September 2022 - MPL Law Firm

Price is What You Pay, Value is What You Get

Hello Everyone:

Inflation is all over the place if you have not noticed. Across the board, everyone is talking about the cost of products and services. If you are a business owner or leader, you may think that any sizable price increase of your product or service will result in lost customers. However, that does not have to be the case.

Price increases are expected right now, but that does not mean that you get into the price gouging game (remember, pigs get fat and hogs get slaughtered). Staying at least on par with market conditions is perfectly acceptable. However, how much should you increase your prices and what should you tell your customers/clients?

Below are some tips that I have found helpful throughout my career:

To see if a price increase is needed, take a look at your competitors and see where you stand versus them.
Review your costs and see how much they have increased. This could be a gauge of the amount you should raise your prices.
Look at your own financials and see where your profit margins stand versus prior periods. Sometimes, your margins have narrowed. A price increase may be needed to get your company back to more normalized levels.
Once you have settled on a price increase, make sure your entire team is notified of the increase and the reasons behind it.
Let your customers/clients know directly and well in advance. A letter or email to clients with a follow up phone call to key customers is recommended.

Clear, concise and timely communication will be the best course of action with your team and your clients when looking to change your pricing.

Below are some additional insights on this commonly misunderstood topic:

Lastly, I will leave you with this thought as you think through your next pricing action:

“Price is what you pay and value is what you get”.

Other items of interest:

Helpful Resource Pages

As always, please don’t hesitate to email myself (jsanders@mpl-law.com), Andy Miller (amiller@mpl-law.com), Christian Miller (cmiller@mpl-law.com), Erik Spurlin (espurlin@mpl-law.com) or anyone in our office with questions or comments.  

Please see all of our prior updates at this link or if you would like to be added to our email list, please click here.

When is the Best Time to Think About Selling….Always!

The number of businesses being bought and sold across the board is robust and likely to remain that way through at least the end of the year and into the early part of 2023. Labor force issues, continued inflation, an unwillingness to go through another systemic shock (i.e. pandemic, financial meltdown or just plain being worn out) and the impact of higher interest rates are all key contributors. However, when you talk to a business owner and ask when they think about selling, typically they don’t have an answer or say that their kids will take over.

In my view the best time to think about selling your business starts when you open the doors and should be a part of your ongoing annual review and strategy. Also, while your kids are a potential acquirer, they should not be your only option. Strategic buyers, existing employees, investors and competitors can all be interested if you offer them something of value.

However, if any of them came knocking on your door and gave you a good offer, could you provide them with the needed due diligence materials in a short amount of time? I argue that many out there could not and if that is the case, you are likely going to lose value on the transaction.

Below are some helpful ongoing maintenance items that any business owner should maintain for when that acquirer comes knocking:

At least three years (Income Statement, Balance Sheet, Cash Flow Statement)
Tax Returns – At least three years;
Real Estate Agreements – leases and amendments;
General Business Agreements – vendor contracts, client contracts, referral contracts;
Company Legal Documents – meeting minutes, by-laws (operating agreements) and amendments, buy-sell agreements, insurance;
Technology Agreements – websites, social media, cyber insurance; and
Employment Agreements – handbook, non-competes, employee contracts, offer letters

All of this may seem like a waste if you are a business owner because there are more important things to focus on like getting the next sale. However, that is a mistake and could cost you in the end. Check out some of the articles below for other helpful hints and the common theme of keeping your “house in order”:

The good news is that you are not alone and help is out there from your professional service providers. Your business accountant, attorney, financial advisor, advisory board or business mentors can all assist with the ongoing maintenance and updating of these business records. It would be a shame to lose out on a potential sale because your records are poor.

A few things that may be of interest:

Helpful Resource Pages

Please see all of our prior updates at this link or if you would like to be added to our email list, please click here.

Managing Organizational Communication

It is hard to believe that it has been 21 years since the tragic events of 9/11. At the time, my wife and I lived in NYC and I was working at my office downtown that awful day. As I watched the second plane hit the South tower from my office window, I can remember my feelings of shock, sadness, fear and ultimately anger as if it were yesterday. One thing that I can tell you is that in the weeks after, everyone, and I mean everyone, in NYC worked together towards a common goal, which was recovery.

Fast forward to today, and we as a nation are moving further away from the COVID crisis. However, this time, that feeling of togetherness and working toward a common goal is not readily apparent. People are significantly divided on issues and seem to be unable to come together to find a resolution. Unfortunately, narratives pushed by media outlets and a seeming inability to find common ground from our political leaders has only served widen this chasm. I don’t recall where I heard it (probably a comedian), but I think the following quote is unfortunately applicable in the current times:

“I respect your opinion as long as you agree with me”

When this type of mentality becomes pervasive in your organization, bad things typically result. It is critical to check in with your team and be open to others’ perspectives. It does not mean you have to agree with them but be respectful and know that you are working towards a common purpose. More importantly, as long as everyone is on board with the direction of the business, the differences will work themselves out. Below are some good communication strategies that successful organizations embrace:

To wrap up, I will share this quote from Henry Ford:

“Coming together is a beginning. Keeping together is progress. Working together is success.”

Helpful Resource Pages

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Happy Labor Day, Good Luck Finding the Labor to Celebrate It

I hope you and your family are enjoying the Labor Day weekend, or the unofficial end to Summer. Coincidentally, we just had the monthly labor report released this past Friday. The numbers indicate a healthy job market, with some signs of slowing. I am not an economist, but typically the employment numbers (specifically the unemployment rate) are known as a “lagging indicator”. Whether that is right or not is a call made by people a lot smarter than me.

What I do know is that bringing on new employees is difficult and made more cumbersome with the continued increase in wages and ever-changing regulatory environment. Employers are looking for ways to meet their staffing needs, while trying to control their expenses. It is important to understand that onboarding 1099 contractors, hourly staff, salary staff and so on each come with specific rules and regulations. If you are over 50 employees, you have a different set of rules from those with less than 50 employees. As an employer, it can be confusing and overwhelming. To shed some light on the situation, below are some helpful articles:

If you need help, I’d recommend reaching out to an HR professional or a Business/Labor Attorney.

A few things that may be of interest:

Liquidity Options for Family Business Owners – Below are two insightful pieces provided by Sean O’Dowd from Silvercrest Asset Management
- The Challenge of Shareholder Liquidity
- Family Business Advisory

Helpful Resource Pages

Please see all of our prior updates at this link or if you would like to be added to our email list, please click here.