Welcome to the Transformation Age

MidasMoments: Rob Slee’s Comments on the Nation

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All of the ladder climbing that I describe in “Time Really Is Money” happens in a business age. Every so often, the rules of business change. In the past 200 years this has occurred several times. First came the Industrial Revolution, which in the early 19th century ushered in the Industrial Age. John Henry may have beaten the mechanical spike-driver in lore, but machines have dominated in every other way for more than 150 years. Next came the Information Age, which began in the 1950’s with the arrival of computers and reached a climax in the 1990’s with the explosion of the Internet. Computers changed the way we work, making complex jobs easy and enabling routine tasks to be performed at ever-lower costs. During this Age, knowledge workers and MBAs reigned supreme.

On September 11, 2001, we entered the Conceptual Age. The United States was thrust into a global war with terrorists. At about the same time, China entered the World Trade Organization. The combination of these events birthed the Conceptual Age and thrust U.S. businesses into a global war of their own. The Conceptual Age marked the intersection of globalization, logistics, and advanced technology. This age is defined by multi-dimensional thinking, and required business owners to conceptualize their way to success.

As we entered the second decade of the new millennium, a new age of business dawned: the Aggregation Age. This Age reflected the reality that firms around the world had evolved and learned to leverage their intellectual capital in ways that were not possible just ten years ago. Firms aggregated their industry spaces without actually owning them. The mantra of this Age was to control, not own, your sphere of influence.

We have now entered a new age of business called the Transformation Age. Nearly all business models in every industry are being transformed. John Mauldin has been writing about the Age of Transformation for the past year or so. He and I believe this Age is marked by multiple and rapidly accelerating changes happening simultaneously. These changes are transforming our social structures, our investment portfolios, and our personal futures.

This is an Age where whole brain thinking is a must; where orchestrating a network, ala Uber, is the best and quickest way to exploit the “sharing” economy. “Network orchestrators” are the Transformation Age value architects, and they employ transformational business models to intentionally disrupt traditional markets. The intersection of technology, the Internet, and the need for mass customization is creating an almost zero marginal cost society. As a result, the Internet of Things, renewable energy, and 3-D printing are becoming the norm, and not the exception.

A major differentiating characteristic of the Transformation Age is the shift to almost zero marginal costs. Marginal cost is the cost of producing additional units of a good or service, if fixed costs are not counted. Jeremy Rifkin, in his book “The Zero Marginal Cost Society”, discusses the move toward a sharing economy based on a shift to almost zero marginal costs. According to Rifkin, automation and sharing services will replace traditional means of production, rendering the marginal cost of products and services close to zero.

As I discuss in TRIM, climbing the vLadder in the Transformation Age is a challenge, and requires the owner to work on different activities, remaking themselves in the process. I have a sign on my wall that captures this thought:

If you want something you’ve never had,
You have to do something you’ve never done

Let’s get busy doing things we’ve never done. And remember, the choice of how high you climb in this Age, and thus how wealthy you become, is purely yours.

– Rob

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The Role of Sales People in Your Business

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Gary Fitzgerald’s Newsletter, Let’s Talk About……

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The role of sales in any business is to develop prospects and close new business. It is the primary source of revenue, and though expense management also plays an important part, the sales function is the biggest contributor to the “bottom line” of profitability.

The role of sales can be distinguished from the role of business development. Business development typically looks at more non-traditional ways to drive new business – strategic partnerships, referral sources, or perhaps wholesale arrangements.

Salespeople thrive on “closing,” and they work primarily with the end customer. Business developers, on the other hand, create and nurture relationships with other organizations. These activities can actually have a greater sales impact, but usually have longer timelines as both parties assess the value of the other to their organizations. Once established, these relationships usually last for an extended time with most of the work taking place during the initial start of the relationships, and residual benefits lasting indefinitely.

Both sales and business development are essential to the health of an organization. While the approach is different, they are both focused on driving revenues.

Measuring sales performance is the easy part. Track progress against goals. Make sure that goals are measureable and benchmarks can be quantified. The more progress benchmarks you can quantify, the better your ability to forecast results.

Benchmarks include such things as:

  • Number of leads generated
  • Number of outreach calls made to target prospects
  • Number of proposals issued
  • Number of presentations made
  • Number of trade shows attended
  • Number of new referral sources developed
  • Attainment of monthly, quarterly goals

The Salesperson

A top salesperson may hold themselves accountable more strictly than you do as the business owner. After all, salespeople have egos. They thrive on performance and want to succeed. Most enjoy being showcased. The last thing a true salesperson wants is to be embarrassed for underperforming. If you have a salesperson that seems to shrug off failure, then you don’t have a winner.

