WHEN…

Dear EFBC Members,

As my tenure as president of EFBC draws to a close, I find myself reflecting on a simple yet profound word: “When.” Throughout my journey, knowing when to make pivotal decisions has been a gift I’ve been fortunate to possess. It’s about discerning the right moments in life – when to embark on new chapters, when to embrace challenges, and when to graciously step aside.

Reflecting on my journey with EFBC, I am deeply grateful for the opportunities and growth it has afforded me. Joining the EFBC in 2008 was the right “when” for me, followed by my involvement with the Lighthouse Forum in 2014 and later joining the EFBC Board in 2021. Each “when” marked a significant milestone in my personal and professional development.

Serving as vice president in 2022 and then president in 2023 has been a privilege beyond measure. It has been a period of immense learning, growth, and adaptation to the evolving needs of our dynamic community. I am immensely proud of what we have achieved together during my tenure – from launching initiatives to enhance member engagement to overseeing successful events that brought us closer as a community.

Looking ahead, I have full confidence in the leadership of Darrin as the incoming president and the entire board. Their dedication and vision will undoubtedly propel EFBC to new heights, continuing to serve our members with excellence and innovation.

I would like to express my heartfelt thanks to Liz, Danielle, and Cha Mi of the EFBC staff for their unwavering support and dedication. Your hard work behind the scenes does not go unnoticed.

A special thank you to Darrin for your invaluable partnership as vice president and to Andy for your guidance and leadership as past president. Your insights have been instrumental in shaping our organization’s success.

Lastly, I extend my gratitude to the Lighthouse Forum for the inspiration and camaraderie over the years. Together, we have made a difference in the lives of our members and the broader community.

As I transition into the role of past president, I look forward to supporting EFBC in new capacities and witnessing its continued growth and impact.

Please remember to join us for our Summer Golf Social outing & Leadership Award ceremony at Itasca Country Club on August 5th – a wonderful opportunity for networking and celebration.

Thank you all for your support, and dedication to EFBC. It has been an honor and privilege to serve as your president.

Warm regards,

Dave Horvath | EFBC President 2023-2024

Summer Recharge: Strategic Planning for the Second Half Your Business Year

As most, if not all, entrepreneurs know, strategic planning is one of the most important elements of small business success, but that doesn’t mean it is always an easy thing to do. While start-of-year-strategic planning comes at the perfect time, coinciding with the natural lull of the holiday season and other end-of-year festivities, mid-year strategic planning often comes when schedules are at their most hectic and businesses must continue to operate more-or-less as usual. Despite that fact, business coaches and leaders alike say it is important to take a beat during the summer months to reassess, address shortcomings, and strategize about changes that will help you better hit your targets in the second half of the calendar year.

That doesn’t mean, however, that mid-year planning must or even should be as robust as end-of year planning. Especially since it coincides with busy season for many small businesses, mid-year planning should be more of a re-direction than a true interruption. It is a time to address the most important things that can spell the difference between a weak and strong second half of your year, rather than a time to address each and every thing you might want to change.

But what are those “most important things?” Though they vary from business to business, strategists tend to suggest three overarching high-yield aspects that you might want to look at in your business during your mid-year planning session. Those things are:

1. Assessing First Half-Year Performance

Evaluating Key Performance Indicators (KPIs) from the first half of the year is crucial. Key areas to assess include:

• Client Acquisition Cost (CAC): How much are you spending to acquire new customers? And is it working? If your CAC has risen significantly and your costumer spending has remained the same, this might be the first place to make an adjustment.
• Employee Utilization: Measure how effectively your employees are contributing to revenue. If performance metrics are not being met, reassess and make necessary changes.
• Sales Revenue: Compare current sales revenue with the same period last year to determine if you’re on track to meet yearly goals. Make adjustments if sales numbers are below expectations.

2. Financial Planning and Potential Budget Adjustments

After reviewing your KPIs, you may have to adjust your company’s budget for the second half of the year. This is where experts recommend utilizing a CRM or financial tracking software to access economic data in real time, which may allow you to switch to a rolling or monthly budget instead of a yearly or quarterly one if that better suits your needs. Whatever the case, it is important that any budget adjustments match the current realities of your cashflow, rather than the other way around. This may mean having to let go of certain things you had planned at the beginning of the year, and that’s okay. The most important thing is balancing the realities that your KPIs brought to light with the needs of continuing to run and grow your business.

