Dashboard: Okay, Boomer, What's Your Succession Plan?

[Music] welcome to another 21 hats dashboard I'm Lauren Feldman I'm here with Gene marks to talk about the things we think business owners should be following this week welcome Jean hey Lauren how are you doing I'm doing great great to have you here Jean as usual you've been writing about stuff that matters to business owners uh including a piece this week about why the world is ready for baby boomer business owners to move on um I wasn't sure this one sounded like you you're usually going after employees uh what were you thinking with this one I wasn't going after it's tough love you know it's funny too because I was um we I was just talking with somebody from the American uh the the a ARP what does that mean the the association of old people that's it Association of old people and um we we were talking about because I was you know we're talking about maybe doing something together and and then she read this article that I wrote in the guardian and she was like I don't know if I want to work with you you don't seem to like our members very much I like I'm not surprised you know what first of all I want to be clear I don't choose the headlines okay that my editor Dominic at the guardian always like put these words in my mouth so so the piece the headline of the piece is called uh okay Boomers the small business world is ready for you guys to move on so first of all I also want to be you know completely full disclosure here I say you guys but I was born in 1965 Lauren and like the I think the cut off is 64 for Baby Boomers so you could very well you know put me in that same category of a of a baby boomer we you know businesses are owned by more than 50% of businesses in this country are owned by people over the age of 50 uh so that is a you know that that is a statistic from the small business administration there are a lot of uh you know Boomers that are starting to talk about succession planning and exiting their business and you know my my point in the article is that we've done you know a real sort of shitty job of of you know of positioning our B businesses to be transitioned on to people I mean just some of the statistics that you that you read I mean you 86 this according to one study that showed that 86 to 92% of companies are still writing paper checks you know paper checks you know and I know them because these are my clients you know um you know we have technology platforms that are sort of you know you know out of date wait do you have clients who have a CRM but also use paper checks yes of course and they have crms but they're using it like a glorified Rolodex and the fact that I'm using the word Rolodex just tells you an example of who's listening to us right now let alone who my clients are you know and then like you know the typical workplace of you know businesses they're still kind of stuck in the past you know I I you know I say like they people still resist the flexible scheduling they don't provide Mental Health Coverage they you know they screw around with you know health insurance you know all all that kind of stuff and you know I just you my point is is that listen guys if you want to plan this is an article on succession planning it's like if you are looking to move on from your business someday five years 10 years from now you got to start thinking about that now and if you want to create value in your business you know you got to really address some big issues I mean I see this on my clients all the time you've got to move your technology into the 19th century at least you know you you've gota you've got to update your employee practices you've got to provide competitive benefits you have to you refurbish your office you have to redo what your invent you know clean out your inventories there's a lot of there's a lot of things that you should be doing in your business to not only get your together but also to you know to build an asset of value so you've got something to pass on and unfort and the biggest thing is a lot of baby booners they want to cling on to their business they want to they don't want to move on you know they wanna it's the very end and it's just hurting future generations and I think we have a responsibility you know for future Generations to to build that value well well let me ask you this there there are obviously a number of different situations here that falls into the the bucket you're describing I mean you know the SBA says there are 30 million plus businesses in America but you know a lot of those businesses are are you know have no employees they're they're very small businesses and similarly with the businesses you're describing some of them are businesses that really don't have a hope of creating a ession plan you know somebody has created a business but the owner is too much a part of the everyday business to really pass it on to someone else or to or to sell it um and you know in some cases it's what you just described it's a lack of forethought it's a lack of planning it's a business that could have been turned into a sellable business in other cases it it probably just isn't in the cards do you have a sense of how much of one there is and how much of the other and are you addressing both both types yeah I mean there's about 7 million um of the 30 million 6 to7 million are employee employer owned businesses you know businesses that have employees you know so you're absolutely right I mean two-thirds of that 30 million million numbers Independents Freelancers very small you know whatever and they're just going to be what they're going to be they're going to die in the business is going to die with them you know but it's also true even if some businesses do have employees I believe yeah it is you're absolutely right but then again that's also not true for even people that might have independent businesses because there are people that are Independents that run you their Consultants their insurance company you know Insurance reps their sales reps that they actually do have something they could pass on to somebody um if if they wanted to sell it or or pass it on to a to another Generation Um and the same goes with people that are you know running employee businesses or employer own businesses you know I mean there there's some value there and I I think not enough and I I know these guys because these are my clients you know we're all we all should be thinking of the future we're all getting older we're not getting any younger and succession planning