The Latest CEO ‘Rule of Thumb:’ Slow Down

In 1990 in his new book Mind Sights, Stanford professor Roger Shepard first introduced this image and called it, Turning the Tables. Shepard was fascinated by why humans perceive the same objects differently simply based upon their physical orientation to us. He argued the reason the average human brain thinks they see different sized tables in these images is because as humans we tend to “generalize” our understanding of what’s in front of us from past experiences. It’s the way our evolutionary brains seem to work. And that was our advantage back in the day when we were being chased across the great savannas by large ravenous beasts looking for a meal. But in modern times, the same skill-set can have far less successful ramifications.

A faulty generalization for example is a conclusion based on limited sample size. For example, let’s say you go to Vegas and bet on lucky 7 at the roulette table, they spin and you win $10,000. Chances are good that given that single victory you will immediately generalize that your lucky streak has arrived and bet again. To Shepard over time these innate human behaviors “have become so deeply internalized, implicit, and automatic in their operation as to be largely inaccessible to our conscious awareness.” In other words, humans simply can’t walk away from the table, and as a result over time develop dozens of unhealthy biases to support our knack for creating generalizations.

Decision Biases in Business

In his widely popular 2011 book Thinking, Fast & Slow, author Daniel Kahneman (notable decision theory expert) linked our tendency to generalize with the concept of Heuristics in decision-making. Heuristics are like rules of thumb we humans learn and use over time as short-cuts to making quick decisions and moving on. Learning and teaching these heuristic (rules of thumb) especially from elders and leaders undoubtedly enabled humans to survive and thrive because they helped us identify a safer way to live such as which plants to use as medicine, or when and where to hunt for food, build temporary shelters, and anticipate weather patterns and seasons. But while many Heuristics can prevent calamity others, which accumulate in our psyche over time as these authors suggest, become biases, and it’s these deeply rooted biases that can cause great harm when making key business decisions.

Perhaps the most damaging of all biases is not what you might first think, it’s not race, religion, gender, or social status that tops the deadly list, it’s actually “Overconfidence,” aka executive hubris. And in business and life we see it everywhere because it’s synonymous to being a “risk-taker,” a person who takes a chance that the expected outcome they perceive will occur is greater than any other. But that’s not all. Coupled with that overconfidence bias is “speed.” Speed alone is not a bias, but when combined with overconfidence it’s like mixing drinking and driving making fast decisions particularly damaging or even deadly. And as humans no matter how many thousands of years have passed, we can’t seem to turn it off.

For example, on January 27th 1986, the night before the Space Shuttle Challenger was scheduled to launch from the Kennedy Space Center in Florida, the temperature out at launchpad 39A was unusually cold that morning, below freezing for the first time in a long time. Still, under pressure from NASA to keep the program on schedule the contractor who built the solid rocket boosters, Morton Thiokol, proclaimed their rockets could handle the freeze as senior program managers gave NASA the green light. The hubris had come from the simple idea that no other rocket had failed to launch in the cold weather before. Consequential, neither would this one the executives told NASA. That overconfidence, which killed seven astronauts is “the mother of all biases” according to Max Bazerman & Don Moore authors of Judgement in Managerial Decision Making (2013) and is responsible for much of the world’s worst human-driven preventable disasters whose rival is only that of mother nature herself.

The same can happen in mergers & acquisitions, which are notorious for not working out as intended. And it was hubris and overconfidence that were center stage when in January 2000 CEOs Gerry Levin of Time Warner and Steve Case of then giant online access provider AOL decided to merge. AOL actually acquired TW using its overvalued stock at the time. The deal was estimated at $165 billion, still among the largest ever. But only a few short months later as the dot-com boom collapsed, so did the hubris and confidence at which time AOL was forced to write-off $99 billion of the deal value the following year which in turn helped to collapse AOL’s market valuation from $225 Billion to $20 billion, essentially laying off hundreds of workers and wiping out 90% of the company’s market value. It remains among the leading M&A disaster case studies of all time.

I use these two extreme examples to showcase that there is no size limit to how deadly the impact that overconfidence can have. Small companies are equally at risk as large ones whose CEOs jump to conclusions heuristically believing their own personal insights and successful tract records will never lead them astray on their road to Vegas. And they may be right most of the time, but when they are wrong, the fallout can put everything on the line. So how do we attack this problem?

How to Overcome your Biases

According to Kahneman, the best way to avoid making a bad decision that might be driven by one or more of your personal biases as a leader is to block your biases at the outset. The way to do that is to “recognize the signs that you are in a cognitive minefield, slow down, and ask for reinforcement,” which simply means to step back and give your biases a chance to reveal themselves and their prospective positions and impact on your decisions. This is the concept behind Kahneman’s thinking fast vs slow. Thinking fast is how we all got here, but thinking slow is how we make the most of it better, not the other way around.

It is believed by many in retrospect that had history’s most eventful decision-makers understood this deep human flaw and taken measures to step back from their heuristic biases and generalizations beforehand, dozens of history’s most bias-driven damaging decisions could have been avoided. And for most of us having that ability to step back and pre-judge our decisions objectively might help us avoid pulling the trigger at the wrong time, and in turn suffering the consequences we never expected.

Make sense?


About the author: Rick Andrade is a Food Industry investment banker at Janas Associates in Pasadena, where he helps Food CEOs buy, sell and finance middle market companies. Rick earned his BA and MBA from UCLA along with his Series 7, 63 & 79 FINRA securities licenses. He is also a CA Real Estate Broker, a volunteer SBA/SCORE instructor, and blogs at on issues important to middle market business owners. He can be reached at Please note this article is for informational purposes only and should not be considered in any way an offer to buy or sell a security. Securities are offered through JCC Advisors, Member FINRA/SIPC. 


The Future of Employee Engagement in Food

As published by Rick Andrade: Food Industry Executive Magazine

It’s mid-year 2019 and the U.S. unemployment rate is at a record low of 3.7%, the lowest in 50 years. And the food industry, which employs more than 20 million workers, is struggling to keep them. While a tight labor market is great news for job seekers, it is tough finding and keeping food workers happy these days. To make matters worse, as wages rise, employees are increasingly tempted to jump ship to a competitor. But a higher wage isn’t always the number one reason staffers make the switch. Often the jump will stem from culture clashes and, more notoriously, a company’s management team’s failure to properly recognize the delicate balance between an employee’s perception of their individual contributions to the company and their weaknesses as perceived by their managers.

