Lesson #261: Leadership 101--Narrow Your Say-Do Gap

I recently was in a client’s office and they had an interesting collage of words and images hung on their wall, trying to summarize the culture they wanted to create for their employees.  One section stood out to me, it said, “Narrow Your Say-Do Gap” next to the word “Commitment”.  Not only did I think that was a great way to manage your team’s expectations by, it must be working, as the company has a “love affair” with their leadership team, as evidenced by their employees long tenure with the company and the very high reviews of their CEO on Glassdoor.  There are some juicy nuggets in here, that we can all learn from in trying to be good leaders with a narrow Say-Do Gap.

WHAT IS THE SAY-DO GAP?

Let’s first define the Say-Do Gap, so we know exactly what we are trying to narrow.  Just as the name suggests, as a good leader and fellow employee, it is important that you “practice what you preach”.  If you tell your team you are going to do something, DO IT!!  The better you follow through on your stated promises with visible actions, the narrower your Say-Do Gap.

WHY A WIDE SAY-DO GAP IS BAD?

A lot of bad managers may give lip service to saying they are going to do something, and never follow through.  And, all that does is irritate everyone in the office that was relying on that project to get completed.   While at the same time, delivers a deadly blow to your credibility as a leader.  If your employees can’t trust you to honor your word, they will never remain loyal to you.  Companies with a wide Say-Do Gap typically have a very poor morale in the office and experience high levels of employee turnover, as employees become disgruntled by mismanagement of unrealized expectations.

A WIDE-GAP CASE STUDY

I have been exposed to a lot of poor leaders, during my work at Red Rocket.  The relationship with that CEO typically starts out fine.  They say they have a problem they want to fix, and they are committed to doing whatever is necessary to fix the problem (e.g., capital investment, new incentives, new hires).  But, after the project starts and recommendations are made, when it is time to pull the trigger they never follow through.  And, worse yet, they say they are working on it, but really have no intention of actually doing it.

Maybe they are concerned about the resulting dilution to their ownership that would come from a financing or new stock option plan, or maybe they are debt averse, or maybe they just don’t agree with their team’s recommendations and prefer to avoid conflict.  Whatever the reason, they get the “engines of change” up and running, which gets their team excited.  But, then when push comes to shove: no actions are taken, and their entire team ends up disappointed in the process.

A NARROW-GAP CASE STUDY

On the flipside, let’s remember my case study from my time at iExplore, right after 9/11/01 with the travel business imploding in the wake of terrorism.  I was always honest with my team, both in good times and bad times of the company.  And, I always followed through on any promises I had made to the team over time.  If I told them we were going to raise new capital, we did.  If I said we would sign a new partnership, we did.  And, that history of a narrow Say-Do Gap between 1999-2001, gained me the trust of our team over time and earned me what would become much needed “trust me capital” when we crap hit the fan on September 11th.

More specifically, iExplore should have gone out of business.  Revenues stopped coming in, as people stopped traveling.  We had a large burn rate carrying a staff of 35 employees.  And, our investors went running for the hills.  So, when I had to terminate all employees, and ask 12 of them to volunteer their time for three months, on the hopes of me raising a new round of capital and getting their volunteered back-pay funded at that time, that would have been a monumental ask of most employees in most any other company.  But, our team was passionate about our business and they trusted me to follow through.  Which I did, getting a new funding round closed in January 2002 and all their earned pay from their volunteered fourth quarter of 2001 repaid in full, at that time.

The point here is not how we saved the company.  The point here is I would have never been given the opportunity to save the company by my team, if I had anything other than a narrow Say-Do Gap in the two years leading up to that event.  Trust matters in being a good leader, perhaps more than anything else, especially when things start to go wrong, and you need your team the most.

WHAT DOES THIS MEAN FOR YOU?

Do a critical assessment of yourself.  How many times do you promise to do something?  And, compare that to how many times you actually followed through?  If that answer is close to a 100% follow-through rate, you are a “Narrow Say-Do Gap Jedi Master”.  But, the closer you get to 80%, or God forbid 50%, the damage you are doing to your leadership credibility may be too insurmountable to overcome.  Don’t let this be you.

For future posts, please follow me on Twitter at: @georgedeeb.