is a big issue with a lot of my clients and it is becoming a a Hot Topic among a lot of places where I go to speak and if you w to you know and it's succession planning is it's all first of all people in they starting up a business or in their 20s or 30s should be thinking about succession planning you know an exit but okay okay I I I give them that that there's other things to think about for sure people that are our age long or that they the boomer generation you know we got to be thinking ahead and not enough of us are doing that right now and you know if you want to sell your business you're not going to do it tomorrow my smartest clients they make plans for five to 10 years from now okay run your business into your 60s but you know you got to start making some Investments now you really do into better workplace practices better benefit plans better Technologies uh better facilities if you want to build something of value that you can one day sell and unfortunately you know I think a lot of baby boomers are not doing that instead they're leaving you know leaving a mess for future Generations or undervaluing what they could be selling in the future do you have a plan um no because my plan is um you know I it's a good question I build up cash in my business and that is what my business is um my business has no value I mean I have no I have receivables and cash all of my clients are not under any kind of contract so it's not like they they have to stay with any successor going forward so if anything if I hand my business over to somebody it's going to be to you know you know somebody that that would pick it up and they're good luck with them trying to continue running it on because they're not but you provide a valuable service if if you wanted to run it as a business with the goal of one day selling it don't you think you could do that yeah I probably I probably could and you know Lauren it's you're really you you're killing me here because you're right you really are I'm sitting there pontificating here in the guardian about all these baby boomers not building up enough value and I'm just as lazy ass as you know everybody else my well it's not I I think you're being too hard on yourself and perhaps on other Boomers it's it's hard um you know sometimes it's it's enough just getting through the dayto day let alone thinking 3 four 5 10 years ahead yeah it's hard and I think and it's such and it's maybe it's another topic for me to write on you really make my wheel spin because it's not only just hard but you know the biggest challenge that you and I have I I don't want to speak for you but the biggest challenge that people have my age and I have is that as we get older you know we start you know plateauing a little bit you know what I mean we want to take a little bit more time off we want to start enjoying life you know enjoying the fruits you know kind we don't have the same kind of energy and drive and you know you know all that that we had when we were in our 30s you know what I mean so it it makes it a lot harder for people of this generation to really put the effort into doing what they that's needed to be done to build up value in their business um and I guess my my takeaway is like you know listen if you're not going to do that you know you know there's no law that you have to do there not putting a gun to your head but we are we meaning me we are leaving a lot of money on the table by not making the kind of Investments that we probably should be making now um and a lot of people in our generation are are at fault for that and I think you know as you rightly point out me as well I'm at fault you're right that a lot of it involves leaving money on the table and it's kind of up to the owner to decide the other thing that a lot of owners I think think about is you know the time's going to come when they're done and do they sell the business or transfer the business in some way that allows the employees to go on working at the business and that's an interesting question uh I I've spoken to I've spoken with a lot of owners about this the the overall sense I get is that most owners feel they would like to create a situation where those employees get to keep their jobs but they don't necessarily feel as though it's their obligation right how do you think of that um I don't think it is their obligation at all I I completely agree with that but it is it is a way to do it and that that leads that that can lead into a whole conversation which we should definitely have at another time about Employee Stock ownership plans um I don't you know to me I don't want to give up any equity in my company um but you know depending on some businesses that are willing to give up some Equity um now is also a good time if you're a baby boomer to consider some type of uh a co-op or an ESOP plan um where you can maybe you know sell 25 or 50% of your company or or 40% of your company uh to your employees to make start that transition plan and start taking value out of your company um and giving your employees more of a say in the business and that's another thing to consider it's funny you mentioned that uh one of the regulars on this podcast Jay goz has just in the last couple months gotten really excited about the idea of doing uh an ESOP and I I think we're going to be talking about that a lot in the coming year because he's really hot on it right now I'm really I'm interested in that also I mean I wrote about that for the inquire a few months ago and I talk about it all the time um and I am I think it's for some companies and Jay's company I think would be perfect for it it's a it's a really really it's it's an almost too good to be true kind of arrangement there are a lot of really attractive things about it there really are I agree all right next topic uh you wrote another piece about things you can do to better manage your relationship with vendors and suppliers uh I think this was prompted by a Wall Street Journal story yeah this is prompted actually because the Wall Street Journal did write a story about Walmart and um I don't know if you were following this or not but like Walmart uh had like a like a big announcement from their CEO telling their vendors and suppliers not to raise their prices you know literally what you can do if you're Walmart yeah it was like wow it must be great to be you Walmart here you know what I mean he basically it was this guy Doug McMillan he said he warned the vendors you know say like don't don't raise your prices on us and it's maybe