Posts on May 2020

The One Year, Thirty Minute Challenge :: Week 22 :: Strategic Planning :: Mergers and Acquisitions

Mergers and acquisitions are things that multi-billion-dollar companies do, right? Certainly, companies of that size do merge with and acquire other companies, but these strategies can be employed by companies of almost any size.

In this week’s One Year, Thirty Minute Challenge, we want to dig into the mechanics of surveying the competitive landscape, identifying synergies that might exist between us and our competitors and crafting a plan to bring two businesses together.

Let’s do a quick definition of terms. In a merger, two equals come together and craft a new business entity that most likely features leadership from both businesses, products from both businesses and a consolidated customer base. In an acquisition, one business purchases the assets, products, and customer base of another business. It’s possible that the leadership of the acquired business will be no longer be present. Its brand might be swallowed completely by the acquiring business.

Before we jump into this week’s exercise, let’s lay out the case for a merger or acquisition –

  • Consolidated back office functions reduce cost – two HR departments become one, two finance departments become one – you get the idea.
  • Distinctive competencies of each entity are leveraged across the new entity.
  • The new entity has a broader product offering.
  • Market share for the new entity automatically increases.
  • It reduces rivalry in the industry.
  • It increases bargaining power with vendors and customers.


Here are a few observations before we start on the exercise –

  • Companies who have grown rapidly through mergers and acquisitions all say the same thing – nothing is more important than culture fit. If the cultures of the merging companies clash, the synergy never happens and value dissipates (sometimes costing companies incredible amounts of money to separate the entities). Occasionally, the companies don’t survive.
  • Merging companies operationally is hard. There are systems and processes that must be combined. Which accounting system will the new entity use? How will we reconfigure the sales pipeline? And much, much more.
  • Most likely, some people will lose their job. That’s part of the improved value proposition. You need to create a separation process that, as much as possible, allows departing people to keep their dignity, positions them for future success, and gives them adequate financial resources for a transition. You also need a plan for the people who are staying – who are grieving the loss of their coworkers.
  • You might be looking at your bank account and thinking, “I can’t acquire a box of pencils, let alone another company.” The current climate has created incredible uncertainty. There might be companies you could acquire for just an assumption of debt or for a stream of future payments instead of a lump sum upfront.
  • Acquire or merge with positive cash flow. A company with negative cash flow might seem like an easy acquisition target, but unless the reason for negative cash flow is readily apparent and easily fixable, you want to acquire or merge with a company that is “paying its own way.”
  • If you’re acquiring a company just for their book of business, be cautious. Unless the company has a locked-in customer base (e.g. the only factory-authorized service center for XYZ brand widgets in six states), customers could defect to competitors and significantly diminish the value of the acquisition.
  • I understand that every bullet point above this seems fraught with peril. These are two hard strategies and they require a lot of soul-searching and empirical analysis before they are utilized. But, when executed correctly, they can create incredible value and opportunity for the owners and companies who utilize them. Companies can quickly experience every one of the benefits spelled out earlier in the post.


Here’s this week’s 30-minute exercise –

  • List 3-5 merger or acquisition targets. Remember, you’re looking for culture fit, complimentary product offerings and organizational synergy. When thinking about complimentary products, consider adjacent industries. For example, an HVAC company might find a good merger/acquisition target with a plumber.






  • Write a few notes after each one regarding why you think they make a good merger or acquisition target. Be specific – cite products, services, people, similar marketing communication.
  • Sleep on it for a night or two. Revisit the list and the notes and see if they still make sense.
  • If it still makes sense in a day or two, introduce the idea to a couple of trusted lieutenants in your organization and get their take on it. Discuss all of the challenges listed above and any additional ones that you identify.


If after this internal deliberation, you still think it’s a promising idea –

  • Initiate a conversation with the principal of the target company. Suggest lunch or coffee. This is your first opportunity to gauge the culture of the organization, because culture flows down from the top.
  • If the conversation is positive, introduce the merger/acquisition topic. If there is interest from both sides, sign a mutual non-disclosure agreement. This will ensure that any financials or trade secrets disclosed during the following discussions will remain private.
  • Arrange a meeting with a small group from both entities. Invite operations people, finance people and tech people. In this meeting you’re still checking for culture fit and you’re starting to dig into overarching operational questions. It might be a good idea to engage a third-party to manage this meeting. Their job is to make sure everyone’s concerns are aired and addressed.
  • Each entity needs to have a debrief after this meeting to discuss culture, markets, operations, finance, and tech.
  • If everyone involved is still feeling positive, it’s time to involve legal counsel, accountants and possibly consultants with experience in merging operations (if you haven’t involved them up until now).