According to researchers, when an employee’s performance is out of step with their employer’s expectations, the misalignment at some point compels a change. Either the employee improves or is asked to find another job. And it doesn’t take much to create a ticking time bomb either. For example, in many cases, a quick review of a company’s mismatches can be found on the website, where former employees can rate their former employers and voice their experiences, good and bad, and their reasons for switching jobs. A common negative refrain emerges, wherein former staffers argue their case for why they were not appreciated as expected and why they were not promoted. “It’s management’s fault,” they say. True or false, in today’s labor market, business leaders can’t afford to second guess even the slightest of potential HR issues. Rather, they should be looking closely at how to prevent turnover and unhappy staffers and drilling down to the root causes of the problem.

Not surprisingly perhaps, the number one gripe in my experience over the last 10 years in the food industry from former employees is not low wages. It’s getting proper feedback. It sounds easy enough, but according to recent studies, trying to implement a robust and effective employee feedback system into an effective “employee engagement” program takes trial and error to perfect. Each company and culture is unique, and a one-size system does not fit all. Still, if your employee engagement program needs a tune-up, here’s the latest on what works and what doesn’t.

The problem with negative feedback

In early August 1943, General George S. Patton, commander of the U.S. Army forces in Sicily, visited the 93rd Evacuation Hospital tent to check on his wounded soldiers. The fighting was tough and the injuries severe. There, he encountered Private Paul Bennet, age 21, shaking nervously. “It’s my nerves,” he told the general when asked. At that moment, history recorded perhaps the most notorious example of negative employee feedback. Sickened by his sense of cowardly injustice, Patton slapped the young private across his neck with his glove and screamed at him, “Your nerves, hell. You are just a Goddamned coward, you yellow son of a bitch.” And with that, the boy sobbed as doctors and nurses looked upon the scene in horror. Needless to say, this example of feedback was not an effective approach, and Patton was later severely reprimanded by Gen. Eisenhower and forced to make a public apology for his actions.

I cite this infamous example as the extreme case for using “negative feedback” to improve a subordinate’s performance because it’s easy to see why the approach does more damage than good. Today, with the exception of military-style training, negative feedback is the least attractive way to improve performance.

The positive approach

In a recent Harvard study, researchers Francesca Gino and Bradley Staats concluded that company culture also takes a hit from negative feedback reviews. Their study asked participants to write a short story, after which they partnered with a researcher who gave them feedback. “People who received negative feedback, we found, were far more likely to seek a new partner for their next task than those who received confirming feedback. People who received criticism from peers looked for new relationships.” It’s a kill-the-messenger response. It turns out that if an employee does not feel their employer values their work overall, negative feedback in any particular area will seem harsh and unjustified, and will cause them to seek other employment at first chance. To stem a negative tide, however, business leaders will have to walk a fine line to get the highest production from their troops.

In May 2019, I wrote an article: Want to Save Your Company? Just Say No – CEOWorld Magazine. In it, I focused on the downside of becoming a “yes-man” organization, wherein managers and staffers never hear “no” for an answer. I argue that a yes-man culture that eliminates critical feedback damages an organization’s ability to take on more risk, the kind that produces new products, new markets, new sources of revenue, and, yes, failure. In my view, corporate culture needs an effective balance of give-and-take to survive in the long run. Researchers, on the other hand, say that we can have it both ways: a softer, gentler, more positive-thinking peer-to-peer company culture that avoids the ill effects of negative feedback and succeeds.

In a Fortune Magazine interview earlier this year, CEO of Mondelez Dirk Van Der Put divulged his formula for the company’s recent success: “I need to take away any barriers so employees can move fast. I need to take away blaming or fear of failure or not accepting being different… then it’s up to the people.”

The reason negative feedback causes such a reaction, researchers argue, is notably because the recipient takes away a negative self-impression from the experience, resulting in a damaging blow to their developmental self-confidence going forward. In the military, this may be overlooked. But in business, the troops tend to quit as a result and look for a new commander with a softer touch. So, how do we fix this?

Linking feedback to culture

Many new hires will quickly recognize how peers get promoted. They will learn if their company has an “HP way” (or not). Coined by the founders of Hewlett Packard back in the 1970s, which was way ahead of its time, the “HP way” was fundamentally focused on a more holistic approach to their employees’ motivation to work, which included children’s scholarships, stock options, and profit-sharing incentives, to name a few. And it worked. But incentives today need to go even deeper and wider into employee engagement to be as effective. Employees need annalmost cult-like emotional buy-in to stay and thrive, and while not all companies are as adaptable, many are learning fast.

Food companies that made the top best places to work recently include Wegmans, Publix, and The Cheesecake Factory, according to Fortune’s top list for Millennials, and In-N-Out Burger on’s top list.

According to GlassDoor’s annual 2019 Best Places to Work as rated by employee surveys, linking culture and feedback works best when everyone sees the same goal as reachable and personal. And the results speak for themselves. Top employee engagement companies, according to the survey, had four pillars of success in common:

  1. A mission to believe in: A motivating mission that inspires quality work. Employees have a sense of purpose and understand the impact they make.
  2. A strong culture: A clearly defined and shared set of values that fosters community. Engaged leaders see positive culture as part of a good business strategy.
  3. People-focused: Employees are engaged and empowered to do their best work. Emphasis on employee growth and development.
  4. Transparency: Open and clear communication, from the top down. Honest feedback is valued and encouraged.


Look familiar? Still, the food business has a long way to go. A look at LinkedIn’s 2018 Best Places to Work shows only two of 50 that made the list, Starbucks and PepsiCo.

Developing an effective employee engagement program

In June 2019 at their annual HR conference, the Society for Human Resource Management (SHRM), the world’s largest HR membership organization, showcased a workshop by Brad Karsh, wherein he advocated for companies to create a culture of continuous feedback on an ongoing basis.

Normally, most companies provide for an annual performance review looking back over the year and measuring performance against targets achieved or missed. The trouble here, as Karsh points out, is the changing composition of a younger workforce, and, in particular, meeting the expectations of the 80 million-strong Millennial generation looking for a faster, more personalized way to gauge and engage their individual performance. And the best and fastest tool to get you there, especially if you’re starting over or need a serious makeover of your existing employee engagement program, is new software.

