Valuable Tips

Chip Mayo 3/16/22 Chip Mayo 3/16/22

Managing Important Employees Who Aren’t Key Employees

Successful businesses require many types of employees to succeed. But it’s vital to know which employees are key employees, which are important employees, and how to properly motivate the latter group. Today, we’ll share a process to help you motivate important employees who aren’t key employees.

Key Employees vs. Important Employees

You likely have more important employees than key employees at your business, which makes it critical to know how to motivate them. Before you can properly motivate important employees, it’s essential to know the difference between them and key employees.

Key Employees vs. Important Employees

· Key employee: An employee who has a talent or skill that’s difficult to replace, whose absence would tangibly harm the business, and who can take the business to the next level.

· Important employee: An employee who has institutional knowledge and an understanding of the business’ processes, but who isn’t willing or able to take the business to the next level.

Key employees often have leadership or ownership ambitions. Important employees may be happy in their roles and don’t necessarily have the skill or motivation for ownership.

This key difference means that owners should avoid treating these sets of employees the same. For example, you’d be more likely to create a comprehensive incentive plan to motivate, retain, and reward key employees. Often, these incentive plans move key employees toward bigger responsibilities (and bigger rewards for fulfilling those responsibilities).

But important employees—who may not be able to fulfill or don’t want the responsibilities that come with comprehensive incentive planning—likely have different motivations. Here are a few ways to keep these important employees motivated.

1. Ask what motivates them.

A fatal mistake many owners make is assuming that employees view themselves the same way owners do. It’s surprisingly common for owners to assume that employees have bigger or smaller ambitions than they really do, which can cause owners to use improper motivational techniques.

So, before you commit to any hard strategies to motivate any of your employees, it’s a good idea to understand your employees first. For instance, you may work through a process to determine where your longer-term employees see themselves in the business in the future. You may use that process to ask them what aspects of their time with the company they’ve enjoyed most, and when they’ve felt most appreciated or valued.

Once you understand how your employees view their futures and pasts, and combine that with the roles you want them to play in the company, you can more accurately decide whether each of them is a key employee or an important employee. From there, you can work with your advisor team to craft programs that properly motivate your employees.

2. Offer incentives that fulfill their needs.

Important employees, like key employees, want incentives. However, the kinds of incentives you provide important employees will likely be much different than those you provide key employees.

Whereas key employees often look for greater leadership opportunities and hefty monetary rewards for going above and beyond, important employees may not have interest in those kinds of rewards or responsibilities. They may find more value in some of the following:

· More time off

· Greater flexibility in where and how they work

· Early access to important company announcements

· Employment opportunities, such as internships, for qualified family members (e.g., kids and grandkids)

· Synthetic equity in the company

· Special recognition

Important employees may lean toward recognition and perks more than being a mover and shaker at the company.

3. Acknowledge their importance.

Just because an employee isn’t key doesn’t mean they aren’t valuable. As you implement motivational strategies, it’s crucial that you avoid underselling how essential your important employees are.

Doing so often requires careful communication and consideration. In other words, you don’t want your important employees to believe that you think less of them just because they don’t have ambitions for things like ownership.

Important employees want you to understand, value, and reward them, but differently than key employees. By acknowledging their importance and implementing appropriate motivational strategies, you can keep important employees on board and contributing toward your company’s future success.

We strive to help business owners identify and prioritize their objectives with respect to their business, their employees, and their family. If you are ready to talk about your goals for the future and get insights into how you might achieve those goals, we’d be happy to sit down and talk with you. Please feel free to contact us at your convenience.

Welcome to Cornerstone's Exit Planning newsletter. We'll provide you with practical tips on planning your business exit twice a month. Contact us with any questions or to help get you started with the planning process. Enjoy!

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

The Cornerstone team includes former C-Level executives, successful entrepreneurs and advisers who offer unmatched experience in delivering advanced, custom-tailored, results-oriented solutions for business leaders. As a member of the Business Enterprise Institute (BEI), Cornerstone is an authorized distributor of BEI’s content and Exit Planning Tools. We developed the Performance Culture System™ to help clients implement best practices and drive high performance throughout their organization. For more information, visit www.launchgrowexit.com, call (910) 681-1420 or email Dallas@LaunchGrowExit.com

Chip Mayo 3/2/22 Chip Mayo 3/2/22

Ex Uno, Multi: The Case for Replacing One Owner With Many

E pluribus unum—out of many, one—is a concept that runs deeply in the blood of many people, especially successful business owners. You likely expect that your co-owners, advisors, and employees all work toward a common goal of business success. However, when it comes time for the business to run without you—by your choice, death, or otherwise—there’s a much more appropriate concept.

Ex uno, multi: Out of one, many.

Your skill set as an entrepreneur is vast. You’re likely a good communicator who knows how to listen as well as sell. You have a focus that keeps you from making rash, emotional decisions. You know how to learn and how to plan. You understand business processes from marketing to operations.

E pluribus unum—out of many, one—is a concept that runs deeply in the blood of many people, especially successful business owners. You likely expect that your co-owners, advisors, and employees all work toward a common goal of business success. However, when it comes time for the business to run without you—by your choice, death, or otherwise—there’s a much more appropriate concept.

Ex uno, multi: Out of one, many.

Finding all of these skills in one person is rare. And if you were to find that person, they’re likely already running their own company. This often means that to find a replacement for yourself to position your business for future success, you’ll need multiple people. Consider Michael Mitel, a fictional but representative business owner who faced this reality.

The Many Hands of Michael Mitel

Michael Mitel’s microchip manufacturing company had grown into a powerhouse. For years, he’d taken the reins of every aspect of the company, from sales to R&D and operations. But growth had begun to plateau, and Michael was finding himself taking longer vacations.

He brought up retirement with his advisor team during one of their regular meetings, but he had a big problem: He couldn’t find anyone who could replace him. He had interviewed successful executives from other companies about taking control, but no single person was able to do all the work Michael did himself.

One of his most trusted advisors, Judy Lee, asked him, “How many other Michael Mitels do you think are out there?”

“None,” Michael said. The wry grin he’d started to flash quickly turned to frustration. “No one else can do this,” he said dejectedly.
“That’s just it,” Judy Lee said. “No ONE person can do this. It’s going to take many hands to replace Michael Mitel.”

At first, Michael shook his head. “Too expensive.”

“Relative to what?” Judy Lee asked. “The company is doing well, but we all know that growth has been flagging.”

“How does having more people fix that?” Michael replied.

“It’s not about having more people per se. It’s about adding the kinds of talent that you bring. Finding one person who can do it all isn’t feasible. But adding several people who have parts of your skill set can solve for that.”

“True, but more people can create more conflict,” Michael pushed back.

“Not necessarily,” Judy Lee said. “We aren’t looking to hire people willy-nilly. We’ll find people who have portions of your skill set, people who also respect and value the strengths of others. They’ll work together toward achieving your goals so that success doesn’t only rely on you.”

Michael’s Push for Success

The thought of less work and more profit enticed Michael. He agreed to finding a leadership team that could eventually replace him, under the condition that he had the final say over hirings.

Over the next year, Michael and his advisor team hired a sales director, an R&D specialist, and an operations manager. The sales director brought incredible communication and sales skills. The R&D specialist was an expert in applied knowledge and planning, while the operations manager mirrored Michael’s tenacity under pressure.

Over the next three years, the business boomed. When Michael took vacations, it was as if he’d never left. Each of the leaders he’d hired was supportive of one another and created a system to highlight their strengths and cover for each other’s weaknesses.

In Year 4, the management team told Michael that they were interested in buying him out for an amount that would provide him with financial independence and generational wealth.
Michael accepted the offer. But his proudest achievement was that he’d managed to find a group of people as dedicated to his life’s work as he was. Out of one person came many, and the many nonetheless worked for one overarching goal: a successful, fulfilling business.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Jennifer Wirtz 2/16/22 Jennifer Wirtz 2/16/22

Why Specific Goals Should Also Be Fuzzy

A longstanding credo for successful business planning is make specific goals. However, there is such a thing as being overly specific in your goals to the detriment of other things that matter to you. Let’s look at how adding fuzziness to specific goals can make your business planning strategies more fulfilling.

Analytics vs. Eye Test

In the world of sports, there’s often great debate between the value of analytics versus the eye test. Analytics often provide hard, quantitative evidence of performance, while the eye test relies on intuitive, qualitative evidence about performance.

Business planning is similar. For example, the analytics might tell you to send your top salesperson to close an important deal because she has good closing numbers. But the eye test—your raw observations and intuition—might tell you to send a junior salesperson because she has demonstrated a special rapport with the customer’s decision makers.

