Twenty-seven years in, four exits, and a dozen companies later, Ryan Deiss tells Cole Gordon exactly how he paces equity deals, hires, and exits so growth doesn't outrun trust.
Posted
1 weeks ago
Duration
Format
Interview
educational
Views
21.3K
212 likes
57 · 43
Big Idea
The argument in one line.
A portfolio of service businesses only compounds when equity deals are paced slowly, re-underwritten on a fixed schedule, and run on scorecards that track cash distributions instead of vanity metrics, because rushing growth or chasing attribution data breaks trust faster than either one builds revenue.
Who This Is For
Read if. Skip if.
READ IF YOU ARE…
An agency or service-business owner doing roughly $500K-$20M who needs to know which hire, system, or KPI actually moves the business forward next.
A founder considering taking equity in clients or building a portfolio of companies, who wants to avoid the pacing and resentment mistakes that kill those deals.
Someone preparing to sell a services business who wants to understand how EBITDA, category, and founder dependency actually set the sale price.
A creator or personal brand weighing whether to go all-in on long-form content, who wants a real example of the attribution and trust tradeoffs involved.
SKIP IF…
You're building a venture-backed software company chasing a revenue multiple; this entire conversation is built around cash-flowing service businesses valued on EBITDA.
You want tactical YouTube production advice; the content discussion here is about attribution, trust, and cadence, not shooting or editing.
TL;DR
The full version, fast.
Ryan Deiss, 27 years into direct response and now running a roughly $200M/year portfolio of about a dozen service businesses, explains why he shut off $150K/month in ads to go all-in on YouTube, and why attribution data lies about what actually drives sales. His acquisition rule: take on founders who are flat or declining, never run their marketing or sales directly, and re-underwrite every equity deal every six months so value gets re-anchored instead of resented. He walks through a five-stage revenue framework from launch to $100M, explains why 'I need a COO' is almost always the wrong ask below $5M, and closes on what actually makes a business sellable: category, EBITDA, and founder dependency, not growth.
Free for members
Chat with this breakdown — free.
Sign in and you get 23 free chat messages on us — ask for the hook, quote a framework, find the exact transcript moment, generate a markdown action plan. Bring your own key when you want unlimited.
Deiss explains why he shut off ads to go all-in on long-form YouTube, framing it as chasing trust in a low-trust environment rather than chasing another traffic channel.
04:56 – 09:06
02 · Why Attribution Data Lies to You
Prospects credit YouTube and Instagram for buying decisions that direct-attribution tools show came from a paid ad; the two argue attribution is directionally useful but dangerous to over-optimize for.
09:06 – 13:20
03 · Shutting Off $150K/Month in Ads
The mechanics of the ad shutoff: forcing organic to work for 60-90 days, then intentionally reintroducing a smaller, more efficient ad budget once fulfillment became the real constraint.
13:20 – 17:44
04 · Owning Your Voice Instead of Chasing Best Practices
Deiss describes writing his own X posts with AI assistance but insisting on arbitrary, imperfect phrasing so he doesn't read as AI-generated, and defends taking a stand over hedging with 'it depends.'
17:44 – 23:32
05 · Building the Portfolio: What Makes the Buy List
The buy box is founder-psychographic, not industry-specific: businesses that have been flat or declining, run by an owner who is genuinely excited to try something new, and who Deiss and his team actually like.
23:32 – 25:38
06 · The Real Reason Deals Get Unstuck
The recurring unlock isn't a novel strategy; it's the decision the owner already knew they needed to make (fire a relative, sunset a legacy product) but needed outside permission to act on.
25:38 – 30:30
07 · Scalable's Three-Tier Client Model
A $2,500/month flagship accelerator that doubles as paid due diligence, an in-person tier-two group capped at 120 businesses, and a tier-three private-client/portfolio tier with phantom equity.
30:30 – 36:39
08 · Avoiding Resentment in Equity Partnerships
A six-month kill switch on every private-client deal, quarterly re-underwriting of what the business (and the stake) is now worth, and deliberately not writing large checks so both sides stay motivated.
36:39 – 43:56
09 · The 0% Success Rate of Rushing Deals
Deiss admits taking on eight portfolio companies in six months and calls it a 0% success rate; the fix was slowing acquisition pace to one or two deals a quarter and refusing to run any client's marketing directly.
43:56 – 55:20
10 · Tracking Cash Distributions, Not Vanity Metrics
Every scorecard mirrors the customer journey with a named owner per metric; red/yellow/green status matters more than the number itself, and cash in the distribution account is the one metric that can't be gamed.
55:20 – 59:04
11 · Launch to Scale: The Five-Stage Framework
Deiss lays out five revenue stages, Launch ($0-500K, just prove demand), Grow ($500K-2M, sell relentlessly, hire your own weakness), Systematize ($2-5M, pause growth to build process), Elevate ($5-20M, build a true functional leadership team), and Scale ($20-100M, rebuild almost everything again).
59:04 – 1:05:07
12 · Why 'I Need a COO' Is Usually the Wrong Answer
Most owners asking for a COO actually want someone to absorb undefined work; a real COO role requires a defined operating system to plug into, which is why hiring one before $5M rarely works.
1:05:07 – 1:32:50
13 · The $5M to $20M Phase
Founder mode versus scorecard-based leadership, the identity shift from top player to coach, and why $10-20M with a genuinely strong leadership team is the most freedom either host has experienced in business.
1:32:50 – 1:42:20
14 · What Actually Makes a Business Sellable
Sale price is set by category (publishing beats 'information marketing'), EBITDA rather than growth, and founder dependency; earnouts average 21 cents on the dollar and nearly half pay nothing.
1:42:20 – 1:50:52
15 · Where AI Is Actually Moving the Needle
Deiss is deliberately non-predictive about AI's macro trajectory but describes cutting a 22-week client-onboarding process to 6 weeks by automating one already-mapped workflow step at a time.
1:50:52 – 1:53:09
16 · 27 Years in Business: The Real Secret
Deiss credits longevity to always benchmarking against the next market up (publishing, not info-marketing; McKinsey, not coaches) while refusing to let ambition override showing up for his family.
Atomic Insights
Lines worth screenshotting.
Attribution data is systematically unreliable because customers credit whatever touchpoint they remember, not whatever channel actually converted them, so over-optimizing for attribution rewards short-term tactics over the trust that actually closes deals.
The best acquisition targets for a portfolio company are founders who have been flat or declining for a couple of years, not fast-growing ones, because growing founders assume they'd have succeeded without the partner's help and resentment builds.
The single easiest signal a business is fixable is a nonexistent follow-up process; most owners already know the fix, they just need outside permission to make an uncomfortable call, like firing a family member.
A minority equity partnership survives long term only when the relationship is re-underwritten on a fixed cadence, every six months and then quarterly, not left to run indefinitely on goodwill built early.
Rushing growth kills more equity deals than bad target selection: taking on eight portfolio companies in six months produced a 0% success rate, because overextension breaks execution across every deal at once.
Cash building in a distribution account, not revenue growth or NPS, is the real proxy for a healthy business, because it's the one number that can't be faked by moving a KPI's goalposts.
KPIs become corruptible the moment a person's compensation depends on them: sales reps KPI'd purely on close rate will quietly take fewer live calls and report more no-shows to protect the number.
Forcing a business to pay out a fixed monthly distribution before it can comfortably afford it is a forcing function that kills underperforming initiatives and often makes the business grow faster, not slower.
Keep no more than about seven months of operating expenses accessible, one month in checking, three in savings, doubled via a line of credit, and sweep everything else into a separate distribution account or it quietly gets absorbed into scope creep.
Needing a COO usually means the owner doesn't actually know what role they need; hiring one before roughly $5M in revenue burns cash on someone who inherits the CEO's undefined problems instead of solving one specific function.
The hire that unlocks $500K-$2M is a single functional leader for whatever the founder is weakest at, chosen for the ability to manage to a metric rather than a task, not a generalist or a swarm of cheap assistants.
$2M-$5M is the hardest revenue range to operate in because the business inherits every complexity of an eight-figure company while still running on seven-figure infrastructure, and the fix is pausing growth to build systems, not pushing harder.
An operating system built by mapping how value actually flows through a business, make it, sell it, fulfill it, beats one built by working backward from company goals, because customers never cared about the company's goals to begin with.
Businesses get valued on EBITDA and category, not growth or story; the same company can be worth wildly different multiples depending on whether it's framed as 'information marketing' or as 'a publishing company.'
Earnouts pay an average of 21 cents on the dollar, and nearly half pay nothing at all, so reducing founder dependency before a sale matters even for owners who plan to stay on as CEO.
The businesses using AI most effectively aren't chasing an 'AI-native' overhaul; they're finding the one already-mapped workflow step that's slow and automating just that, which cut one company's client-onboarding process from 22 weeks to 6.
Takeaway
How to pace equity deals so growth doesn't outrun trust.
WHAT TO LEARN
A portfolio of service businesses compounds when acquisitions are paced slowly, equity deals get re-underwritten on a fixed schedule, and success is measured by cash hitting a distribution account, not by revenue growth, attribution reports, or any KPI a person's paycheck depends on.
01Going All In on YouTube Content
Shutting off a working ad channel to force an organic channel to prove itself is a real diagnostic, not just a leap of faith, when the paid channel has hit diminishing returns.
Owning a distinct point of view, including intentionally imperfect phrasing, builds more trust than optimizing every sentence for polish, because polish now reads as AI-generated.
02Why Attribution Data Lies to You
Attribution data is directionally useful but actively misleading if over-optimized, because customers credit whatever touchpoint they remember, not whatever channel actually converted them.
03Shutting Off $150K/Month in Ads
Forcing an organic channel to work by removing the paid crutch for 60-90 days is a deliberate test, and the ad budget can be reintroduced later at a smaller, more efficient scale.
04Owning Your Voice Instead of Chasing Best Practices
Confusing accuracy with authority is a trap: hedging every answer with 'it depends' is often more accurate but reads as far less authoritative than taking a clear stand.
05Building the Portfolio: What Makes the Buy List
The best acquisition targets are founders who have been flat or declining, not thriving, because thriving founders assume they'd have succeeded without a partner's help.
Whether a partner genuinely likes the founder is treated as a real acquisition filter, not a soft nicety.
06The Real Reason Deals Get Unstuck
The most fixable businesses share one tell: a nonexistent follow-up process the owner already knows about but hasn't fixed.
07Scalable's Three-Tier Client Model
A low-priced flagship service tier can function as paid due diligence, letting a buyer learn a business intimately before ever proposing an equity deal.
08Avoiding Resentment in Equity Partnerships
A fixed re-underwriting cadence keeps both sides of an equity deal honest about whether the value being created still matches the stake being held.
Deals that skip the initial engagement period and jump straight to equity are the ones most likely to fail at the first re-underwriting.
09The 0% Success Rate of Rushing Deals
Taking on too many deals at once doesn't just risk each individual deal, it can produce a 0% success rate across the entire batch by overextending execution everywhere simultaneously.
A lack of clear acquisition criteria is the root cause behind most failed equity-partnership attempts, not bad luck with any single founder.
10Tracking Cash Distributions, Not Vanity Metrics
Scorecards should mirror the customer journey with one named human owner per metric, and 'yellow with a plan' is meaningfully different from just being close to target.
Cash building in a distribution account is the hardest metric to fake, which is why it, not sales growth or NPS, is the real signal of a healthy business.
KPIs get quietly corrupted whenever a person's compensation depends on them, so the metric itself needs periodic sanity checks against reality.
11Launch to Scale: The Five-Stage Framework
Below roughly $500K in revenue, the only real job is proving people want what you're selling and are happy after they buy it; hiring help too early just creates a management burden.
The unlock between $500K and $2M is one functional hire for your weakest area, chosen for the ability to manage to a metric rather than a task, not a generalist.
$2M-$5M is uniquely hard because a business carries eight-figure complexity on seven-figure infrastructure, and the fix is pausing growth to build systems, not pushing harder.
12Why 'I Need a COO' Is Usually the Wrong Answer
Asking for a COO is usually a symptom of not knowing what role is actually needed; a real COO needs a defined operating system to run, which rarely exists before $5M.
13The $5M to $20M Phase
Between $5M and $20M, building a genuine functional leadership team, each hire better than the founder at their function, produces more personal freedom than any other stage of a business.
An operating system built by mapping how value actually flows (make it, sell it, fulfill it) beats one built backward from company goals the customer never cared about.
Scaling from $20M to $100M usually means rebuilding the leadership team that got you there, because the pace the business now needs exceeds what got it this far.
14What Actually Makes a Business Sellable
Sale price is driven by category, EBITDA, and founder dependency, not growth rate or revenue size, and the same business can be worth very different multiples depending on how it's categorized.
Earnouts average 21 cents on the dollar and nearly half pay out nothing, so reducing founder dependency matters even for an owner who plans to stay on after selling.
15Where AI Is Actually Moving the Needle
The highest-leverage AI use isn't an 'AI-native' overhaul, it's automating the one already-mapped workflow step that's slow, which cut one company's onboarding from 22 weeks to 6.
AI still can't replace judgment or accountability, so a team that struggles with either has a hiring and leadership problem, not an AI problem.
1627 Years in Business: The Real Secret
Long-term relevance comes from benchmarking against the market one tier up, not against direct competitors in your own niche.
Ambition and family don't have to be a binary tradeoff, but only if the owner sets a hard personal line about which moments ambition doesn't get to eat.
Glossary
Terms worth knowing.
EBITDA
Earnings before interest, taxes, depreciation, and amortization. The profit figure most service-business sale prices are actually built on, as a multiple of this number.
MQL
Marketing qualified lead. A prospect a marketing team judges ready to hand to sales, and a KPI that gets quietly redefined when someone's compensation depends on hitting it.
Earnout
A portion of a business sale price paid out later, contingent on the business (and often the founder) hitting agreed targets after the deal closes.
Roll forward
When a founder selling to private equity reinvests part of their proceeds back into equity in the new, combined entity instead of cashing out entirely.
