How To Rule The World

Around 5pm EST this coming Sunday, Germany will win the World Cup. 

It will happen because six years ago, having been unceremoniously dumped out of the European Championships - during which the team failed to win a single game - the German football authorities decided to rebuild.

The did not undertake this mission lightly. They didn’t embark on a conversation-heavy, action-light series of meetings and investigations. 

They hired a man and asked him for a plan.

Fortunately for them, and for the rest of us waiting for our respective countries to demonstrate there is a reason beyond passport issuance to believe that next time will be our time, they hired a man capable of giving them a plan.

They hired a man called Jurgen Klinsmann. 

Klinsmann had won the World Cup with Germany. He had played at the highest domestic levels of German, Italian, French and English football. He had moved to California, thereby removing himself from the day-to-day petty politics of European football and ensuring he retained objectivity.

Klinsmann did three things that are a model for anyone re-building a business.

One. He solicited opinions. From players and managers alike. Everyone who would have some influence over how his German players would play. Then he empowered them to make a contribution.

Two. He defined the characteristics of how his Germany would play. Characteristics that were based on well-established German traits. Being dynamic. Aggressive. And decisive. Traits that Klinsmann readily admits were the cause of two World Wars. But which he believed could be better Purposed on the football pitch.

Three. He built an organization capable of surviving his departure, in the knowledge that the emotional effort required to build the foundations would quickly create friction between him and the German Board.

It was not an easy transition. Early results were poor. And he almost lost his job after 18 months. Only a decisive win over the U.S. in 2006 keeping him in place for the World Cup that year.

His team came third. And was celebrated throughout Germany. Then Kilinsmann resigned and handed over the model to his young assistant, Joachim Loew.

Two years later, Germany were runners up in the European Championship.

This afternoon, they play in their second consecutive World Cup semi final. 

It is a case study in organizational re-structuring.

Vision. Execution. Evolution.

And built, not around an irreplaceable individual or a single skill. 

But around a Purpose and a set of timeless characteristics.

Klinsmann’s work has changed the face of world football. Created a template that others will follow. And will bring hundreds of millions of Euros worth of value to the German economy.

As an Englishman, praising German anything is hard.

But between now and Sunday evening I'll be doing something for the first time in my life.

Hoping for a German victory. 

Change indeed.

Consultancy in Action

A potential client asked me yesterday what I mean by Plan The Last Day First. Rather than give her our well honed explanation I pointed her at yesterday's post on Jerry Solomon’s blog.

We don’t disclose our work with our clients unless they choose to do so. So everything here is information that Jerry or his partner Mindy Goldberg have already openly discussed on Jerry’s blog  or on our website.

When we first met Mindy, Jerry and Jeff Preiss they were engaged in a process of redefining their partnership. A process that challenges the most self-effacing and self-aware by demanding that you compare your value with that of other human beings.

Conversations about better or worse anything quickly become emotional. Add to that the financial stakes of sharing the ownership of a business and you get, as Jerry described it, a recipe for impasse.

They hired us to help. We were able to do so. And the impasse was resolved.

Which is part one of the story.

Part two manifested itself in Jerry’s blog yesterday.

We believe that the best companies are built from passion, and towards a purpose.

Most business owners depend heavily on the passion part of the equation. And spend little time defining where they want to end up.

Which seems to miss the opportunity to apply one of the few constants in the life of an entrepreneur. The absolute inevitability that there will be an end.

Some entrepreneurs love what they do so much that they want to die doing it. Others want to capitalize on their success by selling their business one day. In either case, leaving behind a legacy of all the effort, thought and personal investment becomes increasingly important to owners over time.

Many business owners treat the end as an issue to be avoided until their own enthusiasm starts to wane. By which time their ability to affect their own outcome lies somewhere between limited and non-existent. We see this particularly in creative companies, whose founders have a difficult time separating their own value from that of the business.

However, it is the ability of an owner to ultimately make themselves irrelevant to the success of the company that creates the most dynamic future for any business. By empowering the employees left behind. Increasing dramatically the value the business has to potential buyers, or a new generation of owners. And ensuring the DNA of its founders lives on in the soul of a business long after they have ceased to be its daily heartbeat.

In Jerry’s blog yesterday he describes the decision to hire Lisa Margulis as his replacement as, “a conscious choice on whether to remain a life style business or build a company that lasts beyond the partners.”

This is the essence of Plan The Last Day First.

And the key word is conscious.

Every business owner makes a choice about the future of their company every day. Many times they don't recognize it as such. But in all aspects of life, the absence of a conscious decision to do something is an unconscious decision not to.