Analytics vs. Eye Test

Focusing solely on either analytics or the eye test can lead to unintended consequences.

Consequences of Being Too Specific or Fuzzy

Say you have specific goals that include selling your business to a third party within five years for $50 million. You do everything you can to achieve it, only to find that you had to lay off most of your workforce, including your business-active children. Doing something like this could damage your legacy or worse, leave you very wealthy but very lonely.

Similarly, if you only focus on the eye test, you may create goals that are too fuzzy to achieve. For example, you may personally like and have faith in an executive you hired soon after starting your business because she has great raw talent. But as years pass, that executive doesn’t develop that talent into a systematic and repeatable method for success. Having blind faith that that executive will improve can make it much more difficult to achieve your specific goals.

In short, focusing only on one kind of goal over another can lead to dissatisfaction, disappointment, and a business plan that doesn’t do what you want it to.

Resolving the Differences

The key is to marry your specific goals with an element of fuzziness. For example, it’s wise to have a specific timeline for achieving goals to avoid 11th-hour rushes. But equally important is considering how you achieve those goals with the people and processes that make your business run.

One way to begin this process is to ask two important questions.

1. What do I need to achieve success?

2. What do I need to feel like a success?

In business planning, financial independence is a measure of achieving success. However, the second question is a continuance of that idea that asks, “At what cost?”

Trying to combine the quantitative measurements of success with the qualitative measure of what makes you feel like a success might create conflicting goals. That’s OK.

It’s OK because it’s up to your and your most trusted advisors to determine the best way to resolve any conflicting goals. This is why it’s important to not be afraid to have goals that don’t seem to line up.

Perhaps an effective way to develop and implement a strong plan for a successful future of your business (and your ownership of it) might be:

1. Write your goals down, especially if you have conflicting goals

2. Share your goals with your trusted advisors to keep them top of mind

3. In every planning meeting, ask your advisors, “What do you think is the best way for me to achieve these conflicting goals?

Planning isn’t about having all the answers—it’s about finding the answers to provide you with the most fulfilling future for yourself, both personally and professionally. Thinking through both specific and fuzzy issues can help provide you with context and texture in your plan, making it more dimensional, and improving the chances that you’ll be happy with your outcomes.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Jennifer Wirtz 2/2/22 Jennifer Wirtz 2/2/22

Keeping the Family Business Running and the Business Family Happy

Running a successful business is complex per se. Adding the element of “family” to a business often creates more complexities, especially as the business grows. Lifelong family bonds and expectations can run headlong into business realities and needs. Today, we’ll share some ideas about how to keep the family business running and the business family happy.

First, a definition

Let’s briefly define the difference between a family business and a business family

First, a definition

Let’s briefly define the difference between a family business and a business family.

· Family business: A business based on family relationships and involvement, closely connected to the family and its persona.

· Business family: A business (and a family) driven by performance and profitability rather than the family’s personality or reputation, in which the people and the business are focused on achieving business goals, and the fact that some are family members is secondary.

As a successful business owner, you can see how the subtle difference between these definitions can have monumental effects on how you run a business. So, how do successful family businesses thread the needle between family loyalty and business performance?

1. Decide What’s Important

The first step you can take is to ask yourself, “Am I making decisions based on what’s best for the business or what’s best for my family?” This stark question is hard to answer, but it’s crucial to know.

This doesn’t imply that family interests and business performance are mutually exclusive. However, asking this question lets you dip your toe into the idea that you may sometimes need to make tough decisions where family harmony and business performance are incompatible.

Consider a brief example: You have a sibling who’s run your sales department since you founded the business. Sales have stagnated, and profitability has declined. You know your sibling is responsible, but your sibling also helped you get the business off the ground. How do you respond?

Knowing how you’d respond to a situation like this will help you create appropriate strategies to address the issue with the help of qualified, professional advisors.

For instance, if family harmony is non-negotiable, you may create strategies to foster that harmony while capitalizing on your hard work, such as selling to a third party and cashing out.

Likewise, if business performance is your top priority, you might create strategies that reposition family members into more appropriate roles.

2. Separate Business Decisions and Family Decisions

Successful business owners maintain objectivity in terms of business performance. But it can be hard to do that when people you care about are responsible for performance.

One way to address this common issue is by setting performance guidelines that employees must abide by, regardless of their relationship with you. Creating a written standard and presenting it to all employees can help create a business that’s focused on putting you in control of your business’s future success.

It also has the added bonus of creating a more equitable workplace with minimal favoritism. This is important because it provides an objective basis for hiring and advancement, which could attract talent that bolsters your family business and business family.

3. Optimize Operations

When businesses optimize their operations, it can support an increase in business value. When business value grows, both the family business and the business family can benefit via dividends, distributions, stock-price increases, and the like.

However, optimizing operations can lead to tough decisions regarding family harmony. Think back to the example about your sibling. You may realize that your sibling is a much better salesperson than manager. However, that sibling may view a repositioning as a demotion, which can affect family harmony.

Anticipating this kind of issue in the context of optimization can give you a head start in how you handle it. While the strategies you use to achieve your goals may vary, the key is to have the foresight to address such issues.

Create a Balance

There’s nothing wrong with having a family business that derives its strength, in part, from the goodness of the family. You don’t have to give that up. But when you make decisions, it’s a good idea to balance them in favor of supporting the business, because the benefits that can come back to the family when you do so are so much more valuable.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Jennifer Wirtz 1/19/22 Jennifer Wirtz 1/19/22

The Common Element Among Unique and Successful Businesses

Successful business owners may face a conundrum as they pursue success. “Though my competitors do something similar, they don’t do it the way I do it. So, how do I know the right way to achieve success, especially if I don’t do things their way?”

It’s a bit of a paradox: How can you build and enhance your company’s unique qualities while adhering to commonly followed best practices? The key is having a planning process. Here are some of the things you should consider to position your unique business to achieve generally agreed-upon standards of success.

Your Unique Goals

Though all businesses are unique, one common element that successful businesses have is setting goals. Without goals, businesses are aimless, which makes it practically impossible to determine whether they’re successful.

On the other hand, a common feature of goal-setting is the ability to change them. A goal you have now may change five years later. Successful business owners have the ability to pivot.

While setting goals and changing them when necessary are commonalities among successful businesses and owners, it’s the kinds of goals that speak to each business’ uniqueness. As you build your company’s success story, you’re finding the combination of specific goals that make your company unique.

Leveraging Your Resources

A potentially more obvious example of uniqueness among business owners is the resources they have outside the business. You’ve likely heard the story of the business owner who pours everything they can into their business. And there are business owners who sweep out all of the profits their business creates and use them to build an unrelated enterprise or asset.

Regardless of the outside resources you have, a common element of business success is leveraging what you have to create what you need.

With proper planning, it’s more likely that you’ll accurately assess what you have. That can allow you to determine the actions to take to leverage those resources into what you need to achieve your goals.

Becoming Inconsequential

If you create a business that provides for your family but that would fold if you are not at the helm, have you created a successful business?

Many business owners define success as the ability to leave the business when I want, to the person or group I want, for the money I need to live a fulfilling life. This necessarily implies that unless the business can run without you, it may not be successful.

This applies whether you intend to leave your business during your lifetime or at death.

If you plan to leave during your lifetime, you may not want to work for whomever you sell to. Creating a business that doesn’t rely on you can position you to avoid this fate. In turn, this can allow you to leave your business on your terms, rather than someone else’s.

If you plan to work until you die, you’ll likely have people who rely on your business, such as family or employees. Having a plan to allow the business to continue running if you were to die or become incapacitated unexpectedly is crucial to supporting them in your absence.

Although each business has a unique reliance on their owner, one thing is common: Unless the business is ready for a future without you, it can be difficult to achieve your goals, such as financial security, a comfortable financial situation for family, or charitable goals.

Choosing Your Successor

Whether you hope to transition ownership to a third party, an employee, or a family member, one thing applies to all business owners—the time to take the steps to achieve that goal is while you own the business and well before your ideal transition date.

Owners who methodically build their business with an intention to create success for their desired successor owner make decisions today with that future in mind. Developing systems, product lines, customer relationships, and team members that best suit a transfer to the target successor are all deliberate choices you can make.

In short, having an idea for whom you want to succeed you can give you more control over the company’s future. It helps you plan and execute with your intended successor in mind.

Planning: A Common Bond in Successful Companies

All owners and companies are unique. It's the consistency of a planning process that can address your uniqueness within the general context of success. You may have unique goals to achieve to define your success. But it’s hard to guide your success if you submit your future to fate over planning.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Chip Mayo 1/5/22 Chip Mayo 1/5/22

The Virtuous Circle of Improving Cash Flow

If cash is king, then cash flow is the kingmaker.

