Designed Outcomes | a new breed of Business Advisors

9781477266939_COVER.inddOn December 11th, Dave Franzetta, co-author of “Changing Places,” talked with radio host, Kerry Lutz, on FSN, the Financial Survival Network. This is the final Part 4 of a 4-part edited version of the radio interview.

Changing Places is a helpful guide for small business owners planning to exit the company they built and move on with the rest their lives.

KERRY LUTZ:  Dave, you describe yourself as a problem solver. At what point did you realize that was your major function in life?

DAVE FRANZETTA:  I’m not really sure when I first realized it. Some people like solving puzzles. You like finding the answers to questions. You want to understand how things work. And I’ve always been the type of person who likes to look under the hood. What makes my car run?  Why makes my watch tick or my phone operate the way is does?  And it’s that type of curiosity that can be brought to bear on any kind of a problem.

KERRY:  So it’s your analytical skills that kind of attracted you to this. What is the worst situation you’ve ever had to deal with in one of these business break-ups or succession deals?

DAVE:  Well, the worst situation I’ve ever encountered, and I’ll disguise it a little bit…(LAUGHTER) To protect the innocent and the guilty.

KERRY:  Especially the guilty.

DAVE:  It was a family business that had been established by the father. He built the business and ran it for many, many years. He died in his early 70’s and his wife continued to run the business. They had five children, and when the mother got to be about 85 years old she started to decline mentally. The children had been perfectly happy to let Mom run the business, take care of whatever was involved, hire the Managers etc., because a family trust owned the business itself. The children went off and lived their own lives, enjoying their share of the earnings of the business without learning about the business or putting anything into it.

When the children–now all adults, of course–realized that their mother was in mental decline, one of the five, a daughter, came back to take over the operation of the business from the mother, and the other siblings had a fit. It manifested in acrimonious family battles and they wound up in litigation, with brothers and sisters suing each other. Then the mother tried to make things right and hired a financial advisor, but very unwisely gave him complete power of attorney. The advisor wanted to sell it and children wanted to keep it, so everyone sued him. It was a horrible mess.

KERRY: With a little bit of planning, well, maybe a lot of planning, it could have been avoided.  All they had to do is look into the future and realize this day was bound to come, that there would come a point when management would have to change. If they would have looked down that path, all that litigation could have been avoided. And all the legal fees! You don’t want to see people waste money suing each other. It doesn’t really accomplish much, and you wind up with irreparable breaks.

DAVE: Yes, and that’s what is really frightening about the situation we find ourselves in with our economy right now. Small business is clearly going to be the engine for growth in our economy. More than half, 53%, of everybody who’s employed in the United States works in a small business.  But job growth is coming disproportionately from small business.  In the last decade almost 70% of job growth, net of losses, is coming from small businesses, businesses with $10 million or less in revenue. These small businesses in the US are worth more than 10 trillion dollars. So that’s a lot of fortunes potentially falling through the cracks.

KERRY: Oh wow.

DAVE:  Every last one of these businesses is at risk of blowing up, just like the family situation I just described, where a company that should have been worth $20 million was left to just sort of fester as a result of family disputes. When the mess was eventually cleaned up and they were able to sell the business, the 5 children walked away with only $1 million each. So the family watched $15 million worth of value go up in smoke because they ignored the asset.

KERRY:  That’s really a shame, and so avoidable. You hate to see that happen with anybody.  But sometimes there’s none so blind as those who will not see.

DAVE:  That’s why we wrote our book. It’s a small book, a quick read, and it’s designed to get people who own a small business, or have friends or family that are in a small business, to begin to think about what could happen to them and what they want out of their lives.

Ideally, when we are working with a client, what we help them do is to very clearly visualize what kind of life they want when they are no longer working 24/7 trying to build and grow their business. It may mean scaling back a little bit or scaling back a lot. It may mean completely separating themselves from the business. But they have to have a vision for what that new situation going to mean for them, what it’s going to look like and feel like to them, and how they’re going to work with it. They then have a goal, and they work towards that goal, which is creating this new life that they want to enjoy, and that goal is just as vibrant and compelling as the goal that they had clearly set when they first started seeing themselves building and growing their business many years earlier.