Deciding to take control of your future requires that you be willing to give up some control of the present. By involving others and helping them to grow. A win-win on a thousand levels.

I don’t know Lisa personally. But I suspect that she will enjoy working at Epoch a great deal.

Both because it is a company filled with extraordinarily talented, inquisitive, genuine people.

And because its owners are building a business that is committed as much to her future as it is theirs.

A Journey With Oprah

In the spring of 1984, Chris resigned from her job at Good Morning America and moved to Chicago to produce a new local talk show. A.M Chicago.

The host, an unknown from Baltimore, was a woman called Oprah Winfrey.

For the next seven years Chris was part of a very small group that managed the  development of the show, the studios and Oprah’s personal profile. She and Oprah travelled the country together, building both the business and the brand by balancing the need to expose the message with the importance of protecting its value.

As in all great and enduring relationships they taught and learned from each other. And marveled at the journey of a black woman from “nowhere” (as Oprah described her background) to the most powerful media influence on the planet.

That no one could forecast how far this would go is true. But the practices that were instilled in those early days created the platform that have allowed Oprah to do what she wanted on her terms. Including deciding how and when to evolve.

In today’s news the media is reporting the final episode of the Oprah Winfrey Show as an end.

It is in fact a transition. To see if she can build something that has value beyond her own personal reach.

The Oprah Winfrey Network may outlive her. Or it may simply prove that without Oprah, there is no business. But she is unafraid to try. Or to let go of her lifeboat.

And though it is easy to decide that a billionaire has little at stake, this ignores the fact that every founder is emotionally intertwined with their business. Often to a point of paralysis.

One of the things we do most successfully is to help owners take responsibility for their business by separating themselves from it. Which creates the possibility that the business can exist without them.

It’s taken Oprah 25 years to do so. But this is her first step to discovering whether when she is gone, she has created a legend.

Or a legacy.

Never Mind The Beef. Where’s The Plan?

Sad news in the advertising industry this week with the demise of Cliff Freeman & Partners, the legendary ad agency whose founder was responsible for, among other noteworthy entries, Wendy’s “Where’s the Beef?” campaign.

The Ad Age article that describes the company’s closure cites various causes, including lack of a succession plan, an inability to evolve with the changing media landscape, and failed merger attempts.

Creative service companies often end up like Mr Freeman’s. From king of the hill to an industry by-line in a decade.

These three reasons are present in virtually every case:

1. The inability or unwillingness of the founder to make themselves irrelevant. By the time Mr Freeman tried to do so, the company was operating from a position of relative weakness, and the management evolution appeared borne of desperation.

2. A relentless focus on the service that made them successful, without ever understanding the core strength that made those services valuable - as the creator of memorable brand personalities, in any medium.

3. Failed restructuring attempts. 80% of all mergers fail. When the underlying motivation is a shotgun wedding to fix a fundamental weakness, that number goes up into the high nineties. Mergers and acquisitions work when the chemistry is instinctive, or there is a clearly defined and articulated vision that one person takes responsibility for.
   

Mr Freeman isn’t the first to make these mistakes. And he won’t be the last.

But every one of them is avoidable.

At a time when the marketing food chain is changing before our eyes, the advertisng and production industries are in desperate need of better business models.

Head meet sand, however, is not one of them.

5 Myths About Selling A Service Business

When we started our own business, it seemed obvious that we should build it so we could sell it one day.

After all, even in the first raptures of blissful entrepreneurship, we thought it was possible we might not want to stay until the day we died.

So we did what we thought made sense.

We spent eleven years making ourselves irrelevant.

Which allowed us to sell when we were ready to go. And the company to prosper without us.

In the four years that we’ve been consulting, we’ve come across five myths about selling a business in a service industry that we would like to shatter.

1. The Disbeliever: You Can’t Scale A Service Business.

James O. McKinsey was an accounting professor at the University of Chicago. In 1926 he started a business in an industry that didn’t exist. Today, McKinsey & Company are the largest management consulting firm in the world. They keep their sales figures private. But will admit to at least $5 billion a year. Some estimates put it closer to $13 billion.

If the business isn’t scaling, don’t look at the base. Look at the head.

2. The Skeptic: Selling A Service Business Always Involves An Earn Out.

Only if you have made yourself essential to the business.

In which case, the price is depressed because of the uncertainty of what happens when you leave. And you have to stay longer, in order to extract yourself on someone else’s terms.

If the business functions perfectly without you, you get money in the bank and a great goodbye party.

3. The Talker: We’re Definitely Interested In Selling One Day. We’re Going To Start Planning For That Next Year.

Selling begins the day you start. We call it Plan The Last Day First®. It informs every decision, every hire, every customer relationship.

