This Is What It Takes to Build a Business, Vol. 3, Part 2

[Music] hello everyone welcome to part two of our special 21 hats podcast yearend review I'm your host Lauren Feldman this week we take another look back at the conversations we had over the past year highlighting some of our happiest smartest and most insightful exchanges along the way we discuss Whose advice is worth taking whether any business can be remarkable which businesses should try EOS why family businesses can be so vexing what to do when big businesses refuse to pay small businesses how to price services and finally the moving story of the moment that propelled one entrepreneur to first get fired and then to launch a remanufacturing business that would hit $60 million in Revenue in less than 5 years there aren't many places where you can hear entrepreneurs talk about the real life problems they are confronting right now today as they happen with no guarantee of a happy ending but those are the conversations I have every week with Shan busy of Kinesis Paul DS of Paul DS cabinet makers Jay gos of artist frame service Mel Gravely of triversity construction Jennifer Karen of SB Expos and events Liz picarazzi of City bin Jackie Russo of brand Russo Sarah seagull of seagull Communications William Vander blumen of Vander bluman Search Group and Laura Xander of Jimmy beans wo they come from a wide range of Industries and geographies and experiences but they all share a willingness to talk about not just what they get right but what they've learned from getting stuff wrong the episode is titled this is what it takes to build a business volume 3 part two the first highlight comes from episode 27 a Silicon Valley bootstrapper tells all the bootstrapper is Sharon Gillan water and she really did tell all including precisely how much she made selling boardroom insiders the business she'd bootstrapped by sharing that information Sharon learned a surprising lesson which is that the founder of a relatively small bootstrap business can actually walk away with more money than the founder of a venture back business that sells for far more now let's go back to that Tik Tock video what exactly did you share and why did you decide to share it well after I left the company you know I I started talking to people who maybe found me through Linkedin or referred to me through one of my contacts and and these were entrepreneurs early stage entrepreneurs who wanted my advice about something or other and the more I talk to people the more I realize that I knew a lot more than I thought I did and that it was a lot more useful to these folks than I thought it would be when you've been doing something for a long time and it's easy you just think like everybody knows it you know oh everybody knows this well they don't and if you talk to people you can provide a ton of value so that that's when I started thinking about the book I then I got on Tik Tok and the reason I got on Tik Tok is because I was trying to sell the book and no publisher would take me on they said you don't have a platform you know you need to have 20,000 followers or something like that and I had intentionally removed myself from most social media for you know obvious reasons politics and all this misinformation that was going on and so now I found myself in a situation where I had to get back on and I met a woman who's written a book and and she said get on Tik Tok and I'm like what I said I thought that was just for dancing she said no there's a she said there's a lot of business content on there it's a fantastic medium for building an audience and so I got on Tik Tok and I started making videos just like one to three minute videos on specific topics about entrepreneurship like how to validate your product how to find your product idea how to motivate your team and I was gaining followers but then um my son who's a genzer said you know what you've got to make he said you've got to make a video on how much money you walked away with because that's really what everyone wants to know and I thought that is so true because when my partner and I we'd hear about someone we know selling their company and we'd be like for days we' be like how much do you think they got well and then you know we try to do the math and we'd be speculating but nobody would ever tell us and so I thought I've got to do this and it was very scary because I I basically made the video that said here's how much we sold for here's how much um we paid in fees to the bankers accountants lawyers here's how much we gave our employees here's how much the other shareholders got here here's how much I paid with in tax and here's how much I walked away with and so I made the video and then I didn't sleep for it was scheduled to send and I didn't sleep for like three nights worrying about it and then it went out and it kind of you know it did well but then maybe a month in it just exploded I was taking a walk with my husband and my dog on a Sunday and then my phone just started exploding I'm like what is going on and um a couple of venture capitalists had posted it uh who have huge followings and then so that was on a Sunday I think on the following Tuesday I got a text from a friend of mine and she said my daughter just saw you on Twitter and I thought oh no because I was off Twitter I I hated what was going on on Twitter I thought it was toxic and so I didn't post it on Twitter but not realizing that just because I don't post it on Twitter doesn't mean that someone else can't post it on Twitter so it got over a million views on Twitter and a ton of comments and I was so terrified to open the comments I made my son read them to make sure that I wouldn't you know verified and that opened up a huge new world to me of people wanting me to come on podcasts or people wanting me to come to an event and speak or people wanting to me to you know formally consult with them so that did actually open up more opportunities that are generating a little bit of Revenue which is fun but most importantly and most enjoyably just meeting some amazing entrepreneurs that has made me um realize that even though the a lot of the most high-profile entrepreneurs are you know they do behave like the vast majority of the rank and file smaller scale entrepreneurs are amazing people who care about building great companies that serve customers and employees alike for our listeners who are not on Tik Tok can you tell us you you sold the business for 25 million how much did you end up with I got a little over 13 million and after all the taxes I walked away with about n million sounds pretty good to me yeah it was great you know it it's amazing in episode 208 Whose advice are you going going to take Paul Mel and Sarah talk about the tricky calculation all entrepreneurs must make between sticking to their vision and accepting advice Sarah explains why she's reluctant to take advice from people who don't really know the inner workings of her business which is pretty much everyone Paul on the other hand says taking advice from Outsiders helps save his business during the Great Recession and Mel talks about why he thinks every business should have a board of advisers I want to talk about advice today uh specifically how do you know when to take it uh I I've long thought this is a real challenge for most entrepreneurs because you have to be pretty willful and independent to go into business there are always a lot of people telling you you're a little bit nuts to do that but at some point you probably have to be willing to learn from others who may have more experience and expertise but of course even if you're open to taking advice it can be tricky um sometimes as I can certainly attest you can have very smart and experienced people offering you very conflicting advice so to start I'd love to hear maybe about the worst advice that each of you remembers receiving in your entrepreneurial career anybody oh I've got some my old partner who I formed a partnership with in um insisted that if we simply grew our sales volume and didn't worry so much about efficiency on the shop floor that everything would be fine and that's an enormous mistake because we lost a ton of money as we were trying to grow and then the 2008 recession arrived and we were in serious trouble now I did survive it but ever since then I've paid much more attention to profitability rather than just how many dollars are coming in the door so that's that's a pretty big mistake who's who can match that well Paul first did that advice or that uh decision make sense to you at the time no but part of the the issue back then was