Archives for September 2022

The Right Questions to Ask When Negotiating a Deal

By Glen Herman, Creative Business Services

When it comes time to negotiate the terms of a business purchase, asking the right questions can help the deal progress more smoothly. You can always expect that there will be many negotiations between buyers and sellers. So, when issues come up, good negotiating skills are necessary. When you know the right questions to ask, you will help to keep the deal on track.

May I Have Professional Representation?

Trying to negotiate a business deal on your own is rife with pitfalls. There are seemingly endless details to consider. When deeply emotionally and financially invested, it is easy to overlook details accidentally. You may react to any snag in the transaction more sharply than necessary and create tension with the other party.

Having an M&A advisor at the negotiating table with your best interests at heart can make the process go much more smoothly. An M&A advisor not only has a more neutral perspective but also understands the complex factors involved because they have negotiated so many deals. They also understand both sides of any issues that might arise. As a result, they will already have a way to smooth over any differences to the satisfaction of both parties.

How Can We All Get on the Same Page?

For a business negotiation to progress smoothly, everyone must be on the same page. Otherwise, the deal is doomed to fail before it begins. A good M&A advisor will ensure everybody is clear about each other’s expectations and goals.

It is important to keep an open mind throughout the process and be willing to listen without jumping to any conclusions. A M&A advisor knows how to present ideas and offers in a way that will appeal to both parties and keep everybody talking amicably so the transaction can continue.

How About We Split the Difference?

There is usually at least one number that comes up that not everyone can agree on. Asking to split the difference shows you are flexible and eager to keep the deal progressing. This is a common negotiating tactic that can be under-utilized when tension builds.

This is a time when having an experienced M&A advisor who understands how to get everybody talking again can be tremendously beneficial. Your M&A advisor is protecting your interests but also understands the other party’s goals. When one side makes an offer to help bring everybody to the middle, this gesture of good faith goes a long way towards ensuring the deal gets done.

Experienced M&A advisor knows the right questions to ask and plans to smooth out any bumps in the negotiation process. Their involvement will ensure a more streamlined transaction because they have the experience and knowledge necessary to make sure the entire business sale process completes successfully to the satisfaction of everyone involved.

Glen Herman is Business Intermediary of Creative Business Services/CBS-Global in Green Bay, WI.  Call us to 920-432-1166. All your inquiries are strictly confidential. 

Check out the The Next Chapter Webinar Series with Glen and Bill Kinnard HERE.

Some Things Never Seem to Change

By Tom Grandy, Founder Grandy & Associates

Grandy & Associates has been teaching trades contractors how to set profitable hourly rates since its inception in 1987.  We are not alone.  Other companies have been teaching profitable labor pricing as well.  The irony is that after all that teaching the leading cause of business failure is STILL improper labor pricing.  Have some companies learned and moved on to profitable growth?  Of course they have. However, as an industry, we are no closer to overcoming this problem than we were 35+ years ago.

Many companies really have invested time, energy and money in setting proper and profitable hours rates…initially.  But many fail to adjust those rates as things change within the company.

Every change in your company cost of doing business will necessitate a change in your hourly rate in order to maintain profitability!

Grandy & Associates has multiple resources to help contractors set profitable hourly rates.  However, the objective of this article is not to teach the process of setting profitable hourly rates.  The objective of this article is to help the reader understand the need to adjust rates as time goes on.

To be able to illustrate the point we are going to need a simple Sample Company.  Let’s assume our Sample Company is 100% residential service and has three service technicians.  Each service tech bills out roughly half their time or 1,000 billable hours a year.  Let’s look at a few “What if’s”.

  • Techs are doing a great job and deserve a raise. The company desires to provide a $2.00/hour raise for each tech. 
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Question: 

How will that affect what the customer is charged?

The additional basic cost to the company is $12,480/year ($2.00/hour x 2,080 paid hours a year per tech times 3 techs = $12,480).  When the $12,480 is divided by the 3,000 billed hours a year that means the company will need to increase its hourly rate to the customer by $4.16/hour ($12,480/3,000 billed hours = $4.16/hour) just to maintain current profitability.

