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5 Mistakes to Avoid When Selling a Business

Most likely the biggest financial transaction you’ll ever be involved with, selling a business the right way is crucial to your future financial health and the continuation of a business that you’d like to see succeed.

Selling your business is literally, a Big Deal. Here are some mistakes to avoid when selling yours.

1. Identifying the best buyer early and negotiating only with that entity

Wow, that was easy. You’ve already found a buyer and now you just need to negotiate on price. You’ve told all the other potential buyers the business is sold. So many things can happen to derail a deal — problems with financing, inability to come to terms on the value of your company, negotiations that lead nowhere. Sometimes the buyer changes his mind and walks away from the deal.

photoA friend of mine has a big rock in his office with block letters on it that read, “Nothing is set in stone.”  Remember that when negotiating the sale of your business and keep your options open when identifying and negotiating with buyers.

2. Considering only the dollar amount when looking at offers

If this is a business you started, or a family business you took over, chances are you care a lot about its ability to thrive. And its reputation. As Warren Buffet said, “It takes 20 years to build a reputation and only five minutes to ruin it. If you think about that, you will do things differently.”

If you care about continuing the reputation you’ve built up for your company, take a deep dive into the culture and reputation of the companies looking to buy yours.

3. Handling the sale yourself

The saying goes that a man who is his own lawyer has a fool for a client. I would venture to say the same thing about someone trying to sell his business on his own. You need to hire business professionals, which may include tax lawyers, business advisors and a business broker. Some people try to save money, figuring they can handle the whole thing on their own. Respect your business and your time enough to hire someone to get the best possible deal for you.

4. Setting a price based on what you think your company is worth

Although you should be aware of a general market value of your business, to get its true worth you need to go through a thorough valuation process. Hey, maybe you’ll be pleasantly surprised and find out it’s worth more than you thought.

5. Not seeing your business realistically

In a recent Dove ad, women described themselves to a forensic artist who then produced sketches from their description. The resulting sketches bore little resemblance to what the women really looked like, and were actually much less attractive. (The video has been watched 55 million times on YouTube!)

Yes, that’s on a different topic about women and their self-images. But it’s a good illustration that we don’t always see ourselves realistically. And we don’t always see our businesses for what they are either.  Dealing with daily crises and all the things that go wrong, we may sometimes overlook all the positive aspects of our business. Or on the opposite spectrum, we may be in denial about the underlying problems that will affect its value.

Jim Collins, author of “Good to Great” said, “The challenge is not just to build a company that can endure; but to build one that is worthy of enduring.”

Make sure your business endures long after you’ve moved on.

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The First 15 Seconds

In the movie “The Big Chill” one of the characters has been dating for 20 years and laments how hard it is.

“I know in the first 15 seconds if there’s a chance in the world,” she says.

“At least you’re giving them a fair shot,” her friend replies.

That may sound a bit harsh, but the truth is you can tell a lot about someone within the first 15 seconds of meeting him or her. This is crucial to remember if you are interviewing for a job or meeting with a potential client.

In my last column I wrote about ways to lose a job in an interview. I’ve interviewed hundreds of people for all levels of jobs in my decades as a Turnaround Authority, and yes it is possible that you can seriously decrease your odds of landing that job within the first 15 seconds.

We all make snap judgments when we meet someone. Will we like this person? Do we want to be around this person? Our brains made fairly rapid assumptions about the personal traits of others. This process is known as thin-slicing, which refers to our ability to gauge what is important and form opinions from limited information.

Malcolm Gladwell wrote about thin-slicing in his fascinating book “Blink: The Power of Thinking Without Thinking.” Speaking of the book in an interview he said, “When you meet someone for the first time, or walk into a house you are thinking of buying, or read the first few sentences of a book, your mind takes about two seconds to jump to a series of conclusions…. As human beings we are capable of making sense of situations based on the thinnest slice of experience.”

If you are interviewing for a job, you need to spend time focusing on what you are telling the interviewer about yourself in the first 15 seconds. Here are just a few things I can tell immediately upon meeting someone.

