Valuetainment - Proven Strategies To Maximize The Value Of Your Business - Built To Sell

00:00:00.000 why they become entrepreneurs it's not because they want to become the next elon musk

00:00:04.000 it's because they crave in their gut at the most visceral level possible freedom probably the first

00:00:11.840 step is to figure out one thing that you can do better than anybody else how one goes about

00:00:17.760 increasing the value of their company she sold her little nine million dollar business for 54 1.00

00:00:22.400 million dollars what drives the value of a companies i i used to run a research company

00:00:27.920 john i i don't know how to tell you this but i can't sell your company there's there's nothing to

00:00:31.760 sell then they make in my view the biggest mistake which is they start cross selling your mindset is

00:00:38.880 more about let's help build a business based on a subscription model that you can one day sell a

00:00:44.400 hundred percent of it my goal is to coach people on how to build a valuable business that they can have

00:00:50.000 a liquidity event a multi-million dollar exit from

00:00:57.120 my guest today is john warlow who's written a few books one of them being a book i read in 2012

00:01:02.560 titled build to sell that i've recommended to any entrepreneur out there he's also written the

00:01:07.280 automatic customer creating a subscription business in any business in any industry he's also written

00:01:12.400 the art of selling your business winning strategies and secret hacks for exiting on top he has studied i

00:01:19.440 don't know the number i saw 55 000 businesses that he's analyzed and he gives them a certain score

00:01:24.640 or value score value builder score of 90 or greater that are worth double the average performing

00:01:30.640 businesses we're going to get into that today so with that being said john thank you so much for

00:01:34.080 being a guest on value team it's great to be here patrick okay so john let's let's let's get right

00:01:39.520 into it before we get into these books here your background what gives you the moral authority the

00:01:45.280 credibility to be able to say that you can decide what company is going to sell at the highest

00:01:51.520 possible valuation tell us yeah i lived it uh the other side i made all the mistakes i i used to run

00:01:58.880 a research company a quantitative market research business that we built up to five or six million in

00:02:03.840 revenue and i we had great clients we work with microsoft and jp morgan chase bank of america and

00:02:09.680 someone had told me through the years that you know your client list is going to be what really

00:02:14.000 acquirers are going to want to get after right your profit your client list so we had a great

00:02:17.680 client list profitable business and i walked into a guy named perry mielli's office in toronto

00:02:22.400 perry is uh uh an older statesman he's an m&a professional and i said you know what do you think it's

00:02:27.920 worth and i'm just kind of rubbing my hands together and he said it kind of depends on the

00:02:31.440 answer to a couple questions i'm like shoot it's like all right so who does the research i'm like

00:02:37.520 well i'm involved in some of the research you know like it's big companies i gotta be well who does

00:02:41.600 the selling i gotta do some of the selling it's bank of america it's jp morgan chase but he's like

00:02:47.360 john i i don't know how to tell you this but i can't sell your company there's there's nothing to

00:02:51.200 sell it's worthless and and for me that was like getting winded right punched in the stomach i i

00:02:58.400 walked into his office rubbing my hands together thinking i was sitting on this multi-million dollar

00:03:03.200 business and i was leaving his office realizing that i had made all the mistakes that there were to

00:03:10.400 make in building a business i was you know it was about my me and so that took uh years to transform

00:03:18.080 we made it into a subscription-based business uh we got me out of doing the selling out of doing

00:03:23.440 the research ultimately it was acquired by a new york stock exchange listed company so it had a happy

00:03:28.320 ending but for me that kicked off a journey pat that was like a 20-year odyssey i've been on to really

00:03:35.280 understand what drives the value of a company beyond just the typical things that we think

00:03:40.720 what it is that acquires value and care about and what are they i mean i i have your value builder

00:03:46.080 system which i love what you have here uh but uh and and i've gone through the process of both

00:03:52.400 selling and raising money whether it's dealing with private equity guys or investment banker side

00:03:57.680 and they're coming in and they're looking at hey i want to sell the business and what's it

00:04:01.520 going to look like and it's not going to come with me or it's going to come with me what's your

00:04:05.040 replacement who do you have on your team all these questions that come up but for you you have a

00:04:09.680 systematized if you don't mind taking a moment and give us that idea of how one goes about increasing

00:04:14.480 the value of their company yeah look there are eight unique factors that i think acquirers care about

00:04:20.080 probably the first step is to figure out one thing that you can do better than anybody else one

00:04:26.560 offering one product or service that you can do better than anybody else because here's the thing

00:04:30.080 when and you know this pat but i'm talking to your listeners by extension when an acquirer

00:04:35.760 looks at buying a business they're going to shake your hand and smile and tell you all wonderful

00:04:40.960 things about your business then they're going to go and they're going to close the boardroom door

00:04:44.800 you will not be invited into the room and they're going to turn to their colleagues and say should we

00:04:49.360 buy this company or should we compete with it and they're going to compete with you if you've built

00:04:55.280 a business based on me too products commoditized services things that they can do easily and

00:05:00.240 compete with you by lowering the price and if they do agree to buy you it'll be for the absolute rock

00:05:05.680 bottom multiple because they know they can just win all your business by lowering the price the decision

00:05:11.200 they make when they say we're going to buy this business is if it would cost them too long and too much

00:05:18.960 money to try to build what you've created and that you know warren buffett talks about a competitive

00:05:24.640 moat right likes to invest in businesses with that deep and wide competitive moat those businesses are

00:05:30.560 acquirable because you've got pricing authority and you can create the the virtuous cycle that comes

00:05:36.160 with pricing authority higher margins etc so i think it really it comes down to finding the one thing that

00:05:42.800 you can dominate one thing that you can dominate okay so let's just say i found the one thing that

00:05:47.920 i can dominate so essentially what you're talking about is find your own blue ocean don't try to

00:05:52.160 compete in 15 different places look at yesterday i'm talking to gary kasparov and he told me something

00:05:57.200 very interesting gary kasparov the they call him the goat of uh uh what do you call it chess he was

00:06:03.280 number one for 251 months and one of the things he talks about is knowing your advantages

00:06:09.040 is important but it's also important knowing how to conceal your disadvantages right so you don't

00:06:14.400 want the market to know your disadvantages are you pretty much talking about finding your own blue

00:06:20.560 ocean that nobody else is doing that's the number one absolutely and here's the thing a lot of business

00:06:27.520 owners start off doing exactly that they have an idea they have a concept that they want to do and they

00:06:33.040 and they start off and they they become successful in the early days then they make in my view the biggest

00:06:38.480 mistake which is they start cross-selling somebody tells them some book they go to some conference

00:06:44.320 and they hear that it's eight times easier and cheaper to cross sell an existing customer new

00:06:48.240 product and service than it is to go find new customers and that's the moment where they start

00:06:53.920 to fall off in terms of value because again the choirs don't like when you buy cable television you

00:06:58.720 don't want the 200 channels if you could deep couple it and just buy espn or just buy the mlb network you

00:07:03.680 would and that's why those channels have become so dominant because we've been held hostage to

00:07:10.240 buying all this stuff acquires is just the same way they want to buy one thing i'll give you an

00:07:14.880 example of how this kind of happened to one of i do a podcast called built this on radio i interviewed