Like every trade, salespeople need tools to do their job. It is the responsibility of the business to provide the tools that will equip salespeople to sell. Sales tools include:

  • Facts and statistics – To be an expert in the field, they need the facts; it is the responsibility of the firm to find the facts, package them, and train the salespeople, so that they are established as experts. Knowledge transforms the salesperson from someone having a linear interest in the customer, into an industry authority with a thorough understanding of the products and services, and the value they provide.
  • Message – The firm must convey who they are, what they do, how they do it, why they are in the business they are in, and how they are distinguishable from the competition. It is the responsibility of the firm to provide the salespeople with the message script (tagline, elevator pitch, presentations, proposals, etc.); delivery of the message should be part of the skill set of the salesperson.
  • Marketing Materials –Salespeople need to be equipped with outstanding marketing materials (website, brochure, business cards, samples, videos, CD, newsletters, white papers, etc.). It is the responsibility of the firm to provide outstanding marketing materials that present a professional image and reflect key messages that support the salesperson’s discussion or face-to-face visit. Even in today’s technologically sophisticated environment, people are impressed with graphical presentation and will often make decisions based on a brochure, website or other marketing piece.
  • Marketing Programs – Promotions, advertising, direct or e-mail communications, online contact with prospects, and social media all support the efforts of the salesperson. It is the responsibility of the firm to be engaged in marketing programs.
  • Technology – Today’s business is powered by technology: laptops, cell phones, fax capabilities, video-conferencing and webinars all provide the salesperson with the ability to communicate instantaneously according to customer preference, and are essential tools for a successful salesperson.
  • CRM (Customer Relationship Manager) – One central repository of information on prospects and customers keeps the salesperson organized to manage phone calls, meetings, and other responses that are required to appropriately maintain communication. It also allows the firm to monitor and measure the quantity and quality of communication with prospects and customers.

The Customer

It is a positive customer experience that will keep them coming back for more products or services, and that will help your company develop a positive image and buzz to attract new customers.

Measuring the customer experience is simple, but it’s not easy! Basically, all you have to do is ask. It is the asking that is more difficult.

Worldwide competition and a tough economy awoke many a sleeping company from the complacency they had toward their customers. Today, it seems like every one is asking for a survey to be completed to ensure customer satisfaction. Instead of being a positive, this has turned people off. People are now are being asked to respond to a survey even before being serviced. So, a little creativity and a personal approach to obtaining feedback will be necessary.

There is an entire industry (an arm of market research) that focuses on documenting the customer experience. Here are some of the basics:

  1. Have someone other than the salesperson interview the client
  2. Call the customer on the phone and ask for seven minutes of their time (make it an odd number, so they remember it and understand that it will be short)
  3. Ask what you want to know about (for example, the sales experience, the transition to account management, the value they saw in your products or services)
  4. Limit yourself to 5-7 questions
  5. Ask open-ended questions to get them to open up to the interviewer
  6. Once they start talking, you can probe deeper in an area that seems to be a highlight or a concern
  7. Ask if you can use their feedback for a testimonial (which they would review and approve before you publish)

Relationships are developed by becoming a resource to customers in areas of your firm’s expertise, fulfilling obligations beyond those required contractually, and being responsive and anticipating changes in the business landscape. Once you determine the quantifiable value your firm can provide to clients, demonstrate that value repeatedly, and spend time getting to know your customers with a healthy exchange of information and ideas, solid relationships will be developed.

The days of back-slapping “two-martini lunches” are gone. Competition is fierce and clever. And, competition is global. In a technology-driven business environment, customers are no longer limited to local or regional solutions. A solution 5,000 miles away can be easily delivered. This type of competition focuses on price and perceived value. This is when the value your firm demonstrates will set you apart from the rest of the pack.

Developing strong customer relationships that positively impact the bottom line takes time, determination, ingenuity, and good old fashioned one-on-one attention. Be aware that even strong relationships can be disrupted by price considerations if you’re dealing with a commoditized product or service. But when your pricing is competitive, and your sales team can quantify the value your company brings to the relationship, price becomes neutral and the relationship and value will prevail.

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Control Freaks and the American Dream

MidasMoments: Rob Slee’s Comments on the Nation

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I grew-up in a family that owned and operated businesses. My Dad was a serial entrepreneur, with all of the good and bad that such a title bestows. Behaving as a functioning family is tough enough; throwing a business into the mix is just asking for trouble.

