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A father’s tough love is the harder job

This is Jim’s traditional Father’s Day column.

As the father of an adult daughter and son, plus the grandfather of four knucklehead boys (Hurricane, Tornado, Crash and Train Wreck), I’ve learned some things about love.

All the hours logged as Dad and Poppy have often caused me to contemplate how different are the roles of mother and father, especially in the overt demonstration of parental love. It’s fascinating how the manifestation of this love differs between mother and father - biologically, emotionally and experientially.

A mother’s love, at once sweet and fierce, is observed in almost all animals, not just humans. No doubt you’ve heard this metaphor: “… as sweet as a mother’s love,” and this warning: “Don’t get between a momma bear and her cub.” I have been the recipient of this kind of love and have witnessed it, and there truly is no other force in nature like it.

A human father’s love, on the other hand, is more often associated with words that are unfortunate, like “tough” and “discipline.” Here’s a warning no one has ever heard: “Just wait ’till your mother gets home!” As a teenager, my dad once apologized to me when he thought his demonstration of tough love might seem “hard-boiled.” It did.

Consequently, it has troubled me that there are no corresponding sweet references to a father’s love. Could this be why Father’s Day is not quite as big a deal as Mother’s Day? Just saying …
Mothers occupy the pinnacle of parental love - with justification. And not to take anything away from them, but let’s be honest: Since a mother’s sweet love is as primal as the miracle of birth, they don’t have to work too hard to deliver it. But there is a uniqueness about a father’s love that deserves a better rap. Here are two reasons:

  • Unlike a mother’s sweet love, a father’s tough love does not exist outside of homo sapiens.
  • When a father’s parental toughness is required, especially when applied to an indignant recipient (read: teenager), it requires a love that has found the courage to endure a negative response and a willingness to defer gratification - sometimes for years.

No one is more keenly aware of the distinction between the application of these two demonstrations of love than a single parent (especially a single mom), where both kinds are required of the same person, perhaps within minutes.

Mothers, please forgive any paternal bias you may detect, but here is my conclusion about parental love: The only force in the universe that comes close to a mother’s sweet love is a father’s tough love. But the latter is the harder job, and the return on investment almost always takes longer.

Write this on a rock … Happy Father’s Day, Dads. You’ve earned it.

Claim the stealth benefits of small business ownership

The classic financial benefits derived from small business ownership typically fall under two categories:

1.  Earned income: salary and bonuses reported on a W2 each year.

2.  Unearned (investment) income: distribution of profits from the operation and/or sale of the business.

But there are other small business ownership advantages that I call “stealth benefits,” because they’re not as evident as operating opportunities. Arguably the most dramatic stealth benefit, which often has the most wealth creation potential, is for the business owner to also personally own the real estate in which that business operates.

Here’s the classic scenario: Every business is a tenant of some landlord, likely under the terms of a commercial lease. There are many financial and strategic reasons for a small business to lease property from an unrelated landlord. But that arrangement offers the business tenant only tax deductions of the lease payment and associated disbursements, and essentially no financial benefits for the owner of the tenant business.

Now let’s consider the stealth benefit mentioned earlier. As long as the business you own is legally structured as a tax reporting entity, like an S Corp or LLC, you can accrue stealth benefits by personally owning the real estate your business operates in and leases from you. For example: Smith Enterprises, Inc. (SEI), a small manufacturer, has one shareholder, Tom Smith. SEI enters into a long-term, formal lease of the improved real estate it operates in, and the landlord, the individual who owns that property, is the same Tom Smith. Several of the stealth benefits these two entities accrue from this legal arrangement include, but are not limited to:

  • SEI doesn’t have to worry about prohibitive rent increases, or getting kicked out because its landlord, Smith, won’t renew the lease.
  • As with any lease, SEI deducts lease payments and associated disbursements as operating expenses.
  • As owner and landlord, Smith personally deducts expenses necessary to deliver on the lease agreement, including mortgage interest, depreciation, maintenance, etc.
  • Profits arising from this venture are taxed as unearned (investment) income for Smith, calculated at his personal income tax rate, but – and this is important – not subject to payroll tax.
  • It’s possible that Smith could receive cash distributions from the property, even if the investment delivered a loss.
  • Over time, as inflation causes rents to rise against mortgage payments that may be fixed for that period, cash distribution will likely increase each year.
  • When the mortgage is paid off, the income-producing property becomes a cash-producing annuity for Smith.
  • Upon the ultimate sale of the property, basis-adjusted profit is taxed at the current capital gains rate, which is typically lower than Smith’s personal income tax rate.