00:07:19.600 a woman named stephanie breedlove who built a company sold it and she told me about a kind of fork

00:07:25.360 in the road she got to at three hundred thousand dollars of annual revenue she was in a funny business 0.97

00:07:30.400 she did payroll for parents who have a nanny to pay so you've got kids you probably have a nanny you 1.00

00:07:36.720 probably kind of find that paying that nanny frustrated if you want to pay them legit 1.00

00:07:41.920 what's that it's a great niche right but here's the thing she reached three hundred thousand dollars 1.00

00:07:47.200 in sales one employee okay so it's her and one employee very early right and the fork in the road

00:07:52.960 is it's becoming harder for her to find parents who have a nanny to pay so she's got two choices she

00:07:57.280 can go cross-sell her existing customers another service busy parents two incomes two you know 0.52

00:08:03.040 kids they need meal delivery and they need snow removal they need lawn care right lots of other

00:08:08.160 services or she could take the much more difficult road and just go find more parents that have a

00:08:15.360 nanny to pay and everybody was chirping in her ear at the time that it was going to be a lot easier

00:08:20.480 to cross-sell her existing companies and if she had was focused on revenue as her ultimate goal

00:08:25.680 then she probably would have taken that route and it would have been a disaster because ultimately

00:08:29.680 she built a relatively slow growth company it took her 25 years to get to nine million dollars in 0.73

00:08:36.720 revenue this is not like google style 25 years but it's majority of america small businesses so

00:08:43.040 you're talking to the majority of america that's the backbone of america please continue exactly

00:08:48.720 she gets to nine million dollars in revenue 10 000 customers she decides she wants to sell and

00:08:54.000 she goes to care.com care.com is like the angie's list of care providers plug in your zip code it'll 0.62

00:08:58.800 give you babysitters rated five star in your local market at the time they had seven million subscribers

00:09:06.000 seven million parents who have a nanny to pay so breedlove went to them and said look one percent of

00:09:11.520 your seven million by my payroll service that's seventy thousand customers right we got ten thousand

00:09:17.200 customers today that's seventy thousand customers long story short she sold her little nine million

00:09:23.760 dollar business for 54 million dollars care.com would never have purchased that business had breed

00:09:31.920 love made the mistake of cross-selling her existing customers a new service because it would have watered

00:09:36.880 down what she was doing she doubled down on her niche and that's i think one of the most important

00:09:42.240 things we do is is once we pick the one thing the blue ocean to use your term avoiding the temptation

00:09:49.120 to start cross-selling our customers other things because it just redoubles our point of differentiation

00:09:54.160 if we focus on it for a long period of time john how does the entrepreneur the founder prevent

00:09:59.200 themselves from being tempted to want to sell other products through their system to their existing

00:10:04.880 customers and and if they are being tempted what why why is this not a good thing to do you know

00:10:11.600 you hear a lot of people nowadays well i don't know if you've read the book multiple streams of

00:10:15.360 income isn't it great that you can sell 19 products to the same existing customers so to some people

00:10:20.720 who read certain books and these motivational guys say you should go sell your clients you know

00:10:26.240 additional products why should the entrepreneur and the founder stay disciplined in that moment when

00:10:32.480 someone says this could make an additional hundred thousand dollars a month yeah great question and it

00:10:37.760 comes down to what your goal is if you want income if you want just profits short-term profits then

00:10:45.920 yeah go cross sell your existing customers all day long if you want to build a valuable business

00:10:52.000 cross-selling is one of the first ways to undermine the value of that business again depends on your

00:10:55.920 goal if you want to create a lifestyle business you want to have profits coming in and you want to buy

00:10:59.840 the card you want to buy the house and you want to live for today how about it go cross sell your

00:11:03.760 existing customers my goal is to coach people on how to build a valuable business that they can have

00:11:09.280 a liquidity event a multi-million dollar exit from i'll give you an example because i think it it serves

00:11:14.880 to illustrate i think the point i um i was i had an interesting kind of 48-hour period where i did an

00:11:22.160 interview with a guy who built a 15 million dollar business largely cross-selling an existing install

00:11:27.920 bench base a bunch of different products i won't say the name of the company because i don't think

00:11:31.840 you'd want me to share he then went on and sold that business because he was it was a diluted bunch

00:11:37.920 of products that he'd been cross-selling that they weren't differentiated he sold his 15 million dollar

00:11:42.160 business for 25 of revenue for 25 of one year's revenue the next day i interviewed a guy named rob

00:11:49.440 walling rob walling built a company called drip he built this little automatic marketing automation

00:11:57.120 software up to two million dollars in revenue like one eighth of the size of the other guy the day

00:12:02.800 before yet he was looking at offers of between nine and 12 times top line revenue not even up not even

00:12:13.760 so guy chasing revenue is getting 25 of one year's revenue the guy focused on building a valuable

00:12:20.320 company is looking at offers of the multiple of revenue in this case a double digit multiple of revenue

00:12:24.800 that's what i'm talking about when you have the focus on building a valuable company rather than

00:12:30.640 a lifestyle business with income streams it's a completely different frame of mind and uh and i think

00:12:37.200 it's uh it's a decision we all need to make you you you either want to make profit and cash today fair

00:12:43.360 enough or build for the long term yeah that's a great point you you know had a guy named bobby one day

00:12:50.240 we're having dinner together at a steakhouse fleming's in topanga and he's working for his

00:12:57.040 lawyer and this bobby guy's making 300 000 yes how's it working for this lawyer this law firm he said 0.83

00:13:02.400 every month anything that we made in profits he would take it out and put in his checking account

00:13:06.880 i said what's the guy's vision what does he want to build this is nothing he just takes profits i said

00:13:10.880 have you ever asked him what his vision is he says pat i'm telling you his vision is he just wants

00:13:15.520 to take the cash out and put in his checking account i said doesn't want to build the biggest

00:13:19.520 law firm maybe biggest regional biggest nope nothing like this how's it feel working for a

00:13:24.000 guy like that he said i'm looking for other jobs so sometimes also in the profit mode people who

00:13:31.280 are aspirational they're sitting there saying well what do i do with this thing here long term what if

00:13:36.320 i want to get a piece of equity what if i want to you know help take it to the next level why am i

00:13:40.480 doing it if it's just profit sharing because a lot of times that legacy model also has a hard time

00:13:46.160 retaining high quality talent yes you may keep your son your daughter your cousin your nephew your best

00:13:51.840 friend's brother and things like that but it's different to keep to both attract and retain high

00:13:58.000 quality talent but going back to question we talked about selling your company so curious to know if you

00:14:02.720 even have the answer to this question what your perspective would be so the thinking of a

00:14:09.200 uh not necessarily okay so let's just talk about the investment banker so this is you you're

00:14:14.400 thinking about selling your business you go to a banker a broker whatever you want to call it who's

00:14:19.040 from your industry before we go think about the buyer i want you to first give us the perspective of

00:14:25.440 how does an investment banker evaluate evaluate your business or value you to say is this a business

00:14:32.800 worth me taking to the market to talk to buyers what do they ask what do they want to know before

00:14:37.920 they filter out here i understand you said the one product i understand you said the one differentiator

00:14:42.080 i've had many different investment bankers and i have different thoughts but i want to hear it from

