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The Approaching Tidal Wave

Posted on March 11, 2012 by John F. Dini

A year ago this month, I began speaking to business owner groups about “Beating the Boomer Bust.” Since then I’ve delivered the presentation over 20 times, both locally and to national groups, and the requests for it are increasing.

It’s the product of a year of research, and of fifteen years helping business owners prepare to leave their companies. I’m convinced, actually I am certain, that small business owners in America are ignoring a tidal wave of change that, just like a real tidal wave, will leave a few small businesses untouched while wiping many others from the face of the planet.

Am I being dramatic? Absolutely. Am I being overly dramatic? Not in the slightest. Peter Drucker once said “I don’t predict the future. I look at what has happened already and point out the inevitable result.”

Two years ago I set out to learn whether the birth rate curve of the Baby Boomers was duplicated in other areas of American society and the American economy. Not only did that prove to be the case, but the correlation is shockingly perfect. When the Baby Boomers reach an age where specific life activities would normally be expected, the incidence of those activities escalates overnight (with one notable exception that I’ll discuss in future weeks), in volumes not seen before or since, and exactly corresponding to the birth rate increase that started in 1945.

Describing it as a tidal wave isn’t at all metaphorical. Like a tsunami, it is well documented. The causes are known. It is traveling at a defined rate of speed. Its arrival is both inevitable and on a schedule. It will get higher and more dramatic as it approaches the coastline (Boomer retirement ages), and those who ignore the warning signs will be very, very sorry.

The impact will be universal, but I am going to focus on the implications for small business owners. Those who are exiting now will still have some options between selling to a late-stage Boomer and selling to Generation X, and should know what the differences are. Those Boomer owners who are planning to move on (perhaps not retire – another topic we’ll address) in the next 10 to 15 years need to understand the changed market that they will be selling in. Late-stage Boomers should be building a very different business than the ones they started or purchased. Post Boomer entrepreneurs need to assess the many opportunities that these changes will create.

Let’s start with defining the Baby Boom. Most of us know what it is, but it’s more than just a mere demographic description. Since this entire series will be about the inevitability of numbers, we should put the boomers in an economic context. Their numbers helped determine the personality traits of a generation, and of the generations that followed.

An important fact to understand in our discussion is that the Baby Boom is an American phenomenon. We were late to join World War II, and suffered far fewer causalities as a percentage of our young male population. In addition, the US was never a battlefield in the war, so our returning armies were discharged into a healthy infrastructure, with an industrial base fully geared up for maximum production.

In 1945, as the GIs began returning from WWII, the US population was 140 million, and the birthrate was about 2.8 million. That number of births had been roughly consistent, between 2.5 and 2.9 million, from 1900 onward, with one noticeable dip in the middle of the Great Depression.

In 1946, the birthrate exploded to 3.47 million, a 24% increase in one year! New births broke the 3.5 million mark for the first time in 1947, 4 million in 1954, and peaked at 4.3 million in 1957. They didn’t fall back below 3.5 million a year until 1971, and then didn’t reach the 4 million mark again until 1989.

In 20 years (1945-1964) the United States had added 78 million new, natural-born citizens to the population. By 1965 the US population had grown to about 195,000,000. which meant that two out of every five people in America was under 20 years old!

This was the uniquely American phenomenon that was to influence everything for the next sixty years. The impact of the Baby Boom has changed social and cultural mores, the job market, business structures and economics. As they exit the workplace, the Boomers will have one more giant shift to their credit, and it will change the face of small business in America.

If you are a Boomer business owner, know a Boomer business owner, or provide services to a Boomer business owner, I encourage you to share this first chapter of the series. By the time we reach the end, I can promise you that you will view the next ten years in a whole new light.

Posted in Exit Planning, Exit Strategies, Thoughts and Opinions | Tagged Baby Boomers, Boomer Bust, exit strategies, small business advice | 3 Comments

3 Responses to The Approaching Tidal Wave

Brad Elmhorst says:

March 12, 2012 at 1:45 pm

Looking forward to the next installments.

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David Girault says:

March 12, 2012 at 3:22 pm

Great teaser to the rest of the series.. As a Gen X’r trying to work with a Boomer boss on potential exit strategies, this is spot on.. On a different level, living in deep South Texas, where today, over two in five people is under 25, I am curious as to what we can do as a region to create the type of economic renaissance that America experienced as the Boomers came of age….