that I had never really gotten any mentorship from anybody I taught myself my trade and taught myself business to the extent that I knew it which was not much and my partner was older than me uh had been owned several Manu ufacturing businesses and was wealthy and I figured well he must know what he's talking about but he didn't is the short answer and the longer part of that story is that all the businesses that he had run previously he had done with the help of his wife who was a CPA and was the one who actually kept track of costs and profits and productivity and all that and I believe I may have told this story before but about a month after we formed our partnership and she had started working on my business to get the books in order and sort of get everything ship shaped she just died in her sleep and so all of a sudden I had a partner who was deprived of I mean he lost his wife of many years it was very sad but he was deprived of the Steady Hand and the attention to detail that had been a large part of all his previous success and it took me a long time to realize what we were missing uh and so it's a you know it's it's a bad luck story more than anything else I think that if Mary had continued on working with me then we probably would have been in much better shape Sarah how about you do you remember the worst advice you ever got so I'm always very hesitant to take advice in general because that's what I'm talking about yeah it just because I mean when it comes down to it nobody knows your business as well as you do um and there are nuances and factors that nobody is ever going to be able to know as well as the person that created the business um I was given advice and I don't want to say that it was bad advice it was just not it wasn't going to work with the model that I was going to create it was advised of not taking any clients for less than $10,000 a month retainer and you know I was like okay well that will you know if we do that that will in my mind I'm like that will get us you know to a nice cushiony re Revenue number pretty quickly etc etc but what it did was it it gave me clients that I wasn't necessarily passionate about you know they were the clients that had the big wallets and big budgets but they weren't super interesting and I passed on clients that I was like curious about and passionate about and interested in and invested in and really wanted to see their success because I was trying to meet that number and uh as you know last year I had some of some big clients that weren't necessarily in that bucket of making me having that you know 10K or month or or more um leave last year and it put me in a hole and so I spent the last six months rebuilding a company based on you know small to midsize retainers with more interesting companies that are more in the lifestyle space that make me happy and I'm I'm passionate about and I like the owners and maybe it was good advice maybe it was bad advice but it wasn't advice that I should have taken both examples um and this idea that entrepreneurs are hesitant to take advice all come together for me in it's going to be like sound like a soap box but this idea of having a board around you because Sarah's point that no one knows the business like we do is so true and I don't I don't think there's a way to get 100% around that but what I do want around the table are people who um are as close as I can possibly get to knowing everything right they're not going to be me because we feel things about the business that we can't even articulate right but when you have a group of people around you that you are talking to regularly they understand your gold of jectives they know what gets you fired up they understand the strategy they saw you struggle before they can help you look around corners their advice I think is more informed about the total situation and not just about their opinion based on God knows what that right so Lauren I would I would offer you know I've got uh at least a story or two of people I shouldn't have listened to but when I look at who's around the table with me as a board I have found they give me Good Counsel because they understand understand what I'm trying to accomplish better and their council's better it's more contextualized than not it's funny I was going to ask you about that Mel because you mentioned this uh on a previous episode and I think in fact after we stopped Taping that episode I think you said to me something along the lines of you wouldn't run a lemonade stand without a board um which I think is pretty unusual for small businesses I think you're more the exception than than the rule yeah yes St statistically I'm sure you're right um but it's because I don't want to take ad hoc advice I don't want to meet someone occasionally and have them tell me what they think because they can't possibly have the context to answer to really guide me where I want to go they were guiding me based on what they think should happen but as Sarah just said you know making her heart dance around certain clients is something anyone giving her advice if they don't get that then they're not going to be talking to her in that context and you know why should we listen to those people in episode 209 can we all be purple cows Sean Jackie and Jay discuss what it takes to stand out these days especially if your business like most businesses isn't exactly the next big thing can any business make itself remarkable so you think Jackie if somebody comes to you and looks like a commodity business pretty much any business you can turn them around and make them not a commodity business we did it for a milk company uh you know Dairy is probably one of the biggest Commodities and I just use air quotes out there and we were able to work with this Regional Dairy and helped them go from you know zero market share they were entering new markets for the first time and within about six months had 18% of the market share against Organics Heritage and storebrand even though they were not as healthy as organic they were more expensive than the store brand and Heritage means people have just been buying it for generations and generations and you just buy the same thing that everybody bought but we we were able to carve out a niche for them Sean let me ask you kind of the same question but a slightly different way uh as I'm sure you're well aware Seth Goden wrote a book called Purple Cow transform your business by being remarkable it's a very readable book and I think it's obviously good advice if you if you can distinguish yourself you should probably distinguish yourself but can we all be purple cows I remember meeting a guy who basically his his business was buying scrap steel like that's it you know he's buying scrap steel from manufacturers who have you know off cuts and waste and so forth and boy that is a tough business because the buyer in that space is some sort of a like procurement type of person and so they're buying largely on price and it's hard to defeat that I ultimately walked away from the engagement even though he wanted to put money on the table because I I could tell that I don't think he was willing to do what would have needed to be done to be a purple cow and and I think that for companies where they're closer to being a pure commodity you have to be a lot more uh bold and usually that boldness comes in either the form of culture where you're really creating a place where where employees are really engaged and doing amazing work because then the customer feels that and then you're differentiated on that or the offering like the process the way you do things is significantly different in the way you deliver that commodity um and and both of those things require a lot of um vision from the leader and a lot of times what I have found at least in my experience is that a lot of commodity based businesses um the leaders are really fixated on winning by Price you know by by being cheap cheaper than the other guy as opposed to Service delivery process or culture well you left a whole piece out though there's a whole piece to that which is what if the company figured out how to do it cheaper because for I mean I've sold scrap when I cut aluminum frames we used to sell barrels of you know the scrip yeah what if they figured out oh they've got a good location that's closer to the customers therefore I'm paying my truck driver a lot less to go pick up every day and they figured out how to get it to the scrap recycler cheap that is another angle that somebody figured out Walmart someone figured out how to do things cheaper and pass the savings along so that's