Ep6 - Mt. Everest Part 1 - Revenue Planning

Welcome back. Thanks for tuning in. I'm the ESOP guy and let's continue on a journey to an ESOP. This podcast is for those that are thinking they might want to become an ESOP company. One major area that really needs to be considered when thinking about becoming an ESOP company is the idea of revenue, revenue that you are potentially going to have in your company in the future. I'm going to compare this to climbing the highest mountain. Mount Everest is a 29,35 ft or 8,848 m high summit. It's the tallest mountain summit in the world. On the top of Mount Everest, the wind can blow over 200 MPH. The temperature can go down as low as 80 below Fahrenheit. It takes 40 days to climb Mount Everest in order for the body to adjust to just the right altitude. The this podcast that we're gonna talk about today is about the challenge of climbing higher with your company's revenue and planning for the future revenue of your company in a bold way. Speaking of boldness, I just got back from Dallas, Texas, and I realized how big that. That whole state of Texas is and when I think about revenue, I think about big revenue. And when you think about Texas, you think about big, big places and it, and it absolutely is. And I had the opportunity to go to the Southwest chapter of the ESOP Association and met some very awesome ESOP folks and had a lot of great discussions with existing ESOP companies and also with ESOP professionals. I got to talk to an ESOP attorney. Who's experienced in transactional ESOP document plans and all, all sorts of ESOP transactions and The um conversation was interesting and and it kind of validated some things that we're talking about on this podcast, and trying to bring very helpful information to people that are business owners that are thinking about becoming an ESOP. So talking about the podcast for a second, I wanted to put a credit out to my son who is Riley Hayes. He, he's 17 years old and he's the one that wrote the music for the intro and the outro of the podcast. So great job, Riley. Um, as you know, this podcast is designed to help business owners with issues as it relates to ESOPs. If you like what you hear, please subscribe and share it with a friend. So Mount Everest, today's episode, episode 5, to hike the highest summit in the world and risk everything in some ways is some for some people crazy, um, and as you go into business and you're hiking the highest summits with your business and you and you go to extensive lengths to increase your business's revenue, it's almost as crazy for some people to do that, but it's a really, really important um aspect of business when we think about it and Building revenue is, has got a lot of challenges to it. And it's, as we look at the ESOP process, it's very important to identify what's your strategy for revenue. Now, I have never hiked Mount Everest personally, um, but I have hiked a few other mountains. As a kid, I grew up in going to Yosemite National Park, and it was a highlight of my childhood and my early college days to hike multiple times to Half Dome, the top of Half Dome in Yosemite. In fact, I hiked up Half Dome with what is was then my girlfriend, who is now my wife. And that, on that hike, I really wanted to propose to her. And I thought that that would be a wonderfully great romantic story to share. Um, but I was just chicken. And at the time I went up, I wasn't able to do it. And, um, and really just kind of chickened out on it. And so, When I think about the opportunities to build revenue in our company, sometimes we just have to kind of stop being chickens and we have to just go for it. Um, we did hike up and we made it up the up the top of Half Dome. Um, we sat up and we really looked at the mountain or the mountain view, and we took in God's creation and it was just a beautiful thing. And I think the other, the other side of this is getting up the, the mountain on your revenue goal is such a, an, an important thing, but it's also important to have the right view when you get there. So, whether you're a business owner, a salesperson, working for a business or really part of the team that wants to grow your revenue, sometimes we can just get so focused on the sale, but miss the big picture. Hiking up a mountain takes a lot of focus and energy, but we need to be thinking, why are we going? What is our plan to get there? Um, or have we gone high enough and does it make sense for your company to look at other ways to grow your profitability as opposed to revenue? These are all major questions, and they're important to be thinking about because the, the concept of, of the ESOP is, is not just what you did, maybe the mountains that you've hiked, the revenue that you've, you've booked in the past, it's what you're going to do more, more so than anything else. And when you talk to a client about that, it's a very difficult thing in some cases because they're not sure what's going to happen. I mean, how many, how many people know what the economy is going to do over the next 5 to 10 years? Nobody does. How many people know what politics and legislation are going to yield and that kind of risk to our businesses. Nobody, nobody does. And and when you start thinking and you could, when you start thinking about revenue. You can certainly start overthinking revenue in terms of, of putting yourself in a place where it's it's difficult to start to dream and think about what your company could be. The first thing I would say is every business needs, whether you're going to an ESOP or not, every, every business absolutely needs some type of overall sales plan. In terms of leading your company well and helping them to know what you're trying to do. And of course, having