Scale it and Sell it! Business Brain 489

Business brain, episode 489 for Wednesday, October 4, 2023. Greetings, folks, and welcome to Business Brain, the show where we take a topic or three, we analyze them, we dissect them, we use them to help tune our business brains together each and every episode. And that way, we each get to keep living that charmed life. Sponsors for this episode include fastmail.com businessbrain, where you can go get 10% off your first year of the email service that I've been using for, like, five years now. I love it. We'll talk more about that in a few minutes. For now, here in Durham, New Hampshire, I'm Dave Hamilton.

And out here in California, I'm Shannon Jean. I love that tuning analogy. And it's also important to note that while we're doing this, we're tuning our brains at the same time.

Absolutely.

I always joke that I learned the most, but, you know, listener emails and the topics that come up, your experiences, Dave, all that kind of stuff, it really, you know, that's probably, I don't know if it's half the reason I do this show, but, you know, learning.

New stuff every week.

Oh, yeah, it's a part of it.

Yeah. No, I come into this like a sponge, man. You know, I know sometimes I'm the resident expert on a thing here and there, but it doesn't mean that I know everything about it. I like, I want to keep learning, too. Yeah. And. And a lot of times I'm not the resident expert either. Oh, yeah. Yeah.

It's. It's a good thing, man.

We've had an interesting thing going on in our personal lives. We have. Our kitchen is being redone and we're, I don't know, two weeks into this project, it's probably going to be. We're getting close, but, you know, it takes time and now, then there's phases and all that stuff. So we're probably another two weeks before it's, like, done and starting to become a memory. And so it means we've been living without a kitchen, and we dreaded this coming into it. We spent a lot of time thinking, I don't know why. Right. Well, yeah, and it is a massive disruption. It's not just dinner, it's everything. Like, oftentimes your kitchen is where you wind up hanging out, and it's where you certainly, you make your food, your breakfast, your lunch, your snacks, your dinner. But it also, like, for us, it becomes the spot where we put our mail down. And I know if Lisa brought the mail in, I know where to go get it. I know where to do things. Like, it's very. It is the core. It's the heart of a home in many cases, and that's certainly true for ours. And to need to displace that. We knew going in that we were. We convinced ourselves that this was going to be, you know, a. A terrible disruption. And so we thought about, all right, well, what are we going to do? We get the plastic silverware out, we do this, like those sorts of things. And certainly we did that. We ordered a bunch of factor meals. Right. They were sponsored for a long time. Man, that's been a lifesaver for sure. Great. Yep. Because dinner gets cooked in four minutes, two minutes person, you know, and then you're done. But the. The transition into living without a kitchen was that. And we're now a week and a half past that. Right. That, you know, that transition, that first, just 24 hours was. Was in retrospect, much worse than what I've been living with since then. But. Right. Because the transition is all my habits were gone. Like. Like, there's so much that happens in our kitchen. It's like I said, it's the major artery of our house. It's. Everything runs through there. It's where we hang and we can't now. And we even had to move, you know, we had to move everything out of the cabinets, of course, but we also had to make sure we saved some stuff and made it accessible, like our, you know, microwave and our coffee maker and the. The air fryer. Right. Like, you know.

Yep, yep.

And there's some things where it was like, oh, we could do that, but no, that's in a box and we don't want to dig that box out right now. So. Yep, we're not going to do that. But that transition, learning how to live in this new paradigm that we set up for ourselves, I mean, it, you know, we. We chose this. Obviously, we wouldn't. A good friend of mine, who happens to have way more commas in his net worth than me, suggested that you should buy your second home first before you do the kitchen. Redo the kitchen in your first home so that you have somewhere else to live. I do like this advice, but, you know, it didn't work out for us. We just didn't even think about it. But. And we don't have a second home to go live in at the moment, so. But that transition was the worst part of this. And I started thinking about it in terms of how we run our businesses, because change, resistance is Always part of our human nature, right. We all are prone to suffer from it in various degrees. And the transition in supported my belief that. That this was going to be awful, right? That that first day was like, oh my gosh, here we are. Like, oh, I gotta like get up and go down and figure out how to do this and figure out how to do that. And it was true. You know, the first day was that, and then the next day it was like, well, I get up, I know what to do. I'm gonna do exactly the same thing I did yesterday. Cause it worked. And by day three or day four, it was automatic. And there's some parts of this that are really nice, like having those factor meals. And Factor's not a sponsor of this episode, by the way, but having those for D made life like it's way. I enjoy cooking my, I enjoy my wife's cooking especially. But you know, we enjoy cooking together. And that's an activity that we just can't do during this period. But that's okay. The flip side is we, if it's, you know, 7:30 and we say, hey, you ready for dinner? Yep. All right, great. Well, one of us will go heat up the two factor meals and the other one will go set up tray tables in the living room and I'll meet you there in five minutes, like, dinner's done. And then when dinner's over, there are no dishes. Right. We throw it away. So there are parts of this that are very, you know, that are even more convenient than cooking and doing the dishes and, you know, all that stuff. Like, it's a little more costly than, than just cooking normally, but it's, you know, it's fine. So I, I just find myself sitting here thinking when we are faced with a change in our businesses, you know, I always talk about my, well, it's temporary. It's only two weeks, you know, And I tell the staff it's only two weeks with this. I told myself it's only going to be two or three weeks. It's probably going to be more like three or four. But it was temporary.