the commodity but you can still you know win by getting your cost down yeah I I think that's a really that's a really good point you know you might layer into that like say technology right so you could you could put a piece of technology in place that make you made you far more efficient than your competition I tend to think that those kind of moves um um they can be copied more easily uh than than the moves that I'm suggesting um so that's why I go to those places first is that culture is really hard it's really hard to do in a commodity space so if you can do it it's much harder for your competition to catch up to you it's much more of a mode strategy I think the way you deliver your service to your customer something that we've called the proprietary way which is a combination of people service um really process that that amalgam is is a sort of a secret sauce that's really hard to copy um versus you know a technology play once your competitors figure out that technology if they can buy it off the shelf or build it themselves it's a little easier to copy so I'd say yes yes ands to what you're saying Jay well and I'll just jump back in you know Sean we're about 90% B2B too and so sure we've dealt with companies that make widgets and you know small intricate details inside their Industries but I think there's always a way to separate if you didn't start your business knowing you were going to do something different and better than the rest of the competition why' you start I think we have someone here who might be able to answer Jackie's question and that's you Jay I I hope you don't take offense at this but isn't picture framing something of a commodity business how how many picture framers were there in Chicago no way let you answer how many picture framers were there in Chicago when you when you opened up back in the day of the Yellow Pages I remember counting the number of frame shops this is probably 20 years ago there were 69 frame shs you opened 40 years ago right so I'm just saying it's Peak which was probably in 2000 25 years ago 225 years ago there were 6 and you got to remember the framing industry was in a boom for many years because of the Baby Boomers and they framing pictures the framing industry really basic I've been there from the beginning when I started it was just starting to pick up steam and it grew TR tremendously for the next 45 years and then it got mature so then what happened the chain store started to pick it up and and now the independent frame shops are shun so there used to be 69 frame shops in Chicago and now there is about 22 and nationally there were 25,000 frame shops and now it's 6,000 so it's a commodity in that a lot of people do it but it's certainly not a commodity if you do it right there's a huge difference between a well-run frame in business and someone who just showed up and is doing mediocre framing in episode 212 why you should run your business on EOS or not Sean Paul and Laura call on their own experiences to assess whether the EOS operating system as explained in Gina Whitman's book traction lives up to its promise of freeing owners from frustration helping them put the right people in the right seats and generating all of the scale they want Laura hired an implementor to install EOS in her business years ago Paul took more of a do-it-yourself approach picking and choosing from the book's suggestions and while Shan hasn't tried EOS in his own business he has seen how it works in lots of client businesses as a result all three have strong opinions about what types of owners and what types of businesses are likely to do best with EOS Paul if I'm not mistaken you kind of DIY a version of EOS uh what got you uh interested in doing that well I had seen one of the members of my vistage group be extremely successful with it as a matter of fact the guy who I think is the smartest one in the whole group and that's that's saying a lot implemented it pretty much by the book and he just had a great business which he recently sold for 25 million bucks and it was a company that does uh valuations of small businesses for SBA lenders and he grew it from I don't know two or three people all the way up to 20 some but what always caught me were were his margins he was taking home 25% of the gross which is astonishing do you think that was because of EOS that he had that kind of margin this guy would succeed probably no matter what but what's interesting is that he felt that it was helpful and so if you see someone who's really smart and has a has a lot of experience in running different businesses and he came from a background his family is from India and they immigrated to the United States and sort of the classic immigrant story and apparently in each generation the older ones would get together and figure out which of the nieces and nephews and grandkids was going to be capable of running a business and they got him started very early I think he was running uh like a some Wing Stop franchise or something at age 17 and then they bought him a couple of liquor stores and he ran these things and uh and it taught him a lot and then he started his own business and at the end of all that experience and help he's like I need EOS and then he got it and it worked out very well for him so you don't ignore that when you see it happening now when I read the book what what I felt was that uh first of all I I gave my people the little quiz they have at the beginning and it's it's like I don't know 20 questions or whatever um and it gives you a score that's supposed to I believe demonstrate what a what a screw-up you are but it turns out that we were actually scoring in the you're doing great range so it's like okay um and I just didn't feel all that compelled to to then follow this book and you know do every single thing in it because apparently I was already doing a lot of the stuff in it and the one thing that I have never that I identified as a weakness then and still have a weakness now is laying out something like a five or 10year vision for the company because I'm not sure particularly back then exactly what it was going to be and I'm still a little uncomfortable projecting that I would rather have people focused on the nearer term because honestly 10 years from now I better not be in this business and I don't think that's a big motivator for your team H andly like hey hey I'm planning to cash out and go smoke cigars on the beach and you people can stay here and keep working I don't know why that would motivate anybody is there anything in particular that you took from that experience that is still working for you well I think that that having the right people is is is critical and I have a pretty good idea of what kind of people that I want to hire and one of the things that they talk about in the book is that the people who are with you at the beginning are unlikely to be suited to a bigger company and I think that that's absolutely true that at the beginning you don't know how to hire you just grab everybody who's who's happens to be around and often the kind of people who want to take a chance on a very small company have their reasons for it and that may not be something that translates into a bigger company but I think that one of the weaknesses of the book is like so much advice it's aiming at a type of company and a type of growth and a size of company that's just way Beyond where I'm ever going to get like I got 28 people right now so going from 12 people to 28 is a pretty big change but it's not the same as going from 12 to 200 and when you try to write a book and sell as many copies as you can it's not like the EOS for going from 12 to 20 people they're just trying to call it the EOS that fits all sizes and so some of that advice I think is harder to implement at certain places where a business may be because it's more generic and it's more talking about some of larger organizations Sean have you ever thought about implementing uh EOS yeah so um I have had a lot of experiences with EOS either through clients or friends I've probably seen it various version of it done I don't know maybe a dozen times or so the other way I relate to it is is eos is actually a you might call it like a stepchild of the Rockefeller habits book by Vern Harish um so I got exposed to that through the entrepreneurs organization when I was in their accelerator program and I um implemented a lot of what Vern had to say the stuff around U Mission and purpose and values we had done a lot of that already but um a lot of it got a lot more focused when we started working on that and I found you know