Cash flow can have a multiplier effect in terms of achieving your planning goals for a successful future. Often, increasing cash flow requires strong performances from key employees. Let’s look at how properly motivating your key employees could cause a cascading effect that creates a virtuous circle of increasing cash flow.

Mary, Mary, not so contrary

For years, Mary Kowolski’s custom garden-growing-formula business had been on an upward trajectory. But recently, she noticed that cash flow had plateaued, right as she began thinking about planning for her retirement. She wasn’t sure why.

If cash is king, then cash flow is the kingmaker.

Mary, Mary, not so contrary

During her annual year-end meeting with her advisor team, she brought up her concerns. Her advisors noticed that she hadn’t created an incentive plan for her top producer, Margo. She paid Margo well, but her advisors believed that with a motivating incentive plan, Margo could help Mary’s company start growing its cash flow again.

They helped Mary create a written, realistic incentive plan for Margo focused on improving cash flow. Mary presented Margo with a cash flow increase goal of $300,000 in the next year. If Margo could achieve that goal, she would receive a $100,000 bonus, part of which would be paid immediately, and the balance would become vested over the following five years. The plan anticipated that this pattern would repeat in subsequent years with goals for each year set in advance.

Over the next year, Margo managed to grow the company’s cash flow by $300,000. Her hard work qualified her for her bonus and was more than enough for her to comfortably reject job offers from other companies. She was ready to meet her targets for the next year.

Mary saw two direct effects of Margo’s hard work. This first was more money in her pocket. Mary took $50,000 from the increased cash flow and used it to supplement her personal investments.

The second was that Mary had more money to invest back into the business. She took the remaining $150,000 and invested it into the company’s R&D. The investment provided better testing equipment, which allowed her team of scientists to further optimize Mary’s original formula.

The new formula was twice as effective at growing certain crops that tended to struggle in Mary’s muggy climate. It also piqued the interest of several regional growers, which expanded Mary’s client base, bringing in more regular business even during the off season.

Over the next five years, Mary and her advisors created a similar incentive plan for Margo each year, with higher cash flow goals leading to higher bonuses and vested benefits.

As her company’s success compounded, Mary continued splitting the additional cash flow between investing in her business’ management teams and R&D, and her personal financial strategies. This allowed her to hire strong operations managers, giving her more time to find and capitalize on her competitive advantages in her market.

As she approached the fifth year of her cash flow improvement strategy, she realized three things.

1. Her business’ value had increased by a multiple of the new, increased, repeated cash flow.

2. Mary hadn’t given up anything in order to pay Margo’s bonuses – Margo put in the effort and created the cash flow that then, in part, returned to her as incentive plan rewards.

3. Increased cash flow had allowed the company to invest in things that would, in turn, allow them to further increase cash flow.

Cash flow increases can compound

Even modest increases in cash flow can have far-reaching effects. Whether you use those increases to improve business processes, hire more high-quality managers, or invest in your personal goals for the future, creating an executable strategy that builds cash flow is crucial to your success.

In Mary’s case, increasing cash flow started with having a proper incentive plan for her top-performing key employee. With proper implementation, that incentive plan spurred other noticeable changes.

Her key employee achieved ambitious goals and received an appropriate reward for it, keeping her onboard long term. That allowed Mary to take the remaining money and invest it in other important areas. This multiplier effect continued thanks to prudent planning and processes, positioning Mary to leave her business on her terms.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Chip Mayo 12/23/21 Chip Mayo 12/23/21

4 Improvements That Can Position Owners for Greater Success

Success is rarely linear. As a business owner, it’s important to both acknowledge that fact and create plans that can provide short-term results while having long-term impacts. Today, we’ll show you four areas in which strong planning and realistic goals can position you to achieve more success in the coming year.

1. Building strong management teams

Strong management teams implement your tactics and strategies, which determine your success and often, your company’s value. Frankly, when buyers purchase a company, they’re often buying the management team foremost. Having a strong management team is the mother of all Value Drivers.

1. Building strong management teams

This means that having a management team that can position you and your company to perform well is critical to your success. There are three things you should consider focusing on related to your management team to help them provide short-term results while still having long-term impacts.

· Setting goals. Unreasonable goals can cause burnout. To perform well, your management team needs documented goals that are realistic. Many business owners find value in calling on their Advisor Team to help them create goals that are both ambitious and realistic.

· Providing resources. What the management team believes they need may surprise you, but if you trust them it’s important to deliver those resources. Figuring out what they need to succeed can help them drive performance and pursue solutions more effectively.

· Rewarding performance. Don’t give them the rewards you value most – give them what they value most when they perform well. When your management team achieves its goals, it’s crucial to reward them appropriately. Creating a written incentive plan at the outset of your planning is a key to motivating your managers.

For many successful businesses, management teams drive short- and long-term success. Keeping them focused, on track, and motivated often translates to better performance.

2. Having documented systems and processes

Regardless of whether you plan to sell your business in the near future or never, maximizing business value is important. In addition to your management team, having documented systems and processes can position your company to be as valuable and stable as possible.

When you document your systems and processes, you provide your management team (current and future) and potential buyers with a playbook for your success. This often means you don’t need to reinvent the wheel with each new initiative, which can increase efficiency and create more time to innovate.

Likewise, because many buyers will pay a premium to buy turnkey businesses, documenting your processes can help you maximize value and reduce post-sale risks. This is valuable even if you never intend to sell your business.

No matter what, everyone exits their business someday—by choice, death, or otherwise. Documenting your processes can give the people on whom you depend guidance on how to keep the business running in your absence, which is just as important to owners who want to die at their desks as it is to owners who intend to sell their business during their lifetime.

3. Creating a business continuity plan

Remember: The most valuable businesses are those that have a dispensable owner. In other words, if your business relies on your presence, it may not have as much value as you hope for without you. While being needed might provide an ego boost, it also can make it challenging to control your business destiny.

That can be a huge problem if you ever become unexpectedly absent. For example, if you were to die or become incapacitated unexpectedly, how could you position the business to continue running so that the people who rely on it (e.g., family, employees) aren’t left scrambling for solutions?

The answer lies in creating business continuity instructions.

Business continuity instructions can serve a dual purpose. Most obviously, they provide guidelines for how to keep the business running in your unexpected absence. But just as importantly, they can create measures and processes that make the business less reliant on you even if you’re never unexpectedly absent.

4. Using success to beget more success

Developing a plan to achieve success can create success in other realms. For instance, if you successfully implement the three elements above, it could give you more time to create a more well-balanced personal balance sheet. That could increase your access to additional resources, which you could then use to supplement business performance or other interests, creating a virtuous circle of personal and business successes that play off one another.

While success may not be linear, proper planning can better position you to address the natural ebbs and flows your business experiences.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Chip Mayo 12/8/21 Chip Mayo 12/8/21

The Importance of Reviewing Your Performance

As the year winds down, it’s important for business owners to raise their awareness of last year’s performance. Knowing what you did well, along with where you struggled, is crucial to planning for future success. Today, we’ll show you three categories that you can review—strategic performance, tactical performance, and financial performance—and some questions you may want to answer about those categories.

Strategic performance: Reviewing the big picture

Strategic performance: Reviewing the big picture

Reviewing your strategic performance means looking back to the goals you set earlier in the year and in the years before that. In fact, a good place to start your strategic-performance review is by asking three important questions.

1. Did you set short-term and mid-term goals?

2. Did you meet those goals?

3. What were the reasons behind exceeding, meeting, or underperforming on each of your goals?

These questions lay the foundation of planning success. The reason they’re important is they guide the strategies you’ll implement to strengthen your company’s Value Drivers. Recall that Value Drivers can be thought of as the things that make your company valuable to someone else without you at the helm. Strong Value Drivers tend to make your company more valuable.

Once you’ve answered these questions—we find that working with a trusted Advisor Team often helps owners answer these questions more objectively. They’ll challenge your assumptions and help you hold yourself accountable. You can begin to ask yourself which specific strategic goals you set and how you pursued them. For example, you may ask yourself some of the following questions about strategic goals:

· Did we protect or increase market share? How did it go?

· Did we work to mitigate risk? For example, did we diversify our customer base?

· How did our management team perform? What were their big wins and challenges?

Raising your awareness of strategic performance can help you determine whether your big-picture planning was successful. It can also help you supplement strategies that worked while tailoring strategies that didn’t.

Tactical performance: Which actions worked best?

A review of your tactical performance can help you determine which actions contributed to successes and failures toward achieving your strategic goals. Here are a few things to consider as you review your tactical performance.

