Right Attitudes

Ideas for Impact

Nagesh Belludi

Inspirational Quotations #748

By

Life is too short to be little. Man is never so manly as when he feels deeply, acts boldly, and expresses himself with frankness and with fervor.
—Benjamin Disraeli (British Head of State)

No man ever got very high by pulling other people down. The intelligent merchant does not knock his competitors. The sensible worker does not knock those who work with him. Don’t knock your friends. Don’t knock your enemies. Don’t knock yourself.
—Alfred, Lord Tennyson (British Poet)

Happiness is a state of which you are unconscious, of which you are not aware. The moment you are aware that you are happy, you cease to be happy. You want to be consciously happy: the moment you are consciously happy, happiness is gone.
—Jiddu Krishnamurti (Indian Philosopher)

I have seen what a laugh can do. It can transform almost unbearable tears into something bearable, even hopeful.
—Bob Hope (British-born American Comedian, Film Actor)

If we get everything that we want, we will soon want nothing that we get.
—Vernon Luchies (American Clergyman)

There is great comfort and inspiration in the feeling of close human relationships and its bearing on our mutual fortunes – a powerful force, to overcome the “tough breaks” which are certain to come to most of us from time to time.
—Walt Disney (American Entrepreneur)

Not only is there a right to be happy, there is a duty to be happy. So much sadness exists in the world that we are all under obligation to contribute as much joy as lies within our powers.
—John Sutherland Bonnell (American Preacher)

Man is not only a contributory creature, but a total creature; he does not only make one, but he is all; he is not a piece of the world, but the world itself; and next to the glory of God, the reason why there is a world.
—John Donne (English Poet, Cleric)

There’s a difference between tough-mindedness and meanness.
—Jeffrey Immelt (American Businessperson)

Devotion must not be like the flood of the rainy season in which all get washed away. Devotion should be like the river that retains water even in the hottest season.
—Kabir (Indian Mystic)

Some books are to be tasted, others to be swallowed, and some few to be chewed and digested: that is, some books are to be read only in parts, others to be read, but not curiously, and some few to be read wholly, and with diligence and attention.
—Francis Bacon (English Philosopher)

Enduring setbacks while maintaining the ability to show others the way to go forward is a true test of leadership.
—Nitin Nohria (Indian-American Academic)

Loving someone is setting them free, letting them go.
—Kate Winslet (English Actress)

Everyone has been made for some particular work, and the desire for that work has been put in every heart.
—Jalal ad-Din Muhammad Rumi (Persian Muslim Mystic)

How Far You’ve Come

By Leave a Comment

While browsing through advertising genius David Ogilvy’s The Unpublished David Ogilvy, I stumbled across a mention to a 1964 letter of introduction that Ogilvy received from a gifted job-applicant.

Ogilvy calls this “the best job application letter I have ever received.” The first paragraph announces,

My father was in charge of the men’s lavatory at the Ritz Hotel. My mother was a chambermaid at the same hotel. I was educated at the London School of Economics.

Ray Taylor, that aspirant, became an Ogilvy & Mather copywriter.

It reminded me of a quotation from the American priest Henry Ward Beecher: “We should not judge people by their peak of excellence; but by the distance they have traveled from the point where they started.”

Idea for Impact: Appreciate how far you’ve (and others have) come.

Wondering what to read next?

  1. General Electric’s Jack Welch Identifies Four Types of Managers
  2. Ten Rules of Management Success from Sam Walton
  3. Seven Real Reasons Employees Disengage and Leave
  4. How to Hire People Who Are Smarter Than You Are
  5. Hiring: If You Pay Peanuts, You Get Monkeys

Inspirational Quotations #747

By

Who controls the past controls the future. Who controls the present controls the past.
—George Orwell (English Novelist, Essayist, Journalist)

Living a connected life leads one to take a different view. Life is less a quest than a quilt. We find meaning, love, and prosperity through the process of stitching together our bold attempts to help others find their own way in their lives. The relationships we weave become an exquisite and endless pattern.
—Keith Ferrazzi (American Author)

The more you think you know, the more closed-minded you’ll be.
—Ray Dalio (American Investor)

No one ever won a chess game by betting on each move. Sometimes you have to move backward to get a step forward.
—Amar Bose (American Entrepreneur)

There are no such things as limits to growth, because there are no limits to the human capacity for intelligence, imagination, and wonder.
—Ronald Reagan (American Head of State)