Lesson #260: Where to Find Businesses for Sale

As many of you know, I have been looking for businesses to buy, over the last few months.  Primarily in the digital technology space.  There are plenty of resources that I am leveraging in this process, from my personal network to business brokers to online websites.  I figured this would be a useful post for any of you looking for businesses to buy, as part of setting an M&A strategy for your business.

YOUR NETWORK

When looking for a business to buy, you need to be well connected to people that know about businesses for sale.  This includes people like lawyers, accountants, bankers, venture capitalists, private equity firms, consultants, etc.  So, be sure to let these types of professionals know you are on the hunt, and what specifically you are looking for, and they may know of current opportunities.  Or, at a minimum, hopefully, they will keep you on their radar for future opportunities that arise over time.

BUSINESS BROKERS

Business brokers or investment bankers are companies that are engaged by a seller, to help them sell their business.  They prepare all the marketing materials, reach out to prospective buyers and act as an intermediary between the buyer and the seller of the business.  Business brokers come in all shapes and sizes, from "one man shows" to big companies, and they typically have a specific area of focus.  Some focus on big companies, others focus on small companies.  Some focus on the Midwest, others focus on the West Coast.  Some focus on the technology industry, others focus on manufacturing.  All as examples.  So, find the business broker that that best serves your target company size, industry and location.  Doing some searches on Google should point you in the right direction (e.g., "business broker Chicago technology").

As a few examples of some of of the better ones I have worked with, focusing on smaller businesses in the digital technology space, reach out to the partners of firms like these:

Corum Group (based in Seattle)

Digital Exits (based in Los Angeles)

Exit Strategies (based in Silicon Valley)

Peakstone Group (based in Chicago)

Petsky Prunier  (based in New York)

Progress Partners  (based in Boston)

Valley Biggs (based in Tampa)

Also including a more expansive list of brokers focused on the lower middle market that have higher deal flow volume.


ONLINE WEBSITES

There are a plethora of websites promoting businesses for sale.  Some do a ton of volume, and others are smaller.  Some are the front end of a business brokerage, and others are simply an online marketplace.  But, these are all good places to start your search--many with easy tools to search by location, industry, revenues, cash flow and beyond.  Just understand, on these sites, there will be lots of other buyers looking for the same types of opportunities as you.  So, be prepared to move quickly, as you see new stuff hit the market.  If you see listings that have been hanging around for a while, that can either mean "buyer beware" or use it as an opportunity to "make your best offer".  Be sure to sign up for their newsletters or automated search listing announcements, so you don't miss any new listings that get posted over time.  I have put a star next to the ones I use the most.


Acquisitions Direct

App Business Brokers

BizBuySell (**)

BizQuest (**)

BusinessBroker.net (**)

BusinessesForSale.com (**)

Business2sell (*)

Deal Stream (*)

Empire Flippers (*)

Enlign Advisors

FE International

Flippa/Deal Flow (*)

Latona's (*)

Merger Place (*)

Quiet Light Brokerage

Store Coach

Sunbelt Network

WebsiteClosers.com (*)

WebsiteProperties.com

Woodbridge International


Hopefully, you are now "in the know" on how to find a business to buy.  So, whether you are an established business looking for tuck-in growth extensions or additional market share for your business, or an entrepreneur looking for a base platform to invest in as your next venture, M&A can be a great solution for you.  And, worth mentioning, the more recurring cashflow the target company generates, the easier it will be to help you finance such acquisition from traditional banks or SBA backed lenders.  The acquisition financing is out there for good deals, so don't think you need to fund this entirely by yourself.


For future posts, please follow me on Twitter at: @georgedeeb.

[NEWS] Red Rocket to Open Raleigh-Durham Office

We are excited to announce that Red Rocket will be opening an office in the Raleigh-Durham area in June 2017.  We have been networking with the growing technology ecosystem there over the last few months, and have been very impressed with the companies, executives and professionals we have met.  If you are based in the Triangle area, we will have "boots on the ground" starting in June 2017, and we look forward to exploring opportunities together.  And, for those of you in Chicago, it will still be business as usual for any needs you may have, as we will be serving both cities.

If you know any great companies in the Triangle that we should be connected with, we welcome all introductions as we start to build our local network.  Feel free to contact us via the form at the bottom of this page.