having a system that we were were operating on was a pretty effective way to help uh scale the company uh but I guess also I think Paul's touching on some of my experience too is that it is a bit of a one-size uh fits-all and um what I've observed from those who've done it is it's a it's it's truly an OP operating system it's not a strategic system um it's not a marketing system it's not a business model system so if you're going to it looking for those types of solutions it's not really a good fit for that um so if you have a business with a clearly defined customer it's scalable um the market wants what you're selling like you're like Paul's friend it can be really good for that because you're you're really looking to amplify the thing that's already working well Sean could you define that sure explain what it does in terms of an operating system the thing you say that it's it's best debt right what does it give a business it's giving you a a rhythm and a way of working that is designed around repeatability measurement and growth it's really about amplifying the things that work ideally more effectively now I I have a lot of I have a lot of complaints about how it goes about doing that um I think it's pretty simplistic in a lot of ways but generally it's it's about amplifying known things so if you know what you need to do and you know that you know what type of people are there to do it it's really oriented for that um and so businesses that are built like that say like manufacturing you know where you're making the same thing over and over again it can be a good system for that U because then you can really start to identify you know where your strengths and weaknesses are within the system because it really def designed to help you pinpoint where the problems are and to resolve those problems Paul did you find it helpful with that uh no because I was I was already kind of doing it well and actually Paul's not a manufacturer people people call Paul a manufacturer and that's not correct Paul's a value shop Paul Paul builds custom solutions for Unique clients and there are consistencies like Paul has to sand the wood and Paul has to take raw material and plant it down but he's not making the same thing over and over again so but he he's a custom manufacturer well no no the the the distinction that Sean's making is pretty good because we're very very different from a factory and actually my buddy who had the SBA lending uh program was much more like a factory because every valuation sort of had came in from the same place came from a bank in the form of some packet of information the same things needed to be done to it and the output was always the same so there were variations in what each company looked like but they developed a method that could be uh executed by people with a certain amount of training but they didn't have to be Geniuses and that's one of the reasons why the business was so successful and so profitable they figured out how to do one thing over and over and over again and they put all the customization now not in the hands of the people doing the work but in the hands of the customers I had him evaluate my business because I wanted reasons anyway reasons I like that yeah and and so I went through the process and what it was is the I got a questionnaire which is clearly the same questionnaire they gave everybody now I had to do a bunch of work to answer it but I was transforming my own information experience whatever into their format so that by the time their analyst got to uh producing the valuation it was pretty much boiler plate yeah yeah I think that when you were describing your your friend Paul I was like oh EOS is perfect for that type of business I I I knew a guy who ran one of those businesses and and anytime you have a business that's really systems and process oriented where you know kind of the inputs and the outputs are really similar that's where the system like EOS can work pretty well for you um but if if you think about the stuff Paul does the customer is highly variable the end product varies a lot sure it sits on the floor in a room but but that's about it you know sometimes and yeah so maybe right yeah so and similar to my clients you know every client I have is different every solution they need is different and so I think if if anybody's listening to this and they're trying to decide is eos right for me I would say that the further you are on the Spectrum towards consistent outputs inputs process then it will probably help you improve some of those things and become more efficient and more profitable and more scalable if you're on the other end of the spectrum I tend to believe that EOS is probably not the best answer for that in episode 214 should I buy the family business we published another entrepreneurial Fishbowl brainstorming session with Chris Hutchinson in this case it was bayy wal who explained why she has mixed feelings about taking over the Miller waldrup Furniture business that her parents own Bailey has some real concerns the business has been down of late it's predominantly brick and mortar and she would have to work out an ownership structure with a younger brother as you'll hear the 21 hats brainstormers ask some very smart [Music] questions my name is Michael Vice I run Vortex engineering which uh supports the mization of ships and submarines for the Navy and San Diego my question was you know when you say you they own it 100% do they also own as an asset all the real estate and all the property uh along with that yes um my parents own all of the real estate everything in in the business there still is some like a little bit of debt that they're paying off like in relation to some of the assets but they own it all yeah and so that's definitely a question um to in transfer of ownership there's so many different ways it could look right like they keep the real estate we pay them rent we buy the real estate from them you know I think the possibilities are inless and how it could be structured that's great well let's keep asking questions Paul Downs Paul Downs cabinet makers uh my question was is there any debt and that was I guess answered but I always prefer to hear answers that actually have numbers in them rather than there's some or there's a little second thing would be what were your Revenue in the last two years cuz you mentioned what your Peak years were 15 million but what's it what's it looking like now and then the last one was have your parents set an asking price for this yeah okay lots of question so since it's not my business I won't share like exact numbers about the debt but definitely the goal is my my family has like a five-year plan for the debt to be completely paid off so that when the ownership is transferred that it's completely that free that's the goal and and we're on track to do that right now as far as sales so yeah 156 million was where we were during the peak of like our Co boom then we went down to 12 and now we're more like 10 um so we've definitely seen a decline as it as everyone has in the furniture industry but I I feel really hopeful that we're going to be able to Pi it back up and then I was that you had another question I think I didn't yeah have your parents set a price oh no no we haven't set a price yet the goal is to find a payment I think that would be doable for the business but also be fair to them and set them up for their retirement well yeah um Josh Patrick uh the sustainable business do you uh want to buy the business and does your brother want to buy the business yeah that's a great question I mean I think part of the reason I'm here is I'm I'm unsure if I want to buy the business um right now my my brother definitely does and he's all well if you were sure what would be happening uh what do you mean by that well if you were sure you wanted to either buy the business or Not by the business what would be your decision points for that what's preventing you from answering that question yes or no yeah I think I think it's threefold I think I need some like Clarity around a good path forward for me and my brother to be partners in the business and what that would look like um I think that's the first thing I think second thing is I just need to ease some of my thoughts about my anxieties of uh the future of like brick and mortar retail and and where the business is going in that direction and then I I think third and I don't know if this is a question anyone on this podcast can answer for me um but just a little bit of like an existential question of this has been in my family since 1952 it it's all my family has