GUEST COLUMN: Return to our heritage and manage to freedom

The governor is playing a dangerous game. He assumes the role of health czar. He is managing to safety versus managing to freedom. And that is suffocating the citizens of Colorado. When it comes to the role of public servant, managing to safety is morally inferior to managing to freedom.

Though the COVID-19 death rate for those without a preexisting condition is close to zero, the extended power grab has crimped our freedom rights in three ways. First, managing to safety assumes the government knows best — that it must solve the problem. Managing to safety interferes with your right to manage your own life.

Second, the infrastructure of the manage to safety strategy ignores dissent. In their execution of expansive emergency powers, governors and mayors often disregard challenges to their assumptions. Manage to safety-minded elected officials act more like hypercontrolling guardians of children than public servants. Managing to safety minimizes your right to personal liberty.

Finally, the manage to safety mindset is financially reckless. The rescue plans are testament to the government’s guilt. It interfered with your private property rights, your freedom to assemble, the ability to build your business — and discounted your capacity to mitigate your risks. Ultimately, managing to safety interferes with your right to pursue happiness.

When governing officials overlay a manage to safety grid on their citizens, they presume they alone can de-risk the problem. Over time, their increasingly expansive rules undermine individual dignity.

A manage to freedom approach is superior, not to mention fundamentally American. If the response to the pandemic had been guided by a manage to freedom philosophy, elected officials would have only executed short-term executive powers to fix the supply chain. Recall, that was the original argument in mid-March. We would have quarantined the sick and protected the vulnerable, in keeping with a time-tested approach.

Now to the absurdity of masks. In light of a plethora of data against the efficacy of face masks, our elected officials are obligated to give us the freedom to speak unmuffled. I performed a data dive on the topic reading the test results run by the world’s most respected epidemiologists and related infection control organizations.

Before the COVID-19 era, the tests expose why the CDC and the U.S. surgeon general repeatedly stated with impassioned authority that masks should not be worn by the general public and why masks could increase the risk of contracting the virus. Dating back to 2006, “Face Mask Use and Control of Respiratory Virus” tests reveal that most people touch their masks, seed it with bacteria and render it useless or harmful. A professional medical study in 2012 showed a long-term negative medical effect.

After the CDC’s politically driven change of guidance, the NEJM in April warned, “We know that wearing a mask outside health care facilities offers little, if any, protection…the desire for widespread masking is a reflexive reaction to anxiety.” In their follow-up article July 9, they add that masks are only effective “when circumstances compel them to be within 6 feet of others for sustained periods.” Peer reviewed JAMA states, “there is no evidence to suggest that face masks worn by healthy individuals are effective.” The University of Texas reported in April that “cloth masks are not recommended...moisture retention, reuse and poor filtration may result in increased risk of infection.” In June WHO cautioned, “the widespread use of masks by healthy people in the community setting is not yet supported by high quality or direct scientific evidence and there are potential harms to consider.”

By his words and actions, Gov. Jared Polis doesn’t believe these scientists and calls people who don’t wear their “damn masks” “selfish bastards.” The manage to safety presumption arrogantly trades a false sense of security for a long-term deprivation of our three foundational freedom rights. The manage to freedom mindset promotes safety, but with humility. Government can bridge the gap in an emergency, but when it manages to freedom it deploys its power with restraint.

For the balance of COVID-19 and for the next crisis that raises its ugly head, let’s return to our heritage and manage to freedom. It will be a breath of fresh air.

Barry Farah is a deal adviser and served as CEO of twelve businesses in six sectors, wrote three business books, and ran for governor of Colorado in 2018.

THE PODIUM | Masking freedom, ignoring science

The governor is playing a dangerous game with COVID-19. 

Though some inconclusive studies reflect a potential curbing of COVID transmission with a mask mandate, there is scientific data against the efficacy of masks.  Still, Gov. Polis rejects this science, calling people who don’t wear their “damn masks” “selfish bastards” and imposing a statewide mask mandate.