Don’t be sad, don’t be angry, if life deceives you! Submit to your grief; your time for joy will come, believe me.
—Alexander Pushkin (National Poet of Russia)

In the study of one’s personal language and self-talk it can be observed that what one thinks and talks about to himself tends to become the deciding influences in his life. For what the mind attends to, the mind considers.
—Sidney Madwed (American Poet, Author, Public Speaker)

Tragedy isn’t getting something or failing to get it, it’s losing something you already have.
—Euripides (Ancient Greek Dramatist)

There should be neither a women’s movement blaming men, nor a men’s movement blaming women, but a gender liberation movement freeing both sexes from the rigid roles of the past toward more flexible roles for their future.
—Warren Farrell (American Educator, Activist)

The past is the one thing we are not prisoners of. We can do with the past exactly what we wish. What we can’t do is to change its consequences.
—John Berger (English Art Critic, Essayist, Novelist)

It is not the language of painters but the language of nature which one should listen to the feeling for the things themselves, for reality, is more important than the feeling for pictures.
—Vincent van Gogh (Dutch Painter)

Success in business does not depend upon genius. Any young man of ordinary intelligence who is normally sound and not afraid to work should succeed in spite of obstacles and handicaps if he plays the game fairly and keeps everlastingly at it.
—James Cash Penney (American Entrepreneur)

Miracles are a retelling in small letters of the very same story which is written across the whole world in letters too large for some of us to see.
—C. S. Lewis (Irish-born British Children’s Books Writer)

Great genius takes shape by contact with another great genius, but, less by assimilation than by fiction.
—Heinrich Heine (German Poet, Writer)

Most “necessary evils” are far more evil than necessary.
—Richard Branson (British Entrepreneur)

Happiness is not in our circumstances, but in ourselves. It is not something we see, like a rainbow, or feel, like the heat of a fire. Happiness is something we are.
—John B. Sheerin (American Catholic Columnist, Editor)

Inspirational Quotations #746

By

Temperance is simply a disposition of the mind which binds the passion.
—Thomas Aquinas (Italian Catholic Priest)

The first responsibility of a leader is to define reality. The last is to say thank you. In between the two, the leader must become a servant and a debtor. That sums up the progress of an artful leader.
—Max De Pree (American Businessman)

The truth is that we live out our lives putting off all that can be put off; perhaps we all know deep down that we are immortal and that sooner or later all men will do and know all things.
—Jorge Luis Borges (Argentine Writer)

Learning is acquired by reading books, but the much more necessary learning, the knowledge of the world, is only to be acquired by reading men, and studying all the various facets of them.
—Earl of Chesterfield

It’s tough to make predictions, especially about the future.
—Yogi Berra (American Sportsperson)

To emancipate woman is to refuse to confine her to the relations she bears to man, not to deny them to her; let her have her independent existence and she will continue nonetheless to exist for him also: mutually recognising each other as subject, each will yet remain for the other an other. The reciprocity of their relations will not do away with the miracles—desire, possession, love, dream, adventure—worked by the division of human beings into two separate categories; and the words that move us—giving, conquering, uniting—will not lose their meaning. On the contrary, when we abolish the slavery of half of humanity, together with the whole system of hypocrisy that it implies, then the ‘division’ of humanity will reveal its genuine significance and the human couple will find its true form.
—Simone de Beauvoir (French Philosopher)

Whatever results you’re getting, be they rich or poor, good or bad, positive or negative, always remember that your outer world is simply a reflection of your inner world. If things aren’t going well in your outer life, it’s because things aren’t going well in your inner life. It’s that simple.
—T. Harv Eker (American Motivational Speaker)

Think twice before you speak, or act once, and you will speak or act the more wisely for it.
—Benjamin Franklin (American Political leader)

Good questions outrank easy answers.
—Paul Samuelson (American Economist)

History is the enactment of ritual on a permanent and universal stage; and its perpetual commemoration.
—Norman O. Brown (American Philosopher)

We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win, and the others, too.
—John F. Kennedy (American Head of State)

Did you ever observe to whom the accidents happen?. Chance favors only the prepared mind.
—Louis Pasteur (French Biologist)

Inspirational Quotations #745

By

Pop artists deal with the lowly trivia of possessions and equipment that the present generation is lugging along with it on its safari into the future.
—J. G. Ballard (English Novelist)

