Minimize Risk – Keep Pace with Changes That Will Affect Your Business

Much of our success as business owners and buyers depends upon our ability to anticipate changes that will affect our business. Failing to do so can cost us dearly. When we correctly forecast the shifts and trends, we are able to see and act on great opportunities.
I have done both.

In the 80s, I anticipated that the companies running large IBM mainframes had such a large investment in the systems supporting their business that they would be reluctant to change this technology for many years to come, even though new technologies had come to the fore.

The technology that these companies already had-and were comfortable with – was effective.

So I invested in the building of products that substantially improved throughput as well as the management of large complex systems using their existing technology. My assumptions and predictions turned out to be accurate and we prospered. Thirty years later these clients are still using the technology.

However, in 1990, I built a sophisticated class A office building with the intention of filling it with local technology firms. I failed to anticipate the economic collapse in Ottawa’s technology industry that occurred in 1992, the year my office building was complete. By then, there were empty buildings all across the city. I lost my shirt.

I have never forgotten the lesson learned and I want to share it with you today.

The long term trend was for growth in the technology industry but the short term economic adjustment killed me before the long term trend could manifest itself.

Recognizing and leveraging long term trends

Our survival and success is largely dependent on our ability to anticipate what is to come and our ability to separate short term adjustments to circumstances from long term trends. By trends I am referring to the evolutionary changes that affect us both directly and indirectly.

Through the past decade these trends have included:

  • the move from closed corporate networks to web-based systems to cloud-based systems and now to mobile applications using smartphones, iPads, in-car systems, etc.
  • the changes from carefree travel to the security-driven processes with which we now live.
  • working parents and related support services such as the growth in child care.
  • the move to becoming a cashless society with payment systems using many different technologies.
  • downsizing or right sizing and sub-contracting, which has led to the development of many small businesses providing services.
  • just-in-time inventories and virtual retailers.
  • increasing regulatory intrusion in every aspect of our life.
  • issues of safety, environment, workplace and health.
  • ever-increasing taxes to support the growth of government spending.

In 2000, I owned a small company that manufactured herbal tinctures and distributed them through health food stores. The government decided that they were going to regulate the industry and advised us that they would need to approve each of our 34 tinctures. We would have to pay $52,000 for each approval. To my knowledge there were very few companies in North America producing herbal tinctures that worked. The vast majority were produced by large drug companies and the testing by independent labs indicated that their efficacy was so low that they were ineffective. So the threat of government regulations drove each of the quality manufacturers out of the industry and left it to the majors who provided ineffective products. After the few small quality producers closed, the government did not implement their approval and fee program. They had already achieved the desired result.

Fighting change is a losing battle.

To succeed, we have to recognize the coming changes and think through their implications.This is no small task.

Think of the many aspects of our world that are changing—climate, technology, energy supply, transportation, housing, buying habits, financial systems, economies, security, health, family and social structures, employee/employer relationships, communications, and on and on.

Our challenge is to try to anticipate how these changes will affect our business and open up opportunities. An increasing number of purchases are being made through retailers with no bricks and mortar locations, for example. What an opportunity for fulfillment houses that accept orders, inventory a client’s products and do local delivery—or for shipping and delivery companies.

So how do we as small business owners address this? We need to regularly take our head out of the sand to participate in industry meetings, listen to futurists, read in-depth reports, use the web to research what is going on in areas that can affect us and try to stay current with what is happening. We can use our imagination and understanding to anticipate rather than reacting when it is too late.

How many of us brainstorm with our staff or our peers about what may affect our business over the next three to five years or the next decade? How many of us take the time to look at how young people are evolving in a mold different to us?

I am fortunate that, unlike real estate agents, business brokers are not likely to be pressured into becoming a commodity provider of service. The complexity of assessing, valuing, and buying the right business is such that it is a face-to-face exercise where the development of trust and understanding is critical. This is equally so for selling a business.

However there are ample opportunities in our industry to deliver a better service at less cost by implementing emerging technologies such as web-based training, social media marketing, improved customer relationship management systems, internet marketing and service assessment systems, improved recruitment and testing systems, visual communications systems, cloud- based secure document storage and access systems, and so on.

The goal is to help as many people as possible to achieve their goals with the least hassle, cost and risk. Nothing will replace the wisdom and knowledge of an experienced and well-trained business broker but we can certainly find ways to improve how we market and deliver the service and ways to improve the quality of service while reducing the costs.

I encourage each of you to think outside your comfort zone. Follow and assess the changes and trends. Brainstorm with others about the future of your industry and your business or the business you are looking at buying. Remember that you buy for the future benefit. The past performance is not always the best indicator of what is to come. Look at the micro trends as well as the macro trends and make informed decisions.

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Gregory Kells
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