Study the research before the politics of this pandemic and you find the world’s most respected epidemiologists and infection control organizations widely debunked mask usage among the healthy public. These earlier studies expose why the Centers for Disease Control and the U.S. surgeon general repeatedly stated with impassioned authority that masks should not be worn by the general public, and why masks could actually increase the risk of contracting the virus. 

The CDC’s 2009 report on “Face Mask Use and Control of Respiratory Virus” reveals that most people touch their masks, seed it with bacteria and render it useless or harmful. The World Health Organization asserted that masks for the healthy public have little benefit and can be harmful.  Medical professionals conclude that reusing your mask can  increase the risk of coronavirus infection. 

The CDC says they shifted their position because of the characteristics of COVID-19, yet the science behind the change is not authoritative. Witness that in April, the New England Journal of Medicine warned, “We know that wearing a mask outside health care facilities offers little, if any, protection…the desire for widespread masking is a reflexive reaction to anxiety.” The NEJM is concerned that “focusing on universal masking alone may, paradoxically, lead to more transmission of COVID-19...”  Washing hands and social distancing are more effective.

Even after pressure to change their tune, a NEJM follow-up article on July 9 concluded that the proper use of masks are only effective for people “when cirumstances compel them to be within six feet of others for sustained periods” — not in passing at COSTCO.

In the WHO’s June 5 white paper on the topic they declare that, “the widespread use of masks by healthy people in the community setting is not yet supported by high quality or direct scientific evidence and there are potential benefits and harms to consider.” Extensively peer reviewed Journal of American Medical Association states, “there is no evidence to suggest that face masks worn by healthy individuals are effective.” 

Regardless of your opinion, the governor should not be your health guide. The original argument for emergency powers, fixing the supply chain, has been solved. A public servant should not continue to use those powers to violate your personal boundary and tell you what to do with your body.

Nor tell you what to think. You may think the national focus on cases creates unnecessary anxiety. The CDC suggests that actual case numbers are up to 10 times higher than reported. Rather than be alarmed, you realize this results in a potential case fatality rate that is 90% lower than reported. And given that the recovery rate for those without pre-existing conditions is over 99%, you might think that a better approach is to mitigate the risk for yourself, while encouraging the quarantine of the sick and the protection of the vulnerable.  

The problem is that the governor assumes he knows what is best for you. You may wish to wear a mask and you may have the discipline to not touch it or adjust it and you may replace it frequently. Or, you may believe it is less risky to not wear one. You can solve a personal health problem without the governor’s help. His overreach undermines not only your individual liberty, but your dignity. 

Yet, the governor presumes he is the boss of you. That is dangerous because it coerces mass submission and trades a false sense of security for a long-term deprivation of your foundational freedom rights. 

A better way to govern is with humility. He should fix the roads and protect innocent people from violent intruders. He should defend the Colorado way: the right to enjoy life without undo interference, the right to relish liberty without fear and the right to pursue dreams without disruption.  

For the balance of COVID-19 let’s return to our heritage and allow people to manage themselves. It would be a breath of fresh air. 

Barry Farah ran for governor of Colorado in 2018. He is a deal adviser; served as a CEO in six economic sectors, and has authored three books on business.

The EXIT! Building, Buying, Running and Selling Companies – Part Four

I have had the opportunity to build businesses from scratch, buy existing businesses, run them and sell them. This is the final blog in our four-part series. Here, we will take a quick look at the exit – selling a business.

Selling a Business creds. I sold my national business-to-business service to four different buyers over a ten-year period, including the first location to a publicly traded company. I sold my satellite and radar systems defense related software engineering business to a Maryland contractor that manages NASA’s Hubble Telescope. I sold the extended stay lodge to a national private equity firm. I sold my technology firm which specializes in Migration to Cloud, Big Data, Data Analytics, and Data Modernization Competencies to my Capital Partner. I sold our IT staffing firm to my Capital Partner. Including deals not mentioned here, I managed the investment banking role on businesses I built of eleven separate exits, nine of which were seven or eight figures.