For future posts please follow us on Twitter at: @RedRocketVC.

[NEWS] The Red Rocket Blog Passes 1,000,000 Reads!!

We just logged in to write our next blog post and were pleasantly surprised when we got an alert that the Red Rocket Blog just passed the 1,000,000 reads mark!!  We are so excited our reader base continues to grow and keeps coming back, month after month, for our growing list of lessons in entrepreneurship.  Thank you so much for your continued readership, and helping us spread the word to your entrepreneurial colleagues.

For future posts, please follow us on Twitter at: @RedRocketVC.

Lesson #259: With Human Talent, You Get What You Pay For

I get it.  Most startups operate on fumes, in terms of available cash resources.  So, the natural instinct of most entrepreneurs is to pay as little as they can for most of the expenses in their business.  And, I agree with that for most all expense categories, except one: human talent.  Building the right team for your startup is the single most important thing you will do in terms of putting your business on a path toward success or failure.  You try to cut corners with your talent decisions, and you are toast!!

WHEN HIRING EMPLOYEES

There are many ways startups try to save payroll costs.  Sometimes they find the candidate willing to do the job for less money.  Sometimes they downgrade the position (e.g., from a VP of Marketing to a Marketing Manager).  Sometimes they try to avoid paying expensive benefits or giving out dilutive stock options in their business.  Each of these examples are filled with opportunities to fall on your sword.

You have to ask yourself these key questions before going down one of these routes.  Why is that person willing to work for less money than their peers; maybe they are desperate, hopping from one job to the next?  Who has the most experience to help you achieve your desired goals; the first timer experimenting with your business, or the proven veteran that can shorten the learning curve making fewer costly mistakes?  Do you really think you are going to be competitive to attract the best talent up against other high-flying startups when others are offering meaningful benefits and upside incentives and you are not?  As you can see, hiring talent has much higher potential costs, than just their line item in the budget, if you make the short-sighted, cash-saving decision.

WHEN ENGAGING PROFESSIONALS

The same holds true when you are engaging professionals (e.g., accountants, lawyers, consultants).  If one professional is saying they will do the work for $100 per hour and another is quoting you $200 per hour, your instinct shouldn’t immediately jump to the one offering the lowest price.

As an example, maybe the higher-priced solution has the learnings from a 20 year career vs. a 5 year career, to help you avoid more known pitfalls that you don’t even see coming.  Or, they have helped 20 clients succeed in similar situations, vs. 2 clients succeed (the ones they tell you about) and 10 clients not succeed (the ones they don’t tell you about)?  Or, the higher priced consultant can afford to charge those rates, because their time is limited and everyone is fighting to get his or her involvement with their business because they are simply the best?  Again, not all professionals are created equal, and you need to peel back the layers of the onion far deeper than just jumping to the lowest-priced solution.

WHEN SEEKING MENTORS

As a mentor myself, I am very selective with my time.  There are only so many hours in the day, and I have to prioritize with whom I invest my limited time.  In any given year, there may be hundreds of startups looking for free help, and less than 10% percent of them have any chance for long term scalable success.  And, from those dozens that have a fighting chance, the best mentors typically only have time to work with a couple.  So, to the extent you can offer them a good reason to pick your business (e.g., stock options, advisor fees), you want to make sure you break through the clutter, to ensure they work with you.

Equally important, make sure the mentor is qualified to be advising you on that specific topic at hand.  Getting free mentorship on marketing ideas from your lawyer, is probably not as effective as getting professional marketing advice from a proven marketer, even if you have to incentivize that mentor to get it.  So, don’t go down the cheapest route looking for advice, go down the best route.

WHEN RAISING CAPITAL

I have often said that venture capitalists would rather invest in an A+ team with a B+ idea, than a B+ team with an A+ idea.  First of all, that is not a lot of margin for error in your hiring decisions, so it is critical you get it right in order to get investors excited about your business.  And, secondly, when doing your budgeting work, you can’t only look at the talent as an expense line in your payroll; you have to think about if that talent can help you open up additional investment resources that otherwise would not be available to you.  Said another way, you need to invest money in experienced talent that investors are looking for, to help you raise money, that will help take your business to new heights.  So, stop thinking about talent as simply line items in your budgets, as their value can help you many other ways than simply doing their job.