done it's what I grew up in you know do I want to go PVE A New Path uh my name is David Barnett I run a Consulting business where I help people buy and sell businesses and so the first question I have is are the family members being paid a fair market wage for the work that they do so are you getting paid the amount that strangers would be paid if they were filling the roles yes that's a good question we for the most part yes okay and are there positive earnings in the business right now is it making money right now we're at break even um and this is the first time in company history that we haven't been profitable this is also a hard time to think about taking it over but now you said you own the buildings so is the company paying rent to anyone um the company itself you know we're set up in like different LLCs and so the company business is paying rent to the llc's that own the real estate but it's all under the umbrella of my parent okay and is the rent being charged a fair market rent or is it just the amount you need to cover the mortgage payments um a little bit of both I would say two of our buildings are are probably not at market and then I would say one of them so if you didn't own any of the real estate if you had independent thirdparty landlords this company would probably be losing money right now yeah for sure in episode 224 it's not a circuit board business it's an asset Carla tropman explains that she grew up in a manufacturing business electrosoft that her father started but she never intended to make a career of it instead she found success in Corporate America Over time however she also came to realize the true wealth-building power of owning a business any business it's not a beauty salon she says it's an asset it's not a shoe shine store it's an asset that realization sent her back to electrosoft although the transition took a little longer than she expected was your father thrilled when you started to express interest in coming into the business absolutely he was he was going to sell the company until I expressed interest how close did he come was he actually looking around for a potential buyer well manufacturing is is very much in demand um for a lot of buyers I think I get a at least an offer suggestion every week um from someone who is interested in buying us that's a nice thing yeah it's great and he had built a company that he didn't have to be at all the time so he had put all the systems in place so he could have gotten a high multiple if he did decide to sell but he really did want to keep it in the family that said uh as I read in your book your transition I believe lasted 11 years do I have that right that's so embarrassing but yeah it did tell us about that so I mean when you when ever you deal with um succession planning what the previous generation is looking at is their own mortality they're thinking for some reason that like you don't want me around anymore you're you're sending me out to the pastor and it's really not the case it's just that um you know that I was ready for myself to move in to that role I had left my corporate career to do it and I was at that age of being over 40 which is makes it a little bit more difficult to find a position that will be able to meet your lifestyle needs and the level of success that you're at without it being Troublesome so it was just a pivotal moment for me in in life and with the promise of three years I was fine with three years but when after that three the promise of the transition was It was supposed to take three years correct that was the first thing so I said f so Dad I want to take over the company he's like oh that's great I want to retire in three years like okay I can do three years work together and three years came and went and then I said hey it's three years he's like what's three years I your retirement has come is it is time and he's like uh yeah I need three more years I'm like okay that's fine and so that went on until you know I I started to have come to the realization that he's going to drag this thing on forever so I started uh doing a lot of research about family business Transitions and one of the books that I had come across was hug your customers by Jack Mitchell and in that book he talked about having family meetings and I said oh that's great we'll start to have family meetings and that way you can see what it would be like if I worked with my brothers and we can get everyone on the same page and I also had reached out to a company that was used to transitioning family businesses actually knew the office managing partner and asked him to come in and help us and we did a third-party assessment of myself and my brothers to see who would be most Prime for leadership if we should go and all three run the business like how it was going to work out just to kind of push him along give him a little bit of a nudge and he just really was um he kept throwing the brakes on at every Point um but it was important that I'd picked somebody that managing partner with somebody I knew could go toe-to-toe with my dad because he's former military I knew he could walk right over anybody and almost bully them but I knew that this gentleman was not to be bullied so that was really helpful during that time period and then I also realized that my dad wasn't going to just one day say I dubb the CEO I had to show him and be CEO so I just started making CEO decisions and really taking over the direction in which I wanted the company to head because he wasn't really even there anyway after a while he was spending a lot of time on the golf course which he should and really enjoying life which I wanted him to but I also was ready to move forward um so that whole time period took 11 years what do you think kept him from letting go then if he wasn't there that much and you agreed on the important stuff why did it take 11 years I think because folks now see that when people stop working working they tend to fall apart and lose uh have a lack of purpose and then they pass on I think he just didn't want that for himself even though he's very active and he's very healthy as well that for him he just said I'm not ready and you know this is mine this is my thing I started I'm not ready to leave and you see that a lot and they're not willing to it almost in a way that my dad when he did transition was like okay here's the business don't touch anything just like you know put it in neutral and let it coast and that's not I said no that's not how we're going to do this in episode 215 when to pull the plug when to pull the trigger Mel Jennifer and Liz talk about deciding when to give up on something that's not working and when to take the plunge on a new Venture while Mel says he's often been too quick to invest in a new venture Jennifer says she tends to be too conservative in fact she acknowledges that she's been sitting for years on one particular idea that she really wants to try I have a new idea that I'm not ready to talk about but I have a new idea that's new in the fact that it's new for the past 5 years I've been talking maybe it's time to tell us about it Jennifer now's the time it is going to be in my 2025 goal it's a new service and I am tired of talking about it and tired of not making the leap so I have told myself I'm putting in the budget for next year but Mel I'm the like the exact opposite I'm too risk adverse to try this and what's the worst that can happen it fails and I think I'll probably lose $50,000 like I'm I'm trying to figure out how much money I'd lose which is significant right I'm not but it's not I'm not going to lose everything right and and I'm still it's been five years I'm still scared of it yeah well you know I get it by the way um and the reason I think I am the way I am is I sometimes don't know any better so keep in mind I used to run a construction company and I'm not a construction person so I these ideas made sense to me and my team would freak out and then I'd go do it anyway because I was a CEO and I could um and then they'd have to Rally to Save Me From Myself later on and we just talked about this last week that the concern that I have and the board has now is there are no entrepreneurs left in our company so the fear is we're going to become a construction company and if we are we're GNA have a real tough time competing so they're they're working through that here's what I would say I think how much would you lose is a great question there are two other questions I just invite you to to ask uh Jennifer and one is what is the true upside and like is this a sustainable business that drives an upside that