Congrats if you are planning to exit! It is an exciting time. Here are three of the many lessons I’ve learned in selling companies:

1.      Perform prospective Buyer due diligence before signing anything. I sold the Michigan office of my Professional Employer Organization to a NASDAQ company when the market for that type of business was hot. A year later, a large competitor from the East Coast wanted to buy the remainder of the company’s offices. I signed an LOI with the business that contained explicit non-binding language, allowing either party to terminate without cause. I did some due diligence on the company and decided not to sell to that prospective buyer, so I terminated the LOI. He sued me. We countered for tortious interference since we quickly found another bone fide buyer. He tied up the company, causing us to miss the wave of high valuations. In the end, I won a multi-million-dollar judgement at trial. He appealed. I won again on all counts including interest. Sounds good, right? But it took seven years of cash, focus and energy. Even after the New York bond company grudgingly paid us the $5.5mm judgment, I lost millions compared to selling at peak.

Those experiences are hard to predict, but whether it is a piece of property or a business, beware of those who use litigation as a tool to attempt to bully sellers. In the real estate sector, there are bad actors that have used the lis pendens concept to tie up property with little risk. They entice you to sign something and then use litigation as a tool to try to keep others from buying from you. Under pressure, often the seller will relinquish the property at a lower price versus defeat the frivolous litigation. In my case, the prospective buyer was using the LOI in this manner, even though it explicitly gave both parties a walk away with no obligation.

Though this prospective buyer had no case, he thought I would eventually cave.  After seven years in the courts, it probably cost him nearly $10mm, including legal fees. Regardless, don’t get too excited when you have a buyer come in quickly and give you what appears to be an attractive LOI.  First, conduct “prospective buyer due diligence” before you sign a term sheet or a letter of interest or letter of intent. To the extent possible, consider the following:

a.      Is too much of the value tied to the future performance of the prospective Buyer?

b.      Is the prospective Buyer financially capable of making the acquisition, or are they using your platform to raise money after you sign the LOI?

c.      Is the prospective Buyer a good actor; a company or individual with integrity and a reputation for fulfilling requirements in a reasonable manner?

d.      Is the prospective Buyer sue-happy? Do a quick Nexus search to uncover if he initiates law suits as a tool to try to get his way.

2.      Add some independent directors, or at least do some of what they would do for you if you did. Most entrepreneurs place family members and friends on their board. Independent directors who have industry wisdom and value chain skill can enhance your exit price. Here are a couple things that you can do through closing to gain that benefit:

a.      Run past the finish line. While in the selling process, continue to focus on increasing sales and making smart decisions for marketing related expenses. The Buyer’s due diligence team will likely uncover any attempts at masking performance. They are looking for upside. They want to find some value that reflects some ROI on the other side of closing. They will be looking at sales pipeline, service delivery capacity, synergies, rollup efficiencies and client concentration.

b.      Reduce risk for the Buyer. Continue to operate the business with a strong sense of protecting the asset. Make good decisions on litigation issues, as if you were keeping the company for the long term. Terminate problem employees before closing. Close the underperforming office. Leave as little to the Buyer to clean up or fix up as possible. In terms of risk mitigation, expect them to have sophisticated due diligence capabilities and tools to unearth anything you tried to hide. The less they have to fix post-closing, the higher your price.

3.      Deliver a great culture. A great culture helps with the HR checklist on talent acquisition and retention and can increase the company value by up to 15%. A great culture helps with the SWOT analysis. A great culture reduces the pressure from the Buyer’s management team during transition. When you are in the process of selling your business, you might think you are in some way “defrauding” your team to have inspiring culture meetings. That is not the case – an uplifting work environment is a good thing regardless of your personal exit plans. And, the reality is that you are staying engaged to take great care of your employees so they will take great care of the customers to protect the company as an asset. This provides the Buyer with an easier transition.  

If you are in the process of exiting, I hope these thoughts are helpful to you. And, I hope your business flourishes whether you are building it from scratch, buying a company, running a company or selling one.

Building, Buying, Running and Selling Companies – Part Three

I have had the opportunity to build businesses from scratch, buy existing businesses, run them and sell them. I thought I would share a couple things I’ve learned along the way. Here, we will take a quick look at running a business.