Or six or eight.

Or six or eight. Correct. But it, but now today, if you told me it was going to be six or eight weeks before this process started, I would have said, you know what, forget it. But now that we're here, if you said, well, it's going to be another five or six weeks, man, I'd be like, yeah, all right, I know how to do this. And that's what it is, is when we're Faced with something, when we're faced with the unknown, we are very resistant to that. And again, some of us to greater and lesser degrees, but once you know how to do it, then it's like, okay, well, you know, it's fine, it's fine, it's fine. It's not my preference, but it's fine. Do it long enough. Yeah, but do this long enough. If it becomes 8 weeks, 10 weeks, 12 weeks. Well, now going back is also going to be a transition. It's like, oh, man, we got to do dishes again. Like we got to do. You know, we got to remember not to put the mail over here because we're not going to look over there anymore for. We got to remember to put it back in the kitchen. And by the way, it's not the same kitchen we had. There's a different flow now. There's a different layout. We got to learn that. So it's just the transitions that are the hardest. The change itself is usually pretty easy to adapt to. And I don't know, I just, I thought that, that there's a lesson in there somewhere. I don't know.

Yeah, the trend, the transition can be harder than that, than the outcome.

Right, Exactly. Yeah.

At the end. Yeah.

All right, look, one of the things that we can do to ensure we keep living that charmed life is to have a reliable email provider. Right. And this is important for our businesses here. And it's not just reliability that we need. It's a provider that has the features that we need and a provider that puts our privacy first. And that's why I am so happy to have Fastmail on board as our sponsor this week. For over 20 years, Fast Mail has been a leader in email privacy. It's ad free and there's no tracking. And they've been around 20 years. I've been using Fast Mail for my primary email for probably about five years now. You can improve your email productivity with features that they have using things like masked email so that you can create an address that you use for a certain purpose, but then it's not there as just like your main address being out in the world. You can use scheduled send. My gosh, we've talked about the value of that here on the show. Fast Mail supports it natively. You can snooze emails, you can build these custom rules. Fast Mail understands the that email needs to be simple. And speaking of, switching providers is super simple with Fast Mail's easy import and export. I migrated over from my Google accounts and I just gave it the Login for my Google accounts Like I went to Fast Mail's web interface, gave it the login, went to sleep and woke up the next morning and all my email had been imported from my Google accounts. I was ready to go. You can use your own domains to make custom email addresses and then you can customize Fast Mail in so many different ways. To learn more about their service, visit fastmail.com businessbrain for 10% off your first year and then you can follow them on like Facebook and Twitter x Mastodon and LinkedIn again fastmail.com businessbrain for 10% off and our thanks to Fastmail for sponsoring this episode. All right, we mentioned last week, Shannon, that we were going to talk today about Robert's email that he sent us about scaling. Yeah. And the and you know he had a good question. He says, I was wondering, do you have any suggestions on how to best develop systems or processes to scale your business? The goal is to build your business in a way so that if a team member is out you the owner would not be overwhelmed. I would say that's step one to scaling. Yeah. Step two, that's great. Step two is replacing yourself entirely. But you know, we got to do it in steps. Says if your business has systems and processes in place, it should free up your time making everything more efficient. So maybe even getting to step two. He says it should create organization for you and your team, releasing stress over what to do next and reducing the need for you to do everything. Here are some suggestions I've heard of. Number one, move all your documents into one cloud location with an easy to search file naming structure. That way you and your team should be able to find files within a minute or two. When you are looking, create a folder in your password manager with all of your logins and use an in house communication tool such as Slack to get things together. Yeah, I like this. Create an onboarding plan. You can't hire someone before you need them and when you need them you're too busy to hire them. Having a plan in place should make this process easier. Oh, I like that. That's pretty good. Yep. Important. Yep. And then he says set a calendar structure with reasons. Example, Monday is no calls day at work in the business, meetings, planning, etc. Tuesdays and Wednesdays work in the business. I do all of my work on these days. For me it's design and he builds websites. Okay. Thursdays are call heavy days, client follow ups etc. Fridays work on the business, networking and billing. What else? I like these. This Is a good start here.

