BuzzFeed has reportedly been trying to sell First We Feast, the makers of the highly popular YouTube show Hot Ones for $70M. Buyers are interested, but not at that price. Business owners thinking about eventually selling their own businesses could learn some important lessons from the company’s challenges.

BuzzFeed’s experience isn’t unique to big online businesses. According to data from business brokers, only 20–30% of businesses that go to market end up selling. The number one reason that sales fall through is that the business owner has unrealistic expectations of the value of their business. Often a business owner has heard of others selling a business for some multiple of revenues and assumes he can sell his business for a similar valuation. Often those rumored multiples are exaggerated, and every business is unique.

The challenges BuzzFeed faces in selling First We Feast are very similar to those faced by small business owners looking to sell the business they have nurtured and grown. How much a buyer is willing to pay is based on how much cash they think the business will generate in the future and how much risk there is in those forecasts. The three biggest issues facing First We Feast are the same three issues many family businesses face when looking to exit:

– Reliance on the owner and key employees

– Limited growth potential

– Reliability of financial forecasts

It may be too late for BuzzFeed to fix all the issues impacting how much they can get for First They Feast, but it’s not too late for small business owners to take steps to give potential buyers more confidence in the cash generating potential of their businesses. Value Catalysts like myself can help identify the issues that will hurt your valuation and can work with your team to address them one by one. It takes time (typically at least a couple of years) and focus, but the investment is worth it, often dramatically improving how much cash the business generates month after month and significantly increasing the value realized when you are ready to exit.

Let me know if you’d like to talk about how your business can create more value.

Read my full analysis of the BuzzFeed/First We Feast challenges here.

Do you own your business or does your business own you?

It’s essential for business owners to focus on creating independence from your business long before you plan to exit. The keys to achieving this are humility, hiring, and handing-off. Are you ready to celebrate your independence day?

Read the full article here.

Know What Matters tells the story of Panera Bread through the eyes of founder Ron Shaich. Along the way he shares the many lessons learned. He boils down the essence of his and the company’s success to: tell the truth, know what matters, and get the job done. Know What Matters is a fun story to read that happens to teach important lessons for business leaders. It deals with issues from all phases of business life: startup, rapid growth, reigniting growth, and sale/exit.

While Know What Matters is full of business lessons, it is more reflective and philosophical than most. The first chapter begins with the sentence “I learned the most important lesson of my life as my father’s life came to its end.” That lesson, learned from both his parents, is “Take the time now, while you still have a runway into the future, to determine whether you are living a life you will respect. Don’t wait until the end.”

The author is an entrepreneur, and as most entrepreneurs can relate, “living a life you will respect” translates into building a business that makes a difference in the lives of those you serve. Through that process, your business comes to reflect your values and your passions, and your identity and your life are intimately tied up in your business. That’s what makes walking away so hard. As I work with business owners, it is hard, but necessary to prepare the business to survive without them, and for them to build a life beyond the business. Sure, we work to make the business worth as much as possible (probably not the $7.5 billion Panera was acquired for in 2017), but the more important work is helping the business operate well with or without the owner/founder and vice versa.

In between the personal notes in the first and last chapters, the author introduces the philosophy that shaped the many decisions he describes throughout the book. In the preface, he identifies three things as the “secret of [his] success”: 1. Tell the truth. 2. Know what matters. 3. Get the job done. I think of these as acting with integrity, managing strategically, and operating excellently. In the first chapter, the author introduces a theme that he returns to frequently throughout the book which he calls managing future-back, defined as “discover today what will matter tomorrow, and then bring what matters to life.” This approach, strategically managing with the end in mind, served the author and his company well throughout his time at the company that became Panera Bread.

Know What Matters is made up of 31 chapters, a Preface, and an Epilogue over 237 pages. Each chapter is a story and the length of the chapter varies, depending on how long it takes to tell the story. The author breaks these stories into three parts reflecting different phases in the company’s journey: Living the Entrepreneurial Life, Leading a Large Enterprise, and Driving Large-Scale Transformations. The title of the closing chapter in each part reflects the author’s personal/philosophical approach to telling the Panera story: “Business (and Life) Requires Hard Choices”, “Business is Personal”, and “Know When to Sell”.

Know What Matters tells the author’s personal story from his first entrepreneurial venture through completing the largest sale of a restaurant business in history. Along the way, he shares the challenges he faced, the lessons he learned, and the keys to his success. He does so with humility, transparency, and candor. The book is well written, engaging, and helpful. Entrepreneurs and business owners will especially resonate with, and likely learn from the journey. I highly recommend Know What Matters to anyone leading (or wanting to lead) a large business.

Read my full review here.

The AI-Savvy Leader by David De Cremer applies timeless leadership wisdom to the very timely topic of artificial intelligence. Writing about rapidly emerging technologies can be challenging. The author has wisely focused his attention on skills that will continue to be valuable no matter what direction(s) AI takes. Even so, the book provides a timely critique of the mindset dominating many current corporate AI initiatives and explains how companies can avoid the same mistakes in the future.