00:14:45.600 you what are they thinking about before they say i'm willing to represent you to sell your business

00:14:50.000 because i'm confident we're going to get a check how are they thinking yeah it depends on the size of

00:14:55.200 the company if it's a very small business say less than a million in sales that banker is like

00:14:59.360 a likely a business broker and they want to know what you want for your company and if your

00:15:04.160 expectations are too lofty they're going to say it's going to take too much time if your business

00:15:08.560 is between 1 and 10 million in annual revenue maybe 2 and 20 something in that nature neighborhood

00:15:14.400 the natural buyer for those businesses right now is a private equity group they've come way down

00:15:19.120 market and they're starting to look at that type of business and and i think the mna like the mna

00:15:25.440 professional wants to get a deal done and so they're going to look at you and say are you willing

00:15:29.680 to sell to a private equity group and the key determinant there is are you willing to carry equity

00:15:34.480 meaning are you willing to sell 60 and carry 40 and if the answer is no i want out 100 they're

00:15:40.960 going to be like i don't think i can get that deal done can you go a little bit deeper on that

00:15:43.680 go a little deeper on that so what why does the buyer so the broker the investment banker in the

00:15:48.000 middle that you're talking about two to twenty million dollars why does he want to convince the

00:15:53.840 entrepreneur the founder to say look if you carry 40 the benefit of it is dot dot dot what are the

00:16:00.240 benefits of it well so the benefit for the mna professional is they can get a deal done because

00:16:06.480 private equity companies the way they're structured is they don't have managers when you sell your

00:16:11.280 company to a private equity group typically you have to carry some equity and continue to run your

00:16:16.480 business as a as an executive in the new in the new code they're forming and so they need you to

00:16:22.320 stick around the way they do that is get you to carry some equity and so if you're not willing

00:16:26.640 to carry equity it's unlikely that a private equity group is going to want to buy you unless

00:16:31.120 there's some platform that they're going to you know latch you into so you know and that can you

00:16:37.280 know that has some upsides and it has some downsides upsides is what they refer to as the

00:16:42.000 second bite of the apple it's a terribly overused expression but basically it means that you sell

00:16:46.080 your first tranche of equity 60 let's say at x multiple and then downstream because of

00:16:52.000 the professionalism of the private equity group the fact that you they lace you together with other

00:16:55.840 businesses that the second tranche of your equity that 40 actually gets up being worth more because

00:17:02.000 the private equity group has professionalized your business that's the pitch at least the downside of

00:17:07.200 that pitch is that you when you do that deal become a minority shareholder in that business and

00:17:14.720 you no longer control it i interviewed a guy named ryan moran and ryan built a company 18 million

00:17:20.240 dollars in revenue sold it 60 to a private equity group he decided to carry 40 he was kind of done

00:17:27.360 didn't want to run it anymore so the private equity group brought in a ceo ceo didn't really know the

00:17:32.000 business the industry the company starts to falter so much so that the company starts to fail at paying

00:17:39.040 down the debt the private equity company took on to buy the business the bank yanked the line the

00:17:46.080 company went bankrupt his 40 went to zero and he there was nothing he could do about it because

00:17:51.680 he's the minority shareholder in a business that he had mostly sold so that's the print pro quote

00:17:56.320 there's a there's a huge upside if you get it right there's a significant downside if you get it wrong

00:18:00.960 okay so so far we went from the perspective of the the broker and by the way do you have a

00:18:06.560 number when it's above 100 million dollars on how the investment bankers work when it's above 100

00:18:10.560 million dollar revenue yeah you're you're largely looking at either either a very large private

00:18:15.760 equity group or a strategic investor right because that's the third type that we didn't talk about

00:18:20.000 we talked about individual investors very small companies private equity groups you know two plus

00:18:25.440 and then there's different styles of private equity group and then there's very large companies that buy

00:18:31.280 companies for strategic reasons and strategic acquisitions are when you have some strategic

00:18:36.720 reason to buy the business i remember uh i interviewed a guy who started the business

00:18:41.920 blinds.com have you ever have you ever heard of these guys blinds.com great business uh he started

00:18:48.560 it right around the time that uh the guy's name is jim stanfield uh i think it's jim stanfield i'm getting

00:18:53.680 it right he started around the time that bezos was starting to sell books on amazon right and he's like

00:18:59.120 well if bezos can sell books i can sell blinds because his wife had a blind store window coverings you 0.87

00:19:04.480 know his name is jay steinfeld by the way and jay you know the challenge with blinds that are

00:19:11.200 different than books is that blinds are complicated right you got to measure them you got to pick the

00:19:14.880 colors you got to install them like there's lots of more complications just selling a book so it took

00:19:18.960 him a lot longer to build his company but he did build it up he got it up to more than a hundred

00:19:24.240 million dollars in annual sales over a 30-year run and they were dominating the blinds category

00:19:30.800 and so along comes home depot they're a strategic acquirer obviously right home depot had two

00:19:36.640 problems the first one is obvious they were having their lunch eaten by blinds.com they were not number

00:19:42.880 one in the blinds category they want to be number one in every category they sell in the store right

00:19:47.200 so number one they're they're getting they're out being out competed the second though problem was

00:19:55.840 much more hidden but ultimately much more valuable for jay steinfeld home depot at the time had 90

00:20:01.520 billion dollars of revenue yet the vast majority of that revenue was done through a bricks and mortar

00:20:07.440 store they were having all kinds of trouble getting people to go to home depot.com and buying things

00:20:13.840 online and you know what bricks and mortar you know cost space are you got employees you got real

00:20:18.160 estate i mean it's a much more expensive model than if you could get people to just go to a website

00:20:21.760 and along comes this guy named jay steinfeld is number one dominating the blinds category but

00:20:27.280 number two has figured out the secret sauce for in for selling complicated products that need to be

00:20:33.840 installed online what does home depot have they have 90 billion dollars worth of stuff complicated that

00:20:40.160 need to be installed and so home depot bought jay's company for number one to get number one in the

00:20:46.720 blinds category but also because they wanted to graft his expertise his knowledge of how to sell

00:20:51.360 complicated things across 90 billion dollars worth of revenue that's a strategic acquisition

00:20:56.800 right it's not just a financial engineering which is what most private equity groups do

00:21:01.280 they had a strategic reason to buy blinds.com that's a that's a great by the way did jay end

00:21:06.400 up becoming anybody at home depot or he stayed as the ceo of blinds uh it's funny i interviewed he

00:21:12.800 just left uh home depot but he did stick around for a while actually i think he was there for four or

00:21:17.040 five years yeah got it yeah so it must have been like it must have been a back end he probably had

00:21:21.360 some uh you know earn out or something that he had to do on the back end maybe a different uh uh check

00:21:27.440 that he was going to get as well but if if we go back to what you're saying here so we have i want

00:21:33.440 to get an analogy so the audience can kind of get this because this question is typically asked by

00:21:37.280 smaller business owners that are doing million five million ten million and they want to sell their

00:21:41.360 business so the seller you you are the owner of a house the realtor is the investment banker or the

00:21:49.600 broker the buyer is the person that wants to buy your house right that's example of somebody wanting

