The Buzzworthy Marketing Show
When growing a business there is no one secret to success, but a series of strategies that help business owners scale at will. Hi, I’m Buzz and I’ve spent over 20 years marketing for entrepreneurs just like you. On this podcast we uncover invaluable insights that successful entrepreneurs and industry experts use to profitably scale B2B businesses. Welcome to the Buzzworthy Marketing Show.
The Buzzworthy Marketing Show
Exit Strategies Every Business Owner Should Know
Can you imagine stepping away from your business for a full month without it missing a beat? In our latest episode, seasoned business owner and certified exit planner Pete Moore joins us to reveal the secrets of building a self-sustaining business destined for a successful exit. Pete shares his expertise on transforming common business frustrations into valuable freedoms and offers practical advice for creating a sellable company from the ground up. Through enlightening anecdotes, we explore the dynamic journey of business evolution, emphasizing the need for every entrepreneur to have a robust exit strategy.
For many small business owners, their company is a major component of their net worth. We discuss the entrepreneurial tendency to chase new ideas and the importance of evaluating ventures for genuine value. Highlighting insights from Mike Michalowicz's "Clockwork," we underscore the significance of having standard operating procedures and accountability structures that allow the business to thrive independently of its owner. Pete also tackles the often-overlooked challenge of replicating the owner's sales prowess, which is crucial for both growth potential and eventual sale value.
In the face of unexpected life events like death, divorce, or disability, having a well-thought-out contingency plan is essential. We explore strategies for risk mitigation, such as utilizing fractional executives to steer operations smoothly during transitions. Our conversation sheds light on the vital need to understand your business's value and risks, given that personal wealth and legacy often intertwine with business success. This episode is brimming with actionable tips and insights to ensure your business is both poised for any contingency and ready for a thriving exit.
Visit https://simplifyingentrepreneurship.com/ for more information about Pete Mohr.
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Pete Moore helps business owners transform their frustrations into freedoms, using a variety of frameworks that cut through the chaos and overwhelm of running a business. With over 30 years as a business owner himself, he's refined his tips, tools and techniques in the trenches. As a certified exit planner and Colby coach, pete uses proven methodologies to create turnkey businesses, allowing owners to live the life they deserve. It's time to start using frameworks that enable you to achieve true business freedom. Let's dive in. Welcome to the Buzzworthy Marketing Show. Welcome to the show.
Speaker 2:Pete, how are you doing today? Having an awesome day already. It's, uh, it's been a good one and, uh, you know, one of the things as business owners is that we don't always have enough time to spend time with family, but I got to spend some time with my daughter's or my son's girlfriend today, and she they live far away and she she stopped in unexpectedly and it was just nice to give her a hug. So how much better can your day go than that, right?
Speaker 1:Anything like that put a big smile on your face, especially when you're going to be on camera. You're like, okay, now I'm ready. Can you just do this every time I have an interview that day? That'd be great. Well, today we're talking about exit strategies, and before the show we were talking about the fact that every business owner should be looking at their business in a way that, or building their business in a way that they could sell it.
Speaker 1:So many of us get into business and we think about that in the future. We're like, oh yeah, that's a tomorrow issue. I'll worry about tomorrow. Tomorrow, right.
Speaker 1:But as a person who has owned a few companies now, my current business and where our business is now is the first time I've ever really spent so much energy looking at the end result, and I'll give you an example.
Speaker 1:And then I want you to chime in on this.
Speaker 1:So we, for the last couple of years, I've been working with a set of developers to build my own CRM, and it was in a language that was very unique, like CRMs are just not built in this language, right, but it was going to be an all encompassing the whole nine yards.
Speaker 1:Unfortunately, the head developer had his head in the clouds and just could not stay on track.
Speaker 1:There's a small owner group that I was in, so we're all investing money into this thing and after two years and after two years right around that time I had gone to a mastermind where this other CRM developer was talking about the language he was using, and I looked at it and I go that is so much easier to deal with. Oh, my goodness, if I continue to build this CRM in a language that nobody can adopt, this is not going to be sellable, right, and so, even though I had all the sunk costs, I knew that in the end, the opportunity costs at exit will be much more than the few thousand dollars that I'd already dumped and the two years of time and all that other stuff. That's minuscule to the end result of the lost multiples, because nobody's going to be not as many people will be interested in adopting a language that is going to be hard to find people to work in. And so do you feel that that's something that is not just in technology but in, maybe, the way people run their business and operations?
Speaker 2:Absolutely Is the one word. Answer Absolutely, uh, it's interesting, you know, um a lot of times we're especially for founders like people like you, that's starting something and you're actually you're founding something new. It's like you're trying to solve the problem that you have generally and it's like I see the problem, I know the problem, I live the problem so I can solve it and we're going to go at this. But the idea is a lot of times you're solving your problem and you have to see whether other people enough other people actually have that same problem is whether there's going to be value at the end of the day.