Among the list of leaders in the growing “employee engagement” arena is With the help of Deloitte Consulting, OfficeVibe developed a program that provides input from regular employee surveys, and then groups their responses into performance scores. This is essentially a modern digital version of a 360-degree review, whereby all worker performance is evaluated by other workers and management. Performance scores are developed and linked to agreed-upon targets, such as an increase in the number of happy customer comments or a reduction in the number of unit production errors, etc. This approach is like having a live GlassDoor or Twitter comments exchange for employees to reach out and help each other succeed and to vent anonymously about anything that bothers them, from boring meetings to helpful tips on improving a new production line. Managers can then anticipate a problem or shortfall beforehand, which is not a common benefit found in the old-school annual review feedback method.


If there’s one thing most common in business, it is that nothing stays the same for long. And that includes the nature and nurture of your workforce. What’s clear today is that, while nobody likes to hear bad news, most younger workers are not comfortable with negative review feedback that is not couched in a positive way that values and warmly appreciates each worker’s positive overall contribution to the mission of the company. Annual reviews that include negative feedback remarks are rapidly falling away as Millennials prefer affirmative guidance more from employers today. The consequences of failing to adapt to this culture shift are a higher employee turnover rate and a potential loss of key talent, which is harder to replace in a tight labor market.

So, if you find yourself somewhere behind the curve on creating a modern feedback and positive employee engagement work culture, I suggest you take a minute and ask your HR executive for a best practice review, and then act quickly. Giving no action on an old-school annual review feedback program that still includes negative feedback comments as the “stick” with no “carrot” component is a company killer. In other words, as Ric Alvarez, CEO of Richelieu Foods, puts it, “If you don’t have anything nice to say, keep it to yourself.”

Make sense?


About the author: Rick Andrade is a food industry investment banker at Janas Associates in Pasadena, where he helps food CEOs buy, sell, and finance middle-market companies. Rick earned his BA and MBA from UCLA, along with his Series 7, 63, & 79 FINRA securities licenses. He is also a CA Real Estate Broker, a volunteer SBA/SCORE instructor, and blogs at on issues important to middle-market business owners. He can be reached at Please note this article is for informational purposes only and should not be considered in any way an offer to buy or sell a security. Securities are offered through JCC Advisors, Member FINRA/SIPC. 

Want to Save Your Company? Just Say “No”

It wasn’t always this way, was it?

In 1982 First Lady Nancy Reagan famously coined and branded the phrase ‘Just say No,’ which was meant for children tempted by drug use in their lives. It was notably simple, and it worked for a while.  But somewhere along the nearly 40-year path since, “Just Say No” became “Just Say Yes,” and from my standpoint it’s not been a perfect panacea for business owners personally or professionally either.

It’s undeniable, we have become a “Yes” culture in America. In fact, Amazon lists more than 50,000 books on the subject of saying “Yes”, or getting to yes, or convincing people that “No” really means “Yes.” There’s even a cable show called Yes to the Dress. But why the growing abundance of “Yessers,” and all the “Yessing?” Does saying “Yes” all the time make your life or business better? What actually does saying “Yes” all the time get you?

Pouring through the research it appears that saying “Yes” frees you from the emotional reaction of saying “No” to someone, and hurting their feelings, or disagreeing with them, and making it look like you’re not on-board with the team, or not being fair. According to a recent Frontiers in Human Neuroscience study too much agreement, however, creates a culture of “conflict avoidance,” which in abundance is diminishing our objective critical thinking, over-whelming our busy lives, and weakening the impact of our authority.

As a CEO advisor these days I see a lot of Yessers. Each, like me, wanting to be liked and responsively amicable. Sometimes it’s straight-forward, other times it’s implied. As if being positive at every chance will make it so. But while “Yes” makes employees happy, what about the rest? Think about your business, your daily life. How many times a day do you say “Yes” in some way or another? Have you noticed the cumulative effect?

In business it’s “Yes” to every employee, customer, supplier, visitor, yes to your lawyer, yes to your banker, yes to lunch, yes to anyone looking for it – yes, yes, yes. Now add your home-life where it’s yes to your Mom & Dad, yes to the kids, yes to the dog, yes to your in-laws, yes to your dentist, yes to your boss and your wife if they are not one in the same, yes to your barrister at Star Bucks, yes to buying groceries and gas every Saturday, yes to re-painting the garage, yes to fixing the backyard pergola, which has seen better days, yes to the birds screeching when you let the feeder run low, yes to paying the bills on time, yes to the dry cleaner who always says “Yes” after every word you say, yes to your neighbors who park where they don’t belong, yes to every holiday, every office party, every birthday and every social gathering, and of course it’s yes to helping every friend and stranger who asks day or night– Am I  right?

The Hidden Trouble with “Yes”

The trouble with saying “Yes” too much, which is to be excessively affirmative, is packed with hidden risk and exposure to other things which few likeable leaders seem to consider beforehand:

  • YES requires an allocation of resources, including time & money
  • YES is making an open commitment or obligation to someone or something
  • YES implies a certain level of risk you must bear personally & professionally
  • YES puts your reputation on the line, or in someone else’s hands
  • YES creates a company culture devoid of constructive critics

As a CEO, “Yes” should mean that you’ve already considered these, and all the other ramifications, risks & consequences, and agreed to them. But is that really true? Or are you saying “Yes” most of the time because it’s easy, and what you think everybody wants to hear from an approachable visionary leader?

In his article in Harvard Business Review: The Problem with Being Too Nice Michael Fertik offers a warning, “Nice is only good when it’s coupled with a rational perspective and the ability to make difficult choices.”

Too much “Yes”, and its hidden consequences, is therefore creating countless company cultures of affirmative risk-avoidance, and exposing you and your company to the negative effects of a fear-driven company culture that can’t say “No” to anything. And when that transformation is complete, precipitously bad and costly business decisions are not far behind.

The Path to “Less Yes”

The path to less “Yes” is to Just Say “No.” And by that, I mean to skip the trigger-finger temptation to use ‘being agreeable’ as your default communication method. My advice is to cut back on your exposure to Yesses each week. Easiest way is to reduce the number of staffers that report directly to you. Less direct-reports means less fire-fighting the little things and more delegating them. For upper management exchanges, try to be more like a friendly skeptic, like a doctor or advisor: a quick decision-maker who also has a contemplative restraint.