you'll say glad we did it if it wins and the second part is how distracted will it make you and your team because what I have found is if it doesn't have a big enough upside and it distracts the team too much then it probably wasn't worth it that makes any sense it totally does I'm writing this down right now and I'll tell you by the end of the year yeah you're going to do it with the existing team probably and so someone's going to be a bit distracted and um what's that going to look like because you know I'm assuming people are busy in your organization like they in all of our companies and um but if you can work your way through that then um man I say go for it and if it doesn't work stop doing it and try something else Jennifer just to confirm it sounds like this is an idea that you would do within the structure of your existing business not an entirely new business correct it's a joint venture it is in the same industry it would be with my staff doing the work and I have thought considerably well about my distraction level that's one of the big reasons I didn't do it before because we have been in Rapid growth mode and I could not devote one more minute in my brain or or my body to to do something new but I'm I'm as we've talked before almost at the end of the Valley of Death and so um the the new idea would would be with my staff but as a joint venture intriguing I'll let you know in episode 216 being civilized ain't going to do it Sean and Jay respond to a Reddit post where a business owner asks what he can do about a large commercial client who simply refuses to pay a $40,000 Bill did I just learn a $40,000 lesson the devastated owner asks what now well Guerilla Warfare he could go set up in front of one of the restaurants with a big sign and you laugh I've had three collection cases where I've actually showed up at the place there was a law firm class action law firm they had someone embezzling from them and they were pissed about they bought a bunch of art for the offices it was on the walls but they sent me a this is back in fact were the way they sent the fact saying she wasn't authorized to buy this if you'd like to pick up the art feel free to okay so I put a little blue suit on I show up I go to the front desk and I say um I'm here about the I knew her name I'm here about the Wilson situation and the two managing Partners came out because they thought I was with the FBI or something so they whisked me into the office and I I said you probably didn't recognize my name I own blah blah blah I sold you this artwork and I said what are you doing and I shamed him to paying me so I there is stuff you can do than just sit back I went into another a restaurant stuck me one time I walked in there Friday night at 6 and said you can either get me a check or do you see that artwork hanging over those people I'm gonna go in there and take it off the wall and feel free to call the police because I don't care I own my own business I could use the publicity got a check oh wow so you know there is some stuff you can do being civilized ain't going to do it though that's that's a terrible story and uh I think um I would make them really uncomfortable because I can tell you all the Civilized people are just thrown in the towel and going on yel I think you show up at the front of the restaurant and uh make a game out of it and see I'm not leaving until I get something Sean have you ever been stiffed on a Big Bill I have been stiffed um twice in my career uh once was uh in the in the Great Recession I had a client who went Bank rupt and I remember him calling me and I was I was a I was baby business owner at the time he's like yeah sorry you know we just can't pay it and then I kind of learned sort of how bankruptcy works and and you do kind of get screwed but it is I don't know it was just interesting I probably would have handled that differently today I don't know that you can call that being stiff I mean you gave credit people do go and trust me I used to have a different view of it like people do go bankrupt I mean it's the nature of the beast but in this case for the person that wrote Into You Lauren doesn't sound like they're going bankrupt they just decided they're just not going to pay him and that's a whole different animal well there is another lesson here the guy did some research after this all happened and found out that there was a reputation there he probably should have done that research before correct and and and I mean especially if this is a new customer that he's not done business before I think there's a good lesson there of like smaller invoices more frequently determining you know figuring out is this a is this a reputable person are they going to pay me that $5,000 invoice at the beginning of the relationship and if they don't then you know past is usually indicator of future do you guys do that kind of research into a new customer or client oh I made an EDI years ago that if anybody's to get credit they have to fill out the credit form it's got to be checked and if it's some big company I said then get me to sign it but never again am I going to ship out an order without having ass signed and it's never happened since so I haven't had a lot of problems with that I I would say the person needs to decide I just don't like getting taken advantage of I'm telling you what I do I go in front of that restaurant on a Friday night I'd get a card table chair and I'd sit out there and explain to every person coming in what loow life they are and then they're going to say we're g to call the police go ahead call the police looking forward to it like that's that is just in episode 218 a few good plumbers special guest rich Jordan tells Shawn and Jay what it was like buying a small Plumbing business in 2020 despite having very little experience with either Plumbing or business but having spent 10 years in the Marine Corps not surprisingly it took Rich some time to figure out what he was doing but in Just 4 years through organic growth and a few Acquisitions while taking no outside Capital he and a partner have gone from three plumbers and a million dollar in annual revenue to about 90 employees and $20 million in Revenue rich I think you said that in that first year you made some pricing changes that were impactful what happened there yeah I'd say we screwed it up at first um you know with with plumbing and heating businesses um you kind of have companies split on either on either side of a line and so companies basically either charge time and materials right so they give you an hourly rate and then they have a markup on materials and that's what they give you and it's very transparent and those are usually like shops like the one I bought like very very small and then that could be frustrating for the homeowner because a lot of times like the the bill at the end of the day is a surprise right um depending on how long the job took or whatever you know I'm not getting agreement on the price until I finish the job and tell you how much it is and sometimes that can be rough on the homeowner then other companies are flat rate like upfront pricing companies typically you'll see like any kind of like SC company is going to be a flat rate upfront price company and that's basically like every sort of task that could be performed is has a set price like like menu style pricing for it like going to a car dealer they've got that Chilton book they say here's the price per hour but they don't necessarily put that amount of hours into it right exactly so there's an ability for the contractor to make more margin if he's more efficient right so now I'm incentivized to have highly skilled technicians as opposed to Orly skilled technicians um with upfront pricing I'm also like getting agreement right like hey at the end at the end of this job you're going to have a fully functioning water heater and you're gonna have hot water in your home it's going to cost this amount of money does that work for you customer says yes and then that's the bill they end up paying at the end of the day right so there agreement up front and then no surprises so that's how that's how we operate when we when we made that change because because that initial company that started as a time of Material Company um at a fairly like premium rate and we took that hourly rate that he was using and we just like slapped that onto our upfront pricing like kind of math and the reality is that time of materials companies are generally going to charge you for all the time that they're at your home some will even charge you from the moment they leave their shop