Wiggs’ way

By Lance Wiggs, May 4, 2010 @ 9:18 am

Let Lance Wiggs help with your tricky business problems. Email him at advice@idealog.co.nz

Kick ‘em while they’re down

A competitor has had some PR problems recently, and our marketing staff want to pull a Whittaker’s and criticise them directly in our advertising. I've said no—I've always believed even mentioning your competitors is a mistake—but their argument is that these days it's a good way of placing yourself on the side of the consumer.
Love thy neighbour
North Shore

Yes, it can be great to take advantage of your competitor’s problems—but be careful where you throw those stones from. Cadbury and now Nestlé have had their troubles with palm oil among other things, and, sure, Whittaker’s has benefitted but it was in a very strong position to start with. It’s a local business that cares deeply about product quality, and one that doesn’t compromise on ingredients to make a buck. So when its larger competition made rash decisions based on costs and profit margins rather than on what customers wanted, Whittaker’s could take aim.

First, make sure you are coming from a position of unassailable strength when you make claims against competitors. That means you should have an unrelenting focus on customer needs, as Apple does, and only sell high-quality products you are proud of, like Whittaker’s. Can you really say this?

If not then you risk getting into a bunfight with your competitors, making claims and counter-claims. With that sort of squabble you’ll collectively bring your market into disrepute, and everybody will lose.

And absolutely steer away from attacking the customers of your competitor—after all you want them to be your customers one day.

Finally make sure you obey the rules. Comparative advertising is allowed, but get your facts right and make sure they are provable.

Going pro

We seem to have difficulty getting professional advice. There's no shortage of accountants, lawyers and consultants who reckon they can help us, but I always feel I'm paying for more than I get.
Helpless
Christchurch

This is a hard one, and something I struggle with myself. I find there are three sure-fire ways to detect the good people. First is word of mouth. Ask friends and people from businesses like yours—who do they use? Be prepared to grill them on the advice and on the price.

Next have coffee with the person you are considering engaging, getting beyond the standard pitch. Do they ask good questions about your business—ones that make you uncomfortable because they are subjects that have been nagging at you? Do they seem genuinely interested in helping your business grow? Above all, are you getting useful advice on the spot that you can implement straight away? Beware the professional that talks about what they can do but offers no evidence without payment.

Finally, give it a go. Engage the professional for a relatively small task such as a strategy meeting or some tax advice. Evaluate the process, the result and the bang for the buck. Professionals should deliver value well in excess of their fees: accountants should save you time and money, lawyers should make things easier rather than harder, and consultants should help you make more money.

Stay in control once you do engage a firm, and make sure you are still receiving value. I advise people to make sure consultants in particular do not camp at their client’s office. Instead bring them in, work them hard for a short time and then send them on their way.

Cruel and unusual

We're talking with another company about a potential merger or acquisition, including due diligence, but our talks seem to be held up over unimportant details. What should be simple has become, well, tortuous. Is this a sign that we should get the hell out of there?
One eye on the door
Ponsonby

It's difficult to know where the talks have stalled, so let me walk through the process you should be going through.

The first and most important stage is to agree on the basics of the deal, which means bullet points. To do this, the principals at each company should agree on these basic terms—preferably, for smaller businesses and large, without any lawyers in the room. This should result in a one-page heads of agreement that sets out the bullet points of the deal. If you can’t agree, you need to work through the list, engaging in some horse trading. The secret to making a deal work is to make sure everyone ends up smiling, so if you reach an impasse you may need to change something else to compensate (ideally something that’s not so important to you).

Make it easier by locking the decision-makers into a room to thrash out the details, and have as few people in the room as possible. You should have retained someone to help with the valuation and the process, but remember who owns the company and where the incentives lie.

Once you have the heads of agreement, it is time to bring in the other expensive professionals. It’s important to stay in control as the lawyers, tax advisors, accountants and due diligence results arrive. Listen to what they have to say, but be very direct about what you want and refer back to that heads of agreement. Stay in contact with the top people at the other company and systematically work through any issues that emerge.

If it's just too hard, if you start seeing evidence that all is not as it should be, or if you just don't trust the people you are going to be working with, don't be afraid to walk away. Buying other companies can be a fast way to grow, but the post-merger management is not easy, especially when the companies are of similar size. Make sure you have a plan in place so you can move fast to capture the value of the deal once it is consummated.

They leave so young

I follow the mantra to hire people better than you, and it works well. The downside is that great staff often have ambitions of their own, and typically want to start their own businesses. There have been times when I’ve felt that staff are using their jobs to network and train themselves for their own ventures. I don’t want to be a dick about it, but I’m also not an incubator (and these new ventures could soon be my competition).
Proud parent
Wellington

You can either just ignore it and enjoy the top quality staff that bring a continuous stream of new energy and ideas, or you can choose to benefit from it even more.

It’s fun to work with great people, but you can’t make them stay at a company that they have outgrown. So make sure you’re giving the truly great employees enough compelling reasons to stay. Are you ensuring their learning curves stay high, that they are continuously stretching their capabilities and that their responsibilities are growing? For the entrepreneurial ones, are you providing a safe environment for them to develop and share in the success of their own products? Are there decent opportunities to share in the success of the company?

Take a cue from McKinsey and other consulting firms, and give very frequent formal and informal reviews. Make sure that the fun, learning and work outputs stay well balanced, and offer to help people when they want to move on. Offer support—office space, days off, admin support and even funding—to those that want to start their own business, in return for an equity stake in their new venture. But also accept that people move on, and that acting as an incubator for a host of other businesses is not only a good sign for your business, but also a great thing for the economy.

Originally published in Idealog #27, page 18

Comments

Rob Bree

May 14, 2010 @ 9:47 am

Dear Helpless
Paying for more than you get? I suggest you speak to your colleagues in other businesses and find out who really delivers the goods? You can always contact the various professional associations and find out who does what and how respected they actually are. The popular ones are typically the proven ones and they're popular for good reasons. And yes it might not be cheap…but if they are then you have to ask yourself why. Cheers!