In my long career, I’ve seen many family businesses that Mom and Pop founded and operated for decades. But at the end of their business careers, it turns out that the business itself had little or no value to a prospective buyer, and the founders just locked up the business one last time.

However, concurrent with operating their business, Mom and Pop also went about acquiring the property their business operated in, and leased it back to the company. Over those same decades, that corner of an intersection, in a once-sleepy section of town, became a valuable piece of commercial property.

In the end, Mom and Pop made a good living from operating their business, which ultimately was worth essentially nothing. But they retired well by selling the real estate they’d bought for thousands, for millions. Oh, and they actually have one other option that might be preferable: Just continue to lease the property to the next business.

And almost all of this, including years of rent distributions, was taking place under the marketplace radar, as a stealth benefit.

Write this on a rock … Take advantage of the stealth benefit of owning the real estate your business operates in.

Blasingame’s Three Laws of Aggregation (or Two reasons your small business is like Sakrete)

Sakrete is one of the handiest products ever developed. It’s basically a bag of rocks and sand, but to a weekend warrior with a honey-do list, it can be a magic dust.

Packaged in small bags almost anyone can carry, Sakrete is an aggregation of Portland cement, sand and different size gravel. Just stir in water, apply it to your small construction project, wait a little while and, badabing badaboom, you’ve got real concrete supporting your project.

So, what does a small business have to do with a sack of rocks? Two things.

1. Chemistry.

When the components of Sakrete come in contact with water, a productive reaction occurs that, in a short time, manifests as a handy and enduring result. In the marketplace, productive chemistry between people and organizations is has long been known to be critical for sustaining successful performance. Whether Sakrete or your small business, the right chemistry is critical.

2. Aggregation.

Sakrete doesn’t just aggregate the correct combination of stuff, but also different sizes of masonry material. The larger pieces provide critical mass and structure, while the smaller ones bind everything together and nimbly fill in the gaps to eliminate weak spots. But unlike chemistry, aggregation is not as much of a natural law and requires more maintenance. Which is why there are no Blasingame Laws of Chemistry, but three Blasingame Laws of Aggregation.

Blasingame’s 1st Law of Aggregation

Find your success in aggregating the success of employees.

Simply put, this is servant leadership, a term Robert Greenleaf coined in his book titled, you guessed it: Servant Leadership. But the concept goes back thousands of years to the ancient Chinese wisdom of I Ching, “The highest type of ruler is one of whose existence the people are barely aware.” And in his gospel, Mark quotes Jesus, “Whoever wants to be great among you must be your servant.”

Leaders who sustain success, year after year, are those who subordinate their ego by helping their people to be successful professionals, and then aggregate those success stories for the benefit of the company. They celebrate others first.

Blasingame’s 2nd Law of Aggregation

Aggregation prevents aggravation.

In business, aggregation is also known as strategic alliances, which small businesses must build with other organizations, especially larger ones.

It’s aggravating at least, and dangerous at worst, to manage threats and take advantage of opportunities without strategic resources. Compare the merits of forming a strategic alliance with an organization that already has what you need before you risk the expense and possible delay of capitalizing the ownership of that resource. And if you prefer, you can call it strategic aggregation.

Blasingame’s 3rd Law of Aggregation

Associate your brands with those that are more established.

I also call this the “Forrest Gump Strategy.” As you develop strategic alliances, look for partners with brands and influence that have a higher recognition factor than yours, and arrange for the relationship to include your brand being presented in the marketplace alongside theirs. Brand association is smart aggregation, but you have to step up your game to earn the right to that level of aggregation.

Write this on a rock … If you’re not having the level of success you want, perhaps you should take some lessons from Sakrete.

Remember America’s militia on Memorial Day

This is Jim’s traditional Memorial Day column.

