Forget Networking - Be a Connector

I saw this piece a few years ago in SecondAct.com by Alina Tugend. It makes great sense and I thought it worth sending again.  -dpm
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We all know people like them, people who seem to know everyone. They're always able to help -- or if they can't, they know someone who can. You meet them for the first time and in 15 minutes, you're talking with them like you're childhood friends. They're successful, smart and funny, with a likable touch of self-deprecation. And they're interested in everything.

Who are they? Connectors. Take Maryam Banikarim, senior vice president and chief marketing officer at Gannett, publisher of USA Today. She has a perfect job for a connector -- she helps link Gannett's various newspapers and media outlets "and bring the pieces together." "I like people and am genuinely curious," says Banikarim, 42. "I like stories and want to make connections. But I didn't know the word for it until my husband read Malcolm Gladwell's The Tipping Point and said, 'I finally have a word for you -- a connector.' " As Gladwell writes, "sprinkled among every walk of life . . . are a handful of people with a truly extraordinary knack of making friends and acquaintances. They are Connectors." Gladwell describes them as having an ability to span many different worlds, subcultures and niches.

Traits such as energy, insatiable curiosity and a willingness to take chances seem to be the common thread among connectors -- as well as an insistence that connecting is not the same as networking. "Networking I see as a means to an end," says Jill Leiderman, executive producer of the late-night show Jimmy Kimmel Live. But connecting, she explains, is about using a genuine love of meeting people and making friends to engage and assist one another.

Connectors show a willingness to venture outside their comfort zones. For example, comedy writer Josh Bycel (shown top) visited a Darfur refugee camp a number of years ago, and on the way home he came up with the idea of raising money for a medical clinic for the camp. In three weeks, he had collected $50,000. That idea grew into a nonprofit called OneKid OneWorld, which aims to connect schools in the United States with those in Kenya and other developing countries to provide everything from books to clean water.
"I'm a comedy writer. I don't know anything about building schools," says Bycel, 40, who lives in Los Angeles. "But I'm interested in learning. You need to get out and make connections outside of your own world. Being interested in lots of different things by definition allows you to be a connector."

The willingness to reach out to someone you don't know is crucial to the art of connecting, and especially important in uncertain economic times. Those who are in mid-career and may have worked for one company for years should learn connecting skills before they need them.For instance, most people's natural inclination is to seek out friends at meetings and mealtimes. Banikarim says not to do that. "It's easy to sit with someone you know," she says. "It's hard, but more interesting, to sit with someone you don't know. This is not like high school. It's not just the losers who don't have somewhere to sit."

It may seem as if connectors are born, not made, but that's not necessarily true. Banikarim was forced to learn to reach out to people from an early age. She moved with her family from Iran to Paris in 1979, then to Northern California, where there wasn't an Iranian community. "I was often that new kid," she says. When she started college at Barnard, "I knew it was either sink or swim. The first week of school, I joined every club and went to every meeting. I ended up as freshman class president."

Joining clubs and organizations is a terrific way to find like-minded people, but only go when you have an interest -- and don't attend endless networking get-togethers. Keith Ferrazzi, author of Never Eat Alone, says he has never been to an official networking event. Instead, he advises, join organizations that focus on the events and activities you love."I have a friend who is the executive vice president of a large bank in Charlotte," he writes in his book. "His networking hotspot is, of all places, the YMCA. He tells me that at 5 and 6 in the morning, the place is buzzing with exercise fanatics like himself getting in a workout before they go to the office. He scouts the place for entrepreneurs, current customers and prospects." Of course, when you're walking into that first meeting or class and facing a bunch of strangers, the instinct is to flee. That's all right. The point is not to ignore the fear, but acknowledge it -- and then work through it. "I sort of just run into fear, as I run into chaos," says Banikarim, whom The New York Post named one of the 50 most powerful women in New York City in 2008 when she worked at Univision. "You breathe deep, and you have to remember that everyone is scared."