Scorecard-based leadership
A management style where every metric on a company scorecard has one named owner, and leadership's only recurring question is what turns a red metric yellow and a yellow metric green.
Distribution account
A separate bank account that swept, above-reserve cash flows into, kept apart from operating cash so an owner can see at a glance how much real surplus value the business is generating.
Founder dependency
The degree to which a business's revenue or operations rely on the founder personally, whether through direct service delivery or as the sole public face of the brand. The bigger it is, the lower the business sells for.
Growth equity
A funding round where a founder sells a minority stake, often 25-30%, to take some money off the table and fund growth while keeping majority control, as opposed to a full private equity buyout.
Tuck-in
An acquisition where a smaller company is folded into and operationally integrated with a larger existing business, adopting its systems rather than staying independent.
Embedded influencer
An employee of a company who also builds a public personal following on the company's behalf, used to spread founder-dependent visibility across more than one face.
Resources
Things they pointed at.
33:20bookThe Wizard of Ads by Roy H. Williams
49:10bookProfit First by Mike Michalowicz
49:20bookE-Myth and Traction
45:50channelJeff Bezos proxy-metrics story (Lex Fridman Podcast)
1:45:00toolClaude (skill recorder for automating workflows)
“Earnouts pay 21 cents on the dollar... 45% of all earnouts pay nothing.”
specific, shocking statistic that reframes 'we sold for $X million' headlines→ TikTok hook↗ Tweet quote
1:45:50
“You don't have to accurately predict the future to benefit from it. You just have to be looking around.”
calm, quotable stance on AI hype→ IG reel cold open↗ Tweet quote
1:52:40
“Strategic selection of my competitors and enemies... I was always looking up market.”
closing thesis of the whole episode in one line→ newsletter pull-quote↗ Tweet quote
Topic Map
Where the conversation goes.
00:00 – 17:44densecontent strategy and attribution
17:44 – 30:30denseportfolio acquisition criteria
30:30 – 43:56denseequity partnership pacing and resentment
43:56 – 55:20densescorecards and cash-distribution tracking
55:20 – 1:32:50densefive-stage revenue framework and hiring
1:32:50 – 1:42:20denseexit valuation and founder dependency
1:42:20 – 1:50:52AI implementation
1:50:52 – 1:53:09sparselongevity and closing thoughts
The Script
Word for word.
Read-along
Don't just watch it. Burn it in.
See every word as it's spoken — crank it to 2× and still catch all of it. The same dual-channel trick behind Amazon's Kindle + Audible.
17px
metaphoranalogystory
You've been in business since 1999, 27 years in. And I think in that time, correct me if I'm wrong, eight companies to eight figures, four exits, you do a 200 million port code now. So I want to dive into that because I'm really interested in the port code, how that works, how you scale the internal companies.
But first I want to talk about one thing we have in common, which is over the past couple of years, we both went all in on content. So I think there's like a story where this kicks off, where you were spending like 150 grand a month in ads, didn't know if it was working or not. just shut it off.
Yeah. And just rode YouTube. So kind of explain what was the origin of like, OK, we're going to go all in on brand.
And then what happened with that experiment when you shut off the ads? I mean, what we were looking at is we were looking at diminishing returns and the stuff that we were doing. And that always makes me nervous.
Any time you've been doing something for a really long time and it's been producing predictable results and all of a sudden it starts to go down and you're really good at this and yet you can't manage to fix it and to get it going back up. That to me is a sign that we're fighting gravity. And so I go, okay, we need to start figuring something out.
And it doesn't mean that ads are going to go away. It was just clear that the writing was on the wall that in a low trust environment, which is where we are right now, the way that you build trust is not exclusively through advertising. Trust is going to be built in the channels that people are spending the most time on, which is Instagram and TikTok and YouTube.
And I really liked YouTube. And the reason that I liked YouTube is because I knew that YouTube was the channel that I spent. more time on.
When I was serious about something, I would go to YouTube. And so I wanted to start there. I also knew that I have a hard time shutting up, right?
I can just go on and on and on. So long form would be more suited to me. And so it's something that I had dabbled in for a good long while.
But, you know, you and I have a lot of mutual friends. I remember talking to Dan Martell about this. He inspired a lot of us.
Oh, I know. Because I was talking to Chandler yesterday. And Chandler was like, just like...
I saw what happened to Dan. So, yeah. Well, he was my anti -inspiration.
Okay. I called Dan. I was like, all right, dude.
Teach me your ways. I'm ready. You've been telling me to do it for years.
You're blowing up. Obviously I need to do it. Same thing.
Talk to Alex or Mosey. I know, you know, you know as well. All right, dude, like break it down for me.
Yeah. You know, I'm sure it's obvious because I know people come to me and they're like, oh, tell me the secrets. Like there's no real secrets, but like, you know, in general, it's just kind of do the work consistently.
But I remember talking to Dan in particular. He's like, dude, yeah, you gotta, if you're going to do it, you gotta go pro. You gotta go pro.
I was like, okay. Okay, Dan, what does that mean? What are we talking about?
It's a great load -bearing phrase. You just got to try. Got to go pro, got to go pro.
He's like, I mean, you got to hire this and this and you need people following you around and you want to be filming at all times. And it's this. And I was like, uh -huh, uh -huh.
And he went and it was great advice. And I just remember sitting there being, uh -huh, no freaking way I'm going to do that. Like 0 % chance I'm going to do that.
There is nothing at all that I want where at this stage in my career where I'm willing to do that. In part because like, if I say, hey, come on. I'm like, hey, honey.
This is Randy. That's Duke. They're going to be following us around now as a family.
Hope that's okay. I don't need to worry about work and stuff like that anymore because I have nothing to work for. My wife has now left me and taken everything that I love with her for good reasons.
This is not going to happen. There's no freaking way. And I'm looking around at what everybody's doing.
I'm like, I'm just not going to do it. And so I just bailed back out again for another 12 months. I just didn't do it.
And I was like, we just got to figure out the paid side. I get paid. I understand paid.
Like, and it just worse, worse, worse, worse. And finally I just said, you know what? Screw it.
I'm going to do it, but I'm going to do it on my terms. And if I can make it work on my terms, then I'll keep doing it. And if I can't, then maybe I just need to figure out something else completely.
And my terms were essentially, I will make a video every single week, except the weeks that I don't. That was my rule. Yeah.
I would endeavor to do it. I would start off by doing it on topics that I would find interesting. And so I wasn't trying to run any particular strategy or anything like that.
It's just, I think this is good and people would like it. Now, that had very mixed results, which you can get into if you want to. But that was the origin.
And I remember the first couple of videos that I put out, they started getting traction. But the biggest thing that told me, okay, this is what I need to do is we would have prospects. book a meeting with us to learn more about our services and things.
And our sales team would ask him, how'd you hear about us? And the answer every single time was, I've been watching Ryan's stuff on YouTube. I've been following on YouTube.
And then when we added short form, it's like, oh yeah, I've seen you all over Instagram. Now we can look at the data and know that is not how they found out about us. They found out about us because they saw an ad, they clicked on the ad, they opted in for a lead magnet, they got on our email list.
But when you ask them, what is their perception? That tells you everything that you need to know about what actually created the sales environment such that they were willing to move forward. This is an ecosystem.
It is not a funnel. It is a giant net. And that's why it needs to be a part of what we're doing.
Dude, you just described my entire experience literally verbatim. Because I literally did the same thing to where, you know, three years in a row. I'm going all in on content.
I was like embarrassed to say it the third time. Yeah. I'm going all in.
And then it's like, I would try to do it and I'd be like, oh my gosh, this is horrible. And then, you know, even when I went to the Hermosi office, which was really helpful. And I think the most helpful thing, honestly, was just publicly saying that I paid him to go all in on content because.
if i backed out i was like i'm gonna look like a complete fool now and you know they like map out this massive org chart of their media team they got this like ridiculous office and i'm like dude i'm not even consistent posting once a week right you know i don't even know what to post about yeah and so then what happened was i just indexed on like when you know you're probably the same way when i get into trying to do something new I pay everybody.
Yeah. And I want all the advice. So I'm accumulating all these tactics and then I, instead of making good content for like my customers, I'm like trying to make, like I'm trying to do all the tactics and it just produced a bunch of slop and I hated it.
Yeah. And then where we ended up, just to keep long story short, was make content you like for people you like and a format you like to make it. Yeah.
And that's where we kind of ended up with this podcast totally by accident and then when I have time to produce a solo video that's like a talking head, that's what I do. Then we just clip it on every platform. It's amazing.
The videos that I'm excited about tend to do well. Not always. Yes.
But if I'm excited about it, they tend to do well. And I don't think that that's necessarily because I'm my customer. I'm my client.
I think it's because energy is transferable. And it's transferable through these different channels. And if you're excited to make the video and you're excited about the content, that's going to come through.
And if you're not, and if it's just rote, and if it's derivative, then that's going to come through too. Yep. And the other crazy thing too, and Nolan will tell you this, is for the first four months when we started to really start to get traction and people started going, I love your content.
I was like, well, I'm looking at direct attribution. I'm like using all the direct attribution links and Hyros and all this stuff. And I'm like, but where's the money?
You like the content? Did you buy? You know, I'm like, are you a customer?
Somebody approached me at the grocery store. I'd be like, I'm glad you like the content. Did you buy, you know?
And I was so frustrated. I'm like, why aren't these people buying? And then I went through this phase of reviewing some sales calls just kind of randomly.
And I'm like, oh, like they're saying they watched the YouTube video, but they responded to an ad. And then that kind of plays to the ecosystem point too. It does make a huge difference.
Attribution is a freaking lie. Now it lies relatively consistently. And so I'm not saying it isn't useful.
But one of the worst things that you can do in marketing and in business is to over -optimize for attribution because what gets the credit? The first touch? The last touch?
Are we going to try to spread it out? You don't freaking know. And this is not how human beings work and move through the ecosystem of brands anymore.
There was a time when... The only way you could find out about something was you had to walk into a store and talk to somebody. That's fairly linear.
And then even in the early days of the internet, which I would kind of describe as sort of when I got started in 1999 up until, I don't know, the early 2020s, it was still fairly linear. There were funnels and somebody would get in your funnel and they would walk through the different steps and the landing pages that were there and they'd get on your email list and you would send out a series of emails and they would do this weird thing called open and read them in order.
This is not how the world works anymore. And so if you're not out there and available when people are in market, when they're ready to move forward, and if you haven't built that trust up along the way, you're just going to lose to somebody who is. And that was ultimately the decision that I came to.
And so now, because scalable is essentially... what brings people in, and then you eventually evaluate deals from that, which we'll talk about in a second. But to bring people into Scalable, is it just organic now?
Because I know you shut off the ads. You're doing more of the ecosystem approach to where there is some ads as well as into that. Yeah, so like you said to me, we had ads going.
We were spending, you know, on a low month, $80 ,000, $90 ,000, and a high month, $150 ,000, depending on. So when I decided, okay, we've got to make this organic content side work, let's just scale. I told, you know, Matt Swanner, Head of Growth, like, let's just shut off the ads.
Let's just shut it off. And let's make it work here. I knew we would add it back.
Yeah. But the problem when you're running ads at scale, it's kind of that classic, we know half of our marketing doesn't work. We just don't know which half it is.
And so I was kind of excited. I was like, you know what? If we just shut off all the ads for 60, 90 days, force it to come from organic, it'll be a good forcing function.
But the other thing that we can do is now we can start slowly adding the ad side back into it. And I think where we've settled in right now is maybe we're 30, 40 ,000 a month in ads, but getting the same, you know, getting more MQLs, getting more marketing qualified leads at a better rate. And we're all for spending a little bit more right now.
Our constraints are on the fulfillment side. So yay. I mean, everything in business is just about creating better problems, you know, for yourself.
And so we're working on that right now and then we can come back, but we're doing it very intentionally, you know, in the ad back. I don't know that I would necessarily recommend that strategy to everyone. I just, sometimes I'm a rip the bandaid off kind of guy.
Yeah. And so YouTube, I'm pretty like, it's very clear what your strategy is. Do you write your own X?
Because I do follow you on X. Yeah. Yeah.
So when do you find time to do that? So we have, we have a team, we have a strategist that will help me brainstorm ideas and they'll come out and they'll say. you know, this is performing well and we think you would have an interesting take.
And sometimes I'm like, I do. And sometimes I'm like, I don't care about that at all. And so I'm very editorial, like I am the editor.
I'm going to think about it like a newspaper editor being like, yep, this is good. I have an opinion about this. And so that's kind of one part of it.
The other part is taking the long form stuff that is done well and creating derivative things from that. So they'll say, you know, this video did really well and you seem to say some smart things in here. Why don't you write a post about it?
So the ideas will come from other sources and I'll do some of my own as well. And then I'll just sit down and I will write them. And I do use AI to help, but every single word that's on there has been touched and rewritten by me.
And I will make, and I think this is important right now in the age of AI, I will make arbitrary changes. I will just make arbitrary changes. I will say stupid stuff.
I think that voice... is in the unnecessary yeah and right now everybody is trying to be tight and crisp and perfect and what you're going to sound like is a computer you're going to sound like ai so i now add in and i say things that have no business being there but they're how i would say it yeah And that's what I'm trying to get to come through a little bit more.
Yeah, I think it's just like the old copywriting principle of write like you talk. Yeah. Like just voice dictate.
That's how I do a lot of my written just because it will sound so natural. Whereas when I start to use AI as the editor, I'm like, it's hard not to look at it and be like, yeah, that is pretty good. It's pretty good.
But the next thing you know, you're saying it's not this, it's that, it's not this, it's not, you know, and then you're doing all the typical mistakes. Is it the same type of process with IG? And the reason I asked too is because IG, I find that when you're a business guy like us, it's like, how do I say everything I want to say in like two freaking minutes?
I hate it so much. I hate it so much. He's smiling because he knows.
I hate it so much because I hate giving half answers to things. And I hate it when you have to, you know, it's like, I want to fully answer the question. I want to close the loop.