This One Year, Thirty Minute Challenge was a thought-starter for one of the more ground-shifting topics in the series. If you decide to undertake one of these strategies, think long and hard, and get help.

The One Year, Thirty Minute Challenge :: Week 21 :: Marketing :: Social Media

Unless your current and potential clients constitute a very obscure part of the business-to-consumer or business-to-business landscape, you need an effective social media presence. Look at these statistics from Hootsuite (a social media management tool vendor) Source:

  • 50% of the global population (3.8 billion people) uses social media
  • 84% of people with access to the internet use social media
  • In 2019, people spent, on average, 2 hours and 24 minutes on social media every day
  • The average social media user has 8.3 different social accounts
  • 43% of internet users use social media for work purposes
  • 43% of internet users use social media to research potential purchases
  • 90% of internet users say they watch video online at least once a month
  • Social ad spending is forecast to increase 20% to $43 billion USD in 2020
  • Active users by platform
    • Instagram – 1 billion
    • Facebook – 2.5 billion
    • Twitter – 152 million
    • YouTube – 2 billion
    • Pinterest – 335 million
    • LinkedIn – 675 million
    • Snapchat – 218 million
    • TikTok – 800 million


This week’s One Year, Thirty Minute Challenge is to reexamine your social media strategy. Some of you might have ignored this marketing, messaging, and customer service channel, but you’re probably ignoring it at your own peril. Your customers, potential customers and competitors are most likely already there. Some of you might be active in social media but are not maximizing the results. Some of you might be knocking it out of the park.

There are two things that are unique and wonderful about social media. The first thing is that the best social media content is “useful”. The plumber is posting a list of the 10 worst foods for clogging garbage disposals. The chiropractor is sharing an infographic on how to lift heavy items without hurting your back. You’ll occasionally see a “hard sell” on social media, but they aren’t prevalent. The second thing is that, unlike almost every other marketing and advertising medium, social media is a conversation – business-to-customer, customer-to-business, and customer-to-customer (in front of the business). And those conversations are enabled and encouraged by the platform provider. Some platforms include tools that help the customer rate, review, and recommend the business.

One more thing before jumping into this week’s exercise. Some business owners and managers live in fear of what might be posted on social media. They dread the one-star review or the lengthy post from the irate customer. That content represents one of the best opportunities on social media. Customers don’t expect companies to be perfect, but they do expect companies to make things right when they make a mistake. When the poor review or the flaming complaint comes, jump right in. Apologize for the missed expectation, commit to making it right and give the complaining customer the first step in repairing the relationship. I recommend something like this, “Jim Smith, I am sorry that was your experience in our office. We want every customer to feel like they were treated well and received incredible value by purchasing our product. I’d like to talk with you about your experience. Would you call me at 888-555-5555 or email me at, so we can see what happened.” Again, in front of this complaining customer, all your other customers and any potential customers, you’ve voiced your commitment to making this right. If you’re able to resolve the complaining customer’s problem, invite them back to the post to share the resolution (without all the gory details).

Let’s jump into this week’s exercise –

Create a social media manifesto

  • Describe what you want to accomplish (position my company as an expert in the field, showcase the talented people on my team, generate sales leads, provide industry and company information so people can understand what we do, sell products or services online)
  • Define what winning looks like (reach, number of views, number of followers, number of engagements – clicks, likes, replies, pins, saves, number of leads, number of mentions, number of tags, number of reposts, shares or retweets)
  • Identify 6 – 8 themes that you want to consistently communicate (these might revolve around core values, products, people, community involvement)


Stake out your place on social media – I suggest creating accounts on the platforms you think you might want to use, just so you have the account name claimed. You can build them out as it makes sense (you have a plan that fits the platform, the ability to create meaningful content and the bandwidth to interact with customers on the platform).

Identify the best place or places to talk to your customers and potential customers on social media – If you don’t know where they hang out on social media, ask them. Each social media network has detailed demographics of its users. Review those and see if your customers are there.

Create a social media calendar – Using the themes from your manifesto, create a content calendar with dates, platforms, and messages. Content can be original (created by you or your team) or curated (useful to your audience, consistent with the messages of the manifesto but created by someone else). Schedule in “big” content and the run up to it. For example, if you’re going to be at a trade show, announce it in advance, ask followers to meet you there (scheduling appointments would be great), show pictures of preparation and broadcast live from the event when you get there. Track results from the content you share. Check levels of engagement and use it to refine future content. Periodically extend the invitation for more interaction outside of social media (if that makes sense in your business model). Download a sample social media calendar here.