Speaker 2:And you see some of this kind of stuff on TV. All these crazy ideas you think are crazy ideas, but those crazy ideas were somebody else's problem and they solve them and whether they fit you or not is a different thing. But as we build our businesses, the idea here in building value is so important that others can see the value within it, or else it's really just solving your problem. That may be useful but it may not be valuable as far as the transfer of that business down the road.
Speaker 1:Oh yeah, I think that the thinking in so many people are like, well, things move so fast that you know, even if you're looking at five years down the road, it's like AI is going to have everything taken care of and all that good stuff, but it's like, yes, you will pivot. My company's pivoted four times in 19 years. So on average, every five years we have a huge pivot right Rebrand, and there was four 19 years. So on average every five years we have a huge pivot right Rebrand and there was four different brands. So along with that right, same company, same value, same, yeah, same mission, just a different way of doing it.
Speaker 1:But there was only one time where the fundamentals of how we ran the business changed and that was when I went from a brick and mortar to a virtual company and I had reinvent the entire company right, like really from scratch, like all of the SOPs and all of the manual and employee manuals, all of that out the window, because you're not coming in, you're not, this it's the same, you just don't do business the same way, right, and how we even onboard clients and all that other stuff has all had to change. So the last five years it's like redocumenting an entire 13 years of SOPs and all that other stuff, and then you have things like AI and plus that, but the thing is that after 19 years, we're still doing the same work. It looks completely different, yes, but the same work is there. And if we had it and I think that if I had thought of exiting and building it to sell is that kind of like I've heard that term before.
Speaker 2:Yeah, build to sell.
Speaker 1:yeah, I probably would have not spent as much time on some of the shiny objects along the way. What do you?
Speaker 2:think I think yeah we're entrepreneurs, right, and I, like you you mentioned it in the intro 30 years at it and I've had bathroom renovation companies, cleaning franchises. Currently I'm a retailer. We own a couple of shoe stores and spend a lot of my time coaching other business owners around their businesses, and you know all that we're, we're. I think the entrepreneurial nature is that we uh, it's like squirrel and it's like you know uh, these, these kinds of ideas of, of going off to the next and new thing, but what we need to bring brought back really is this idea of is it valuable, is it valuable to our customers and is it valuable for us down the road? Because what we're doing in building our businesses and keep in mind that for most small business owners, their business is worth about 70% of their net worth.
Speaker 2:So how important is it for you to build the value and understand the value of your business? Pretty darn important. For those of us that aren't the business owners listening to this show, then your biggest asset may be your home or maybe your financial portfolio, but a lot of times, instead of investing in stocks and bonds and all these other things, business owners have invested, like you mentioned earlier, into their business, and that's where a lot of their money goes, and they don't watch the value of that as closely as they should and it's really or even know or understand what the value is. Maybe they've never even had a valuation of their company over that course of time. So they think, because somebody at the golf course said that, hey, I got a million bucks for my business, you should get a million for yours. Okay, but what's behind that? You know you talked about SOPs. How important are your SOPs? Well, incredibly important, because when you go to sell your business, somebody else needs to know what to do. How important is it that you have other people doing work for you and other people accountable and making the decisions that mean everything in your operation every day without you being involved Crucially important for the continuance of that business?
Speaker 2:If a new business owner takes over, what's the legacy that you're leaving and what's the legacy that you're going to be able to transfer to that new owner, and what are you going to be taking from that so that you can live a better life is a big reason why we get into business and if you think about it, you go back to when you first started the business. It's like for those of us that do own businesses. We got into business probably because we were thinking we'd probably have a better life as the business owner right, than working for someone else. It's like I don't want to put up with that. I don't want to be told what to do, all these different things.
Speaker 2:But part of it's because we thought we were going to have more freedom, more freedom to make our own decisions and more freedom to do what we want to do with our lives and in our businesses. But some of the stuff that we've done because we've had to a lot of times, because we didn't start off with deep pockets, let's say, and we've had to make all these decisions we've had to do everything ourselves we've habitualized ourselves into making all the decisions and habitualized ourselves maybe into working 50, 60, 70 hours a week, right, right. And most of the people I work with they're like, okay, I'm done with that now, like I actually want to have my life back a little bit, and so they may be looking to start to what I call move from operator to owner or turn your frustrations into more freedoms. You know, by using some of these things, by setting up better procedures, by setting up better people, by setting up even an accountability chart, which so many small business owners don't even have.
Speaker 2:A proper accountability chart that's dictated and shown to everybody. Who's accountable for what other than just me, Right.