As always, Good Stuff, John!

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Kelly Rainford says:

March 16, 2012 at 10:02 pm

I have always known that the generational impact of the Boomers has been undervalued in business. As this high-powered generation gears up for retirement, the last thing we should do is wait to see what will happen. In fact, I have watched as this influential generation has struggled to step aside and actually retire. New retirement ages and redefining retirement as launching a consulting career are a part of this.

In addition, Generation Y is coming on to the scene, uninterested in playing by the Boomers’ corporate rules. What I am wondering is, how will Generation X stay in the game as the business rules are being rewritten?

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Hunting vs. Farming

Posted on March 4, 2012 by John F. Dini

At the family gathering, you are being introduced to a distant cousin you haven’t seen since childhood. The introduction usually includes your status as a business owner. “Do you remember little Cousin Bobby? He owns his own company now.” Or you hear it as you pass a conversation; “There goes Rebecca. You know, she has her own business.”

You know what they are thinking. It may be the somewhat awed tone of being in the presence of success, or a “Who would believe it?” skepticism. When you are a business owner among non-owners, the undercurrent of envy and admiration comes from certain commonly held beliefs about the lifestyle of a business owner.

You pay yourself as much as you want. As the holder of the checkbook, you can just decide how much salary you need, and take it. After all, if you determine other people’s compensation, so you determine your own, right?

You only work as much as you want. No one tells you to be in the office by a particular time. No one orders you to stay at your desk until a deadline is met. You can’t get fired for leaving early. You don’t have to accrue vacation. If you work a lot of hours, it’s probably just because you like money so much, and want more. (See belief number one, above.)

You only do what you want to do. That’s why you have employees. You can pay people to do whatever you don’t like to do. You write your own job description, as well as everyone else’s. No one is crazy enough to write a job description for themselves for a job they wouldn’t want to do! (Are they?)

Of course, you are probably smiling right now. We know what it takes to start and build something that achieves that level of freedom. It can take years to get there, and it’s seldom an easy road. Many of us never make it that far.

But it could be true. The vision other people have of an ideal entrepreneur’s life isn’t wrong, it is merely miss-timed. The entrepreneur always believes that such a lifestyle is in the future, it just isn’t here yet. It will just take a lot of work, a lot of talent, and at least a modicum of luck to make it happen.

It should be true. Along the way, however, many (if not most) entrepreneurs stall in the “lots of hard work for inadequate reward” stage of building a business. It happens because as the business grows, they are drawn away from what they enjoyed the most, from what they were best at, and into what the business demands that they do. They become farmers.

Management is farming. Balancing the checkbook is farming. Paying the rent is farming. Locking up the business at night, or opening it in the morning is farming. Purchasing supplies is farming. Writing procedures is farming.

Bringing in new sources of revenue is hunting. Finding and training great employees is hunting. Closing deals is hunting. Outmaneuvering your competitor is hunting. Motivating people to excel is hunting.

As an entrepreneur, you owe it to your company, your employees, your customers and yourself not to get tied down in farming activities. You started your business to do what you do best- not so that you could teach yourself a set of skills that you have little inclination to learn.

Picture Credit

Posted in Entrepreneurship, Life After, Thoughts and Opinions, Uncategorized | Tagged business ownership, entrepreneur, entrepreneurship | 1 Comment

One Response to Hunting vs. Farming

Donna says:

March 11, 2012 at 10:23 am

Great advice; I’m tempted to pass it along to the entrepreneur I’m employed by. He is seriously conflicted, loves the “hunt”, as he should, but micro-manages “farms” his staff to the point of self destruction.

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Absence Makes the Heart Grow Fonder (Not!)

Posted on February 26, 2012 by John F. Dini

When you are in love, separation from your loved one is painful. The longer you are separated, the more you want to be together. The saying is attributed to Thomas Haynes Bayly, a popular (but fairly light weight) writer of the early 19th century. Ironically, the popularity of the phrase he coined has far outstripped his reputation.

The effect is opposite in business. Physical separation is often the cause of friction, misunderstanding, resentment and defensiveness.

Anyone who has managed multiple locations knows the phenomenon of “branch mentality.” The employees in a remote company location resent the “interference” of the corporate office. The folks in corporate don’t understand how hard it is to compete out in the real world. They are focused on reports more than results. They operate on theory rather than practicality.

