Category: Authentic Negotiating

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Authentic Deal-Making Authentic Leadership Authentic Negotiating Deal-Driven Growth

Providing Value as an Entrepreneur-in-Residence

entreprenuer-in-residence Ramon Ray sits with hands on legs, blue sweater, black pants, yellow tie, smiling

Ramon Ray is a leading expert on small business success. He inspires and educates thousands of business owners every year through his content, events and media interviews. He’s also a four-time entrepreneur who has sold two companies, and a best selling author. His latest and fourth book is Celebrity CEO, all about personal branding. Ramon has shared the stage with many leading business thought leaders, including Seth Godin, Simon Sinek, and Gary Vaynerchuk. Most recently, he’s been named as the Entrepreneur-in-Residence for Oracle NetSuite. Ramon has also been married for over 25 years and has two adult children. Listen to our full conversation now, or read the show notes below!

(He also shared about influencer and sponsorship deals back on Episode 3 of the podcast!)

Bit By the Entrepreneurial Bug

Ramon was born in the Midwest. From childhood he loved to tinker, play with electronics, and read books. As a young teen he moved to Brooklyn, New York. You can say Ramon’s part “well-mannered midwestern” and part “action-oriented” New Yorker. He studied business administration in college, and one of his first jobs was as a temp staff member doing clerical work at the United Nations. Ramon went on to serve at the United Nations for over 10 years, and was promoted to administrative officer. There, he managed the administrative functions of the NY Office of a UN Agency headquartered in Asia.

While at the UN, Ramon was bit by the “business bug” and started a few small companies. By day he worked hard at the United Nations and by night he worked on his side businesses. This included attending networking events and producing many of his own successful events. Eventually, he left the UN and became a full time entrepreneur. Although Ramon enjoyed rubbing shoulders with diplomats from around the world, his passion was entrepreneurship. His business education and thirst for entrepreneurship was nurtured through the pages of Inc Magazine, Black Enterprise, and Entrepreneur Magazine. Ramon credits much of his education and business influence to many New York area business owners, including Yacov Wrocherinsky. 

The companies Ramon started include a small tech consulting business, Small Business Summit (an event company co-founded with Marian Banker), and a well-known blog, SmallBizTechnology.com. Ramon eventually sold the Small Business Summit to another event company. In 2019, he sold SmallBizTechnology.com to a publisher. Smart Hustle Media, Ramon’s latest passion, allows Ramon to combine his love of entrepreneurship and small business success.

Entrepreneur-in-Residence: New Opportunities Emerging

Earlier this year, Ramon joined Oracle NetSuite as an Entrepreneur-in-Residence. He notes that many business-related brands are looking for mini-influencers. In commercial spaces, there are a lot of major influencers for products like clothing, makeup, and more. But in the business space specifically, things begin to narrow. There are a few big names that tend to dominate the space, and then a much larger middle ground. That’s where Ramon sees himself; as a small business influencer in that middle ground.

That’s where Oracle comes in. They have a board, of course, and they spend marketing dollars. However, they realized they didn’t necessarily have that strong personal, or human, element. They needed someone who could be themselves and do their own work, while also adding to who they were and how they presented themselves. As they say: “As part of our commitment to provide the resources and expert insights needed, we’re excited to partner with Ramon Ray, entrepreneur and founder of SmartHustle Media, as our first Entrepreneur in Residence. In his new role, Ramon will work closely with our team to help us inspire, educate and better serve business owners and entrepreneurs.”

Because Ramon had already built a relationship with Oracle, he was able to identify areas in which it would make sense for them to partner together. In fact, he was the one who proposed the Entrepreneur-in-Residence title as part of the shift in their relationship! There have been huge benefits for both sides — definitely listen in to hear more about these dynamics.

Building the Trust Factor

As Ramon shared about the ways in which his role with Oracle NetSuite had evolved, I was struck by how essential the trust factor had been. He had shown up as a speaker, gone live, offered feedback, and engaged with the organization on many fronts, over time, before taking on this larger, extended position.

Approaching the company and trying to start with where he is now probably wouldn’t have garnered much interest. By finding ways to engage while consistently providing value, Ramon set himself up to broker a larger deal when the opportunity arose.

He also had other strengths on the table, both tangible and intangible. Email lists, social followers, and a list of reputable connections, interviews, and appearances were key parts of demonstrating his value in the marketplace. Intangible components included his reputation, capacity to continue growing and expanding, and passion for entrepreneurship and small businesses.

That trust factor allowed Ramon to negotiate a profitable deal that allowed both sides of the table to feel excited about their future together. (Listen in to hear Ramon’s thoughts on the “perfect deal”. It includes a consideration of the payoff for BOTH sides.)

Structuring the Deal

Ramon’s deal with Oracle is structured annually. As such, it consists of a variety of “buckets”. For instance, he’s been leveraging relationships with other existing brand ambassadors and influencers. That includes actively identifying ways they can work together, collaborate, or otherwise bring something new to the table. Ramon is also actively involved in helping the organization work on utilizing their brand story. And, of course, he’s a major part of events as a speaker and influencer himself.

One major intangible benefit to Ramon is the credibility provided to him through a deal of this nature. He has been able to remain independent as an entrepreneur, while also receiving the backing and support of a larger organization that instantly adds authority to his name. Although he had done quite a bit of work with Oracle NetSuite in the past, becoming their Entrepreneur-in-Residence was a major shift in that relationship. 

At the end of the day, Ramon keeps coming back to the power of showing value. Value, value, value. You can’t beat showing up and providing value to anyone, at any time. 

No matter what negotiation you’re heading into, knowing that you’ve provided value and will continue to do so will set you up for success.

If you’d like to find out more about Ramon, head over to www.smarthustle.com OR check out www.ramonray.com.

Listen in to the full episode to hear more!

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker. He is deeply passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

If you want to find out how deal-ready you are, take the Deal- Ready Assessment today!

 

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Authentic Deal-Making Authentic Negotiating Deal-Driven Growth

Repeatable Processes For Organizational Success

repeatable processes: two men sitting on a park bench, dressed in business clothing, looking at an iPad screen

As CEO, Martin Hershberger has scaled two companies to 8-figures and beyond. As a small business owner, he’s sold to Apple, HP, and American Express, to name just a few. He has spent the last fifteen years of his career consulting for businesses in the 5-50 million dollar range. Today, he helps business owners and CEO’s prepare for successful transitions by developing and executing strategies for repeatable processes that lead to profitable growth.

Martin believes that many change initiatives fail because they only offer partial solutions. He’s developed a framework that allows every element of an organization to get into sync and support strategies, leading to success. As Martin knows, all too often people underestimate the profitability you can grow with repeatable processes and solid systems. (A few weeks back, DealQuest guest Joel Block talked about the move towards subscriptions. This is a classic form of repeatable processes that lead to profit!)

Early Deal-Making 

Martin shares that being a business consultant wasn’t on his radar as a kid. In fact, he wanted to be a baseball player for the Red Socks. Although that never came to be, he’s pretty happy with how things turned out.

Martin was part of a team of three that shut down a supercomputer division of an organization. As part of that experience, he negotiated settlements for over 300 members. He notes he learned a lot about negotiating there! 

Upon starting his own company, he started signing major deals quickly while experiencing rapid growth. (Their first deal was with American Express!) Of course that feels amazing, but that kind of expansion early on can also lead to all sorts of struggles as well. Martin notes that there were often logistically difficult clients and a lot of specific needs that had to be met as part of these deals. Learning to navigate those was a major deal-making feat that required ongoing strategic planning.