Like that's my desire because I'm a... I like to teach is what I like to do. And as an expert, you probably also like to say a lot of times, it depends.
Yes, because it always does depend. But you can't do that. It doesn't reward that.
And the other thing that I've had to learn over the years is you can't confuse accuracy with authority. Some of the least accurate people out there on planet Earth are some of the most authoritative. Yes.
And some of the most accurate people... are also the least authoritative because they never seem to take a stand on anything. It's not helpful.
So it's a balance. And there are times when I will push back and say, I don't feel like I can say anything of value in that short a period of time on that subject. So we simply have to narrow the scope.
And I think that's important. Like you either own your voice or you don't. And if you're simply a parrot, then somebody with an actual point of view is going to burst through.
So I'm okay doing it quote worse than what it should be. If it's more, me. And this goes across the board.
I'm all about intentionally breaking rules with and best practices, but strategically. And with the idea of like, I'm breaking this rule for this reason. Let's see if I was right.
Let's find out. We are hiring at closers .io. So we are specifically looking for account managers.
So if you want to make more than $600 ,000 a year, here's a commission check right here of 54 ,000 in a single month that was from last month to prove it, then listen closely. So a lot of you guys know that what we do is we recruit and hire and train sales teams on behalf of our clients. We have over about 800 to 900 active contracts right now.
The individuals that service and manage these accounts who do the sales training, the coaching, the business coaching, and help these companies scale, those are called our account managers and they make a lot of money within our company so if that's an interesting position that you want to check out there's a link in the description essentially again what they do is they're the ones managing the accounts doing some of the sales training helping the business owners scale and then they also are commissioned on the retention and the upsells of all of our clients so you have to be highly highly highly skilled to do this position and I know a lot of people my audience might be interested in this so I wanted to make this quick mid roll to show you what it is so Link in the description if you're interested.
Now, back to the video. Makes perfect sense. So before we move on, because we're going to talk more about your business and everything, but just with your media, I'm curious, what's the biggest thing you're working on kind of like next 12 months you guys think you can get better at or implementing, etc.?
I've got a fundamental belief about all content, and that's that there are really only two strategies. And the strategies are be everywhere all at once or be missed when you're gone. And the everywhere all at once strategy, and we know the brands that are out there doing this, they're effectively taking on an entertainment model, whether they realize it or not.
If you're saying, I want to be everywhere all at once, I want to make sure that wherever somebody finds me, I'm optimizing for views, I'm optimizing for eyeballs and attention, that has a specific monetization component to it that is baked in. It just is. And I'm not saying it's a bad model.
But when your total addressable market is the Fortune 5 .91 million, which mine is, if I have a video that gets 10 million views, something has gone horribly wrong. Yes. Like, what have I done?
I have made a terrible mistake. And so where my focus is right now is making sure that I'm missed when I'm gone. And so what it means to be missed when you're gone is to produce really good content and really good information that people go, holy crap, that's awesome.
Yes. But then to sometimes not be there. So you got to leave, but then you got to show up again on occasion.
So it's consistency, but it's consistency within a cadence of I'm here, I'm gone, I'm back. This is, you know, think about the shows, I think you're old enough to remember this, you know, back before streaming, when you would just be glued to your TV set at 7 .30 because your favorite show was about to come on. Like, and you weren't going to miss that.
Yes. You oriented your life around these kinds of things. So my goal right now is how do we put out the kind of content that people miss when it's gone, whatever the channel.
So I really want to double down on less but better. But then every now and then, let's kind of come off the top rope and just try to see something that can go a little bit broader. But I don't see it as like, I think the mix is like 90 -10 at most.
Makes sense. So moving on to the Portco. So I think last I heard it was 17 companies?
It's less now. We've sold a few. Okay.
How many now, roughly? About a dozen. Okay.
And so when you're thinking about the buy box of companies that you want to add into the portfolio, what does that look like? And what is the overall thesis towards that? So, I mean, the companies that we're looking for were somewhat industry agnostic, but they tend to be services, business services, those kinds of things, if only because...
that represents the majority of businesses out there or business services, home services. So that's kind of the core of it. It's also where we can add a lot of value because the stuff that we're good at, they benefit more from than, you know, let's say if you're doing, you know, heavy industrial manufacturing, like probably not your guy.
If you're like, oh, we need materials fabrication. It's like, I didn't do that well in physics and chemistry. So good luck with that.
And so we're less interested about the industry. It has more to do, with the psychographics of the business owner.
And specifically what we're looking for is somebody who has been flat or down the last couple of years and who is really excited to try something new. Because if we, and this has happened before, if we get a company in the portfolio that is already a rocket ship, which by the way is what all VCs want, it's what all private equity wants, like we don't, what we find because our model and the way that we enter into the deals and the way that we work with these companies if they were going up anyway, then they would just assume that they would have done it without us.
And that can create some resentment. And maybe they're right. Usually not.
But let's say they are right. Whereas if somebody's been flat or down for the last couple of years, then they're open and interested in trying something new. And we can truly create a growth thesis around that that can be executed against.
And so now you have an objective measure of, you know, is this working? And then we also want to make sure... as simple as it sounds, do we like this business owner?
Yeah. It's the tacos and tequila test. Yeah.
I mean, it really is like, do we just like this person? Is this someone that I want to see win? I've known people in this business that I would kind of like them to lose.
Because they're just pricks. I don't want you to have more. And I'm not actively rooting against you, but I certainly don't necessarily want to help you.
Thankfully, those people are few and far between. But it has way more to do with the psychographics of the founder. We like businesses that have been succeeding almost in spite of themselves from a sales and marketing perspective.
They have to have a great product or service. We can't necessarily fix that. They can have issues in the delivery and fulfillment that was created by scale.
Fine. But the core of what they're doing needs to be there. But that's...
The bulk of what we're looking for. What do you think is the one thing where, and I'm sure you've had this, to where you're looking at a deal and you're like, there's like one problem they're struggling with where you're like, oh my God, like that is perfect. Like we're going to crush it.
I will tell you the easiest one, and it's the stupidest one, is when we look into a business and we're like, let me see what their follow -up is like. Really? And it's just non -existent.
That's a lot of businesses though. All of them, man. It is shocking.
And so we know, and we're transparent. We're like, what are you doing in terms of follow -up? Oh, yeah, we're not.
It's like, okay, well, we can probably help with that. It's almost always the simple thing. I'll tell you what it comes down to.
I can give you the category that it comes down to. It's the thing the business owner knows they need to do, but they're afraid to do it. And they just need outside permission and a forcing function to make that decision.
So it's, yeah, I kind of need to fire my brother -in -law because he's holding us back. Or... Yeah, we sort of need to sunset this legacy product or service line and say bye to some clients that we like, but maybe they're getting a little too needy and entitled and they're holding us back from this.
It is rare that we come up with a truly unique and original idea that they've never thought of. Interesting. It's almost always, and the same thing is true with private equity.
Private equities don't have any new ideas. They go in there and they acquire these companies at a substantial discount to what they would actually be worth if only the business owner. were to make those hard decisions on their own but they come in and they rest control away and they go we're on a three to five year plan so gotta go gotta go double down here and it's just so if we bring some element of that into it without having to fire the founder which we don't want to do then that's when we know we've got a business we can help and you think a lot of times the reason they're not even taking that action that is the hard decision is maybe just kind of the there might be an emotional component or like a politics component or bureaucracy kind of in the company and so just having like a new face and a new partner yeah probably just like almost just helps he made me do it yeah i didn't want to do it he made me do it as silly as that sounds yeah that is very often the role that that we play um in in these companies because you know we only make decisions to do something new when the pain we're dealing with is greater than the perceived pain post -decision and so
The number of business owners I see who are just willing to endure a flat, languishing business where they're effectively working for everybody else. At the start of the month, they're like, we just got to make this much in revenue so I can make payroll. I'll never forget the time when I had to tell my wife, we're not going to be able to go on that vacation that we had planned because I got to make payroll.
And she was like, that's fine, but... are they working for you or are you working for them? And the number of business owners I see who will just live this life of quiet desperation in their business because they believe that the pain of making that really hard decision that's going to be the thing that allows them to level up, they believe that pain is going to be greater than just sucking it up.
And eventually they reach a breaking point. They're ready to do it. But it's usually we reduce that pain because we're the bad guys.
Yeah. That's nice. And so with scalable, what is, so people come in, what is generally kind of the price point or engagement in which people come in?
Then there's probably like a backend level engagement. And then, so then within that, how do you sort of, like, there's probably a lot of people going through that who have a lot of results, et cetera. How do you find kind of the 1 % or the few that you actually even want to have a conversation about with the deal?
If I had to do it all over again, I don't know that I would have built what I built. And you and I were talking obviously before this about. Jeez, like the number of businesses that exist out there that were founded purely on the basis of just blind ignorance.
Yes. Like an entrepreneurial optimism. It's kind of a gift.
Easy. Yeah. Like just delusional optimism.
Because what we want at the end of the day is to grow the portfolio and the distributions that we're receiving from that portfolio. Like that's it. I don't necessarily want to have a services business.
I don't necessarily want to have, you know. uh masterminds and these these kinds of things um and i i often wonder and i've asked myself if i just had you know my business partner like roland and you know richard like there we have a a plat we have platforms like we have social media followings and stuff like that if we just said we'll do consulting like on a one -off basis and on you know on the back of that consulting added people to the portfolio would that have worked um because that's not what we do right now what we have right now is a very very clear cadence but As we've gotten into it, our best portfolio companies were clients first.
And so I'm kind of speaking out of both sides of my mouth, but I'm kind of glad we built it the way that we built it. And the way it is right now, it's a three -tier structure. Tier one is our flagship accelerator.
And it is a minimum kind of 12 -month engagement. And for the first six to 12 weeks, we are rebuilding your company operating system. And for that...
For us, that means something very specific. But we're going to get in. We're going to map your process flows, create your SOPs.
We're going to identify the different humans that should be doing this. And if you don't have the humans to do that, the hires that need to be made. So what's kind of your ideal org chart?
We're going to create scorecards so that you know the metrics that matter. Install meeting rhythms. This is what, if you were to get acquired by private equity, this is what they would do.
Especially if it were a tuck -in. Like if you were getting rolled into a bigger business. They do what's called integration.
And integration is essentially kind of taking your company and plugging it into their existing operating system. So that is our initial focus for the first bit. What this means is we're effectively getting paid to do due diligence on a business.
We can find out here, do we like them? Do they have a good business? While delivering an incredibly valuable service.
And then we just continue to work with them. Kind of a quarterly cadence to what needs to get done this quarter. Here's some stuff.
We're heavy, heavy, heavy on the one -on -one side. And that's for two reasons. One, it's what sold the best.
But two, it's what gives us the greatest insight on that. So tier one isn't just an astoundingly high margin deal. It's a flat $2 ,500 a month.
Because again, we want to make it simple and easy for people to get into that program. And we just want to be half the price of a crappy employee. It's kind of the thing.
That's where it... Starts, you know, and so any given time we probably have right now five or six hundred Businesses that are swirling around in that and that's again that that's growing but we've had some capacity constraints that we're working on tier two is Our now in -person kind of group within the group limited to 120 businesses And these are the people who once we've worked with them in tier one We kind of give them a shoulder tap and say we'd like for you to come to this new place where we can get to know you even better.
And so they ascend from there. And then tier three is private client and portfolio company. And so that's it.
And it's basically 2 ,500 a month, 4 ,500 a month, or all the private client deals are different, but there's some component of phantom equity, profits only interest, cash at exit, those kinds of things. Makes sense. And I would imagine too, there's probably some people in tier one who go right to portfolio.
It's probably not always a clear ascension. We are now almost forcing it to be a clear ascension because we have found that when people skip steps, those have been the private clients that have not worked out. Makes sense.
Because one of the things that makes the deals that we do at the private client level work for us where it hasn't worked for other people who have tried this before, because we've been doing this for a very long time. Yes. I mean, we've been doing this for...
some version of it for over 20 years yeah now um and so we've learned a lot of the wrong ways to do that and what we found is if somebody is excited to give you a chunk of their business they're like here you go we just want you to have a chunk of your business you probably don't want it okay like you probably don't want it yeah they're like they're very desperate and they're cast casting all of their desperation upon you and it's help me obi -wan kenobi you're my only hope i don't want to be that That is too much pressure.
At the same time, you know, our business model isn't that we write these gigantic checks, you know, into companies. We're active equity partners. We are coming in and we are deploying kind of our general awesomeness to help to grow this company.
So we're, you know, we might put some money into it or we might have some deferred distributions that go into our buy -in. But in general, we're coming in and we're earning sweat equity. on these deals because there's not a lot of money because they're not we're not writing them a big check resentment can build where people can look at it and they can go yeah i don't i don't know that you're really doing enough to justify the 20 to the 10 or whatever that you have and so all of our private client deals have a six month uh kill switch right so at six months they can tear up the deal and that we found that that is essential for both of us Because it means we have to add enough value in that first six months for them to be excited to keep working with us.
But we have to have more in the tank and still be able to paint a future. So they want to keep working with us. The businesses that have skipped steps where we've gone straight from a referral and we did initial consult into portfolio.
Those are the ones that at six months, it's like, maybe you should just have this back. And so I'm curious because, you know, if you give somebody a huge insight and information, right. Super valuable day one, day 90, they don't value it at all anymore.
Right. So how do you, like, especially it's kind of a two -prong question because it's like, how do you keep them from becoming resentful when a lot of times like the value can be unlocked. just right in the beginning.
Because like, you know, you can probably look at a business and you can go, okay, I know they need to fix this. This is their number one constraint. Then that's going to create this problem.
That's going to lead to this. That's going to lead to this. Okay.
That's basically doubling your business and fixing pricing. Boom, done. So how do you sort of, number one, make sure the value tips over that six months.
And then also, I mean, you want to work with these people for a long time, for multiple years. So how do you sort of like make sure they keep valuing it and that resentment doesn't build? A lot of it is making sure so much of it is on us.
