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Welcome to Stephen Dietrich's Blog

Here, you’ll find news from our office, insights and observations from trusted sources in management consulting, testimonials from our clients, resources and recommendations of note, and more. Read a post or two and comment on anything that strikes a chord.

Five Issues That Arise In All Transactions

As 2017 gets rolling, I am just getting started on a few new buy/sell transactions, giving me the opportunity to reflect on some issues that commonly arise as buyers and sellers negotiate terms of their agreements. These issues probably will not surprise you, but if you are buying or selling a business — especially an auto dealership — the insight I provide here will prepare you for some of the human factors and resulting hurdles you may likely encounter.

Understanding The Complexities of Running an Auto Dealership

Auto Dealership Complexities

I was speaking with a neighbor this week, and I mentioned I was heading to the 2017 NADA Convention and Expo (the annual trade and education event for the National Auto Dealers Association which gets underway today in New Orleans). I attend this event because a significant number of my clients own, operate, or invest in auto dealerships and other related businesses. I was struck by how little my neighbor knew about what it actually takes to operate a dealership, much less multiple dealerships. Since we are friends and I had some time, I tried to enhance his understanding while reminding myself of why I find my work so rewarding.

The normal impression of a dealer is a person who merely “wheels and deals.” While every dealer I have met is certainly a skilled negotiator, the strong and lasting dealers are, first and foremost, managers of highly complex businesses that including many moving parts and skilled players.

The Parts

In practice, a dealership is a conglomeration of several businesses

Fear as Business Friction

In the vast marketplace of ideas, you can easily find several concepts or key words that have staying power and typically attract attention and investment. For example:

  • Trust
  • Accountability
  • Vision
  • Goal
  • Strategy
  • Efficiency
  • Innovation

Entire industries are built around these kinds of words. Consultants evaluate companies to determine whether they have these characteristics. If they determine the companies do not have these attributes, they generate significant income by creating plans to inculcate the business with the “missing” ideals.

At the core of these concepts is to enable a business to achieve its full potential. Improvements may take the form of operational changes or cultural shifts. The focus may be on the individual, a sector, a business unit, or the entire company.

The Goal: Eliminate Business Friction

The goal of improving trust, accountability, efficiency, and so forth is to reduce business friction — anything that blocks progress, impairs productivity, or slows the pace of innovation and business itself. In physics, friction is the resistance that one object or surface encounters when rubbing against or moving over another object or surface. In a car, friction reduces fuel efficiency. Energy needed to move the vehicle is partially used to overcome friction and is lost in the form of heat. Friction and the resulting heat cause wear and tear on the car that eventually results in the need for repairs.

In a business, friction results in a loss of focus, creativity, confidence, and direction, and negatively impacts productivity. Moreover, organizational friction inhibits innovation, which often results in decreased sales. All of these make a business less efficient and therefore less productive. Secondary effects of business friction may include

The Benefits of Investing in Employee Retention

This time of year brings thoughts of change and new opportunities. If your business is looking forward to the new year with great hope and potential on the horizon, you’re not alone. According to the Conference Board, CEO confidence surged in the final quarter of 2016, reaching its highest level in nearly six years. Also, business leaders’ appraisal of current conditions in their own industries also improved significantly, with forty-six percent stating conditions in their own industries have improved versus only twenty-one percent in the third quarter.

As part of any smart business planning, CEOs and business leaders are always working to understand where to invest business capital. Capital investments can, of course, take the form of purchases to improve or expand operations, but thoughtful owners and operators think of brainpower, skills, and experience as investable assets, as well, and as keys to business success.

One of the most rewarding areas of investment is in employee retention — investment in human capital. As I work with businesses and read about what affects business operations the most, I have noticed that employees consistently have the most impact, good or bad, on the success of a business. For purposes of my thoughts here, I will focus on the benefits of retention and touch only lightly on some

Real Estate: The Asset That Is Part of Every Deal

I was talking with a prospective new employee last week, and I asked her if she had any experience with real estate matters in her transactional experience. She gave me a quizzical look and her response stated that she did corporate work and that real estate was not part of what she typically did. I wish this was the only time I encountered this response when discussing mergers and acquisitions or “corporate” representation, but it reflects a common misconception. The fact is that real estate is an asset that is a part of every deal.