Early Partnership Mistakes

Now, Martin works with industrial manufacturers and supply chain strategies. He notes that he transitioned from corporate to consulting as part of having experienced downsizing in the 4 billion dollar company he was working with. As part of his services for them, he had brainstormed solutions to major problems; problems he realized that everybody was having. He put together his own business plan, based on his prowess at solving systems problems, found a partner, raised funds, and launched his first company.

Building a partnership and raising funds were two major deal experiences he had early on. Martin notes he was incredibly naive when it came to raising capital, and that ultimately it would have been difficult to choose worse partners! Because of how he structured those early deals, Martin ended up with negative net equity almost immediately. Although he was able to sell to major corporations (like Apple and HP), he found he was having to do major “explaining” when it came to his balance sheets. 

Martin’s strategy was always to cash out of that business within 5-10 years. Unfortunately, with five offers on the table, his early investors wouldn’t accept any of the proposed deals. Having come out of the mainframe business, Martin knew that electronics prices were going to fall. As a result, he wanted to be able to get out of the business while it was at a peak, rather than waiting for prices to lower. Eventually, he ended up cashing out; his investors stayed in and ended up losing ground with failing internet sales.

Navigating Those Dotcom Bubbles

I remember the days of the dotcom bubbles and crazy inflation as well! Martin noted that the investors passed on a 20 million dollar deal for the business, because they just *knew* the company would be worth over a hundred in another 5 years. 

In my own 30+ law career, I saw clients navigate huge amounts of money, and put major deals on the table. I also remember how inflation rates were such that you could generate huge revenues but never make any profits. A client of mine was in exactly that position; even though there was a massive amount of money involved, he wasn’t taking anything home. Since then, he’s been able to create businesses that actually create more profit; on the flip side, he’ll never be able to sell them for the kinds of money that his early business went for.

Martin notes that he was seeing those same things, which is what motivated him to sell his shares and move on when he did. His original partner was able to do all right as well, and they left the investors behind to wait for those phantom larger numbers.

Building Partnerships

Although his investment partners didn’t work out, Martin notes that his early business partner was a great fit. Their skill sets and abilities complemented each other well, and they were able to work together to create success. Between them, they had a strong understanding of what they were looking for in a business.

Looking back, however, Martin also notes that they had a verbal understanding rather than a written one. Even though things ended well, that was more luck than anything. If there had been problems, it would have been really difficult to navigate them since nothing was in writing. Now, Martin would never do that again!

Finding That First Deal

When Martin was getting his business started, he knew that everyone was going to be worried about working with them. After all, no one wants to be the first to work with a new company, no matter how innovative their ideas are. (Or maybe especially if their ideas are innovative!)

Their first deal was based on a combination of solid systems, great salesmanship, and strategy. Martin knew that the client wasn’t going to be able to find anyone else who could offer what they could in terms of shipping. In fact, he sent them to FedEx to ask about their options so they could hear it from them themselves! He’d have them go there first, then he’d get them at the table and present his own value proposition.

Martin notes that he had some advantages here. He deeply understood the problem, and he had an excellent value proposition. Because he understood the larger picture that the industry operated within, as well as the more specific picture of how he could shrink a particular company’s pipeline, he was well positioned to make deals. 

Not many people can say that, as a competitive advantage, they actually sent people to the competition to learn exactly what their options were!

Repeatable Processes & Systems

Creating repeatable processes and systems makes a major difference when it comes to selling out or making deals! Martin’s philosophy is that any company should always be ready to sell if needed, and part of that means having systems in place.

An early client had commented to Martin, “You know, when I want to sell my company, no one wants to buy it.” Why? Because he wanted to sell in a downturn. By having systems and processes in place, as well as a transition plan in the back of their minds, business owners can actually position themselves to sell when they have the most leverage. (Which is much better than having to settle for what you can get in a buyer’s market!)

This is achieved by preparing yourself personally and your business organizationally to be ready to sell. Too many owners have a vague idea that of course they’ll want to get out at some point….but when they feel ready to sell they are so enmeshed in the business that it’s not clear what would happen if they left it.

Repeatable processes, clear systems, and the understanding that you will have to leave at some point can help remediate this. Martin recommends that business owners focus on repeatable success, which comes from systems and processes!

Listen in to the full episode here to hear more insights about repeatable processes and systems. They are the force that will enable you to exit when the time comes!

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker. He is deeply passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

If you want to find out how deal-ready you are, take the Deal- Ready Assessment today!

Categories
Authentic Deal-Making Authentic Leadership Authentic Negotiating Deal-Driven Growth

Capital Gains Rates and Deals

capital gains rates: black coffee mug sitting next to a legal folder with a paper reading "tax withholdings"

In this solocast, I talk about how potential increases in capital gains rates can have an impact on deals. Last year we started seeing this, and it’s only continued to grow coming into this year. We don’t know if capital gains rates are going to continue going up. However, we do know the Biden administration is proposing increases. The marketplace, of course, is watching and waiting. Regardless of your politics, you’ll want to be thinking through the business and deal-making implications of capital gains rate increases.

Capital Gains Rates & Deal-Making

When we started seeing the potential significant increases in capital gains rates at the end of last year, many businesses pushed deals through quickly. They were able to get them done in November and December of 2020, just in case the rates did change. It was a very busy time for deal-makers, despite the pandemic.

That acceleration has continued into this year. Now, possible increases in capital gains rates now appear to have been pushed back to 2022. As a result, many deals are occurring, and many businesses are positioning themselves to pursue active deal-making. On the M&A side of things, that means we’re headed for a robust year. Pair that with the reopening economy and the increased gains in Covid vaccinations, and I believe we’ll see deals continuing to move ahead full force in the upcoming months.

Other market factors are driving deals as well, such as valuation trends. However, an awareness of potential increases in capital gains rates is certainly present on everyone’s minds.

Deal-Making Timelines 

If your timeline for selling was about 5 years out (or more), you likely don’t need to make any major adjustments. However, if you were hoping to sell within the next year or two, it would be wise to have some awareness of how things are changing, and how that could impact your plans. It’s wise to be aware of how tax rates will impact you as both a seller and buyer, and it makes sense to mitigate losses when you’re able to.

Something worth noting, however, is that the primary driver of decisions is not tax policy. There are so many other factors impacting deals, including strategic reasons to buy/sell/acquire/merge, that tax policy cannot be considered the primary driver of deals.

When capital gains rates go up, there can be a depression of capital available for people wanting to invest. The increased rate of taxation makes returns less attractive, which can change people’s actions on the market. However, results and trends do show that these rates are not the only factors on the deals and investments people are making. Many factors contribute to deal-making, and taxes are only a single factor.

Should You Accelerate?

If you’re in the position to sell your company and you have a short term horizon, it may make sense to look into accelerating and taking action this year. Although capital gains rates may not increase, we do feel pretty sure they will either stay the same or go higher. They aren’t going down!

I definitely don’t think there is any call for panic though! Just because capital gains rates might be going up, you don’t need to feel pressed into selling if the time isn’t right for you. It’s wisest to make a measured, wise decision that takes both short and long term considerations into mind.

Maximizing net returns on capital is key for investors, for example, and their ability to do so is a more compelling decision-making factor than capital gains rates alone. Again, there are so many complex factors in deal-making that surpass tax rates. Although capital gains rates can impact things, the reality is that investors will be looking to deploy capital and get back multiples on that capital, and they’ll do it via investing.

Now, they may also choose to take the higher tax rates into consideration when coming to the deal table. This may change deal structures and offers, and may be something worth considering. The opportunity for growth within the market, however, will still be the largest factor in whether deals get done.