Dad wanted my older brother and me to stay in the family businesses, and eventually buy him out. Back then, passing the business to the next generation was a major tenet of the American dream. I think that part of the dream is now under attack.

In the 1980’s, the Family Firm Institute did a study showing that about 30% of all family-owned businesses survived into the second generation; about 12% made it to the third generation; and only 3% survived through the fourth generation and beyond.

I checked a couple of dozen websites of business succession advisors, and each quoted the FFI statistics as if they applied today. I don’t think they do. In fact, at least for the middle market, I’d be shocked if more than 10% of family businesses are now transferring to the second generation.

We’ve looked behind the curtain of hundreds of family businesses over the last few years. And in at least 90% of the companies, neither generation wanted any part of a transfer. Here’s a summary of what we heard and saw:

Parents

– Don’t really understand the global economy…just see risk of ownership going forward
– Don’t totally trust their kids to own/operate the business going forward
– Can’t get their minds around how to fairly treat siblings who are not involved in the biz
– Don’t want to leverage the company to do a transfer
– Still often view/treat their kids as 6 year-olds

Kids

– Are making $150,000+ a year and getting home in time to have dinner with their kids
– Figure that when the business is sold they will eventually get the cash anyway
– Don’t fully trust the global economy
– Don’t really want to leverage the company to do a transfer
– Often view/treat their parents as authoritarian and out-of-touch with reality

An entire industry exists to promote and assist in family transfers. But it’s as if most of these helpers have never lived in a family unit. Their mantra is: “If only the family would plan for the transfer, everything would work out.” I call bull$#@%. With all the dysfunction that exists in families, it’s amazing to me that family businesses can even stay in business, let alone plan for a transfer. My advice to the industry : first bring in the psychologists…

This situation reminds me of the ESOP industry. For about 40 years an army of ESOP advisors have touted the heavenly benefits of doing an ESOP. According to them, ESOPs darn near cure cancer. Yet, after all of this time, less than 12,000 ESOPs exist (out of 300,000 middle market companies and millions of smaller firms). It’s always seemed to me that ESOP advisors are mainly selling their own motives, without considering why the market is 99% deaf to their value proposition.

Of course, most biz owners are self-selected control freaks, and this affliction causes them to procrastinate before making any transfer decision. Here’s my favorite example. An 85-year-old man sought my firm’s help to effect a transfer. The man was distraught because “Junior” had recently been offered the chance to buy the family business but had declined the opportunity. The elderly owner castigated the younger generation for their flimsy work ethic and lack of vision. I later discovered that Junior was 62 years old! Junior told me he had worked in the business for more than 30 years and had offered to buy the business more than 10 years before, but the “old man” wouldn’t even discuss it. The most revealing aspect to this story is that it occurs every day on Main Street.

If only the old man had planned better.

– Rob

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Let’s Talk About The Blockchain

MidasMoments: Rob Slee’s Comments on the Nation

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When Satoshi Nakamoto created Bitcoin a few years ago, something unexpected happened: a far more important technology was created – the blockchain. Bitcoin is still the biggest blockchain, but that is almost a side story now. I think blockchain will do more to democratize commerce than even the internet. But I hear you: what is the blockchain?

The blockchain is basically a distributed database. As Don Tapscott – the foremost thought leader on the blockchain – says: “think of a giant, global spreadsheet that runs on millions and millions of computers. It’s distributed. It’s open source, so anyone can change the underlying code, and they can see what’s going on. It’s truly peer to peer; it doesn’t require powerful intermediaries to authenticate or to settle transactions.”

This last sentence is a key point. Blockchain is replacing the need to use financial intermediaries such as banks or credit card companies. Now you can see why Fintech is drawing so much venture capital.

Blockchain uses state-of-the-art cryptography, so if we have a global, distributed database that can record the fact that we’ve done this transaction, what else could it record? Well, it could record any structured information, not just who paid whom but also who married whom or who owns what land or what light bought power from what power source. In the case of the Internet of Things, we’re going to need a blockchain-settlement system underneath. Banks won’t be able to settle trillions of real-time transactions between things.

So what we have here is an immutable, unhackable distributed database of digital assets. Well this changes everything. And it’s not futuristic: blockchains are in the here and now.

Most blockchains are what are called permission-less systems. Transactions are completed without knowing who the other party is and are independent from central authorities. These blockchains all have a digital currency of some kind associated with them, which is why everybody talks about Bitcoin in the same breath as the blockchain, but Bitcoin is no longer the only such currency.