· Did you break down larger goals into smaller, more achievable goals?

· How did you quantify expectations, measure results, and implement what you learned?

· How do your team members and employees know whether they impacted company targets throughout each quarter?

These questions focus strongly on the nuanced actions you and your company took toward achieving your strategic goals. The answers you find may help you refocus on the important actions you need to start taking (or continue taking) to pursue future success.

Financial performance: What you have vs. what you need

Finally, reviewing your financial performance can tell you where you are in terms of your personal and business goals. After all, you’ll likely need a strong financial standing to achieve many of your most important goals. Here are a few questions to ask yourself about your company’s financial performance.

· Did you meet your financial targets? If so, why? If not, were your goals realistic?

· How does your yearly performance affect your plans for a successful future—personally and professionally?

· Do you need to recalibrate your goals based on last year’s financial performance?

Realistic goals and proper reviews can provide a road map

Year-end reviews can help you determine how you need to act in the next year to achieve your goals. It can also help you set new goals or recalibrate old goals to address the context you work within. Tracking your strategic, tactical, and financial goals can show you how each intricacy of your unique business fits into your bigger-picture personal and business planning.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Chip Mayo 11/17/21 Chip Mayo 11/17/21

Planning Is a Team Sport: Which Teammates Do You Need?

Talent wins games, but teamwork and intelligence win championships. –Michael Jordan

You are a talented business owner. It’s why you win in your market. But when it comes to long-term planning, having an intelligent team to support your talents can position you for even bigger wins, such as continued business success, financial independence, and a fulfilling retirement. Today, we’ll show you some of the expert teammates with whom you’ll be working to help you focus on what you do best and win your planning championship.

Talent wins games, but teamwork and intelligence win championships. –Michael Jordan

The Coach and the Players

Experience in leading teams through a planning process is the key to a successful coach in this context. The coach goes by many names (Exit Planning Advisor, Business Planning Coach, Business Advisor, etc.). The key to a successful coach is the ability to extract the best that everyone on the team has to offer. This coach, by whatever name, coordinates and communicates. They move information, decisions, and implementation forward to help achieve your goals on your timeline.

Is it possible for the coach to also be a member of the team? Absolutely. A good coach can play multiple roles, sometimes acting as the team coordinator, and other times contributing their own technical expertise and strategic problem-solving.

Is it possible for you to be the coach? Maybe. But is that the best and highest use of your time and energy? Maybe not.

Now let’s look at a few of the players. Your specific team will be comprised of the experts who are right for your situation. Specific expertise in business valuation, business purchases and sales, Employee Stock Ownership Plans, asset protection, or capital investment may have a key role to play on a team. But it can be helpful to look at a brief overview of the types of work that may need to get done to help you get a sense for how the team may look.

Financial Advisor and Insurance Professional

Your team may need the specialized skills of a financial advisor and insurance professional , who may be the same person or two different teammates. When the team comes up with a planning strategy, they may turn to the financial advisor to work toward your financial goals, or the insurance professional to help manage risk. The team may be going in any number of directions with its planning ideas, and these professionals contribute options that might take you across the finish line or protect you from harm.

The Certified Public Accountant (CPA)

What’s the role of a licensed CPA on your planning team? The CPA is an important teammate to have, for both short- and long-term planning. The CPA skill set may be called upon to help with tax analysis and minimization or supporting business growth. A good CPA is always looking for options to help you manage taxes and improve cash flow.

The Attorney

The attorney skill set contributes an ability to document and implement some of the strategies that the team develops. The attorney team member may be working to protect you and your business from risk. They formalize decisions that you make during the planning process.

The attorney role can add value if you are getting the company ready for sale or managing requests from potential buyers. An experienced attorney can see potential problems and contribute ideas about how to avoid or overcome them.

The Business Consultant or Coach

Do you need another consultant or coach? Yes, you might. This consultant or coach role is very different from the coach who manages the collaboration among team members. A knowledgeable business consultant or coach may be involved helping magnify company strengths, on one hand, or minimizing company weaknesses on the other. If the team sees a need for process improvements, systems updates, management team development, or strategic planning, it’s likely the teammate with the consultant or coach expertise will be called on to take the lead in those areas.

Is a Planning Team expensive?

The cost of working with a planning team will vary based on the complexity of your planning needs. A strong team delivers more value than it costs. Think of the specialized teams you may have worked with in the past – building a home or having major surgery. Those teams bring value in their wealth of expertise and ability to get things done. Planning for the future of your business should be no different.

With the help of a world-class team, you can work toward positioning your business, your family, and yourself for future success. Because teamwork and intelligence win championships.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Chip Mayo 11/3/21 Chip Mayo 11/3/21

How Time Can Affect Planning Success

Time is the one consistent element that affects all business planning. It’s also something that business owners can harness with proper planning. When harnessed properly, time can be your best planning friend. When ignored, it can turn the best intentions into a planning nightmare. Let’s look at how time— and how each owner used it—affected the futures of two separate business owners in different ways.

Hurry Up and Wait vs. Wait and Hurry Up

Hurry Up and Wait vs. Wait and Hurry Up

If it weren’t for their last names, you’d never know that Tim and Jim Slim were brothers. They had both built extremely successful last-mile delivery services, well-known for their exceptional service in their highly competitive region. But how they each used time to create success was as different as they were.

Tim originally founded Slim Pick-Ups as an alternative to national last-mile delivery services. From the start, Tim instilled an attitude of “hurry up and wait” across the business. He expected his employees to complete their work well ahead of schedule so that he could have time to review their processes and find more efficiencies. He took the same tack with his personal and business planning.

His younger brother Jim despised this method. Jim thrived under pressure, often holding out until the last second to make his moves. His “wait and hurry up” process worked well for him—he believed it was a big reason he had been Tim’s top sales performer over the company’s first 10 years.

As was Jim’s wont, he eventually and suddenly quit to start a business to compete with his brother.

Though Tim was surprised (and a little insulted), he wasn’t rattled. He had begun training one of Jim’s direct reports years before to assure that he had backups for his top performers. After just one month of flat growth, Jim’s internal replacement got the sales team back on track, thanks in no small part to Tim’s preparation.

As the years went by, Tim continued to plan early and often. He began creating a continuity plan many years before he decided to retire – just in case his company needed to continue without him. His family and advisors knew the precise chain of command should something ever happen to Tim, even if his family thought it was a bit morbid to plan for something like an unexpected death or disability. When other people called him tedious, Tim would hold up his index finger and say “Prudent.”

Unlike Tim, Jim was spotty in his planning. In fact, he often began planning just days before an event, logging long, grueling hours making sure everything looked orderly on the surface. But Jim’s strategy brought him skyrocketing growth at the outset. It also created the kind of tension he craved. He considered himself a maverick—proof that his brother’s methods were inefficient and a waste of energy.

As they grew older, larger competitors approached each of them about buying their business.

When Tim was ready to talk, the process went exceedingly smoothly. In the years since Jim left, Tim had painstakingly documented his business processes, reorganized his business entities, and cleaned up his financial statements. When he found the right buyer, in the midst of a supply chain interruption, he sold his business for three times what he needed for financial independence.

Jim faced a much different fate. His “wait and hurry up” method of planning often left him scrambling. He found that “Let me get back to you on that” rarely went over well when discussing his business processes with potential buyers. When one of his top salespeople suddenly left, Jim had to handle her territory himself, which took more time away from his negotiations and preparation for a sale.

When the supply chain interruption hit, Jim’s lacking planning and discipline led to missed and incorrectly routed deliveries. His business’ reputation cratered. Jim finally hired a business consultant to help him create a plan. But the consultant told him that his best bet was to liquidate. Jim was forced to lay off his entire team and liquidate just to avoid bankruptcy.

Time is a Key Ingredient in Planning

While short-term goals are worth pursuing, successful planning requires long-term vision and time. It took Tim years to organize his planning to his benefit. But when it mattered most, he was prepared. That positioned him to achieve all of his longer-term goals.

Jim’s short-term focus brought him success month over month. But because he often waited until the last second to start planning, he usually had no response to larger issues. His lack of long-term vision positioned him to waste more time—time he could have used to pursue his longer-term goals of a comfortable retirement. Unfortunately, because he didn’t appreciate the power of time, the result he faced was far from what he had intended.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Chip Mayo 10/20/21 Chip Mayo 10/20/21

Protecting Yourself Against Employee Risk

Successful business owners constantly strive for growth. And when everything’s humming along, it can be easy to think the good times will last forever. However, it’s crucial to protect yourself, your company, and your future against employee risk throughout your growth and planning.