3. A Marketing Strategy Refresh

The thing that is most often overlooked during mid-year planning is marketing, and it really shouldn’t be. Marketing is an area with great potential for optimization, where businesses can significantly improve their efficiency by updating and refining campaigns to ensure they are current, effective, and contributing positively to sales leads. Mid-year is a great time to revisit these numbers and strategize with your marketing department.

Strategic planning is a continuous process. Mid-year planning allows businesses to realign their strategies and make necessary adjustments based on their performance and market conditions. By focusing on key performance indicators, adjusting financial plans, and refreshing marketing strategies, businesses can ensure a robust finish to the year. Engage your team, use strategic tools, and set clear objectives to navigate the second half of the year successfully. The EFBC is here to support you throughout this process.

Which Entrepreneurship through acquisition (ETA) Model is Best Suited to Your Needs and Goals?

Entrepreneurship through acquisition (ETA), or the path to becoming an entrepreneur by buying and growing an established business, is a strategic way to achieve business ownership with relatively less risk. Though any entrepreneurial endeavor is inherently risky, this path takes the stark reality that nearly 50% of start-ups fail and flips it on its head: by purchasing and leveraging a proven business, owners that choose entrepreneurship through acquisition enjoy a nearly 80% success rate.

However, that trade-off does not come without cost, in this case literally. Buying a business can cost 30 to 100 times more than starting a business, and not everyone has the capital to easily become an entrepreneur through acquisition. Fortunately, there are several ways to raise the necessary capital, and each method comes with its own set of pros and cons.

So… future entrepreneurs through acquisition, we’ve put together this mini guide to the most common ETA models. You can use it to figure out which one is best suited to your needs and goals, and hopefully alleviate at bit of the confusion surrounding funding your acquisition:

• The Traditional Search Model

The Traditional Search Model is probably what immediately comes to mind when you think about raising capital for any business venture because it’s a well-established menthod. In the world of ETA, it involves raising funds from an investor to cover search phase expenses as well as a salary for the searcher (you), usually for a period of 24 months. The major “pro” of this model is that it allows entrepreneurs to focus full-time on finding a suitable business to acquire during the search phase. The major drawback is that a business owner will be given a smaller share of the company, as equity is usually spread across the entire investor base. This also means the business owner will likely be beholden to the targets and ideas that their investors have in mind. But that isn’t always a bad thing: spreading an equity net also creates a safety net and support system. As long as your goals are aligned with those of your investors, everyone has a stake in the success of you and your business.

• The Self-Funded Search Model

On the other hand, entrepreneurs that use the Self-Funded Search Model don’t take a salary while searching for an acquisition. Instead, they use their own capital and careful financial planning during the search process. This is the most common search strategy, and it allows a searcher to maintain up to 100% equity in the company they acquire. However, it doesn’t come without risk. Investing ONLY your own capital means the success or failure of the business you acquire rests squarely on your shoulders, and hits only your wallet. This is why many self-funded searchers take on freelance, consulting, or other jobs to support themselves while conducting their searches. This model tends to be better suited to seasoned entrepreneurs: people who have already built networks, might have extra capital to invest, and understand the risks associated with the business they are seeking to acquire. Novice entrepreneurs can attempt this model as well, but it does require careful planning and multitasking.

• The Sponsored Search Fund Model

The Sponsored Search Fund Model involves partnering with an investing firm that provides all the search and acquisition capital for you and your future business. However, this process also involves the investing firm becoming the controlling shareholder of your future business. The major upside of this model is infrastructure: often the investing firm provides administrative support and other resources that a traditional searcher may have a hard time affording on their own. Having a committed fund of capital from a single source also provides a searcher with legitimacy, as well as the ability to check in with their majority stakeholder often (sponsored searchers usually work on site). The downside of this model is that your partner investment firm will own the majority of your company’s equity and have control over your Board of Directors. This means they will have unilateral authority to make strategic decisions, including firing the searcher as CEO. Though the Traditional and Incubated Search Fund models also carry this risk, they offer the possibility of having a more diverse investor base, which may create a more diverse set of perspectives on your board.