Here’s how it works in Fintech. If I owe you $50, we do the transaction. There’s a huge community called miners, and they have a powerful computing resource. These miners have an economic incentive to authenticate that a transaction occurred. In most cases today the first miner to solve the problem gets paid in Bitcoin.

The solution is called blockchain because the block the miners create is linked to the previous block, and the previous block—ergo, a chain. This blockchain is running across countless numbers of computers.

Blockchain is not limited to just financial transactions. Imogen Heap, who’s a singer-songwriter in the United Kingdom, is working with a company called Consensus Systems, which is a world-wide blockchain developer. By using the Ethereum platform – which is one blockchain – Heap has already posted her first song onto the Internet. It’s not far-fetched to expect that many big recording artists will use this new paradigm whereby musicians get compensated for the value that they create, and are not limited by music labels or even iTunes.

Tapscott asks us to imagine a world where foreign aid didn’t get consumed in the bureaucracy but went directly to the beneficiary under a smart contract? Rather than a $60 billion car-service aggregation, why couldn’t we have a distributed app on the blockchain that manages all these vehicles and handles everything from reputation to payments? Ultimately, they’ll be autonomous vehicles moving around. Or blockchain Airbnb? This is all about the value going to the creators of value rather than to powerful forces that capture it.

I’m beginning to imagine a whole new world, and it begins with the blockchain.  

– Rob

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Building a Business Advisory Team

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Gary Fitzgerald’s Newsletter, Let’s Talk About……

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Some entrepreneurs can successfully run their business for years on the strength of their own passion, intensity, business smarts, and a little bit of luck. They don’t believe they need advice, and don’t ask for it. They might have an attorney on call for business paperwork, and a CPA who does their tax returns every year, but they’re just “hired hands” like the rest of their employee team. Life is good “at the top.”

However, as a business succeeds and grows, sound management skills become as important as entrepreneurial brilliance. There are a lot more moving parts, and things aren’t as easy as they once were. The business owner finds it harder and harder to keep up with all the spinning plates. He is losing sleep and afraid he might lose his business if he makes a mistake. Suddenly, it’s “lonely at the top!” If you can relate to those feelings, the time has come to build a business advisory team.

That business transactional attorney and CPA are a good place to start, but you might also include an estate planning attorney, a financial planner, and an insurance professional. As the term “advisory team” implies, none of these professionals are as useful to you alone as they are working together as an integrated and collaborative team.

A good business attorney will be needed for buy-sell agreements, transfers of stock (or interests), and good solid advice about how to keep or get your business up to date with things such as annual minutes and a review of existing contracts. The attorney will also be able to tell you where you are vulnerable to future liabilities and how to minimize those liabilities.

An estate planning attorney will help monitor and ensure that your estate plan is in line with your exit plan. Part of that review will be your revocable living trust/will, durable power of attorney and health care directives. They will also discuss with you estate taxes and methods of transferring some of your estate to your beneficiaries early to reduce those taxes. If you are considering forming a family limited partnership or making use of irrevocable trusts, your estate planning attorney will be critical in the formation and maintenance of the entities.

Your CPA is crucial in the preparation of compiled, reviewed, or perhaps even audited financial statements. Generally speaking, a serious business has a history of regular (monthly or quarterly) CPA-prepared financial statements. These statements will eventually be reviewed by all potential buyers. You want to be sure you understand just what the financial statements say about you. They are called your accounting “books” because financial statements can be read just like a book that tells the story about the company from inception to today. They tell a lot about where your business has been and what has happened through the years. Simply having properly-prepared financial statements adds to your credibility and thus to the value of your business. The CPA is also important for the preparation of tax returns, and advice on how to reduce those taxes.

A financial planner is critical to helping you with current investment choices while the business is active, as well as helping you to understand what you will need from the sale of the business to live the lifestyle you want after the sale. They can offer guidance in different ways to receive the funds from a sale; for example, installment sale versus outright cash. A good financial planner is critical at the beginning and during the preparation of the exit plan. What you need from the business in the way of future funds will determine how much work is required to build the business value to meet your need.

Insurance agents are also a necessary part of the advisory team. Risk is a part of life but we all need to balance the cost to put that risk into reasonable perspective. You will certainly need to review business insurance liability policies, and be sure you are covered with the basic compliance polices required by government and lenders. Your personal insurance needs should also be reviewed for items such as long-term care, health, life, accidental death, etc. Insurance may also be a big part of employee benefits, buy-sell agreements, and estate planning.