Execute – Social media requires consistent care and feeding. Create good content, consistently share it, track the results, engage with your audience.

This is the most rudimentary of social media information. There’s much more to learn if you want to go deeper. Here are some good resources if you want to take your research further.

The One Year, Thirty Minute Challenge :: Week 20 :: Value Creation :: Economic Value Creation

Earlier in the One Year, Thirty Minute Challenge (week 11) we examined Experiential Value Creation – the gap between what the customer pays for our product or service and the worth and enjoyment they experience from the purchase. The goal is to widen that gap as much as possible, so the customer’s enjoyment of their purchase far exceeds the monetary investment. In that exercise, we explained the three ways that customers interact with purchases and how to maximize those interactions to create the greatest experiential value. Experiential value creation involves the sometimes-subjective evaluation of customers.

This week’s One Year, Thirty Minute Challenge is the purely objective exercise of economic value creation. Economic Value Creation is the gap between the sales price of our product or service and the cost to produce that product or service.

In economic value creation, we want to push the Sales Price and the Cost as far apart as possible. This is the money we get to keep. It’s fairly easy to track because we know all of the numbers. Successful Experiential Value Creation allows us to push the sales price up. In this week’s exercise, we want to work on pushing the cost down.

Costs fall into two categories – variable and fixed. Variable costs (expressed as cost of goods sold when broken down by sold unit) are those costs that go up and down based on the number of times the product or service is delivered – every cheeseburger sold has a bun, a piece of cheese, a hamburger patty, a squirt of mustard, three pickle slices, a wax paper wrapper and 4 minutes of employee time devoted to frying, dressing, wrapping and delivering the finished product. Every therapy session has 55 minutes of the counselor’s time. The more times the product or service is delivered, the more costs we incur. Fixed costs are those we incur simply by being open. If we serve 2 or 200 customers, they do not change. Rent, utilities, communications, hardware, software, and insurance typically fall into this bucket.

I want to discuss variable costs in the context of the value creation chain.This week’s exercise is devoted primarily to variable costs, but certainly attention should be devoted to reducing fixed costs. We should be regularly checking price vs. value on our office space, insurance, technology and more.

Inputs > Transformation Activities > Outputs

Here are a couple of samples of value creation chains from very different industries.

Economic value creation improves by moving through the value creation chain better, faster and cheaper.

One manifestation of better can be quality – that could be evidenced by fewer defects – i.e. your quality control people find fewer parts that don’t meet your specifications or that need to be reworked. Better could also mean that the raw materials are free from problems. That opens up the entire vendor or supplier discussion – do all of the vendor’s raw materials for your product perform as expected. Is the quality consistent or do they vary wildly from batch to batch? Do you have tools in place to measure vendor performance so you can identify underperforming vendors and defective batches? Do you have initiatives in place that stop or reduce defects in the process? Initiatives that keep your production people from making mistakes? If you’ve visited someone in the hospital lately and been there when the nurse has administered medication, you’ve seen a procedure that makes patient care “better” – the nurse scanned the wristband on the patient’s arm, then scanned a barcode on the medicine he or she was about to administer. That allows the EMR system to alert them if a wrong medication is about to given to the patient. Better might be more effective use of personnel, materials or machinery. In short, “better” can represent exploiting a host of operational opportunities.

The second improvement you can make in the value creation chain is faster. Faster is desirable for several reasons. First, it hastens the moment you get paid. If you can put a product in a customer’s hand quicker, you can be paid quicker. I realize that collecting money, paying for raw materials on terms and credit card processing times all constitute a bunch of moving parts when it comes to money, but suffice it to say, faster is almost always better. Faster on the shop floor means that the same resource can do more work in the same amount of time. If you can automate or organize so that a worker can make 10 widgets in an hour instead of 8, you can significantly increase profitability. Any time you can create more units of output with the same units of input with no degradation in quality, that’s a good thing. Faster also applies in the delivery of raw materials before transportation and delivery after the product is transformed. I know that most of us automatically switch into manufacturing mode when we’re talking about value creation but let me remind you of the value of faster when it comes to stroke treatment. If you can begin the transformation activities (i.e. treatment) faster, the patient’s prognosis improves dramatically, since during a stroke, 1.9 million neurons die every minute. Speed is almost always a competitive advantage.