Once they get to that point where they have a clear goal for the life they want to live after their business, then it’s simply a question of putting the right steps in place, creating the action plans, selecting the right advisors for things like insurance, brokering their business if they want to sell it, financial planning so they’ve got the level of annual income they need to make it all work. And then just take it step by step by step.

KERRY: That makes total sense, Dave.  So if listeners want to learn more about succession planning, or buy your book, where do they go?

DAVE:  They best place to go is our website at www.designedoutcomes.com where you can get some background on us, and what we do. The book is also available on Amazon.com and BarnesAndNoble.com.

KERRY:  That’s wonderful and what we’re really talking about here is preparation and that’s what the Financial Survival Network is all about. Dave, thanks for being on the show and if any of you needs a succession plan, buy the book. Dave is available for the next 17 years.

DAVE:  Thanks, Kerry, it was a real pleasure.

Check it out: “Changing Places: Making a Success of Succession Planning for Entrepreneurs and Family Business Owners”(published by AuthorHouse).

Feedback please to: dfranzetta@gmail.com

LAGUNA NIGUEL, CA – (DAVE FRANZETTA > SIRI > BLOG POST> 01.11.13 > 11:42AM PST)

9781477266939_COVER.inddOn December 11th, Dave Franzetta, co-author of “Changing Places,” talked with radio host, Kerry Lutz, on FSN, the Financial Survival Network. This is Part 3 of a 4-part edited version of the radio interview.

Changing Places is a helpful guide for small business owners planning to exit the company they built and move on with the rest their lives.

KERRY LUTZ:  Sometimes succession and transition planning includes looking for buyers for the company.  And selling a small business presents lots of challenges that you wouldn’t have with a publicly traded company, obviously, right?

DAVE FRANZETTA: Absolutely. Maybe the single biggest issue in selling a small business is getting a decent valuation; one that both the buyer and the seller can agree on.  It’s somewhat like selling a home you have lived in for 25 years.  If you live in that home, you don’t think of it as merely a chattel–a parcel of real property that you can sell.  It means much more to you than just the bricks and mortar; so you want to get a high value for it.

But, there is very often a large disparity between what a buyer and a seller will see as the value of a house. At least it’s easy to get comparable values for a house. It can be very difficult to get the right kind of comparable values for a business, especially a small business. The problem is even more difficult when much of the value of a small business is not in the tangible assets that it owns, but in the trade value, arising from the intangibles that are created by the specific individuals who built the business.

If you’re going to buy a business, and you’re buying a trade name, what’s the value of the trade name when the individual associated with that trade name leaves that business?  Getting buyer and seller to agree on value in cases like that can be really, really tricky.

KERRY: And again, the sellers can have a lot of emotional issues wrapped up in their business–people’s sense of identity, their family history and a lot of unresolved issues come up as well.

When you deal with small businesses, maybe you need to be part financial analyst, part lawyer, and part psychologist.

DAVE:  Exactly. That’s how my practice in this area started. I was working with a company as their financial advisor and serving on their board. The company had also been working with a corporate psychologist for a number of years. We both got involved with the company’s succession plans and leadership development, looking at it from different angles. We saw that our collaboration could become a really great fit for working with clients. His 35 years as a clinical psychologist fully prepared him to deal with issues like this. Combining his psychological, clinical skills with my business experience in mergers and acquisitions, sales and business valuations allowed us to bring a truly advanced tool kit to work with businesses. It has been great for us.

KERRY:  I am sure it has.

To be continued…stay tuned for the final Part 4 in the next post!

Check it out: “Changing Places: Making a Success of Succession Planning for Entrepreneurs and Family Business Owners”(published by AuthorHouse).

Feedback please to: dfranzetta@gmail.com

LAGUNA NIGUEL, CA – (DAVE FRANZETTA > SIRI > BLOG POST> 01.10.13 > 2:30PM PST)

9781477266939_COVER.inddOn December 11th, Dave Franzetta, co-author of “Changing Places,” talked with radio host, Kerry Lutz, on FSN, the Financial Survival Network. This is Part 2 of a 4-part edited version of the radio interview.

Changing Places is a helpful guide for small business owners planning to exit the company they built and move on with the rest their lives.