it done on a one year increment is very important so that you, you have in a sense a one year budget towards what you think you're going to hit. And I would argue though that having a one year budget that can also be very limiting because. A lot of things happen in 1 year and 3 years and 5 years. And so I would, I would first recommend that the business owner and however they do that and their management team, um, develop a revenue plan. The one of the best ways to do this honestly is to get off your um out of your company and do some type of formal retreat or an informal retreat where you're challenging your people to think about the future. Successful and really healthy companies that I've done business with do this at least once a year, every year, if not more than once a year, like multiple times through the year. So, in that meeting, whether you do it offsite or not, you're gonna want to start with the big picture in mind. So I would imagine if I'm planning to go up Mount Everest, I'm thinking, how do I get up here? It's gonna take 40 days. I'm gonna have to plan for getting to the top, but what is the top of your business? So let's start with a 10 year sales goal for your company, and then a 5 year goal from the 10 years. So we're working our way backwards, then a 3 year goal, and then a 1 year goal. Now, please listen closely to this next part. Don't ask how. Just ask what? And make it bigger than you can imagine. If you are the CEO that I'm talking to, and it's time to think big. And there might be that pause of, what are you talking about, you know, should it be a $100 million dollar company, Should it be a $200 million dollar company? Should it, should it be, um, it doesn't matter. As long as you're, you're going way beyond what you think is possible on your 10 year goal, why is that important? Because so often we are historically thinking about what our goal should be, and we get stuck in a corner on challenging our organization to think much bigger than that. So, in addition to this, as you start thinking about that, start thinking about what new products and services will, will you expand in the future that you're not currently offering existing customers and sometimes a new product or service isn't an absolutely new thing that you've created. And invested research and development dollars into. Sometimes it's, it's a continued modification of something or an expansion of something. Maybe you're, you're selling into the healthcare industry and you can now sell into the construction markets or the manufacturing markets or there's other, other industries. So maybe you're just expanding that existing service, but you're modifying that product or service for those applications. So think big in terms of what that expansion plan looks like. What are your major trends in your industry? Think about the latest technology and automation and how, how do you think it will change the way you do business in 10 years, in 5 years, and 3 years? The prediction of those, the companies that are able to predict the future in those areas and in a sense be right, obviously it's going to be more successful. But if you're not trying to change your business with the changes in technology and automation, I will, I will say that your revenue plan itself is going to unfortunately be lacking something. Most businesses because technology is changing so fast, are going to have to adapt. To the changes in technology and understand that their customers are changing. So if your revenue model doesn't include how your customers are adapting to technology changes, then you might have more of a problem than trying to grow your revenue. So, incorporating a little bit of research and assigning that out to your team, it would be a really important um piece of advice to build into your planning, your revenue planning or your sales planning um activity that you're going to embark on. Now when you get to this. Say 1 year to 2 year to 3 year mark, it's time to then start thinking about how does your revenue transform your business and some areas that you're gonna want to be thinking about is um the reality of, of more revenue is going to necessitate the reality of other things that are going to have to keep going and growing with that revenue. So things like Facility size. Facility location. And Opportunity within the facility to, and in some cases, you know, move your facilities towards customers or, or get closer to certain areas, geographically it's going to be important. And how does that fit into your revenue model? What is the structure of your employee base when it comes to the existing revenue and what would it be going forward and additional revenue? So, What would be the direct additional direct labor that you would incur? How many more administrative people would you need to need to support that? Um, as your business grows, you're, you're constantly facing the investment choices when it comes to people. And the investment choices with people are also going to be um impacted dramatically. By the opportunity to leverage technology. So how are you leveraging technology and especially when it comes to um giving your people more tools to use in their business and freeing up more time to do other things. So what sort of efficiencies have you created in this, in this additional revenue model? Again, to climb the highest mountains, we have to have the right stuff in our backpack. We have to have the right equipment to make the journey and make that journey well. As you look at your, um, what's really in your company, honest assessments are gonna have to be made about your leadership structure. Do you have the right leadership team to get you to where you're trying to go? A lot of times when we