I could summarize De Cremer’s main critique of business AI initiatives is that they are too focused on efficiency gains, undervaluing the contributions of humans and overemphasizing technology. Too often business (people) leaders are deferring to technology leaders, hurting their people and reducing the potential for the technology to truly help the business. De Cremer explains that instead of focusing on replacing people with AI, companies should focus on helping people do more/better with the help of technology.

To help leaders accomplish this, he proposes nine “leadership actions” they should embrace. He acknowledges that these are not new concepts, unique to the Connected Intelligence era, but rather core leadership activities that they already practice. The AI-Savvy Leader explains how to apply those practices in the context of AI’s introduction to the workforce.

The book is organized around these nine leadership actions. Each gets its own chapter. Each chapter starts by explaining how companies are falling short in applying that chapter’s leadership discipline as they deploy AI and the impact of those failures. The author then explains specifically how leaders need to change their thinking and acting. Most chapters contain at least one section made up of specific ways in which leaders can put the chapter’s concept into practice. 

The book is easy to read. It doesn’t try to make bold controversial statements, but rather engages important topics with rational explanations, even as it often challenges conventional wisdom. It’s relatively short at less than 200 pages, but full of useful wisdom and helpful guidance. I strongly recommend The AI-Savvy Leader for anyone choosing, leading, or merely trying to survive AI initiatives in their business.

Read my full review here.

Welcome to AI by David Shrier provides a past, present, and future perspective on artificial intelligence: the good, the bad, and the scary.

Everyone is talking about AI. For decades I’ve paid attention to how artificial intelligence could impact my work, first as a software engineer and then as a business strategist. And yet, AI is changing so rapidly that even I at times struggle to get my arms around what it is and how it will change our work and our lives. Welcome to AI seeks to step into this gap.

The book is divided into three parts, roughly chronological with the first part more backwards looking, the second focused on decisions we can make today, and the third part focused on different potential futures. Not surprisingly, given the challenges of predicting the future in a rapidly changing discipline, the first part is the strongest and most helpful.

Overall the book is very readable. And yet at times it was very hard to read. The odd combination of the author’s hard criticisms of institutions he doesn’t like, over-confidence in institutions he does, alarmist warnings of coming doom, and rose-colored confidence in humanity and technology to perfectly do what is right challenges his credibility, at least in this reviewer’s eyes. There were several times I just wanted to put the book down without finishing it.

Despite those challenges, the book still has its merits. For those with limited understanding of the technology, Welcome to AI, provides a decent introduction. Perhaps more importantly, the strong positions that the author takes on important topics force readers to think about what each of us believe on those topics. The more the book rests on the author’s shaky future predictions (the AI future at this point in time is just too unpredictable), the harder it is to trust the author’s conclusions, but even his flawed perspectives help us realize how important it is to have a perspective.

If you are worried that your lack of informed perspective on artificial intelligence has kept you on the periphery of important discussions and decisions, Welcome to AI may be a great place to start to change that.

Read my full review here.

I’ve recently finished reading two books on artificial intelligence, Welcome to AI and The AI-Savvy Leader, both from Harvard Business Review Press (reviews forthcoming). Although artificial intelligence is something I’ve followed since the late 1980s, first as a software engineer and then as a business strategist, these books helped me realize that my long relationship with the concept has caused me to miss a subtle, but important shift in how society is starting to view AI.

To me, artificial intelligence is a technology. It is a tool (or class of tools) that we can use to do our work — perhaps similar to a personal computer or a spreadsheet or a smartphone or a programming language or the Internet.

The books I’ve just read don’t deny the technology that makes up AI, but they speak of AIs as individuals. In a business context, they describe an AI as a worker, not as a tool. There’s a sense of independence and equality and dignity similar to what we would ascribe to our human co-workers.

In the article linked below, I argue that we are making AI in our own image, but that image is only a weak surfacy reflection, most importantly lacking “heart”.

Read the full article here.

From my experience, successful business launches require an affirmative answer to five questions:

1. Is there an unmet business need?
2. Does meeting that need align with our vision?
3. Do we have some unique ability to meet that need?
4. Is our advantage defensible against adjacent incumbents?
5. Is this new business worth pursuing?

It’s important to note that I have framed these questions so that they make sense whether we are talking about starting a new stand-alone business (a startup), or starting a new business within an existing business (a new division or line of business).

In the article linked below, I look at each of these questions, identify specific tools that can help answer the questions, and at the end recommend some helpful books.

Read the full article here.

The Venture Mindset by Ilya Strebulaev and Alex Dang teaches nine principles that define the “Venture Mindset” and how even large companies can adopt the principles to achieve disruptive innovation.

I have served as an executive in big companies, attempting to champion disruptive innovations. I have co-founded tech startups that have sought funding from various sources. I have advised venture-backed startups as they ride the roller-coaster highs and lows of market success and funding rounds and tranches. Over the decades I have seen (and at times lived) the truths presented in The Venture Mindset over and over again and yet it has never made as much sense to me as it does now, thanks to the authors of this book. 