• The Incubated Search Fund Model

 Similar to the Sponsored Search Model, The Incubated Search Fund Model provides both infrastructure and the potential for daily interaction between searchers and shareholders. The main difference is that this model focuses solely on search funds, with between three and five entrepreneurs searching from an incubator at the same time. The major “pro” of this model is that the singularity of its focus means that all available resources are geared toward optimizing the search process. Intermediary relationships, as well as recruiting, hiring, and onboarding, are all handled at the fund level. This means that a searcher doesn’t have to focus on anything except sourcing proprietary deal flow and eventually closing a transaction. Another major “pro” to this model is that most managers of incubators have successfully pursued some form of ETA in the past, making them potentially invaluable mentors to emerging searchers. However, having three to five searchers operating out of the same fund at the same time has the potential to foster unhealthy competition. Beyond that, an Incubated Search Fund Model has all the same drawbacks as the Sponsored Search Fund Model because it is also a model that provides just a single source of committed capital.

• The Crowd-Funded Search Model

As the newest form of ETA (emerging in 2016), the Crowd-Funded Search Model is exactly what it sounds like. In this model, the entrepreneur raises capital from crowdfunding sources, usually providing equity in or shares of their business in return. This model can be an effective way to raise capital, and online platforms already exist to assist entrepreneurs interested in crowdfunding. However, terms in this model do change on a deal-to-deal basis, and investors may not have enough equity to feel a strong stake in the success of your business. If you’re looking for a new and exciting way to raise capital, or if your network is full of people who only have a small amount of capital to invest, this model may be worth looking in to.

President’s Letter: Spring Achievements and Summer Excitements

All EFBC Members,

I hope this message finds you well and thriving as we dive into the vibrant energy of June in Chicago, 87° in May ouch. It’s been an exciting journey for EFBC, with April marking significant milestones and May bringing enriching experiences for our community. Let’s take a moment to reflect on our recent accomplishments and look forward to the exciting events lined up for the month ahead.

Highlights from April and May

April was a month of triumphs for EFBC, with the flawless introduction of the Hive Bright App for our members. The launch of this online platform has truly revolutionized the way we connect and engage with one another, with an impressive 64% of our members already signed up. If you haven’t registered yet, we encourage you to do so! For assistance, please reach out to Cha Mi at chami@myefbc.com

Our Spring signature event at Sky on Nine was nothing short of spectacular, featuring keynote speaker Sam Silverstein. Sam’s powerful presentation on “Accountability: The Highest Form of Leadership” left a lasting impact on all who attended. A special thank you to BJ Slater and the programming committee for their dedication in organizing this memorable event.

Upcoming Events: Mark Your Calendars

• Fireside Chat – Member Story – Tuesday, June 11th:

Join us at Medinah Country Club for an intimate Fireside Chat with EFBC member Jim Armbruster of ATMI Precast and Quantum Forum. Led by Strategic Partner George Karavattuveetil, this conversation will delve into Jim’s journey and the invaluable leadership lessons he has learned along the way. Space is limited, so reserve your spot today!

• Government Impact on Family Business – Thursday, June 6th:

Join us for lunch at Gibsons in Oak Brook for insights into the latest developments from Washington, DC and their effects on Family Businesses. A panel of government relations experts will unveil findings from the FEUSA 2024 Annual Family Business Survey, discussing current legislative landscapes and tax policy issues affecting successful families, family offices, and businesses.

• Summer Golf Social and Annual Leadership Award – Monday, August 5th:

Save the date for EFBC’s Summer Golf Social and Annual Leadership Award at Itasca Country Club! Tee off with a shotgun start at 12:30 pm following a delicious lunch at noon. The event will conclude with a buffet dinner and cocktails, providing ample opportunities for networking and celebration.

As we embark on the adventures that only June in Chicago can offer.  Your presence and participation enrich our collective EFBC experience, and we look forward to sharing many more memorable moments together.

Thank you,

Dave Horvath | EFBC President 2023-2024

The Myths, Truths, and Powers of Peer Groups

In his 1937 book about self and business development entitled Think and Grow Rich, Napoleon Hill offers an early description of what business leaders would currently call a peer group. In the book, Hill writes of “two or more people actively engaged in the pursuit of a definite purpose with positive mental attitudes,” and says that this group “constitutes an unbeatable force.”