While it’s likely that many of your employees are good people working in good faith, just one error or bad-faith employee can ruin years of planning. Today, we’ll walk through a few ways to mitigate employee risk and the consequences of succeeding and failing in doing so.

Protecting Against Bad-Faith Employees

Protecting Against Bad-Faith Employees

Key employees are those who consistently exceed expectations and tangibly affect company performance. You likely know how important it is to keep key employees on your team for the sake of your long-term success. But it’s just as important to prevent key employees from wielding their power against you.

For example, a key employee might understand how important they are to the company and take advantage of it. One key employee working in bad faith can purposely sabotage your plans to get ahead for themselves.

In the worst cases, they may attempt to blackmail you if they know you need them to achieve your goals. For instance, if they find out you intend to sell your business on the condition that they stay, they may demand a slice of the sale price as a condition for staying, putting you in an impossible bind.

Protecting against these possibilities is paramount to your long-term success. You might consider implementing non-compete and non-solicitation agreements for your employees to prevent such issues from the outset, to the extent they are available for your company and the employee in question. That way, if an employee leaves on poor terms, you position yourself to take legal action against bad-faith actors.

You may also consider implementing more checks and balances in the critical functions inside your business. Having two different employees involved in essential tasks such as collecting accounts receivable, vendor contracts, or preparing financial statements can reduce an employee’s temptation to engage in self-dealing or theft.

Retaining Great Employees

Even in less extreme circumstances, a key employee who threatens to leave can do irreparable harm to your planning. For instance, a key employee may tell you they received an offer from a company outside your industry. While that key employee may not intend to harm your business, simply leaving your company could harm it. They may also unwittingly position clients they brought on to leave.

In such cases—where a key employee might find a place to work that’s a better fit for them—you might consider retaining them with a strong incentive plan.

With the right kind of incentive plan, you might reduce the likelihood of key employees leaving for greener pastures. However, the “right” incentive plan depends on what your key employees want. While some may have interest in ownership, others just want more money. Likewise, you must make sure that what the key employee wants can ultimately contribute to your success.

In short, key employees are both a benefit and a risk. A strong incentive plan is one of the most direct and effective ways to increase the benefits they provide while decreasing the risk they’ll try to leave for something better.

Repositioning Ineffective Employees

Even the best-intentioned employees can slow or stop your planning. For instance, you may have employees who always bring a can-do attitude but simply don’t have the skills to help you achieve your goals.

It’s important for you to find ways to have the best people making the biggest decisions for your company. That means avoiding the temptation to install people with the right attitude in positions that aren’t the right fit.

For example, you may have a sales manager who’s really nice and likeable, but who merely hits quotas every month when you need someone who can outperform those quotas. Relying on that person to drive sales performance may not be appropriate for your longer-term business goals, no matter how nice that person is.

Instead, you’d likely want to consider finding the right person—whether internal or external—to drive the results you need to achieve your goals. You can still find a more appropriate role for the nice, average performer. But simply installing people in positions that can affect your success because they’re likeable can be an act of planning self-sabotage.

Planning Impacts Employee Risk

Planning can help you leverage your team’s best qualities, and reduce the risk associated with some of the more negative aspects of human nature. Looking for ways that you can do both, through planning, can give you peace of mind and an advantage in a competitive world.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Chip Mayo 10/6/21 Chip Mayo 10/6/21

Why Communication Is Essential to Successful Planning

The one thing that makes humans unique (and the most dominant species on the planet) is our ability to communicate using language. Why, then, do so many business owners fail to communicate their business plans—both short term and long term—to those who can best help them achieve them?

A business plan isn’t something to tuck away. Instead, it’s something to share so that you can best achieve the goals your business plan sets. Let’s look at three ways communicating your business plan can benefit you, your company, and your future.

Communication is the First Step

As a successful business owner, you know that you simply cannot do everything on your own. You may have a wide range of skills, but you also rely on lots of different people to sustain your success.

However, many business owners fight against these facts. They may worry that other people won’t understand their problems and anxieties about their business plans. Or they might fear that others won’t support their goals and vision.

Fortunately, that’s often not the case. In fact, business owners often surprise themselves with how supportive their advisors, co-owners, employees, and family members are when they share their plans with them.

For example, when you share your plans with your advisors, you expose yourself to their years of expertise in the context of your goals. They can help you focus, strategize, and act to achieve your goals. In some cases, they can even take the tactical weight of action off your shoulders—after all, how comfortable are you in your ability to navigate complex areas of technical planning, such as business valuation, key employee incentive planning, or preparation for an ownership transfer?

It’s nearly impossible to work toward your goals if you’re the only one who knows what they are. And you’re likely to find that many people are ready, willing, and able to help you achieve them, if only they knew.

Set Expectations

Like many successful business owners, you’re likely more ambitious than most. This ambition can serve you well, but it can also corner you if your expectations for your goals are unrealistic.

For instance, you may have experienced rapid growth early in your business’s life. As your business matures, it’s less likely that such growth will continue at the same pace using the same strategies. But it can be tempting (and professionally devastating) to think, “It’s always worked this way, so why change what’s worked?”

Communicating your goals—no matter how ambitious or, frankly, unrealistic—can put you on a path to set realistic expectations. With the input of other experts, both personal and professional, you can position yourself to see the blind spots in your strategies, replace idealism with realism, and reduce frustrations by minimizing the temptation to tilt at windmills.

Realistic expectations are often achievable expectations. Without communicating your plans, it’s too easy to get lost in your own head about what could and should happen, rather than focusing on what must happen to achieve your goals.

Minimize Challenges

At the end of the day, it’s your business. How you run it (and eventually leave it) starts and stops with what you want. However, exceedingly few business owners operate in a vacuum. You likely have a spouse/partner, family and friends, and employees you care about. Your business decisions affect not just your life but also theirs.

By communicating your plans with these people early in your planning, you can better avoid false starts and personal grief while planning.

For example, if you intend to one day leave your business to your children, it’s good to know whether they even want that to happen. Keeping decisions like these a secret (e.g., to surprise them) can ruin both your day and your long-term business plans.

This does not mean you need to have a consensus before making decisions. However, when you know how the people you trust and care about feel about your plans, it can help you navigate the emotional side of business planning. That way, you can make more rational, smarter decisions that allow you to pursue your goals more effectively.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Chip Mayo 9/22/21 Chip Mayo 9/22/21

What’s the Point of Asset Protection?

As a successful business owner, you know how important asset protection is. However, many business owners look past an important question when protecting their assets: “Why am I doing this?” A cursory glance at that question might make an owner say, “Because I’ve worked hard to create what I’ve got.” But that raises another question: “How is your hard work connected to what you now own?”

This isn’t a semantic trick, either. It’s important for you to know the reason behind asset protection so that you can implement strategies that allow you to use the assets you protected to achieve your purpose. Today, we’ll look at how you can more confidently answer the question, “What’s the point of asset protection?” and begin focusing on ways to best use the things that you protect to achieve your goals.

Before we dive too far in, an important reminder: Achieving and maintaining financial security is almost certainly one of your most important goals. We’ll always keep this in mind.

Start With “Why?”

Before we dive too far in, an important reminder: Achieving and maintaining financial security is almost certainly one of your most important goals. We’ll always keep this in mind.

Start With “Why?”

There are countless reasons why you may have started your business. The freedom to be your own boss. Personal pride in your company’s mission. A chance to grow your wealth and give your family a comfortable life. To improve your community.

Regardless, you’re still in business now because you have goals. Knowing precisely what those goals are is the initial thrust behind asset protection.

Determining your goals motivates you to protect your assets. More importantly, it can help reveal the most efficient and effective strategies for protecting your assets to achieve your specific goals.

For example, if protecting your wealth so you can pass it to future generations is most important, you may dedicate more time to planning for the most efficient ways to transfer that wealth. This may include gifting ownership in the business to family, separating some assets into a new operating entity, reducing personal guarantees from your business, or implementing strategies to manage and reduce taxes you pay during and after ownership.

Another example: If keeping the business in your community is most important, you may create plans that train and motivate inside employees to eventually take the reins. You might also create plans that encourage third-party buyers to keep the business local. You might even use some of the wealth your business has given you to benefit charitable organizations in your community. These approaches are also a form of asset protection, as you protect your ability to benefit those close to home.

While achieving financial independence is paramount, you should also know why else you’re protecting your assets. Knowing why can help you plan more appropriately and make life—both inside and outside the business—more fulfilling.

Next, Ask “How?”

After you determine why you’re protecting your business and other assets (i.e., your personal and business goals), it’s important to determine how you want to use your assets.

For instance, after assuring your personal financial independence, you may want to use your assets to send all of your grandchildren to college. To plan this successfully, you need to know what you currently have and what you’ll eventually need to achieve goals like this.