Nonetheless, having less direct reports and fire-fighting distractions will help you regain the real meaning and true value of saying “Yes” and reserving it for customers, and bigger issues with higher impact outcomes, Killer Decisions I call them. And be sure to use a decision-making tool for those, such as a Decision Ring that can help separate and weigh the options widely and evenly, not compulsively or emotionally.

Finally, if an idea to implement a lesser Yesser program sounds super amazing to you, then I invite you to join my new Just Say No – Practice & Training Club, wherein members can rediscover the meanings of “Yes” and “No.“ Upon graduation, on the one hand I expect you’ll be just as likeable if a bit less agreeable, but on the other hand pleasantly more able to identify and dispatch with the little Yesses and focus on the bigger ones. And when you do that, your new army of ninja skeptics may one day save your company, and make you a happier, healthier, and even more successful leader.

Make sense?

Go ahead, just say it… 😊



About the author: Rick Andrade is an investment banker at Janas Associates in Pasadena, Ca and a finance writer in Los Angeles helping CEOs buy, sell and finance middle market companies. Rick earned his BA and MBA from UCLA along with his Series 7, 63 & 79 FINRA securities licenses. He is also a CA Real Estate Broker, a volunteer SBA/SCORE instructor, and blogs at on issues important to middle market business owners. He can be reached at Please note this article is for informational purposes only and should not be considered in any way an offer to buy or sell a security. Securities are offered through JCC Advisors, Member FINRA/SIPC

Government Resources for Small Business CEOs

As a proud member of the Small Business Administration’s SCORE volunteer group and as a working financial industry professional, I can’t say enough about the collection of individual talent and commitment SCORE has grown to become over the last decades. SCORE has become the go-to resource for all business, not just start-ups, and small business, all business. No matter how big or how widespread a company becomes the fundamental rules and guidelines are still precedent in the minds of successful CEOs.

And as we look forward to the balance of 2019 the economic outlook seems to favor a moderate economic growth trajectory with a 3.7% unemployment rate and low inflation. On Main Street that translates all into “good for business.” And with that SCORE and other US.GOV and .Org group advice from thousands of contributors can help most. Below is a list of links I want to share. These run the expanse from A-Z in business, all FREE courtesy of your tax dollars and the contribution and lessons from thousands of former and current business executives.



Want to Learn the Best Way to Increase Sales this Year? Let’s ‘Chat…’

Over the last few decades CRM (Customer Relationship Mgmt) software has evolved from basic call-centers and contact trackers to a vastly more expansive suite of customer-engaging capabilities. Moreover, as the cost of acquiring new customers continues to rise, new lower-cost-to-implement technologies like online ‘Chat’ are leading the way to help turn your website ‘looky-loos’ into solid sales leads.

According to one lead- management vendor expert, Chatbots (short for Chat robots) are at the front lines in the battle for first contact messaging software dominance, and it’s just beginning.  Why? Everyone knows you have but one chance to make a good first impression. Today they say, “a gap still exists between a well-designed website and human connection” that’s needed to engage new customers when they first appear on your landing page online. Moreover, adds an analyst at Gartner research firm: “Conversational marketing will be a recognized channel of B2B and B2C customer engagement and revenue by 2020, displacing a combination of marketing, sales and service activities.” So, does your company need an online ‘first contact’ Chat feature?

What is on-line Chat and Why is it Important for business?

Ever go to a website using your desktop or mobile phone and notice a small (often oval shaped) CHAT- button suddenly appear on the right-hand side of your screen? That’s a “first contact.” And if you click on that button a message box will pop open and a smiling sales representative image with a headset on will ask you how your day is going. That’s Chat. The significance of that first customer touch point online can no longer be taken for granted.

“Mr. Watson, come here, I want to see you.” That was March 10, 1876, Alexander Graham Bell’s first words spoken into his new land-line invention he called the telegraph. He would later add: “the day is coming when telegraph [phone] wires will be laid on to houses just like water and gas — and friends will converse with each other without leaving home.” Without leaving home? Amazing! But what’s also amazing is how much his invention has so suddenly (in the last 5-10 years) become itself outdated, displaced not so much by technology, but rather because speaking to another human, especially those you don’t know is now a complete turn-off. And the reasons are simple.  It’s all about texting.

The once favored Bell telephone and all its comm-cousins including email, voicemail, online forms, and even the original face-to-face communications of old are each no longer the preferred first choice to make first contact with your business online anymore, mostly because all these methods are either painfully slow, or too invasive & solicitous for a first-time visitor simply browsing your website. Nothing worse than jumping through hoops just to get a straight answer to a simple question, right?

Enter the new frontier of CRM Lead Management: The Chat Wars?

As Lead Management tools grow more critical to increasing online sales each year, it’s the Chatbots that are fighting it out on the front lines. Battles between nascent newcomers and more established Chat software providers are heating up. Each sees the pot of gold waiting for the winner. At the heart of it are two competing Chat business models ‘duking it out’ for your marketing dollars. The first is A.I. (Artificial Intelligence,) like IBM’s Watson computer which recently used A.I. to beat a legendary Jeopardy champion hands-down on the famous tv gameshow for brainiacs. The real victory for Watson’s designers wasn’t just getting the right answer as fast as possible, it was understanding the question. Same goes for Chat. The key success factor is learning how to understand and communicate with humans online who use slang, broken sentences, mixed intonations, and many unique language idioms and fact patterns that matter most. So, is it hard to be a human and get good service online after all?

The big downside is when a prospective online customer senses a computer at the other end, gets frustrated and goes to your competitor. Older Chatbots were simple Q&A based pre-written scripts. Sometimes they worked well, and gathered good leads, other times they failed miserably and lost potential new customers. More recently, however, A.I. has really stepped up its game by quickly using machine learning algorithms to learn how to best communicate like a human, hence the Chat wars.

The second option, which is also an outsourced solution is also a Chabot, but the Chatbot uses real humans in a live Chat session. This is highly preferred but also expensive with industry hacks hired by call centers to engage new customers via Chat and phone.  Implementing live Chat in-house means someone has to be available 24/7 to respond immediately. It’s the old debate, human v. computer, which begs the question: Is a live Chat message response from India as good as a computer-generated A.I. response? Both can be devastating to your sales conversions if the customer gets frustrated either way. A few years ago, I would have said to go with a live Chat operator “hands down,” but not today.