A good business advisory team is critical to helping you step by step to increase the value of the business, and fully prepare for a successful future transition. They will work on coordinating and balancing each aspect of the business internally as well as preparing the management team for your ultimate departure, which they may or may not know about at the time. There are some basic things in a business that will help to drive value which include having a fully functional management team in place, having positive operating cash flow, having strong and proven processes and systems in place, having low owner dependency and well as low customer and vendor dependency, and having a clear vision for the future growth of the business. By working with a good business advisory team, the value of the business can be enhanced dramatically.

Depending on the nature of your business, other advisors you might include on the team include: an intellectual property or patent attorney, a real estate professional, or a qualified plan/pension specialist.

Admittedly, the proper involvement of a business advisory team is not inexpensive. But in most cases it will be less expensive than trying to do it all yourself. The costs will generally be offset by you concentrating on the things that are most profitable for the business, by paying fewer taxes, by a higher sales price when it comes time to sell, by less hassle, and by greater peace of mind.

Traits of a Strong Business Advisory Team

The team of professional advisors you select should work well together and collaborate annually on your behalf. Look for the following traits:

Connection: One of the primary attributes a team can have is the ability to connect with you and your objectives. Teams that immediately go into “problem solving” mode typically are not good listeners. In planning there is no such thing as “one size fits all.”

Experience: There are many professional generalists. The right team will have the experience to guide you in the area of expertise in which they are proficient, and rely on other team members in areas they are not.

Collaboration: An effective team is one that has a seamless collaborative process. All the experts know their roles, and provide accountability to the other advisors on the team. Like any team, there is typically one professional who serves as the team leader. You can choose that leader, and it is often the professional with whom you first begin the planning process. It’s important to remember that you don’t have to be the one who keeps the team coordinated and collaborative. You have enough to do just running your business!

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Things I Think I Think

MidasMoments: Rob Slee’s Comments on the Nation

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The following is what happens when I think too much for an extended period of time. So let’s blame the Summer break for this.

Here are just a few things I think I think:

– Never do biz with desperate people, for they do not have control over themselves

– Good news to a biz owner: the bad news he/she previously received isn’t as bad as they first thought

– Blockchain will do more to democratize biz than even the Internet

– Retirement is a concept best applied to corporate workers

– Never make performing miracles a requirement for an IBanking job. It turns out the client not only won’t pay for the miracle, but usually won’t feel obligated to pay any fees at all

– Never grant respect until it is earned

– You appreciate college more once your kids go

– We all choose our level of wealth by how we spend our time and who we associate with

– At this point politicians can’t solve our problems …they can only make them worse

– The Matrix is more interested in maintaining power than in doing the right thing for society

– Incremental solutions won’t work to solve a totally failed situation

– China’s form of cannibalistic capitalism will ultimately consume itself

– Highly successful people spend most of their time on activities where they can add maximum value

– If you’ve spent 5-10 years in the same hourly pay range, you are more likely to fall from that range than rise above it

– Only 10% of the population consistently adds value, the other 90% consistently consume it

– The proverbial fork in the road now has more than a dozen options

– The reason most biz owners don’t create valuable businesses is because they measure risk and return on an individual (not SHH) basis

– Every year for at least for the next 5 years the US will both exceed $500 billion in trade AND budget deficits and will generate more than $2 trillion in unfunded liabilities. Each year. This will continue until the system fails. Then Grampa Slee’s words about life will ring true: it’s bad for a while, and then it gets worse.

– Negative interest rates are the canary in the economic coal mine and signal loudly that the worldwide Econ situation is toxic

– Trump’s attack on the Matrix is the first, not last, such move that someone on a national level will make

– Only 2% of any population think and act above $500 dollar per hour activities

– I’ve only met a handful of biz undergraduate majors who were right brain thinkers; whereas, I’ve met hundreds of liberal arts majors who were right brain thinkers

– Managers can be made; leaders are born

– In 2014, the Social Security Administration (SSA) took in $786 billion through the Federal Insurance Contributions Act tax… $73 billion short of the $859 billion needed to pay claims.
By 2026, the SSA will run up a cumulative deficit of $1.6 trillion. There is no trust fund…apparently that is something the politicians have concocted to distract us from a highly unsettling truth.

– Honest gurus know that they sell most of their stuff to people who will never really benefit from the stuff Only 2% of any population think and act above $500 dollar per hour activities

– I’ve only met a handful of biz undergraduate majors who were right brain thinkers; whereas, I’ve met  hundreds of liberal arts majors who were right brain thinkers.

Many of the above ramblings will become Midas Moments between now and the end of the year.

Until then.

