Wednesday, November 22, 2006

Business Partnership Gone (Really) Wrong

One of the most common problem areas I see in my practice are business partnerships gone bad, and people coming to me to help them clean up the mess. In fact, this week I met the owner of a fantastic business that was in a heap of trouble because of partners--most of which could have been avoided by better planning at the very beginning of the relationship.

If done correctly, a business partnership can be great a way to grow your company without implementing difficult and time-consuming changes to your business. A partnership can help you increase your market share, gain a new competitive advantage, and help you to respond and adapt more quickly to change in the marketplace.

But, business partnerships can be tough, and getting out of a bad one can be worse than an ugly divorce.

I see problems with business partners so often, I was inspired to write an article called The 10 Most Deadly Mistakes Business Partners Make - And How to Avoid Them.

You may have read about the grizzly murder/suicide that took place in Manalapan, New Jersey back in October. A man killed 2 family members and then shot himself--apparently over a business partnership gone bad.

This is an extreme case, I know, but a poignant reminder of the extent to which partnerships can go bad and the need to carefully plan the relationship in advance.

Friday, November 17, 2006

Wisdom About What You Don't Know

I do a lot of networking to market my business. When I meet with new people, sometimes I find it difficult to succinctly explain to people how the services I perform truly benefit business owners.

Much of my work is done with other lawyers and we regularly throw around titles like "securities attorney", "outside general counsel", "corporate lawyer" to describe what we do. These titles just do not resonate with most people. I know because my closest friends still have no clue what I do for a living. They know I represent businesses on transactional matters, but regularly ask me questions about their cousin's divorce or how to get their landlord to repay their security deposit.

Recently, I started being very sensational about how I describe what I do in order to provoke a reaction. I have been telling people that I “save business owners money on legal fees”. People have heard of lawyers protecting client’s assets, but lawyers actually saving money on legal fees, that's unheard of. It definitely gets people to listen to what I have to say next.

One of my newest clients, Margaret, is a marketing communications specialist. To her, it was very easy to describe what my practice is all about (I’m finding it is much easier to sell someone else’s business than your own sometimes). One afternoon over lunch she smiled and said:

"Steve, when you are a business owner it isn't what you don't know, or know you don't know that can hurt your business... but what you don't know you don't know that will really get you in trouble--you bridge that gap for your clients, which protects their assets and saves them money."

It's a bit of a mouthful for my elevator pitch, but very sound advice nevertheless.

Thanks Margaret!

Thursday, November 09, 2006

The 6 Slides Your Presentation to Investors Must Have

I have talked about how when you are communicating to investors, you should focus on what's most important to them, not what you are most comfortable talking about. As entrepreneurs, we can be a self-absorbed bunch, and for many of us who are looking for capital, we don't have the slightest idea what investors are motivated by. Here's a start.

When preparing your presentation for investors, as a general guideline, divide the presentation into 6 parts of about equal length:
  1. The Mousetrap. Only about 1/6 of your presentation should be about your technology, service or product, and your story should be understandable to an 8th grader.
  2. The Team. Many investors buy management. If they don't love the idea, but there's a management team who can responsibly manage investor's money and make the project a success (and it doesn't hurt to have management with prior entrepreneurial success selling or IPOing a company on board) they will be more likely to invest. If you know you are lacking the management needed to make the business fly, be up front about it. You'll get further with investors, particularly VCs and Angel Groups.
  3. The Market. Explain the market for your product or service. Where does your product or service fit into the market? Why are consumers desperate for it? How big is the market (the bigger the better)? How much of the market can you carve out, what will your revenues look like for the next 10 years, or why will a major player in your industry be motivated to buy your Mousetrap in the future?
  4. The Margins. Investors are looking for BIG margins. Bigger margins mean more room to make mistakes. If margins are narrow, a mistake can sink the business. Describe unit costs and operating margins and profit margins.
  5. The Risks. Be honest, what's out there that can sink your company and how can investors’ cash help to mitigate risks. Talk about potential IP challenges, lengthy regulatory reviews, gaps in management, competition, manufacturing or supply issues. Every business has risks; investors want to know that you've done your homework.
  6. The Exit. Nearly every investor is motivated by three things: (i) How am I going to get out of this thing? (ii) When? (iii) How much can I likely make for the risk of being involved? While it’s not advisable for you to project the valuation at which your company will be sold for (or IPOd at), you can give investors examples of the success stories for similar companies, or let them draw a conclusion based on market size.
If you follow these guidelines, you'll be in good shape.