00:21:56.320 to buy your business 100 now on the buy side say me i don't want to sell 100 say i want to go raise

00:22:04.560 money i can get passive money i can get active money i can get a strategic partner or as a passive

00:22:11.920 guy that's just giving me the money hey i had a guy was sitting down with he sold one of his businesses

00:22:16.720 for 1.6 billion his father did in the insurance business he was one of three kids he got a half a

00:22:21.440 billion of them when his father died he's been in the insurance business 30 years he said i'll give you

00:22:25.440 five million dollars but i don't want you to call me i don't want a board seat i want nothing i just know

00:22:30.320 this works i want you to give me results every 90 days and maybe send me an email once a month i

00:22:35.040 said that's not a fit for me so when somebody is looking for a strategic partner to come in maybe

00:22:41.680 you're going to sell 20 equity maybe 30 maybe 15 what are some things the entrepreneur and the

00:22:47.280 founder needs to be considering with the strategic or questions to be asking before saying yeah i kind

00:22:53.280 of want you to be my strategic investor here and when you say strategic investor your definition

00:22:58.560 is low touch uh someone who's not like the example that you're you're providing i'm talking about

00:23:05.520 more from the standpoint of look i'm going to come in i'll get a board seat i will use my contacts and

00:23:10.560 my relationships to help you go get a new partner a new vendor a better technology i offer xyz to you

00:23:20.000 based on my rolodex that's kind of what i mean where i'm willing to have him become an investor

00:23:24.000 because it's worth me giving up 20 of my company to this guy for the amount of money he's buying

00:23:29.200 because he's going to bring me additional things yeah tread carefully is what i would say uh i just

00:23:34.400 did an interview with uh a couple who sold 15 of their business to one of the sharks robert herchovec

00:23:42.400 if i'm pronouncing his name correctly and that's the kind of deal right he's smart guy great network

00:23:47.920 and he you know did 15 they uh sold him the 15 and never actually spoke with him to my knowledge

00:23:57.040 after that i asked them what was it like on the podcast i said what was it like to work with robert

00:24:02.000 and like you know they're like well we actually didn't talk to him after that and so again you

00:24:07.680 could say well that's fine and robert gave the money as he promised he would and and you know that

00:24:12.160 was what they were raising they were raising money and it's hard to put uh a value on or put

00:24:17.440 like a fence around the advice piece right like how how do you objectively measure how much advice

00:24:23.920 the person is going to bring so i think you you want to really tread carefully there because it's

00:24:28.560 hard to you know measure that i think you see that a lot with private equity groups as well the

00:24:33.360 private equity groups wear a nice suit they went to the right schools they rock up and they say hey

00:24:37.760 we've got all this expertise we understand your industry and i'd push a little bit there uh you

00:24:43.920 know it's funny i i uh when i sold my last company uh we ultimately sold to a strategic as i mentioned but

00:24:50.480 we also looked at selling to private equity and we did research for b2b research uh so very large

00:24:58.800 financial services companies technology companies and telephony companies those are the three categories

00:25:03.600 that that bought what we sold and i did this you know dog and pony show and talked to a few private

00:25:09.440 equity groups one private equity group you know was trying to make the pitch that we should sell to

00:25:14.320 them and i said so what are you going to bring to the table beyond money and and they said oh expertise

00:25:19.840 we've got lots of ideas how to build your business i'm like oh interesting so like shoot give me one

00:25:25.520 and they're like well we think that you know i know you market to a lot of like large enterprise

00:25:31.680 organizations but i think you should sell to the toronto maple leafs organization and i was like

00:25:37.680 the toronto like the hockey team and he's like yeah well you know they have lots of small businesses they

00:25:43.520 like it was the most asinine idea that you could possibly conceive of i'd been running the business

00:25:49.280 for 10 years i knew exactly who the target customers were i'd spent 10 years thinking about it

00:25:54.080 and here they were they went to the right mba they got the right school they had the right suit

00:25:58.400 and they thought that they were going to like impress us with that idea and so look i don't

00:26:02.640 mean to discount the entire private equity group or or you know the whole population but i would

00:26:08.160 certainly push hard for examples you know specific tactical examples of what somebody thinks they can

00:26:15.760 bring to the table for your business because guess what if you've been running your business for 10

00:26:19.760 years you probably know it better than anybody else and while they may have some other experience

00:26:24.800 to bring i think it's worth vetting that so based on what i'm hearing from you the last 15 minutes is

00:26:31.200 you're not a fan of selling uh a 60 and letting 40 ride and you're not a big fan of bringing a private

00:26:42.080 equity guy or a person up front that may buy 10 15 20 points because you don't necessarily know if

00:26:48.000 they're going to be involved or if they're really going to be bringing value to the company your mindset is

00:26:53.520 more about let's help build a business based on a subscription model that you can one day sell a

00:26:59.040 hundred percent of it am i reading that correctly or my way off you're absolutely right i'm not saying

00:27:05.840 never sell to a private equity never sell 15 i'm saying be skeptical there are a lot of sharks out

00:27:10.960 there and there are a lot of very slick people a lot of slick people who will tell you what you want

00:27:15.120 to hear what i think most entrepreneurs want is freedom and we talked freedom offline and i think most

00:27:21.680 people when you push them on why they become entrepreneurs it's not because they want to

00:27:26.080 become the next elon musk it's because they crave in their gut at the most visceral level possible 1.00

00:27:33.840 freedom and you give that up when you take equity from a private equity group you give that up when

00:27:40.400 you bring on an investor a brand name investor who wants to tell you how to run your company

00:27:44.640 and i believe entrepreneurs add the most value when they control their destiny and for a lot of things

00:27:50.400 i think it's better that they sell and they move on stephanie breedlove didn't go work for care.com 1.00

00:27:56.000 for 20 years right she built an amazing company she got a great multiple and she left and i think

00:28:03.360 i don't think there's anything to be ashamed of in that equally i think jay steinfeld built an amazing

00:28:08.240 company he helped in the transition and then he left and and i think that's admirable and i think most

00:28:15.280 entrepreneurs if you push them their primary motivation even in many cases even isn't just

00:28:21.840 money it's freedom and you give that up when you sell uh to somebody other than a strategic in my

00:28:28.400 view you give that up when you sell that to someone other than a strategic when you sell your business

00:28:34.400 a part of your business to anybody other than a strategic that makes sense so okay so for for uh

00:28:40.960 okay so do you mind if i push that a little bit and unpack yeah is that okay with you okay so uh on

00:28:47.200 one end i think what you're talking about is okay jobs lost the board the board fired him he brought

00:28:53.520 scully in first time around they fired him he left he did pixar he got disney to buy pixar he became the

00:29:00.480 biggest shareholder of disney before they he died and then he came back in and they brought him back

00:29:05.840 into apple and he was a point six percent shareholder of apple you know obviously he saw he was offended so

00:29:11.200 he sold a ton of his shares i've interviewed steve wozniak before and we've had a good time together

00:29:16.720 on the flip side of it a bezo sells off 20 of his company right off the bat i think he goes and gets

00:29:23.200 fifty thousand dollars from 40 different people and then later on he ends up becoming a 16 owner of the

00:29:28.640 company similar to an elon musk 16 owner of the company and it ends up succeeding for him and them