Today A.I. is super-close to the real thing, and a lot cheaper 24/7, but it all depends on what you’re selling, and how much online traffic you generate. The key metric to track with either method is “response times,” aka how quickly you engage a potential new customer online.

Is that important?

According to the Kayako company (Chatbot software provider) who surveyed 400 anonymous consumers and 100 anonymous businesses found that:

  • 38% of consumers are more likely to buy from a company that offers Chat
  • 51% of consumers are more likely to stay with or buy again from a company that offers Chat

At the close of business for the 2018 Holiday season, online sales grew by more than 17%, topping $122 billion according to Digital an e-commerce data- tracking firm. Furthermore, Forbes predicts total “global e-commerce retail sales to increase to $4.1 trillion by 2020 from $2.8 trillion in 2018.” The growth is mostly due to increasing global use of the internet and mobile technology devices.

Why does this matter to your business?

As online sales continue to grow, your website is quickly becoming the first stop for new customers who haven’t made up their minds yet. And if your response times to each online prospect visitor is slower than your best competitor, guess who’s going to close the deal?

In a study of 433 software providers online conducted by a Chatbot software developer, they filled out 433 online contact forms and/or clicked on the Chatbot (if available) hoping for an immediate response. What they found was only 7% responded inside 5 minutes, which is the wait-time threshold they argue for most customers before they move on, and 55% of the study took 5 days or more to respond. Yikes! This proves that online forms and email newsletter subscriptions are outdated, and don’t work well enough to compete for the new “need for speed” in the lead management world.

So, what does it cost to get this level of first-contact engagement you ask?

The Cost of Chatting

Depending on the size of your company and your Chat-specific needs these programs can be very affordable. For smaller more simple-product companies including professional services firms, like lawyers, dentists, and even financial advisors, the monthly fees range from Free (personal use) to $1500/month or more depending on which Chat features you include in your monthly package. Larger companies and those with more complex product configurations should look to pay more. The deeper you require a Chat operator to learn your business in order to become an effective first contact representative, the more expensive your Chat provider will cost you. But it may be well worth it if you’re selling big ticket items. Click over to, a website optimization-tool vendor, for more specifics on the top 10 Chat software providers and their pricing.

Choice of Chatbots

While most of the leading Chatbot providers can also integrate with your back-end CRM systems, front end functionality may come first. I suggest you make a list of your first-contact business requirements and how Chat software and its tracking features can best work for your company. Then when you’re ready, click over to software industry reviewer Chatbot reviews. They looked over several of the leaders in the Chatbot conversational software universe and ranked them by several functionality metrics. This list is a good first stop before jumping into a demo or free trial offer.

Putting it all together

As I wrote in a recent article: Winner; Best Product 2018 – is Speed, the rising customer demands for more speed & convenience from your company on the web is begging you to raise the bar to meet them. Each day you delay is another potential day of missed opportunities. Adding a Chatbot program to your website may be the fastest, cheapest, and easiest way to up your game and increase sales this year. This way, instead of losing out on new business opportunities, you engage every new online arrival with a friendly, “Hello, how is your day?”

And that can be like having your own doorman at the Fairmont.

Make sense?

About the author: Rick Andrade is an investment banker at Janas Associates in Pasadena, Ca and a finance writer in Los Angeles helping CEOs buy, sell and finance middle market companies. Rick earned his BA and MBA from UCLA along with his Series 7, 63 & 79 FINRA securities licenses. He is also a CA Real Estate Broker, a volunteer SBA/SCORE instructor, and blogs at on issues important to middle market business owners. He can be reached at Please note this article is for informational purposes only and should not be considered in any way an offer to buy or sell a security. Securities are offered through JCC Advisors, Member FINRA/SIPC


Small Company M&A can be like an “Arranged Marriage”

While hundreds of small businesses changed hands this past year, few were lucky to be asked by one of the world’s largest CPG companies to join the family. And of those small mostly innovative start ups that make the cut, even fewer ever reveal the inside story about what it is like to wake up one morning rich beyond your dreams from an arranged corporate marriage the night before. But here it is. In this eye-opening  article by Tom Foster, Editor-at-large for Inc Magazine he lays out the pros and cons and big changes in this candid interview with owners selling their fledgling business to a mega-giant.  (click on the link above or here to read more about it}

Rick Andrade

M&A Advisor
Managing Director
JANAS Associates
Securities Licenses: Series 7, 63, 79

Investment Bankers &
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Goldilocks has Come for Dinner Is Your Business Ready?

Consider this;  the US economy grew at an impressive 4.2% annualized growth rate in the second quarter of 2018. This figure was revised upward reflecting more business-spending on software, and the forward trend looks to sustain a robust 3% annual growth rate for all of 2018.

The last time that happened was 2005. And things continue to look good economically now and for the next six months. But as the economy starts to cool in 2019, will Goldilocks stick around after dinner?

As of mid-September, all three major stock index averages, Dow, S&P, and Nasdaq are at or near record highs. And with unemployment rates lingering below 4 percent consumers are not only busy working, but also busy spending. The evidence is all around us.

And I am confident you can feel the growing enthusiasm when you speak with customers and employees who will likely altogether contribute well to the bottom lines of American businesses this Christmas season.

As far as consumers go, despite all the media head-fakes and White House melodramas this year the typical consumer seems oblivious to all the noise, like a 3-year-old at Disneyland.

And given that our U.S. economy runs on 70% consumer-driven spending for fuel, it is probably a good idea to keep them in La-La Land for as long as we can.

But as the party continues outside, I am also hearing from the subtle concerned voices inside about what if anything a CEO or business owner can do to prepare for a potential downturn (aka future recession) and stay one step ahead of their competitors. Hence the question:

How long will Goldilocks have her way in this late stage Bull Market for business?

While recent changes to US tax laws have triggered part of the recent boom; The Tax Cuts & Jobs Act of 2017 as you know substantially reduced individual and corporate taxes, and also lowered the tax bite to repatriate billions trapped offshore in business accounts.

The key drivers behind this market’s bull run for business is the euphoria consumers feel from their 401k balances and job prospects. US workers are quitting at the fastest pace in 17 years according to the Labor Dept. report.

Workers tend to quit their jobs when new job prospects appear more abundant. The JOLTS (Job Openings & Labor Turnover Survey) recorded nearly 7 million job openings as of late, a new record. And when people have job security, they tend to spend more on discretionary fun stuff, like trips to Disneyland. It’s all great fun until somebody pulls away the party punch bowl.