– Rob

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People are Usually the Key to a Successful Business

Gary Fitzgerald’s Newsletter, Let’s Talk About……

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People are usually the key to the success and growth of a business. Most business owners have very high hopes for the people they hire. However, most owners have also been amazed to watch the transformation of some of these employees from motivated go-getters to drifting, lackadaisical annoyances!

Why does this seem to happen to a large percentage of the work force? We can attribute some of that to a lack of ambition, personal issues, or an unpleasant personality. But the majority may actually be a reflection of our own lack of dedication to developing their better qualities. Business owners ask:

  • Why do people seem to care so little about their career?
  • What does it take to keep a person personally involved and in the game?
  • How do I figure out who is the right person for the job?

A Matter of Mindset

A mindset is a “filter” that highlights some information, ignores other information, and changes how each person interprets the environment around them.

To motivate employees striving for personal fulfillment in a team environment, it is necessary to transform their attitude from an “I don’t care” employee mindset, to a partnership mindset. For most employees, personal contribution and a sense of belonging and being needed are fundamental pillars that lead to maximum performance.

The willingness to trust others with your vision for the company will demo

nstrate to them that you are indeed interested in them and that you are all “in it together.”

Many small business owners, however, believe that employees should think like they think, see what they see, and hear what they hear. Unfortunately, most small businesses are run by entrepreneurs, and they are a rare breed! Every person approaches work (and the world) with a mindset developed over many years – built of experiences both good and bad. Each person, therefore, may react and respond differently to another person, both having received identical information from the world around them.

For example, the owner is willing to leave only when all of the customers are taken care of. An employee, on the other hand, may want to leave at the designated time. Many employment conflicts are caused by this difference in how people view various situations. Conflicts become much easier to resolve if we can see the different mindsets at work within a conflict.

In any business, the professional mindset puts the customer first. Everything is done from a customer-centric perspective. Employees seek better ways to serve the customer rather than seeking only to enhance their own well-being. They are good listeners, responsive, and give customers the confidence to make a decision and move forward. The professional mindset grows out of personal integrity and a sense of partnership between the company, the employee, and the customer. When the business owner can train each employee toward a professional mindset, the business will prosper.

A highly functioning team requires people of diverse mindset and diverse skills. We can miss hiring the right people if we hire only those like ourselves. We should try to find people who can offset our own weaknesses. In building a team, we most actually counter our natural tendencies and learn to judge the talents of others as compared to the job, rather than compared to ourselves. That process necessitates a thorough understanding of the workflow needed to complete a task, the building of job descriptions that cover each step of that workflow, and hiring people to complete those tasks. And it isn’t finished there! Next comes training those people in the necessary tasks, holding them accountable for completing the tasks, and building the team interactions that lace all of those tasks and skills together.

A top performance environment starts with people taking responsibly because they desire to be part of a high performance team. In terms of management, this desire is often accomplished through effective delegation by the business owner. Many business owners are trapped by the restrictive thinking that they are the best at everything that is done in the business. It some cases, it might even be true. But, continuing to fill your day with some of these activities may be preventing you from doing things that more directly and significantly impact the sales and growth of the company.

In order to grow you must build a team that can function without your direct oversight and management of every job. This process does not happen overnight but develops as team leaders begin to step forward with a willingness to take on more responsibility. It can take months or years for you to develop a maximum performance team to support you. It takes time for the changes and attitude adjustments to take root, but the payoff is that you will personally move to a new level of accomplishment, as will each person to whom you’ve delegated responsibility.

Hiring Employees

Finding the best and brightest for your team will require time, attention, and skill. As a small business owner, you probably find yourself working in the business most days, rather thanon the business. And since you spend most of your time doing what you do best, it may be frustrating and uncomfortable to go through the process of hiring new employees.

If your business is large enough, you may have a human resources person who will take care of most of the preliminary work on your behalf, with a hiring decision made by whoever will directly supervise the new hire. Many (perhaps most) small businesses, however, don’t have those resources, and the hiring is done directly by the business owner.

When you’re ready to begin recruiting, you should first engage your personal network. Talk to friends, colleagues, (and maybe even competitors), and let them know you’re looking for a new employee, and what type of candidate would fit well with your organization. Utilize social media. It’s a fast, inexpensive (or free) means of spreading the word and finding that rare gem who “knows someone who knows someone.”

Remember that the brightest person for the position may possess technical skills, but may not be a good fit for the firm’s culture or adaptable to the pace or style in which the firm conducts business. They may not be a good fit for the high-performance team already in place. Focus on a good fit in all these areas. The right people are out there, but you may have to “kiss a lot of frogs” to get to the “handsome prince!”