It costs no more to build for sale, than to build to stay. The only difference is the choices you have when the last day comes. Which is usually sooner than you can possibly imagine.

4. The Optimist: I Get Calls All The Time From People Interested In Buying My Business.

There’s a difference between buying a company. And talking about buying a company.

The first involves due diligence. A process that is invasive and uncomfortable and spends a lot of time looking at your financial statements. You’ll know when someone’s really interested in your business when they ask the third set of follow up questions. The ones you were hoping they wouldn’t.

The second involves a salad and a decaf cappuccino.

5. The Fantasist: We’re having a bad year. But if I got the right offer, I’d consider selling. 

This is actually two myths in one.

Buyers don’t buy service businesses in a bad cycle unless they can see the problem clearly. Buyers buy service businesses when things are pretty good, and they think they can run them better. Which typically means cheaper.

And unless you’ve trained other people to do what you do, the ‘right’ offer will definitely involve an earn-out. In other words, this scenario means giving your company to someone else, and then having them tell you what to do for the next three years.

And if they get it wrong, you don’t get paid.

The Sixth Myth

There is a sixth myth. It’s the one that says building a company that can be sold means you’re betraying your craft, your passion, your calling.

The alternative is closing the doors when you’ve had enough. Or dropping dead at your desk.

Which seems like a waste of a lot of time and money.

Unless you believe in fairy tales.

Who's Working For Who?

This morning, every one of the people who work for you made a decision to do so again today.

The vast majority probably didn’t think about it like that.

But you should.

Otherwise they will.

The fact is, we all have a choice about what we do for a living. Even with unemployment approaching ten percent, nine out of ten people who want to work are doing so.

If you’re building a better business, you’re hiring insightfully, training pro-actively, mentoring sensitively, promoting effectively and compensating fairly.

Which is a start.

Being sure that you’re also building a company that creates long term possibilities for your best people is the other part of the equation.

We meet so many business owners these days who missed their time. Who thought they alone were responsible for their company’s success. Who thought it would never end.

Until now.

For them, it’s too late.

But for you, it’s not.

Build a business that gives your employees a reason to keep coming back. Personal growth. Long term economic benefit that goes beyond a salary. A voice.

The company will expand beyond your DNA. And will begin to incorporate theirs.

When you’re ready to leave, they will no longer need you.

But they will need your equity.

A win-win.

And the key to this model?

Two words at the end of every day. Spoken to every employee. With real understanding of the choice they will make tomorrow.

Thank. You.

Doing What It Says On The Tin

Building a better business means first doing what it says on the tin.

An English expression I have come to value. Simply put, it means stating your intention. And then acting towards it.

Too many business owners do the first. But not the second.

With the result that instead of building a business, they’re expending a lot of energy giving themselves a job.

Here are four ways you can tell if the company owners are interested in creating real value for themselves and their key employees. Or just satisfying a need to be needed.

1. The original founders are the only people with real ownership


2. They are essential to the company’s ability to earn business


3. No one else in the company has responsibility to make meaningful decisions


4. No one can envision the company without them

If a ten year old company exhibits more than two of these, the chances are it will stay in business only as long as its founders want to work.

When they’re done, so is the business.

Self-Imposed Slavery

Do you want to sell your business?

For many entrepreneurs who own a service company this is not a yes or no question.

In some cases their indecision is driven by the fact that they so love what they do that they would choose to one day die while doing it.

As a commitment to your craft that takes some beating.

For the others, their lack of clarity about The Last Day comes from an over-emphasis on today supported by three false assumptions.

One. That because a business makes them a lot of money today it will make them a lot of money for as long as they need.

Two. That because a business makes them a lot of money it will make someone else a lot of money.

Three. That selling a successful business is a transaction negotiated largely on their terms resulting in freedom.

If your company provides a service there are only two ways you can create a retirement from it.

1. Make so much money while it it is successful that you don’t need the income once it’s not.

Because any business built to be dependent on you dies when you die. Which is disappointing for your family and employees on a number of levels.

2. Make yourself irrelevant to your business so that owning it is valuable to someone other than you.

If you do neither, you will one day reach a point when getting out is a lot more attractive than staying in. And your options for doing so will be slim and none.

Buyers buy businesses because of what they will do in the future.

If the success of your company is dependent on your personal involvement, the only way you can sell it is by selling yourself along with it.

And for three to five years you’ll be taking orders from someone else, doing it their way, and hoping their way doesn’t screw it up so badly that there’s actually money left to pay you when all is said and done. Not to mention the impact on your hard earned legacy.

If your business depends on you and you want to retire in five years, start shopping now. And then hope you can convince someone you’re not as good at running this business as they will be. And that you’re dying to work for them.