Anticipating Increased Complexity

When I look at a transaction or a company, I often find that the issues involving real estate are the most intense and often the most difficult to resolve. The issues also tend to vary considerably because companies and individuals treat real estate in a wide spectrum of ways in a deal. In its simplest form, real estate could be an owned asset being purchased. However, even in these “simple” situations, if the party holds and financing the real estate separately, it can add significant complexity to a transaction, especially if it is one of the higher dollar assets related to the business.

At its most complex, the real estate may be a leased asset unrelated to the business, and the change in ownership or operation may signal an opportunity to renegotiate the lease or refinance the property. Adding to the complexity of dealing with leased properties are the practical reality of having to coordinate with a third party that is not part of the transaction to obtain a lease amendment or consent. The phrase,

Self-Driving Vehicles: Excitement and Apprehension

The concept of self-driving vehicles fascinates me. By combining various technologies, including computers, a global positioning system (GPS), and robotics, scientists and engineers are beginning to accomplish what most people could never have imagined — a car that can drive itself from point A to point B.

Combine that with the emerging Internet of Things (IoT) — where machines can communicate with one another — and blockchain technology — a shared ledger system that can record transactions and track assets across business networks — and you can envision a day when you will be able to order a car online and have it deliver itself to your home, stopping for fuel along the way.

I love the prospect (especially when I am stuck in traffic) of eventually having my own, impersonal chauffeur available 24/7/365 that will never fall asleep at the wheel. However, I also feel some

Understanding The Vetting Process to Choose an Attorney for Your Business

In my last post, “Hire an Attorney… When or Before You Need One?” I asked you to consider establishing a relationship with an attorney before you need one, so that when you need an attorney, you can hit the ground running.

Vetting Attorney

You can find plenty of attorneys online, in a phone book or through referrals from colleagues and trusted friends. After your collect your referrals, you face the challenge of having to choose which attorney is best for you. In this post, I lead you through one process of vetting your prospects.

Choosing an Attorney Who Meets Your Needs

The first step in vetting attorneys is to

Hire an Attorney… When or Before You Need One?

“Hire an attorney” are three words most new or early-stage business owners never want to hear. The phrase is commonly associated with being in trouble or experiencing frustration with an abundance of overly complicated paperwork required to perform what would appear to be a simple, straightforward deal or arrangement. As an attorney, I understand the reluctance to seek legal counsel… and to pay for it. I get it.

When to Hire a Lawyer

Reluctance is a normal reaction when anyone has to engage in a process or establish an unfamiliar relationship. Fear or anxiety at having to invest additional time, money, and effort to engage legal counsel when you are already investing time, money, and effort contributes to the reluctance. It is a fear of the unknown combined with dread of the known. Many people do not know what an attorney does or can do, and popular culture leads people to expect the worst.

Good News

In business, needing an attorney is often a

Organizational Structure Graphic

What to Consider When Choosing an Organizational Structure

Although the ideal time to decide the structure of your organization is before you establish it, there may be reasons to consider restructuring your business once its established (and by restructuring your business and organizational structure, I’m referring to the arrangement of roles and responsibilities; for example, hierarchical, flat, etc.). Even a company operating for decades can benefit from taking a closer look at how it is structured and determine the best structure for meeting the organization’s present and future needs.

Organizational Structure Graphic

On its surface, choosing a structure may appear to be a simple exercise. For a one-owner/one-business operation, that is typically the case; however, more complex businesses have a variety of issues to consider when structuring the organization. When deciding how to structure your business, be sure to make the following key considerations:

Letters of Intent — Are They Worth It?

Who would think a non-binding document could create so much stress when you are putting a deal together. A letter of intent (LOI) is such a document. Simply stated, an LOI which may also be referred to as a “memorandum of understanding (MOU)” or “term sheet” expresses the intention of two parties to do something. While the purpose of such letters is to facilitate transactions by proactively addressing potential areas of disagreement, the question of whether to use an LOI can itself become a point of contention.

Letter of Intent

Opposing Views

Whether an LOI is worth the time and trouble stirs opposing views:

  • Pro-LOI: This side views the LOI as an efficient, inexpensive and quick way to determine whether the deal is even worth the time of the two parties to engage in negotiations.
  • Anti-LOI: This side thinks the better approach is to draft a more detailed deal document from the very start and then sort out any issues.

Disagreement also arises over the