Overall Impact

There is a knee-jerk logic that says raising capital gains rates will automatically depress investment. I don’t think that is necessarily true, an idea that historical rates supports. Now, if the rates stay high for an extended time, we may see more negative results.

At the end of the day, it may happen or may not happen. In business, we have to deal with what is and minimize adverse impacts as we’re able to. Ultimately, entrepreneurs will keep building companies, investors will keep investing, and deals will be made.

Short-term, deal-growth and acceleration are being spurred by the possibility of capital gain rate increases. In the long-term, we’ll have to see whether the rates increase even gets passed at all. If it happens, I believe most operational business owners will find that there are many other factors that have more primacy than these rates over whether deals happen or not. 

There is honestly so much money out there that is ready to be deployed; deals aren’t going to dry up overnight because of increases to these rates. However, if you are positioned to make a deal this year, it makes the most sense to close it out before the end of the year. This way, you can avoid potential losses as a result of capital gains rate increases. We’ll be ⅓ of the way through the year when this episode goes live. Because deals take time, you’ll want to get moving if you know that you want to complete yours this year. If not, there’s no need to rush into anything based on this one factor.

Those are my thoughts. I’d love to hear from you how you’re choosing to react to the possibility of capital gains rates increases!

Listen in to the full episode here.

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

If you want to find out how deal-ready you are, take the Deal- Ready Assessment today!

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Authentic Deal-Making Authentic Negotiating Deal-Driven Growth

Specialized Asset Management Firms

asset management: a man and a woman dressed in business clothing giving one another a high five

Brett Hickey is the Founder & CEO of Star Mountain Capital, a specialized U.S. lower middle-market investment firm with approximately $1.5 billion in assets under management that has completed over 100 investments to date. Star Mountain employs a data-driven approach to provide value-added debt and equity capital to established small and medium-sized private companies leveraging its scale-driven resources and longstanding relationships. Star Mountain also has a secondary investment business providing early liquidity for investors in U.S. lower middle-market private credit and private equity funds or direct assets. Brett has over 20 years of investment and advisory experience, with over 15 years specifically focused on investing in the U.S. private small and medium-sized business marketplace.

Throughout his career, Brett has been structuring, analyzing and managing private equity, mezzanine and U.S. Government sponsored investment funds for nearly 20 years. He also has extensive experience performing due diligence on, selecting and building small business fund managers. Brett has helped structure over a dozen larger funds representing a few billion dollars in assets.

Early Ambitions

Growing up in small-town Canada, Brett was very involved in the local community and sports scene. He admits he didn’t think too far ahead about the future; mostly, he enjoyed competing, practicing, and having fun. In hindsight, he figures those early interests helped him build grit.

The first business activity Brett initiated involved a small, empty classroom at his highschool. He approached the principal and asked if he could use the classroom. Thankfully, he also had the foresight to note that being able to use the classroom was going to support the curriculum of the entrepreneurship class he was taking at the time. The principal said yes!

From there, Brett approached a clothing company and convinced them to give him clothing on consignment. He didn’t have the money to pay up front, so he needed to be able to sell the items first. They agreed, it turned into his first business!

Around the same time, Brett started a roof shoveling company. He would garner business (and in snow-heavy Canada, many roofs needed to be shoveled!), and then take a cut from his labor team. All this was happening around 15-16 years old; Brett had an early start to business and deal-making!

Star Mountain Capital

Brett built Star Mountain Capital primarily to bring large market expertise down into the private lower middle market. Upon moving to the US, Brett had seen the sort of buying and selling that was occuring, and where there were opportunities for growth. He found he loved working with the access and resources of big firms…but also noted the many inefficiencies of the lower middle market. With Star Mountain, he wanted to build a specialised firm that focused exclusively on the lower middle market and its challenges and opportunities. To do this, they pursue two primary approaches:

  1. Star Mountain provides flexible capital solutions. This includes having both debt and equity investing capabilities. They can sit down with business owners, gain clarity on their desires, needs, and goals, and then come up with the structure and expertise needed to grow.
  2. With a separate division for that same market, Star Mountain uses a secondary funds business to purchase limited partnerships interests from those looking for liquidity. Across that platform, the company has closed over 100 separate investments.

Although exact definitions may vary slightly, Star Mountain thinks of lower middle market companies as not being start-ups, but also not yet a highly efficient market. This often applies to companies with over 15 million in annual revenue, and under 30 million in annual EBITDA (earnings before interest, tax, depreciation, and amortization). 

Star Mountain focuses on industries that have positive macroeconomic tailwinds and in which they have competitive advantages.

They tend to stay away from real estate (highly competitive) and gas & oil (highly volatile), and focus more towards technology companies, business services, transportation and logistics, education, and healthcare. Because they have deep expertise in those sectors, they can most confidently command the best deals for their clients.

Overall Market Trends

Recently, I did a solo-cast on the SPAC explosion, which has been a major trend in 2020 and moving forward. Brett noted that this seems to him to be an indicator that there are a lot of bubbles in the market right now. As you see abnormal dynamics and valuations, you’re also seeing higher risks, reminiscent of the late 90’s. This might signal a number of “black swans”, and there may be some bubble bursting. 

Some people are going to make a lot of money, but others will lose a lot. 

Based on current valuations, there is a lot that could happen. That’s going to probably include some hard drops.

Conversely, however, the valuation arbitrage between smaller companies and larger businesses is larger than it’s ever been. (SPACs are a great example!) Essentially, you’re taking private companies and reverse merging them into a public shell, with private owners giving up about 20% of their company. This allows them to move much more quickly to the public marketplace, often at higher valuations. If you can find 2-3 good quality smaller businesses, each with about 5 million in annual EBITDA, and effectively combine them and bring them to market, you can set yourself up quite well.

(Listen in to the full episode to hear more about Brett’s thoughts on this!)

Pressure to Deploy Capital

People who deploy funds don’t want their money to just sit in a bank account collecting interest. They are looking to get it invested in quality companies that will yield good returns. In overheated markets, however, this can create a pressure to deploy fundcapital in order to get things moving. That can result in entering into less-than-perfect deals.

Brett notes there are a few angles here.

For one thing, if you’re a wealth manager for a lot of people, it’s really hard to time the markets. History shows, in fact, that you really shouldn’t try to time them. As a result, a lot of the capital in the world will continue to stay invested. However, when people do pull out, the market can drop fast — last year we saw it go down about 35% over just a few weeks. We’ve seen that in 2008 and in other recessions as well. Even if things are frothy, however, a lot of money will stay on the market with the assumption that things will turn around and go back up again.

In the alternative investment market there is less obligation to stay invested. However, it’s worth remembering that zero investments equal zero chance of profits. 

Star Mountain focuses on simple premises and alignment of interests. 100% of the senior team has personal capital invested in all of Star Mountain’s deals, and every employee owns part of the company, making them completely employee owned. They find it essential to structure their funds appropriately relative to capital, market, and time. If you have many years to put your money to work, you can be more selective and identify better deals. Having your team fully aligned also allows for better deal alignment. Rather than seeking aggressive deals, or feeling pressured to deploy capital, you can then enter into opportunities that are best suited to your investment and return needs.

They also ask questions like:

What if there is a problem? How would I solve it? Could I lose my own money?

That sort of mentality is critical to ongoing growth and sustainable results. Brett also notes it’s a harder mentality to maintain in larger firms where employees are only employees and don’t tend to have the same level of skin in the game.

Specialized Asset Management & Investment Decisions

Every investor talks about management and the importance of the team behind a possible company to invest in. 