I learned…that inspiration does not come like a bolt, nor is it kinetic, energetic striving, but it comes into us slowly and quietly and all the time, though we must regularly and every day give it a little chance to start flowing, prime it with a little solitude and idleness.
—Brenda Ueland (American Journalist)

In dwelling, live close to the ground. In thinking, keep to the simple. In conflict, be fair and generous. In governing, don’t try to control. In work, do what you enjoy. In family life, be completely present.
—Laozi (Chinese Philosopher)

The interpretation of our reality through patterns not our own, serves only to make us ever more unknown, ever less free, ever more solitary.
—Gabriel Garcia Marquez (Colombian Novelist, Short-Story Writer)

There is nothing wrong with men possessing riches. The wrong comes when riches possess men.
—Billy Graham (American Baptist Religious Leader)

Forgiveness is the name of love practiced among people who love poorly. The hard truth is that all of us love poorly. We need to forgive and be forgiven every day, every hour—unceasingly. That is the great work of love among the fellowship of the weak that is the human family.
—Henri Nouwen (Dutch Catholic Priest)

The pleasure of criticism takes from us that of being deeply moved by very beautiful things.
—Jean de La Bruyere

That which causes us trials shall yield us triumph: and that which make our hearts ache shall fill us with gladness. The only true happiness is to learn, to advance, and to improve: which could not happen unless we had commence with error, ignorance, and imperfection. We must pass through the darkness, to reach the light.
—Albert Pike (American Military Leader)

What experience and history teach is this—that nations and governments have never learned anything from history, or acted upon any lessons they might have drawn from it.
—Georg Wilhelm Friedrich Hegel

The way to avoid responsibility is to say, “I’ve got responsibilities.”
—Richard Bach (American Novelist)

Self-interest is but the survival of the animal in us. Humanity only begins for man with self-surrender.
—Henri Frederic Amiel (Swiss Philosopher)

Inspirational Quotations #744

By

Luck is what happens when preparation meets opportunity.
—Seneca the Younger (Lucius Annaeus Seneca) (Roman Philosopher)

Those who make us happy are always thankful to us for being so; their gratitude is the reward of their benefits.
—Sophie Swetchine (Russian Christian Mystic)

If the people around you are spiteful and callous and will not hear you, fall down before them and beg their forgiveness; for in truth you are to blame for their not wanting to hear you.
—Fyodor Dostoyevsky (Russian Novelist)

Grief walks upon the heels of pleasure; married in haste, we repent at leisure.
—William Congreve (English Playwright)

Manner is everything with some people, and something with everybody.
—Conyers Middleton (English Clergyman)

While you have a thing it can be taken from you… but when you give it, you have given it. No robber can take it from you. It is yours then for ever when you have given it. It will be yours always. That is to give.
—James Joyce (Irish Novelist)

A good plan, violently executed now, is better than a perfect plan next week.
—George S. Patton (American Military Leader)

Often the difference between a successful man and a failure is not one’s better abilities or ideas but the courage that one has to bet on his ideas, to take a calculated risk—and act.
—Maxwell Maltz (American Surgeon)

No one remains quite what he was when he recognizes himself.
—Thomas Mann (German Novelist)

The beauty seen, is partly in him who sees it.
—Christian Nestell Bovee

I have never met a man so ignorant that I couldn’t learn something from him.
—Galileo Galilei (Italian Astronomer)

Perfectionism is slow death.
—Hugh Prather (American Christian Author)

It takes a great deal of living to get a little deal of learning.
—John Ruskin (English Art Critic)

Intelligence recognizes what has happened. Genius recognizes what will happen.
—John Ciardi (American Poet)

It is impossible to calculate the moral mischief, if I may so express it, that mental lying has produced in society. When a man has so far corrupted and prostituted the chastity of his mind as to subscribe his professional belief to things he does not believe he has prepared himself for the commission of every other crime.
—Thomas Paine (American Nationalist)

There are many ways of going forward, but only one way of standing still.
—Franklin D. Roosevelt (American Head of State)

We know nothing of tomorrow; our business is to be good and happy today.
—Sydney Smith (English Anglican Writer)

Conspicuous Consumption and The Era of Excess // Book Summary of ‘Luxury Fever’

By Leave a Comment

The Superrich Influence the Standards for Desirability in Consumer Goods: The Less Rich Emulate Them

'Luxury Fever' by Robert Frank (ISBN 0691146934) The core argument of Cornell economist Robert Frank’s Luxury Fever: Why Money Fails to Satisfy in an Era of Excess (1999) is that the extravagant consumption of the most affluent in our society has a ripple effect on everyone’s spending.