So now what? Should you keep your head down and hope for the best?

A few key measures to keep your eyes on may help avoid falling into a deep recessionary trap in the months ahead.

Start with how the political winds blow this fall after the November 2018 mid-term elections. If the Republicans stay in control of Congress, we should expect to see more of the same pro-business policies. However, if the Democrats win, all bets are off because the Dems will most likely refocus their political agenda to impeach and undue all that President Trump has endeavored to repair after decades of Washington mismanagement and neglect to help preserve American business’ competitiveness in this country and across the globe.

But Washington policies and politics alone are not the only foreseeable risk: If you are a CEO, pay attention and take action at the first signs of trouble. Here are three crucial key trend indicators to watch:

  • Escalating Signs of Inflation: especially wage inflation lurking nearby, but also commodity input cost inflation, some which we will likely see if tariffs on Chinese imports increase. If you start seeing signs of rising costs, you need to immediately focus on margin gaps and inventory costs. Calculate how much you can absorb before increasing prices. You will need to absorb the difference and if that becomes a problem in your profit forecasts you should consider not carrying higher levels of inventory (on lower margin products) in 2019.
  • Escalating Cost of Borrowing: will trend up later this year as the Federal Reserve Board votes to raise benchmark interest rates (borrowing costs) again to incrementally try and slow growing signs of inflation from this 10-year-old economic bull run expansion. Ahead of this, be sure to re-secure any long-term debts at lower fixed-interest-rates now. And any short-term borrowings aka Lines of Credit with adjustable interest rates should be paid off or swapped into long-term fixed-rate loans. Don’t delay. Once interest rates go up it could take a long time before they come back down, meaning the cost of business in the future will go up. So, act now and call your lender to discuss this timely critical issue, and how they can help you plan for it.
  • Escalating Trade Wars: not knowing where, when, or how US Trade sanctions could affect your supply chain and customer accounts be prepared to absorb short-term cost increases internally, and try to make up for it by cross-selling more services like 1-day delivery (see my article CEO World; Winner Best Product 2018: Speed). But the best way to avoid the impact of a trade war in the meantime is to offer more products genuinely Made in the USA that Americans want to buy.

As we head into the final Quarter of 2018, America businesses will likely continue to see a robust demand market and a very Merry Christmas as cash registers ring up big sales this December.

The important thing to recognize here is to be ready to act quickly to the first signs of anything that could trip up those sales or profit margins. In 1999, Andy Grove, former CEO of Intel wrote the best seller: Only the Paranoid Survive… which can still save many CEOs from disaster. Read it, and you’ll learn how too. In the meanwhile, let the good times roll, but let’s also keep an eye on little Miss Goldilocks this winter. She could shake things up looking for a warmer spot elsewhere come January 2019.

Make sense?

Goldilocks has Come for Dinner Is Your Business Ready?


Winner: Best Product 2018

Have you heard the news? According to NASA, planet Earth is slowing down thanks to the moon. And in a mere 180 million years or so our planet’s 24 hour-long day will slow, adding a full hour to each day. Wow. That’s welcomed news. Because while NASA is busy studying the impact of a slower future, these days if you’re in a business, being too slow is the kiss of death, because Speed is the new currency of convenience, thanks to the internet, and Amazon.

I know what you’re thinking, speed (aka being fast at something) is not a new concept to CEOs and business owners; rather it’s been around for a very long time especially as a customer-centric sales strategy. This time is different though. Because while companies struggle to identify more ways to stay ahead in the game, delivering high quality products is still #1, and being environmentally responsible is also still #1, and being socially sensitive is still #1, and being the top drawer most awesome customer friendly business ever is still #1. While all these compete for resources to drive new sales, Speed, which translates into convenience is the new #1, And by passing them all, ‘speed’ has recently become its own product category addition, racing past the rest to become the newest must-have competitive differentiator for nearly all businesses everywhere today.

The upside for the winners (aka younger new market entrants and early online adopters) is increasing sales, increasing marketshare, and a chance to shake up the old line status quo; All this by recognizing how adding “speed” as “convenience” in every conceivable customer-centric way to their core value proposition is genius! The downside for the laggards is a bumpy ride down the rapids; losing existing customers, new customers, and hard-earned profits – maybe forever.

So how is Speed related to convenience?

To a business speed is a simple thing defined as “removing the bottlenecks in any process.” To your customer though, it’s more like “a faster order-to-delivery cycle time experience that satisfies.”  In other words, in your customers’ mind they want everything faster. Do you know what that is worth to them? Turns out, increasingly it’s a lot! Convenience means that your customers have better things to do with their time than to wait for you. Waiting at a loading dock, or in line at a restaurant is no fun. Give them back some time and your customers will reward you – becoming more loyal and satisfied. This in particular explains why delivering speed, for example, created a dozen new delivery services in the food industry.

So how did we get here? And why is speed the best new product?

30 years ago in 1988 there was no internet as we know it today. And as large Consumer Packaged Goods manufacturers dominated consumer purchasing choices by controlling end-to-end how a customer perceived value and convenience, retailers let them do it — because it helped drive traffic. But even after the first “.coms” came on the scene in the mid-1990s many would have expected the internet to have completely dissolved the old-school formulas years ago. But of course given the intervening Financial Crisis aka The Great Recession slowed things down, a new catalyst was needed. I’m talking about Jeff Bezos, Amazon, and the instant addictive satisfaction we all get from convenience at the push of a button.

The result is a renewed feverish increase in the pace of business transactions that is today part of Web 3.0 – companies using Big Data, Robotic Automation, Artificial Intelligence, Amazon and Uber, are all together elevating the need for speed as convenience in favor of embracing a new utopian customer-centric “deliver to us everything now internet model.”

But as many business owners and CEOs are still slow to adopt, they are now consequently looking up at a fracturing water dam wall about to burst down on them. Yet these companies, reluctant laggards, are still building products the old way, still selling to customers the old way, still advertising to customers the old way, and still hoping business will go on the old way… But it won’t and companies caught behind will go under.

So what should you do now? And can you fix it?

Yes. You have already most likely given this some deeper thought as you sense the ground shaking. But all will not survive the deluge. Here’s why. Remember these two existential questions your strategy consultant once asked you to think about separately?

  • Why does my business matter?
  • How does my business matter?