1. Whether they are respectful of others

Did he show up on time? Was she friendly to the receptionist or anyone else I introduced her to? Is he dressed appropriately for a job interview? Does she look polished and put together? Are his pants ironed? Did she wait for me to invite her to sit down?

2. Whether they have confidence

Did she look me in the eye when we met? Does he stand up straight? Did she smile when she met me? Does he seem excited to be here?

3. Whether they arrived prepared

Did he bring a copy of his résumé and references along? Does she know my name?

Frank Bernieri did a study at the University of Toledo in Ohio to find out if there are any particular mannerisms that will help you in a job interview. Two people were selected to be interviewers and were trained for six weeks on interviewing techniques. They then interviewed 100 people for 15-20 minutes and filled out a six-page questionnaire on each person. His conclusion was there were no particular tricks you can use in an interview.

But then one researcher asked to do a second study with the videos they had made of each interview, showing people just the first 15 seconds of the interview as the applicant arrived and met the interviewer. They were then asked to rate the candidates using the same criteria that the trained interviewers had.

In an article in The New Yorker written by Malcolm Gladwell, Bernieri talked about the results. “On nine out of the 11 traits that the applicants were being judged on, the observers significantly predicted the outcome of the interview. In fact, the strength of the correlation was extraordinary.”

Accept the importance of the first 15 seconds of any encounter towards making an impression on someone. And do what you can to make yours a positive one.

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Five Ways to Lose a Job in an Interview

You just have to chuckle when you read a story like the one I did recently about a young woman who showed up for a job interview as a buyer at American Eagle with her cat in a crate. She then proceeded to put the crate on top of the interviewer’s desk and play with it.

That may be the quickest way I’ve heard to sabotage a job interview. But there are plenty of other ways. Here are just a few I’ve seen.

1. Blaming others for your failures

I like to ask job candidates to tell me about a project they were working on at their last company that failed. It gives me a chance to learn about how they work with others. The big red flag: when they blame others for everything that went wrong. Yes, there are people who claim they have never made a mistake and probably really believe it. But I won’t hire those people.

2. Being overly negative about your current situation

No one likes to hang around negative people. And even though your current job is making you break out in hives from stress, there has to be something positive you can say. If that’s a stretch, focus on what you are looking for instead. You can say you are leaving for more growth opportunities or a chance to take on more responsibility. Don’t ever forget that no matter how big the city is where you are interviewing, it’s still a small world, especially within a certain industry. Your interviewer could be a golfing buddy or in a book club with your current boss. It can only hurt your career to be negative.

3. Focusing more on what the company can do for you rather than what you can do for the company

It’s good to ask questions. In fact, it’s a big red flag if an interviewee doesn’t ask questions. But if those questions are all focused on what you’ll be getting out of the company — salary, benefits, vacation, type of office — rather than what you are bringing to the company, well that’s a huge red flag. Companies want to hire team players with a motivation to contribute to the goals of the company.

4. Talking too much or not answering the question

I get it. You’re nervous and that may cause you to talk way too much and take five minutes to answer one question. Or not answer it at all. I get really frustrated when I ask what I think is a simple, straightforward question and I get a rambling, long-winded, irrelevant response. It’s like asking a politician a question at a press conference. And it tells me this person needs to work on his or her communications skills.

5. Not knowing your own strengths and weaknesses

An interviewer doesn’t expect anyone to be perfect. But he or she does want to know what strengths you are bringing to the team. You wouldn’t conduct a draft for a baseball team without knowing whether your shortstop has the strength to throw the ball to first base. You also need to know the batting stats of all the potential recruits, whether good or bad. It’s the only way to build a winning team.

Another candidate left his cat at home. But he also left his shirt. The HR manager couldn’t recall any policy against candidates being half clothed, so he interviewed him. After that he added a sign to his office that read “No shirt, no interview.”

So here is one last tip. Arriving fully clothed to any interview is always appropriate.

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On the Radio

I’ll be discussing my experiences as a Turnaround Authority and my new book “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes” tomorrow on the Michael Hart Show at 9:00 a.m.  You can listen online here: 
http://tunein.com/radio/The-Michael-Hart-Show-p49631/#

This is my third appearance on the show. Click below to listen to my first two appearances.