Since 1937, much has been written about peer groups and how they can help business owners achieve success by providing insight. These groups put business leaders in the room with like-minded individuals, as well as individuals from different industries and those who take drastically different approaches. Some writings about peer groups are useful, but others do miss the point, or spread myths about peer groups that may not be true. By demystifying which pieces of conventional wisdom surrounding peer groups are true and which are myths, we can ensure that business leaders are using this potentially “unbeatable force” to the best of its ability.

Myth: Only those business leaders who are doing something wrong need the advice of a peer group.

The Truth Behind It: Even when things are going well, every business leader stands to benefit from speaking to and learning from other business owners. It’s a good way to keep a pulse on the market and overall economy, as well as to analyze general market wide trends and get advice to help you avoid any stumbling blocks.

Of course, some leaders do have a certain level of clout and experience, and can either employ experts to track market trends, or may already be doing so themselves. But peer groups can have use for those individuals as well. Truth is, running a business is stressful, and leaders often take on more responsibilities than one person should reasonably handle. Peer groups offer leaders a platform to express their thoughts and feelings outside of their organization, providing a neutral space to voice the primary concerns of your business and life balance. It also allows them to get objective feedback and support from people from all walks of life, providing an objective lens into their strengths and weaknesses (everyone has them).

Myth: People who join peer groups do it for opportunistic reasons.

The Truth Behind It: Yes, people do join peer groups with the hope of improving their businesses, but that doesn’t mean they are going to use them as platforms to try and sell their good and services. In fact, many participants in peer groups have stated that the groups are good opportunities to get away from the constant selling they are tasked with in their day-to-day jobs.

The other thing that participants in peer groups have to say on the subject is that the most effective groups are the ones in which members get vulnerable. If members of the groups use them simply as opportunities to sell, network, or build connections, they tend to only present the positives about their businesses. The result is that they fail to get perspective on the issues they came to the peer group to address AND end up leaving with only surface-level connections.

So yes, opportunistic peer groups can be a problem, but a fixable one. If you yourself come to a peer group ready and willing to dive in, be vulnerable, and do the work of actually presenting the challenges you face as a business leader, others will likely follow suit. Then the real work can begin.

Myth: It’s not worth my time to engage in a peer group.

The Truth Behind It: There is some truth behind this myth. Peer groups do take time and intentionality to be effective, and busy business leaders may have to carve time out of already packed schedules to participate. However, it is the opinion of MANY that have participated in peer groups that, when it comes to this tool, “a stitch in time saves nine.” Peer groups can offer solutions and strategies for everything from time management to delegation to life/work balance, and actually might help you save time in the long run. That being said, you may not want to jump into one at your busiest time of year. That is the time to take notes on what is going well for your business when it’s at capacity and what can be improved upon. That way, you can bring those notes into a later peer group to help you solicit solutions and offer advice of your own.

Takeaways: Like anything in business or life, you will get out of a peer group what you put into it. If you show up with a willingness to be vulnerable and spend a little time away from your day-to-day, they can be incredibly effective tools. Participants have cited everything from less stress to innovative practices as things they have gotten out of the process, which has been used over the years by successful business leaders from Andrew Carnegie to many other accomplished professionals.

How EFBC Can Help: If you are looking to join a peer group, look no further than EFBC forums! If you’re not already familiar, our forums allow business leaders to connect once a month in small settings and receive all the benefits associated with any other peer group. And if time is still a concern for you, we offer a flexible option that might work better with your busy schedule. Find out more here: https://myefbc.com/forums/

Building Your Own Network When You’re Part of a Family Business

Is It All Really in the Family?

Family businesses: despite what network and cable television would have us believe, they are not all drama, backstabbing, and fighting for succession. In fact, 87% of all American businesses are family owned or controlled. From local Mom and Pop-style restaurants to multi-billion-dollar companies like Fidelity Investments, there are 32.4 million family-owned businesses in America alone. But when second, third, and fourth generations inherit companies from their parents and grandparents, they often also inherit rolodexes and address books full of their parents’ and grandparents’ business contacts. These contacts are valuable of course, but savvy new owners know that if you are going to grow any business, your network must grow with it. This is why a common question that many inheritors of family businesses find themselves asking is “How do I build my own network within the frame of what previous generations have already established?”