This is what we call addressing the Asset Gap. Generally, there are four aspects to consider when addressing your Asset Gap:

1.   The current value and expected growth rate of the business
2.   The future performance of all non-business assets (e.g., investments)
3.   The amount of money you expect to spend going forward
4.   The life expectancies of you and your spouse/partner

Addressing your Asset Gap can help you plan and act in ways that help you not only protect your assets but also eventually use those assets in ways you want to use them. As you can imagine, many business owners have one set of expectations for how they’ll manage and protect their assets during the years in which they rely on their business as their primary source of security, and a different set of plans for future years when the some of the business goals have been achieved. So, looking at your financial situation today, and also at what you want it to be at various points in the future, can help you plan to fill your Asset Gap and meet a series of goals.

Then, Ask “What’s Next?”

Knowing why you’re protecting your assets can provide focus. Knowing how you want to use your assets provides motivation. The final overarching step is to figure out what you need to do next.

For example, if you want to sell your business to an employee or group of employees, you’d want to propose a method and schedule of ownership transition before implementing your plan. It’s a sinking feeling to create a plan only to find out that your wants don’t match the wants of the people you’re relying on to achieve your goals. Bringing the right people into the conversation and planning at the right time can help protect the integrity of the plan and improve the possibility that it will be a success.

Likewise, if you want to use your assets to provide your family a comfortable life, you may consider creating a business continuity plan. This can protect your family and your business (which is likely your most valuable asset) if you were to die or become incapacitated unexpectedly. This is yet another way to use the concept of asset protection in your regular business planning.

Overall, we encourage you to think of the topic of asset protection as something that is much more broad than you might have expected. Protecting your goals, the people you care about, and your desired future are just as important as protecting assets from more immediate threats.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Chip Mayo 9/9/21 Chip Mayo 9/9/21

How Your Employees’ Motivations Can Affect Your Business Planning

Business planning often revolves around the idea of “What’s in it for me?” Business owners usually want the kinds of planning that let them run, grow, and eventually leave their business on their terms. But rare is the business that can run, grow, and allow its owner to leave on their terms without support from key employees. To gather that long-term support, business owners likely need to incentivize those employees.

Consider the example of Donald Fowler, a fictional but representative owner, and how incentive plan choices changed the arc of his business planning.

If It Looks Like a Duck and Quacks Like a Duck . . .

Consider the example of Donald Fowler, a fictional but representative owner, and how incentive plan choices changed the arc of his business planning.

If It Looks Like a Duck and Quacks Like a Duck . . .

Donald Fowler always said, “If it looks like a duck and quacks like a duck, it’s a Fowler!” Donald had found great success manufacturing duck-centric treats and training tools for dogs—professional show dogs, hunters, and mutts one and all. He employed 60 full timers, including his two key employees, Grover and Courtney.

Grover was an outspoken and ambitious sales manager constantly looking for the next big win. A natural-born leader, Grover often asked Donald for more challenges to grow the company. His sales staff adored him, and Donald knew that Grover had a huge role in his company’s success.

Courtney was quieter and much more cerebral, but no less important. She had implemented several business processes that lowered production costs, increased fulfillment speeds, and helped Donald attract the best talent, including Grover. Courtney was also Donald’s adopted daughter, and Donald had always longed to pass the business on to her when he retired.

During an annual performance review, Grover told Donald, “Another company approached me. They’re offering me stock in their company. I’d rather stay here, and I’m not really sure how I feel about owning part of a company, but the money is so good. I need you to offer me something similar.”

Donald was stunned. Grover had never mentioned an interest in ownership. And Donald didn’t want to provide Grover with stock, since he intended to pass the business to Courtney. Donald assured Grover he’d figure something out for him. But he had no idea what to do.

He set up a meeting with his team of advisors. One of the newer members of the Advisor Team told him that he was right to hesitate about giving Grover ownership if he wanted Courtney to run the business. Employees and family members often clashed in those situations. Donald felt stuck.

“Donald, you always say, ‘If it looks like a duck and quacks like a duck,’ right?” his newer advisor asked him.

“Yes . . .” Donald said.

“Well, what if it looks like a duck and quacks like a duck, but isn’t really a duck?”

“What are you getting at?” Donald asked.

“What we’re saying,” another advisor said, “is that you can give Grover something that looks like stock, acts like stock, and has value like stock, but isn’t really stock.”

“I’m listening.”

Phantom Stock as an Incentive Plan

Donald’s advisors recommended that he consider a Phantom Stock Plan to incentivize Grover to stay. Grover had said he wasn’t sure about ownership but that he liked the idea of more money. But Donald needed to keep Grover motivated in the long term to achieve his financial independence goals. When he approached Grover with the idea of a Phantom Stock Plan, Grover was intrigued.

With help from his Advisor Team, Donald proposed a plan to Grover. Every time Grover exceeded a specific and written annual sales goal, he’d receive Phantom Stock shares. As company value grew on the back of Grover’s work, so would the value of Grover’s phantom shares. However, the plan also included vesting and forfeiture terms to entice Grover to stay to receive full value, effectively handcuffing him to the business.

In the end, Grover loved the idea. He’d receive more money based on his performance, which was a perfect motivator for someone as ambitious as him. But it also relieved him of the pressures of actual ownership, which Grover wasn’t too comfortable with in the first place.

The incentive plan helped align Donald’s goals with what motivated Grover most. Grover continued to outperform expectations, making more money for himself as the business grew in value.

Growing business value gave Donald more opportunities to achieve his financial independence goal, which he did over the next five years. He then transitioned ownership of the company to Courtney, who continued to incentivize Grover with a similar plan with similar results.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Chip Mayo 8/17/21 Chip Mayo 8/17/21

Strength From Within: How Preparing Employees for Ownership Can Strengthen Your Business

No matter how you define business success, one thing is constant: When everyone is rowing in the same direction, it’s much easier to reach the destination. As you grow your business, you’ll likely find that the stronger your internal people and processes are, the more options you have to achieve success.

Today, we’ll examine some of the potentially positive consequences of preparing your key employees for a stake in ownership. Whether your long-term plans are to sell your business (to employees or a third party) or stay forever, prepping your key people for possible ownership can position you for greater success.

Increase Commitment

Key employees are often drivers of sustainable and scalable business success. A key employee is someone who tangibly contributes to the success of the business above and beyond expectations. By nature, they tend to be ambitious and take immense pride in their work.

Keeping these people focused and motivated is a crucial first step in strengthening your business now and for the future. A stake in ownership can encourage that focus and motivation.

However, not all key employees are interested in ownership. They may be more interested in incentive plans for taking on elements of ownership. It’s therefore essential that you identify what will best motivate your key employees as you train them to take on more responsibilities.

Once you’ve identified key employees and confirmed their interest in some kind of ownership, you can begin enticing them to commit to your company in the long term.

For example, you might offer them an actual slice of ownership. You could tie their compensation to written, ambitious, realistic performance standards. If you offer them something like potential future ownership that keeps them committed to your company, it can improve processes and create alignment in how everyone defines company success.

When everyone’s aligned on how to define company success, it can make your company stronger and more stable, which can increase its value.

Make the Pie Bigger

Preparing your best people for more responsibilities can also give them more opportunities to reap bigger benefits. For example, as your company grows, your key employees’ stake in it may also grow. That can lead to more money, prestige, and opportunities for all.

Even better, it can give you the option to sell your business directly to them in the future. For many owners, keeping the business in the hands of people they trust is important. When the people you trust can run the business and still put you on the path to financial independence, it can give you more options to pursue success, inside and outside the business.

When your key people are successful in growing the company (the “pie”), you are likely to feel good about sharing some of that with them.

Focus on Fundamentals

Finally, preparing key employees for ownership can increase the likelihood of stronger outside offers to purchase your business. Because your key employees have taken on more responsibilities, and because they essentially run the business, you may be able to entice third-party buyers to purchase your business on your terms.

To third-party buyers, the best kind of business is one that doesn’t rely on any single person for its success. If your company functions well without you—due to preparing your key employees for ownership—it may become more valuable. That can open up new possibilities for you to define and pursue success—financially, professionally, and personally.

But, if your key employees financially can’t or simply don’t want to own the business, you can still reap the benefits of preparing them for that scenario.

Stay Flexible

It’s important for you to understand what motivates your key employees to stay with your business in the longer term. Once you’ve established those motivators, you can begin training them to prepare for the responsibilities of ownership, or something that looks a lot like it.