Reasonable people disagree on the exact origins of what is now called Memorial Day.  But most accept that the practice of decorating the graves of Americans who died defending their country began in earnest by women of the South during and following the Civil War.

On May 5, 1868, General John A. Logan, National Commander of the Army of the Republic, was the first to make Memorial Day official with General Order No. 11, which stated in part that, ” … the 30th day of May, 1868, is designated for the purpose of strewing with flowers or otherwise decorating the graves of comrades who died in defense of their country …”

Since then, other than Congress making it a national holiday and changing the date to the last Monday in May, America has honored its fallen heroes from all conflicts in pretty much the manner that General Logan anticipated with the language of his order, whereby  “… posts and comrades will in their own way arrange such fitting services and testimonials of respect as circumstances may permit …”

When America issued its first call to arms - before it was a country, before there was a standing professional army - that call went to the militia, which was identified as, “all able-bodied men.”   Calling themselves the “Minutemen,” because they could be ready to fight on a minute’s notice, they were primarily shopkeepers, craftsmen, farmers, etc.  Today, we call them small business owners.

From as far away as Scotland, America’s Minutemen were impressive. Writing about the colonies’ quest for independence from England in his classic work, The Wealth of Nations, Adam Smith predicted America would prevail thanks to its militia which, ” … turns from its primary citizen character into a standing army.”

By the 20th century, state militias had become part of the National Guard. And by 1916, the National Defense Act created another layer of citizen soldiers, the Reserves.

Prior to the war with Spain in 1898, latter-day Minutemen served only on American soil. But ever since, including two World Wars and four major conflicts, America has deployed citizen-soldiers around the world alongside regular forces. Indeed, in Iraq and Afghanistan, Guard and Reserve members accounted for one third of U.S. forces, as well as a comparable percentage of casualties.

Whenever they’ve been called, small business owners and their employees have left the marketplace to demonstrate their courage - and die, if necessary - on the battlefield. So this weekend, as we honor all who paid the ultimate price in service to this country, let’s also remember the long tradition of America’s small business volunteers who’ve answered the call, and served faithfully in harm’s way on behalf of a grateful nation.

Write this on a rock … America owes much to the sacrifice of those heroes who’ve turned from their, “primary citizen character into a standing army.”

Nine first questions to ask when you’re buying a business

So, you’re planning to buy a business and think, “Hey, I’ve made big purchases before – a sofa, a car, a house – this can’t be that different, right?”

Paraphrasing Mark Twain, the difference between making a large consumer purchase and buying a business is like the difference between lightning and a lightning bug.

Every business sale is a totally unique transaction, which is the opposite of buying a commodity, like a car. And besides being the most complicated transaction you’re likely to ever undertake, with all of the components that make up any business, there’s one more, huge factor in buying a small business: it’s someone’s life. Consequently, the education process for such a transaction is quite involved.

To help you get started, consider a few questions to ask a prospective business seller, suggested by my friend and business-buying expert, Russell Brown, each followed by my thoughts. And while I’ve numbered them, you aren’t likely to ask them in this order.

1. Why are you selling?
This isn’t abrupt or inappropriate as long as you work it in at the right time. Regardless of the answer, it’s information that may contribute to your decision about whether to buy, and how to negotiate.

2. May I see the last three years of financials?
You’ll use their numbers as a base from which to “recast” and project your future business, adjusted for how you’ll run it. If the seller refuses, either he doesn’t have any, doesn’t want you to see how bad they are, thinks you aren’t a credible prospect, or you’ve asked for them too soon.

3. What are the industry trends and greatest future challenges?
The answer will inform you, and/or tell you how much the seller understands the current marketplace. In the 21st century, market challenges and competition comes in many forms and from many directions. You’ll need both pieces of the puzzle to determine how much unclaimed opportunity can be realized.

4. How can I increase sales/profits?
You might think if the seller knew he would just do it. But often he knows the answer, but doesn’t having the expertise, capital, or even desire to take that next step. This would be especially true regarding new technologies and 21st century marketing strategies.

