Category: leadership

Bethenny’s Dealmaking Rules

Bethenny Frankel’s one of my favorite entrepreneurs. Inc Magazine’s too.

Inc recently published her rules for dealmaking on new projects, which I thought were rather good. We’ve repeated them below, with some editorializing:

  1. Establish your own code; do you think the deal will be enjoyable for you? If not, think twice about it.
  2. Pick the partner that moves at your own pace. Have shared values and have partners that work at your own speed.
  3. Be upfront with your own flaws and weaknesses. Outline your own deficiencies in any negotiation. To which I’d add, all negotiations have got to be a win/win/win for everyone.
  4. Define what you will do, and what you won’t do. Self explanatory, but IMHO, when money starts flowing, misunderstandings proliferate if not in writing.
  5. Master the care and feeding of your partners. Again, self explanatory, and make sure you take their concerns into account. It’s not your way or the highway. Celebrate successes. IMHO, behind the scenes figure out what happened with failures.

Gotta Know Your Limitations

To paraphrase the Clint Eastwood movie, ‘A man’s gotta know his limitations’.

What does that mean for you, as an owner of a company?

It means don’t get ahead of your organization’s ability to execute what you want to do.

It’s fine to have buy-in from your organization on your plans (we recommend it), but you might task your organization with more than it can do in the time frame you’d like it done.

An example: in one of my companies, we were adding production capacity, expanding eastward in the United States, and adding English and Australian distributors, and I and my plating manager got the idea for a completely new metal coating process for our exhaust parts on a Friday afternoon.

We were also improving our shipping times, which required a fairly major commitment to more inventory.

I discussed the new pr my partner, who had blessed the idea previously but who had expressed valid concerns about going beyond our capacity, So Monday, I and my partner held an all hands meeting with my staff, front office and warehouse, as well as production. My CFO missed the meeting, but she would have asked me what additional strain I would be putting on our financial resources.

Frankly, I didn’t know, and I admitted as much. My name was on the building, but I discovered it was ok to not know something. At Wharton and Ford, you were expected to know the answers.

So, we kept implementing the other expansion plans, and I started the process of doing market research and actual testing of the parts in the worst climates where we had discrete distributors. I might have otherwise skipped the market research test because the initial response from a couple of key distributors was overwhelmingly positive.

We digested the plans already in the works, and then tested the parts in places like Seattle, Houston (for marine uses) and Denver. All positive.

The tests took about six months, during which time our competitors might have found out what we were up to, but they didn’t.

So, we stayed within our limitations, kept the financial wheels on the business and had a very successful product launch.

And the staff was happy, because they didn’t get pushed beyond their limits.

Financially, we added nearly 30% to our sales in a year in the middle of a recession, which we didn’t think we could do, but it worked.

Gotta know your limitations so you can exceed them

 

Know When It’s Time to Pass the Torch

I have two clients where the founders are struggling with passing the torch to the next generation.

In one case, the founder was ready to pass the torch: he had worked leading the business for close to 30 years, had brought two of his three children into the business at a relatively early age and knew what he wanted to do after he sold the business. We helped him develop his kids and did reviewed the MOU for the transfer (the legalized transfer was done by the lawyers after the fact), so this transfer went smoothly.

In the other case, we’re somewhat stuck on what one child will do after assuming the Presidency. He will run the company differently, but all the other kids agree that he should run the company, since he’s been the operating head for the last couple of years. The problem is the founder is having a hard time accepting that there might be more than one way to run his business. And one division has been somewhat neglected, but we’ve got a plan to fix it. We’ve proposed a unique stock  ownership structure where at least two of the kids, and the founder, have to agree on a major decision. And it’s actually in the buy/sell that the company has to remain in Solutions Forum.

The answer, in our opinion, is to leap off the bridge, go ahead with the buy/sell and see how it works.

Nothing is irreversible.

Pass the torch!