Speaker 1:Yeah, how much of your, how much of your business is in your head locked away? I know there's a great litmus test that I grabbed from Mike Michalowicz. He wrote a book called Clockwork. Yep, can you walk away from your company for 30 days, no contact, and if you can, will you come back to a company that is bigger or smaller, or is it will be stagnant? If it is smaller or stagnant, you don't own a company yet, because there's a piece of you that the company relies on if it can't grow without you.
Speaker 1:And one of the things you were talking I mean you, you awesome stuff about operational culture and all that other stuff and document all of that. Another thing that I see when you talk about multiples, like how many multiples of your revenue can you get from your company? Right In the service-based business, that's a huge deal. Retail is probably a lot different and you're the expert on that stuff. I do not promise to even understand it, but in the service-based business and I'm sure it has a lot to do in the retail as well it's how do you garner new sales and is that systemized and is that reliant on the owner, or is there a team that can work without the owner, to get the accounts, to sell the product, to do all that stuff, because you can run a great business and go yes, look, I have this whole thing, that works really smooth.
Speaker 1:Okay, so how do you get sales? Oh, that's me. Well then, if I take you out and you're the personality of the company and nobody else can sell it without your say so and your John Hancock on all the contracts, you're now the bottleneck, and that means if you sell the company, you're going to have to sell your freedom, because they're going to want you to be there for one to three years to show them how, introduce them to all the who's that you know and transfer all that knowledge you got locked in here onto a piece of paper so other people can do it for you, right, and I think that that's a big big deal. Um, that I mean right now, like for me, I'm in a transition where I've stepped back into the sales because we haven't been able to replicate my uh, my abilities, Right, but we're also being extremely picky about who we're letting in as clients and and on what services we're we're going to offer and not offer, right, and until you have all of that, like, really lined out in black and white so that people just go down the list.
Speaker 1:Can I do this? No, oh. What can I do instead? This instead, okay, and sometimes, guys, it's okay to say no.
Speaker 2:Gosh yeah.
Speaker 1:You know, when people are looking at it it's like so who do you serve? The more, the more personas you give that person who is looking to buy, the less likely they're going to be interested because they want turnkey. And every time you say, oh, we've got 10 personas, that's 10 variables in the sales process. That's 10 variables in the operations process. That's 10 variables in your marketing process. That's too many variables, right? Like, get focused. If you're going to sell, get focused in the service space. I'm sure the product you know. The more SKUs can probably dilute some of that too, right?
Speaker 2:It can. And I mean there's so many different intricacies in everybody's business and you know everybody will say, well, my business is different, well it is.
Speaker 1:but it's still a business.
Speaker 2:Yeah, yeah, it's still a business. It still needs to turn. We still need to create value. We still need to do all these steps because, ultimately, someday you will exit, and if you're not prepared for that exit, that's a problem.
Speaker 2:It's not only a problem for your team, who you may have worked with for 20 years and you want to see them do really well, you know, even after your exit, but it's a. It's a problem potentially for the legacy of your family. It's a problem for all sorts of different things and I'll tell you there's a couple of big ones that happened to about 50% of business owners that caused them to exit their business. One of them is death.
Speaker 2:Nobody thinks they're going to die right, but everybody is everybody is right and and so you know we don't prepare for that. We don't prepare for divorce yet 50% of marriages end in divorce. We don't prepare for disability, yet. Somewhere in your career, sometime through your career, you're probably going to be out of work for a few months because something has happened to you. You had an operation, you had a car accident, a variety of these different things that happened to us, or maybe it's a dissolving of a partnership.
Speaker 2:If you're in partners with another group. One of the partners either needs or wants out. What does that look like? We don't prepare for that. Sometimes that causes the failure of the business because maybe they're the money partner and you can't do it without them.
Speaker 2:I mean for a variety of different reasons people exit, but 50% of businesses exit for one of those type of reasons and that's a problem. You don't wanna be in that situation. It's called insurance, so you want to insure yourself against those things. You want to de-risk those things, understand the flow of what happens if any of those happens, so that the business can be sold and so that it's ready to be sold at any given time if need be.
Speaker 1:Hopefully you don't need to, but 50% of the people do, and I think that you can reduce that 50% right by doing exactly what you're talking about being ready for it, creating the, you know. Risk mitigation is definitely one thing. You've got those. If you live a wild lifestyle, you need more insurance, right. And I think that one of the things that we are now blessed with in this day and age is the fractional space where, if you were to have to step aside, do you have a plan to have the people who are still there trying to run the and have a plan of like? Who do we go to to have a fractional come in and take care of yours, your processes, what's your responsibility? Like you said, your accountability, your, your chunk accountability. Who's going to do that?