Perhaps one of the most important attributes of a connector is a willingness to help and to reach out even if there is no obvious or immediate payback. That means thinking long-term. Jen Singer is the founder of the blog Mommasaid.net, author of five books, a Pull-Ups spokeswoman and an undeniable connector. "The biggest mistake people make is they think that 'if I help this person, something will happen immediately.' We have to stop thinking in linear terms," she says.
Helping others out doesn't mean you can't hold some things back. Singer, 44, uses the word "coopetition" -- a combination of competition and cooperation -- to describe her philosophy. "I think this generation understands you share, but also protect your own interests -- you don't give a key to everything you have. It's a line you have to learn to walk."

Finally, a connector also occasionally has to disconnect. Leiderman says her boyfriend "has taken away my Smartphone so I can super-connect with him."

Four Possible Scenarios of the future: How would your company respond?

[Editor's Note: When we initially published this article, most business leaders were still expecting a "normal" recession and recovery cycle. We now know that we have seen a combination of uncertainty and slow growth. While many companies have reacted relatively passively, some are changing the dynamics. We have updated the article, but surprisingly, many of the observations  are still present.What are your thoughts? Do these possible scenarios of the future still hold true?  I hope you find this thought-provoking. - DPM] 1. Paralysis/Survival: This describes a situation where external events will be unknown and surprising, and companies will respond to them in a predominantly passive and reactive manner. This, clearly, is the worst-case scenario. In this situation, "unexpected and disruptive events will increase over the next several years, and companies (and/or economies) will react by pulling into a protective shell." The external shocks could include economic developments such as the nationalization of major global industries (like oil, banking, auto) and significant disruptions to global material flows. On the political front, terrorist attacks could continue to escalate in different parts of the world, and the U.S. led anti-terrorism effort could fall apart. Isolationism and protectionism may gain strength. Companies (could) react by trying to protect existing assets with layoffs, reduced R&D investment, reduced product development, and lower foreign direct investment. Consumers may compound the problem by reducing spending dramatically. The bottom line in this scenario: A long, global recession 2. Slow Growth: This scenario predicts a future where external events will be known and expected, but companies will respond passively to them. This, too, is a relatively grim scenario, though not as irredeemably dismal as the previous one. In this case, "disruptive events with moderate impact continue, and while seen as normal, they result in an economic malaise." This scenario would be marked by debt and currency problems in key world economies, though a full-blown long-term global recession may be avoided. Unemployment (or Underemployment) would be higher but manageable, but consumer confidence would be low. Politically, the war against terrorism could head toward a stalemate situation. Companies would get used to the risks of terrorism and learn to cope with their losses. They would make modest investments. The bottom line in this scenario: Life becomes an overpowering shade of gray 3. Thriving With Chaos: Here, external events will be unknown and surprising, but companies will respond mostly in an active and opportunistic fashion. In this scenario life is still gray, but sunlight filters through the gloom in some areas. "Unpredictable disruptive external events" would continue, but "corporate and national resolve to be successful in the face of adversity" would drive modest prosperity. While uncertainty would continue, it would be considered a cost of doing business. Companies would try to seize business opportunities amid the disruption and uncertainties, and make increasing investments in areas that seem to be potentially profitable. In the political arena, the continued global realignment of the U.S. with Russia and China would continue to open up new market opportunities, but the Islamic countries crippled by terrorism and some developing nations could be shut out of these new alliances. The war against terrorism would continue without a clear victory. The bottom line: Life could be better, but there's money to be made if you know where to look. 4. Global Growth: In this scenario, external events will be known and expected, and companies will respond actively and aggressively. This, clearly, is the best-case scenario, one in which "countries and peoples of the world recognize common goals and focus on economic development and peace as the route to permanent stability." The key features of this scenario would be that the business cycle would return to normal; the global "coalition" against terrorism would evolve into a coalition for peace and commerce, and the threat of terrorism would fade. Oversupply of oil would transform the role of oil in Middle Eastern politics. Consumers would feel confident about the future, increase their spending, and lay the foundations of a sustained economic recovery. Trade barriers would be lowered and the developing economies would grow in tandem with the developed ones. If these four scenarios - or a combination of them - represent what lies ahead in the next few years, what strategies should companies put in place today to deal with them?  Clearly, though, neither these scenarios nor the strategies that follow from them will apply across the board. The scenarios will play out differently not only in different industries, but also in various regions of the world. Accordingly, the strategies that companies develop to cope with these situations will need to vary to reflect these differences. It would be a mistake to allow the uncertainties that prevail today to put business decision making on hold. The future may be unclear, but one thing is certain: In today's circumstances, scenario planning is more than a tool. It is a weapon to combat uncertainty, and the future will belong to companies and executives that wield it well.         How well is your company prepared to respond? Are you taking control of the things that you can? Are your actions strengthening your company - or weakening it? Are you building flexibility into your plans? Have you changed your approach to planning? The Mead Consulting Group helps dozens of companies and organizations - like yours - every year with scenario planning. The process has helped our clients consistently outperform their competition.  Please comment.      ¹Excerpted from 12 CEO Diseases and How to Treat Them, Dr. Robert Lawrence Kuhn, CEO Magazine, October/November.