It’s a valid question, and not one with an easy answer. Partially, it does depend on whether a business owner wants to continue to operate their new business in a similar manner to what was done previously, whether they want to move the business in a completely new direction, or whether their plans lie somewhere in between those extremes. Either way, if you find yourself the brand-new owner of your family’s business, here are some things to consider when building your network:

1. Utilize Established Relationships

Begin by exploring the existing network your family has built over the years. This includes relationships with clients, suppliers, and other business contacts. By understanding the history and dynamics of these connections, you can identify areas for growth and potential opportunities for collaboration.

2. Seek Peer Support and Education

Reach out to other business leaders who share your commitment to family values and entrepreneurial success. Join peer groups and forums like the EFBC, where you can learn from others’ experiences and share your own insights. Surrounding yourself with like-minded individuals offers fresh perspectives and strengthens your support system.

3. Leverage Technology and Digital Networking

In today’s digital age, technology has become an invaluable tool for building and expanding networks. Here’re some examples:

• Take advantage of social media platforms: LinkedIn is a great platform to connect with professionals in your industry, join relevant groups, and participate in discussions.
• Email Newsletters: Subscribe to industry-specific newsletters to stay informed and connect with contributors
• Online Communities: Join organizations or associations that offer online community forums where members can discuss challenges and share resources.
• Virtual networking events: Attend webinars and online conferences to meet and engage with peers and industry experts.

4. Seek Mentorship

Mentorship is a powerful resource for personal and professional growth. Look for experienced mentors who can offer guidance, advice, and support as you navigate the complexities of family business ownership. Their insights and perspectives can provide valuable perspective and help you build your network effectively.

5. Give Back to the Community

Of course, giving back to the community is always something that sounds like a great thing to do, but for new business owners, especially those inheriting family businesses, the motives for community outreach can go above and beyond altruism. After all, the community in which you are doing business has supported your family for years, and the members of that community will want to know that you continue to be as invested in them as they are in you. In fact, studies show that 85% of consumers have a more positive image of a company that gives back, and 90% of consumers want to know how a company is engaging with their community. Beyond that, giving back can help build or strengthen partnerships, which only serves to build your family’s network, and by extension, your own.

In conclusion, building your own network within a family business is a dynamic process that requires a strategic approach. By utilizing technology, cultivating relationships, seeking peer support as well as mentorship, and giving back to the community, you can create a strong network that supports your personal and professional growth. Embrace the journey, and make the most of the EFBC community for support and guidance along the way.

Review of Sam Silverstein’s Book “The Accountability Advantage”

by B.J. Slater, Education Director

I looked at the dozen members of my team staring back at me and my mouth dried up. The knot in my stomach reflected that I wasn’t sure what to say at this point, and I suspect the look on my face may have said the same. This was the first staff meeting since we had fired a long-time toxic manager, the first time I had really started to take responsibility for the culture within our family’s fertilizer company, and now everyone was looking to me for leadership. That day I took the first step on a long journey of rebuilding and shaping our culture. The Accountability Advantage by Sam Silverstein makes an excellent guidebook for just such a journey. Sam, a leadership accountability expert, will be the featured guest at EFBCs Spring Signature Event on May 16. EFBC members each received a copy of one of Sam’s ten books. In this article I provide my review of one of them, The Accountability Advantage.

During our company’s culture journey we had wins and setbacks and a lot of trial and error. Slowly but surely positive trends emerged. At the time I didn’t understand exactly which of our efforts were effective and which weren’t. The Accountability Advantage offers an explanation of what worked, why it worked, and how to achieve better results in the future. At the time of that staff meeting those years ago, our family’s business had what Sam refers to as a “culture by default,” as opposed to one by design. The early chapters of The Accountability Advantage, spell out, with blunt honesty, the causes and costs of culture by default. Lack of accountability, specifically in leadership, is the root cause of myriad cultural ills within organizations. This lack of accountability stems from leaders’ fears of doing what they know they should do. I appreciate that throughout the book the author calls for a high degree of honest self-reflection.

I feel this fear in leaders which Sam describes as “misguided” and being, “based on false assumptions,” may be particularly relevant in family business environments. Personally I recall situations I felt compelled to behave according to family expectations or hesitated over concerns of what my father’s opinion might be. There are many situations in which holding ourselves accountable as leaders can be difficult or complicated.