like wow you know that's really yeah wouldn't that be awesome if we could do that too so okay clearly we can't do that because we're you know we'd be laughed at in our face so I I do you know it led me to think about some ways to improve relationships with your vendors I mean you know it's not about necessarily having them reduce prices but um having a good relationship with your vendors particularly if they're a critical partner to your business is is super important you know so you know I I wrote about the need to have strong Communications with your vendors obviously both you know through email through your website through you know just ongoing things like that um the other thing is that I it just drives me nuts Lauren we must have talked about this before is about how people you know they they monkey around with financing with their vendors you know they don't get they they don't get financing with their bank so they they screw their vendors by like extending payments you know you know usually this comes up in the other direction it's small businesses complaining that they don't get paid for months and months by big companies that obviously yeah those are right because they're the vendors and they're getting screwed you know so like but I see also the the businesses themselves like saying like a vendor's terms are 30 days and the business just pays in 45 days because they they want that extra 15 days of financing you know and it's it just drives me nuts it's such a thing to do because you really piss off your your your potentially critical Partners when you do I mean how would you feel if like your you know customers weren't paying you on time and then they come to you like in need of a product um you know for their customers you know what are you going to jump to attention to help them when these guys have been messing with you you know on their payments for years so I I just like to tell people that you should always be paying your vendors regularly and try to pay them either on time or take early discounts um as well because there's there's real advantages for doing that if your cash flow can afford it and it's just you know the more you can do to to help out your vendors planning ahead helping them out with leads themselves you know introducing them to partners and customers and you people in your community I don't know I just you can't demand that they lower your prices but there are a lot of things you can do to expand and and you know and and you know you know accelerate your your relationships with your vendors I don't know if that's the going to keep them from raising their prices on you but I I think you make a very good case it won't and and I don't think it will keep them from Raising prices but I think it will keep them at least being loyal to you and delivering product on time and at the very least maybe giving a heads up I mean we're in an inflationary environment right now we all know that pric are going up it would be good if you had a close enough relationship with your vendor that they could tell you in advance like Hey we're GNA have a price increase we're just telling you now in 90 days so at least you can you know you can you can you motivate your way around that the other thing and then before we get off this topic is I see a lot of my clients Lauren when they're talking about raising their prices on their customers they're being very you know targeted about doing it nowadays because they've got a lot of data so they're protecting their margins and their protecting their best customers and they go after customers you know they're raising prices on some customers and not raising prices on others they're not just like having this overall price increase so if you're like a really good customer and I know some of it depends on volume I get that but if you're a good reliable customer to a vendor and it comes time for them to raise prices you may find yourself being on the better end of that price increase than other of their customers that that treat them like so you know just to keep that in mind that makes sense all right last topic uh The Washington Post published a story last week about a congressional investigation that found rampant fraud in the PPP program uh the program that was designed to keep businesses alive and employees employed during the during the early stages of the pandemic the report seems to place most of the blame on so-called fintech companies they named Blue Acorn wample cabbage which is now owned by American Express um I I'm curious what you thought about this story I'm a little concerned that there's a danger that some of them you know some of the wrong lessons might be taken from this whole episode but but what did you think when you say wrong Les wrong lessons from what episodes from the the the whole PPP program yeah I think I well I'll tell you what I think the um the program was created right you know at the time of the lockdowns it was a somewhat desperate situation the idea was to get money out the door as quickly as possible and I think a deliberate decision was made to do what it took to get the money out knowing there would be some fraud I mean there's always fraud under the best of circumstances there was going to be more fraud people knew it they decided it was the right thing to do and even now looking back I kind of think it was the right call um so you know after the fact here at this point to I mean obviously we should go after the fraud and whoever's guilty is guilty uh should pay the price but I I hate that I the lesson to be learned from this that the whole program was a mistake yeah I I agree with that and I don't know if anybody says would think that the whole program was a mistake but I can tell you this much there was there was a lot of fraud way more fraud than what even gets reported in the media because um you know I know personally from my client-based Lauren that many many many businesses took PPP loans that that didn't need it um you know they they in the end it was supposed to be based on need but what happened was the program was launched in like March and April of 2020 when we were all ourselves about covid and um and the the the eligibility requirements were basically like ask and you'll receive you know if you if you say you're going to need it you know we'll provide it you know what I mean I think you're right about that and it wasn't just the PPP money I mean There Was You know the the idol loans there was the um the employee retention tax credit that a lot of companies