Brett and I wanted to talk about a few other factors related to making investment decisions. Last year, Brett notes that his firm looked at around 1,500 investment opportunities. They invested in about 30 of them. Some of the options just didn’t fit their focus at all, which is always a possibility.

For those companies that did fit the general picture of what Star Mountain was looking for, however, Brett noted a few distinguishing factors. 

Start with a business plan that has the highest probability of success as possible. This means considering the industry, sector, competitiveness, what the product or service actually is, and other factors. If that doesn’t make sense, the rest of it doesn’t matter.

If the probability of success looks good, Brett’s team turns to looking at competitive positioning within the business. What dynamics are at play? How does the business fit into the market, and in what ways can it set itself apart?

From there, the current diversity and quality of the customer base is key. This includes what relationships and contracts already exist, how sustainable the base is, and how long-term the relationships have been.

As those areas are clarified, then Brett notes you’ll start to get into the alignment and makeup of the team as whole.

Ultimately, you’re looking at the predictability of revenue occurring, as well as what can put revenue at risk. Brett states that revenue can solve a lot of problems, in that it gives you the time to work through issues and work through challenges.

You can listen to our full episode here!

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

If you want to find out how deal-ready you are, take the Deal-Ready Assessment today!

The information provided in this podcast should not be considered a recommendation to purchase or sell any particular security. There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive this podcast or that securities sold have not been repurchased. The securities discussed do not represent an account’s entire portfolio and in the aggregate may represent only a small percentage of an account’s portfolio holdings. It should not be assumed that any of the securities, transactions, or holdings discussed were or will be profitable, or that the recommendations or decisions made in the future will be profitable or will equal the performance of the securities, transactions, or holdings discussed herein.

 

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Authentic Deal-Making Authentic Negotiating Deal-Driven Growth

Your Primal Brain & Deal-Making

Primal Brain: 5 people depicting evolutionary growth

Tim Ash is an international keynote speaker on evolutionary psychology and digital marketing. He’s also a thought leader, marketing trainer, and founder of strategic conversion rate optimization agency SiteTuners. Tim has written multiple books, and is the bestselling author of Landing Page Optimization: The Definitive Guide to Testing and Tuning for Conversions. As an industry leader he’s created over a billion dollars in value for massive brands like Google, Expedia, Nestle, Semantic, Costco, and more. He’s the founder and former chair of the worldwide Digital Growth Unleashed conference series. His work has helped him learn how our primal brain impacts businesses and lives.

His latest book is titled Unleash Your Primal Brain: Demystifying How We Think and Why We Act.

Early Experiences

Keynote speaking and becoming a primal brain and marketing expert were not on the list of what Tim imagined for himself as a child! After immigrating from Moscow to the US around age 8, Tim set his sights on becoming a cowboy. (Listen in to hear about the deal this made me think of — it was one of the few cash deals from Russia at the time.)

As Russia opened up in the 90’s, all sorts of creative maneuvers were part of making deals!

When Tim reflects on his earliest deals, he remembers shoveling snow in driveways in New Jersey. Rather than charging by the job, however, he created a subscription model. He would charge $5 per week for the three months of winter, and pledge to shovel all the snow during that time. Even as a teen he was a hustler! This reminded me of Joel Block’s advice on subscription models, which he sees as a current business trend.

Brain Evolution & Deal-Making

Tim notes that marketing subscription models makes sense from an evolutionary psychology perspective. Because the sale goes on auto-pilot and minimizes your need to think about something, it’s much easier to get people to continue paying once you’ve drawn them in.

When I used to do deals in the health industry, I saw the shift away from an annual membership that you had to choose to renew, to a month-by-month subscription that had no hard end date. Even though people “could” cancel anytime, they often didn’t. It’s easier not to; plus, canceling sends a message to yourself that you’re going to do the thing you signed up for. 

Tim shared about a subscription he kept for years without using it — even with all he knows about the brain, the same tricks work on him sometimes.

Neuromarketing and Evolutionary Psychology

Eventually Tim came to believe that the best and highest use of his time was not in providing a service. Now, he focuses on keynote speaking and writing. He also offers some consulting for senior marketing executives looking for a backup CMO who will be on their side and make them look good.

When he started his first agency, Tim’s group focused on performance-based deals. Rather than putting the risk on the client, Tim decided to share it. Client’s paid him when he created results for them. However, this created complex contract issues and other issues. For the first time, Tim fully realized how much human nature played into deal-making!

Eventually he opted to sell his shares of that business to his partners, who have experienced continued growth.

As he’s grown, Tim has also explored various options with distributing stocks in the companies he owns. What he’s found from that is that you need clear guidelines if you’re planning to do this! From becoming joined at the hip, to facing confusion about who gets to make what decisions, Tim has found that clarity  is essential when distributing stocks!

Working With Your Nature

Tim notes that we play many roles in life: you can be a parent, a spouse, a CEO, a speaker all at once. Sometimes those roles will overlap, and sometimes they will conflict with one another.

If he could go back, Tim would focus much earlier on his personality and the things that energized him. He shared his DISC, Enneagram, and Meyers-Briggs all helped him understand important parts of himself. In addition, he’s seen how working with his strengths and nature works much better than fighting against it.

In terms of his personal career transitions, Tim breaks them down into three major phases:

  1. Being someone’s employee. Tim had seen soul-killing enterprises from the inside, and he knew he didn’t want to take that path! He knew he could better himself.
  2. Work for yourself. Once he started an agency, Tim felt like now he was basically hiring his own bosses. Yes, he had more control….but at the end of they day, he was still working for clients and answering to them.
  3. Jettison both of those! Tim was ready to be done being an employee…AND done hiring bosses. 

After transitioning into Phase 3, Tim found that he felt a bit naked. He was so used to being an agency head, and realized that he had been defined by that in many ways. One thing he’s really enjoyed is being able to shift from constantly thinking about what would best for his business, into being able to genuinely think about how he can serve others.

I love this way of thinking, and have done quite a few exercises myself pertaining to establishing personal identity outside of my titles and roles. Certain roles can truly become entwined with who you are as a person!

Unleash Your Primal Brain

Tims’ newest book, Unleash Your Primal Brain: Demystifying How We Think and Why We Act, is a crash course on being human. He covers everything from sleep, chemicals in the brian, storytelling, and more. It’s not dumbed down, but it’s not just a bunch of jargon either. Tim thinks of it as a fast-paced detective story about what makes us tick.

Although I’m not the expert Tim is, I have done some reading on neuroscience and brains. My biggest takeaway: this field is constantly evolving because there is so much to learn about this! Tim is working to unify fields like neuroscience, behavioral economics, anthropology and more by breaking down silos and finding the red thread of evolutionary psychology.

He sees this topic as being what all 8 billion people on the planet have in common!

My question to Tim: from an evolutionary psychology perspective, what makes some people “deal-makers” and others not so much?

We Are Always Negotiating

First off, Tim notes that, as humans, we are always doing deals because we are always negotiating. Being able to engage with negotiating is a useful skill to have across the board.

Tim shares that when things are black and white, we automatically evaluate and accept them for what they are. If something is a sure thing, or is definitely going to fail, we know where we stand. However, once we start bringing in probability, statistics, and chance, things feel much riskier. People pay a premium when risk is reduced.

In fact, Tim notes that guarantees (such as a lifetime guarantee) have a huge impact on sales. All sorts of packaging uses this now; it gives immediate peace of mind that makes the consumer feel good, and the percentage of people who actually exercise it is tiny. 

Creating certainty and minimizing risk is a major deal-making plus!