00:29:35.280 so what is the difference between i i hear the horror stories i've been around the block for a long

00:29:39.920 time i've heard the horror stories they suck you're miserable you feel handcuffed you go from one day 0.66

00:29:44.560 being an entrepreneur to the next day you're an employee and this is not what you signed up for 0.99

00:29:48.480 that's exactly what you didn't want to do you're back to being an employee again you're miserable

00:29:53.040 conflict the board you and i are you and them are fighting you don't want to show up to this

00:29:57.360 you're just acting like it's just it's ugly it's very ugly everyone's unhappy personal life is

00:30:02.000 unhappy people are sick and tired of you guys bitching at each other not a good situation right

00:30:06.560 but in some of these cases they work in those that do what makes that work

00:30:12.720 i think you raised some great examples of musk and and bezos and and jobs i think it's about

00:30:19.120 understanding your psychographics psychographics is the study of human motivation and we've done a bunch of

00:30:26.320 research into what motivates small medium-sized business owners and we've discovered there are

00:30:31.840 three psychographic profiles we call them mountain climbers freedom fighters and crafts people mountain

00:30:39.680 climbers are people like jobs wozniak uh you know bezos who are trying to build something and their 0.99

00:30:46.400 greatest motivation is the challenge associated with i mean you can see it with branson and they're all

00:30:50.400 going into space i mean it's the it's the challenge of doing it they don't need the money they don't

00:30:54.800 need to go to space they want the challenge and so they go to the the highest peak and they literally

00:30:59.520 look around the horizon looking for the next highest peak and so for them they pray at the at the altar

00:31:05.280 of revenue right because revenue is the ultimate arbiter of size and importance right so that's a

00:31:11.760 that's a mountain climber right the second group is a freedom fighter and their primary motivation is

00:31:18.560 independence they're motivated by fu money right the ability to decide when to work for who to work

00:31:26.560 what to do they don't want to be the next jeff bezos right they want control over their destiny

00:31:32.400 and their freedom fighters and the third group are craftspeople and they want to master their craft

00:31:37.280 they're the the lawn care specialists who who you can impress ingratiate yourself with by just just

00:31:42.480 talking about how well they cut the lawn or the you know the the copywriter the massage therapist they

00:31:47.680 are motivated by mastery not building a business by having a craft right those three types of

00:31:53.840 entrepreneurs and i think the majority of employer based companies meaning not just the owner but at

00:32:01.440 least one employee the vast majority of them are freedom fighters statistically quantitatively the vast

00:32:06.800 vast vast majority i would agree it's it's only a very small slice who are truly mountain climbers

00:32:12.640 if you are a true mountain climber and for you and here's and here is where the rubber meets the

00:32:17.760 road before i go further there's an inflection point in virtually every growth-oriented business

00:32:23.600 and that is that the the company runs out of money if it's growing fast enough right and when that

00:32:30.720 happens you have one of two roads to choose from right option a is you sell some equity you give up a

00:32:37.360 little bit to you know as bezos did to 50 uh you know people in order to continue to fund growth or

00:32:45.040 your throttle back growth in order to contain 100 ownership and when a freedom fighter reaches that

00:32:52.880 fork in the road the decision they make nine out of ten times is to throttle back sure so if you reach

00:32:59.920 the fork in the road and you're willing to give up some independence as bezos did as jobs did etc 0.97

00:33:05.760 in return for growth you're probably a mountain climber you're probably happy taking on equity

00:33:10.480 etc i think the tragedy and you've seen it and you describe it in your comments i think the

00:33:15.040 strategy is when you have a freedom fighter take outside money and they think they want to grow revenue

00:33:20.880 but what they really want is independence how does that fight how does a freedom fighter know

00:33:26.560 how to be true to themselves in cases like this because you're living in a in an era where you're

00:33:32.880 being compared to because the mountain climber you don't need to tell the mountain climber the

00:33:36.640 mountain climber knows i'm not like anybody else yeah i'm not wired like the freedom they they don't

00:33:42.240 need to be sold that they're a mountain climber you kind of have to you almost have to try to convince

00:33:47.440 the mountain climber listen johnny enjoy the process this whole right is not about you go just

00:33:52.720 try to enjoy the process where the freedom guy is more like look is it really worth it why am i freaking

00:33:57.520 doing this i don't want to work saturdays i don't want to work so you can tell that but how do you get

00:34:02.000 the freedom guy to realize listen you just may not be the mountain climber that's willing to pay the

00:34:06.720 price at levels that you're nothing wrong with that how do you get that person to understand that

00:34:12.640 i think it's it's it's it's asking themselves the the question if you had to give up equity in return

00:34:20.720 to reach the goals that you have for your business are you willing to do that are you willing to give up

00:34:25.920 control in return for achieving the goals you've stated if the answer is yes then they're probably

00:34:32.240 a mountain climber if i think most of the time the answer will be no and if they're honest about it

00:34:37.520 you know once you sell a tranche of your equity your company is on a one-way track to be sold

00:34:44.400 because you have to get a return for that investor right so like the moment you take even if it's five

00:34:48.560 points ten percent twenty percent the the clock is ticking between the time you have to sell your

00:34:53.920 company and and so i think that really is really important for people to hear because again you owe

00:35:00.560 it to your investor to get them a return and to do that you need to get liquid makes sense by the

00:35:04.800 i love the whole mountain climber freedom fighter and crafts people mountain climber they you know they

00:35:10.800 want a challenge of doing something that's never been done before top of mentality freedom is to have

00:35:14.880 a few money craft is i want to master what i'm doing a specialized type of skill so let's go to a

00:35:20.320 different side here again on this topic before we go to the next part is you know uh selling to a

00:35:26.560 strategic selling to private equity okay selling to private equity is it fair to say that a private

00:35:32.320 equity uh thinking and maybe you'll you'll add additional things to this uh a private equity guy

00:35:37.920 or gal wants to buy at 8 to 12x and they want to sell later on at 15x uh and that's what their

00:35:46.720 formula is i'm a name i'll come and i'll buy you at 11 i'm going to sell you at 15 and you're going to

00:35:50.880 go grow another 30 for the next three years i'm going to be able to sell you at four times the valuation

00:35:55.520 i bought you at it's private equity purely mathematics is it purely math depends on on the type yes

00:36:02.640 they're in the buy low sell high game so they're trying to buy you as low as possible they're going to

00:36:07.120 use a lot of debt so they don't put a lot of money into the deal they use debt so their return

00:36:11.280 on investment if it works out successfully is very very very high so they're going to buy low and sell

00:36:16.400 high that's there's a there's a as a hybrid private equity group that i would characterize

00:36:21.920 as somewhere between a private equity group and a strategic and a hybrid is is usually rolling up an

00:36:27.200 industry and so they get a kicker so let me give you an example there's a private equity group

00:36:31.600 right now rolling up dental practices and so they're buying the dental practices at x

00:36:36.800 multiple and they're rolling them all together and they're going to sell down down the road now

00:36:42.080 because they're rolling these private these uh dental practices together they're enjoying

00:36:47.440 some synergy so you don't need five head office peoples if you have if you buy five dental practices

00:36:54.320 you probably only need one head office person you probably don't need a reception you can get away