KERRY LUTZ:  When it comes to exit planning there is always a lot of baggage in these family businesses, a lot of emotions that have never been worked through, and a lot of issues that are unresolved; especially when you have a powerful father figure involved, too, and suddenly he dies. So what could the father have done to avoid his children ever having to be in that situation in the first place?

DAVE FRANZETTA:  What he could have done is to have worked through the details of what would happen after he died.  Everything was all right as long as he was here to settle issues between the brothers. What he didn’t do was to work through what to do when he’s not here.  How will we settle things between Nate and Will when I’m not around?  Who do they go to settle disputes? And what happens when one of the brothers wants out of the business; what will the other one do? It’s really a question of working through all of the different possibilities and potential scenarios and “what ifs,” and determining what’s going to be best outcome personally for the people involved in it.

This particular dad had a real challenge, because he loved his business; it gave him the opportunity to be the kind of person he wanted to be. And he just assumed that both of his sons wanted to be in the business and would love it and would want to engage in the business in exactly the same way he did.  It is a real danger in succession planning to assume that others want the same as what you want.

KERRY: Assumptions are always very dangerous, especially in family situations of any kind. So, David, in the midst of all the baby boomers coming of age, your business must be booming, what with so many people needing help with succession and exit plans for their businesses.

DAVID: It is crazy. Think about the numbers involved. There are something like 30 million small businesses in the US, and about two-thirds are owned by baby boomers, like me.  Every 57 seconds, for the next 17 years, some baby boomer who owns a small business in the U.S. will turn 65. It’s like that magic age, when you suddenly start thinking about life after your business. With so many businesses in need of succession and exit plans, it’s natural that there would be lots of advisors and counselors that would like to help with succession and exit plans. But some are much more qualified and experienced than others.

When it comes to exiting a family business, things can get very tricky. Choose counsel wisely

To be continued…stay tuned for Part 3 in the next post!

Check it out: “Changing Places: Making a Success of Succession Planning for Entrepreneurs and Family Business Owners”(published by AuthorHouse).

Feedback please to: dfranzetta@gmail.com

LAGUNA NIGUEL, CA – (DAVE FRANZETTA > SIRI > BLOG POST> 01.09.13 > 8:25AM PST)

9781477266939_COVER.inddOn December 11th, Dave Franzetta, co-author of Changing Places, talked with radio host, Kerry Lutz, on FLN, the Financial Survival Network. This is Part 1 of a 4-part edited version of the radio interview.

This is KERRY LUTZ and you are listening to your Financial Survival Network and you know we are big on small business and big on personal branding, but think if one day you want to establish a business and become successful, you eventually may want to do something else or…retire, God forbid. There is a book, “Changing Places”–a must read if you are ever thinking of exiting your business, or getting close to thinking about it.

With me is David Franzetta. He has a lot of corporate experience, has worked for an international think tank, and knows a lot about solving these problems.  Welcome Dave.

DAVID FRANZETTA:  Thanks, Kerry. Glad to be with you.

KERRY: We are thrilled to have you with us, because I have been in this situation, needing to do succession and exit planning, when I was a business partner with my brother, and I didn’t want to be. I wanted to be off doing my own thing, but there weren’t any provisions in our documents for doing so, and it became just an issue of our wills being exerted against one another. Finally we did come together and actually sold our company. But it was really painful. What should we have done differently?

DAVID:  Well, first of all, the situation you describe is not unusual at all. It happens all the time. We have a client, Nathan, who we’ve been working with for more than two years who is in a very similar predicament. He and his brother William are the sons of a very charismatic, powerful man who built a company–literally from the ground up–starting in the 1940s through to the 70s. He turned the company over to his sons when he was approaching 70 years of age, but he stayed involved as sort of a chairman emeritus. Nate and Will didn’t always agree on where the business should be going, but their father was able to intervene between the two brothers when they disagreed.

But the father died suddenly and Nate and Will were left in a situation where Will wanted to dominate the business and Nate was a different, less aggressive personality type. The challenge that they had was they were 51% – 49% partners in the business and they couldn’t structure a deal that would easily allow one of them to leave the business. The older brother, Nate, had the smaller interest and he really wanted to get out.  So what we had to do first was help them with their personal/emotional connection to the business. We worked with them as counselors, to help them understand their personal goals and where they wanted to go in life.