Sunday, November 05, 2006

Overwhelmed by Your Business? Get Objective, Then Break it Down

My friend Karen (not her real name) has run a mortgage brokerage business for over 10 years. Recently, Karen had become so overwhelmed by her business that she wasn't even showing up to her office. Her assistant, Mary, was so concerned about Karen that she called me to see if I could help. Sure enough, Karen, had been going through some difficult times in her personal life, including losing a parent, and she fell behind on her business. When Karen went into her office, she felt so strangled by everything she had to catch up on that she literally became paralyzed--to the point where she was no longer showing up.

I recently went through something similar in my own business. In my case, I was completely bogged down by several marketing projects. I was revamping my website and building a second one, creating this blog, planning for two upcoming speaking events, recording two audio courses, writing articles and press releases, pitching for speaking events for next year, and going to four networking meetings a week--all while managing my legal workload. All positive things, but I had taken on too much and was not finishing any one of these items completely. I was completely overwhelmed.

This summer, I met Jennifer Zweibel, who joined a professional organization I belong to. Jen is a "professional organizer" and, in addition to helping people organize their stuff, Jen also helps business owners prioritize their workload and calendars.

As is customary when a new person joins our group, I met with Jen to learn more about what she does. I desperately needed the services that Jen offered, and the meeting quickly turned into a free consultation. What I found out at a later meeting was that my experience with Jen was not dissimilar from that of many the other members in our organization.

What I learned from Jen was that most business owners, at some level or other, can easily get overwhelmed by our businesses--sometimes to the point of becoming paralyzed. Many of us started our own businesses to escape having a boss, yet, most of us could use one to stay focused and be accountable.

In Karen's case, her situation was an extreme one. However, I met with her and Mary and, in only about an hour, we identified the big items that she needed to get caught up on, we broke each item into many smaller steps, and we scheduled the steps in a calendar so both Mary and Karen were doing one or two things each day to complete the major tasks. In about two months, they would be completely caught up. To Karen, each major task seemed very challenging, so much so she wasn't showing up to work, but when we broke the pieces down into the individual steps, it suddenly became completely manageable.

I was able to help Karen because, just eight weeks earlier, I hired Jen to help me do the same thing. We listed and prioritized each of the major tasks I was trying to complete, we broke down the most important major tasks into individual steps, delegated what could be delegated and calendared the individual steps. Since doing this, I finished both websites, I am writing in the blog, I spoke at two conferences, I wrote a press release and recorded two audio courses.

I can't say that what Jen did was magic, or that I didn't already know how to do this, but because she was not emotionally invested in my business, breaking down each major task into individual steps was mechanical for her, where it had become very difficult for me to do. It was the same for Karen. I know very little about the mortgage brokerage business, but what Karen needed to do to catch up was plainly obvious to me, but not at all to her.

Despite putting on our best "game faces", in my professional organization, every member who met with Jen had the same thing to say about Jen helping them manage being overwhelmed by their business. So if you own a business and you feel strangled by your business, don't be embarrassed--you are not alone. List the major tasks you are trying to complete, prioritize them, break them down to individual steps and calendar them. If you are too stuck and don't know where to start, or are not finishing the items on your calendar, speak with someone you trust for an objective opinion, or talk to Jen.

I'm happy to report that Karen is back in her office and is on track to have her best year ever, and I just crossed another small step off my action list!