Like, do we have more to give? So if all we have to give is some good ideas and general awesomeness in the first six months, and then it's, we're kind of done. I don't think we deserve to keep earning on that.
It's thank you for the opportunity to work with you. We're out of ideas. Seems like you got it.
Go ahead. Now. So if it is truly the thing where that's all we had to give, then we should essentially get fired at that point.
I think what you're talking about is you did give a lot and you do have more to give, but resentment still builds. So how do you make sure that that doesn't happen? And the way that you make sure that that doesn't happen is one, at the six -month mark, when the relationship is re -underwriting.
And I learned this from one of my mentors, Roy H. Williams, who wrote the book The Wizard of Ads, because he does this with... He has a similar model in his marketing agency that he's run for 30 -plus years.
where as the business grows, his fee grows. And so the conversation that he has with his clients is, if we pull this off, what we're talking about doing here, your business is going to be worth this, which means your distribution should be around this. The value of the company is this.
Hopefully you can sell it for that. But we're going to be making, why? We'll be making this.
Are you going to resent me when we get to this point and we did it together and we're clinking glasses for making this? Because if you are, let's not do the deal. Now, before the actual cash has hit, pretty much everybody's like, of course not.
And they shouldn't. But when you inoculate against that on the front end, you can reference back to it. And we found that that is helpful.
We also reference back to it quarterly. So we don't wait until something big has happened. We're meeting with them quarterly.
We are running a basically evaluation every quarter. So what is the business worth today? So we're tracking on a quarterly basis.
Here's where we are in terms of EBITDA value for the other value drivers we put in place. The business is now worth this. So our stake is now worth this.
You still good with everything? And as long as you're checking back in and the communication is there, the right people get it and the right people value it. If you go too long between...
that communication and that reminder of value and that look at all the stuff we've done together and you don't re -anchor that, then even the right people are going to forget about the value that you provided. So I think it's on us to continue to remind them and to reinforce that while also inoculating against it from the get -go.
So a lot of people, even me included, have tried this model and just completely failed miserably. And I know it's a model that a lot of people in our industry want to do, where they want to take equity in their best clients and have more of a portfolio and have more leverage. But I mean, there's you have done it well.
I know Andrew Wilkinson's done it well. Hormozy's done it well. I'm sure there's other people.
But out of the amount of people I feel like get into this, it's like a very small percentage actually get it to work. So what do you think a lot of people do that, you know, what are the mistakes they make when they try to actually go this route, partner with clients, build a whole co? that type of deal?
They're not clear on their acquisition criteria, number one. So they don't know exactly what they're looking for. They think it might be industry specific, but they don't have an acquisition criteria around the the where the business is.
So the business lifecycle and the business owner themselves. And so they get in business with people they don't want to be in business with or they get involved in businesses that are on, you know, rapid decline that they've got to try to save. And that comes from I mean, how do we get a really crystal clear acquisition criteria?
Doing it wrong for a decade. You know what I mean? So a lot of this is just, I would argue they're probably on the path if they just stick with it.
But not having clear acquisition criteria means you wind up taking people you shouldn't take, doing deals you shouldn't do. And there's so much time wasted in helping a business, trying to help a business grow that doesn't want to grow, trying to help a business that has a fundamental broken aspect of their business model.
And so I see a lot of people kind of getting stuck in that. They also don't have a period, an initial engagement period, and then a re -underwriting period. And that's been the biggest difference maker for us.
If we have that initial six, and we found, by the way, we did it 90 days, wasn't enough time. We've got to do six months in that. We're working together for six months.
It's a long time. You're going to learn a lot about a business and what you can do in the business owner over a six month period of time. And after that.
they could walk. Everybody has to re -underwrite the relationship. When you put that in place, you get really selective about who you take on the front end.
Because if you think that somebody's going to just take the good stuff and then leave, you're like, yeah, no, screw it. I'm good. We haven't done a deal in 18 months.
You know, we haven't done a deal in 18 months because there just hasn't been the right things that have come along. We had a couple of them. We had one of them that was like this close and then a partner dispute.
kind of came out of nowhere and blew it up. And that just sucked. And you hope that you get it back.
We've got another deal that's open right now. That's a potential roll up in the kind of landscaping tree services space that I know we could do phenomenal stuff on, but there's a lot of hands in that cookie jar. And so it's just going to take a while.
And so the willingness to wait and to let the cake bake is a number of times we've had these conversations with people and it didn't work out, but. we kept falling up and we're like, how's it going? And 12 months later, 18 months later, they're like, I think we're ready now.
A lot of people just don't give themselves enough time. Yeah. So on letting the cake bake, you're going to laugh at this.
When we started to do this, we were like, yeah, we're really excited. We're going to do it. We took on eight portfolio companies.
You took on eight? In six months. Perfect.
That's the other thing. Yeah. It's like the most common, I mean, I could have just told you that.
Yeah. And you'd be like, oh yeah, I know how the whole rest of the thing is going to go. This is a 0 % success rate.
0 % success rate. It's almost embarrassing to say it, but I'm quote ribbing it myself. And so took on eight people in six months.
Yeah. Great idea. Just great.
Like, why don't you just make sure that you're overextended here? And then everything that was working in my current businesses is completely neglected. Yeah.
So also a good way to make sure it's the wrong people. Yeah. Good way to make sure, which we also did.
We over -promised all sorts of stuff that we were going to do for like 20 % of revenue. You know, we're running their sales team. We're running their marketing.
And then it's like, okay, we maybe doubled their business. Now they can't scale their client success. We'll run your client success.
And then we're like, I think we're making 20 % here. Like, what are we doing? And then now we're resentful.
Yeah. You know, so there was that issue. There's so many more that I could name, but if there was one, holy crap, like we should have done one deal.
One. Over 12 months, maybe. If you're doing one a month, that's a lot.
Yeah. Like one or two a quarter is kind of what we're targeting at a max. And you've been doing it.
And we've been doing it. I was getting started. We have an infrastructure, yeah, but going and taking it because the reality is power laws apply, right?
You know, out of the, part of the reason we're kind of shedding the companies that were in the portfolio is because, you know, out of 17 of them, there's like three or four of them that delivered 80, 90 % of the results. It's just how it is. Yeah.
Right. It's just how it is. So it's hard because you've got to kiss enough frogs to find the ones that fit.
But if you move too fast, you won't be able to kiss anybody. I mean, you're just hopping all around and they're, you know, and they're gone. So yeah, you can't, you can't do that.
You also, what you said there, I didn't, I didn't mention this hard lesson learned. You cannot do any of the services for them. Yes.
So, um, In our, we have a portfolio model, but we do not have a shared services model. And we have found if we tried to have any type of shared marketing or shared sales or show product fulfillment, but the only thing that we can share is accounting, finance, like payroll services, those kinds of things, they scale relatively easily and have economies of scale in them, which is nice.
But we will not, will not run your marketing for you. We could do it. Like we, like we know how to do it.
But one, Now we're stuck kind of being this provider, which is a really bad positioning problem. But also you're not putting the value where it needs to be, which is in the company itself.
And so we won't run your marketing. we might help with something on an interim basis, but we're moving towards hiring for that role. So if you're enjoying this conversation I'm having with Ryan right now, it's funny because Ryan actually spoke at one of our eight figure boardroom events.
So if you want to network with people like Ryan and hear people like Ryan speak and other top operators in our space, as well as network with some of the highest level entrepreneurs in the space who are doing mid seven figures, eight figures, or even multiple eight figures a year, check out our next boardroom event. It's in New York City.
There's information in the description in terms of where it's at, when it's at, what's included, what we talk about at the event, but it's really the number one mastermind for people in our space who want to get to a million a month or their next million a month. So check it out in the description.
Now back to the podcast. Well, you know what the other issue is. This is what we found is we would take over their marketing and sales.
Let's say they were doing 200 grand a month. If you're doing 200 and I take over your marketing and sales, you are doing 400 30 days from now. I do not care what your business is.
That said. What I realized is, is like the, my pace, I mean, I've scaled three multiple eight figure companies now. My pace is not the right pace for them.
And so a lot of times what would happen is, is we would like actually outgrow the company to the founders like comfort zone. Yep. And they would be like, I fucking hate this now.
Yep. Like I hate, cause you know how it is. It's like, you kind of go through these things as a founder where you grow a little bit and like the first time you, you know, there's like little things.
The first time you get a bad review. you're upset right the first time you get a charge back you're like oh my god what do i do i got a charge back the first time you know you have some churn and somebody quits or an employee tries to like sue you for some reason well when you hyperscale a company with a founder who's never done it before you're accelerating like all of those massively triggering problems for them in a compressed time frame and then all of a sudden they're like i kind of liked my business better before you yeah and i wanted to make less money and that actually happened to us and at first you're like well, what's wrong with you?
You know, what's going on? Like you got mindset issues. Now I realize like, no, like we just had, we just asked for it.
You know? You have to let them set the pace. It's their business.
Yeah. That's been the hardest lesson. One of the hardest lessons to learn is we're minority partners in all the deals that we do.
I don't want majority because I don't want majority risk. I don't want majority control. Like that just doesn't work for us.
We're not private equity. We have an inverted private equity model. Essentially, we want to run a private equity style playbook.
on these businesses so that when they ultimately do sell to private equity they can realize the full value of the thing they've built as opposed to selling at a discount allowing private equity to realize that value and then supposedly scale it up and beyond that so we want to do that but it has to be at their pace and they have to decide and the number of the hardest thing that i've had to learn over the years is having a conversation with with a portfolio company CEO or heck, a client.
And them asking me what I think they should do and saying this is what I think you should do. And looking at them, it's like, you're not gonna do it, are you? And they're like, no, I'm not.
I'm like, okay, that's fine. Because sometimes you gotta let the cake bake there too. Well, and it's like an employee, like how I'll train an executive is sometimes, especially if it's not a Jeff Bezos one -way door, you let them make their own mistakes.
And every once in a while, You know, I've been like, I don't think that's a good idea, but you know what, whatever, just go for it. And then it's a good idea.
And I was how we learned. We want to, you know, we want to basically say, you know, act like we're God's gift of business. And therefore we should just be able to tell people what they should do and get it right the first time.
Not realizing that we're robbing them of the thing that actually made us smart in the first place. Yeah. So, yeah.
And like, you got to pick and choose your battles. You don't want them to drive the car off the cliff. Yes.
But all too often it's like, you need to do this and this and this. And even if. If being married for 25 years has taught me anything, it's that, again, there's a difference between being accurate and being right.
Like I can be accurate in how I talk to my wife and the feedback that I give, but it will not make it right. And that's leadership, man. that is leadership as well so before we move on from this i think there's one other thing in terms of monitoring the companies you say the main thing that you look at is if the cash distribution account is growing more so than any of the other kpis so explain kind of that and why you look at it that way so That is the main thing that I'm looking at.
But we have scorecards for every single company that I can pull up. And the scorecards, the way that we build scorecards is they mirror the customer journey. So we don't really have scorecards by department.
I mean, they're loosely by department. But the way our scorecards at the company level are built is, you know, the marketing, the big important marketing KPIs, those are going to be at the top of the scorecard. Sales is going to be after that.
then you're going to have fulfillment product. Not because marketing is more important than sales or any of that, but that's the flow of the customer journey. And I want to have for every metric, I want to track what is the number week over week.
And so our teams come in on Monday morning and they report it for the previous week. And they're going to compare that to a target for the month where everybody's agreed. The owner of that metric is also every metric has a name next to it, has an owner next to it, a human, not a department.
a person, and they're responsible for inputting that metric and they're responsible for optimizing that metric and making sure that they are on track with that target because they set that target. So I don't have to look at the metrics. I don't have to look at any of the numbers themselves.
I can just scroll down and just look for red or yellow. And for us, green is obviously you're on track or ahead of target. Red is you're behind and you have no idea how to catch up.
Yellow is you're behind, but you have a plan to catch up. And this is incredibly important. Yellow is not close.
I don't care if you're close. Close is optimism that's going to bite us all in the butt. I want to know, do you have a plan for getting it back in the green?
Because that's accountability. And so I don't want near misses. I want to, if it's yellow, this is how we'll get it back in the green by the end.
So I can now pull that up and I can look at the scorecard. And I just look for... Are there any red spots?
Is that a metric I know anything about? I will glance at that. But I think the ultimate sign of a healthy business, it's not going to be some KPI.
It's not going to be like NPS. It's not even necessarily going to be profit or sales growth. Those are all factors.
It really is how much cash is building in the distribution account. Yeah. Because that is a sign that you are creating surplus value.
Yes. And everything else is a proxy metric. Everything else is looking, yeah.
Have you heard Jeff Bezos' whole take on corruptible proxy metrics? No. Well, essentially what he says, there's a whole story, it's on the Lex Friedman podcast, where essentially he's always like, you want to be aware of proxy metrics, which proxy metrics approximate what's basically everything that is leading up to the value, which really is the surplus value in the cash distribution account, basically.
And so what he was saying is he instinctively knew that the customer wait times were really long. But the KPI was like, they were like, no, look, it's two minutes or it's a minute or whatever it is. So he's like, he was talking to his leadership team and he's like, well, let's just call them and see.
And so he calls them and he waits 10 minutes on the line, like super embarrassingly in front of everybody on an executive meeting. And he's like, okay, I think that the proxy metric is wrong. So I always tell my team this too, because we've had this in several different scenarios.
Like if our, and I'm not saying our CMO did this, but I've seen this happen. where if a CMO is KPI'd in MQLs, I've seen it happen to where in order to drive it down, they will change the definition of what an MQL actually is. And it's not like, you know, it's not like in bad intention.
It can just kind of happen over time a little bit. They can really question like, well, should we be DQing these people? I think these people are actually fine.
Should we be doing? And then it's like, well, you really didn't improve performance. You just moved the bar.
Yep. Same thing will happen with salespeople. If you KPI on close rate, there's better ways to KPI the salespeople.