Next, Tim notes that we all tend to aversive to threats more than we are open to rewards. We’re tuned in to loss and pain avoidance much more than we are to pleasure seeking. Pain is more motivating! For that reason, the way we frame offers in our deals is key. For instance, if a doctor tells you that you have to have a procedure, they could present it in one of two ways: there is a 95% chance you’ll make it through OR there is a 5% chance you’ll die. The former orients you towards the positive, the latter orients you towards the negative.

Most deal-makers can find ways to frame their deals that emphasize the positive and decrease the focus on pain and loss. It makes a difference!

Due Diligence as a Deal-Maker

I always tell people that doing a major due diligence process to prepare for a deal is a key part of preparation. Why? Because the people walking into the deal are highly risk averse. They stand to lose a lot if things go wrong, and they want to avoid any problems.

As such, if they smell smoke during a deal they assume there is a fire.

Rather than letting that happen, you must do your due diligence and ensure that you have your ducks lined up. Tim also noted that, as a deal-maker, you don’t want to let the party you’re deal-making with get too far into their analytical brains. He suggests you diffuse that mindset and refocus on the bigger picture if you want to avoid death by a thousand cuts.

(During the interview, Tim recommends two books: Never Split the Difference and Pitch Anything.)

To learn more about deal-making and the primal brain, listen in to the full episode! Tim shared more amazing thoughts on cold cognition, the role of emotion, and more in this powerful interview!

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

If you want to find out how deal-ready you are, take the Deal-Ready Assessment today!

Categories
Authentic Business Relationships Authentic Deal-Making Authentic Negotiating Deal-Driven Growth

Breakthroughs In Health & Deals

Health Breakthroughs: Clipboard with a white paper that shows an image of a spinal cord.

For over three decades Dr. Patricia Boulogne has helped thousands of people solve their lifestyle medicine problems & have health breakthroughs. She helps her clients who are sick, overweight, and tired finally release lifelong weight problems, chronic diseases and genetic disposition to restore energy and vitality! Dr. Boulogne accomplishes this by making sense of complex and challenging problems and situations quickly and with measurable results. She’s also the author of the bestselling book, Why Are You Sick, Fat, and Tired?.

Her services are truly unique, as she uses Functional Medicine to target the root of a problem and doesn’t chase symptoms or ignore important signs that may become a disease that will kill you. Genes can’t be changed. However, you can change the message genes receive from the environment. Diet and lifestyle medicine solutions tailored to what counts: Results.

Early Dreams & Deals

For a whole lot of people, what they’re doing is not what they expected to be doing when they were kids. Pat is no exception! Although she often played doctor (and was never a nurse or a patient), she doesn’t remember ever exactly saying or thinking that she would be a doctor one day. She did, however, always enjoy science and running little experiments.

Now, Pat has her MA in Oriental Medicine. She is passionate about working with patients to help them heal lifestyle related problems.  (Listen in to learn why drinking hot tea can help cool you down!)

The earliest deal Pat remembers was running a lemonade stand near her house. She’d purchase the lemonade and supplies, and even put up signs directing traffic from a nearby shopping mall. Later, she moved into shoveling snow and babysitting, both classic early entrepreneur adventures.

Stronger Than Medicine (And Adversity)

 Pat shared that, at the moment, she’s busy rewriting and upgrading her existing course, Stronger than Medicine. This is geared towards busy female executives who want to increase their ability to be present and connected rather than overtired and stressed.

This connects to a lot of Pat’s work; she started in chiropractic care and loves helping people heal without relying on traditional medications or approaches.

One of the things I talk about is how anyone in any kind of business can make deals. Pat’s early chiropractic experience is a great example of this. She started out working with someone who had a great model for an office. After about a year, Pat had her husband start looking for potential practices coming on the market.

Initially, they attempted to get a conventional loan, but they didn’t have enough credit. Finding out they couldn’t qualify for a $25,000 loan was extremely demoralizing! It felt like such a small amount of capital, with a clear conversion into a business — but the answer from the bank was no.

As a result, they pivoted towards an SBA loan. They were able to piece the proposal together and fill in gaps, and the money came through. (Listen in to hear how the bank still tried to withhold funds, and why silence can be so powerful!) By the end of the year, the business had revenues 6x what Pat and her husband had purchased it for. In fact, she was able to purchase needed high ticket equipment with cash.

Selling Out & Moving Up

For the first 4-5 months after buying the business, Pat and her husband were on their own with the business. When they had made the purchase, the office was seeing about 30 patients per week. By the end of the year, they were seeing 125.

Their growth came from networking and doing in-office talks. They made growth goals, and Pat managed the practice by statistics. She knew what their goal was for the week, and she always kept at least 20 cards on hand. From canvassing the local health food stores to visiting area college campuses, Pat was motivated and determined. The practice continues to grow, at an average of 15-20% per year.

Eventually, they hit the cap of how much they were able to take on. This also coincided with Pat’s divorce, leaving her to run the practice solo after buying her ex-husband out. She shifted into hiring the right people that would allow her to continue running the office. (Including her handy Post-It note CRM system.)

Pat also started doing interviews and engaging with media and other groups. She spoke to her local Rotary and Lions Club, and visited any club or organizations that would have her. This organic growth sustained her practice and enabled her to flourish. It also set her up for a very successful deal when it came time to sell the practice.

When it came time to sell, Pat started looking for the right person to handle the marketing of the practice. She had a full assessment done, and was able to sell within 3 months, which was incredibly fast for the industry. (Plus, she got the full price she was asking for.)

Organic Growth & Final Sales

Although Pat grew the practice with the intention of keeping it, it was a huge relief to be able to sell it when the time came.

A powerful lesson illustrated here is that there are no downsides to organic growth. While Pat was actively working, organic strategies increased her revenue streams and success. Those increases greatly impacted her assessed value, and likely contributed to the quick, full-priced turn around when it came time to sell.

Being able to leave her business (at profit), allowed Pat to step into the next part of her journey. Her writing, courses, and consulting work are driven by her passions, and she’s so glad that she did not tie herself to a private practice that she was never able to leave. Too many business owners tie themselves to businesses that no longer bring them joy or profit; properly preparing to exit can help you avoid that!

Overall, the deal came together quite well. One note: Pat shared that there had been no clause to prevent the buyer from pre-paying. He made a final large payment unexpectedly on Dec. 27, which wreaked havoc on Pat’s taxes that year. If she could go back, she would definitely have addressed that contingency!

To learn more about deal-making in the healthcare industry, listen in to the full episode!

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

If you want to find out how deal-ready you are, take the Deal-Ready Assessment today!

 

Categories
Authentic Business Relationships Authentic Deal-Making Authentic Leadership Authentic Negotiating Deal-Driven Growth

Angel Investing & Startups with Dom Einhorn

angel investing: man sitting on a pile of large gold coins

Dom Einhorn is a French-American social entrepreneur and founder and CEO of UNIQORN, the largest rural incubator-accelerator of its kind in the world. Located in southwestern France (Sarlat-la-Canéda), its mission is to give entrepreneurs and their families their lives back while helping them build game-changing technology startups. Dom has a long history of working with startups and in angel investing, and he shares so much wisdom in our interview!

He is also the founder of multiple other successful startups and businesses, including the Startup Supercup. This is a leading tech conference that unites 1000 carefully vetted angel investors, VCs, private equity funds, technology startups and leading media outlets from around the world. The three-day conference takes place in medieval Sarlat France.

Listen in today to hear all about Dom’s work!

Young Dreams

As a kid, Dom wanted to be like his dad, who worked for the French railway as an engineer. Clearly he ended up going down a different route!

The first deal-making experience he remembers was with his magazine route. Students could get a commission for every issue they sold, and Dom outsold everyone else. It was his first time getting compensated, and it sparked his entrepreneurial dreams.