Well they’re not separate any longer. Because while nearly all CEOs can answer ‘Why’ their business matters, many at the same time are learning it’s not enough. Because the ‘How’ your business matters is newly arrived at the top of Why your business matters today. And as it turns out (at least in my experience), nobody really cares about Why your business matters. Customers don’t. They only want to know How you can help them, right now. Because companies like Amazon and those that followed have finally and completely redefined the old internet shopping experience, and perhaps inadvertently created an entirely new categorical customer expectation not only for B2C companies but also for B2B companies as well. Take note! Today, the new perception of added product or service value is speed as convenience. And it’s like striking gold if you get it right, especially if your customers think it’s free.

There is however still the matter of How your business matters, because How it matters these days is quickly outpacing Why. In other words as more and more higher quality products all compete for the same, increasingly online sale, the new best product offering for How a business matters is SPEED. Not just slashing delivery times to the home, but in every aspect of your business, from supplier-to-manufacturer –to-retailer. The entire business value chain in cycle times is now on steroids, and will soon be poised ‘at the ready’ to please any customer, anywhere — instantly. And if you don’t prepare for that reality now – you’re going to feel it.

 So here’s the key takeaway

Once treated as an add-on feature at the bottom of your web page, speed as convenience is now at the top, winning over new customers and increasing sales from newer competitors. This makes SPEED; the hands down ‘winner of best product for 2018.’ Because regardless of your size or market share, big or small, as all businesses switch targeting from a “mass” market to a “me” market, from front office to rear dock (if you want to survive), adding speed and selling it as a differentiating competitive feature that delivers convenience is what is winning the day; Something that could help save a lot of slow-to-adopt laggards when the dam breaks from smashing up against the rocks.

Make sense?


There’s Something About 2018

It’s been 10 years since the start of the Great Recession which officially started Dec 2007 and lasted until June 2009, and was to-date the deepest and longest recession since the Great Depression, hence the comparative name.  But in all these past years as the planets shift above, the world below seems to have aligned economically to make M&A and all of finance an active place to engage and growth with.

Since President Trump’s election in November 2016 his desire to reset our economy on his terms has been on a frantic pace. And whether or not we find this president’s style a bit heteromorphic has little to do with the reality behind the raging bull’s impact in the 18 months since the election. “It’s Trumponomics silly.”

  1. Lower Tax rates: corporate and personal income taxes are down. This fiscal stimulus is just getting started and includes among other things the repatriation of nearly 2-Trillion in funds held offshore being brought home by big corporations. The 2017 Tax Cuts and Jobs Act should continue to boost 2018 M&A activity for several months.
  2. Unemployment: rates are at a 30-year low. Yes. If you want a job they are aplenty these days. And while this will increase the cost of labor for business, the flip side is more spending in an economy where 70% of GDP is driven by consumer spending and that’s great for all businesses.
  3. Stock Market: stocks have seen a monumental increase in the last 18 months. The DOW for example was 18,332 on election day November 8th 2016. By April 13th 2018 the DOW topped 24,360, a 32% increase in 6 months. If it holds up (so far so good) it will mean that we haven”t seen a move that big in a long while.
  4. CEO Confidence is way up. According the NFIB, CEO confidence racked up another record.  Here’s the official quote: “The small business optimism index reached its 16th consecutive month in the top five percent of 45 years of survey readings, according to the NFIB Small Business Economic Trends survey… The 104.7 March reading, down from 107.6 in February, remains among the highest in survey history.”
  5. Consumer Confidence:  hits an 18 year high in February 2018. Consumers do feel wealthier as the impact of lower payroll taxes kicks in and 401k balances rise.

These are but a few of the good times in 2018 thus far, making this year a super hot market for M&A. But how long will it last? Critics and pundits, economists and stock-market traders all agree: there’s something about 2018, and smart people will recognize this unique time as a golden opportunity to make the most of it: Which begs the next question…

What could cause a downturn from such great heights?

The list of prospective issues that could become headwinds later in 2018 and into 2019 is long, but keep your eye on these 4 keys indicators for hints:

  1.  Trade wars: President Trump is pushing back on perennial trade rule violators like China and is willing to take a short-term trade hit for a long term gain says the White House. That is tough language for M&A.
  2. Recession: It’s long over-due. As the 2018 U.S. Bull-market economic expansion period (now in it’s 9th year) has become the longest Bull-market run since World War II.
  3. Interest Rates: Finally the 10-year benchmark treasury ( a key driver of consumer loan rates from credit cards to home mortgages is on the rise as the Fed expects to slowly raise rates each quarter this year. This means that lenders (Banks) will in-turn increase loan rates for consumers and small businesses nationwide.
  4. Inflation: With a super tight historically low unemployment rate (4.3%) the US economy will soon face a deepening labor shortage, and this time the tech/robot replacement trend may not be able to keep up. This will bid up the cost of wages. Moreover, as the general demand for goods increases with higher wages and consumer spending, prices for commodities, food, and housing will also trend higher under these macro demand pressures.

So far, however, none of these nor a dozen other indicators have yet to show real material signs of caution, and while pundits will argue of choppy waters ahead, they also say that the 2018 global economy has a strong chance to outperform across the board and into 2019.

What should you do now?

In summary, if the headline Tweets are keeping you on the fence about what to do in 2018, don’t panic, you’re not alone. But, at the same time don’t just stand there with your hands behind your back waiting for something to happen to you. There’s something about 2018 that is presenting to you a once in a long time opportunity to use the increasing value of your business to grab market share and dominate. Take a close look at your industry and you will see big-fish M&A happening all around you. And that may be perfectly fine. But remember, at some point all the little fish get eaten.


A Forgotten Depreciation Strategy Makes a Comeback –

By Rick Andrade –  Nov 2017

For baseball pitchers it’s all in the wrist. For Tax Advisors it’s all in the code. And when it comes to real property depreciation policy and methods, we all know there’s an abundance of tax code.

And despite recent tax relief talk in Washington, one depreciation strategy is making a strong comeback. It’s an old method that reclassifies real estate assets from long term recovery periods to short term recovery periods (aka accelerated depreciation). It’s called Cost Segregation (CS) and it’s been around for a while but in an earlier incarnation called “component depreciation,” whereby an owner of a new commercial building or one making substantial improvements to existing commercial real estate can segregate specific real estate assets into separate depreciable component groups.