Or you can avoid all this by building a business to last. Regardless of who owns it.

This comes with a number of benefits. Including but not limited to: lifelong income; potential wealth; employee security; reward for loyalty; negotiation leverage; personal legacy; reputation; family security; quality of life; inner peace.

Actually the last one is less certain. We are complex beings, after all. The others are guaranteed.

It takes as much effort to build a business to last as one built only for today.

Doing so provides for that eventuality that overcomes all strategies. Death.

And will make your employees grateful for one thing when you’re gone.

They get your desk back. 

The Top One Characteristic Of A Great Company

Fred Wilson, the renowned venture capitalist, wrote a blog last week about the top ten characteristics of a great company.

It’s a provocative list, written by a man who as he said himself has, “24 years and over 100 startups watched from the front row” as research to support his views.

Fred’s a great blogger because he writes to promote dialogue and then engages in the debate. When last I checked his list had elicited 179 comments.

As he freely admits himself, there were a couple of key areas that he left out. In part, I suspect, because he wrote the list in 15 minutes on his Black berry.

And in part because sitting in the front row is not the same as being on the stage.

Not worse. Not better. Not the same. Either vantage point is incomplete.

Where Fred and I agree completely on the Defining Characteristic of a Great Company I found buried deep in the comments section on his post. In response to one suggestion he wrote this:
 
“If you build to last you don't have to sell and that's how you build great companies.”

There are nearly six million companies in the U.S. alone.

Each of them took a lot of time, effort and money to create.

But most are not built to last. So, most of them don’t.

Which makes the decision about when to sell moot.

Unless you build your company to be great.

Which perversely costs a lot less.

And makes it worth a lot more.

So. Build for today?

Or build to last?

Tough decision.

A Ticket To No Where

The word strategy gets used a lot.

It’s one of those comfort words that make us feel we’re fully engaged in our business. An invisible force field, inside whose protection only good things happen. After all, who ever went out of business while working on a new strategy.

The problem is that a strategy is not a destination.

Instead, it’s the means by which you move your business.

The temptation to add the word forward to the end of that sentence is one I’ve come to respect. And resist.

Direction is contextual. And requires you know where you have come from. And where you’re headed.

Working on a new strategy without knowing where you want to take your business is like buying a ticket before you’ve decided where you want to go.

Don't be surprised if you're disappointed where you end up.

Heart and Soul

To many people owning your own business is a microcosm of life.

I think that’s true.

If you get it wrong.

Most people do.

In the early stages the analogy is exact. Romantic. Beguiling. You start with nothing. You create life. You nurture, teach, feed and protect. It grows. It becomes unruly. You rein it in. Teach it good from bad. Right from wrong. It continues to grow. It becomes self-sustaining.

You keep your hand in by making sure the critical decisions go through you. After all, it was built from your DNA. Who else really understands it the way you do. But instinctively you start to sit back a little.

And ignore the ticking clock.

Businesses are like dogs. They get old in a hurry. One day they’re ten, bounding upstairs like a puppy. The next, they have a hard time getting down off the couch. When that happens you know the time they have left is less than the time they have had. And though you can ease the discomfort and slow the aging process, the end is inevitable. And coming like a freight train.

But businesses don’t have to get old. They should outlive us. After all, why build a business that can not, when it takes the same effort to build one that can?

What it requires is less. Less ego for one. Less hubris for two.

Most business owners define themselves by their companies. They describe themselves as its heart and soul. It radiates from them and through them. Which is fine for a while.

Business owners talk about heart and soul a lot. As though they were inextricably linked. Which, of course, they are not.

The soul is one of the great mysteries of existence. It is purported by some to weigh 21 grams. Maybe. But unquestionably, it is the essence that makes us who we are.

The heart is perhaps the most studied organ in medicine. No surprise given that it is the epicenter of our life force. The fulcrum around which every action is taken. But over time, we have learned that it is replaceable. That we can use someone else’s without losing the uniqueness of who we are.

Our heart is transplantable. Our soul is not.

If you want to create a business that lasts, it will require your heart and your soul.

But only to begin with.

Eventually, as your enthusiasm wanes (and it will), your business will need to get its energy from somewhere else. It will need a new life force. It will need a heart transplant.

If you see this as the natural progression of things, you will prepare for it and embrace it. It hurts. But only a little. And the rewards are extraordinary.

And if you get it right, your business retains your soul. Indelibly imprinted long after you have left the building.

As Chris and I walked out the door of the Whitehouse for the last time on that Friday night in 2005, two things were certain.

Part of who we are was forever infused into the soul of that company.

Someone else would turn on the lights on Monday morning.