According to Frank, the desire for many to indulge in luxury “possessions” is motivated less by the gratification they may bring than by what others are buying or want to buy. We try to achieve happiness by improving our relative social status. For example, if your neighbor didn’t buy his new Mercedes Benz, you wouldn’t probably feel the need for the latest-and-greatest Jaguar, and you’d both work less, and spend more time with your loved ones and invest in meaningful experiences that bring you joy.

It is not just the rich who have gone on a spending spree. Middle- and lower-income earners have been spending more as well. The prime mover in this change may have been the increased spending of the superrich but their higher spending level has set a new standard for the near-rich to emulate, and so on down the income ladder. But although middle- and lower-income families are spending much more than in the recent past, the incomes of these families have not been growing.

While the rich have the money to indulge their whims, the rest of us tend to finance our wasteful spending through reduced personal savings or through increasing debt. To substantiate this trend, Frank describes burgeoning household debt and a remarkable increase in personal bankruptcies.

Luxury Fever summarizes persuasive biological and psychological evidence that suggests how human nature is such that we measure our success in relation to what others have. In other words, we tend to spend money on luxuries to appear to be more successful than others are. Frank concludes, “Evidence from the large scientific literature on the determinants of subjective well-being consistently suggests that we have strong concerns about relative position.”

Relative Consumption, Not Absolute Consumption, Affects Consumers’ Happiness

Much of the increased luxury spending is wasteful, given that consumers could get the same benefits by consuming non-luxuries with lower price tags. Research has proven that money doesn’t buy happiness,

Behavioral scientists find that once a threshold level of affluence is reached, the average level of human well-being in a country is almost completely independent of its stock of material consumption goods.

Frank’s thesis on runaway consumption and extravagant luxuries seems as valid now as it was in 1999, when his book was published at the height of the dot-com boom. The era of excess has now proliferated to India, China, Russia, and other developing countries that are facing not only widening economic inequalities between their rich and poor, but also mushrooming appetites for luxury goods among their affluent middle classes.

Can a Progressive Consumption Tax Challenge the “Luxury Arms Race”?

Based on the solid evidence he provides, Frank’s thesis on runaway consumption of extravagant luxuries and this era of excess is hard to dispute. Consumers have indeed been saving less, working longer hours, and spending more per capita on luxury goods. However, his claim that the spending patterns of the super wealthy has incited luxury fever among the non-wealthy lacks substantial evidence.

The Luxury Fever‘s solution to this problem is to come down hard on lavish consumption and to encourage more savings. To this end, Frank presents policy proposals that are reasonable in the abstract, but will face serious political and cultural hurdles. Frank promotes a tax exemption for savings and a steeply progressive consumption-based tax as a substitute for income and sales taxes. If Americans expend less on luxury goods, he argues, we’d collectively work less, and make more money available “to restore our long neglected public infrastructure and repair our tattered social safety net.” However, economists have argued that a progressive consumption tax would burden the non-wealthy more than the wealthy because the latter tend to save much larger percentages of their incomes.

The Good and Bad Sides of Consumerism: How to Clamp Down on Conspicuous Consumption and Encourage More Saving

Despite its flaws, Robert Frank’s Luxury Fever is a valuable read in behavioral psychology and behavioral economics. Luxury Fever offers an appealing compendium of interesting case studies, anecdotal evidence, and statistics on society’s current “wants-not-needs” and “more is better” materialistic way of life, and its harmful impact on our lives, relationships, and societies.

Complement with The Millionaire Next Door (1996, read my summary,) a bestselling exposition on the surprising secrets of America’s wealthy.

Wondering what to read next?