In the main office, the complaint is that the employees in the field don’t follow the systems. They make everyone’s jobs harder by doing their own thing, ignoring deadlines, and communicating poorly.

Any sales manager has heard salesmen complain that the company’s prices don’t work in their markets. Their customers are unique, and want different products or different services.

Every franchisor knows that an unsuccessful franchisee will blame the poor systems, marketing or support of the franchisor. The successful franchisee, of course, is successful only because of his or her own skills and innovation in the local market.

And then there is email. A separate column, actually a separate book, could be written about email. Email battles seldom start between people who see each other every day. The begin because people who don’t see each other try to influence behavior remotely. Their message is urgent, but isn’t responded to in what they consider a timely manner. They try to tell others what they should do in an email. They copy the boss, or coworkers, or hit “reply all” with a criticism.

The solution to every one of these scenarios is the same: face to face communication. Sociologists say that as much as 85% of our interpersonal communication is through body language. Try this the next time someone asks you for a report:

Say “You are such a stickler for deadlines!” face to face with a big smile and while rolling your eyes comically.

Say “You are such a stickler for deadlines!” face to face, with a scowl.

Say “You are such a stickler for deadlines!” in an email. Now copy the email to five other people.

How would the reaction differ? The first one you are likely to get away with, even though what you said might not be appreciated. The second is bound to generate some defensiveness. The third starts a war.

As the owner of a business, your leadership responsibilities include spreading the culture of the organization, and making everyone part of the team. It’s easy to “forget” the folks in the field as long as they are doing their jobs. In truth, they need twice the contact of the people who see you every day.

Include remote workers in regular meetings. Conference calls are better than memos, because employees can give immediate feedback. Skype or other web-based video conferencing tools are better yet.

Limit the number of central office employees who can broadcast to the people in the field. It is frustrating to receive multiple emails on the same topic, or to open a string of messages from accounting, operations, sales and marketing. (“Don’t those people have anything else to do but send emails?”)

Most importantly, get people face to face. Send employees from the main office to visit those in the field, not to inspect, but to learn. Bring remote personnel into the main office periodically to meet the people who support them.

It can be difficult to budget an expense for activity that seems to lack specific purpose; but what better purpose can you have than a company where people work together more effectively?

Posted in Leadership, Management | Tagged business ownership, employees, leadership | 1 Comment

One Response to Absence Makes the Heart Grow Fonder (Not!)

Joe Zlotkowski says:

February 26, 2012 at 4:38 pm

Good discussion. I am especially interested and working on ways to effectively use remote technologies like Skype, webex, and communicator.

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Are Mistakes Good?

Posted on February 19, 2012 by John F. Dini

“Experience is a dear teacher, but only a fool will learn from no other.” Benjamin Franklin

Business owners learn a lot from their experiences. As a friend says, “Experience is what you get when you don’t get what you want.”

In many companies, you can trace the history of their employee issues through their handbooks. The dress code says that Fridays are casual days. Then it goes on to say that casual dress does not include ripped jeans, low-cut blouses, flip-flops, shorts, sleeveless t-shirts, pants that drag on the floor, baseball caps, piercings over a certain number, dressing in the clothing of the opposite sex (Real! I’ve seen it!), or graphics that include crude or offensive language.

You can visualize every incident, the counseling, and the subsequent managers’ meeting that added more language to the handbook.

But the experience that comes in operating a business is usually the results of making mistakes. We don’t tend to change our behavior because of our successes. If it works, we don’t want to break it.

You want to do some marketing. You decide to send postcards to prospects. If they buy, you keep sending postcards until they don’t work anymore. As long as they keep working, you keep sending them. When someone says “Where is your Facebook Fan Page?” you respond “My customers aren’t interested in that. They like postcards.”

How do you know?

We fear making mistakes, but if you do what you’ve always done, you’ll get what you always got. (attributed variously to Mark Twain, Zig Ziglar and Tony Robbins.) As an owner, it’s your job to make mistakes. That’s the best way to control their potential damage, and to keep your employees from making them for you.

How do you decide which mistakes to make? That seems like a foolish question. I once saw a business assessment instrument that asked “What is your system for identifying the things you haven’t thought of?” At first blush it seems idiotic, but every one of us would gladly lay out cold, hard cash for such a system.