Michael Hart interview with Lee Katz

We had a rousing discussion about fraud and the most important things companies can do to prevent it.

Michael Hart interview with Lee Katz and Bernie Marcus

Bernie and I discussed the government and business as well as how to create more jobs in this country.

I hope you’ll tune in and listen!

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Tips on Hiring From the Corner Office

“Here’s a calculator, a pencil and a sandwich. We’ll be back in two hours.” That’s how one $2 billion hedge fund interviews for analysts positions.

That’s one of the things I’ve learned reading “The Corner Office,” a column by Adam Bryant that appears in the New York Times on Fridays and Sundays. He interviews CEOs with questions about leadership and management.

Because I deal with CEOs as well as function as an interim CEO in my business as The Turnaround Authority, I enjoy reading insights into other CEOs. When I’m running a company I do a lot of hiring and firing so I especially enjoy reading their thoughts on how they hire new people for executive positions.

Meridee A. Moore is founder of Watershed Asset Management based in San Francisco where they give the calculator, pencil and sandwich test. They simulate a real office experience and see how an analyst reacts to a tough assignment, looking for people who enthusiastically embrace the challenge.

She said they consider it a bonus if a person has had a rough patch in his or her past, because, “If you’ve ever had a setback and come back from it, I think it helps you make better decisions. There’s nothing better for sharpening your ability to predict outcomes than living through some period when things went wrong.”

Bill Marriott, executive chairman and former CEO of Marriott International, says as a young man he learned a lesson from President Eisenhower, who was visiting his family’s farm at Christmas. They were going to shoot quail but it was extremely cold, so his dad asked the president if he still wanted to go. President Eisenhower turned to young Bill and said, “What do you think we should do?”

From that Bill learned that the four most important words are, “What do you think?” Like me, he likes to hire people smarter than he is, but sometimes those people come with huge egos that preclude them from considering other people’s point of view. So when he interviews candidates he always looks for good listeners.

The CEO of YouSendIt, Brad Garlinghouse,  says he looks for people with passion. Some of the questions he asks include, “How would your friends describe you in college?” and “When you started working, how would your first group of colleagues describe you?” He also looks for humility so he asks if they have ever fired someone and what it was like. He is looking for a sense of empathy from their response.

Wendy Lea, chief executive of the customer experience platform Get Satisfaction, also looks for people who are self aware by asking her favorite question, “Let’s assume we’ve worked together now for six months. There’s something that I’m going to observe of you that I have no idea about right now. What would that be?” She finds that is a way to dig a little deeper into a person.

The CEO of International Medical Corps, Nancy Aossey, says one of her favorite interview questions is to ask candidates about colleagues who are not on their reference list, people they didn’t get along with. She wants to know what those people would say about the candidate.

You may be surprised what Karl Heiselman, the chief executive of Wolff Olins, is looking for when he asks candidates, “What’s your story?” He doesn’t just want to hear about the job they are interviewing for. He is trying to find out what they want to do with life and determine if they are being sincere.

If you are interviewing with a CEO it’s usually a given that you’ve already got the skills and experience for the position. So what they are looking for goes deeper than that. They are looking for people who are self-aware, display passion for the profession and are good listeners.

What do you think?

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Smart Businesses Recruit from the Military

Every year on Memorial Day we celebrate those who have made the ultimate sacrifice and died serving our country. We also take a moment to acknowledge the 1.5 million men and women serving in our armed forces today, helping to protect the freedoms we enjoy in the United States.

In addition to being grateful for their service, smart businesses also recognize the value that young people who leave the military can bring to their companies.

In 2008, senior executives at Walmart were dealing with the potential vacuum of young leaders to grow into store management roles. Their usual recruiting methods couldn’t keep up with their projected growth.

The CEO, Bill Simon, who was a 25-year veteran of the Navy and Naval Reserves, suggested the company create a program to recruit junior military officers.

“The thinking was that we could bring in world-class leadership talent that was already trained and ready to go,” said Jennifer Seidner, a senior recruiting manager at Walmart. “And then we could teach them retail, because we know that pretty well.”

