Jay Sachetti joined Jeff O’Brien, partner at Husch Blackwell and Dyanne Ross-Hanson, president of Exit Planning Strategies talked about the market for mergers and acquisitions, exit planning opportunities for companies that don’t end up for sale and how companies can maximize their eventual sale price during an early October panel at the first Upsize on Tap event at Summit Brewing Co. in St. Paul.
When the state Legislature passed a law requiring employers to provide paid leave and safe time for employees, Justin Bieganek started hearing differing details from friends, colleagues and peers.
‘Grow or die’ is an apt motto for fast-track companies, but some firms grow AND die—felled by mistakes that are all too common, but don’t have to be.
Avoiding mistakes that are avoidable is our topic today, and I’ll ask each panelist to give their two cents’ worth.
I’m a patent attorney, and there are a couple of highlights from an intellectual property perspective that can remediate things later on that can be big sticking points.
The first two things I call dealings with employees and dealings with non-employees. You might ask, who does that leave? That’s the beauty of that; it doesn’t leave anybody.
It’s important to have more formal, structured relationships with both employees and non-employees, right upfront.
Why do we care from an IP perspective? Because we want to be clear, if an employee invents something, who owns it? You might think, it’s the company’s. That’s not true.
U.S. law goes to the inventor; the inventor has to give you the rights, both with respect to inventions and confidential information about the company. So it’s a good idea to have an understanding with all your employees. It doesn’t have to be overly complex or overly reaching.
Secondly, have an agreement with non-employees. Mostly it happens with small companies, they will be talking about this great idea they have for a patent, and I will ask who are the inventors? And I will say, are they employees?
The problem is, if it’s an independent contractor now Joe owns that patent. If we file it, he owns it. And he doesn’t at this point have an incentive to sell his rights to the company. These things are kind of hidden, and they pop up later in time.
My third point is designing IP into your product or business. It could mean literally trying to design your product in a way that you can protect it with IP law.
But there are also things you can do ahead of time to actually put something in your product that’s protectable under the law. It prevents people from knocking it off, and also allows you to develop some brand strength.
You can have brainstorming sessions with technical people. You can compensate them with basically a day off for innovation. Google does things like hack-athons.
They give them a couple of days off and they literally sit there and code. It can start off small and humble, but there are different ways to build the idea from the get-go that we are going to innovate, we are going to protect our products, and we are going to own our products.
Quick poll, show of hands if you’ve experienced any technology-related down time in the last year. OK, 40, 50 percent of you are raising your hands. I’ll share some ideas to take back to the office and avoid down time.
We have a client with 100 people in their office, and we just proactively did a scan on their computers to check and see if any were susceptible to CryptoLocker. It’s this current phenomenon, a virus where hackers lock up your data with a password, and if you want the password you have to pay them for it.
We don’t negotiate with those guys. Instead, the way to prevent significant down time is to have really good backups. We don’t look at backups just as the ability to store your data, but also how long it can take to get the data back. That’s an important thing to take into consideration.
Another thing we’ve done with another client is, let’s see what happens when we unplug this important wire. We pulled the plug on our client’s main system, and checked to see how good the backup system was.
We ran that client for almost a whole week with their backup system with almost no down time. The question to ask your IT people is, how long would it take in the event we were hit with CryptoLocker, to get back up and running again.
Depending on the size of your organization, it could be multiple outsourced partners, or a combination of internal and external, but it’s important to have someone in place to give us some direction and budget for IT. That can trickle down to someone doing project management, and desktop support.
1, Disaster recovery, how long does it take to recover.
2, Cybersecurity. Go back and ask about two-factor authentication and mobile authorization. Those are baseline things that you want to be thinking about that will help keep your information secure on all your mobile devices.
And 3, build your technology team.
We approach every client relationship with a business assessment. Two businesses can look identical but have very different valuations.
We look at 400 different qualitative aspects of the business, and what comes out of that for the client, is some sort of prioritized list of issues to do the tough things to make a better business out of it. We decided to make our own top 11 list of mistakes business owners make:
How many of you have a marketing budget? OK, a handful. When you think about change management, it’s the same thing as marketing but it’s focusing on employees.
If you’re an organization of one or two it’s less of a deal; you can walk down the hall and talk to your colleague. As you get larger it’s even more complicated.
I’ve seen so many organizations where they had a great opportunity, put a ton of effort into it, and then failed to put together the change mangement and employee communication around it, so employees understood how it would change the employee’s day-to-day job.
An example: We’ve got a client in the cement, concrete and energy industries. They’re a compilation of 30 small family businesses that have been acquired over the years.
Largely integration never happened. They’re part of a bigger organization but they still think of themselves as small, individual businesses. The president of the larger conglomeration realized they needed to consolidate and integrate.
It was a great strategy, a great plan, but the company failed to let employees know the why. So employees said, ‘That’s fine but I’m still going to do my job the same way I always did it.’ They failed to show employees the bigger picture and what was in it for them.
We use a process for communication planning. Understand who are the stakeholders; what are the questions and issues they might have; what are the core messages that if you and your core senior leaders walk down the hall, you would all answer the questions the same way.
Finally, how are you going to measure that? How will you know the message was successful? The way to measure it is: do the employees understand it, and do they know what they need to do differently tomorrow than today.
The last little tidbit I’ll share, is study after study will show you that the large majority, in fact up to 70 percent of projects or initiatives or acquisitions that fail, fail because of lack of employee communication and lack of communication principles.
A big mistake I’ve seen is not having up-to-date financial information. It’s amazing how many teams get their information six months after the fact, three months after the fact.
That equates to getting tax surprises—you don’t know what your bottom line is. I call you and you owe a big dollar amount. Being surprised on cash flow makes big issues in a company.
The second mistake is, not recognizing when it’s time to walk away from a project, or to close a location, which partially goes back to not having financial information. People say business isn’t personal, but when you own a business, there’s nothing more personal.
It’s important to look at things from a purely financial perspective, not out of pride, but working with your team of advisers to say are we on track.
Another thing is being under-capitalized. That can deter you from taking opportunities. You can’t diversify and buy your own facility. And then not being able to expand your business based on customer demand.
Down markets happen. And so not to be able to manage those hiccups—nobody wants to lay people off. So being prepared is important.
Another one that’s painful is not communicating to your professionals. Your team is there to help you. Just make sure your team knows each other: introduce your attorney, your accountant, your banker.
We’re going to be able to service you better. Don’t call them after the fact, saying—oh I did this. I signed this agreement. Keep them in the loop.
[contact]
Rick Brimacomb is founder at Brimacomb + Associates and Club E: ri**@*******mb.com
Tim Grathwol is a patent attorney at Schwegman, Lundberg & Woessner: tg*******@***ip.com; www.slwip.com
Dan Moshe is founder of Tech Guru: da*@********it.com;
www.techguruit.com
Tom Siders is a partner at L. Harris Partners: to********@*************rs.com; www.lharrispartners.com
Anne Sutton is managing director at Straight Talk Communication Consulting: an*********@***********************on.com;
www.straighttalkcommunication.com
Jennifer Verly is a principal at DS+B CPAs + Business Advisors:
jv****@*****pa.com; www.dsb-cpa.com
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