Whether those responsibilities manifest as actual ownership, phantom (synthetic) ownership, lucrative compensation plans, or something else, preparing your people to operate from a mindset of ownership can strengthen your company, now and for the future.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Chip Mayo 8/4/21 Chip Mayo 8/4/21

Connecting Your Personal Financial Plan and Business Continuity Plan

Owning a successful business is a constant exercise in planning. Many successful business owners have already committed to personal financial planning, including investing and providing financial security for themselves and their families.

However, fewer business owners have created a business continuity plan. A business continuity plan includes strategies and action items regarding what happens to the business if or when you are no longer available to run it (due to choice, death, or otherwise).

Lacking a business continuity plan can harm your personal financial planning. On the other hand, creating a business continuity plan can often complement your personal financial planning. Let’s look at a couple of ways your business continuity planning might connect to your personal financial planning.

Continuity and Personal Finance Aren’t Mutually Exclusive

Many business owners and their families rely on the business's ongoing success to support their lifestyles. But business success doesn’t just spring from nowhere. It likely took you years to build your business to a point where it produces consistent income to you and supports the lifestyle you and your family want.

Unfortunately, all of your hard work can come undone quickly if you were to die, become incapacitated, or face more common issues that can affect your business ownership (e.g., divorce, bankruptcy) without a plan. This is especially true if the company relies primarily on you, your leadership, or your business relationships for its success. If you’re gone, business performance may start to decrease rapidly.

However, with a robust business continuity plan, you can begin to insulate your personal financial situation from unexpected events. For example, a business continuity plan can provide guidance to your family, company, and business partners about what to do with the business if you were to ever unexpectedly leave it. You may describe how executive functions, critical relationships, or essential business activities are to continue without you.

Such planning can also help you articulate your personal financial goals more clearly. When you create a plan that provides instructions for the business to continue without you, it can also help you focus on how much your personal financial security depends on your business.

You can then approach your personal financial planning in two contexts—with the business and without—to give you a fuller picture of the actions you may need to take to achieve your personal financial goals.

Other Benefits of the Business Continuity Plan

A business continuity plan can also help you play offense in your planning. A core aspect of business continuity planning is establishing a chain of command to address business issues if you can no longer run the company. This means that as a result of proper continuity planning, you’re likely to install or further develop a strong management team.

A strong management team is one of the most important Value Drivers (if not the most important) for your business. When a company runs well regardless of the owner’s presence, it can make that company more valuable than one that relies heavily on the owner. This can lead to more lucrative offers if you ever decide to sell your business.

Even if you never intend to leave, a business continuity plan that focuses on a strong management team can positively affect your personal finances throughout your ownership.

Strong management teams can elevate the company beyond what you alone can do. That can increase your company’s reach and profitability. This, in turn, can help you create larger income streams for you and your family. It can also give you more time and freedom to do other things you’re interested in since you can confidently leave the business in the hands of your management team.

Leverage the Connection

A strong business continuity plan can complement your personal financial plan. It can protect your business from unexpected events that may damage your personal finances. It can provide guidance to those you care about most if you ever left the business suddenly. And it can create more value for your company while giving your more time and resources to pursue your financial and values-based goals.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Chip Mayo 7/21/21 Chip Mayo 7/21/21

Are You Protecting Your Most Valuable Assets?

As your successful business grows larger and matures, you should always be on the lookout for forces that can diminish its value. New companies and competitors constantly aim at the top dog by identifying and exploiting weaknesses. To mitigate this constant threat, you should do two things.

1. Identify what makes your company valuable.

2. Protect those assets as much as possible.

Today, we’ll look at two processes you can use to identify and protect your business’s most valuable assets.

Identifying Your Business’s Most Valuable Assets

1. Identify what makes your company valuable.

2. Protect those assets as much as possible.

Today, we’ll look at two processes you can use to identify and protect your business’s most valuable assets.

Identifying Your Business’s Most Valuable Assets

It’s impossible to protect the things that make your company valuable if you don’t know what they are. When we talk about valuable assets in the context of planning for the future, we’re talking about things outside of your presence as the business owner.

The first step in identifying your company’s valuable assets is focusing on things outside of your presence that help the company run well. Remember: If your company’s success relies primarily on you, then it likely has lower transferable value. And transferable value is a key ingredient that can be leveraged to help you meet your business and personal goals.

What are some potential assets that give your company its value? While your company is unique, there are some general features and components that tend to contribute to a company’s value.

· Trade secrets (e.g., pricing algorithms, sourcing methods, operating systems)

· Intellectual property (e.g., copyrights, trademarks, patents)

· Key employees (e.g., team members who impact strategy or product development)

You may have knowledge of what some of your company’s valuable assets are. But it can sometimes be challenging to identify which are the most important and which you need to improve. Working with objective, outside advisors can help provide a clearer assessment of which assets are most valuable to your company, and thus worthy of your investment in protecting them.

Protecting Your Business’s Most Valuable Assets

After you’ve identified your company’s valuable assets, it’s crucial for you to protect them. For example, you may consider drafting legal documents that describe the proper use and dissemination of trade secrets or intellectual property. This is a common strategy that successful businesses use, many times through the implementation of a company handbook that employees must acknowledge and abide by, coupled with regular internal training programs to emphasize the importance of intellectual property and trade secrets, and how they support company performance and growth.

Perhaps most important is protecting your key employees. Recall that key employees are those who tangibly affect company performance above and beyond expectations. Often, they have influence on other employees. In many cases, key employees are a company’s most valuable asset, which makes protecting them vital to future success.

To position your company to protect key employees, you may consider using two different tactics.

1. Incentivizing performance and retention

2. Discouraging post-employment harm to the company

Incentivizing performance and retention includes coming up with ways to keep key employees on board and engaged in the company, now and in the future. For instance, you may offer incentive plans that provide more money or ownership if the key employee exceeds certain goals. You may even apply a “vesting schedule” to those rewards, which can encourage this employee to stay with the company over a longer period to receive the full benefits of the incentive plan.

Discouraging post-employment harm to the company is the flip side of the coin. If a key employee decides to leave your company, it’s important to minimize any harm they can do to your company once they leave. Some examples include non-compete agreements and non-poaching agreements (i.e., a former employee may not recruit other workers away from your business). It’s important to keep in mind that these kinds of restrictions must be custom-tailored to your business/employees and state laws, and that there may be other requirements that go along with these types of protections. You’ll need individual legal guidance in order to avoid potential landmines.

This is why identifying your most valuable assets early is so important. If you know what it is that makes your company valuable, you can then work to protect those things, either before it’s too late or before those valuable assets have outsized leverage over your company’s success.

You Don’t Need to Do This Alone

Protecting your trade secrets and intellectual property, designing custom incentive plans, and discouraging former employees from harming your business can be challenging work. Indeed, it’s often too much for one business owner to tackle alone. Fortunately, you don’t need to do it alone. Working with the right experts can give you the comfort and confidence you need to continue growing your business and developing your most valuable assets.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Chip Mayo 7/12/21 Chip Mayo 7/12/21

How Agility Can Affect Your Company’s Future

One of the most important skill sets that successful business owners have is the ability to be ready for just about anything. The key to doing this is being agile. Let’s look at what an agile framework looks like, why it matters, and the differences between waiting for perfection and being agile in your business planning.

The Agile Framework

You may have heard of the agile framework in the software space. It’s the concept of working collaboratively to break large projects down into smaller, more achievable goals and outcomes. Achieving these smaller targets allows you to deploy part of your plan, test its success, and then use what you learned to plan and release even more smartly for your next goal.

The agile framework is an excellent approach to planning for the future success of you and your business. It can help your company remain flexible in the face of unexpected disruptions in your marketplace, whether it’s an innovative competitor, increased government oversight, or something else altogether. It also positions your prospects and clients to receive a steady drip of improvements from your company, instead of waiting for one “silver bullet” improvement. In this way, following an agile framework moves you in confident steps toward the growth and success you want or need from your company.

Finally, the agile framework can protect you against the temptation to wait for perfection. Rather than waiting years and years for your plan to be entirely complete before releasing or implementing it, being agile allows you to hit checkpoints and learn as you go. This method is often preferable to trying to eat the planning apple in one bite, especially with how quickly technology brings about change.

An agile, flexible company may be able to build more value than a perfectionist, rigid company. Let’s examine an example of the difference between being agile and trying to be perfect in your planning.

Agility vs. Stiffness: When Perfection Doesn’t Drive Value

Percy Lux and Connie McGorkle had been friendly competitors for 25 years. Percy, a third-generation business owner, ran a tight, meticulous ship. Unless he approved of each project personally, projects rarely got off the ground. But over the last 25 years, Percy’s strategy made his company a leader in his distribution market.