00:36:58.480 with etc so you're getting to get to eliminate some of the overhead costs so that's one way they win

00:37:04.240 the second way they win is buying power all of the big you know oem manufacturers of dental equipment

00:37:11.120 so whether it's the lights or the chairs give rebates and discounts based on volume right so if

00:37:16.640 you've got one dental practice and you want to buy a two thousand dollar light you pay retail for that

00:37:21.200 right if you've got a thousand dental practices and you want to buy light for every one of your

00:37:25.120 practices you pay a much much much lower price and so look they they have lots of different ways to

00:37:30.880 make money one is buy low sell high two is use debt in order to leverage up just like buying a house

00:37:36.720 leverage up your return if the asset goes up in value three is stripping out some of the the costs

00:37:41.840 associated with uh with running two businesses in the same industry and four is getting rebates or

00:37:48.000 discounts based on volume and so it's a really attractive business model if if you buy low enough

00:37:55.200 and can sell high enough yeah and that's happened a lot by the way that's happened a lot of different

00:37:58.880 industries the industry is just one of them i mean it's happened in every industry it's happening in

00:38:02.640 ours right now where guys are going around picking them up left and right and they're saying look you're

00:38:08.000 doing 10 million here at 10 million you probably don't have a cfo you may have a ceo maybe you got

00:38:12.000 a vp of finance maybe a controller but you don't have a cfo 220 let me provide that cfo service for you

00:38:18.320 so we'll save you xyz money you don't have to worry about getting a general counsel i will use my law

00:38:23.200 for a minute are you going to be able to save that and and they're doing that and they're picking

00:38:26.400 them up at seven to nine in our field and then they're pulling them together then they have

00:38:30.800 leverage against the bigger insurance company now the bigger insurance companies are worried because

00:38:35.040 if they make one decision so essentially these guys are controlling the bigger insurance company

00:38:40.400 and the insurance companies are shivering so i'm seeing a lot of that happening i'm sure you've seen

00:38:44.320 it as well in many different industries so let's transition into a value builder value builder would you

00:38:50.080 mind taking a minute and breaking down your system of value builder i know you got 12 modules i have

00:38:56.720 it sitting here right in front of me if you don't mind just taking a moment and explaining how that works

00:39:00.240 for you yeah so value builder is practice management software for business advisors and business advisors

00:39:08.160 being coaches consultants m&a professionals business brokers who use the system as a way to start the exit

00:39:14.800 conversation with business owners and for those that are interested build the value of those companies

00:39:20.800 typical company that starts with with value builder a typical business that uses we have an intake

00:39:26.000 questionnaire like an assessment questionnaire the average score is 59 out of a possible 100 those

00:39:31.600 businesses when they trade are trading at around 3.5 times pre-tax profit those companies that come in

00:39:39.440 they learn about the eight key drivers of value and improve their score up to 90 or greater so these

00:39:44.960 are sort of our best in class provide you know businesses they're getting offers of 7.1 times pre-tax

00:39:51.760 profit or about double the average performing business and so we have a whole network uh of advisors around

00:39:59.040 the world who offer the value builder system to their clients as a way to build the value of their business

00:40:04.240 you mind if i go through some of the modules here with you so the audience can kind of hear it

00:40:08.080 yeah sure thing first one we got is uh benchmark where you're at module two scalability finder

00:40:14.080 construct a durable platform for growth then it's customer score capture the voice of your customer

00:40:19.600 okay three is growth potential four is recurring revenue which i want to come back to that

00:40:25.280 five is monopoly control which i'm curious to know what that means seven is uh i'm sorry that was six

00:40:31.040 seven is hub and spoke break free of the day-to-day operations of your business

00:40:34.800 eight is switzerland structure strength strengthen the foundation of your company nine is customer

00:40:40.560 score uh ten is valuation teeter-totter boost your cash flow and then eleven is the shortlist builder

00:40:47.520 pinpoint a list of your strategic buyers makes sense and then twelve is the envelope test decide when to

00:40:53.920 sell let's go back to recurring revenue and monopoly control can you give me examples of industries that

00:41:00.400 are typically transaction based type of industries how they can make it recurring i'll throw some of

00:41:05.680 them out there and see where your mind's going to go to if you've dealt with 55 000 businesses you've

00:41:10.640 analyzed i'm sure you have experience in almost every industry so real estate mortgages real estate and

00:41:16.400 loans are typically transaction based right hey we sold the house six percent three three million dollars

00:41:23.200 thirty thousand dollars eighty percent twenty four thousand dollars twenty percent we make our you know

00:41:29.280 six thousand dollars we're happy to go we do a hundred of those you know we're making money etc etc

00:41:34.560 how does a real estate or mortgage shop from your experience create a recurring revenue to help increase

00:41:41.280 their valuation yeah that's a really really really unique example and a really tough one

00:41:47.920 and so some of the models the recurring revenue models need you to go outside of your comfort zone right

00:41:53.440 i mean you want to talk about like a software product you can turn it on a sas that's easy

00:41:58.480 real estate is really really tough i think you have to ask yourself what is your expertise and how do you

00:42:04.880 create a membership organization around that so if you've got a specialty in selling five million dollar homes

00:42:12.560 that's probably a nuanced service that's probably some unique skill set that you have that you could

00:42:20.160 create a mastermind organization around of other people in other markets that do exactly that sell

00:42:26.000 five million dollar homes and so you're offering a mastermind access to that on a recurring basis so

00:42:31.520 for a thousand dollars a month you can be part of my mastermind there's an example of where you're

00:42:36.640 going way outside of what you do every day which is sell houses but you're basically meant you're

00:42:41.760 taking your expertise and you're turning it into a subscription model but i mean that's that's

00:42:46.720 probably you picked on probably one of the toughest ones and and one that requires the biggest leap

00:42:52.400 of of the of what you do every day i mean there's there's lots of other industries that that are going

00:42:58.560 through this kind of metamorphosis i had an interesting one the other day where i i had a chance to

00:43:03.760 speak to the car wash association so these are guys who have car washes you remember the the old days

00:43:11.200 we used to you know it was transactional right you get a tank of gas you get a car wash well as you

00:43:16.640 may know they're all in the midst of transitioning to recurring revenue all you can eat subscription

00:43:22.800 based car washes so now you're in fort lauderdale there's dozens of car washes where you can pay

00:43:29.440 thirty dollars a month and you can go any day of the week there's no extra charge it's unlimited

00:43:33.840 car washes it's a subscription model and that change you may say well why would they do that well it's

00:43:38.480 making those companies much much more valuable because of acquirers value subscription revenue

00:43:44.320 recurring revenue not transactional revenue at least not to the same extent so that's a that's

00:43:49.040 an industry that's being completely changed as we speak to become more recurring revenue but the

00:43:55.040 real estate one's a more challenging one but but certainly there'd be there'd be examples of ways

00:43:58.880 you could do it what would you do i mean you know that space pretty well i mean i look at gary

00:44:02.320 keller gary keller took the keller williams i'm not even in the business but he took it

00:44:05.680 and he got it to 190 000 associates realtors i think you know worldwide they've done a great job

00:44:11.360 they're killing it right now and their model isn't necessarily a subscription model their model

00:44:16.800 is a replacement model so you get started with them you give up i think the first three sales to

00:44:22.720 the other realtor that's training you and then you open up your franchise you're paying rent to the

00:44:26.480 cubicles it is a very different kind of a model that they have but it's hard to do on real estate

00:44:31.920 i got another guy named barry habich who on the real estate side he created a software he creates

00:44:37.840 content for us he created a software that dictates an exact uh value of the house you're buying today

00:44:47.200 12 months from now three years from now five years from now 10 years from now so let's just say you go

00:44:51.280 buy this house and xyz zip code they do an audit on the house and say the house is worth a half a million

00:44:56.000 dollars but the seller's asking for 550 you don't want to pay 550 because the value today is 500.