  1. How Ads Turn Us into Dreamers
  2. The Extra Salary You Can Negotiate Ain’t Gonna Make You Happy
  3. On Black Friday, Buy for Good—Not to Waste
  4. The Problem with Modern Consumer Culture
  5. Why I’m Frugal

Inspirational Quotations #743

By

To judge human character rightly, a man may sometimes have very small experience, provided he has a very large heart.
—Edward Bulwer-Lytton, 1st Baron Lytton (English Poet)

Writing makes no noise, except groans, and it can be done everywhere, and it is done alone.
—Ursula K. Le Guin (Science-fiction writer)

Faith may be defined briefly as an illogical belief in the occurrence of the improbable.
—H. L. Mencken (American Journalist)

The goal should not be to make money or acquire things, but to achieve the consciousness through which the substance will flow forth when and as you need it.
—Eric Butterworth

None are more taken in by flattery than the proud, who wish to be the first and are not.
—Baruch Spinoza (Dutch Philosopher)

Let a fool hold his tongue and he will pass for a sage.
—Publilius Syrus (Syrian-born Latin Writer)

The happiest is he who suffers the least pain; the most miserable, he who enjoys the least pleasure.
—Jean-Jacques Rousseau (Swiss Philosopher)

Luck can often mean simple taking advantage of a situation at the right moment; it is possible to “make” your luck by being always prepared.
—Michael Korda

The greatest analgesic, soporific, stimulant, tranquilizer, narcotic, and to some extent even antibiotic –in short, the closest thing to a genuine panacea –known to medical science is work.
—Thomas Szasz (Hungarian Psychiatrist)

A teacher of fear can’t bring peace on earth. We have been trying to do it that way for thousands of years. The person who turns inner violence around, the person who finds peace inside and lives it, is the one who teaches what true peace is. We are waiting for just one teacher. You’re the one.
—Byron Katie (American Speaker)

Where legitimate opportunities are closed, illegitimate opportunities are seized. Whatever opens opportunity and hope will help to prevent crime and foster responsibility.
—Lyndon B. Johnson (American Head of State)

Nothing you do for children is ever wasted. They seem not to notice us, hovering, averting our eyes, and they seldom offer thanks, but what we do for them is never wasted.
—Garrison Keillor (American Author)

Few will have the greatness to bend history itself; but each of us can work to change a small portion of events, and in the total of all those acts will be written the history of this generation.
—Robert F. Kennedy (American Politician)

How to Buy a Small Business // Book Summary of Richard Ruback’s HBR Guide

By Leave a Comment

Beyond the capital markets and startups, I’ve been exploring buying a suitable small business to invest in and operate. To inform myself with the process of searching and valuing privately-held establishments, I recently perused Richard Ruback and Royce Yudkoff’s resourceful HBR Guide to Buying a Small Business: Think Big, Buy Small, Own Your Own Company (2017.)

'HBR Guide to Buying a Small Business' by Richard S. Ruback (ISBN 1633692507) The authors of this HBR Guide teach a popular Harvard Business School class on “acquisition entrepreneurship.” Their curriculum trains self-employment-inclined MBA students to search, negotiate, and buy an established business and become an entrepreneur-CEO within a year or two.

According to the authors, MBA students are drawn to their class by the prospect of a meaningful leadership responsibility earlier in their careers, as opposed to slowly climbing the corporate ladder or taking on the great risk of starting a company from scratch and establishing a viable business model.

The first section of the HBR Guide to Buying a Small Business can help you decide if entrepreneurship is a good match to your temperament, lifestyle, work-experience, and career ambitions. The largest part of the book provides a comprehensive roadmap for all aspects of acquiring a business—bankrolling the search process, deal-sourcing, managing risk, organizing equity- and debt-financing, running due diligence processes, structuring the purchase, and closing the deal. The final section of the book discusses changing the leadership over and transitioning into operating management.

Reflection: Is Acquisition Entrepreneurship Right for You?

  • Self-employment is not for everyone. Entrepreneurs need to be smart, driven, business-savvy, self-motivated, strategic, resilient, persuasive, and be able to deal with uncertainty.
  • On top of the challenges of self-employment, acquiring and operating a small-business will require reaching out, projecting self-confidence, and persuading people you don’t know—business brokers, financiers, investors, regulators, sellers, employees, and customers.
  • During your exploration of what business to buy, you’ll have to quickly learn about unfamiliar industries, markets, and companies. As a leader, you must be able to develop cross-functional expertise quickly.