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And You Think Rio 2016 Has Problems

MidasMoments: Rob Slee’s Comments on the Nation

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I interrupt your Summer vacation with a timely, urgent Midas Moment.

Zika virus? Green pool water? Polluted bay water? Incomplete venues? Ha! The Rio Olympics are a gift from the Olympus gods when compared to the 1904 St. Louis Olympics.

Bet you didn’t know that St. Louis ever hosted the Olympics. There’s a reason. They continue to be the gold standard for failed sporting events.

Here are just a few of the highlight from 1904.

The city of Chicago, Illinois originally won the bid to host the 1904 Summer Olympics, but the organizers of the Louisiana Purchase Exposition in St. Louis would not accept another international event in the same time frame. The exposition organization began to plan for its own sports activities, informing the Chicago OCOG that its own international sports events intended to eclipse the Olympic Games unless they were moved to St. Louis. The Olympic Committee, such as it was, gave in.

Officially, the games lasted for four and a half months! But St. Louis was apparently a difficult destination, so only a handful of European countries attended. Total participants totaled 651 athletes – 645 men and 6 women representing 12 countries. However, only 42 events (less than half) actually included athletes who were not from the United States.

The marathon was one of the most incredible races in Olympics history, as nearly half of the contestants almost died. The thirty-two participants were supposed to run the entire twenty-six miles, but most gave up because of heat stroke and other health-related issues. One runner suffered from stomach hemorrhaging after swallowing too much of the dust created by automobiles on the track. The winner was immediately disqualified when the judges learned that he had driven part of the way. The gold medal went to the runner-up, an Englishman named Thomas Hicks who clocked in at three and a half hours. However, Hicks was also sick from the heat. To keep him going, his handlers gave him sponge baths and periodically administered a drink made of strychnine, brandy, and raw egg. Upon learning that he had won, Hicks immediately collapsed, and it took several doctors to revive him.

Other memorable racers included a runner from South African runner named Len Tau, who was chased off the course by a pack of wild dogs. Further, Felix Carvajal, a penniless Cuban postal worker who hitchhiked his way to St. Louis. He arrived shortly before the race, starving and wearing street clothes. Having no time to eat or change, he began the competition anyway, picking fruit off trees as he ran. He soon became ill with stomach cramps, and took a nap in the middle of the event. He still finished in fourth place!

Alongside traditional Olympic sports, the 1904 games also included a bizarre and highly controversial event known as “Anthropology Days.” As part of the two-day contest, so-called “uncivilized tribes” were recruited from the World’s Fair’s “human zoo” exhibits and encouraged to try their hand at Olympic sports. Ainus, Patagonians, Pygmies, Igorot Filipinos and Sioux were all paid to participate in traditional Olympic events such as the long jump, archery and the javelin throw as well as specially made contests like the pole climb and mud throwing. The event was billed as a display of the tribesmen’s natural athletic ability, but the participants received almost no instruction and most performed quite poorly. Anthropology Days organizer James Sullivan smugly concluded the events were proof that “the savage has been a very much overrated man from an athletic point of view,” but others labeled them a demeaning and racist sideshow. For his part, Olympics founder Pierre de Coubertin called Anthropology Days an “outrageous charade,” and noted, “it will of course lose its appeal when black men, red men and yellow men learn to run, jump and throw, and leave the white men behind them.”

Rio is looking better and better.

– Rob

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Outgrowing the Sole Proprietorship

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Gary Fitzgerald’s Newsletter, Let’s Talk About……

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Jerry Sims started his small business from scratch, and has always run it as a sole proprietorship. Now that his revenues have become predictable, and he’s added employees, he knows he needs to operate more formally as a business entity. In fact, his accountant and attorney have been bugging him to make some changes. So how does Jerry choose between the various business entity options?

There are a number of factors to consider when selecting the appropriate entity for your business. Your goals will help determine which factors must be considered and which are most important. Generally, the things to consider are the following:

Ease and Cost of Formation: If a business is going to operate as a sole proprietorship, there may be little cost to the formation and establishment of the business. However, if the business is going to be an entity formed under state law, there are filing fees and possibly minimum annual taxes required. Usually, the type of business venture and its complexity will have a greater bearing on the choice of business entity than will the cost of formation.

Management and Control: If there are multiple owners, you will have to consider whether all of the owners will have equal say in the management and control of the business. For example, in a general partnership, all of the partners have an equal vote in the management and control of the partnership. However, in a limited partnership, only the general partner is charged with the responsibility of management and control. The limited partners have no right to control the limited partnership, but also have no personal liability for the partnership’s obligations.