00:45:02.560 you may pay 550 because their formula says in three years that's going to be a 700 000 house

00:45:07.520 i'll buy it so they offer that for loan officers and realtors where they're presenting that to their

00:45:14.400 clients it's a very it's a subscription type of model i think it's got 20 30 000 customers that are

00:45:19.200 paying on a monthly basis and that's one angle to take it but straight realtor and loan officer

00:45:25.040 it's pretty hard to do what the brokers will do is they will create a broker fee per loan that's being

00:45:32.320 funded that the lo pays so if i fund a loan that's going to pay ten thousand dollars a commission no

00:45:38.000 matter what the loan is you give me a 900 processing fee so a lot of these brokers are making money off

00:45:43.840 their processing fee but that still is not a fully a recurring model that we're talking about yeah i

00:45:49.440 describe that as reoccurring that versus recurring very big and the difference reoccurring is like a

00:45:55.600 rash it comes back you never know when it's going to come back recurring is a predictable cadence by

00:46:00.640 the way question for you what is the difference between a car wash having 30 000 customers let's

00:46:08.480 pick a number 30 000 the average car wash gets how many customers a day is it fair to say 100 let's just

00:46:13.520 say it's a good size gets 100 depends if it's may or november in toronto so so let's let's use a

00:46:18.720 hundred okay so let's say 100 times 30 is what three thousand right let's just say three thousand is

00:46:24.080 the number here so you got two car washes one of them gets three thousand car washes no matter what

00:46:30.080 happens and they're paying whatever they're paying the other one has three thousand members that are

00:46:36.320 paying 30 bucks a month revenues identical identical revenue okay one just knows people gonna show up

00:46:44.000 because he's on the right corner the other one is i got members man they're gonna pay me this money no

00:46:47.600 matter what how big of a difference is the valuation of the company with recurring versus revenue just

00:46:54.320 coming in yeah i think most acquirers will play a premium on the recurring revenue i don't know what

00:47:00.960 it is in car washes i can tell you what it is in other industries i mean if you take uh let's take

00:47:06.240 security for example uh the home security where they wire up the sensors on your windows call the cops if

00:47:11.760 there's a break-in they have transactional revenue which is the installation revenue that they charge to

00:47:18.720 come and install the system in your house and then they have recurring or subscription what they call

00:47:24.080 monitoring revenue which is the 39 bucks a month we pay to monitor the system adt or chub or whoever

00:47:30.400 you use typical choir today will pay about 75 cents for every dollar of installation revenue

00:47:38.800 and three dollars for every dollar of monitoring revenue 75 cents per dollar of installation revenue

00:47:47.360 three dollars three dollars for every dollar of monitoring revenue said another way your

00:47:53.200 monitoring revenue your recurring revenue is worth four dollars for every dollar of installation

00:47:58.160 revenue so interesting that makes sense so and so that's the i mean that's that's that's the stakes

00:48:04.640 that we're talking about like when we talk about wouldn't it be nice to create recurring revenue

00:48:09.120 this is not a a a little bump to the value of your company this isn't like a nip and a tuck

00:48:15.440 this is transformational to the value of your business and that's why you know you you throw

00:48:21.520 out examples and people you know one of the things that that happens a lot i think is when we talk

00:48:26.320 recurring revenue again if you're in the media business if you're in the software business people

00:48:30.160 who get it understood it like we do we've been doing that for years right but when you're in the

00:48:35.040 manufacturing business or the distribution business or the real estate business or the legal business or the

00:48:41.280 retail business a lot of people just go that's not for me that's not the way our industry works

00:48:47.360 is the most common refrain i hear that you just you don't get our industry and they kind of smile

00:48:51.840 right and what i usually tell them is the story of h bloom so do you know anything about h bloom

00:48:57.040 no tell me h bloom is a business that got into business selling flowers right and if you know flowers

00:49:03.440 i mean this is a crappy business model right flowers the farmer cuts the flower off the stem it starts to

00:49:10.480 die immediately right typical flower store in america throws out 60 of its inventory wow right

00:49:15.840 why because it's dead rotting in the refrigerator unbelievable right typical flower store in america

00:49:21.200 throws at 60 seasonality mother's day and valentine's day is when 30 of the flowers get purchased 30

00:49:29.440 two days so you got 363 days of the year to try and sell flowers right and how do you do that

00:49:36.560 you sell flowers by and so look mother's day and valentine's day great days but then the rest of the

00:49:43.120 year you have to rent really expensive space at a retail corner the concourse level of bank tower

00:49:50.400 just to try to intercept some guy who's forgotten his you know wedding anniversary to sell flowers

00:49:55.360 right it's like it's a crappy business model on every dimension right they're going out of business

00:49:59.360 all you know all over the place these two guys brian burkhart and sandy panda came around based new

00:50:05.120 york based guys they said we're going to get into business selling flowers but we're going to do it

00:50:10.320 differently we're going to do it on subscription and here's the thing that they did which most people

00:50:16.160 miss when it comes to transitioning a transaction business model under a career model they didn't

00:50:22.000 try to create subscriptions for anybody who buys flowers they didn't try to look at mother's day and

00:50:28.560 weddings and funerals and graduations they said no who are all the people that buy flowers and they

00:50:34.240 looked at all the reasons people buy flowers and there's one tiny segment of flower buyers that

00:50:39.120 need them on a regular basis and that segment is hotels if you go down to the four seasons hotel in

00:50:49.120 miami you walk into the reception table there will be a beautiful bouquet a 200 bouquet of flowers

00:50:55.440 fresh cut flowers because that gives the image that it's a five-star hotel that manager of that hotel has

00:51:02.480 better things to do than walk down to the flower store and buy a 200 bouquet of flowers so h bloom

00:51:06.880 figured this out and they said every two weeks we're going to ship you a brand new bouquet

00:51:11.360 of flowers we'll get rid of the old flowers and we'll do that on subscription the typical average

00:51:18.640 lifetime value of an h bloom subscriber is more than four thousand five hundred dollars

00:51:24.000 dollars yeah you make one sale right and you're gonna get four thousand five hundred dollars worth

00:51:30.480 of revenue from that customer right and here's what that does pat and again i know you know this

00:51:35.600 but it changes the economics of the business totally now you can hire sales people to go call

00:51:41.360 in hotels give them an account and give them a car like totally change the economics uh and and and

00:51:49.120 the secret again if you're sitting here saying how do i transform my business my manufacturing

00:51:55.040 company my retail company my distribution whatever it is into a recurring revenue the secret is to

