Dairy Marketing Practice | Contributing Columnist


Time’s Winged Chariot Goes Boom

Dan Strongin ASQ CMQ/OE Uncorporate Consultant

July 28,, 2017


In the last few months Andronicos sold to Safeway, AJ Ferraris shut down its stores, Whole Foods has been rumored to have lost 20 percent of its sales to Kroger and is responding by entering the low price derby, having centralized its buying and hired an executive from Target. Cowgirl Creamery sold to a big Euro Cooperative, Vermont Butter and Cheese sold to big Uncle Sam coop...

....and the little Genova deli in Oakland shuttered its doors... What the heck is going on here? Some of these were what business schools would call disrupters. They were innovators and revolutionaries just 25 years ago. Now they are subsidiaries or gone. Is this a bad or a good thing for our industry? Is it truly the “dynamism of the marketplace” or not beginning with the end in mind?

Lord knows I can’t blame anyone for not wanting to face their demise, but, whether your goal is for your business to continue beyond your demise with its soul intact, or you want to cash out, advanced planning can make a big difference. What is interesting is we are seeing mainstream solutions from businesses that began as alternative businesses. A conventional sellout can consist of selling the owners’ share in the business or selling everything, all assets, including the trademark, and euphemistically, the employees. The first is better for the seller, the second for the buyer.

You can try and negotiate sweet deals for the employees, or not. Either way you lose control as you are no longer an owner, and promises to maintain the business as it was are impossible to fulfill, even if we are more likely to believe them when closer to having the cash in hand, and Time’s winged chariot is drawing near.

Preparing for succession comes down to a couple of simple but serious questions. First, what do you want, a life of luxury? (Not likely selling a cheese company.) Maximize the return on your investment?

Work until you drop? Have the vision and core values that you and the people you employed created and cultivated over the years continue to thrive with enough do re mi left to live comfortably in retirement? Stay involved as long as you are useful? Leave a legacy for your progeny? Transfer ownership to them and trust they will treat your people well and not squander the wealth you worked so hard to build?

the first step is to get an objective valuation of your business by a professional, then sit down and plan how to achieve the valuation you need to make your choice work

If you are lucky enough to come across a buyer who wants a lifestyle business, great! You are more likely to end up with conventional business people looking to generate profit rapidly, and as much as possible. And, the market for small and medium businesses is in a glut. Business brokers are overloaded. A lot of boomers are trying to sell their businesses; many without proper planning and “packaging.”
The people most likely to have the same values and to continue with your legacy are those who already work with you. An interesting option I have not seen on the table in all this change is to convert to a worker owned cooperative.

If maximizing the bucks is not the only thing you are interested in; if your legacy continuing for seven generations is more important to you than buying a Tesla; if you want a “lifestyle” solution at the end like you wanted a lifestyle business in the beginning, a worker owned cooperative can be a wonderful, courageous decision. You can set it up to provide for you, even remain on the farm if you have one, and what you may lose in volume of money you gain in real wealth, a wonderful rich life surrounded by people you love and respect and who are filled with gratitude. But to ensure success will require a lot of training in advance and a good plan.

Some of the same can be achieved by selling to some or one of your employees through self financing, with them paying you off over time, like a pension, if you have trained them well in business to prepare them to perform without you.

If your kids want a go, great, but get a good lawyer — ever see King Lear? Train your children from the ground up. On the other hand, if you want to leave a nest egg for them but in no way want them having control of the business, you can create a trust, and put control of the business in the hands of the trustees, with your offspring getting a draw.

The point being there are a variety of options to look into and prepare for if you start now. Wait, and you risk losing your legacy and having to do a fire sale. The first step is to get an objective valuation of your business by a professional, then sit down and plan how to achieve the valuation you need to make your choice work.
All options will be helped by improving the flow of work and money in your business and focusing on adding value directly for customers.

Not only the valuation, but the likelihood of continued success will be improved. After two decades of helping people optimize their businesses for quality, productivity and lucrativity I can boil it down to a simple question: what are the things that you are doing that directly add value for the peopl
e who buy your cheese? Get rid of or minimize everything else!

Any interesting and innovative solutions you have found to the grim reaper problem? Share them with me? DS


Dan Strongin

Dan Strongin is a former president of the American Cheese Society, chef and business coach for small to medium value added businesses, and the owner of the sites learn.managenaturally.com, and the Facebook group Enjoy Cheese. His online course: “Cheese: How to Buy, Store, Taste, Pair, Talk About and Serve”, is available at enjoycheese.net. Dan can be reached via email at dan@danstrongin.com.

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