Plain Talk about Exiting Your Business: The Needs Gap and the Value Gap

[Editor's Note:  There is a lot of misinformation about the state of the market for lower middle market ($10M to $200M in revenue) companies looking to sell - either now or sometime in the next few years. I asked some of our clients to provide questions that were on their minds. Answers have been provided by private equity firms, intermediaries, business owners, and bankers.

While good, well-managed companies are being sold at close to record prices, this article addresses a problem for companies looking to sell -  how to address a "value gap" or "needs gap" that has developed between the current market value of their business and the amount they need or expect to get from a sale.

If you have any questions about this information or a question that we did not answer in the following, please do not hesitate to contact us. -DPM]

Question: How do I determine if my company has a value gap or needs gap?

Answer:

What many companies looking to sell are experiencing is called a "value gap" or "needs gap." This means that the company as it is performing or configured today will not achieve the sales price in the current market that it would have earlier before the 2008-12 downturn. This gap is the difference in value between then and now.

Question: How do I know the current value of my company?

Answer:

We suggest to our clients that they contact a reputable investment bank or M&A intermediary who can estimate a market valuation range for your business. This market valuation is very different than a valuation that an organization might do for estate planning or tax purposes. An M&A intermediary will value your company based on the current market for companies of similar size, industry, performance, and growth. A common mistake that owners make is comparing their company to the valuations of large publicly-traded companies in their industry. The truth is that large companies trade at higher valuation multiples - sometimes much larger multiples - because risk is generally perceived as significantly lower than with smaller companies. An M&A intermediary or investment banker can determine the appropriate market valuation range for your business.

Question: OK, so now I know the estimated value range for the business. Now what?

Answer:

Once a business owner knows the estimated value of the company, it's time to figure out how much the owner gets to keep and to determine if that's enough. Consulting with a competent tax accountant, you can calculate the net proceeds which is the estimated gross value of the business less the legal, accounting, and intermediary costs to sell the business, less the tax bite that Uncle Sam may take. [Many times there are built-in gains in the business that may make that tax bite significant - and your accountant and wealth management professional may be able to suggest ways to mitigate this BEFORE you sell.] Once you've determined the net proceeds, it's time to review this with your wealth management professional to determine how you might invest the proceeds to see if you will be able to support the lifestyle you expect.

Question: What if it's not enough?

Answer:

Then you and your wealth management professional must determine how much you do need. We then help clients develop a strategic growth and execution plan for the business, with specific steps necessary to achieve the increase in valuation in order to meet the owner's needs.

Question: Is that the needs gap?

Answer:

Yes. It is the difference between what an owner may need from the net proceeds of the company and what it's currently worth.

Question: Then what is the value gap?

Answer:

The value gap typically occurs when a company's performance slips. A company may have had a valuation of $1,000 in 2007, based on certain performance projections for growth of revenue and cash flow. If the company has failed to meet those projections for 2008, it may now only have a valuation of $700. That difference between the previously "expected" value and the current market value is the value gap. The gap may actually widen if buyers begin to suspect (or even imagine) that the business may have additional unknown risk. It is an uncomfortable place for all parties and typically the company is taken off the market.

