National Clothesline

John Wooden wrote the following definition of success: “Success is peace of mind which is a direct result of self-satisfaction in knowing you did your best to become the best you are capable of becoming.”

Coach Wooden recently passed away, but that definition defined him and helped define the way I approach my business and life.

When I managed and coached Little League and YMCA basketball, Coach Wooden’s philosophy was always in my mind. I had to do the best I could whether it was team sport, business issues, or personal fun.

The man was a legend in his own time. The few times I had an opportunity to speak with him, he was always ready to answer any question I had, whether it was about basketball, or life. The men who played for him were blessed to have this human being as a coach. Coach Wooden’s legacy will live on for many years.

“I was wondering if you knew of any instances or case studies of owner/operators teaming up to be more competitive. Example: one guy with three locations teams up with a guy with two locations, centralizing their plant, etc. Not a buy-out but a merger. Any guidance on this or even a point in the right direction would be greatly appreciated.”

When I first received this question, I had to take a deep breath and a step back from my computer. I am going to use two aliases for the plant owners who are contemplating teaming up. I will call the owner of three plants Joe and the owner of two plants Paul.

These two friends are located in the same city. They are close enough to each other to consider a central plant for both operations.

This situation occurred in my family many years ago. My father and his partner teamed up with a competitor’s company to purchase a building and set up a finished laundry facility. It appeared to be a win-win situation.

Keeping that history in mind, the first suggestion I made to Joe was to meet with Paul and write a business plan. If they cannot agree as to the workings of the company such as management, quality control, operating costs and budgeting they should not attempt to get married. We can call the creation of the business plan an engagement period.

One of the issues is consideration of changing to a single company name. Ego will play a part in this potential change. Instead of using two different kinds of packaging, they would be able to purchase larger quantities of merchandise for a single-named organization and therefore save money.

Marketing would be a lot easier when you advertise one firm with five locations. I do not know if the sales volume was the same with both Joe’s and Paul’s companies because that might affect the upcoming marriage. If the volumes are equal, there is no problem.

Consider if Joe’s business will be 60 percent of the volume and Paul will contribute 40 percent of the volume. Should Joe have 60 percent of the stock and control the company, or should both partners come up with the same amount of money to build their central plant and own equal amounts of the stock?

Should the plant be a separate company, and both Joe and Paul pay that company for processing the work? Is there an advantage for Joe to pay for his work to be processed? Will there be a real savings? If either of the two parties is operating at a lower labor cost, will the more efficient operator pick up the less efficient company and actually benefit it?

How do you balance the possible inequities of two companies that may or may not be operating in the same fashion or at the same profit level?

It is very easy to talk about a merger, but there are so many considerations, it will be easy to err in writing the business plan. Many things could go wrong, but I will not touch on those.

Let us take the stance that total agreement is made on all of the above issues and any others I did not mention. The engagement period is a success. The two companies are going to get married. The business plan spells out exactly what the contributions will be and how the business will operate.

The next step will be a pre-nuptial agreement. In a business, this is known as a buy-sell agreement.

First, a mutually acceptable attorney has to be selected. His or her job will be to write the buy-sell agreement. A good buy-sell agreement would protect both parties, assuming the agreement is properly written.

I went on to tell Joe that once the agreement was written he should take it to his private attorney and Paul should do the same thing.

After the three attorneys and the two partners reach mutual agreement on the verbiage of the buy-sell, they can celebrate. Upon approval and signing of the document, the partnership will move forward.

Finally, life insurance should be purchased to protect the financial interest of each partner. I always recommend term insurance. It is less expensive and allows you to decide how you want to invest those extra dollars you would be paying the insurance company when you buy ordinary or universal life insurance.

Computer conference

I recently attended a computer conference. A new (to me) acronym was used. The acronym was CEM, which means customer experience management.

What this means is the perception of your customers when they interact with your place of business. How focused are you on your customer’s experience with your company?

I want you to focus on the following four words: customer experience boosts revenue.

If you want to create an inviting, outstanding customer experience, I suggest the following two critical components.

The first component is providing customers with greater value through your products and service.

The second is using your customer data to enhance the likelihood of your customers continuing to do business with you.

I have said this before and I will say it again: the second most valuable asset you have is your customer database. It is inexcusable not to use the information that your computer has collected.

If you do not know how to use the database, or are too undisciplined, or lack the knowledge to do it yourself, hire someone to use the database for the benefit of your company.

My final bit of advice for the day is, do not worry about the competitor down the street or the competitor around the block. As John Wooden would say to his players before a game, “We don’t control what the other team does to prepare. We can only control what we do to prepare.”

Coach Wooden, you were my personal hero. The world will miss you!