Connie founded her company as a start up in response to some of what she called the “antiquated tactics” Percy’s company used. She invested heavily in her management team, who constantly presented new, often disruptive ideas into the industry. Her motto—one she constantly reminded her employees—was “Good is greater than perfect.”

As they planned for a successful future, Percy began planning for it like everything else. He was a stickler for detail and demanded that all suggestions or changes to the plan he created himself go through him first. His advisors constantly recommended that he replace his rigid management structure and outdated operations with something more flexible. Percy constantly refused because “It’s always worked for me.”

Connie, on the other hand, was open to outside ideas. When her management team discovered that her company could offer free shipping on bulk orders above a certain amount with minimal negative impacts on her bottom line, she was skeptical. No one else was doing this, and she worried about whether order fulfillment would falter. But Connie was committed to launching new ideas in smart ways to see if they would take off, and she believed in her management team. She did not interfere or slow things down.

After a few initial months of flat performance, Connie’s investment in agility paid off. As word got out, prospects flocked to her company. Larger orders brought larger customers. Connie scaled her business with the help of her management team. As her company grew, her management team made more decisions, which took the company in other unexpected directions.

Her competitors couldn’t figure out how her company did it. Even Percy, whose company had the capability to compete with Connie on this front, was curious.

But in the end, he chose to stick to his rigid ideas about growth and planning. All decisions went through him, and the company methodically worked for years toward each major goal. As the years passed, Connie’s company began to siphon market share away from Percy. His company finally implemented bulk discount shipping years after Connie’s company innovated it. By then, it had become industry standard.

Buyers wondered why an industry leader took so long to change. They discovered that it was because Percy was so meticulous in following his plan (and his plan only). It cast a pall of doubt on the management team, which hurt his company’s value because it slowed innovation.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Chip Mayo 6/16/21 Chip Mayo 6/16/21

Retaining Key Employees: One Size Doesn’t Fit

Retaining your company’s key employees is one of the most important steps toward your business’ success. Key employees can reduce your workload, noticeably improve company performance and operations, and act as the backbone of a successful business sale in the future. So, how can you keep these employees on board and engaged as you work toward a successful future? Let’s look at some ways to keep key employees motivated to grow your business and stick with you for the long haul.

Retaining Key Employees: One Size Doesn’t Fit All

One Size Doesn’t Fit All

Though key employees all do the same thing—tangibly contribute to company success above and beyond expectations—their motivations can be as unique as they are. Each key employee has different goals, ideas, and motivations in everything that they do. This means that trying to motivate and retain all key employees exactly the same way is often a recipe for disappointment.

In short, as you consider how to identify and retain key employees, you should avoid implementing one-size-fits-all incentives. Doing so may imply that you don’t understand the very people driving your company’s success, which can prevent future success.

Fortunately, though key employees may have unique motivations, those motivations generally fall into a few categories, which makes approaching how you’ll address them a matter of good planning. As you consider these methods, remember that it’s important for your key employee planning to fit into your overall goals for the success of your business and yourself in the future.

Planning for Key Employees Motivated by Money

A common motivator for key employees is simply more money. If money is indeed the biggest motivator for your key employees, proper planning can allow you to fulfill their wants, keep them on board, and position your company for future success.

For these key employees, consider creating a compensation plan that rewards their efforts to grow your company both now and in the future by sharing some of that growth with them. You may decide to pay them a certain percentage for exceeding certain goals now, with the opportunity to earn even more if they stay on board and continue to produce in the future, potentially compounding their earning potential if they stick around and continue to hit targets.

Planning for Key Employees Motivated by Freedom or Creative Control

Though many key employees are enticed by more money, not all are. Some key employees have a greater desire for freedom or creative control in their work. Trying to motivate these employees with more money may ring hollow to them. Fortunately, there are ways to engage and motivate these kinds of key employees.

For example, you might consider forming a subsidiary company that this key employee has more control over. Of course, this strategy would require you to assure that this subsidiary wouldn’t introduce outsized risk to your existing company, which is something that planning for future success can help you overcome.

Another way to entice these kinds of employees is with plans that give them more autonomy in how they work. Whether that means setting their own schedule or empowering managers to have a say in the company’s performance goals, you have options. The goal is to give these kinds of key employees the autonomy they crave while still working toward your overall goals.

Planning for Key Employees Motivated by Recognition or Ownership

Finally, some key employees are motivated by recognition and ownership opportunities. While it may be uncomfortable to face this kind of ambition, there are ways to engage and retain these kinds of employees without handing the reins over to them (either all at once or in totality).

For instance, you may tie performance goals to ownership opportunities. So, the better they do, the more chances they have to obtain slices of ownership in the company. Alternatively, you may consider motivating these employees with improved job titles or more chances to represent the company publicly.

How Do I Know What Motivates My Key Employees?

Determining what motivates your key employees isn’t as challenging as it may seem. There are several ways you can figure out what they want in the context of your overall business goals.

1.    Just ask: If you have good everyday rapport with your key employees, simply asking them what motivates them is the most direct way to determine the best strategies to retain them.
2.   Work with an outside consultant: Not all key employees will be comfortable telling you what motivates them, and that’s OK. They may feel more comfortable sharing their desires with an outside consultant. This is a more indirect method of determination, but it can be just as effective.
3.   Give them options: You may consider giving key employees choices in your incentive and retention planning. For instance, you might present a deferred compensation plan, a stock bonus plan, and a chance to run a division or subsidiary, and let your key employees choose or self-nominate. However, it’s important not to overwhelm your key employees with too many or confusing choices.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Chip Mayo 6/2/21 Chip Mayo 6/2/21

Guiding Your Wealth to Where You Want It to Go

When you die, how much money do you want to have to pay lawyers to wrangle the complications of your estate? How about the IRS—how much of your life’s work would you like to hand over to them? And if given the choice, would you prefer a smooth and responsible transfer of wealth to your family, or a difficult, bloody-knuckle battle? These questions may have obvious answers, but less obvious is how you get there. Today, we’ll look at some ways you can consider balancing your estate so your money goes where you want, not where others tell you it needs to go.

Planning for Your Legacy

Being a successful business owner can be lucrative for you and your family. Eventually, you’ll need to consider what happens to your legacy. Without a plan, phantom costs—like taxes you didn’t know about or legal fees—can have negative effects on your legacy, your wealth, and your family’s lifestyle. Because without guidelines, outside forces may try to take “their fair share.”

Fortunately, with proper planning, you can work toward a legacy you and those you care about are proud of. For business owners, proper planning can begin by asking yourself two questions.

1. What do I want my business’ future to look like?

2. What do I want the future lives of those I care about to look like?

Legacy Planning: Your Business’ Future

In some cases, balancing your estate first requires you to prepare your business for a future without you. Positioning your business to continue well without you—whether you sell your business on your terms or face unexpected challenges that remove you from the business— can help you make the most of your life’s work, for you and your family.

There are many aspects to this kind of business continuity planning. However, to start planning for a successful future, you may consider looking for answers to three questions.

1. How can I strengthen my company to run without me?

2. What do I want for my family once I leave my business—by choice, death, or otherwise?

3. What do my company, my family, and I expect from the business 5–10 years in the future?

Planning for a successful and more resilient business future can better position you to guide your legacy as you choose. The more inconsequential you are to your business, the more options you have to relieve yourself of it on your terms. That, in turn, can give you more ways to balance your estate fairly.

Slaying the Tax Dragon and Preparing Your Family for Wealth

Just about every business owner must confront estate taxes. To quote James L. Moore, JD, “It’s really not a tax at all. It’s a penalty placed on people who don’t plan.” Fortunately, business owners have two options regarding estate taxes.

1. Plan to vastly reduce or eliminate them.

2. Do nothing and let the government take their slice of your life’s work.

When we add the additional layer of complexity that results from speculation about how the tax landscape may change in the near and mid-range future, you may start to feel stress about having too many or too few options. Returning your focus to the facts of your situation and the outcomes you intend for your business and your family can help you regain a sense of agency during turbulent times.

When you know what your goals for your future are and how estate taxes can affect those goals, it can motivate you to enlist the right team of qualified professionals to help reduce the effect estate taxes can have on your goals. In fact, working with a collaborative group of advisors can help you determine those goals and then pursue them.

Finally, planning for a wealth transfer on your terms often requires you to prepare others to receive that wealth. We’ve all heard stories about someone receiving a large sum of money from a successful parent, only to spend most of it within a year or two of receiving it. Is this an outcome you want for your family? If not, there are steps you can take to prepare you and your business for a successful future while also preparing your family for the consequences of that future success. Communication frameworks and objective data that back up your assumptions can reduce drama and smooth out the path that you intend for your family and even future generations.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.