Question: So what happens with a needs or value gap? Am I stuck staying with the business?

Answer:

Please note that in some cases, it may not be possible for a business to grow sufficiently to add enough value to meet an owner's needs, due to an aging industry, product obsolescence, etc. If that's the case, however, business owners tell us they would rather know that as soon as possible so they can possibly take other steps.

However, we have been pleasantly surprised over the years at how many businesses can actually achieve their needs with a good plan and great execution. Many businesses become a "lifestyle" business over the years, supporting the income needs of the owner. As a lifestyle business, many companies are worth more to the owner than to a prospective buyer looking for a return on investment. By focusing on the primary drivers of value for the buyer, a business can be transformed into a much more valuable entity.

Question: What are the drivers of value for the buyer?

Answer:

What are buyers looking for? It comes down to four things:

1. History of revenue and profit growth

2. Strong cash flow or EBITDA

3. Strong management

4. Opportunities for growth

In order to get the best price, you must be able to present a company that the buyer can see will bring them a reasonable return on their investment. That means the business has to have the potential to grow and has management that is knowledgeable in the industry that will help them grow the business. For more detail see "Prepare your company to be bought."

Question: Does that mean that businesses that don't have the four value drivers won't sell?

Answer:

No, but what is true is that flat businesses, or those with an inconsistent history, are less desirable and therefore are typically "discounted" by buyers. Businesses without the four drivers have a higher risk of not meeting the desired investment return. Simply stated - higher risk means a lower price.

What is happening in today's market is that buyers are being more selective and those companies perceived as "less desirable" are either not sold because banks will not provide debt financing, or they are being deeply discounted.

Question: How long does it take a company to transform from a lifestyle business to a value business?

Answer: That depends on a number of factors. Based on the dozens and dozens of companies Mead Consulting has worked with, we would say it comes down to 12/24/36. That's 12 months, 24 months, or 36 months. We have found that by focusing company management on the key drivers, an organization can be ready to go to the market in as little as 12 months, but more typically it's 24 or 36 months. See"Maximizing Company Value at Exit."

We assist a company with direction and resources, but a lot depends on the commitment and discipline of the owner and management team. We tell business owners that there is no magic button to push - it's hard work. But, most successful owners agree that it's worth it. Many times, we can accelerate the process by helping the owner stay focused and hold himself and the management team accountable for progress.

Question: How much progress can a company make (over 12/24/36)?

Answer:

We've seen companies with needs gaps improve valuation by as much as 500% over 36 months. A $50M revenue client company that sold in 2006 had a 16X IMPROVEMENT IN EBITDA between 2002 and 2005. Another more recent client valued at $16M in early 2012 sold for $80M in 2014. While these situations are possible, it is more typical to see improvements in value of 30% - 50%.

Question: As a business owner, what should I be doing?

Answer: Act Now! This is a Sellers' Market. The stock market is at record highs, borrowing costs are very low, there are more buyers than sellers, and both private equity and strategic buyers have stockpiles to invest. Most people believe that the dynamics of this "sell cycle" which began in 2012 cannot last more than another two to three years. Start today to work on preparing your business to meet the four value drivers. Only those companies that are well-prepared will gain a top price; the others will, at best, sell at a steep discount.

For more information, also see "Common misconceptions about selling a business" 

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 The Mead Consulting Group has helped dozens of clients prepare for successful sales transactions ranging from $15M to $350M in transaction value. We help companies increase the value of their businesses leading up to a transaction, minimize the things that cause potential buyers to discount the price, prepare to best position the company, and assist the owners in building a  transaction team.