These subcomponent groups such as lighting, doors, floors, walls, etc. can then be depreciated individually over shorter lifetimes such as 5 years, rather than being lumped altogether with all building assets in a general bucket and depreciated over a much longer 39 year recovery period, under the current MACRS method.

The immediate benefit is increased after-tax cash flow, meaning that by adopting a CS depreciation expense strategy, your depreciation expense/ write-off is much higher, more front loaded, and thus reduces your business tax liability. Furthermore, new tax modification acts in 2001 & 2003 provided that if real property is reclassified from 39 yrs. to the shorter 5yr, 7yr, or 15yr periods, there is an additional bonus catch-up recovery provision which can further accelerate depreciation expense by 30% – 50%. Sounds good right?

So. If it’s more valuable and perfectly legal, why don’t more CPAs & Advisors use it?

Because most advisors simply don’t have the right detailed cost information for each component of a recently purchased building or accurate cost records for individual building components to do the job. While there are several CS methods that can be used to estimate component costs separately, risk-averse tax advisors still resist efforts to calculate the cash flow benefits. Rather they prefer any method that is least likely to get audited approach first. But this fear is likely overblown and misplaced.

Enter your Cost Segregation specialist firm. These consultancy firms, or CPA firms with add-on CS services, specialize in reviewing, and completing engineering studies, and component cost analysis using IRS rules of the road. Result? Once armed with a detailed Cost Segregation report, business owners who acquire real estate assets or make large building improvements can save as much as 5% in taxes on every $1 Million is real estate asset dollars deployed. Translated, a $10 million RE investment could provide as much as $500,000 in real tax savings! And those are hard dollars that can be put to better use elsewhere in your growing business.

So what exactly is Cost Segregation?

A Cost Segregation study is a detailed review and cost breakdown of a real estate investment allocated into four (4) key categories:

  • Personal Property
  • Land Improvements
  • Building
  • Land

Exactly which group a real property investment component falls into is where the rubber meets the road. In many cases after a building is acquired in an M&A transaction for example, the CPA will use a current appraisal, or worse, allocate 20% to land and 80% to building and fixtures as an old general rule. Land has no depreciation expense value, and the building overall has a 39 year straight-line recovery period under MACRS.  This approach offers no accelerated tax relief because it does not attempt to isolate and identify the costs of building components separately. The 80/20 grouping also fails to specifically identify and therefore write-off any specific cost for major replacement components such as a roof, loading dock, electrical stations, removable HVAC systems, and dozens more areas.

A better way is to first see if a cost segregation study will save you enough tax money to justify the cost of the CS report, which can range in price for middle market companies from $5,000- $15,000 or more according to KBKG a tax advisory firm to CPAs. And to figure that out, the CS examiner will re-allocate your purchase price or cost of improvement into these four buckets and then compare your current depreciation method to the cost segregation results. Experts say the more detailed a real estate asset can be broken down into its individual cost components the more likely a cost segregation study will pay off.

Who Gains the Most by Using CS?

Acquirers of existing commercial real estate and new construction benefit the most because they have the benefit of conducting a new CS upon acquisition, or by gathering the most accurate cost information documents while new construction or improvement work is being completed. The IRS will disallow a cost study based on older construction or engineering documents that don’t accurately link construction costs to component costs according to a Rutgers University analysis.

Done right, that is, using the IRS Audit Techniques Guide for Cost Segregation, however, high tax bracket real estate business owners can potentially save as much as 5% in taxes for every $1 Million invested in a real estate purchase or development. The actual savings are based on which tax rate bracket the owner falls into, and the amount of depreciation expense benefit when compared to other depreciation methods. In most cases the higher the tax rate… the higher the CS savings.

The real trick is to justify which cost components fall into which of the four key groups above.

For example, typical building component groupings include items such as hand rails, wall or floor coverings, light fixtures, plumbing, electrical and HVAC systems with a 39 year life. However, a proper CS study can potentially group all of these building assets into a much shorter depreciable life, including moving assets from 39 years to just 5 years.

For example, in the 1997 landmark case Hospital Corporation of American v. Tax Commissioner, the tax court held that HCA could re-allocate dozens on 39 yr. life building component-assets down to 5 yrs. including:

  • Primary & secondary electrical systems
  • Lab & maintenance shop wiring including conduit boxes
  • Carpeting & wall coverings
  • Special plumbing installations
  • Kitchen hoods & exhaust
  • Patient handrails
  • Accordion doors & partitions

Other overlooked examples that can qualify for 5yr depreciation include: signs, security systems, un-affixed cabinetry, fire suppression, accent lighting and dozens of others.

Warnings, Pros & Cons

The advantages of CS are clear: lower taxes, more after tax free cash flow, identifiable asset write-offs, bonus depreciation options, and a host of other benefits according to Ernst & Morris, a Georgia-based Cost Segregation consultancy firm.

The disadvantages include the risk of having to recapture the advanced depreciation tax savings if you dispose of the real estate within a few years after your investment. A second risk is conducting a poor CS report that fails to effectively link building and land improvement components to their cost documents. And lastly, being too aggressive in re-classifying assets as tangible personal property vs structural components (inherently permanent as affixed to the building), can raise a red flag. Speak with your advisor about all the risks.


Nevertheless, in many cases the overlooked CS study approach is definitely worth a closer look for business owners, or private equity investment firms who own or plan to own commercial real estate.

Properties either recently acquired or improved in excess of $1 million may well benefit from a CS study. There are many Cost Segregation advisory firms you can find online. Once you find one you like, ask for a free upfront review of the numbers that compares depreciation strategies. Each firm should also provide an estimate of the CS study cost/benefit, timeline, and discuss the methods they use to complete the study.

Finally, at the end of the day, if you see yourself making a large real estate investment in the coming months… consider doing a CS study. You might find the time & benefits of having more free cash-flow upfront to kick start or reboot your real estate investment easily out-weighs the cost.

Make sense?

About the author: Rick Andrade is an investment banker at Janas Associates in Pasadena, Ca and finance writer in Los Angeles helping CEOs buy, sell and finance middle market companies. Rick has earned his BA and MBA from UCLA along with his Series 7, 63 & 79 FINRA securities licenses. He is also a Real Estate Broker, a volunteer SBA/SCORE instructor, and blogs at on issues important to middle market business owners. He can be reached at This article is for informational purposes only and should not be considered in any way an offer to buy or s