Once they worked through their personal issues it was easier for them to look at the business as a tool, rather than an end in itself. They were able to think about the business as more than a gift from their father; but as an asset that they could use to help achieve the personal goals they had laid out for themselves. They had decided what was important to themselves and to their families, and they made it work. With our help and the help of their financial advisors we structured a buy/sell arrangement that was a win-win for both Nate and Will.

It’s very difficult and painful to acknowledge and deal with the emotional elephant in the room, especially in a family situation. But you can’t make progress until you do.

To be continued…stay tuned for Part 2 in the next post!

Check it out: “Changing Places: Making a Success of Succession Planning for Entrepreneurs and Family Business Owners”(published by AuthorHouse).

Feedback please to: dfranzetta@gmail.com

LAGUNA NIGUEL, CA – (DAVE FRANZETTA > SIRI > BLOG POST> 01.08.13 > 01:30PM PST

9781477266939_COVER.inddOn December 4th, Dave Franzetta, co-author of Changing Places, talked with radio host, Michael Dresser, on the Michael Dresser Show, broadcast on CRN Digital Talk Radio. This is Part 5 of a 5-part edited version of the radio interview.

MICHAEL DRESSER: I wanted to jump to another subject. You’re old enough to remember the Peter Principle.

DAVE FRANZETTA: Absolutely. Rising to one’s level of incompetency…

MICHAEL: And that’s what happens to so many people. They say, okay, I’ve got this great salesperson, he does a terrific job, and so now he’s been there long enough I’ll make him a manager and, well, he’s just an okay manager. And time passes and now he’s been there long enough so that he gets bumped up to an executive position. Great salesperson,, okay manager, lousy executive. What they hit was their level of incompetency and that’s something businesses have to watch out for.

DAVE: They certainly do. Not only watching out for Peter Principle type of issues but also making sure, especially in family businesses, that they’re not making early judgments about who’s the right person to take over the business.  Primogeniture Rules aren’t going to necessarily give you the best next generation leader. The oldest son may not be the best person to run the company.  You know, child number three, your daughter, with an MBA from Kellogg School at Northwestern, she may be the one.

MICHAEL: David, let me ask you, I pick the book up and I read it page-by-page, cover-to-cover, what do I get as an entrepreneur that I didn’t have before reading your book?

DAVE: Okay…the most important thing you get is clear, step-by-step suggestions about what you need to do and what you need to know as a the person, and what you need to know as an owner of a business, to keep your business alive and kicking after you depart the business. That’s what you get.

MICHAEL:  Interesting point that you brought up and I don’t know how many people realize that you have to look at this one person–the business owner–with two different perspectives: that of the owner, and also that of the person. And if we do that, then all of a sudden the world takes on a completely different context, doesn’t it?

DAVE: Exactly right, Michael. And that’s the major focus of our book. You have to start with yourself as a person, and know what it is that you want out of your life; not just what your life is today, but what you want out of the rest of your life. You should have a place where you want to go.

MICHAEL: I wonder how many people can actually answer that question? Somebody gave me a process years ago and today it still really works. If you don’t know what you want to do with your life, project yourself 10 to 20 years ahead, and put yourself at a dinner party where they are honoring you.  Then write down everything that you want them to say about you and your accomplishments. Then consider what you doing now, and where you are going. Now you’ve got 15 or 20 years to create your personal vision of your future.

DAVE: There are a wide variety of techniques available to help you do that. I can remember a situation that I had myself, when I was in graduate school and taking a Business Planning class. In our first class session our instructor told us, “If you’re going to learn to plan for your business, the first thing you have to do is learn to plan for yourself.” The very first assignment was to write our own obituary; “What do you want people to say about you when you’re gone?”

MICHAEL: Yeah, I remember there was somebody interviewed years ago and the name of the book was, “–” (Dash); It was the punctuation mark on a gravestone, signifying the time between the date of birth and the date of them leaving this world.

Wow, David, we are all out of time. Could we get a website where we can find you and get the book?

DAVE: Sure. You can find me at DesignedOutcomes.com

MICHAEL: Wonderful. Hey, David, thank you so much for joining us today. Great book!