got and maybe didn't even need um but even there I you know it was an unusual circumstance let's hope um and I think the decision was made to ER on the side of sending out too much money rather than too little and I think maybe that was the right decision you're right I forget if I touch you like I interviewed um I had like a a good like half an hour interview with Marco Rubio like a month or two ago and I wrote about it um and I I the whole thing was about PPP and how he uh developed it and that was a very bipartisan thing you know everybody got together it was a crisis and um it was really interesting and and you know he said the same thing like you know they were they were expecting there to be fraud I mean you can't put a you know a trillion dollars out in you know the market with and the SBA was over taxed to begin with you know they didn't have the resources so you know they just kind of knew that there was going to be fraud but they had to do something they had to get the money out and I think in the end it what it did though is not only did it provide those funds which was really important but it provided this level of credibility and and to the business community that the business Community needed to hear from government at that point in time you know um and you know the mistakes during the Great Depression were that you know the the markets contracted and the and the government did not provide any liquidity and all these Banks went out of business and those mistakes were not made this time the the you know the government provided liquidity in all sorts of forms unemployment insurance you know you know programs for banking as well as PPP Idol um and it that what it did is it not only gave us cash but it gave us confidence and I think there's a psychological benefit to that and I think when you're doing that you're going to have fraud it's just it's inevitable there's fraud in every government program no matter how well thought it out it is um the the other aspect of it that I think is interesting is this report really singles out these so-called fintech companies um and I wonder if they're not being scapegoated a little bit I mean I have no love for these companies I got fired by one of them in fact they were as the report makes clear they were the middleman in this uh situation they were finding businesses oh it was easy to find them that weren't being helped by the big Banks the big Banks had no interest in helping them these uh fexs got them together got helped them create applications do it they automated the process and they hand delivered it to Banks and as I understand it I could be wrong about this was probably a lot that I don't know but I think it was the banks that had the final decision on whether to approve or not approve the loan did they did and they were making these decisions based on incomplete and changing rules as well and the bottom line is though is that you know were there any laws broken here you know I mean did these fintech companies do they behave unlawfully I mean they were you know were they were following there there may have been I don't want to rule out that possibility and and the report did have some language that did make you cringe I mean there there were people inside a couple of these fintechs who saw this situation for what it was which was and for what they saw as an opportunity to make huge fees for doing relatively little work um but you know it was the government that set the fees it was the banks that approved the loans agreed unless I'm wrong about that somehow um I don't think all the blame goes well it certainly won't be the last time that people in the financial services industry get huge fees for doing a little bit of work you know what I mean so like you just said they were following the rules and the fees that were prescribed by the government I don't think that they broke I I really don't think they broke any rules or broke the law um and what you can't what do you can't put somebody in jail based on their attentions I mean people they have a right to earn money if it's within the law to do that and that's exactly you know what they were doing I just don't you know I it was the same controversy back during PPP when people like uh Danny what's his name the restaurant tour Danny Meyer Meyer and like all these other you know guys with like zillions of dollars were taking getting PPP money and you know they it's a p they had a PR mess on their hands because they had the money they didn't have to get the PPP money but they weren't breaking any laws they W up giving it back right and then the government wound up you know changing some of the rules based on on what happened but at the time they weren't breaking any rules they they were entitled to the money it just looked terrible that they were taking it and I don't think I think it's the same thing with the fintech companies I don't you know maybe you can say like they were they were greedy and giving the money out everywhere but at the same time like I don't see where they were breaking the law so yeah we'll see all right I I hope more of this comes out um I think it is important to understand what happened here so that you know we're better prepared for the next time something like this happens agree I agree Jean working on anything we should know about coming up this next week yeah I'm going to um you know I I I'm going to write a piece um for the inquire about hiring interns which I think is kind of an interesting thing um I've got a a couple of Technology pieces on the way for um you know for Forbes um on some new texts to be considering for 2023 as well and uh I've also started W for the Chicago Daily Herald and I'm going to be interviewing a bunch of Chicago business owners about um what their remote work policies are forever interested in what companies are doing with remote and work from home workers so you you being a longtime practitioner yes so just always interested to see what people are doing I'll be eager to see that as well good Gan marks is a CPA who writes weekly on small business for the guardian the hill the Philadelphia inquir the Washington Times Forbes entrepreneur and now the Chicago like what's that always happy to hear of a new publication it's usually going the other way you can also hear I'm on ABC radio's eye on the world with John Bachelor Jee host two small business podcasts with paychecks Corporation and the Hartford thank you Jean thanks Lauren we'll see you next week appreciate it have a great week everyone [Music]