PAYROLL MISTAKES ARE THE MOST COSTLY

Hopefully, what you have seen in this post is: (i) decisions around human talent will be the most important ones you will make; (ii) going down the cheapest route, is often times a recipe for disaster; and (iii) the costs of making a talent mistake can often end up being materially more expensive than the originally monies you were trying to save in the first place.  To pound home this last point, you hire the wrong enterprise sales guy, trying to save a short term buck, and you lose precious months of selling time and revenues, and potentially just put yourself out of business.

So, long story short:  don’t think cheap with your talent decisions; think the best, even if it comes at a higher cost.  What you are losing in short term cash, you are more than going to make up for in long term success.   As the old adage says: you get what you pay for!!

For future posts, please follow me on Twitter at: @georgedeeb.

Building a Hard-Working Team Starts With You

Startups require a lot of hard work, with no rest for the weary. Since you need to be moving at light speed to gain first-mover advantage, it often means a lot of late nights in close quarters alongside your fellow team members. The founding team must be able to thrive in that environment. Capital will be tight and you will need to stretch your human resources as far as you can, without breaking the bank.

Read the rest of this post in Entrepreneur, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

A Successful Career--But My Best is Yet to Come!

I recently passed my 25th year of being in the work force.  Most careers span around 50 years, so at the midpoint in my career, I figured I would do a little self-reflecting on where I have been, where I am, and where I would like to go, to see if you guys can help me better achieve my goals in my next 25 years.

WHERE I HAVE BEEN

Credit Suisse First Boston (8 years).  My investment banking days in New York were pretty amazing.  It really honed my financial, strategic, fund raising and M&A skills.  And, as an expert in the retail industry group, it was exciting to work with the CEO's and CFO's of some of the nation's largest retailers (e.g., Home Depot, Babies R Us, Saks Fifth Avenue, Pep Boys).  It was really a meteoric rise for me, starting as a financial analyst, getting promoted to associate without needing an MBA (the only person in my class to do that) and ultimately rising to the level of Vice President.

I loved the big paychecks for a guy in his 20's.  But, the transactions started to become routine (e.g., the 4th IPO was no different than the first three).  And, all I could think was, I would rather be the entrepreneurial CEO of the companies I was taking public, that grew their business from zero to $250MM in sales, and got a huge financial windfall by taking their companies public.  I was too creative and entrepreneurial, and needed to make a change, even at the expense of cutting off my "golden handcuffs" in terms of compensation.

Overall experience:  A
Overall happiness:  B+

iExplore (10 years).  With the dot com boom in full swing, I figured the timing was right to make my leap from investment banking to building a startup.  I was a passionate adventure traveler, and new the process of booking a trip was very cumbersome, and that the internet can make it better.  And, apparently, we struck a chord with other travelers, as we ultimately attracted over 1.3MM unique visitors per month to our website.  We cut a deep strategic relationship with National Geographic, and powered the adventure travel sections of many large travel sites (e.g., Expedia, Travelocity, Starwood, Fodors, Frommers, Lonely Planet).  My creative and entrepreneurial juices were constantly flowing, and I really loved what I was doing.  It was here where I honed my business, marketing, branding and product skills.

But, the travel industry was very cyclical.  And, when times were bad (e.g., after 9/11/01), they were really bad, making it tough to scale, especially when consumer marketing was so expensive in the crowded online travel space.  And, having raised venture capital from outside investors, I needed to get them an exit at some point.  So, we ultimately sold the business in 2007 to TUI Travel PLC in London, the largest seller of leisure travel in the world, with over $25BN in sales.  I lasted two years with TUI, before the politics, procedures, processes, travel time and slow speed of a big European company tooks its toll, and I moved on to my next business.

Overall experience:  A+
Overall happiness:  A+

MediaRecall (2 years).  I didn't found MediaRecall, a B2B digital video technology and services company.  Their founders had already built a great product and needed help scaling their company.  So, I acquired a third of the business and became their CEO in late 2008.  We had a strategic relationship with Getty Images, around the clipping and monetization of stock footage, and had established customer relationships with many of the large film and television content owners, or their partners (e.g., National Geographic, BBC, Deluxe, Johnny Carson, Oprah Winfrey).  It was here where I built my enterprise B2B sales and SaaS experience.