Searching: A Full-time Job in Itself

  • Plan to commit full-time for six months to two years to raise funds from financiers, identify and vet potential acquisition targets, and negotiate with sellers on a realistic purchase price. Afterward, plan for no less than three more months to perform due diligence and complete the transaction.
  • “When you are seeking out a business to buy, you might face months when you work 12 hours a day and simply not find a desirable prospect. It’s a frustrating experience with lots of effort and no reward.”
  • Arrange for debt and equity financing from potential backers and risk-sharing partners. Contact affluent folks in your network and investors who specialize in small-businesses. The networks of people you bring together to help your mission can also lend a hand during the deal making and the due diligence processes.
  • To find potential businesses to buy, try reaching out directly to businesses whose owners may be inclined to sell. Engage small business brokers (there’re some 3,000 small business brokers and intermediaries in North America,) or comb through databases of small businesses for sale.
  • For potential sellers, look for business owners who, after building their firms over the decades, are approaching retirement and don’t have an inheritor interested in running the business. Many aging business owners are determined to ensure that their businesses live on.

Seek Enduringly Profitable Businesses: Recurring Customers and Predictable Revenue

  • Look for “enduringly profitable businesses”—stable, slow-growth companies in dull-and-boring industries (such as sandblasting, equipment maintenance, industrial repair and overhaul, window-cleaning, service-providers) in small, defensible niche markets.
  • Seek businesses whose business-to-business customers are unlikely to switch vendors because the product or service their customers buy isn’t a big part of the costs of their business. Consequently, they’re not motivated to shop around for lower-cost vendors and squeeze margins.
  • Focus on businesses with yearly revenues of $5 million to $15 million and cash flows of $750,000 to $3 million.
  • Avoid promising start-ups and risky turnaround opportunities; “it is tempting to imagine buying a troubled business or one with uneven performance, because the purchase price would be very low. But we strongly advise against it, because you’ll have to reinvent the business model and doing so is a very difficult and risky endeavor. Instead, buy a profitable business with an established model for success—one that is profitable year after year.”
  • Avoid high-growth businesses because “high growth means that your new customers will quickly outnumber your existing ones. Because new customers bring new demands, there are many ways to get in trouble. New customers are, well, new; they have no loyalty to the company and no history. High growth requires great management effort. It also absorbs money rapidly, and raising that money puts a strain on the business and its owner. A rapidly growing firm also attracts competitors, which see the expanding market and the opportunity to attract new customers. So, in a high-growth business, you could work hard and still fail if you cannot keep pace with your competitors. And even if your business survives, you might find that competition has forced you to sell at low prices, so you enjoy little financial reward after all. Making this all the harder, the seller will demand a much higher price for a business that has the potential to grow quickly.”
  • Avoid technology-driven companies (they face shifting customer needs and therefore demand constant reinvention,) cyclical business, and businesses with well-established competitors.
  • Small business-owners usually don’t hire large consulting firms or investment banks to sell their businesses. Their businesses are too small to appeal to private equity firms. “We think it makes sense to buy a business with between $750,000 and $2.0 million in annual pretax profits. … At the upper end of our size range—$2 million or more in profitability—we find that institutional investors, like smaller private-equity firms, start to become interested and that competition raises the purchase price, reducing the financial benefits of owning the business.”
  • “EBITDA margin (EBITDA/revenue) ≥ 20% for services and manufacturing or 15% for distribution and wholesale”

A Checklist for Enduringly Profitable Businesses

Initial Filters:

  1. Is the prospect consistently profitable?
  2. Is it an established business instead of a startup or turnaround?
  3. Is it in the right size range?
  4. Is it located in a place you are willing to live?
  5. Do you have the skills to manage it?
  6. Does it fit your lifestyle?

Deeper Filters:

  1. Is the prospect enduringly profitable?
  2. Is the owner serious about selling the business?

Valuing the Company and Negotiating a Deal

  • Use the company’s past financial information to project future earnings and your return on investment. Then decide on how much you should pay for a small business: “You’ll need to base the offer price on the general range of 3x–5x EBITDA.” Adjust the multiple for profit margins and growth prospects.
  • Run a primary due diligence—“a focused period of rapid learning in preparation for making an offer. This is when you’ll test the seller’s initial claims and verify the information that has made the business appealing to you. … You’re looking for any reason that you might not want to acquire this business.”
  • Finance using equity and debt. “Visit banks and approach your investor network to raise money for the acquisition. You should be prepared to provide information about the business and its industry, details on the due diligence that you’ve done, your financial projections, and the deal terms that you are proposing.”
  • Once your offer has been accepted after negotiations, run a confirmatory due diligence “in which the company’s records will be fully open to you. You will typically have around 90 days to work with your accountant and attorney to check for any inconsistencies and red flags. … This can be an extremely nerve-racking time for both the buyer and the seller, so it’s important to be patient and calm.”