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What successful business owners say about us:

 ...We could not have completed the sale of our business without the advice and guidance of The Mead Consulting Group. Their experience was critical in helping us prepare, and endure, the transaction process to a successful outcome

. ...Charles M, President, Healthcare IT Company

 

A successful process is draining and stressful.  The Mead Consulting Group brought the experience and expertise necessary to help our team focus on the critical issues and not get caught up in the multitude of items that can derail a transaction.  Why reinvent the wheel?  We chose to take advantage of individuals who could help us understand the nuances, negotiate effectively, and close the deal 

. ...  Ken W, CEO, Behavioral Healthcare

...We missed the opportunity to sell our family business during the last upcycle. Mead Consulting helped us grow revenue and EBITDA to record levels and guided us through the selection of a transaction team. Dave Mead and his group provided great counsel throughout the sales process, removing obstacles and firmly encouraging us to a great deal with a strategic buyer that mirrored our family business values.

...Dan M, President, Building Products Company

...I do not know why anyone would attempt to sell their business without Mead Consulting. Since they have owned and sold their own businesses, they understand the challenges of continuing to run the business while trying to sell it. Their experience kept us focused on the right things and they helped keep our transaction team well-aligned during the process. They truly act as the advocate for the CEO and owner, helping to make sure that it was the best deal for the owner. ...Ron T, CEO, Software Business

   

 Let us your your thoughts. Post your comments below.

The Value of Mentoring Youth

[Editor’s Note: As we enter the season of giving, I thought it might be appropriate to share an article about giving back. I have been concerned about the lack of role models and adult guidance for many of our youth and it has been demonstrated that youth who have a formal mentoring relationship do better in school, stay in school, have lower incidence of substance abuse, and lower incidence of crime, not to mention an overall better future. As I began to investigate the statistics about the value of mentoring, I found that the results are compelling. Mentoring benefits not only the individual and the community, but also employees and businesses.

Most successful people know the value of mentors – I know I have been fortunate to have had several key mentors over the course of my life and career.

One of the things my mother used to say: “If something concerns you, stop whining about it and do something to make it better.” Years ago, I was a Big Brother for several years and it was very rewarding. I wanted to have a bigger impact. So, I joined the Board of Mentor Colorado (Colorado Mentoring Partnership). In Colorado almost 300,000 young people do not have a formal mentoring relationship. Mentor Colorado (Colorado Mentoring Partnership) is the support organization for the 60+ mentoring organizations to help them in scaling their activities with adoption of best practices in recruiting, training, and supporting mentoring relationships. There are mentoring partnerships in 26 states. Mentor Colorado is one of the most recent states to form an organization. The models Colorado is following are the organizations in Minnesota, Massachusetts, New York, and Pennsylvania which have dramatically increased the number of quality mentoring relationships. – dpm]

In 2015, The National Mentoring Partnership and Ernst and Young sponsored a 2015 report Mentoring at the crossroads of education, business and community about the value of mentoring to the individuals, the community, and to businesses. As the report states it, “Mentoring is changing the trajectory of thousands of young people’s lives.” 

Value to the individual and community.  Some of the benefits to the individual and the community include:

• Better school performance.  Improved attendance,  higher graduation rates, and more likely to go on to college

• Less Substance Abuse. Mentored youth are less likely to start using illegal drugs and alcohol.

• Lower Crime rate. Fewer disciplinary problems and lower incidence of criminal behavior

• Better jobs and much less likely to be dependent on entitlement programs

Value to companies.  Key reasons companies engage in youth mentoring:

• Fostering employee engagement, satisfaction and retention. Today’s employees are strongly attracted to companies that are purpose-driven and that offer opportunities for engagement.

• Cultivating and developing their future workforce. Prepare a more productive workforce

• Supporting vibrant communities (which include viable customers) 

• Branding
• Improve its image in the community
• Increase community awareness of its mission

Mentor Colorado can help your company get started.

Many organizations have a fragmented approach to not-for-profit activities. Other companies may not know how to get started. Mentor Colorado is helping sponsoring companies with the development of mentoring programs, training, and managing mentoring activities.

Become a Founding Sponsor and make a lasting difference.

To get involved:  

If you would like more information about how you and your organization can get involved (and make a positive difference), please contact Dave Mead or Executive Director, Brad Strong.