Running a Business creds: I was CEO of a national business-to-business service for more than twenty years. Concurrently, I was the executive Chairman of a defense software engineering business, which upgraded NORAD’s satellite and radar systems for twelve years. I ran an extended stay hospitality business for five years and parallel to the above ran an executive suites business for eighteen years. I ran a digital transformation consulting and IT Staffing business for four years

Our businesses served well-known brands including Goldman Sachs, American Airlines, MIT, TD Bank, Boeing, GEICO, Neiman Marcus and the United States Air Force. We provided investors with double digit returns most of the time, with the best yielding $15mm for every $300k invested – over a twelve-year period that was solid triple digit territory.

As CEO in a total of six different sectors over nearly three decades, I learned that the job can be simplified in two primary audiences and four responsibilities.

First, you serve your external stakeholders. And, to your external stakeholders you have two primary responsibilities:

1.      You are the investor. You deploy capital to increase value. You are “el jefe” of capital allocation strategy, and that is your external lever to increase long-term business value. For me, that includes driving the company’s capital allocation objectives of improving free cash flow and investing in projects and acquisitions with likely returns above the cost of equity and debt. That factors in the hurdle of reasonable estimations of market risk. Whether you are expanding an office or buying another business the hurdle rate needs to be reasonably likely. For example, if your business is ready to add an office do you increase the size of your Miami office or establish a new one in Fort Lauderdale? The prestige of having multiple offices sometimes clouds the capital allocation strategy question. Here is a simplified approach to weigh the decision.

a.      Analyze the total cost of increasing Miami’s footprint and compare that to the total cost of adding a new location in Fort Lauderdale. Include all leasing, tenant finish, likely delays, travel from top executives and financing costs. If we need to raise the increased cost of the expansion with debt does that clip our wings in other more profitable ventures?

b.      What is the hurdle rate (ROI of the investment) of the new Ft Lauderdale office? In other words, how much higher of a return does the more expensive (risky) option need to be to take it on? Establish before the next step.

c.      What is the likelihood that sales will increase as we expect? What happens if we are wrong?

d.      Is the projected higher return enough in percentage terms and in aggregate dollars to compensate for the increased risk and uncertainty?

e.      Calculate a return on both investments.

If the return for the Ft Lauderdale option is above your hurdle rate move forward with the expansion – if not, just increase Miami’s footprint.

2.      You are the customer loyalty strategist. Your COO will pull it off, but you set the strategy. If you don’t have a good customer experience strategy that you like, consider the five steps outlined in my book The Magic Wand, summarized here:

a.      Develop and deploy an objective, measurable Customer Experience (CX) vision.

b.      Understand each step and touchpoint in the customer’s path and how the customer feels about it.

c.      Reorganize all customer touchpoints to create a better, more real-time dialogue with them that solicits from them the kind of interactions that deepen loyalty.

d.      Recognize and reward CX knowledge throughout the company.

e.      Communicate and measure CX everywhere—from top to bottom.

These steps are achievable by deliberately asking empowering questions.

Second, you serve your internal stakeholders. And, to your internal stakeholders you have two primary responsibilities:

1.      Build an exceptional company culture. Use some rendition of the three cultural pillars of Integrity, Innovation, and Invitation. This helps create a talent arbitrage environment. I was able to attract world-class talent with little more to offer than championing the Customer Success mindset. For a quick read on the details of this culture see my book Go Ahead! Unleash a Contagious Customer Success Culture.

a.      Build a proactive customer success environment built on rock solid principles.

b.      Hire exceptional people with a customer success bent.

c.      Train your team to sell with integrity, negotiate with value and serve with excellence.

2.      Align your team to increase business value. This includes establishing the strategy for a map of all touchpoints that crystalizes every team member’s OKRs (Objectives and Key Results or whatever metric you prefer). Peter Drucker’s management by objectives is the forerunner to this structure, but I like OKRs because of their simplicity and power. Complex performance management systems have the tendency to become cumbersome over time. The tool of OKRs is a reliable way to encourage the team to stretch in their efforts with energy and passion. And, as long as the CEO is leading the way, the results should yield outsized performance.

The final part in this building from scratch, buying, running and selling series is the exit – selling the business.