Transitioning into Leadership and Emphasizing Business-as-Usual

  • As part of the negotiated deal, try to get the seller to stick around for 3 to 6 months to help you in the transition.
  • “After closing the sale, you should focus on four tasks: introducing yourself to all your managers and employees, meeting with external stakeholders, communicating the transition plan to everyone, and taking control of your cash flow.”
  • “The most common trouble for small firms under new owners is running out of cash. … So set up a process whereby you approve all payments before they go out, and review your accounts-receivable balances at least weekly. You should also implement a 90-day rolling cash-flow forecast.”
  • Meet with all the constituencies and reassure them that they won’t see any immediate changes. Lay emphasis on “your overarching goals for the company—for example, excellent customer service, commitment to quality, a satisfying work environment—and encourage people to stay focused on their work.”
  • Visit every major customer as soon as you can. Keep your ears open for ideas to improve your product- and service-offerings.
  • Don’t make any big changes early on, get to know the business, and be very respectful of all the constituents—they know more about the business than you do.

Recommendation: Read ‘HBR Guide to Buying a Small Business’ for a Very Good Introduction on How to Buy and Organize Finance for a Business

Richard Ruback and Royce Yudkoff’s HBR Guide to Buying a Small Business is excellent manual for prospective entrepreneurs, employees of small businesses, financiers, and value-seeking investors. You will also become acquainted about interactions with bankers, brokers, sellers, accountants, and attorneys you meet while searching for a business to buy.

Wondering what to read next?

  1. Your Product May Be Excellent, But Is There A Market For It?
  2. Consumer Power Is Shifting and Consumer Packaged Goods Companies Are Struggling
  3. A Business Model Like No Other: Book Summary of ‘Becoming Trader Joe’
  4. Sony Personified Japan’s Postwar Technological Ascendancy // Summary of Akio Morita’s ‘Made in Japan’
  5. The Loss Aversion Mental Model: A Case Study on Why People Think Spirit is a Horrible Airline

Inspirational Quotations #742

By

Never contend with a man who has nothing to lose.
—Baltasar Gracian

Whenever you are to do a thing, though it can never be known but to yourself, ask yourself how you would act were all the world looking at you, and act accordingly.
—Thomas Jefferson (American Head of State)

The walls we build around us to keep sadness out also keep out the joy.
—Jim Rohn (American Entrepreneur)

For the things we have to learn before we can do them, we learn by doing them.
—Aristotle (Ancient Greek Philosopher)

The greatest obstacle to discovery is not ignorance—it is the illusion of knowledge.
—Daniel J. Boorstin (American Historian)

Riches get their value from the mind of the possessor; they are blessings to those who know how to use them, and curses to those who do not.
—Terence (Ancient Roman Playwright)

If we subject everything to reason, our religion will have nothing mysterious or supernatural; if we violate the principles of reason, our religion will be absurd and ridiculous.
—Blaise Pascal (French Catholic Mathematician)

A single lie destroys a whole reputation of integrity.
—Baltasar Gracian

It is not the language but the speaker that we want to understand.
—The Upanishads

A bibliophile of little means is likely to suffer often. Books don’t slip from his hands but fly past him through the air, high as birds, high as prices.
—Pablo Neruda (Chilean Poet)

It requires greater courage to preserve inner freedom, to move on in one’s inward journey into new realms, than to stand defiantly for outer freedom. It is often easier to play the martyr, as it is to be rash in battle.
—Rollo May (American Philosopher)

The greatest mistake we make is living in constant fear that we will make one.
—John C. Maxwell (American Christian Professional Speaker)

Life is made up of constant calls to action, and we seldom have time for more than hastily contrived answers.
—Learned Hand

The reading of all good books is indeed like a conversation with the noblest men of past centuries who were the authors of them, nay a carefully studied conversation, in which they reveal to us none but the best of their thoughts.
—Rene Descartes (French Philosopher, Mathematician)

That which does not kill us makes us stronger.
—Friedrich Nietzsche (German Philosopher, Scholar)

The oppression of any people for opinion’s sake has rarely had any other effect than to fix those opinions deeper, and render them more important.
—Hosea Ballou (American Universalist Clergyman)