But if you KPI strictly on close rate, they will take less live calls. Oh, yeah. And they will report more no -shows.
Yep. It's like, how did that happen? It's like, but it's just, it's a corruptible proxy metric, which is why I like when I heard that.
I like how you just look at when you're looking at these companies, is the account actually growing? Because that is the actual source of truth. Yeah.
And I'll tell you, if you have scorecards that are tracking the different stages of the customer journey. on that same scorecard, it'll be pretty clear where, okay, yeah, you're green here, but then it's red here. So obviously something's wrong upstream.
Yes. And so it's why I don't like just cherry picking a couple of metrics. You actually have to track a few, but they need to tell a story.
And I should be able to look at your scorecard and generally understand how customers flow through your business, how value flows through your business. But if it's not showing up in the form of... Distributable profit.
And by the way, that's why I say distributable. You don't have to distribute it. You could have it and choose collectively to reinvest it in something.
Fine. I'm just looking at basically how much free cash flow are we starting to throw off. And if we decide that we're going to reinvest it, let's make that decision.
Obviously, if it's an expense that we've done, we can budget it. And so that might be above that line. Again, that's an intentional decision that we've all made, that we believe we make this investment.
It's going to result in... the optimization of some metrics, which should result in eventually some more free cash flow. But how much and over what period of time?
These are all discussions you need to have. But business owners, we tend to not do that. We just have kind of one account that all the money sits in and it gets bigger and it gets smaller over the month.
And then it kind of stays the same. And, you know, we're like, I guess things are fine because the metrics are good. And I guess sales are up.
No, you track how much actual cash you had and could distribute. And I know you're big too on really pushing a lot of founders to pay themselves distributions. Yeah.
Why is that? Because it is the forcing function to build a better business. And we experienced this at one of our companies.
One of our companies had basically been flat for two years in the portfolio. And this company was doing, it wasn't a giant company. I want to say it was doing around...
you know, between a half million and a million a month. It's basically a six, $7 million business. So solid, solid company, but also kind of in this little messy middle swamp of scale, you know, all the complexities of an eight figure business, but not quite there yet.
And everything was like, okay, how are we going to get breakthrough to 10? How are we going to get to this point? How are we going to grow?
It's like, we need to try this new thing. We need to try this. And it was all optimizing around, you know, marketing and sales and let's release this new product.
And things worked. Things didn't. Sales and profit never moved.
So finally it was like, you know what? Here's what we're going to do. I want 50 grand.
I want $50 ,000 a month. Coming like our way as a distribution. We're going to start pulling that out of the company starting in about 60 days.
We got two months to figure out how to reverse engineer to $50 ,000 a month coming out. Because that we're just... Let's start taking it.
It's been too long. We're all working for free. When that decision was made, now it was like, well, if we're going to do that, then we probably shouldn't keep this group over here that is sort of underperforming around.
And maybe we don't need to invest anymore in this new product line. And maybe we don't need... It forces the hard questions.
And something amazing happened 60 days later. Not only did we have 50 grand come out, 90 days later, it was 100 grand. And then the business magically started growing again because it had this...
cool thing called fuel in the form of cash to fund the growth. And it didn't have all of these barnacle ideas just latched onto the business, slowing it down. And so if you will just reverse engineer, and it's not a new concept, Mike Michalowicz talked about this in Profit First.
If you will reverse engineer to what the profit should be, you will reverse engineer to a better business. And I think you have a framework too, to where you say, if people are kind of debating on taking a distribution versus reinvesting, you recommend Hey, let's just take the distribution.
And then once we have it, we can decide if we want to reinvest. Yeah, that's like cool. Why is that?
Somebody's like, I don't think we should take a distribution. I think we should just put it back in the business. Let's do both.
Let's take the distribution. And then we can decide once we have it, if we want to put it back. It's the same thing.
I mean, fundamentally, I mean, you could talk to your tax advisor about any tax implications. Like that's incredibly solvable, especially if you're a flow through entity LLC. It doesn't matter at all.
Exactly. But.
But I'll get pushed back. I don't know. Why does it matter?
Just take it out and then put it back in. Literally, all we're doing is removing the money from this account to this one. And then we can just move it back in.
It's just done. What's the problem? The problem is that once I got it, I don't necessarily know if I believe as much in that idea anymore.
And you also, especially if you have a partnership, it's really, really good. Because if one partner is like, no, I want to put it back in. Another one's like, I don't.
Well, then maybe there needs to be a discussion on the partner that's putting that back in, having a bigger piece of the cap table because equity is a function of risk. They're willing to take some more risk. That's come up a couple of times, maybe two or three or four over the past couple of decades with my business partners.
And it's usually me because I'm kind of the obnoxious pain in the butt who's like very just earnest, like we need to put it back in the business. And Roland's like. let's just take it out.
We can put it back in. I was like, well, we take it out. Like I'm going to put it back in.
Okay. Well, let's have that conversation. Take it out.
It's like, all right. So I think we should put it back in now. He's like, I don't.
So where do you want to go from here? And it's like, well, why don't you feel like we should put it back in? You know, and you sleep on it and you just make far better decisions when you're thinking about it as a capital allocator.
Not an operator just spending all the dry powder that you have laying around. Take it out. Take it out.
And one of the things, talking to Andrew, Alex, you, one thing everybody who does it successfully has in common is they do not let these companies have massive cash reserves that just sit there. It is one thing I have heard that is a commonality between everybody. One month operating expenses in the kind of main business checking account.
Three months fixed. operating expenses in kind of a savings account. Go get a line of credit against that.
Double it up to six months. You effectively have seven months of operating laying around in cash between what's there in cash and what's available in terms of your line of credit. That is the max that we'll have sit around in any of our business.
Everything else gets swept out. So at the end of every month or and sometimes we'll do it after the first payroll is made. If you want to be kind of more conservative, everything over and above what that fixed amount should be.
And maybe it's we just round it up. Maybe it's. $250 ,000 or $400 ,000 or $1 .2 million.
It depends on the size of the business. It gets swept. Some is going to get swept into a tax account for savings and payroll and all that stuff.
Fine. But then we're going to look. How are we doing in terms of our savings account?
Is it full? Cool. No need to drop any there.
Are there any reinvestments that we decided we need to make? Have we already decided that we need to fund some type of account because we want to buy equipment or we want to do an acquisition or we've got a warehouse and the building's going to need a roof or something like that? Okay, cool.
We can fund it there. But if it doesn't have a home, its home is the distribution account. And it is literally a separate account where money goes and sits.
And so I can look and see how much is in there. Yep. I do the same thing, even just with me.
Yeah. I do the exact same thing. So I want to talk about scaling.
So you have a five level framework is launch zero to 500K, grow is 500 to 2 million, systematize is two to five, elevate five to 20, and scale 20 to 100. Yep. I want you to walk me through each of these phases in terms of like, what is the focus at each level?
What do we have to also like learn and unlearn at each level? And also what are the key hires on each level? So we'll kind of break it down.
But first, like zero to 500, what do we focus on there? Just seeing if anybody actually wants the thing you're selling. Yeah.
I mean, it's really is that simple. And, you know, people throw out fancy words called product market fit and things like that. But it's just, does anybody want it?
Yes. And importantly, after they bought it, are they happy they did it? And so our thing is just sell and serve like that.
That's it. And usually it's going to take you to about a half a million in revenue to find out that, yes, people want it. And yes, they're happy they bought it.
And that's the simplest thing in the world is just for the people who bought it. Hey, on a scale of one to 10, how likely would you be to refer? Talk about this to a friend or colleague.
It's just a basic NPS score. I want to hear a lot of eights and nines. It's that it's that simple.
The number of businesses that have tried to scale with a product that nobody wanted or when they got it, they were unhappy. they bought it, it's just not going to work. It will not work.
And that's why we usually are not going to look to bring a company into our portfolio group until it's well beyond the launch phase and typically even beyond that initial growth phase. Because you're still proving some stuff out there. But I mean, who are you hiring at the growth phase?
Nobody. I mean, it's you. Yourself as a salesperson.
Yourself as the delivery. You're selling. And one of the biggest mistakes you can make is to overhire a bunch of VAs and helpers and stuff like that.
And you get all these people running around. And it's one of the things I really hate about this idea of. What you need to do is you just need to make a list of all the things that you do on a given day and then draw a line.
And anything that is an hourly rate below what you should make, outsource that. It sounds so smart. It is so dumb because what you do is you replace a lot of very simple tasks you could do in your spare time, literally while you're on the toilet, with a new task called the management of virtual assistants.
That's a task too, and it's a lot harder to do. So yeah, in general, maybe you've got a business partner. Maybe you need to bring on somebody to help with fulfillment or something like that.
But no, you're hiring yourself. It's pretty easy. So 500 to 2 mil.
500 to 2 mil is, I think, the most fun. Yeah, I think so too. Yeah, 500 to 2 million is, that is when it is just, everything's held together with like duct tape and bubble gum.
And the big thing that matters at that stage is just growth. I don't care about your systems at that point. You know, when I hear somebody...
you know, bragging about, which I get now a lot. People want to brag about like their checklists and SOPs and stuff like that. I'm like, that's, that's cool.
How big is your business? Like, Oh yeah, we're going to do like 800 grand this year. It's like, what are you SOPing?
You have no idea. You're speaking my language. Yeah.
Don't like, don't, don't do that yet. Like, you know, I mean one or two, it's fine, but like, let's not play business, um, by like just spending much time organizing our file cabinets. Like, no, you don't, you don't need a bunch of that stuff.
What you need to do is go sell a bunch of stuff. And I mean, sell a bunch of stuff. And ideally, certainly as you're getting in closer to 2 million, this is what I want to say.
Let's optimize your margins. Let's start paying ourselves well. Let's get cash pouring out because you are about to enter no man's land.
You're about to cross a desert. And if you don't have adequate store of supplies in the form of cash, then you're really going to struggle. But it is about sales.
It's about... you know, you can't overhire at this stage for the love of God, between a half a million, 2 million in the growth phase, don't hire a COO or an integrator or something like that. We might as well talk about it now.
Right. Cause a lot of my clients come in question and you're like, uh, you're my preacher on this. I'll be, I need to find like a video cause you explained it so well.
And I just need to send it to my clients because they come on the call and they'll be like, I think I need a COO. And I'm like, all right, it's time for this conversation. It's time for this.
So Why do most people, when they feel like, which I think is a key word, they need a COO, it's not the actual reality? It's because, one, they don't actually know what they need.
And so when you don't know what you need, as a business owner, you tend to default to two errors. The first is hiring a bunch of helpers. So let's throw a bunch of helpers at it.
Get a bunch of VAs, get a bunch of low -level people. I'll just tell them to do what I do because I don't know what I need, but I know I need stuff done. And so let's just throw...
Warm bodies at it. That is one thing. That doesn't work because, again, you create this new task of now you're a manager.
A manager of low -level employees who can't self -manage. The other mistake they make is they say, I need an operator. I need a generalist.
And what you're really saying is, I need somebody to do all the crap I don't want to do and don't know how to do. That's not actually a role. And so we throw around these terms like COO, but...
A COO means something very specific. Now it can mean something very different depending on the industry and the scale of the business. But what it never means at any point in scale in any successful businesses, I do all the crap that the CEO doesn't want to do.
Yeah. Or I integrate the vision. Right.
What does that even mean? Yeah. This idea that like - That is not a scorecard.
I just want to sit back and I just want to, yeah, I just want to be able to sit back and just, you know, visionate all over the place. And, you know, I get where it comes from. It's what business owners want to hear.
You're a parent. You had a kid. It's a business.
You don't get to opt out of diaper changes. You just don't get to do that. Not at this stage.
Not yet. And if you try to make that hire and you try to hire a COO, no real CEO is going to take that job. And so what you're hiring is just some dude who doesn't know what the role is or they're like, if I can make a couple hundred grand working for this jackass, I will.
And they're going to... absolutely crush your margin, they're going to cost you what two or three functional people would cost you, and they're going to fix likely nothing. I'm sure somebody's going to say, oh, but I hired this person.
They did great. There's always exceptions. But I would argue the exceptions prove the rule because I've seen it work approximately never times in my experience.
So $500K to $2 million, don't hire a generalist. Don't hire a bunch of helpers. Hire a functional.
leader for the place that you're weakest at. Most business owners are really good on the demand side and they're maybe not as good on the fulfillment side. So they're really good at sales and or marketing and that's what allowed it to work.
They were good at just going out there and drumming up business. They could walk the walk, talk the talk. They had a knack for it.
They were able to do it and they were good enough at the fulfillment to make that work. Others, phenomenal at client services. And they do such a great job, they get a lot of referrals.
They're kind of weak on the sales and marketing side, on the demand side though. So there's inherently going to be one that you're better at or worse at. 500K to 2 million, hire the person who is better than you at the thing that you're not as good at.
But don't hire a generalist. The stupidest thing you can do, maybe even stupider than hiring a generalist, is I'm going to hire somebody. to do the thing that I'm good at so I have time to figure out the thing I'm bad at.
Yes. Don't do that. Just hire somebody who's good at the thing you're not as good at.
And you know you've done it right when this person tells you how to do their job. If you have to tell them how to do the job and they're supposed to be better than you, you likely have made a mishire. They're going to be expensive, by the way.
They're probably going to be pretty expensive. They're going to look like a director of marketing or a senior marketing manager or a... maybe maybe it's a sales manager but it might be a probably just a really good sales person who can kind of self -manage yeah like a great just one really great person right from the beginning but they're probably gonna make a couple hundred grand they might make 150 200 grand a year which i think a lot of people mess this up and well i mean everybody messes it up honestly even including myself but the first couple of those hires too if you just overpay a little bit Just to get like the difference between a salesperson you really have to manage versus a salesperson where you're like, you know what?
I'm just going to pay you 20 % over market. But I can almost like you can almost self -manage. Not to say you shouldn't manage them or just say, okay, good luck.
Right. But. they can almost kind of self -manage a little bit.
They're a little bit more autonomous. They have the experience. It's just a huge exponential difference in performance and also like your bandwidth.
