The Entrepreneur's Mentor

The Art of the Deal

Some entrepreneurs love making deals. To them, doing business is boring- it is doing deals that is exciting. The high is in buying and selling. I know one entrepreneur that used to walk into my office and basically say "You buy me or I'll buy you. It doesn't matter. Let's do a deal." To him it was a big, fun game, and he was pretty good at it. Not everyone is.

Transactions are full of pitfalls. While some entrepreneurs feel they have a sixth sense about reading people and sensing when a deal is right for them, they still need a team of experts around them to make sure all goes well. Taking the time to build such a team is hard for some who are "can do" folk and who believe in the Nike philosophy of "just do it." They view lawyers and accountants as obstacles rather than a support team.

Rather than the professionals being the obstacle, the entrepreneur's thought process is the real barrier. There is risk everywhere and it takes experts to steer around it or eliminate it. Great business sense does not make up for a lack of legal or accounting or tax or human resource or ERISA knowledge. Thousands or even millions of dollars can be involved in some key pre-purchase decisions. A transaction that "feels" right and looks superficially like a home run can turn into a disaster of huge proportion if all key areas are not explored. Proper due diligence can make or break a deal.

I bought one company without sufficient due diligence and with the wrong supprt team. What looked like a cheap deal on paper turned into a million dollar fiasco with far-reaching consequences. Those of us that can see opportunity everywhere need to re-orient ourselves. Instead of opportunity we should be thinking about our capabilities. We need not just our eyes on the deal but the eyes of those paid to protect us. These folks needn't be viewed as obstacles. Think instead of navigators, who will help us find a safe course through difficult waters.

Satisfy your deal urge. It is a great high. Just do it smartly- with the right guidance. Your team, your posse is worth every penny you pay them if you choose them well.

Innovation Environment

It doesn't stop. The flow of new ideas, leading to new businesses and new products, is not deterred by a weak economy. To the contrary, it may be spurred by our economic distress. We have to be more clever and more inventive to achieve with fewer. resources.

Entrepreneurs have had to re-think all of their processes in order to eliminate as much cost as possible. They have had to seek out new sources of revenue. Even many who have never thought of themselves as innovative have discovered previously unknown competencies, driven to the surface by necessity.

Suppose that President Obama banned the sale of gasoline in our country effective in one year. Don't you think necessity would propel innovators to come up with new solutions quickly?

Innovation is, of course, part creativity and part intelligence. But it is also the application of critical thinking to common problems to come up with uncommon solutions.

There are different ways to be innovative. We can all think out of the box. It is important for entrepreneurs to remember that. Instead of giving up when an obstacle seems too difficult to overcome, look at it as a Rubik's cube. Move some parts around; turn it over and look at it from a different angle; keep thinking and re-thinking and possible solutions become visible. We can innovate with totally new ideas or by taking an old one and adding or subtracting a key element or two.

Necessity can be the mother of invention. This old adage can be the key to your business surviving and thriving.

Keep That Thinking Cap On

Word is that the recession is slowly winding down. Even if this is true, do not expect to see a quick turnaround. The  economy did not crash overnight and it will not recover overnight. And it is certainly not clear what a "recovered" economy will look like. But do not expect it to soar to the heady heights of two years ago.  There will be a new "normal."

So, we cannot pop out of our bunkers like hurricane survivors and just go about our business. We have to be wary of jumping into old patterns. We cannot spend in anticipation of improved sales. We can't ease restrictions we have put in place. In fact, for many businesses, it is still going to get worse before it gets better. Not everyone got slammed in the same manner at the same time to the same degree. Our economy was hit in waves and it will recover in waves. That recovery may take years.

Many business owners who feel they may have escaped with just mild bruising may still be in for a beating- especially if they lose their focus.

It is important to recognize and remember those factors that are critical to the ongoing success of the organization. If there are ratios or other metrics that tell you the crucial facts, keep your eye on them. If you need 100% effort from everyone, stay intent on making sure you communicate clearly and credibly and you work hard to maintain employee engagement. Employee engagement can be the difference between succeeding or not, staying alive or shutting your doors. There is a direct correlation between employee engagement and customer loyalty; and ultimately to profitability. Don't leave your employees hanging or guessing. Let them know what is going on and inspire them to align themselves with the company goals and objectives.

Stay in touch with your customers and your suppliers. You need to understand their situations. You need to know if their capabilities have changed in the downturn. You need to know on who you can count.

Catalogue your good habits and make sure they stay habitual. Follow the behaviors that are positive and abandon those that take you down the wrong path. Remember, everything has to be geared toward survival.

When the economy does turn, some companies will be in position to take advantage of it, and some won't. You know in which group you want to be.

More Myths Busted

Scott Shane's book The Illusions of Entrepreneurship provides chapter after chapter of new insights.

As we listen to the talking heads on cable news talk about our financial crisis, they all speak to the entrepreneurial aspect of America and how we are so much different from Europe and other areas.

But Shane has some interesting facts that can be added as fuel to this fire.

• America is not becoming more and more entrepreneurial. In fact, entrepreneurialism is on the decline in the US.

• We are not even one of the most entrepreneurial countries. Turks are four times as likely to start their own business. Peruvians are three and one half times as likely to become entrepreneurs. The US is in the bottom third of countries when measure by the number of young businesses per capita.

• Silicon Valley and high-tech corridors are exceptions rather than the core of entrepreneurialism in the US. People are more apt to start businesses in poorer and more agricultural areas.

• Businesses are more likely to be started in areas of high unemployment than people in places with low unemployment. Unemployed people are more likely to start a business than those with jobs.

• Startups in an area tend to mirror businesses already in the area. That is because most people start businesses in the industries in which they are currently working and in the geographic areas where they live and work.

• Businesses do not start up in greater abundance in areas where there is a lot of capital available. Business does not follow capital. In fact, capital follows business. So capital tends to gravitate to areas where a number of businesses are starting.

The American entrepreneur looks pretty different from Donald Trump, Bill Gates and Steve Jobst. And while some of us would like to achieve what they have, most just want to make a living.

Opportunity in a Crisis

It isn't going away. This recession or depression, whichever it is, is going to be around for a while. During that "while", thousands of businesses will go under every month. Many of the owners will feel victimized by the times and will not take any responsibility for their plight.

Yet, many businesses will survive. They exist in the same circumstances as the others. Why do they make it?

They make it because they use the downturn as an opportunity- an opportunity to make changes in the business, in the strategy, in the niche...in many areas. They see that within a crisis lies an opportunity or two.

Instead of lying down or going through hand-wringing, every business owner needs to stop and look at what the market needs and what changes need to occur to offer that to consumers. I am not talking about precipitous cutting of prices. I am talking about reaching out to different markets; different uses of products and services; bundling of services for value; strategic alliances with competitors or suppliers or customers. I am talking about using technology, the web, viral marketing.

Now is the time to examine everything you do and why you do it. If there is not a sound business reason, make a change. Get rid of those sacred cows that may be bogging you down or keeping you from seeing innovative approaches. There should be no "givens".

Now is the time to work "on your business". Now is the time to get out and talk to people about what they are doing to survive; it is the time to be open to change.

Doing the right things now may not only save your business now, but it can point you in the right long term direction.