The problem is, we don’t make the mistakes we don’t try, but we have no way of knowing whether not trying is a mistake. For those of us who founded our businesses, the leap of entrepreneurship was a huge risk. If it was a mistake we failed, but if it worked, if we were tenacious and strong-willed enough to make it work, our appetite for risk began to decline.

When your business is successful, you enjoy the financial trappings of that success. You also feel an obligation to safeguard the livelihoods of the employees who depend on you, and the customers who depend on your product or service. You won’t take a “bet the company” risk except in the most exceptional circumstances.

It’s easy to then progress down the slippery slope of risk aversion. Avoiding a “bet the company” risk progresses into avoiding a bad year, then a bad quarter, then a bad month. If you aren’t careful, it becomes an avoid-loss-at-all-costs mentality. The status quo is safe. Change is risky. Why bother?

But you have to risk some losses in order to have new wins. You have to try new things, or the risk of not changing grows to company-threatening proportions.

Set aside a mistake budget. Periodically, say once a quarter, deliberately spend some time and money on trying something you’ve never tried before. Attempt a new marketing approach. Introduce a new product. Hire for a new position to do something that no one in your company currently does.

If the new idea is a mistake, you have contained the downside risk. If it isn’t, you’ve avoided an even bigger mistake- doing nothing.

Posted in Entrepreneurship, Leadership | Tagged business ownership, employees, leadership, small business advice | Leave a comment

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The (pen)Ultimate Hire

Posted on February 12, 2012 by John F. Dini

Every sane business owner will acknowledge that there is a point at which his or her own skills are no longer sufficient to grow the business beyond its current level. The revenue point where that happens differs by industry, but it frequently begins at around 20 employees.

At that point, an owner becomes swamped by the conflicting needs of managing the existing operation, and having enough time to perform the tasks that made the business grow in the first place.

The owner realizes that further growth requires the addition of a key employee; one who can assume some of the owner’s duties so that he or she can focus on organizational development.

The typical plaint in this situation is “I need someone who can think. An employee who can run things without my daily input, so that I can focus on what I do best.”

But there is another version that is materially different, although it sounds the same on the surface. “I need someone who can run this company without me.” is a far cry from one who can handle day-to-day operating responsibilities.

Many owners fail to look beyond the immediate need for task relief to determine exactly what this key employee’s long-term role will be. There is a big difference between hiring an SIC (Second In Command) and an SIT (Successor in Training.)

A Second In Command is responsible for assuming some of the owner’s ongoing decision-making and management duties. The SIC’s role is to free the owner to do what he or she is best at (or enjoys the most). The job description is based on the assumption that the owner is present, or at least available, to check off on major decisions and give ongoing guidance.

In my presentation to business owners, “Beating the Boomer Bust” I discuss the likelihood that many owners will have to execute their own succession plan by growing a successor internally. This Successor In Training is more than someone who can merely back fill your skill set. It needs to be someone who can eventually replace your skills in the business.

The common wisdom is that an SIC should compliment, not duplicate, your talents. We advise owners not to hire a “mini-me,” since it is unlikely that you can find someone who has the same motivations to cover all the various skills that ownership requires.

Typically, you take your job description (finance, sales, business development, culture, motivation, operations, marketing, management) and subtract those things that you want to continue doing personally. The rest of the duties become the SIC’s job description.

But the intention of many owners is to develop the SIC into an SIT. An SIT is someone who can eventually assume all of your higher-level duties. He or she has to create value while you are still there by filling in the gaps in your skill set, but must also have the potential to grow into a broader role as you prepare to withdraw from the business.

Of course, you are still in for a long search if you seek a “mini-me.” The likelihood is that your SIT will eventually need an SIC of his or her own. If you can’t run the company by yourself, your successor can’t either. If you need an SIC now who pays closer attention to the numbers and ratios than you do, then that person will eventually need someone to focus on sales and development.

Hiring a key executive is the single most important decision you will make. Don’t begin the process by making the mistake of looking at only the needs you have today. A solid SIC will probably take five years to fully integrate with you. An SIT may take ten. The investment can be wasted if you look only at your immediate needs. Start with a longer-term vision of how you want your role as an owner (or as an ex-owner) to play out.