Yeah, those are good.

Yeah. Great.

Yeah, I love the.

Is.

The first thing is.

Is.

Is that whole concept of systems and putting these systems in place and, you know, adapting, develop them over time. I think the onboarding thing is critical. When you first hire somebody, you want to set the tone from the day they start. Yeah. And you want to have something to give them. You know, some places have documents they print out and hand to somebody. I really love the concept, you know, where he's got everything in the cloud. But I also really think there's some value in creating some videos for onboarding and other tasks. Like, hey, this is how we use the calendar. Let me sit and walk you through it. And use a product, whatever. You could do it in QuickTime and record a video. You could use a service like Loom or somebody else. But thinkific.

Right. We had that sponsor for a while, thinkific plus. Thinkific would let you do that, too. Yeah, I'll put a link to that, too. Yeah. Yeah.

I like coupling writing, you know, paragraphs with video because I think we are just programmed, especially today, to absorb smaller chunks of data. But then looking at video, I think, is powerful. I love that. And I think it's also important to embrace that 85% rule that we talk about a lot, that we learned from Gary Von Meer, from Tech Defenders, that once someone can do your job or maybe another person's job in your organization, once they're at about 85% that they can do it, you should then put them in that position and then let them fill up the rest over time because it's. That's enough to cover your bases, to free up your time to go do something else. So I think it's great overall, that focus on developing these systems and, you know, putting standards in place where, you know, stuff's not scattered all over the place. You know, we're going to talk a little bit about this silver Tsunami and businesses that are, quote, impossible to sell. Well, this is one of the reasons is that everything's in some owner's head or it's spread out in papers all over the place. That makes it really tough to find a buyer for your business.

I was very fortunate that when we sold the Mac Observer, I sold it to someone who did not see that as a downside, because we had 25 years of systems that we had built in house, a lot of them. I was the only person on the planet who knew how they worked. And he's like, yeah, it's fine. I'm just Going to sort of slurp it all into WordPress and it's okay to lose all the old content. I'm like, wow, all right, great. Cool.

Yes.

You know, and, and it was, it was good because he didn't have any emotional attachment to any of this stuff. So he could just be like, oh, yeah, forget it. It doesn't matter. Like, oh, whether it matters or not doesn't matter to you. You're writing a check. Great. You know, I, My opinion on this is wrong. I, you know, I was here for this. But you need to think like a buyer. Right. Somebody coming in. Do you want to inherit all that headache? No. You know, so, yeah, I've often tuned.

If you're, you know, if you flip it. If you think on the flip side, sometimes it can be a strategic advantage not to have it all and not to know as much as maybe. Yes, I had a. I'm not going to name them, but somebody that's been on this show years ago that talked about how it was a real benefit for him when he was selling one of his companies, just to keep saying, I don't know. I don't know. I don't know where that is. Hey, you know, and because he's like, I really, I wasn't trying to. He wasn't trying to deceive anyone, but he really did not know. So he's like, oh, hey, if you're not comfortable with that, I totally get it. But he knew this, this entity wanted his business so much.

Yep.

That they were, they were already committed. And he was like, I don't know where that is. I don't know how to pull that together. Here's the information. If you guys just kind of want to piece it. So there's a different.

That's a different negotiating tactic, in a sense. You know.

Yeah, yeah, yeah. So it's kind of interesting and I think also talking on this concept of scaling and then we were discussing this silver tsunami again of businesses that going to be hard to sell. We did that episode. Was it 409? Is that what it was?

Yes, episode 409. You're. Absolutely.