to when they get back to the shop but they're definitely going to charge you for the all the time that they're in your home The Upfront pricing like kind of price books are generally built for because it's really the only way to build is they're built for the amount of wrench time that the task takes right so so you're not getting that hourly rate for the entire time you're in the home you're only getting that hourly rate for you know the 15 minutes that it takes to install a frost free hose bib on the outside of the home right you might be at the house for an hour but the task is generically built for 15 minutes so we took the hourly rate he was using and we just translated directly over to the flat rate upfront price book and we saw our margins just crater and we weren't really smart enough to figure it out at first and the reality is that like our billing efficiency tanked um is what happened so really like you know now being in the industry a little bit longer um like a Plumbing Service Company um that's on an upfront pricing model is generally only going to bill for 40% of its time right so a guy if a guy works a 10 hour day he's only going to bill for four hours because he did four hours a wrench time and he had all this drive time and he had all this diagnostic time and presentation time and explanation time and all that stuff so basically you know 40% billing efficiency it means whatever hourly rate you needed to charge well you're you're kind of like back of the house hourly rate in that upfront pricing math needs to be two and a half times whatever your desired hourly rate is does that make sense yeah I knew this was coming I was waiting for the punchline because I mean I live through you know we hang pictures and no matter what I charge per hour it doesn't cover the because there's no way I'm billing for anything close to eight hours a day to your point loading the van unloading the van coming in the more it's the nature of the beast that's why stuff costs more because it takes longer than you think when you build everything else in you certainly can't just charge for quote unquote wrench time yeah absolutely so um so we basically we went through like a very difficult two months financially when we made that choice and didn't understand the math behind it you know ultimately we adjusted rates um to accommodate that that change and bilding efficiency and and then then it worked but uh that's something that you know because I I talk to guys all the time now that are getting into the trade for the first time they're taking over time in materials company and they want to switch to Flat Rate I think I've saved quite a few folks from the same headache that I had in episode 221 the Dei backlash hasn't changed Mel gravely's story Mel talks about writing a book Dear White friend that was aimed primarily at fellow business owners in the book Mel suggested strategies for those who might have been motivated by the murders of Ahmad Arbury and George Floyd to operate their businesses with more intentionality and more diversity it's been less than four years since Mel published the book but of course much has changed since then in this conversation Mel talked about the backlash that has ensued and the strategies he still believes can work for those who don't consider diversity a dirty word I want to ask if you've if you've changed how you think about any of this in in light of the backlash but but I I want to emphasize a couple of things that I took from the book one is that you were very open in acknowledging that uh you yourself benefited from some folks who were intentional about reaching out to you uh in fact at that Tugboat event if I remember correctly I think you referred to yourself as an affirmative Act Action Baby which kind of has a different ring to it today given the way people talk about affirmative action now has anything changed about the way you think about that given the backlash no um not at all um and let me just clarify why I say I'm an affirmative action baby there there were two or three at a minimum situations or times in my life where it was obvious that I was there because someone was intentional about providing me because of my race a particular opportunity and without that access I would not have gotten that opportunity it happened with the college I chose to go to they were starting a new co-op program for minority it professionals I got that opportunity and I did very well there it happened again at IBM when I joined ibms and in late 80s so my point is is that um that intentionality so in the book I call them actions of intentionality not affirmative action because apparently that branding has gotten so negative but actions of intentionality providing opportunity for people and if if you look at the balance of at least my life the investment of the accents of intentionality has produced returns whether it be for IBM uh for the college I attended for you know the city I live in now um and so if we look at it from an investment SL return standpoint I I don't know why the branding has gotten so off but you're right affirmative action is is definitely something that has become negative and people say well don't you don't you worry about that diminishing who you are no deal with me and you'll find out there's no diminishing of who I am because of how I got to the opportunity to sit in front of you um deal with me on a business transaction or on a board or in the community or leading my company and you'll find out that no there's no diminishing of me because of how I got the opportunity so um you know maybe things are a little different now I I I don't know but but no my thoughts have not changed and I think time I think history will tell will teach us that it was effective then and going to miss some opportunities if we're not careful as you point out I mean clearly the ROI is there for the people who reached out to you one of the other things I liked about the book though is that you acknowledge it's it's not foolproof it it doesn't always work and in fact you were I think you have uh a section where you refer to the way you ran your business at one point I think you had a division that you required to meet a quot of 20% African-American was it um and that didn't work out uh which you acknowledged what why didn't work out and what did you learn from that well it didn't work out because I gave the Mandate without Clarity I'll take complete responsibility I gave the mandate because I thought I was doing the right thing because this division was struggling to hire people of color and I was like I want you to be serious about this Let's Get Serious let's put a number on it let let's get really serious about it and they translated that to me no matter what that person did I wasn't letting them go because they wanted to get to their 20% and so you had Performance challenges we had attendance challenges you know all these things are going on unbeknownst to me but they were keeping their 20% if that is what I said it's not what I meant and so uh you know we went in and Revisited that we still struggle in that division for sure to hire African-Americans well we've got a different way of going about it now and um catching folks a little younger training them a little differently pairing them up and partnering them with Min trying new approaches but I can't just give that number mandate and think that it's not going to get con get uh a little twisted up and it did it's great that you acknowledg that even you could struggle with it I know a lot of well ition people who have sought to create more diversity within their companies and and and struggled with it they didn't come at it the way you did because it wasn't part of their purpose um so they didn't have the same need the same commitment to it do you have any advice for people who are trying to do that and struggling with it yeah well advice would be strong but I I always invite people to think about what's your posture on this you know is this interesting to you this whole idea of diversity is it important to you or is it imperative to you interesting says you know what if it comes to you you'll take it you're not against it you're willing to talk about it important means you've got some plan but you don't want to go too fast or go too far imperative is where I sit and where I hope 85% of the time my company sits and that means we have to win in that space because it is a part of our purpose and it's part of our value proposition and so it pushes us to try Innovative things in episode 219 I'm not building wiener mobiles my whole life special guest