Can I tell you the difference that you're looking for in that? Yeah. You're looking for somebody who can manage to a metric versus a task.
And so really great employees and team members can manage to a specific task and they can do it well and they don't need a lot of oversight to do it well. And we love those people. Those people are amazing.
Companies are built around those people.
Salespeople. can can manage to a task a lot of them are really really good at man i'm going to do my activity metrics i'm going to make it happen heart surgeons can manage to a task okay so i'm not diminishing the value of task -based team members but the higher that you likely need to make at this stage for your weakness who's better than you as somebody who can manage to a metric and so you can say currently our mqls are this and we're paying this much for one what how would you go about you know getting it from here to here what are some things you've done in the past And so you ask metrics -based questions and then they'll figure out the tasks that need to be assembled to make that happen.
That's the difference in the leap that we're making. And you probably got one of those 500K to 2 million. If you can make one of them, you're good.
You're good. Cool. Let's go two to five.
Two to five is the absolute worst place to be in business. It sucks.
I've had companies where I made so much more money at 2 million than I did at 5 million because you're in that swamp of scale. you now officially have all of the complexities and challenges and issues of an eight -figure business with the seven -figure business to support it. And if you've done the job right, done what we talked about in the 500K to 2 million, you can get through it.
But this really is the time where you might have to hit the pause button on growth and say, we need to build systems. Because the only way that you're going to be able to make it through this phase is if you have solid systems in place that get somebody who's... you know, currently able to do 80 % output to do 140, 150%.
And systems are the only way that we're going to do that, period. And you have to do it. It's frustrating for business owners to kind of pump the brakes and say, we need to optimize for margin.
We need to put the systems in place so that we can just be able to execute super efficiently. But if you'll do that, and it might only take a quarter or two, this is when you'll start to see the growth happen. And define systems because you don't mean checklists.
I don't mean checklists. I mean, that could be an aspect of it. But this really is the core source code of a business is going to be some type of visual value flow, visual business process map.
And so we're using sticky notes on a whiteboard, but I want to just be able to visualize how do customers happen in this business? Yes. So we run out of here, we go here, then they go to this page and do this.
I want to be able to look at all of that. And I want to now create a scorecard. that will measure against that.
And I want to optimize based on just classic kind of theory of constraints. Where's the bottleneck right now? We go and, you know, we attack that.
And as we're unblocking the bottlenecks, you can make a lot of these optimizations without a lot of additional cost or investment. And so it's about getting more from what you got because we need to increase our gross margins. We need to increase our average customer value.
We need to increase all these things so that we've got the money dumping out the bottom. so that we can reinvest to grow to the next level. The way that you bypass this is you go and raise capital.
That's how other companies will do this. But for a lot of us, if you're bootstrapped, it's not an option or you don't want it to be. And there's a bunch of cons with that as well.
Tons. Yeah, I don't want to do it. I would rather just figure out this problem.
It's figureoutable. We'll go more slowly. All you're doing when you raise capital is you're pulling the future forward.
A lot of people don't realize what future they're pulling forward when they do that. But you're pulling a future forward where you now have a board that can fire you. Yes.
I don't know. But it is also often between kind of at that range, this is when you now need to hire for your strength. So I think you think you're really, really, really, really good at.
You probably need to think about bringing somebody in to do that thing so that you can focus on systems building and optimization. And because frankly, They're probably better at it than you are if only because they're doing it 100 % of the time.
They're not doing it part -time while also running a company. So if you think you're great at sales. probably time to hire that sales manager hey really quick i put together a full playbook you can get for free on how to scale eight figure and multiple eight figure offers all the way from zero so this covers everything you need to know to build an eight figure offer it's actually from a viral video i did on youtube covering how to create banger offers based on my experience scaling a 36 million dollar company and several others so if you want it link is in the description we'll send it to your email now back to the video and while we're talking about operating systems what do you think um e -myth, traction, a lot of those things get wrong because I can tell you from my own experience, and this is very common for very, I'm a very sales oriented person by nature.
I used to be a salesperson. And so when I read those books, did I take away some things? Yes.
Okay. We should have, we should have an offsite. We should have, you know, this and that, you know, quarterly planning, et cetera.
But a lot of it to your point, I was like, yeah, I feel like this is just playing. business like almost a little bit of like operational mental masturbation type yeah it's entrepreneurial arts and crafts time it's like let's go i was like i was like i was like i think i need 20 of this and then 80 is not growing my business or not delivering value to my customers or making them stay longer and pay more so i Naturally, it just kind of only took 20%.
Then when I found your stuff, I was like, okay, well, this just makes perfect sense. This is exactly aligned with my intuition, which is we run a lot of your operating system style into our company with the dashboards and the value system and having everybody map their workflows. Super valuable, especially right now with AI, which is a whole different topic.
But I'm curious. Anyways, I'll let you. answer is what do you think of the issues with the most most of those traditional operating systems and what are the kind of the differences in the way you do it it could be summed up summed up in one word in that sequence um the way that most companies build their quote -unquote operating system is they start with their goals and they work backwards from their goals to what needs to happen and it sounds logical right we want to double Okay, what do we need to do if we need to?
Well, we need to do this and this and this. And these are the activities that we need to do. And these are our rocks and things for the quarter.
And then because of that, this is what we should track to know if we're achieving that. And everything is company first, goal first, where we're headed, working backwards to, okay, in light of that, what are we going to do? The marketplace doesn't give a crap about your goals.
They just don't care. Your customers, your clients don't care about your goals. They don't care that you want to double.
They don't care that you've got, you know, a vision. and your mission, you know, with all due respect to like Simon Sinek and that, like the whole start with why movement, I think it's a really good idea for a lot of large corporations that have largely lost their soul. But my clients don't care about my why that much.
They care that I care about their why, right? And so what we simply do in our process is we just flip that on its head. We start from how is value created in this business?
And we work backwards from there. And so when you ask the question, how is value created? Well, all businesses create value because they do three things.
They make stuff, they sell the stuff they made, they fulfilled the stuff they sold. That's every business on planet earth, period. Every single one of them.
Now, if you've already, if you've got a service -based company, maybe you don't need to go into how you quote unquote made the thing, but at a bare minimum, every business should map and visualize how do customers happen? Because nothing happens until something is sold. It's cliche, but it's true.
So let's get a picture of that. Then let's create a picture of, and by picture, I literally mean a flow chart. And we do this with, again, sticky notes on a whiteboard.
So what happens first? Well, they see this ad. Then what happens?
Well, then this. Then what happens? Well, it depends.
If they do this, it goes here. Like that's it. Basic flow charting.
Not a complex process or activity. Then we do it for the fulfillment process. If you will map the growth engine, so how customers happen, and you will map.
The fulfillment engine, what you do with them once you have them, you now have a visual picture of the customer journey. You have a visual picture of how value is created in the business. That is the starting point.
All the other operating system frameworks, they don't do that at all. Now, once you've looked at that, now you can say, okay, what are the steps and stages in there that we really can't afford to screw up? High chance for human error, doing it a lot.
Maybe we create some checklists and SOPs around those. Fine. Look to build some automations.
Let's create some skills in Claude, all this other good stuff. What I'm most interested in is who. Who is uniquely accountable for making sure that one gets done right?
And that one, and that one, and that one. So we start with how value is created. Then we go to the team and ask who does what.
Then we ask the question, how do we know it's working? And so that's when we start to build our scorecards by going and saying, what are the metrics we should track? And we know who should track those metrics because they're the person responsible for it.
And that is how you work backwards to build out. an operating system in the business. And now the meeting cadence, like you said, which we have a meeting rhythm.
We do off sites and stuff like that on occasion, but you're talking about the scorecard and you're saying, okay, in light of what happened in the next quarter, what are the metrics that we need to focus in on? And if these are the metrics we're going to focus in on turning from red to green, what are the activities? What are the things we need to do?
The key initiatives to turn those from red to green. Okay, done. I mean, so we do our quarterly sprint plans in like a couple hours.
We don't need to go and do some like kumbaya, you know, rope, tight rope type thing, trust fall nonsense. Like just get in there, get the work done, repeat it quarterly, have that funnel back into the changes that you're making to your flow charts and businesses start just growing at that point. So it needs to be a tool you use, not an artifact that people just look at.
And you know what else I found was super helpful about that process is that you know as we've scaled sometimes like you have a really good leader and what's happening in the department um kind of gets away from you not necessarily in a bad way but they're doing really good all the kpis are good and you just kind of don't need to worry about it but then you know they maybe move on they take another position they start their own company whatever and you have a new leader in there i had this happen with one of my departments where i had a new leader in and i was like you know i know everything was going really well but I kind of don't even really know how this works, to be honest.
And what I did was I did basically that flow chart of like, what is like, how is value being created in this department? And what are all the things? And that was the most like, it got me up to speed within an hour.
And what it also did is I was like, why do we do all these steps? Like these steps don't create any value. And they were like.
yeah i don't know either and you know my favorite thing of elon's algorithm is just the delete part yeah like that's my favorite part so i'm just like delete delete delete delete delete made everybody's job easier and so much better as we're on this topic about operations and management i'm curious what you think about this trend of you know there was uh it's like the paradigm was like this top -down management structure now what's very popular is founder mode right which is more of the flat organizational structure and then even from there now there's like dorsey mode which is i don't know if you've seen this but it's like what is that i don't really know how to explain it i kind of was reading about it and i was like yeah i don't think this applies to me but it's you know everything like there's only three roles in a company and then there's builders individual contributors and something has to do with a lot of ai stuff but anyways gotcha you're familiar with the founder mode yeah the you know how jensen runs his company elon what do you think about that in
For the average small business owner who's not running a tech conglomerate, what applies, if anything, from what they're doing there? There's not one right way to do it in one right time. I think as a business owner, you're either at 30 ,000 feet or you're three inches.
And what business owners, where they get trapped is in the middle, where they're sort of trying to manage stuff. And most of us aren't necessarily the best. managers that are out there.
So I don't think about it in terms of, am I doing founder mode or whatever? Because there's a time when it makes sense to, okay, I need to throw all my resources at this, either because there was a black swan event and everything's going to go to crap if I don't, or we're pursuing a new initiative. And so it's time for me to do that.
So I don't see it as being binary. I see it just as being a tool that you can pull off. the tool chest but if you need to constantly be in founder mode then what you need to acknowledge is that you have a business that is inherently founder dependent and if that's the case and you have a business that isn't very valuable because the more valuable you are to your business the less valuable your business is this is a hard truth that that a lot of business owners have to figure out when they go to sell their company because they thought they did everything right because i was hustling i was getting all the stuff done but like somebody's buying it they're like yeah but You kind of do everything.
So I don't buy that. What we do is we practice scorecard -based leadership. That's what I want to do.
I want to practice scorecard -based leadership, which we're going to measure the metrics that matter. And we know that they're the metrics that matter because they mirror the value flows that we talked about. And we're going to say what red metrics need to be yellow and what yellow metrics need to be green.
And if all you're ever asking is, what are the projects that need to be executed to turn red metrics yellow and yellow metrics green? And if you're asking that to a team of people who own those metrics, it's really simple.
They either know the answer or they don't. And if they don't know the answer, you should help them as a business owner, try to find it. But it's not my job to have all the answers as the business owner.
And I absolve all the business owners out there of the feeling that they need to have all the answers. You don't. It is your job to ask the question.
This one is red. How? Do you suggest, owner, because your name is next to it, we turn this red metric yellow and then green?
What are you going to do? And if you build a team of people who are capable of turning red metrics yellow and yellow metrics green, then the business is going to grow. Now, it's very possible that somebody at one point in time was able to do that, and then they're out of their depth, and they can't anymore.
And that's a hard conversation, but it's a simple one. Love you mean it. You've done great work.
to still sit in this seat requires that you know how to turn red metrics yellow and yellow metrics green. I'll help you out when I can, but I don't know how to either. So if I don't, you don't, then we're going to bring somebody in who does.
And as long as that's the question that we're asking, what projects do we need to execute to turn red metrics yellow and yellow metrics green? And you just ask it over and over and over again. If you're tracking the right things, the business is going to grow.
That's scorecard -based leadership. That's what we do. If I got to go into founder mode, then I better be doing something.
I better be finding something. or something's broken uh to me i know that a business owner is there's a lot of founder dependency if i don't look at their calendar and see a lot of white space well and the other thing i would say is i think you know most of all of the business world really looks to tech for like i mean tech is what's in the news it's very popular it's like kind of like i guess we're all like the statuses but there's like a lot of signal to noise in terms of what's going on there versus what's applicable to you so for instance I think that's a big trend, rightfully so, because yeah, it's like these huge companies like Airbnb and so on.
They got so bloated, you know, to where like, yeah, the notion of probably had too many middle managers who weren't doing anything, probably true. You know, it's the same thing with, oh, like AI is replacing all of their jobs. It's like, no, I think they were just really bloated and they just didn't need these people because interest rates were 3%.
They hired on all these people. And so now they're letting them go. They're saying it's AI because they found out that if they say it's AI and they let people go, their stock price goes up.
Right. Yeah. It's a market approved excuse for doing the thing they should have done before anyway.
Yeah. It's like, I don't think that they're really like replacing everything with AI and you're super behind. Yeah.
I think that they were just overhired. I think I'd be really careful who you're modeling. You know, if I decide that I want to get into jogging, I probably shouldn't model the Olympic.
marathon gold medalist. They're Olympians. And I would have to look at it and say, do I want their life?
Do I feel like I actually have the resources around me to do it even if I did want their life? And so business owners need to be really careful about are you modeling them because you believe that the path that they're laying is the right path for you or are you just doing it because there's the perception that they're the best and by God you want to be the best?
Are they happy? Do you want their lifestyle? Are you sure?
Are we sure that that's what we want? And so I just... I look at, I have so much respect for obviously the Jensen's and like these people out there, but they're Olympians, man.
I'm not a fricking Olympian and I can be really, really happy and really, really, really successful. And by the way, it's not binary. It's not a, you got this hustle or die business or it's just a lifestyle business.