5. Will you finance part of the purchase price?
Russ says that 80% of all small business sales in the United States involves seller financing. Even if you don’t need it, ask for it and use it if availble. Any terms from a seller will usually be better than the bank. Plus, it shows how confident the seller is about the business’ viability. Do not be afraid to ask this question.

6. Will you stay with the business for a while?
In most cases, you want the owner to agree to help you make the transition, which could range from a couple of weeks to months. Be cautious of any deal where the seller won’t spend any time with you. The proper amount of time is the day after the seller goes from being helpful to getting in the way.

7. Who knows the business is for sale?
Mishandling the news of any business being for sale can harm its viability, especially with key stakeholders: employees, customers and vendors. The trick is timing the breaking news with closing the deal so that gap doesn’t create problems.

8. Who will I negotiate with, and who will make the decision?
In selling or buying a business you must know who’s the decision maker. Otherwise you can waste a lot of time dancing around with a surrogate who can’t pull the trigger. As a business buyer you need to be talking to the real decision-maker as soon as possible.

9. What’s your timetable?
One of the biggest impediments to putting a deal together is when the buyer and seller are on different time frames. When you ask this question listen for the time AND the reason – they usually travel together.

Notice that most of these questions have a dual purpose: to get specific information and find out how savvy, sophisticated, and motivated the owner is. When buying a business, ask lots of questions and listen for the six interrogatives: who, what, when, where, how and why. In time, you’ll start noticing what isn’t said.

Write this on a rock … This is the equivalent of your first hour of class on the way to acquiring a four-year business-buying degree.

The power of building customer communities

Incredibly, in 2017, here’s a question many small business owners ask: “We have a website, do we need a social media strategy, too?”

The answer is the same as for why you have an email address even though you have a phone.  It’s not either/or, but rather both/and. Because as outstanding and handy as your website may be, there’s one increasingly important capability you need that most websites aren’t good at: community building.

Once customers find you, returning to that beautiful website of yours will be of decreasing interest to them. It’s not that your new stuff - products, how-to information, order status, special offerings, etc. - is no longer of interest to customers. It’s just that they don’t want to have to come back to your website to get it. More and more, customers are saying to businesses, “I like what you offer, but I won’t be returning to your website much, because I’m very busy. Why don’t you follow me home with the new stuff?”

This is what customers and prospects mean when they join your community by giving you permission to connect with them and send them offers and helpful information by email, text messaging, Twitter, Facebook, etc. They just want the new stuff, including updates to your website. Even when they return to buy something on your e-commerce platform, they expect to enter your website through the offer page you sent them, not from your homepage.

Building online customer communities - and getting permission to follow customers home - is how a small business transcends being competitive and achieves the pinnacle position: relevance. As you may know, I define a business social media strategy as building customer communities. But by my definition, social media is much older and more comprehensive than the online platforms, like Facebook, Twitter, etc. Your customer community strategy includes everything you do to build, connect with and serve those communities, including: email marketing, customer loyalty programs, the new social media activity, and, of course, the original social media: face-to-face.

In the old days - way back in 2003 - your customer list was just names on an accounts receivable report or sales forecast. Today, those customers are part of your business’s community, which also includes prospects who’re just becoming interested in you. But unlike the passive customer list of old - and visitors to your website - this community is functioning and dynamic, with fast-evolving expectations you have to meet or they’ll defect to another community.

Another important component of building customer communities is allowing prospects and customers to see your corporate values. Increasingly, prospects will turn into customers, and customers will become loyal, because they’re attracted to what your company stands for, which is evident in the values you demonstrate, including online. For example:

1. Are your brand elements - brand promise and image - all about you and your stuff, or do they sound like something that would benefit your customer community?

2. When delivering information, is it all about you, or does it contribute to the community?

3. What’s the tone of your marketing message? “Tone” is how brand messages are incorporated as you serve the community, from crassly commercial to almost subliminal. You should strike a tone balance between serving the community and making a sale.

Notice all of these demonstrate values that favor relationships more and transactions less.

In a world where everything you sell is a commodity, value - product, price, service - is the threshold of a customer community, but values are the foundation. Value is easy to find these days. But when community members are attracted to your values, they keep coming back and bring their friends.

Write this on a rock … Build and serve customer communities with a website and social media strategy that demonstrates your values.




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