The final improvement you want to make in the value creation chain is cheaper. This probably seems like a no-brainer and it is. You certainly want to cut the cost of your processes anytime you can. Cheaper can translate into higher margins or in the ability to reduce prices to consumers making your product or service more competitive and hopefully driving more volume. Certainly, improvements in speed as we discussed earlier can cut costs, but there are other opportunities for cheaper as well – more preferable pricing from vendors, cheaper transportation costs before and after the transformation activities and lowering administrative costs (that are typically spread across all produced units).

For this week’s 30-minute exercise, map your value creation chain.

How can inputs be obtained “faster” or “cheaper”. How can you keep a minimal number of inputs on hand (saving on inventory holding costs) while still making sure you never impact the ability to start the value creation process? If the input is a skilled employee, how can you develop them, so they are “better”? How can transformation activities become more streamlined? Be more accurately measured? Require less rework? Be touched by fewer people? How can outputs be delivered to the final customer quicker or in a more convenient way?

Explain the value creation chain to the people involved in each of these steps. Ask them to critically examine their responsibilities in the light of better, faster, and cheaper. Offer them financial incentives when their recommendations for improvement drive more money to the bottom line.

The One Year, Thirty Minute Challenge :: Week 19 :: Finance :: Financial Literacy

If you want employees to make decisions like you make decisions, they’re going to need access to the same data you have and they’re going to need to know how to make sense of that data. That includes a big dose of financial literacy.

Rudimentary financial literacy doesn’t require that everyone in the organization take an accounting class and it doesn’t mean that everyone knows what everyone else makes. Basic financial literacy rallies everyone in the organization around common goals, gives them a common language and increases their value to the organization.

This week’s One Year, Thirty Minute Challenge lays out the first financial literacy concepts that everyone in your organization should understand and gives some ideas on how to begin financial literacy education in the organization.

Profitability is built on creating an economic value surplus. The formula is

Revenue (units sold * cost per unit)

Cost of Goods Sold (materials + labor)

Fixed Costs

= Profit

It’s important for your team to understand each of these components. Revenue is a combination of two things – volume and price. The price for your good or service must be enough to cover the cost of goods sold (the materials and labor required to make the product). The remaining money, in aggregate, must be enough to cover the fixed costs of the business (rent, utilities, insurance, phones, desks, trucks, office supplies and more). Volume represents the number of people that are interested and willing to pay for your good or service at the price you’ve established. The money left over after paying the cost of goods sold and the overhead expenses is profit. The accumulated profit must be enough to build a surplus so the business can survive temporary downturns in volume or can capitalize on emerging opportunities.

The real magic happens when team members see how their day-to-day responsibilities drive each of these components. Price must be high enough to cover the fixed and variable costs and must also create a favorable value proposition for the customer (the price paid must be equal to the benefit derived by the customer). Pricing plays into decisions on marketing and advertising.

Cost of goods sold represents an incredible opportunity for inviting team members into financial literacy. If they can streamline the creation of the good or service, it drives the labor cost per unit down – allowing the company to make more units in the same amount of time. That increases profitability. If they can negotiate more favorable rates with suppliers, driving the cost of materials down, that increases profitability. If they can obtain higher quality materials for the same price, thus increasing quality and lowering the defect or warranty rate, that increases profitability. Greater profitability enables the company to create a larger surplus and be more prepared to weather economic storms. The COVID-19 crisis has shown us the importance of financial resilience. A report by JP Morgan Chase showed that only half of all small businesses have enough cash on hand to survive for 27 days.

Fixed costs are those incurred by the business just by being open – rent, utilities, insurance and more. When team members understand how co-working or working from home can lessen the need for office space – pushing rents down or how staying healthy can help push down insurance costs, they begin to get an understanding of the financial calculations that you are making every day. That understanding leads to engagement and empathy.

These actions move team members to the same side of the equation as owners. Instead of owners being adversaries – the employee’s loss is the owner’s gain – team members are now rowing in the same direction as the owners because they understand the owner’s endgame – building a viable, sustainable, and stable enterprise – one that can continue to offer employment and opportunity for years to come.

So, where do you start? First, I’d convene a meeting with all employees (if the company size allows it, if not, do several meetings) and explain the economic value surplus equation above. Explain that from this time forward, you’re going to share some of the company’s financial information so they can see how these pieces work. Then ask for their help in increasing revenue and decreasing expense. Finally, explain what’s in it for them. I’d suggest giving them skin in the game. If revenue increases, expense decreases, profitability increases (whatever information you’re willing to share), give them a cut of the savings or increased profits. You’ve now created common goals and explained it with, what is now, common language. You’re on your way.