Now, Dom has several major focuses. One major one is UNIQORN, which he returned to France to launch in 2018 (in German Dom’s last name means “unicorn”!). UNIQORN startups are provided with a complete ecosystem for success. This includes direct access to proven funding sources, top-notch legal and accounting representation, access to the world’s most generous business incentives and, most importantly, a dedicated sales and marketing accelerator. All that combined puts a startup’s product or service on the fast track to success.

Art Auction Adventures

In 1996 Dom created the first online art auction company. It quickly became one of the largest in the world, and he was able to turn around and sell it 5 months later.

At that time, Dom happened to have a lot of artists as clients. They were all “starving artists”, including himself! He decided to build the online art auction in order to solve a problem he saw his clients facing. Selling art on a one-off basis was difficult, and didn’t scale well. His solution? An online auction house.

The first few months saw little activity, but one day a major magazine came in and did a report. They skyrocketed from 150 bidders to 20,000+. Overnight, they were in the art business….which they realized they knew nothing about. They were shipping art uninsured, with glass, and found themselves in a logistics nightmare.

One day they got an email from a buyer willing to buy them out; Dom was ready to move on and do something else! The new buyer had infrastructure to handle logistics and shipping, but were lacking on the technical side. Their weaknesses were Dom’s strengths, and they arranged a 6 month transition period. Once their team had the platform knowledge they needed, Dom was fully out of the business.

The fundamental lesson he learned from the online art auction house was that whatever you launch you should serve a legitimate purpose and respond to a problem in the market.

Vanity Business Models

Dom has noticed there are a lot of companies popping up that don’t solve a new problem or reach a new market. He referred to these as “vanity business models”, and noted that they simply aren’t sustainable.

If you want to become a billionaire, help a billion people. The rest will happen by itself.

Early on, Dom noted that if you wanted to be in e-commerce, you needed an Oracle license that cost $32,000. Raising cash was key, because barriers to entries were extremely high. By 2015, if you had a couple hundred dollars worth of technology you could launch an entire business. That’s both a blessing and a curse; there isn’t a natural economic gatekeeper. That means more opportunity for more people, but can also mean there is no real vetting process pushing people to only bring the best ideas to the table.

Back in the 90’s, you had to be in Silicon Valley if you wanted to get backing or support. Now, however, you can be anywhere. Dom shares that when he’s visited Vietnam with his wife they’ve seen co-working spaces the size of Walmart, with teeneagers building out online games that are worth billions now. The market is expanding, and decentralization has really democratized the process.

Dom foresees that we’re heading “back to the garage”, where things first started for technology.

Moving Away from Cities

Prior to Covid, Dom’s UNIQORN team did a study and found that 12% of young entrepreneurs wanted to move away from large urban centers to launch their businesses. Today, 38% say they want to operate outside of large cities.

He feels that the world is coming to the realization that not only CAN that be done…it probably should be done.

Dom shared some great examples of employees who have new commutes of about 45 seconds on foot. He’s seen this new way of living and working lead to better quality of life, with employees who are fresher, less tired, and able to show up in a different way. Now, more than ever, people see what is possible when it comes to living and working outside of major metropolitan centers of business.

This trend isn’t just in entrepreneurship. Large companies are starting to realize that their people can be just as productive working remotely as from inside the office. Employees are also starting to show up to interviews with more confidence to request remote or flexible work options.

From No Cash to Major Deals

In the first 2-3 years of one of his early startups, Dom was ready to throw in the towel. By 1999, however, the company exploded. They had a leg up on the competition, they were gaining traction for clients, and things were taking off. From a handful of clients to 500+, they grew with amazing speed.

One day Dom realized they had run out of money. Because of their fast growth, they had been burning through cash at a much faster rate than he had thought. It was time for payroll, and the reality was: there wasn’t enough money to pay everyone.

Dom was sitting at his desk, trying to get creative with numbers, when he got a call with an offer: someone wanted to buy the company. Although he first held out on selling, the offer was too good to refuse. The seller was building a new technology, and they needed merchant relationships. When the check was put on the table, he took the offer — then rushed to the bank so he could deposit it and make payroll.

When clients are pouring in and business is booming, entrepreneurs often underestimate the need for cash flow and profit. What Dom learned the hard way was that revenue and profit are not the same thing, and profit margins are an absolute key.

Dom shares that when he looks at a new business now, he doesn’t pay any attention to top line revenue. All he wants to see is actual margin, because that’s where you can see how healthy and sustainable a business is.

Building Value

Dom’s had deal-making success throughout his life because he’s built value again and again. From the outside looking in, buyers were able to see that value, and they came to him. That’s a much different situation then being in a bad place with your business and desperately looking for someone who might be willing to buy.

If you focus on solving a fundamental problem, Dom believes that there will always be people out there looking for what you have. He’s never proactively gone out looking for a buyer, because the people who need the solution he’s created have always been able to find him.

To hear more about the ways in which Dom has leveraged strategy, connections, and deal-making, listen in to the full episode!

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

If you want to find out how deal-ready you are, take the Deal-Ready Assessment today!

Categories
Authentic Deal-Making Authentic Leadership Authentic Negotiating Deal-Driven Growth

Post Merger Integration

post merger integration
Matt Sonnen is the founder and CEO of PFI Advisors. He provides strategic operational consulting in the RIA industry. In addition, he helps existing RIAs tackle various operational and strategic issues that they encounter as they grow. Matt emphasizes how important it is to think through post merger integration as part of deal-making. The work is not done when the deal has been made!

Early Deal-Making Experiences

At age 8, Matt wanted to be the third baseman for the CA Angels. By age 18 he wanted to be Eddy Van Halen. He certainly hadn’t considered being a strategic operational consultant in the RIA industry!

An early deal he remembers is baseball card trading during recess. His deal-making prowess has certainly grown since those days.

Now, Matt is deeply involved in the RIA industry. PFI Advisors first went to market as breakaway specialists helping advisors start RIA’s. Recently, Matt noted that they’ve been receiving a lot of traffic from buyers who have just closed their first large RIA deal, and who don’t know what to do next. Billion+ dollar firms are buying million+ dollar RIAs, and finding they don’t know how to integrate. Systems are difference, specializations are different, and there are many details that aren’t considered until after the deal is done!

This is also the result of diversification. Large firms are looking to bring on RIAs that offer something different….but then find that almost everything is so different that integration becomes challenging. Matt sees this trend continuing into the future.

After The Fact Issues

Many firms report that just getting the deal done is often perceived as the challenge. Unfortunately, however, this means they are prioritizing the “yes” without considering the “how”. Once the deal is done, this leaves all sorts of issues on the table!

Matt notes that the actual work begins when it comes to fully integrating the new acquisitions. I see the integration conversation as being a fundamental part of due diligence, and encourage firms to be forward-thinking when considering possible deal opportunities.

After all, a successful outcome will mean you MUST successfully integrate. It makes sense to consider the logistics of that before you finalize a merger or deal.

Preparing for a Smooth Post Merger Integration

Matt suggests that firms can ask questions on the front end to help minimize back-end problems during a post merger acquisition process. Often, he notes that the buyers avoid in-depth questioning. This is often attributed to not wanting to “scare” the seller away by appearing bureaucratic or demanding.

However, forward thinking firms understand that the two sides do need to get on the same page. A mutual understanding of what changes might be coming around the bend, and what an integration may look like, create a foundation for a strong transition.

Operationally, things like branding, emails, tech stacks and more might all be on the table. Post merger integration really can come down to nitty gritty details. These are things that people hardly think about day-to-day. If asked to change, however, they may feel resistant, even after the deal is done.