Screw you. I reject that dichotomy, reject it completely. The vast majority of the businesses that employ the vast majority of humans.
Like in this nation and others are small businesses by definition. You can build a phenomenal business that makes a amazing dent in your little corner of the universe. Be really happy doing it without having to go founder beast mode.
Yeah. So I think this is a good segue to five to 20 million. And I want you to cover that.
I will say on your note about it's not a dichotomy. I noticed in this range, I don't know if this is common. I actually felt like I had more freedom.
than any other range. Because it was the first time I had a full executive team. And I was like, I can actually really, like realistically go on a 30 -day vacation.
But anyways, five to 20 million, what to learn, unlearn, what do we have to do, what do we focus on? I mean, you said it. At five to 20 million, this is when we need to build out a true functional leadership team.
And by functional leadership team, I mean, look at the core business functions within the company. It's usually gonna be sales, marketing. fulfillment, client services, product, maybe if you're software or something like that, and make sure that you have somebody who is better than you at that specific thing.
And when you have a team of true experts, true leaders who can manage the metrics, who can even begin to manage strategically on that, and they can build better teams and people under them. This is when I found that same as you, tons of freedom, tons of freedom. I mean, if you got five to seven direct reports and they're all just, pros, they don't need a lot of quote management.
I mean, you should be meeting with them on a regular basis, but a lot of people say they don't want to be a CEO. Like I want to be a visionary and have an operator and integrator doing this. The reason you want that is because your team sucks.
Yeah. Like you just, and it's not even their fault necessarily. It's just, you're asking somebody who's a task -based person to manage an entire team.
Yeah. And so if we can truly build out that leadership team and what that means is every single person who's there, They're not only better than you, but ideally they've been a part of a team that has gone where you want to go.
So they've been a part of 20, 30, $50 million teams. They know what it looks like. They know the things they need to put in place and the timing.
If you're having to teach these people how to do their job, you made a bad hire. But that's what we're doing at this point. The systems are in place.
Hiring should be happening. And so as long as you're hiring the best. Now, towards the tail end, if you decide that...
you do want to hire a COO, an operator in this range that those people can report into. I don't have a problem with that. I'm not anti -COO.
I'm not anti -operator at all. I think that business owners set up operators and COOs for failure because they don't define the role very well. And there's not a clear operating system for them to step into.
Exactly. We solve systems, then people. Because good people don't fix broken systems.
Broken systems break good people. They just do. So let's solve for the systems first.
The number of times we've had clients come to us and be like, my people suck. I just need to fire everybody. It's like, okay, let's find out.
And going through the process you went through, let's map and visualize how this stuff happens. And you can watch the team, their eyes go, that's what we do? And now when your people have context and understanding, and they just have a little bit of give a damn, they actually start to perform really well.
And people are amazed, like, oh my gosh. It's like, my people are pretty good. It's like, right.
perhaps it was your fault all along, you know, like good news. You can also, you can also fix it. But if you do that, you're, you're right.
My, my favorite phase of business is that kind of 10 to $20 million range. That's when just money just starts to fall out of the bottom of it. It's when you can take vacations and it's, that's when you truly have the option if you want to.
And if you do it right to sell to private equity, you're doing at least a couple million dollars in EBITDA at that point. But if you have your systems in place, you're going to receive the full value of that. You're not going to get discounted.
You could go and do a growth equity round if you do want to raise capital at that point in time where you're able to pull some chips off the table, get some additional cash to fund growth. But there's still minority. You're still majority.
You just have so many options at that point. So many. We'll just keep doing what you're doing.
And I also think it's the most fun because when you have people who. are actually good yeah which is the key thing right so your executives are actually good and you like them then it's like you're kind of all working together on whatever the fun and challenging goal is in the future and i found like when i kind of got out of like it's just me feeling to actually really having other people that i was working with that i liked that i respected that were really good and i could rely on rely on is a big word yeah i was like wow like i I'm having so much more fun in my business than, especially even when I was doing just a couple of billion.
So a lot of times when people say they want to have, you know, I just want to do a couple million dollars a year. And I think you should do whatever you want. There's a million different ways to run business.
But I do try to, because a lot of these people haven't been to maybe five to 10. And so I do try to paint a picture of what that could look like so that they can just make an honest decision. Yeah.
Do you want to just build a million, $2 million business because you just want less? Is that it? Like you just, I just don't want it because that's never what people say.
They're like, no, no, I just, you know, I just, I want it to be small and, and, you know, have more of a lifestyle and have it be free. You will never have more freedom than when you're running a 10, 15, $20 million business with a just rockstar leadership team, solid systems in place and a consistency of revenue and like channel diversification, which is going to happen at that point as well, that you don't run the risk of like, well, maybe next month we'll do zero.
You know, it's just, there's so much freedom and so much optionality. All right. 20 to 100.
So this is the scale phase. This is where I need help. So hopefully give me some advice.
Yeah. 20 to 100 is when you really have to kind of decide what you want to be when you grow up, because that is when the hardest identity shift for a business owner to make is going from being the most valuable player on the field to being the coach on the sidelines. That's the hard first one.
And that's basically what you're doing between 5 million and 20 million. You've got this team. You've got these players.
They're out there doing their thing. But north of 20 million, when you decide you want to push to 100, you're basically making the decision that we're going to enter another no man's land. In and around kind of that 30, 40 million dollar range, it gets sucky again.
It just does. And I'll tell you. I don't really want to shepherd businesses through that anymore.
I'm just at a point in my career where I don't want to do it. So I would rather kind of be out of it and maybe sell to private equity, sell to somebody who they're good at going from like eight to nine. Because that is, you can do it.
Like you can absolutely do it. You can absolutely figure it out. But you are entering into a bigger, badder no man's land if you choose to make the leap from eight to nine figures.
And so I think, That's the thing you got to decide is, are you going to stay the coach on the field and really level up? I mean, like really level up because probably, and by probably, I mean, certainly the team that got you to this point, you're almost certainly gonna have to fire every single one of them or top them.
And it's going to break your heart because the business is going to need to grow at a rate that they haven't grown at yet. And you can't wait for them. And the worst part of all is you're a hypocrite.
Because you have to fire them. You have to hold them accountable to leveling up to a point that they've never done before. It's not really fair when at the same time you acknowledge that you've never done it before either.
And this is why as business owners we want to give so much grace to our team because we know we're kind of frauds. Like, I don't know what I'm doing either. I should extend the same grace to them.
You can't. You can't at that point, nor should you because they're not taking the same risk that you're taking. It's not their business.
You don't get to hang around. You have to. You're the parent.
Any parent, by the way, you'll experience this eventually. When they hand you that little baby, when you leave the hospital and you're like, you're just going to let me take it? That's what everybody says.
Yeah. Like, really? You have no idea.
You don't know what you're doing. That's the closest analogy I have to business ownership. And if your business is growing, you're always out of your depth, which is why you can't afford to let anybody be out of their depth.
at that leadership level. And that's just the hardest thing in the world. So if you're going to go from 20 to 100, what that's going to look like is repeating a lot of the same pains that you had to do at two to five.
We're going to have to up -level the systems. We're going to have to up -level the people running the systems. We're going to have to have a lot of difficult conversations.
And this is when, in my experience, a lot of business owners will say, I don't know that I want to do that. Or if I do that, let's bring in some more professional management in the form of selling to private equity. I can take a lot of chips off the table.
I can be good. But if you want to go, that's what it looks like. It's a repeat of two to five, just with more zeros.
Yeah. Well, because we scaled very fast to the 30 to 40 range, one year 50, then back to 30, then now kind of like mid 30s. And it has been the hardest.
It's like, I just stuck. It's like I rocket shipped and then I, bam, just was really stuck at this level. And it's been very difficult.
I have a plan. I'm curious though. How much of it do you think is the opportunity vehicle versus, and to define that, I would say a lot of times like the economics and kind of the money engine of your business and how that all works.
How much of it do you think is that versus is it something to where you're at a stage where you kind of need to diversify a little bit more profit centers? Like I always think of like Mark Ford's Ready, Fire, Aimed where there's a certain phase where it's like you have this campaign, you have a back end for it, you have to have like another front end campaign.
Do you think about it that way? Yeah. I'm curious if...
Almost everything about your business is going to have to change to go to the next level. It usually isn't just a matter of pouring more fuel on the fire. Yeah.
And that's what makes it so painful. You're going to have to kill a lot of sacred cows. It just is.
A lot of the stuff that you will find, you will look at certain product lines and you will say, this made perfect sense here before, but this particular product line or this particular service line, we can't sustain that while also going to this level. We're going to have to add... Add this.
And it's just, it is a process of cutting, you know, throughout. And that's what makes it so difficult. And that's everybody wants to apply the same playbook that got you there to the next level.
And it's a fundamentally different playbook when you're going really zero to two million. Like that is a playbook. That encompasses kind of two stages, but like that is a playbook.
And if you want to go from, you know, two to ten. That's a totally different playbook. If you now want to go kind of that 20 to 100, it's another new playbook.
And so it's going to mean dying to a lot of those things. Yeah. Well, I'm going through it and it is tough.
Yeah. So I do want to talk about, this is a good segue into exiting. And so I'm curious, you know, especially speaking to our...
So you have a lot of cashflow businesses, mainly service based businesses, but they get their clients through usually some sort of online marketing. Like that's my audience. How sellable do you think these types of businesses are and what do you have to really become to become sellable?
Aside from having a good leadership team, having the good systems, et cetera. But you know, a lot of people in our industry, they, they don't sniff an exit. Like they're not even close.
Right. And you haven't seen a lot of people do it. There's been Alex.
There's maybe a few others, but not very many. Yeah. So absolutely, they're sellable, I will say.
But so much of it's going to depend on the category that you place your business in. So if you define your business as a coaching company, right, that isn't as attractive as a business services company. Now, you're like, aren't those kind of the same thing?
They're not. Right. And so the choice that you make in the category that you're competing in and where you place your business, it's the same thing like back in the day when, you know, at Digital Marketer, we sold, you know, marketing trainings and certifications and people like, oh, you're in the information marketing business.
Like that's not a thing. We're a publishing company because publishing companies are things. They have a valuation range.
It's kind of like Hormozy said it's a licensing company. Yeah. I thought it was very clever.
It's exactly it. Right. And so the choice that you make in your category.
that you're going to, is what is going to determine your valuation range and if they can clearly peg you within that. So just, now this has gotten to be a lot easier. You can go to Claude or ShedGBT and be like, this is the kind of business I run.
What is, what's a category that an institutional investor, private equity or strategic would understand? You know? And okay, what are the valuations for that?
It doesn't even require the same degree of research that it once did. So that's going to be big. The biggest thing, Beyond that is optimizing for EBITDA.
And so we've got to get, you know, just kind of roughly earnings before interest, taxes, depreciation, amortization. We've got to get our profit up. And so a lot of businesses have been pursuing growth.
Like, let's just grow, grow, grow, grow, grow. And they're really disappointed when they find out that, guess what? You're not a software company in the year of our Lord 2021 where you're being evaluated on a multiple afford looking revenue.
Like, you're just not. You're going to be valued based on EBITDA. What is your...
profit and everything at some point is going to back into that right so making sure you have that and then the third big area is founder dependency and founder dependency can come in the form of the founders doing everything kind of on the services side or the founder is the exclusive face of the business and so i'm all about i mean it's kind of where we how we started the conversation i'm all about business leaders being a spokesperson for their business That's a very different thing for me to say I'm a spokesperson for the scalable company than to sell Ryan Co.
Consulting, right? And this is, again, like having a spokesperson versus having a personal brand business. This is what you want to watch out for.
So if you're thinking about exiting, and I had to do this at Digital Marketer, right? Digital Marketer for years and years. That was like the Ryan Dice brand.
I had to introduce other people. who could be what we call embedded influencers. So influencers that are embedded within the company, employees of the company, you know, team members.
So it wasn't just me. So we get some diversification there so that if I do step away, other people are there. So that, those are kind of the three big areas to think of.
But if you choose the right category, if you optimize for EBITDA, and if it's clear that the business can run, even if you're not there, absolutely you can sell it. Absolutely you can sell it. Now, whether you sell it, you know, whether it's priced at, because they're going to come in and be like, oh, we're a three to six.
That's just kind of where everything starts. Maybe a three to six multiple on EBITDA. So you're thinking to yourself, okay, cool.
So if I'm doing 2 million right now in profit, I bet I could sell this thing for 12 million. That's pretty good. I'd take 12 million.
That's spent. That'd be fine. In reality, they're going to go in when they get into due diligence, start picking everything apart, and they're going to discount, well, this revenue over here isn't as much, and this isn't as much.
And really, you're kind of going to be on the low end. It's going to be more like a 2 .8 of this. And so this business you were thinking, 12 million, you know is is kind of more in the you know four -ish you know million especially because they got you all distracted during the sale process so sales are starting to decline so that's another hit on you so that's why i say like when we're working with our clients it's let's make sure that we've already run the the playbook that private equity is going to run That we've upgraded the operating system because they're going to do that.
That we've up -leveled the leadership team. That we've aligned team member incentives. That we've optimized our pricing and our average customer value.
That we've diversified our channels, awareness channels, things like that. That we've reduced founder dependency. Let's do the things that private equity companies would do so that you receive the full value of the company when you...
when it comes time to sell. If you're a business owner who has appointment setters or an outbound sales team, you're going to want to hear what I have to say for a second. So a multiple eight figure business owner texted me the other day and when he started using dollar .io for the first time, his pickup rates went from 9 % to 20%.
So imagine doubling your pickup rates and ultimately the throughput of what your outbound salespeople and setters are going to get. How does that impact your business? The answer is a lot.
So if you want to check out dollar .io for a phone sales outbound system, just click the link. the description or just go to dollar .io now back to the podcast and to be clear can you do it even if you're staying on as ceo yeah or in a in a if they really want to have a clean exit they'd have to have a ceo how do you think about because you know um do you know who tommy mellow is so he's like two minutes down the street from me and uh obviously he's been insanely successful uh one of the smartest guys i've spoken with and he rolled forward into private equity.