00:52:00.080 not try to dilute and water down your offering by figuring out all of the trying to come up with a

00:52:05.760 recurring revenue for all your customers the secret is to segment first and identify if there's a

00:52:12.160 little segment in your customer base that for some reason needs what you sell regularly that's the

00:52:17.600 person you want to build out your subscription model for so it's it sounds like i mean if you

00:52:21.520 can figure out a way to get i mean this this is nothing new the more you can figure out your niche

00:52:27.440 and not trying to uh be the business that's for every customer like the whole word holistic i remember

00:52:34.560 one time when i started my own insurance company i was sitting down with a guy in uh uh pasadena at a

00:52:40.320 sushi spot and i said tell me about your company's vision he says well let me tell you what we want to

00:52:44.880 to do we're going to be able to sell loans we're going to be able to do this we're going to be able

00:52:48.480 to do mutual funds stocks bonds money under management ria pnc auto insurance homeowners

00:52:54.640 insurance life insurance annuities and he just kept going he says we're going to be a holistic i

00:52:59.200 said how the hell do you expect one salesperson to learn how to sell all that stuff it's not that

00:53:04.800 hard i said that's a lot of learning to do right there he says what's your vision i said we are

00:53:09.840 going to specialize in selling life insurance and life only that's all we're doing he says but

00:53:14.880 you're serious seven you're 66 you're 31 you're 26 i can sell futures commodity stock i can sell it

00:53:20.640 he says nope we're doing life only and that's it you're going to give up the health insurance money

00:53:26.480 yes you're going to give up the loan money yes fast forward from there we got now 16 000 agents

00:53:31.040 nationwide we had a conventional last week at vegas with 10 000 in attendance with mike tyson nikki jem mario

00:53:37.440 lopez sebastian maniscalco because we went niche and what was so crazy about it is when we were

00:53:43.520 sitting down with buyers and i had no clue what was going on it's by the way biggest credit goes

00:53:48.560 to reading books like yours i read your book in 2012 and i'm trying to i read yours and i read the

00:53:53.840 other one there's two of you one is built to sell one is built to last is built to last eric reese i think

00:53:59.200 and then you're no built to last is jim collins the not built to last then built to sell

00:54:04.800 and then there is uh the lean startup is eric reese startup yeah so i read all i read like 50

00:54:11.120 of these books of startup simultaneously and i draw something like man this guy makes sense this guy

00:54:16.800 makes sense so as a person who doesn't have an mba as a person who doesn't have a four-year degree

00:54:22.160 two-year degree i don't shadow a ceo or a founder my source for guys like you who wrote your books

00:54:27.840 where i can lean on you for feedback to see how i need to build my business and i cannot even tell you

00:54:33.440 what that did for our business so for somebody that's watching this if you haven't read i can

00:54:38.960 only speak on one book all the other books i'm sure if you uh if built to sell was a great book

00:54:44.800 for me i'm sure the other ones as well we're going to put the links below for all the books but the one

00:54:48.160 that made a big difference for me was built to sell i think anybody that's not even thinking about

00:54:52.960 selling their business should read this book and i think anybody that's working for somebody that

00:54:58.240 doesn't necessarily know how to prepare their company to sell them maybe you're the cfo co i think you

00:55:02.880 also need to read the business because you become a better value person to your partner but last but

00:55:08.160 not least before we wrap up here and send you off switzerland structure strengthen the foundation of

00:55:15.760 your company you're from canada why are you giving a shout out to switzerland because they're obsessed

00:55:22.240 with independence okay so like if you look at the country of switzerland it's it's i mean if you're

00:55:27.040 looking on a map it's this tiny little blip right beside france germany italy if anybody should be

00:55:33.760 part of the european union and like be an active member in europe it would be switzerland but no

00:55:38.240 they don't even use the euro currency right they didn't join the world wars they didn't send troops

00:55:43.200 to iraq why because they want to remain independent they want to be able to not cozy up to any one

00:55:49.760 geopolitical faction because they want to be independent and so we gave the name the switzerland

00:55:54.800 structure to a company that is independent of any one customer employee or supplier you can't have

00:56:02.480 too much reliance on a single customer supplier or employee and an employee i think most people get

00:56:11.200 customer concentration most people have heard i think increasingly supplier dependence is also a big deal

00:56:19.520 where an acquirer looks at you and said you know like an amazon reseller right now right i did one

00:56:24.800 where uh i did one with a guy named ben leonard who built a company called beast gear they did like

00:56:28.880 straps for working out and like great business but all on amazon and so when he went to sell it one of

00:56:35.440 the concerns that the acquirer had was you know what if amazon delists you what if they demote you and

00:56:41.760 their search algorithm if all of your revenue is amazon related it's a problem i did another interview with

00:56:47.760 a guy named adi pinar who built a company a checkout software and cart abandonment software for

00:56:54.320 shopify well shopify if you've looked at the stock i mean it's going through the roof right and all you

00:56:58.960 know all boats lift you know rising tide lifts all boats and so he's like latched his cart onto a

00:57:04.720 juggernaut which is great but then when he went to sell it they're like but what if shopify creates

00:57:10.720 their own cart abandonment software you're out of business and so any any dependency on a single

00:57:19.040 customer employee and increasingly supplier is a challenge for an acquirer that's just powerful

00:57:24.960 right there by the way the monopoly part was that just the fact that hey you don't have a business

00:57:29.040 that it's easy for barrier to enter that anybody can go and just compete against you is that what

00:57:33.280 the monopoly concept is yeah it comes from warren buffett's goal of investing in businesses that have

00:57:38.240 a monopoly so pick one thing dominate don't cross sell i got you okay great well listen it's been

00:57:43.120 great having you on i appreciate your time i i hope the audience uh uh learned just as much as i did

00:57:49.120 john we're going to put the links below for people to order your book and we're going to put the link

00:57:52.720 below on folks to find you do you want us to drive them to twitter or your podcast you know best place

00:57:58.320 to go is built to sell.com value attainment we actually put together a little page for your guys so

00:58:03.680 you can get a yeah a bunch of downloads a bunch of videos there's a there's a checklist for the

00:58:08.640 nine subscription models it's just built to sell dot com slash value attainment we're going to put

00:58:13.520 that link as the first one to drive traffic to it but with that being said thanks for being a guest

00:58:17.520 on value attainment this was great thanks pat so this is the first time brooklyn is making it in a

00:58:22.320 video every baby's made in a video before now it's brooklyn's first however what an incredible interview

00:58:27.600 to sit down and talk to a guy whose book impacted my life in 2012 when i read it kirsten i know what you

00:58:32.800 took away from it comment below i got two other videos i want you to watch one of them is with

00:58:36.880 the billionaire chip wilson who founded lululemon if you've never seen it it's absolutely amazing baby

00:58:42.400 literally it's ridiculous video you're going to watch it one day the other one is how to scale your

00:58:46.640 business as an entrepreneur if you've never seen it click over here haven't said that if you enjoyed

00:58:50.720 the interview thumbs up and subscribe to the channel take care everybody bye-bye can you say bye or no

00:58:55.040 no no it's all good i took it as a bye bye

Valuetainment - August 27, 2021

Proven Strategies To Maximize The Value Of Your Business - Built To Sell

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