When leaders opine on accountability, their remarks often focus on “holding others accountable.” To achieve Culture by Design, Sam argues, this is the wrong approach. Trying to hold others accountable puts them on the defensive and often backfires. Instead, he presents a compelling case for leaders inspiring accountability in others by first demonstrating it impeccably in themselves. While this may at first sound basic, Sam details ten non-negotiable relational commitments he argues form the foundation of being an accountable leader. These ten commitments make prominent appearances in his other books, and are foundational to his approach. It is by making and reliably keeping these commitments to your team that achieving Culture by Design becomes achievable.

The benefits of achieving such change can be massive. Sam outlines numerous organizational “Pains in the Butt” that can be transformed into competitive advantages by reshaping a culture through accountability. The balance of the book is dedicated to laying out a roadmap for achieving a Culture by Design and the advantages it provides. Sam presents this cultural transformation plan in five steps: defining, modeling, teaching, protecting, and celebrating the culture. This forms a logical and sequential progression that was easy to absorb and understand.

Sam begins the segment on defining the culture with a discussion of values, how to define various types of values, and their roles in organizational culture. This is followed by a practical exercise on how to clearly identify your own personal values. The exercise generates great insights and is well worth the time invested. This section of the book in particular contains exercises and conversations that aren’t meant for the reader alone. The above values exercise is meant to be repeated by everyone on the leadership team followed by discussions to share the results.

Once you and your leadership team are clear on their personal values, Sam advises getting your employees all in the same room and conducting a similar exercise with the group of them to identify your company’s values. How many of your employees, you ask? If you have fewer than 50, Sam argues you should just get every one of them in the same room. Like me, you may have second thoughts on this. How do I know this exercise will work?

Well, to me, this is where The Accountability Advantage became truly valuable. What is described are the very exercises Sam and his team at The Accountability Institute have actually run with companies they worked with. The text presents antidotes to common doubts and concerns as well as practical suggestions for skeptical employees. It also provides examples of cultural values developed by past clients that can serve as a guide.

The book walks through the remaining steps in the process presenting clear direction on how leaders should model the cultural values they and their team created in the prior exercises. Considerable guidance is provided on how to build and maintain accountability as a leader, how to build the courage needed to keep relational commitments, and how to avoid pitfalls and common traps leaders often run into during the early phases of cultural transformation.

In later chapters the focus shifts outward from the leadership team modeling cultural values to leaders communicating and teaching those values to others in the organization. An entire chapter is dedicated to the power of communicating values through story. The text again offers practical easy-to-follow tasks, suggestions for avoiding common issues, and plentiful examples of what other companies have done successfully before.

Having discussed designing and building the culture, Sam turns, necessarily, to protecting the culture. The author discusses dealing with very real situations that might derail your high performance culture whether they be a single person, or a merger with another company and different culture. Hiring and separating with employees is addressed also with plentiful real-world examples.

In the final and shortest step, Celebrating the Culture, Sam shares the vital keys to sustaining culture change by recognizing and celebrating excellence. The author argues this is as much a mindset about people as it is a set of practices. I wish there was more on this section, as I believe there is a lot of truth to the idea that this is a key way in which a high-performance culture is nurtured long-term.

In reading this book, and reflecting on our own journey at Plant Marvel, I gained significant clarity over why our most successful initiatives at developing a high performance culture were so effective. I also, humbly, realize how far we have yet to go – how far I have to go. Perhaps the greatest compliment I can give this book is that I left it with renewed clarity and conviction that I can accomplish the needed tasks. I believe this is a valuable guide full of hard-won wisdom from the trenches of organizations. I look forward to putting it to use. The author closes the book with a call-to-action reminding us that all we have, and all we need to make a difference, is this present moment.

The Accountability Advantage offers a tested road map for achieving positive organizational change by implementing accountability. Far from a passive read, the book is full of practical exercises designed to implement the ideas of the book in an actual organization. This is augmented by the author’s advice and wisdom gained from years of performing this same work with organizations. It presents a very powerful tool for organizational leaders of all types.

I am very excited to have Sam Silverstein keynote EFBC’s Spring Signature Event, Unlocking Potential: The Highest Form of Leadership! I hope that you will join us at 4:30pm on May 16th at Sky on Nine in Rosemont as Sam shares more of his wisdom in a special presentation just for the EFBC community. It will be a night to remember!