We'll link it in the show.

Notes.

We talked about seller discretionary expenses and very important.

Right. Yeah.

To understand what those are and also how to list them on your. In your finance financial report. It's very easy to do. Creating accounts that you can list things that you're like, well, I take this money out or these funds or I expense this thing. But maybe the buyer wouldn't, you know, even Your salary, your officer salary, your payroll taxes for yourself, your officer, travel expenses, vehicle expenses, all kinds of that stuff.

You can. Just the stuff that you don't. That you really don't want the IRS to ask you about. But even though your accountant says it's going to be okay, like, that's, that's the right. That's a good place to start, is thinking about those things. Yeah. Sde, the seller's discretionary expenses. It. I was. It. It hit me like a bolt of lightning when I realized that these things can be added as profits to your business and therefore will be added back. Well, that's what I mean. They're added as profits. Added back as profits. And then you get to sell those as profits. Right. Like when you're coming up with the multiple for the business, those get factored in and your salary is included there. Yeah. You're.

Maybe you have a higher level of health care that the buyer would not need. You know, that you spend a lot of money on anything like that. It's going to benefit you and make it easier to justify whatever number you're looking for if you do want to sell by having those things out and seeing like, oh, yeah, these are all the, the ESC SDE items that were adding, you know, that we're adding back in.

Yeah. And buyers, well, savvy buyers will absolutely expect this. It. I mean, if you choose not to do it and they can pay less, a savvy buyer will happily pay less. But they, they will not, you know, blink when you say, oh, yeah, well, obviously we're going to add my, you know, my, my company car back in. You know, even though you can fully justify it for the irs, a buyer knows, yeah, I got to pay for that. That's. That's actually profits. Yeah. You know, that's fine. Yeah.

Yeah. Things that, you know, your salary may not qualify as much if they have to hire somebody to replace you.

Right.

So that's going to be calculated.

Yeah. But if you're paying yourself triple what you would have to pay someone then, then you, then you add that back in as an expense. You say, okay, well, I'm paying myself, you know, whatever, 150k a year. And really the job that I do is really only worth 50k a year. So I'm going to add that back in. By the way, if that is true, if you're paying yourself. Let's say that's true. Let's say you're paying yourself 150k a year and the job that you're Doing for the business is something you could hire someone else to do for 50k a year. Go find that person because that will make your business so much easier to sell. If you don't have to work there and they don't have to replace you. If you can say, oh yeah, I don't work there anymore, I replaced myself and here's the team and it's huge. It absolutely makes your business completely. It looks totally different and for obvious reasons. Right. You're thinking about it right now like, of course that's the business I want to buy because then I don't need to. It's a turnkey operation. It's just like, yep, here you go, here are the keys and here are the profits. You're done. Yeah.

You've embraced those systems that we were talking about earlier in the show, all those things that we're talking about to automate things and to, you know, have people and you're onboard all that stuff. When you can say, oh yeah, I don't work there and you've left to do something else, or you're overseeing the business, but the day to day is run by these folks that you've hired. You're going to be in a much better space to negotiate when a buyer comes your way, and there are lots of buyers coming our way as older. If you're an older business owner, you know, it's, it's all over. Just jump on Reddit or X or any, any place where on LinkedIn we're.

Talking empire flippers like, go look, you gotta.

There is just a massive wave, you know that. Yeah, there's a wave of older sellers or, I mean, older business owners, but there's also a wave of younger business owners that are not buying into the corporate lifestyle of working for someone else. They say, you know what? I want to buy a small business that's kind of already established and I can then apply all my fancy stuff. I've learned whether that works or not, that's another show. But they're out there, they're coming to look for you. And if you're ready to talk to them, it's just a great opportunity for you.

Yeah, be ready because they will show up, especially as things sort of stabilize and a little more confidence comes into the market.

Yeah, of course. Absolutely. Absolutely.

Good stuff. Thanks for hanging out with us folks for the last 20 minutes or so. Make sure you email us like Robert did at feedback at BusinessBrain Show. When you do that, you get entered into a drawing. We're going to do it in about 11 episodes here. That drawing will win someone a MacBook Air. Could be you. Feedback at business sprain show. We really want to hear from you. We love having this content. It's amazing. We all get to learn together. Love it. We all get to keep living that charm life. Easy for me to say, man. I'll see you Friday.