In addition to being informative and helpful, Ilya and Alex have written a book that is a joy to read. It combines many of the attributes of my favorite books. It is full of real-world stories that bring the authors’ lessons to life; it is highly structured around nine specific and memorable principles; most of its conclusions are supported by scientific research; and it makes clear recommendations that the target audience could actually implement (although most won’t). 

While many books point out the challenges big companies face in implementing the kind of innovation fostered in venture-backed startups, The Venture Mindset is rare in doing so within the context of explaining how large business practices enable those companies to be very successful in incremental innovation, and how big companies actually offer incredible advantages that no startup could ever match (resources, customers, scale). The book also does a much better job than most of identifying very specific actions big companies could make if they wanted to embrace the venture mindset, and explaining why doing so will be so hard.

The book is structured as an introduction, nine chapters, each on one of the nine principles that make up the venture mindset, and a conclusion.

As many of the other chapters do, the Introduction starts with a story — how a couple of venture capitalists took a risk on an early stage startup called Saasbe. They went against conventional wisdom and even the counsel of the other partners in their firm. Saasbe went on to great success, changing its name to one that all of us have come to know. They put the first $500,000 into a company that, at its peak, was worth $150 billion (and today is worth about $20 billion). They use the story to introduce “nine distinct ways in which the Venture Mindset succeeds where most people fail — or don’t even try.” These nine principles are:

• Home Runs Matter, Strikeouts Don’t
• Get Outside the Four Walls
• Prepare Your Mind
• Say No 100 Times
• Bet on the Jockey
• Agree to Disagree
• Double Down or Quit
• Make the Pie Bigger
• Great Things Take Time

Each of the nine chapters in the book takes one of these principles and fleshes it out. Each chapter includes stories from VCs and the ventures they back, as well as from the authors’ teaching and consulting experiences. Most chapters reference detailed research performed by the authors or others. The authors often point out how the Venture Mindset differs so significantly from how big companies operate. Each chapter also includes a section with specific lessons for big companies and specific actions they could potentially take to embrace the principle covered in the chapter. Each chapter closes with a short list of critical questions leaders should ask to discern how far they are from the venture mindset.

Bottom line, The Venture Mindset is perhaps the best book I’ve read on how a big company can innovate like a tech startup. Readers are given a clear picture, a well-marked path, and realistic expectations if they choose to set out on the journey towards disruptive innovation.

Read my full review here.

Especially as they begin to consider their exit, business owners want to know what their business is worth. For many, the life they have planned for after their exit depends on the funds they can get from selling the business, so they really need to know. The short (but not very helpful) answer is that your business is worth whatever someone is willing to pay for it. The secret to getting a more useful answer to the question is to think like a buyer.

In the article linked below I explain the three broad approaches to valuing a business and how each is calculated:

– Asset Based Valuation

– Cash-flow Based Valuation

– Comparable Business Valuation

I also talk about the three areas business owners can focus to increase the value of their business:

– Business Performance

– Business Risks

– Potential Buyers

Read the full article here, or reach out if this is a topic you want to learn more about.

When Christians face hard decisions, it’s right for us to step back and ask “what would God have me to do in this situation?” In Choose Better, T. David Gordon has compiled into one volume five Biblical models that have emerged over the centuries for answering that question. 

The book is relatively short (123 pages) and has a very simple structure. Chapter 1 introduces the five models. Chapters 2–6 each cover one of the models. The book closes with a brief conclusion. Click the link below to read my full review, but here’s a quick overview of the five models.

The first model (chapter 2) is the Imitation Model. When facing a decision, I should ask which option most allows me to emulate God or to cultivate human traits that reflect His image. 

The second model (chapter 3) is the Law Model. When facing a decision, I should ask of each option whether God, in the Bible, has commanded or prohibited that option.

The third model (chapter 4) is the Wisdom Model. This is perhaps the most nuanced of the models, requiring us to carefully consider the consequences of the decision being made. Does the Bible provide general guidance on this topic? Does how God has made the world align more with one option over others? Can wise human counselors help us with the decision? Can we learn from the past (from history) what would be a better decision? In short, we should apply the sources of Godly wisdom that the Lord has provided in making the decision. 

One of the key takeaways from the Wisdom Model is that often a given option won’t be the best one for everyone. While all of us Christians should be seeking to become more Christlike and increasingly obedient to the same revealed commandments, our differences in gifting, personality, and situation will often result in wisdom pointing us to decisions uniquely suited to each of us.

The fourth model (chapter 5) is the Communion Model. When facing a decision, I should ask of each option whether it enhances or inhibits my communion with God and His people. Will it lead me to spend more or less time in His Word, meditating on His Word, and in prayer? Will it allow me to be more or less actively involved with my church family?

The fifth model (chapter 6) is the Warfare Model. The Bible describes very real (but often invisible) battles between the forces of good and the forces of evil. When facing a decision, I should ask of each option whether it is likely to serve the forces of good or those of evil. I can think of the battle between the flesh and the spirit in my own life, Satan’s attempts to inflict damage in my family/business/church, and broader cultural spiritual battles.

Read the full review here.