  • One of the service techs van just died. The company needs to purchase another one right away. 
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Question:

How will the new vehicle purchase affect the hourly rate?

Total cost with racks and wrapping the vehicle produced a loan payment of $550/month principal and interest.   That just added $6,600 in annual cost.  When the $6,600 is divided by the 3,000 billable hours the hourly rate will need to go up $2.20/hour.  That does not include the extra cost of insurance.

  • Good news! Health insurance for the three techs, owner and bookkeeper/CSR only went up $35/month each.
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Question:

How much will the “additional” cost of insurance affect the company’s hourly rate?

Five employees at an additional cost of $35/month will result in an increase in the cost of doing business of $2,100 ($35/month x 12 months x 5 employees = $2,100).  Dividing the $2,100 by the 3,000 billed hours will cause the hourly rate to be increased by $.70/hour.

None of the three additional costs are huge by themselves but literally every additional dollar spent on the cost of doing business will DECREASE the company’s net profit by the same amount.  If the three items above were simply adsorbed, the company’s net profit will decrease by $ 21,180 ($12,480 + $6,600 + $2,100 = $21,180).  For a simple three tech service company that is a lot of lost profit!

Now, think about ignoring minor increase year-after-year.  You don’t need to be a brain scientist to see the long-term effects on the company’s profitability.

In honor of Grandy & Associates 35 years in business the founder, Tom Grandy, has written a book entitled Profitable Labor Pricing for the Trades Industry.  It covers why companies fail, differences in cash flow and accounting, how growth can put a company out of business plus detailed worksheets on how to set profitable hourly rates.  The $19.45 investment includes shipping.  Order Today!

Secret Enemies of Productivity

By Dave Ramsey, Ramsey Solutions

You probably feel there are rarely enough hours in a day, no matter how hard you work, to get things done. But being distracted doesn’t necessarily mean keeping up with friends online, or spending hours watching cat videos. There are other forces at work, many of them business related, that can secretly keep you from being productive.

Issue: Email

It’s all too easy to fall down a rabbit hole when you see dozens of emails sitting in your inbox. But are all of them worth your time and attention? Could some of them be handled by someone else?

Answer: Choose two times during the day to read and reply to email, and put those times on your calendar. If you have an assistant, put them in charge of your email and instruct them to forward only what you need to see.

Issue: Meetings

Getting together for updates, to communicate priorities and to develop new projects is a necessary part of doing business. But meetings can quickly get out of hand. 

Answer: Set a time limit and create an agenda for your meeting. Stick to both. If an issue isn’t resolved in the allotted time, assign someone to work on it and report back by a certain date. Then, move on to the next thing on your calendar.

Issue: Multi-tasking

The ability to multi-task is generally viewed as a valuable skill in the workplace. But the hard, cold truth is few of us do it well. Our brains just can’t handle five things at once for an extended period. In the long run, you end up stressed out, less focused and less productive.

Answer: Start every morning by writing down your goals for the day. Prioritize them and stick to your list, focusing on one task at a time. If you get distracted, take care of the issue, and go back to your list.

Issue: Socializing

I love hanging out with my team. They’re a great bunch of people. But socializing is one of those things that can quickly get out of hand if you’re not careful.

Answer: If you’re naturally talkative, block out a few minutes on your calendar each day to socialize, and stick to the time limit. If you don’t like to chat it up, schedule time specifically to interact and be sociable. After all, spending time with your team is an integral part of being a leader.

Respect your time, and you’ll be amazed by how much more you can accomplish—and how profitable that can be!

* Leadership and small business expert Dave Ramsey is CEO of Ramsey Solutions. He has authored numerous best-selling books, including EntreLeadership. The Ramsey Show is heard by 18 million listeners each week on more than 600 radio stations and multiple digital platforms.

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