DAVE: Thank you, Michael.

As a business owner, you have to start with yourself as a person to know what you want out of the rest of your life.

Check it out: “Changing Places: Making a Success of Succession Planning for Entrepreneurs and Family Business Owners”(published by AuthorHouse).

Feedback please to: dfranzetta@gmail.com

Changing Places is a helpful guide for small business owners planning to retire.

LAGUNA NIGUEL, CA – (DAVE FRANZETTA > SIRI > BLOG POST> 12.28.12 > 7:41PM PST)

9781477266939_COVER.inddOn December 4th, Dave Franzetta, co-author of Changing Places, talked with radio host, Michael Dresser, on the Michael Dresser Show, broadcast on CRN Digital Talk Radio. This is Part 4 of a 5-part edited version of the radio interview.

MICHAEL DRESSER: I just opened your book, Changing Places, to page 103 and read the quote about how there’s a trick to the graceful exit. Maybe the key is that when you’re creating your business plan, you have to build in a path to quit the business and exit gracefully. Most people don’t think about that, right?

DAVE FRANZETTA: Yes, and that’s what makes exiting the business so difficult for most business owners; they never even think about it. The cost of failing to plan for a graceful exit is one of the major themes of our book, Changing Places. In family and entrepreneurial situations leadership turnover is so rare–we’re talking every 25 years or so for small companies, compared to Fortune 500 companies where the CEOs are changing every five to six years–that small business owners don’t have any experience with succession planning. They’ve got very little practice in handling a business leadership transition. They do have lots of experience handling personal life transitions, though. The first stage of the work that they have to do, if they’re planning for a succession for their business, is to determine for themselves what their life is going to be like once they leave the business. Because if they don’t have a life planned ahead of them, something that excites them that they want to go into after they leave the business, they’re going to hold onto that business until their last gasp of breath.

MICHEAL: Well, sure, they’ll hold on tight.

DAVE: It’s turns out to be to be very difficult for them to turn the business over to anyone.

MICHAEL: What was it, Jack Nicholson was in the movie About Schmidt  and it’s a prime example of what you are talking about.  The guy retires and asks himself, “Now what do I do? My identity is gone and everything that I am was in that business.” And that’s when, effectively, if you’re not careful, life can stop for you.

DAVE: Exactly. We’ve seen many instances where people have a situation like that, and sometimes there really isn’t any perfect answer for people who are trying to plan a succession. What it may involve is the founder of the company wanting to have some kind of an ongoing role in the business, but it’s more like a retired professor–a professor emeritus–would have at a university. They have their name on the business. They get involved in board meetings, and some large company functions. They have an office and they come to work every day; but they’re not really running the business anymore. They stay in the business they need something to connect with, and they haven’t found a way to connect themselves to a life beyond the business.

To be continued…stay tuned for Part 5 in the next blog post!

Dave Franzetta and Moss Jackson pen, Changing Places, an essential guide for small business owners planning to retire.

Check it out: “Changing Places: Making a Success of Succession Planning for Entrepreneurs and Family Business Owners” (published by AuthorHouse).

Feedback please to: dfranzetta@gmail.com

If you don’t have an exciting life planned for yourself when you exit your business, you may just keep coming to work and coming to work, until when you do finally leave the company it will be on a gurney.

LAGUNA NIGUEL, CA – (DAVE FRANZETTA > SIRI > BLOG POST> 12.24.12 > 11:00 AM PST)

9781477266939_COVER.inddPart 3: On December 4th, Dave Franzetta, co-author of Changing Places, talked with radio host, Michael Dresser, on the Michael Dresser Show, broadcast on CRN Digital Talk Radio. This is Part 3 of a 5-part edited version of the radio interview.

MICHAEL DRESSER: Another area of concern is communications. We toss the word around like it’s nothing, yet it’s so critically important. In my years of doing whatever I’ve done in my life, a lot of what I’ve done is consulting–as you do, Dave, with your consultancy firm, Designed Outcomes. So often I would go into a business and I say to the CEO, “Okay, write down what this person’s job is.” And then, you go to that person and you have them write down what they believe their job is, and 9 out of 10 times it’s a completely different answer.

