doors back up to those they kicked out unnecessarily? I actually had a bank representative (name withheld to protect the “innocent”) contact me to try and help place their customer with another bank that would accept check cashing and payday lending. I asked the obvious question – “Do you not serve businesses in the industry?” The response was, unfortunately, not surprising, “No.” I sent him an article to enlighten him about the change in Operation Chokepoint. Never got a response. I still go back to the high customer satisfaction in the industry and the high product demand and just don’t understand the disconnect.

There was much discussion during the conference about the CFPB’s timeline for the rules to be effective. It appears that the final rules may not be effective until 2017, but that could change. At this point we still don’t know if the rules will only cover payday loans or if they will reach over into title loans, installment loans and other products. Based on the amount of time this is taking, it may be safe to assume the reach will go beyond payday loans. Not only are there going to be industry-changing rules in the future, data at the conference illustrated that customer demand has been shifting from a single-pay product to a multi-pay product. Customers are also getting more comfortable operating in an online environment for their financial products. Think about these last two items as they relate to your current operations. Do you offer a multi-pay product now? Do you offer your products in an online or mobile environment? If you said no to either of those, winter may be closer than you think!

So what should your strategy be to prepare for the upcoming “winter”? Here are a few things to consider as the landscape continues to evolve:

  • Continue to provide excellent customer service in a compliant, ethical fashion. The best way to maintain and grow your business is to still offer it at a high standard.
  • Explore options to add installment loans to your portfolio. There is a lengthy runway to implementing installment loans successfully – start now!  At the same time, you might want to start looking for extra funding – installment loans tie up cash.
  • Look at your current systems to understand what it would take to offer your products online or in a mobile environment. Will your current system handle installment loans? Do you need to change platforms?
  • Maintain good relationships with your vendors and bankers. At the same time, look for effective replacements. Don’t let yourself get caught without a way to operate.
  • Stay informed. The product and regulatory landscape are changing quickly and dramatically. Monitoring regulations and your competition are critical to gain insights to the future.

While these times are fluid and maybe a little ominous, there is also good news.  If you have the right strategy and the ability to adapt with the times, customer demand is out there.  If you don’t, there are experts out here that are able and willing to help you succeed.  Winter is coming.  Let’s get ready!