Travis Lefever shares the unusual Journey he and his co-founder wife Amanda have taken to build Mission Mobile Medical which makes mobile health clinics in Greensboro North Carolina that Journey LED Travis somewhat improbably to overseeing sales for a company that manufactured specialty Vehicles including the Oscar Meyer Wiener mobile it was there that Travis had a life-changing experience when a nurse with a Federal grant asked if he could build a mobile clinic to reach patients in underserved communities that was the spark that led Travis and Amanda to cash in their insurance policies and start Mission Mobile Medical in 20120 the company whose remanufacturing process allows it to create mobile clinics in less time and for less money than his competitors expected to hit $60 million in Revenue in 2024 I got a Consulting gig to do a turnaround Project A friend of mine was was working with a specialty Vehicles company and they uh built things like uh the Oscar me Wier mobiles or the planners nut mobiles they were super cool you know special vehicles uh mainly from marketing and they they were having some trouble in sales and of course you know turn around you come in big sales marketing effort VP of sales and uh and we started Landing clients locked Martin caterpillar the Navy um Facebook Proctor and Gamble you name it and we you know turned it around second year I was there I think was their best year in 46 years so uh we we we were doing good and then in uh summer of 2009 we uh had a nurse from our local hospital come in and uh she uh asked if we could build a mobile clinic and uh we never built a mobile clinic uh we've done a few healthc care adjacent things but our tagline was if you can dream it we can build it and so it was very much like sure and so we sat down we put together this proposal uh a pitch for you know this really complex custom for 40 foot long coach uh biggest generator you could buy all the bells and whistles and uh and I took it to her and I said hey look look at this right sit with me look at this and she laughed at me she said you uh you really don't understand what we're trying to do do you and she began to educate me for lack of a better term on uh the the number of underserved people in our community and how scarce funding was to to care for them and uh she said she had a grant for $250,000 she had till Christmas to spend it and really what could we do for that and so went back to to that organization and you know met a little bit of resistance really didn't want to do a a low margin job really didn't want to do anything you know outside of building custom vehicles but uh finally got him to say that if she would take a uh a remanufactured RV which is you know an RV that you take all the consumer stuff out of and rebuild it with commercial stuff that they thought they could do it for 250 so you know went and ask and she said what is in what was in hindsight really the magic words which is doesn't matter right like it needs to be out of the Sun out of the rain and run every day and I think it'll it'll help these people and that took us to to the day that changed my life forever uh which is when I invited her over to sign the contract now you can imagine my experience signing contracts with folks like AED Martin in the Navy you know it's a very business-like Affair there's a lot of terms and conditions and box checking and uh and then when it's over there's a lot of really firm handshakes and claps on the back and but she was different she came around the table and I stuck out my hand again the handshake and you know she she pushes it away she gives me this really big hug and and I remember in the in the moment thinking I've never gotten a hug at work before like this is is weird like we don't hug where I come from and you know construction and uh but then here it's kind of the moment I don't know if you've ever experience this but maybe your spouse or your mom or your grandma or somebody like talk to you while they're hugging you like you really it's a very intimate thing you you don't really have any place to go you kind of have to pay attention to them and and she starts telling me that I'll never know what it's going to mean to the people she's going to go go go see wow that she's going to take it up into the mountains Appalachia mountains here in North Carolina and see people who don't trust the doctors or won't drive uh the hour it takes to get into town and and my stomach just went not uh because uh she was so wrong like I didn't know what it's going to mean to those people because those were my people like I grew up an hour north of town in the Appalachia mountains my mom big farm family one of 13 kids uh dirt floor poor they slept four to a bed my six uncles are chicken Farmers I had cow pastures on three sides of my house we drove 10 miles on a dirt road to get to church and so all I can think about right is how I'd heard growing up that you can't trust the doctor don't go to the doctor they'll find something wrong with you uh you can't afford to be sick uh the hospitals where you go to die and and because of those attitudes beliefs right core beliefs you know both of my parents struggled with their health their whole lives like obesity heart disease Di diabetes and and then you know like I said when my dad was 66 uh getting ready to retire um at at work in a storage room by himself uh has a massive heart attack dies um cold dirty lolium floor right and scared to death I'm sure the the whole time and and that's not fair you know like he he raised me in my brother right he he took care of what he's supposed to take care of he worked hard he saved he did all the right things he's a veteran and and so when she's standing there she's telling me this all I can think about is what if someone with her heart had headed up into our little town and you know like treated my dad like a patient instead of a profit margin like a human and uh would he have maybe listened to the doctors adhered to the medication whatever it was uh took the heart meds uh would we gotten 10 or you know 15 20 more Christmases with him would he met his granddaughters would he you know maybe finish raising me and so in that moment like I got on fire really for this work and I thought well this is what I'm going to do I'm going to help people like her help take care of people like my dad and uh and so I I go to work right like I'm VP sales I'm gonna do marketing I'm going to figure out this market and so I go and I look and turns out it's a real Market it's a big thing there's lots of people out there there's academic research centers there's uh hospitals there's Health Systems there's health centers that serve the underserved I was like this could be a big deal and really it didn't resonate with the the owners there uh I didn't resonate with what I was saying and uh January uh 10th I think it was Friday afternoon 2020 the owner comes in my office and he says hey we don't need you here anymore and and um and I got this got a box packed up my stuff say goodbye to my team and and went home were you fired for some kind of cause was the uh was the idea that you would been been devoting too much energy to this side project that they weren't interested in and not doing what you were supposed to be doing or how was that explained no well it wasn't explained to to be uh transparent but I mark it down to Vision right like a small family on business has a vision of what it is wants to be it has been for for nearly 50 years and I have a vision for what I want to do with with my life and what I what impact I can make uh in this world and if they're not the same like I'm not building wiener mobiles my whole life that's not it for me and the the very definition of the vision is two visions and and I think that the further apart they are the more tension there is in a relationship and to be honest it's okay like there's absolutely they need to go be who they are and I need to go be who I am that's what makes the world such a beautiful places we're all different and we're going to do different things but then we came here and you know so we incorporated the first week of March uh 2020 uh it took us about three months we cash our life insurance we uh you know designed my first website it was awesome and turn the marketing machine on and that's the end of part two next week we'll be back with a brand new episode featuring a brand new addition to the 21 hats podcast team in the meantime my thanks to the entire 21 hats podcast crew the 21 hats community and especially our amazing producer Jess duon of blank word happy New Year everybody