One of our customers liked us so much, they ultimately wanted to buy the company.  As we were deep in digital services, where their strength was in film services (which was not the future).  So, Deluxe made us an offer we couldn't refuse in 2010, and we sold the company to them (including an earnout with the potential of a 10x return).  I was expecting another five year run when I joined the company, so we sold a lot sooner than I thought we would.  But, I found myself with time on my hands, and not knowing what to do next.

Overall experience: A-
Overall happiness:  B+  (liked B2C of iExplore, more than B2B of MediaRecall)

WHERE I AM

Red Rocket (7 years).  I founded Red Rocket to find another business to invest in and become CEO, as I did with MediaRecall. I never intended it to become a business.  But, with the success of the blog readership (almost 1,000,000 reads to date), leads started coming in and I have been staying busy full-time helping clients with their growth strategy, execution of financing needs.  I have been approached by over 800 companies during this time--in the $0-$20MM revenue ranges--including the good, the bad and the ugly.  A few bigger clients got me engaged in more longer term, outsourced CMO roles, which were my favorite projects to work on.

But, consulting to CEOs is not the same as operating as a CEO.  As a consultant, (i) clients are typically looking to you for solving a specific project-based painpoint (e.g., 3-6 month fixer upper, not long term engagement), and (ii)  you do not have any control over the upsides or the outcomes, as you are not the one "driving the bus" (which makes taking equity-based roles hard to do, unless you really trust the CEO you are working with).

Overall experience:  A-
Overall happiness:  B

WHERE I WOULD LIKE TO GO

Red Rocket will be a great thing, when I am closer to retirement age and looking for fun projects to stay busy and keep me intellectually stimulated.  But, with me on my mid-40's, I still have way too much energy left.  And, I feel like I haven't done my best work yet.  I am driven to building something really big and great, where there can be a big financial pay day at the end of the build (as I am never going to create long term wealth as a consultant).

So, to that regard, I have been on the hunt to get back into the CEO chair (or CMO chair for a more established growth stage business where I trust the CEO).  I have been exploring all avenues to getting there--buying a company, executive recruiters and working my network of relationships.  I would consider B2B or B2C companies, but as I mentioned above, B2C are a lot more fun for me.  And, as for geography, I would look at acquisitions anywhere, if easily relocatable, and executive roles primarily in the major technology markets.

The goal is to find something where I can get my experience and happiness factors to both score an A+ again.  I need that adrenaline rush again, like I had at iExplore, this time driven with all the business learnings and experience I wished I had had the first time around.

CHALLENGES

As you can see above, my experiences have been all over the place--investment banker to Fortune 500, CEO of early stage startups, advisor to growth stage companies, outsourced CMO, etc.  Across a wide range of industries--retail, internet, travel, media, services, technology, ecommerce, SaaS, etc.  So, people looking at my background cannot label me in any one bucket, which puts me at a disadvantage versus executives that have only been doing one specific thing over their career.  All, I know is, I am a quick study on anything new I try, and I have been largely successful at everything I have ever done.  My smarts and natural business instincts have always served me well.

MY ASK OF YOU

Think you or someone you know is building greatness, preferably in the B2C space.  Is your company willing to take on a new growth-driven partner in your adventure, preferably as CEO (or CMO for the right company).  Or, are you willing to sell your company to a new investor group, lead by Red Rocket.  Are you large enough that you are not a broke startup, but actually have over $500K of profits for me to apply my sales and marketing magic to help scale the business, without the need for raising outside capital?  If this sounds like you, let's talk!!  Feel free to email me via the contact form at the bottom of this page.

For future posts, please follow me on Twitter at: @georgedeeb.

The Top 3 Selling Techniques--Which Is Best For Your Business?

Not all products or services are created equal in terms of how you sell them. And, not all customers are created equal, in terms of how sophisticated or needing they are for a product or service.  And, selling into different levels of an organization, often requires different types of selling techniques, in order to get their attention.  This post summarizes the three most typical selling techniques used today.

Read the rest of this post in Forbes, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.