The Walmart JMO program was launched and dramatically changed how Walmart recruits young talent. This past February the company announced that effective this Memorial Day weekend, it would commit to hiring more than 100,000 honorably discharged veterans within 12 months of leaving active duty for all types of positions.

Walmart isn’t the only company that sees the value in hiring young, trained talent.

The financial services company USAA launched the “Combat to Claims” initiative to train post-9/11 veterans to become claims adjustors.

“The reason the program is working so well is because military folks have such a sense of discipline and order,” said Joe Robles, the CEO of USAA and a retired Army major general.

Each year Victory Media publishes the “Top 100 Most Military-Friendly Employers” index to serve the 400,000 military personnel who leave the service each year to enter civilian work. The list is based on surveys of businesses with annual revenues of more than $500 million.

The trucking company Crete Carrier is on the list and actively recruits military on its website: “We’re looking for men and women with honesty and integrity, who assume responsibility and adhere to a code of ethics. In other words, if you succeeded in the military, we’d like to enlist your services. Welcome home.”

Another company on the list is Travelers Insurance. “We find that military veterans bring dedication and discipline to their roles, and that they seek and accept responsibility readily,” said John Clifford, executive vice president of Human Resources. “The skills they learned during their military service transition well to any position within our company.”

Other companies that actively hire military officers include Deloitte, General Electric, Shell, Amazon, Accenture and PricewaterhouseCooper PwC.

Hiring veterans isn’t just a feel-good thing to do for your country. It makes sense for your business. As Amazon CEO Jeff Bezos said, “We actively seek leaders who can invent, think big, have a bias for action, and deliver results on behalf of our customers. These principles look very familiar to men and women who have served our country in the armed forces, and we find that their experience leading people is invaluable in our fast-paced work environment.”

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Fraud is Everywhere

Readers of this blog and my new book, “How Not to Hire a Guy Like Me: Lessons Learned From CEOs’ Mistakes,” tell me they especially enjoy my stories about fraud. I have plenty more where those came from.

Fraud is everywhere, and not just at the multi-million dollar corporations I deal with. Anywhere you’ll find money and people with access to that money, you’ll find fraud. Parents even steal from organizations their children are involved with. Nobody, and no group, is immune to fraud.

Here are just a few recent examples, including the first one that appeared in the newspapers today.

• A former guidance counselor and assistant principal in the Memphis City Schools system made $120,000 from a scheme he ran from 1995 to 2010 that involved him helping teachers cheat on their certification exams. They paid him $3,000 and he paid test takers a couple of hundred to take the tests on their behalf. He was sentenced to seven years in prison.

• A New York socialite got 19 months in prison for swindling corporations out of at least $20 million. She asked CEOs to give her free and discounted goods that she said she would distribute as samples and promotional packages in her supposed large network of retail establishments and other outlets to increase sales. Instead she sold the merchandise for profit.  She funded almost 200 investment accounts and purchased expensive art with the money she stole.

• An Australian man stole $20 million from his company over a 12-year period by paying almost 300 invoices to a fake supplier that he had set up. He used his ill-gotten gains to buy racehorses, motorcycles and boats and gifts for young women he found while trolling “Sugar Daddy” websites. He pled guilty and was sentenced to 15 years in jail.

• A dentist in Toronto even swindled his mom in a Ponzi scheme that netted him $40 million. He used the money for personal expenses and paid off credit cards. I hope he at least bought his mom a nice Mother’s Day present.

• A PTA president in Atlanta made news when she was found to have stolen $57,000 that was meant for the PTA at her child’s school. Instead of depositing checks in the PTA account, including several donated by a local church, she deposited the funds into a bank where she worked and was also a co-owner.

• The Girl Scout motto is “Be Prepared.” But they weren’t prepared for this. A Girl Scout troop leader in California stole $6,000 of the proceeds from her scouts’ cookie sales by misusing a debit card tied to the account. She spent the money on buying gas, getting her nails done and purchasing items at Nordstrom and Victoria’s Secret. Seems she had quite a secret of her own.

I’ve said it before and I’ll say it again. Any time there is money involved, you must have checks and balances and review who has access to that money. Go by the scout motto and be prepared.