Minimize Client Pain Points

Matt notes that core technology changes that are often connected to post merger integration include performance reporting tools, CRMs, financial planning tools, and client portals.

For efficiency’s sake, its preferable to choose a single platform/tool that each company will be using. That way employees and owner of each are familiar with the language and user experience, and are sharing a common experience.

Buyers who want to get in the M&A game really should be in relationship with the major custodians. That way the seller is able to keep their clients in the systems they are already using. (This applies in RIA-to-RIA deals). That prevents the need for the seller to repaper all their clients, which can be a huge sticking point.

Finding out during the post merger integration that repapering is going to be required is extremely frustrating. Ideally, this would be avoided!

Biggest Lessons Learned

Matt shares one major lesson he’s learned is that outsourcing is somewhat of a myth! What he’s found from experience is that, even when outsourcing, it is vital have someone in-house who understands what was outsourced and how it works. Your team needs to know how the data and systems work, and what options you have.

You can save yourself a lot of time by knowing how the major functions that you outsource actually work. Somebody (often the COO) needs to know how every system works! Ensure that an outside firm isn’t the only one who knows what you have going on.

Also, there are somethings that need to happen in-house or on-site. Practical, day-to-day implementation, monitoring, and application shouldn’t be so fully done be an external agency that the COO doesn’t have clarity around what is happening, and how. This is especially true when it comes to compliance and audits.

Strategy & Operations

If you want to get to the next level, your strategy and operations have to evolve. Matt notes that right after launching PFI Advisors, he read The Emyth Revisited. (He wished he had read it BEFORE he launched!) He recommends checking it out. You can listen in to some of his favorite examples from the book by listening to our full interview!

Owning an advisory business is a whole skill set onto its own. From tech stacks to workflows to management – Matt often sees that these areas get pushed to the side in new companies. This is partially because actual revenue generating activities are being prioritized. This is why, at some point, he often recommends bringing in a professional management company to ensure that all angles are covered. Matt finds this is especially key during times of growth.

Feel that administrative tasks are slowing things down, or that client needs are slipping through the cracks? It’s probably time to let your advisors focus solely on client services and business development. Obviously administration and management is still required! That’s where a professional management company comes in.

Sacrifices and Growth

In the RIA space, there is money to be made as a lifestyle business. If that’s your desire, you may not need to reevaluate your management needs. However, if you’re saying you want to grow and you’re serious about it…you may need to make some sacrifices. This is also something to consider if you’re looking to sell down the road.

Matt shares a great example of an owner who described the scrambling of the first year. That was followed by the up-leveled investments (using most of their profits) of the next years. Those were sacrifices that came into play before they finally started seeing huge growth. Short term sacrifices are often required before true, sustainable growth is achieved.

Listen in the full interview for more from Matt Sonnen!

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

If you want to find out how deal-ready you are, take the Deal-Ready Assessment today!

 

Categories
Authentic Business Relationships Authentic Leadership Authentic Negotiating Deal-Driven Growth

How to Hire the Best

How to Hire the Best: Dr. Sabrina Starling on DealQuest Podcast

Business psychologist, How to Hire the Best author, and Tap The Potential Founder Sabrina Starling is back with us again! This time she joined me for an amazing interview we conducted live on Facebook. Dr. Starling has coached thousands of entrepreneurs to overcome the day-to-day struggles of business growth by getting out of their own way and developing a success mindset that propels them to higher and higher levels of success (and profitability). Last time we talked we focused on transforming small businesses into highly profitable, great places to work. Today, we focused in on her latest book in her How to Hire the Best series.

Small Business Owners with Growth Opportunities

Years ago, Dr. Sabrina realized she was working with small business owners who were passing on growth opportunities because they didn’t have the capacity to take on anything new. They were stuck in that place so many entrepreneurs find familiar: running their business reports, ordering supplies at Staples, and wearing so many hats they were ending every day drained and exhausted.

Even though they were reaching the point where more and more opportunities were naturally coming their way….they had maxed themselves out and could no longer take advantage of their natural momentum and growth. If they did happen to have an employee or two, they were often what Dr. Sabrina calls “warm body” employees. That is, they were technically hired to work there, so they were there. They didn’t really have that A-Player, above-and-beyond, valuable asset energy of someone who could help you reach a new level.

Dr. Sabrina knew what they needed: to hire A-player employees and increase their capacity! However, she also knew that hiring is a huge commitment. From candidate searching and posting your job, to screening and interviewing, to onboarding and then releasing responsibilities to this new team member — the time, expense, and potential for things to go wrong make it feel prohibitive!

That’s why so many small business owners and entrepreneurs make the choice to put off hiring until “later”. The truth of the matter is, however, that you will never magically become less busy. If your business keeps growing (which is usually desirable!), you’ll actually have less time and capacity. You have to choose to either “cap out”….or find a way to expand!

For Growth, You Need A-Players

As a business psychologist, she tried coaching business owners on how to turn their “warm body” employees into something more…and it just didn’t work. The alternative, however, seemed to be hiring top-line employees. A lot of small business owners didn’t feel that was possible. After all, the more skills and experience someone has, the more they expect to be compensated. 

This felt like a true dilemma, and was one Dr. Sabrina herself believed for quite a while!

One morning, however, she woke up with this question: “What if it’s not true?”

That question resulted in the search for small business owners who already had employees they considered A-level. She started interviewing them, and kept asking how they had found them and hired them. Their answers, again and again, were “I don’t know!”. (They also requested she come back and tell them if she ever figured out, because they all wanted to do it again!)

I see that as “unconscious competence”, which Bob Proctor has done lots of work on! Somehow, some small business owners had hit the hiring jackpot. Since they weren’t clear on how they had done it, they weren’t able to truly profit from it.

Eventually, Dr. Sabrina found that networking and word of mouth seemed to be the key for success. (Very similar to the most proven marketing techniques for finding clients.) Because the small businesses employing these tactics weren’t aware WHY they were working, they hadn’t been able to consistently and methodically employ them for ongoing, repeated hiring success.

Traditional Hiring Methods Don’t Work

When you follow traditional hiring methods, you have a 1 in 4 chance of hiring an A-player. (And a 3 in 4 chance of ending up with another “warm body”.)

Traditionally, you decide you need to fill an opening. You make a job ad, and put that out into the world. As applicants respond, you complete interviews, then you pick someone. That’s how we tend to do it….and that’s the method that offers a 75% chance of missing the best fit for the role.

In How to Hire the Best, Dr. Sabrina teaches employees how to leverage her non-traditional method that’s been proven to work consistently.

Part of her approach includes starting with the end in mind, and employing best practices in a strategic way.

The first question I had is, “When does all this start?” I knew it probably wasn’t going to be “Once you realize you need someone.” – and I was right!

A-Players Think Differently

For one thing, Dr. Sabrina notes that traditional job postings tend to attract people who are unemployed. This can mean they’re willing to accept anything — even if they aren’t that excited about your company, mission, or values, they’ll position themselves as if they are because they need the job. 

A-Players, however, move from one opportunity to the next. They are looking for opportunities, and they transition when people in their networks let them know about promising positions. You should be networking for A-Players long before in the position of desperately needing to hire.

The best time to hire is when you are generating consistent business leads. As soon as you hit your rhythm here, you should be tapping into your networks and using them to look for your next A-Player. I appreciate Dr. Sabrina’s technique here, and see that it would fit into the bucket I call “entrepreneurial freedom”. 