think of revenue plans, we're thinking of our sales department and you should be. You need the best sales people that are, that are out there. If you're going to grow, you're gonna have to look at what their activities are and what they're actually doing. But then there's other aspects of it because your, your revenue plan as is your company grows, is going to necessitate more um people at the leadership level that can, can help build and invest and and structure you towards um sustainable growth to where you're, you're not trying to hit something and you don't have the ability to manage the expectations of clients, the expectation of more staff. And, and the, the complexities of managing larger companies, it's going to require higher quality talent as well. So assessing your, your leadership team is going to also bring you to this idea of, of your own management transition plan which we talked about in episodes 2 and 3. And how important it is to be weaving into that leadership structure, the, the right mix of of transition towards responsibilities in your company. Other, other aspects of revenue growth are going to be, how are you protecting your company from a patent and trademark standpoint? Have you thought through the IP and are you at the stage where you need to be stopping everything and continually looking at protecting? What sort of research and development are is your company making to support this revenue plan? What does it need to, to invest in in order to create the new products or the new services that will, um, That will um fuel the growth of the future. And then finally, looking at the revenue plan, and this certainly isn't everything, but looking at the international markets, how is your business scaling up globally? How does it do business in other markets outside of your domestic market and looking at those opportunities in your revenue plan? I guess the last one would be looking at that revenue plan in terms of how do you incorporate if it's necessary, an acquisition or a merger into your company so that you can accomplish it even on a, on a more strategic basis to where it's not 100% organic revenue growth. So don't play it safe, you know, as, as companies look at this issue, far too many companies in the stage 2 of business that are trying to break out of a stage 2 level company get stuck because they're, they're, they cannot think past the um what they did last year, and they, they need to be setting their sights on bigger horizons. And all those sales plans are not the only aspect of your vision, it is a very important element of your vision as you as you build out the vision of the company. Um, I'm not condoning a plan to go to Mount Everest revenue. And not have uh a stunning great view. So what do I mean by that? There's nothing worse than getting on top of a mountain and seeing something you don't like. Um, which means you built something that you just aren't really happy with. You're not making the money that you should be making on profitability. You don't have the quality of, of time in your organization. You have a culture that you've sacrificed. And so I want to make sure that that's a very important part of, of your plan. It's a holistic plan. It's not just trying to get to the top of the mountain. We want to enjoy the view when we get there. So When you look at the, the questions you're making or the questions you're answering when you look at your revenue forecast, you have to answer the question of quality and how you look at each client, each customer, and how do they measure up in your quality. And so as we start to look at that issue, what I've decided to do in this podcast because of just the very beginning parts of it, took up some time. I want, I want to move this into part two, Mount Everest part 2. Where we're going to talk about the quality of revenue in more detail. And as you start thinking about that, um, and, and get and get ready for that next episode, ask yourself these questions. Um, when I, when I reach for the stars and I build this revenue to where it needs to be, how will that impact your forecast? Because when we come back to the, I did the episode on Nostradamus with the forecasting, when we come back to the idea. The revenue plan or the sales plan doesn't necessarily work for $1 for dollar in the, in the forecast. It's just what you're trying to target. But ultimately, when I start thinking about the, the company that is going through the process of trying to sell their company to an ESOP. It's gonna be very important for them to have a very clear revenue plan with very clear, a clear vision and targets, which helped them to support a very clear forecast that then provides um a pathway towards cash flow. So, you know, that's how, that's how that connects, but. The beginning part of of thinking about the forecast and the cash flow is to understand that that company has to be led well and there has to be targets in the future. And and those targets, as I, as I summarize it, need to be balanced in all the aspects of your, of your business. And, and when it, when revenue targets become out, become more important than balancing your business, then they don't work very well. So just trying to think about that and balancing it. So prepare for the, the future, do your sales plan, get on an offsite retreat, and on the next episode, we'll talk about the quality of revenue and the breakdown of revenue, and then that's going to pose some valuation questions that we're going to get into as well. So tune in for, for Mount Everest part 2. Thank you for listening to Mount Everest part one. And we look forward to um the next podcast episode. If you like what you hear, please subscribe to the podcast and share it with a friend.