Why Some Transactions Fall Apart- Part 1

July 10th, 2012

Skeletons in the Closet

Selling a staffing company can be a challenging task. This is why we highly recommend hiring an M & A advisor to help you with this extremely important step on your way to retirement or another career. We would like you to hire us, however you should interview a few of us and decide who you feel most comfortable with handling one of your larget assets. Ask for references and please contact them. We are sure you will make a good decision even if you choose someone else. Its most important not to go it alone.

An undisclosed material fact discovered during the due diligence phase or just before closing can crater a deal quickly. Every business has its own good, bad and uglies – items that are less than perfect, pending litigation, warranty problems, back tax issues, etc. The buyer may discover that workers comp expenses are under reported or that certain key employees are not under a non-compete agreement.

The deal could be blown if the seller discovers that the cost of replacement employees will force a reduction in the purchase price or the buyer is unwilling to invest additional funds to correct the workers comp errors. These are not hypothetical we have the scars from each of these challenges as a reminder of how important it is to reveal everything to your Advisor, an experienced Advisor will know how and when to address the issue (s) to minimize its impact.

The best way to handle skeletons in the closet is to reveal them from the very beginning of the deal. Buyers (and sellers) hate surprises. Addressing them from the beginning with a plausible explanation should eliminate this problem. Sellers should realize that the skeletons will come out of the closet somewhere along the line. Since you “can’t conceal it”, be upfront about “revealing it” and build trust.

Financial Issues Surface

A major deal breaker occurs when sales and/or earnings suddenly drop. If the buyer has been made aware of a drop – for example, decreased sales due to seasonal business – most likely, no problem. But, if there is no apparent reason, the buyer could become spooked and either lower their offering price or drop the deal all together. It is important that management continue to run the business effectively during the sales process.

 The other financial issue that may surface involves the seller getting cold feet. All of a sudden, the seller realizes that the proceeds from the sale are not what he or she expected. After paying off suppliers, bank debt, taxes, etc., the seller realizes that it really doesn’t pay to sell and the deal craters. A seller should sit down with his accountant and intermediary and go through the numbers to determine just what the real proceeds will be preferably before a decision to go on the market is taken and certainly before an LOI or Term Sheet is signed.

Part 2 will follow next week and will discuss two other common causes for M & A deals falling apart.

For more information or a complimentary confidential discussion, contact:

Bob Cohen at 416-229-6462 or Sam Sacco at 910-509-0691. We can also be reached at bob@racohenconsulting.com or sam@racohenconsulting.com.

Sam and Bob have successfully completed over 130 staffing industry transactions. Visit our website for more articles and information at: www.racohenconsulting.com

 

Avoiding Sales Failures-The most common causes of Sales failure and how to avoid them!

June 11th, 2012

The four the leading causes of failure in sales organizations are:

  1. Planning fall-off. Goals are so large and long-range that salespeople become frustrated in reaching them. It’s better to set realistic goals, with starting points, ending points and fixed durations.
  2. Attitude drop-off. Some salespeople go through periods when their level of caring falls off and complacency sets in. They forget that the prospects are the ones doing the buying. The solution is to know what customers expect and collaborate with them to meet or exceed those expectations.
  3. No longer listening. They fail to learn about the customer’s changing needs because they do most of the talking. Acknowledging what the customer has said and asking related questions is the best way to overcome this barrier.
  4. Burnout. This comes from repetition, boredom, a lack of challenges or not being excited about their work or a combination of all four. Energetic salespeople understand that they are much more likely to be rejected than accepted by a prospect. They accept rejection as part of the life of a salesperson and refuse to become tired or depressed. If the challenge to succeed is no longer there, maybe they need a career change.

Have the courage to fail

Salespeople who refuse to fall victim to rejection have the courage to fail. They recognize that rejection can transform failure into a powerful tool for success and help them develop the skills to find new prospects and turn them into customers.

 An old Sales Manager used to say “ every time you get a no, it brings you closer to a yes; he was a very wise man who would not be defeated.

Top salespeople understand that by avoiding failure, they’re missing new challenges and opportunities.

Credit for the article belongs to Ken Dooley of Sales/ Marketing Business Brief.

For more information or a complimentary confidential discussion, contact:

Bob Cohen at 416-229-6462 or Sam Sacco at 910-509-0691.

We can also be reached at bob@racohenconsulting.com or sam@racohenconsulting.com.