Speaker 1:Now, some people will say, well, I have a plan for the good deal internally, but that's not always going to work, because what if you're in a surge? You're growing right and we all grow up to our capacity and then we add more capacity. So, if we're right at the precipice of your capacity and then you go down, they're not going to have the bandwidth to do that right. So, having another contingency of like, yeah, that's great. Have, like, your COO, take over for you for a minute, your best sales manager maybe take over for the CEO a spokesperson point and all that other stuff.
Speaker 1:But, like, at some point you're going to have to go. You know what? I'm going to need a fractional CEO to step in. If you're the CEO of your company because some owners are COOs, as you know but whatever, that is the fractional pieces for that, and it might be a couple of fractionals because a CEO, you might also be the CFO, you could be the CRO as well. Well, you're not going to hire somebody who's going to be able to do all of those as fast, because they got to learn everything fast. So you might even have to have three phone numbers that get called if you went down Right. And I just don't think that people think that far Like, oh yeah, I got a contingency plan, I was going to take care of it, right.
Speaker 2:The bigger piece of this puzzle and I kind of roll it back is that so much of the expectation and the wealth of most small business owners and I'm in Canada or in North America or anywhere in the world revolves around their business. And if you don't understand the value of that properly and you don't understand the risks around that, it could affect your family, it could affect your life, it could affect all of these other things and you can't let that happen. So you really do need to be thinking about these things as you roll into your business, as you're within your business, and looking at them for the future of what you're going to do outside of your business. And I think all this combination we're just so busy doing the day to day all the time, michael, it's like we're so busy, it's like the next person's calling, the next contract needs to be signed, all these things happening.
Speaker 2:We don't think about this enough and the idea here is that hopefully through this conversation it's tweaked a couple of things to say listen, I maybe should go back and do a couple of these things. I maybe should have my business evaluated so that at least I'm not anticipating it's worth 4 million bucks and in reality, it's worth 1.5. Like, these are the. These are things that I deal with every day. When we're talking to people, it's like, oh, I actually I'm hoping to be out in two years and I didn't think my business was worth that. I thought it was worth a lot more than that.
Speaker 1:Well, we all think it's worth more than we think right.
Speaker 2:Right, but if that's what you're planning on, and that's your pot, then that's a problem.
Speaker 1:Right? Well, I think you hear so many of these stories In marketing. There's a huge secondary market for agencies, right? And there are people who have made fortunes of just pumping up an agency and selling it, pumping up a different type of agency and selling it, because they know the game in the secondary market. And so you hear these what I call unicorn multiples, right? Like, oh yeah, if you can get it to this number, your top line revenue to here, you're going to get this multiple on it.
Speaker 1:And I'm like and it wasn't until I started actually looking at what would somebody ask me, what would you sell your company for? And I go, shucks, I have not thought of that Like, what do I need to retire as an entrepreneur, at least as a marketing entrepreneur? Because you're going to have a clause that says you can't start another one of these for a few years, right? So you're gonna have to go do something else once you sell, right? So, yes, in retirement, that's an easy thing. But what is the number to retire on, right? And so I had a reverse engineering. I go, okay, crap, okay. So then I looked at it. I was like, so what do I have to have my company look like to get that number Right, and it's not top line revenue, it's profitability, it's all of the things we just talked about.
Speaker 1:Um, on top of that, right, it's rep, it's. It's how replicable can somebody just walk in or maybe even take your, your client list and plug it into their systems in in our, in our industry? That's what they're looking. They want the list. They want to say what's the value of this list and what's your sales and marketing process that keeps you growing this list, because we need that too. That's what they're buying. They're not buying any of your processes or any of that other stuff. As far as, like, how you deliver service or any of that stuff. It's like that stuff can be. I mean, that's in your SOPs but it's going to get changed. You are going to disappear out of that business before too long. So, with all that said, what is that Like you said, everybody's like oh crap, I need, I probably need to do something. What would be the first thing? That's an entrepreneur who hasn't even thought about building a business to exit. Do like tomorrow.
Speaker 2:The first thing really is to knock off those processes. If you don't have those SOPs and so many like you mentioned, it too it's in their head. So the idea here really is they need to be written, they need to be in video format, they need to be in all sorts of different formats, because people learn in different ways. And then, once you have those, somebody's name needs to be beside them other than you. If your name is beside them. This is the problem. This is where the value of your business goes. From whatever multiple that is down about seven times because and nobody wants, nobody's going to buy you. They're buying the company. They're buying the recurring revenue, which is big on the marketing side. Right, they want the recurring revenue. Can you show and value the recurring revenue that you have with your existing customer basis so they know that it's going to be there when they take over and you're not there.