Reconvene the meeting each month and report results.

Where do you go next? I’d suggest explaining double entry accounting – every financial transaction is recorded in two ways – when you sell a product, cash is debited and revenue is credited, when you buy copy paper, cash is credited and office supplies are debited. This prepares team members for the next, very important step.

Introduce the three primary financial reports – the Profit and Loss Statement, Balance Sheet and Cash Flow Statement.

The Profit and Loss Statement reports income and expenses for the business for a time period.

The Balance Sheet shows the organization’s financial health by tracking what the company owns and owes.

The Cash Flow Statement shows the movement of money in and out of the business. It differs from the income statement because all money coming into a business might not be income. For example, if a company takes out a loan, it receives money but did not generate any income. Conversely, if a company pays back a loan, it spent money but did not incur an expense. Instead it decreased a liability.

In your thirty minute exercise this week, decide how you can best engage your team in financial literacy by inviting them into some of the difficult decisions you make on a daily basis.



The One Year, Thirty Minute Challenge :: Week 18 :: Governance :: Legal Organization

This week’s One Year, Thirty Minute Challenge isn’t too sexy, but it could –

  • impact your ability to shield yourself, your family and your assets from legal liability
  • impact your ability to raise capital for your business
  • impact your personal tax liability
  • and more

My purpose this week isn’t to offer advice, because the topic is outside my area of expertise. The real answers will have to come from your accountant and/or tax attorney. My purpose this week is to offer education and encourage you to consider your options for the legal organization of your company.

Typically, most small business are legally organized one of these 5 ways –

Sole Proprietorship

Sole proprietorships are the simplest form of business organization. They do not produce a separate business entity but can register a separate trade name (Super Good Plumbing vs. Jim Smith, Plumber). Business assets and liabilities are mingled with personal assets and liabilities. Consequently, sole proprietors can be held financially liable for business debts and can be held personally liable for the actions of the business (which could put personal assets at risk). Sole proprietors can sometimes have greater difficulty in raising money than those who choose other business organizations.


This is for a business owned by two or more individuals. In “General partnerships”, partners share profits, losses and liability. In “Limited partnerships”, one partner has control of the operation and bears unlimited liability while the other partner(s) contributes, shares profits and has limited liability. Limited Liability Partnerships (LLP) give limited liability to each partner, protecting them from the actions of other partners. Partnerships can sometimes more effectively raise money versus sole proprietors since lenders can consider the combined creditworthiness of all partners.

Limited Liability Companies

Limited Liability Companies (LLC) are hybrids of partnerships and corporations. They allow owners to protect their personal assets by separating them from the business’ assets. They also protect owner’s assets in the event someone sues the business. Business profits and losses are passed through to the owner’s personal income. Members of an LLC are considered self-employed.


A corporation is an entity unto itself, separate from its owners. It can own assets, sell assets, sue, be sued and sell part of itself to other entities (stockholders). The corporation is responsible for its own debts and liabilities. Shareholders are protected from liability, but should the corporation become worthless (loss of all asset value, bankruptcy, a large legal judgement, etc.), the shareholder’s stock could be worth nothing. There are several flavors of corporations, but here are three common ones.

  • C Corp – it is owned by shareholders and is taxed as its own entity. In some cases, the profits are taxed twice – the corporation pays taxes and, when dividends are paid to shareholders, they are taxed again when the shareholder pays personal taxes. C Corps can raise money through the sale of stock.
  • S Corp – it is owned by shareholders, but profits are passed through to shareholders to be taxed at each shareholder’s individual tax rate. There are limits on the number of shareholders in an S Corp.
  • B Corp – these are for profit entities, but shareholders hold the company accountable to make some tangible public benefit besides making a profit. Some states require an annual filing that documents their public benefit.



Cooperatives are owned and operated by those who benefit from its services. Profits are disbursed to the members of the cooperative. A frequent use of cooperatives is farmers banding together to market their products as one entity to regular buyers – distributors, grocery store chains, food service suppliers.

If you want more detail, check out the Small Business Administration Page on business structure at

This week’s exercise is to consider what you’ve just read and examine, with your accounting and tax advisors, whether or not you can find more favorable tax treatment, better financial resources, better protection for personal assets, better options for employee compensation or any other additional benefits by changing your legal structure.