Sam and Bob have successfully completed over 130 staffing industry transactions. Visit our website for more articles and information at:    www.racohenconsulting.com

What every salesperson needs to know! Part 2

June 4th, 2012

In Part 1 we discussed how customers might believe certain aspects in the staffing usage such as price and product quality may be the most important aspects,  however,  their behaviors showed the product or service features (quality) and the overall sales experience were the actual determining factors in their usage of staffing services.

We also learned that 55% of what customers described as the “most destructive” behaviors by sales people have easy fixes.

The two areas of concern for customers were (1) failing to have adequate product knowledge and (2) contacting customers too frequently. Only 3 percent said they weren’t contacted enough, suggesting customers are open to fewer, more meaningful interactions.

Fortunately, both damaging habits can be readily fixed.  Staffing companies can address a lack of product knowledge by centralizing content development to guarantee a uniform message and creation of compelling value propositions for customers.

Striking the right balance between contacting customers too much and too little requires understanding their stated and actual needs.

There should be a clear strategy for reaching out to customers based on needs and profit potential, with schedules dictating frequency. The best contact calendars center around events that create value for customers, such as semiannual business reviews, which provide an opportunity to assess customer needs and ensure satisfaction.

 The key is to recognize that customers are also looking to lower their interaction costs, so any contact with them must be meaningful.

 Clearly the sales experience matters, and a good one starts by getting the basics right. A sales manager should ask customers the following questions:

 What are the most influential drivers of the sales experience?

What things are my sales personnel doing that could damage relationships? How does the perception your customers have of your sales force compare to how they view your competitors?

 It is only by knowing and understanding the answers to these questions that companies can begin to identify and pursue the best course to better their overall sales performance.  Building your company sales and profits will one day lead to you gaining more value for your company when you are ready to sell.

We hope you enjoyed this posting.

What every salesperson needs to know! Part 1

May 28th, 2012

If staffing customers say they care most about service and quality why do they so often go for the lowest bidder?

We think it’s because we haven’t been able to adequately demonstrate  how spending a little more hour will give them much greater value.

We also think that they also really want a great sales experience.

When it comes to building valuable relationships with customers, sales representatives are critical players on the front lines. Customers want to be contacted just enough, not bombarded. Let the customer tell you how often they want to see you! Ask them,when would it be a good time for me to follow up with you?

Sales reps should know their services intimately and how they compare with those of their competitors. Customers need information on how a service will make a difference to their businesses. And while customers may say price is one of their biggest concerns, a satisfying sales experience is ultimately more important. How it is measured is critical.

 These were the key findings of a survey conducted by management consultants, Mckinsey and Company of more than 1,200 purchasing decision makers in small, medium, and large companies throughout theUnited States  and   Western Europe  who are responsible for buying high-tech products and services. The insights were consistent across simple to complex services and products.

McKinsey found a big difference between what customers said was important and what actually drove their behavior. Customers insisted price and product aspects were the dominant factors that influenced their opinion of a supplier’s performance and, as a result, their purchasing decisions.

 Yet when McKinsey examined what actually determined how customers rated a vendor’s overall performance, the most important factors were product or service features and the overall sales experience. The upside of getting these two elements right is significant: a staffing service seen as having a high-performing sales force can boost its share of a customer’s business by an average of 8 to 15 percentage points.

 That makes their next finding all the more important. Of the many habits that undermine the sales experience, two that are relatively easy to fix accounted for 55 percent of the behavior customers described as “most destructive”: (1) failing to have adequate product knowledge and (2) contacting customers too frequently. Only 3 percent said they weren’t contacted enough, suggesting customers are open to fewer, more meaningful interactions. Part 2 of this posting will appear in our next blog.

When is the right time to sell your staffing firm?

April 12th, 2012

Selling one’s company at the right time is critical. It is difficult for the owner of a privately-held company to, as they say, “align the stars with the moon” to achieve the perfect time to sell. Public companies have their stock price to guide them.

Generally, most of us only know if the market turned after it happened, it is very difficult to time the market at its peak.

Here are some other ideas of what many would consider the right time:

  • Sell when the economy is robust.
  • Sell when your industry is hot.
  • Sell when your company is doing well.
  • Sell when the company is fully mature.
  • Sell after proper planning and preparation.
  • Sell when you find the right buyer.

While all of these factors will rarely line up in one’s favor, consider selling when most are in place. The universe is rarely in perfect harmony, but you can certainly choose a time when most factors are shining on your business.

There are certainly many other reasons. Others haven’t even been mentioned such as: health issues, personal problems, and the offer that’s too good to pass-up, etc.; the list is endless. Most people sell their business because something in their gut tells them it’s time. It is probably the same gut reaction that told them to buy the company or start the business in the first place.