It’s important to note that A-Players aren’t necessarily people who are superstars on every level. An A-Player might be a role player with a very specific ability or capacity — but in your business, that ability is what enables them to shine. You can’t be the best at every single thing, and your employees can’t be either. It’s not fair to expect that from them!

Hiring an A-Player is more about bringing on the people who have the gifts, talents, and personality strengths to do what you need them to do. They also need to resonate with your business’ values and culture. When you can get them plugged in, the change is powerful!

So who are these magical people? Well, they are go-getters, problem solvers, and autonomous agents who know how to use resources. A team full of people who think like that can change your business from the inside out!

Build Your Team to Create Your Desired Lifestyle

Regardless of what you do, building a team enables you to create a lifestyle business that will allow you to step away as needed and have your business continue to run without you. (Your A-players are there making it all happen!) 

This could mean you’re setting yourself up for a 4-week vacation, or that you’re working on a future transition plan. Dr. Sabrina notes that no one comes along and says, “I hear you work 70+ hours a week in your business. I’d love to buy it!” No one is looking to buy a job, they want to buy a business.

When you learn how to hire the best, you’re setting your business up for success, both now and in the future. The more A-Players you bring on to your team, the more value you are adding.

Dr. Sabrina notes that if you currently have many players who are more like D-Players, it can be overwhelming to know how to fix it. She encourages business owners in that position to focus on hiring up as they grow. That might mean you have the chance to replace someone, and you find an A- or B-Player for the open position. Once you hit a tipping point (say 3 out of 5 are strong employees), those who are lower performers will either choose to leave, or will rise to the challenge. 

Gradually, your culture will shift!

If you’re looking to hire the best, you NEED to listen in to this interview!

 

Categories
Authentic Deal-Making Authentic Negotiating Deal-Driven Growth

Market Upheaval & Continued Growth

Thriving despite market upheaval with Steven Mail

Steven Mail was the founder of the largest single manager global macro hedge fund in Europe. His investments center around companies that deliver insights to hidden areas of the enterprise. He is an ambassador for business to Scotland and an advisor to the Endeavor organization. Throughout his career, Steven has experienced market upheaval and panic. He says those things have shaped him for the better as both a businessman and investor.

Steven is also the founder and managing partner of Mail Venture Partners. He got his start as a bond trader and hedge fund manager in London. After “retirement” at age 39, he moved to Florida, where he has continued to engage in investment and giving back. You can listen to our interview HERE.

Getting His Start

Steven runs Florida’s largest youth soccer club, but growing up, he was an aspiring boxer. Both of his parents were involved in athletics, and he had an early passion for them as well. Now, he’s thankful that didn’t work out!

At age 12, he started playing poker (he was quickly playing with kids 5+ years older than him!). At age 15 he started his first job, and at age 17 he started his first business. By 21, he was involved in business. Coming of age in the UK during the “big bang” era had a strong influence on Steven’s career path, as many doors in financial industries were open and there was a strong recruitment drive.

Unfortunately, the week that he started his bond trader trainer also happened to be the 1987 “Black Monday” crash. It was an unusual, emotional experience that shaped Steven’s entire career. He finds that he has always been able to survive and even thrive during the most difficult times in the market, which he connects to the humility and detachment he was able to learn from the volatile markets he experienced early in his career.

Steven also notes that the ability to reverse his positions has been a clear strength. He’s never held too tightly to a stance, and has been able to pivot and change as needed on a moment-by-moment basis. (This makes total sense! Detachment is part of the negotiating framework I provide in my book, Authentic Negotiating.)

Regardless of the difficult market, he started trading in 1987 as a bond trader and market maker. He thought it was a bit like boxing; you put out an offer (throw a punch) and they throw one back and it goes on like that. He loved the years he spent in that arena, and eventually shifted into proprietary trading. This coincided with the launch of the Euro and it’s trade being shifted from headquartering out of Paris and into London. Steven was named head trader, and had a fantastic first year as such.

Growth Through Upheaval

At the end of his first year as head trader, France wanted the Euro trade headquarters to return to Paris. After negotiations ensued it became clear operations were going to be moving. Steven felt uncomfortable about the language change, and eventually it was agreed  that if he made the move, everyone would speak to him in English if he would be willing to come, which got him to agree. Ultimately, he was able to make many connections in Paris, and greatly enjoyed his time there. 

After some time in Paris, Steven returned to London and continued to grow his career. He worked through another crisis in which the market dried up, and things got hard. The markets literally closed, and there was general panic.

Shortly after, Steven became aware of a Japanese pension fund that was desperate to sell half a billion of bonds. Despite the market havoc, Steven decided that everything has a price, and that there was an opportunity there. After evaluating the market, he made an offer they accepted — an offer that covered the losses from all the rest of the positions he’d held during the market upheaval.

His ability to continue engaging in the market and think strategically has enabled him to continue to experience success, regardless of whether the markets are up or down.

Investing in Mentorship & Advising

Steven shares he’s never been in the game to make the most money. Instead, he’s always wanted to have an interesting experience. He enjoys meeting people, traveling, and enjoying new things. As a result, it’s no surprise that his career has changed over the years.

He found hedge fund management to be much slower than bond trading, and when he moved into private company investments he found it to be yet another slow down. Now, he does fewer trades, and they take longer.

Whether you find yourself in trading or investing, Steven notes self-confidence is key. If you don’t believe in yourself, who else will? Beyond that, he also looks for humility and character. In the same way you want your friend group to be made up of great people, the people you invest in ought to be the same.

His investor role often comes with a great deal more advising than his time in trading did. Steven leverages his network for connections, advice, and insight — he enjoys mutually beneficial relationships that highlight giving back and growing. Mentorship has also been something he engages with, from his formal role with Endeavor to his work with the youth soccer league in Florida.

Making Investment Decisions

Steven enjoys finding ways to help companies by opening doors and making connections. One way to do this is to help companies piggyback off of each other in order to scale their growth to the next level. 

He pictures investing as a pyramid, and finds early-stage companies to be the most fun to get involved with. He also notes it’s key to look at and choose individuals when investing in early-stage businesses. After all, the business itself is going to pivot as things progress. Rather than getting too attached to the hoped for final outcome, he finds it helpful to choose founders who have the traits needed to really push through the difficulties and change as needed. To that end, Steven looks for problem solvers who have resilience. Evolution, growth, change, and problems are all part of starting a business, and a founder who can’t endure them won’t be able to build a business that can last.

His Most Important Interview Question

Thinking back 30 years or so ago, Steven notes that the best interview question he ever asked applicants was:

What’s the worst thing that ever happened to you, and how did you handle it?

It may be a popular question now (or at least some form of it), but when he first started using it it was quite uncommon. He was specifically looking for people who had lost money and been able to make it back. Ultimately, he was hoping to find the quality of the “bounce back” in new applicants. No matter how good the markets looked at the time of the interview, Steven knew how quickly things could change. He wanted to hire candidates who would have resilience and grit when things got hard, because it was inevitable that they would.

For longevity and sustainability, you must be able to endure the hard periods and be willing to push through. I remembered a seminar I was at years ago when a speaker who had undergone a great financial failure was asked what his mistake had been. His answer? “I mistook a bull market for brilliance!”

Doing well when everything is going well isn’t that hard. Showing up, putting in the work, and refusing to quit when everything is falling apart – that’s what sets successful people apart again and again.

Growth Mindset

At the end of the day, embracing challenges, showing you can grow through hardship, and making smart decisions are key indicators that Steven looks for when he considers investing. He sums this all up as having a growth mindset, and thinks it is a powerful key to success.

To learn more about how he makes his investment decisions, what values have driven him, and how his journey has continued to unfold, listen in to the whole episode!