But I'm curious, I mean, that probably is more of a function of if you're a home service business, you're probably taking on the capital to be able to do M &A, be able to expand, be able to grow. And then that's probably a more common roll forward situation. It probably doesn't happen as much in our industry.
Is that right? Or how would you think about that? It just, it depends on what you want.
So if they perceive founder dependency, then they're going to want you to stay on. Yeah. They're going to structure.
So let's go back to, okay, cool. So now we got the business. We're valued at the 12 million.
They're like, we're going to give you six, but the other six is going to be on an earn out. So you're only going to get the other six million if these goals are hit and if you stay on and if you do all this other stuff. If you do all those things, then you'll get the rest of your six million.
That's called an earn out. So you hear a lot of these businesses talk about how they sold for this big pricing. What you don't realize is a massive chunk of that was as an earn out.
And on average, if you look at the data, earn outs pay 21 cents on the dollar. And more than half, like 40, I actually think it's 45 % of all earnouts pay nothing. Dang.
And so this is why even if you think you want to stay on, you still want to reduce founder dependency. So I would say to somebody, if you think you want to sell, let's make sure we got a rock solid leadership team in place. And then, yeah, maybe let's bring in a president or a COO who can run the company so that if you decide you don't want to go along with the business, you can say, I don't really, I'm not active in the day to day anymore.
You got to give me my money. I don't need an earn out because you don't need me. They do it.
Look, here's my vacation schedule last year. Look at all the times I was gone. Everything's fine.
Even if you say you want to stick around for it, I would still make sure that you have somebody who can be there to run it. Just because your life is going to be a lot better because kind of every business owner I know who sold to private equity and now they got... a boss that's some 38 -year -old MBA person, say 38, you're probably 38, lower 30s actually, who's now bossing around and telling them all the stuff they need to do, this doesn't go well.
And that's why 76 % of CEOs, of founders, when they sell to private equity, they're gone. They're outie. So you don't have to do it.
If you want to stick around, you can. That is where in the ecosystem, if somebody says, and I don't know if Tommy sold a private equity or if he did a growth equity play. I know he rolled forward like just under 50.
Okay. So it's probably a private equity play with a roll forward. And more and more, they're requiring you to do a roll forward.
yeah which i know in that space what i've heard is the pe came in in the 20 2019 2020 2021 thought they were very smart got absolutely destroyed yeah and so now what they've learned is is they need to do their pe stuff but they need to let the actual founder who knows the technicians knows the sales guys knows the installers actually be able to still lead and withhold the culture otherwise they lose the entire thing and that's why because i don't want i understand why they want that and they're right they're right But I still don't want to go along.
And that's why before we think of selling a business, there's another operator who's there who's like, yeah, that's, there you go. That's his job. That's his job.
That's what he does. I don't do any of this stuff. Because I don't want the earn out.
I don't want to have to do the earn in where they're going to force me to roll forward a bunch of my stuff. It's why a lot of people, they're better off doing a growth equity play where they say, let's sell off 25 % or 30 % at this, take some chips off the table, fund it. But like, I still run the business.
Cool. So before we end, I want to talk about AI. Overall, macro level, where do you think it's going?
And then kind of on a micro level, for business owners, small business owners, a lot of service companies, how should we be thinking about using it? What is the most valuable use cases you've seen for people like us? What do you think?
I'm going to answer that question in two different ways. It was like four questions, so feel free. So where do I think it's going to?
I have no idea. I've never been more uncertain about the future than I am right now in terms of what do I think it's going to look like in five years. I remember when in 1999, when I launched my first business, you know, online, everybody was convinced that the model was going to be these shopping malls where you would basically go online and you would click around a visual thing.
And if you want to choose, you would go to the shoe store. and you would buy your shoes there and you'd go to the clothing store and you'd buy that. And there were all these like, that's what we thought it was going to be.
And then it shifted to like, no, it ain't that. Like the entire internet is a shopping mall. And it was just all these different websites.
And now it's back to like, there's one shopping mall, it's called Amazon. You know, I think we're still, as far as AI is concerned, at the, I bet e -commerce is going to look like a shopping mall that you log into and you walk around in. and visually pick up your things.
And we could not have been more wrong. That was the stupidest thing. So I don't think we know what it looks like.
I don't think the jobs that are going to be in demand, the kind that we're going to be looking to hire for, have even been invented yet. I think most companies, for example, most teams are going to have an AI person on that team as opposed to a centralized AI role. So I don't know.
Here's what I've discovered though. You don't have to accurately predict the future to benefit from it. You just have to be looking around.
And so, I would discourage people from trying to make too many predictions because when you make predictions, you get sunk cost bias and confirmation bias in that. So just watch what's happening.
Watch what's happening. Now, what can everybody do today that I do think is going to work? So what, you know, to your point, we should be visualizing.
I'm gonna go all the way back to like what we do when we first work with a client. Yeah. Let's visualize your freaking value engines.
Yes. How does growth happen? How does fulfillment happen?
And then you should do a step -by -step stage by stage audit of how could we leverage AI to make this stage more efficient and then this one and then this one. We're getting the biggest gains at our companies from AI, not through some massive overarching AI overhaul or having an AI native business and all this other stuff, which I don't think anybody quite knows what that means yet.
We're getting it through kind of micro deployment of AI as an employee or as software. to automate this thing that used to take a really long time. I'll give you an example.
When a client comes on board, it used to be a 16 -week process to work with them and their team to build out their operating system. And we'd have to get on the phone with them and we'd have to kind of interview them and then they'd get their team on and we'd kind of map the stuff out together and then we'd go back and do some stuff and they'd go back and we'd come back together.
What do you think about this? And it's a lot of back and forth to get kind of the core assets done to build out the operating system. And so it was designed as a 16 -week process.
On average, it took 22 weeks. Well, we're able to take all of the data that we have from building out all these operating systems with all these different companies. We were able to plug that into AI.
We were able to build a plugin that now our client service managers, our business advisors, they can have a meeting, have an interview with one of our clients, ask a number of questions, and they can come back and say, we're going to get back to work. I'm going to come back and I'm going to present you with your value engine.
I'm going to present you with your scorecard. We're going to build it for you. You tell us where it might be a little bit off as opposed to waiting for them to do it or us to do it and all this back and forth.
We've taken a process that was taken 22 weeks and cut it down to six weeks. And the clients are thrilled. And it's actually less work.
We've increased our capacity. But that didn't come about by saying, how do we create an AI native business or how do we predict this? It's what are we already doing right now?
that we could automate, we could amplify with AI. And what it looks like now, Cloud makes it so easy, man. It's got the skill recorder.
I mean, you go into Cloud and do record a skill, basic dropdown, walk through, you or somebody in your team can walk through the process of doing the thing while you're talking through it. It records the whole thing and doesn't just create the SOP, it builds a skill that automates it. And so that's where I think it's going to come from.
Are the micro wins. Yeah. Along the way.
That's, that's where we're focused. One of the things, and I totally relate to that. One of the things it's so simple that helped me was I went through the whole phase where I felt like Claude was releasing a feature a day.
Yep. And then I'm like, I got to get open claw. I got to get Hermes.
I got to, what's this feature. What's that? And I felt like I had to understand everything myself.
What I ended up doing was two things. Number one, we just hired a really good developer. Who's also really good with AI.
Yep. great because now he can do the work of like way more developers way quicker and then the other thing is is i just had every department leader map out all the workflows that they do in their department and then he meets with them and they brainstorm how can we make this easier for you yep and that has been the most impactful thing and it's so it's like i can let him worry about all the releases and grokbot and all these things it's just like it's a little bit too much for me and i tell him to let me know when it's important yeah right but That one hire was so relieving.
And what's happened is, similar to what you said, we found where if before AI, before the coding agents, it would probably be impractical to have like a team of four to five developers and then like we're developing this whole system that sits atop on all of our software layers as an application that makes our business easier but really what it's done is it's lowered the cost of making software so now like on top of our ats for recruiting for instance we have like a really cool ai engine that you know takes in the calls with the client automates and basically creates their scorecard we check it with them but then it auto matches within our database of like several several thousand reps that are active right now of who might even be a good fit which kind of speeds up the search right so it's like we didn't get rid of our ats but it's an application layer that says on top of our ats does that make sense absolutely and so same thing we're doing and that that comes from this this step right here how do you make this one a little better how can we deploy ai to make this a little bit better um
The two things that AI I don't see doing anytime soon or having an impact on anytime soon is judgment and accountability. You still need the basic judgment of the team to say, this is something that we could AI -ify. This is something that we could automate.
This is something that we should focus on. This matters to our people and to our clients. This is how I think we should do it.
This is good. Because AI is like, I did it for you. And you're like...
that's awful. It's like, I'm so sorry. That's terrible.
I'm going to go back. You know, it's like, right. So you need judgment, but also accountability.
Like, is it working and who's responsible for it? And the people I see who are trying desperately to automate everything with the goal of removing people, they're the ones that are going to lose in this. They will lose in this.
If I have somebody who is amazing, I want to give them a tool. that makes them more amazing. I don't want to get rid of amazing people.
And if you're saying to yourself, yeah, my people aren't that great, then you don't have an AI problem. You got a hiring problem. Yes.
A leadership problem. That's what happened to all those tech companies. Exactly.
Yeah. So one last question before we end off. So one thing I really respect about you is I think you're in this for 27 years now since you started in business.
Dude, I hadn't done that math. But yeah, I mean, if I got started in 1999, you said it and I was like, that's not right. Man, that is right.
So 27 years. In our industry, I mean, you know, Dean has been around a long time.
There's obviously Tony. And there's not many people who make it as long as this. So what do you think is just the key?
And there's a lot of people too, like if I think about, because I kind of studied the industry around like the OG internet marketing, 1999, you know, early 2000s. A lot of those guys, I don't even know where they are, right? And maybe they're doing something really cool.
I just have no idea. But, you know, you stayed relevant for 27 years, which is pretty insane. What do you think has just been the key to that longevity and just being able to stay in business, not burning out, being able to have a business that you really like and do it with people you like, all that stuff?
The first thing is strategic selection of my competitors and enemies. I never saw, when we were building stuff at that time, the people I knew that were in, quote unquote, the industry. as being the people I was competing against.
I was always looking up market and saying, what is the billion dollar version of what I'm trying to do? And that's why I said, like, this isn't information marketing or the course business. This is the publishing business.
Are there billion dollar publishing companies? All over the freaking place. All over the place.
Even at like the scalable company, right? Oh, it's kind of coaching. It's kind of business.
It's like, it is business services and consulting. Like how big is McKinsey? Bain?
Those are who I'm comparing myself to. And so because I never decided that I had won at anything or I had achieved some amount, I was always just being like, but that over there, we can do that over there. Now, there's a real danger and downside to that as well.
And I've experienced the downside of that too. I've experienced burnout. I've had multiple companies on the Inc.
505 ,000 list while also basically never seeing my wife and kids and having her tell me like, you can keep doing what you're doing, but you can't pretend like you're doing it for us. anymore like i've had the downside of uh ambition but if you can balance those two things with ambition which i truly do believe is just the strategic selection of your competitor of the market you are competing in with principles what are the things that matter most to you and are you going to let your ambition trump your principles or are you going to make it home for dinner Are you going to take your family on vacation?
If your kid asks you, hey, dad, can we go play golf? Is the answer yes or is it, oh, buddy, I'm sorry, I don't have time. Because I've lived both of those.
And I can tell you, if when I die, I've built an ex -McKenzie, but I had missed out on those golf rounds with my kids and those family vacations, I wouldn't be a happy man. I wouldn't be a happy man. But if you can balance those two, I think you can kind of do whatever the heck you want to do.
And that's all that matters. Awesome. Brian, thank you so much.
That's the pod. Thanks, bud. If you enjoyed this podcast, you're also probably going to like this podcast.
I also did recently that you can check out by clicking the screen right here.
The Hook
The bait, then the rug-pull.
Cole Gordon opens by putting a number on Ryan Deiss's resume: twenty-seven years, eight companies to eight figures, four exits, and a portfolio now clearing $200 million a year. What follows is less a highlight reel than an operating manual for how he got there without burning out the founders he partners with, or himself.
Add Modern Creator as a preferred source and Google shows you more of our breakdowns in Search, Top Stories, and AI Overviews. It only changes what you see, and you can undo it in your Google settings anytime.
Add to Preferred SourcesOpens your Google source preferences with us pre-loaded. Tick the box and you're done.
A recruiter-turned-eight-figure operator lays out six frameworks, hiring leverage, who to fire, how to give feedback, how to raise standards, and how to stop being everyone's bottleneck, that he says fix 99% of why founders stay stuck in the weeds.
Two direct-response operators sit on a patio and trade the actual numbers behind their businesses: setter pay, application grading, spend cuts, and the leadership gap that shows up once you're past eight figures.
Two direct-response operators trade notes on the offer changes that took a low-ticket start to nine figures, and why most health offers stall at the same monthly number while a handful pull in millions more.
Cole Gordon and Jordan Schumacher, who've built a combined $225M in lifetime revenue, trade sixteen systems for scaling a company past the point where it needs them in the room.
01:29
03:00
05:52
07:42
08:31
11:49
12:49
15:34
17:09
19:52
21:21
22:46
26:56
28:32
29:44
33:29
34:04
35:29
38:44
39:37
41:21
42:37
45:37
47:40
48:40
49:42
50:59
52:42
53:55
56:34
58:19
61:03
62:29
64:01
66:41
68:19
69:18
71:04
72:39
73:47
74:59
76:50
78:34
79:17
81:22
82:21
83:44
85:21
86:39
89:01
89:39
90:47
93:27
96:02
96:53
97:58
99:08
101:12
102:00
104:44
106:18
108:41
109:01
112:03
1:04:06
2:00:02
12:57
1:39:43
1:43:10
1:53:02