Liability of Owners: In a general partnership or sole proprietorship, the owners have personal liability for the debts and obligations of the business. However, shareholders of a corporation, members of an LLC, and limited partners of a limited partnership do not have personal liability for the debts and obligations of the business.

Transferability of Interests: With a limited partnership, LLC or closely held or professional corporation, there are generally restrictions on the transferability of the entity’s interests. In a publicly-held corporation, transferability of interests is usually a non-issue, due to the free market trading of public securities.

Ability to Raise Capital: Outside investors would prefer to invest in a business where they are insulated from the liabilities of the business. This makes a corporation or LLC a more appropriate entity if raising capital is an important consideration.

Sale of the Business: If you want to sell your business, you may wish to consider a corporation or LLC for ease of transferability of the ownership interest. Income tax considerations are always an important aspect of selling a business and the appropriate entity structure can help you achieve certain tax advantages.

Income Tax Considerations: A C corporation is subject to entity-level taxation while partnerships, LLCs and S corporations can elect to be taxed as “pass-through” entities. That is, the tax is imposed on the owners as opposed to the entity. Income tax considerations can also apply to the contribution of property or services by the owners to the entity. States may also impose minimum annual franchise taxes on certain entities. Finally, depending on the type of entity, self-employment taxes may be imposed on the share of income of the owners.

There are many types of legal entities, and the best choice for one particular business may not be the best choice for another. In deciding which entity to use, it is important to understand the characteristics of the various entity choices, considering the pros and cons of each in the context of your own business. Keep in mind that you may want to change your entity type as the business grows and changes, but each change requires the input of your professional advisors to avoid adverse tax consequences.

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The Tear In Our Social Contract

MidasMoments: Rob Slee’s Comments on the Nation

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The U.S. is facing numerous seemingly unsolvable travails. But far and away the most important dilemma is typically not even mentioned in the press. What might this be? Our social contract is torn.

America’s social contract was created from the patriotic fervor of our Founding Fathers. This country started and grew strong by relying on a few unifying themes. Aside from several interruptions, such as that major tiff over state’s rights, Americans have prospered from a shared vision. Until recently.

For such an important concept, it is hard to find a definition of social contract. Here is mine:

“Social contract is what the people, government, and business expect from, and owe to, each other.”

There’s a triadic logic at work here, such that all three stakeholders must agree and signoff in order to make the contract binding.

Let’s review the tenets of America’s existing (albeit torn) social contract. What does the government owe to the people and to business? The government is the guarantor of our collective future. It owes citizens a good education, such that they can add value to society. It is the safety net for the people, for both emergencies and for retirement. It owes business reasonable regulation and a level playing field. It owes business the resources it needs to compete. Government is the tool that creates the opportunity for people and businesses to succeed. Although unspoken, the people expect government to create a condition where each generation surpasses the prior in economic terms and in education.

What do the people owe the government and business? People owe the government an undying loyalty. They owe the government their trust. They owe the subjugation of their individual rights, if that is what is required to benefit the many. People owe business a work effort that creates value. This means that people will generate more economic impact than they receive from business.

What does business owe the people and government? Business owes people the chance to work for fair compensation, including benefits. It owes people job security if they create value.

People expect to earn enough to buy a home and a car, and to eventually earn their retirement.

Business owes government honesty, in that it will follow the government’s rules and regulations.

Several ideals helped glue our social contract together as well, such as: our collective faith in God and religion; our reliance on the family unit; our sense of belonging to a community; and our belief that hard work and faith can conquer any evil.

During the last fifty years or so, many elements of our social contract began to tear. Certainly the turmoil of the 1960s caused some shredding. Many people lost faith in the government, business and each other. Fighting inflation in the 1970s kept us busy for most of that decade – so not much to report on the social contract front during that period. The “Me” decade of the 1980s certainly added fuel to the lost-sense-of-community fire. And the “greed is good” 1990s had the effect of a running a chainsaw through the contract. The 2000s finished with a bang – meaning that it blew-up what was left of the contract.

What happens to a society that no longer has a shared vision, or in-tact social contract? An every-man-for-himself mentality sets in. Government, people, and business become thoroughly self-serving. Destructive partisanship reigns supreme. Sound familiar?

I believe many Americans are searching for a shared set of beliefs to unite us as citizens again. These beliefs must allow personal freedoms and diversity to co-exist. To get us started, we could use a dose of what John F. Kennedy was prescribing some fifty years ago when he challenged Americans to think and act communally.

One way or another, even if it requires a revolution, it’s beyond time to create a new social contract.

– Rob

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