DAVE FRANZETTA: That’s true, Michael, what is happening over and over again–as in the situations you’re describing with entrepreneurs and with family businesses–is that the founder has so much of his identity tied up in the business itself that he can’t think about the business as being anything other than him, out in front, running the business.

MICHAEL: By the way I have your book, Changing Places, right here in front of me, and here’s what I really like about it; you’re dealing with something that outlines a process. In most instances what happens is the people running the business lose their focus. They don’t realize that when a business is just starting off there is a process involved, and to start the process they’ve got to get held by the hand and go step-by-step to make it happen. But we’ve said enough on that subject. Tell me, David, back when you first decided to put pen to paper and write your book, what caused you to sit down and write what you did?

DAVE: Well, my business partner, Dr Moss Jackson, and I had been working with a number of smaller companies, and a few of them had owners about our age, baby boomers, and they were beginning to think about retiring. They had been very successful: they created business plans, they had a process in mind and a business model, and so they knew how to build a business. But once they had built the business, they didn’t know how to get themselves out of it without causing a lot of harm, even potentially destroying the company. So we worked with these business owners to lay out the plans to make sure that they had in place the right next generation of leaders, people with the skills and the abilities to take over the company after the current generation of owners leave. The more that we looked, the more that we found that the bulk of the work–particularly the academic work–that had been written about succession planning was focused on very large companies – big, corporate Fortune 1000/500 companies that had functional human resources departments. There was very little written that was helpful for smaller companies that didn’t have a human resources department at all, where people in the senior positions of the company wore many hats. So we tried to put together a book that would help them develop and execute a process for arranging an orderly succession from one generation to the next generation of leaders, whether within a family, or involving a transfer of responsibility to existing managers, or even the sale of the company to an outside party.

To be continued…stay tuned for Part 4 in the next blog post!

Dave Franzetta and Moss Jackson pen, Changing Places, a helpful guide for small business owners planning to retire.

Check it out: “Changing Places: Making a Success of Succession Planning for Entrepreneurs and Family Business Owners”(published by AuthorHouse).

Feedback please to: dfranzetta@gmail.com

LAGUNA NIGUEL, CA – (DAVE FRANZETTA > SIRI > BLOG POST> 12.22.12 > 3:00PM PST)

9781477266939_COVER.inddPART 2 – Tuesday, December 4th, Dave Franzetta, co-author of Changing Places, talked with talk radio host, Michael Dresser, on the Michael Dresser Show, broadcast on CRN Digital Talk Radio. This is Part 2 of a 5-part edited version of the radio interview.

MICHAEL DRESSER: We were talking about entrepreneurs finding the right people to fill the gaps in their own skill set. One of the things I noticed over the years is that people who start businesses usually bring a bit of ego into the equation. You know: “I started the business, it’s mine”, and when they hire people they are not looking at how much more those people can do than they can do themselves. It’s usually somebody that they think they can have control over–not in every instance, but most of the time. I’ve always believed that if you start a business and you bring somebody in, you should do it to augment your skills, because you can’t do it all yourself. That person should know more about that position than you do.

DAVE: It’s an absolute fundamental. Why would you bring somebody in unless they know more about it than you? There was a fascinating article on the Internet the other day where the writer was talking about how Chief Executive Officers, especially in smaller companies, not Fortune 1000 companies, but companies with less than 20 million of revenue–large by some measures, but in the grand scheme of things, smaller companies–where the Chief Executive Officer simply doesn’t give enough scope, enough span of responsibility or enough credit for ability to his Chief Marketing Officer, or his Chief Financial Officer, or Chief Operating Officer and the CEO can’t stop himself from trying to run every aspect of the business himself. You mentioned it’s often an ego issue, and many times it’s the result of a fundamental desire to control everything about their environment. Unfortunately, giving in to that desire can come at the expense of the company’s future after the CEO makes his exit.

To be continued…stay tuned for Part 3 in the next blog post!

Check it out: “Changing Places: Making a Success of Succession Planning for Entrepreneurs and Family Business Owners”(published by AuthorHouse). Feedback please to: dfranzetta@gmail.com

LAGUNA NIGUEL, CA – (DAVE FRANZETTA > SIRI > BLOG POST> 12.20.12 > 4:57PM PST)