Episode 01 | Part Two: Pivot Don't Panic

Gregory Shepard, an entrepreneur who's built and sold 12 businesses, a recipient of 4 private equity awards, TEDx speaker, and Forbes author. This is The Boss Podcast with Gregory Shepard.

Welcome back to part 2 of my chat with Randall Laveau at Boss Capital Partners and our real American hero, Scott Tate, the executive director of the National Security of Innovation Catalyst located at UC San Diego. In part 1, Scott told us how he handled crisis situations in the military. And now I want to get Randall's take on handling a crisis like the one we're all going through in light of the COVID-19 pandemic. Randall, what do you do first when everything is hitting you all at once?

Yeah, well, I mean, the first thing is stepping back and understanding what exactly the status quo is and what the impact to the status quo is from the potential obstacle or crisis. And then once you have that, you need to isolate it, right? So what are all the dependencies to it? Typically, people go through what's called a root cause analysis at this point to understand all the different motivating factors that can influence this particular thing that's happened to your business. A tool that I like to use anytime I'm dimensioning the prioritization of things is a SWOT analysis. I know it's, it's a tool that's been around for a while, but going through strengths, opportunities, weaknesses, threats. When you have isolated that one factor or that one crisis or roadblock really helps you dimension all the different aspects of it. And it's particularly important for charting your course ahead, right? So making sure that you're laser-focused on the potential areas of importance that are going to influence that to something that could be a positive outcome for you. You know, within each crisis, there is an opportunity. And sometimes the opportunity isn't seen upfront, and that's why they say it's about the journey, right? Not necessarily the destination, but it's important to be agile and vigilant while you're going through this process to make sure you understand the opportunity and capitalize on it.

I think that that is a big point, that there are always opportunities in these scenarios. And those that not only recognize an opportunity but act on that as an opportunity are those that come out of these things really well. Like, in 2008, those people that knew that the housing prices were so low and went out and bought those houses and then rented them out are doing really well right now. And in the tech crunch, people bought companies at super low valuations and made the arbitrage on those businesses. I wonder, you know, if in the world that you're in, Scott, if you see or can advise to people what sort of opportunities they should be looking for And Randall, the same question to you. How do people go about, first of all, recognizing an opportunity, and then how would you advise them taking advantage of that opportunity?

Sure, I can give you an easy example. It's not high-tech. Most of the companies we deal with are young entrepreneurs. As you said, we're in San Diego where the bar scene is pretty strong, so we've got a lot of friends that are in the bar business. And for many of them, we were able to take a quick look and said, hey, you know, your core thing isn't really selling alcohol, it's providing an experience. People want to get alcohol, they can pick it up at the store cheaper and drink it at home. They come here because they like the experience. So let's do some streaming services. They can have some experiences from home. You've got this incredible human capital in your bartenders. Why don't you do some mixology things on your webinar? You know, there's all sorts of things that they could do quickly. As soon as we identified that their core principle, what they were providing their customers that nobody else could provide, was the experience. It wasn't really The physical food and drink. On the entrepreneur side, they tend to be nimble anyway. So the minute that you get them sniffing around looking for something else they can do with their same technology or looking for new pain points to address or possible new sources of revenue, they, they love it. It's been fun to watch some of these rabid young entrepreneurs go after new opportunities and just pivot on their heel and move out.

Yeah, I've seen like some really interesting stuff like trade shows. I was booked to speak at all these trade shows and they've just basically moved them online. And now you're doing conferences, keynotes, panels, everything, you know, online. And in school, our kids are now, you know, learning at home. Even though it's been a rough ride to get them going, it's definitely progressing us and there are just huge number of opportunities in that space. Randall, can you provide some expertise to folks?

Yeah. One of the things that's important to understand is a crisis is very reactive, right? And when a crisis hits, we have to react to it. But there's some proactive things that people can and should be doing prior to a crisis hitting, right, that are going to set you up. And some of the examples, you know, that Scott's gone through, and I'll even share a couple examples, are all indications of people understanding the markets and the buyers that they're serving prior to the crisis. And when a crisis hits, they know how to serve them then, right? And a lot of companies, especially smaller ones, kind of give up on this. The things like social listening, buyer interviews, right? Just really being plugged into who you're serving is very important. It's not very challenging for companies to do. You don't have to be an IBM-sized shop and have a team full of people to do this. So, there's a—

take advantage of the time and interview the people that you're trying to sell to or collaborate with to find out what they really want so that you can then go back and give them what they really want?

That's a possibility. But what I would do is dig into what are the motivators or the new motivators of the buyer. And an example of this is, there's a local restaurant by me, very popular. And when the crisis hit, the restaurant had to close down. But they knew that their products sold well. They knew that people wanted to frequent their restaurant because of their food. So rather than closing the restaurant down, they turned it into a drive-up service where you could literally come and pick up the ingredients, take it home and make it. And this allows them to keep their people employed, allows them to maintain their rent and stay in their building. So they're going to come out of the crisis better because of the loyalty and credibility that they've now built with their audience. So, really having a detailed grasp or an understanding of who your buyers are, what their motivators are, and making sure that you could be agile and shift quickly in a crisis to serve them still.

You know, in 2008, I gotta tell this story. When that hit, I had all these employees and I had to lay off conference rooms full of people. I had 38,000 square feet at that point. And I had, I don't know, 6 or 7 conference rooms, and each conference room held, I think, 30 people, the bigger conference rooms. And I had to lay off conference room after conference room of people. And I have to say that what that did is it made me really go back and look at every piece of my business. Do I really need to be doing that? Right? And what I did is I did exactly what you're suggesting, Randall. I had conversations with the customers and I said, Do you really value, like, is this really valuable? If I had to reduce things, like, is this something that, you know, you would be willing to do yourself or you're not willing to pay for? Does it differentiate me? What about this particular thing? And I ended up refining the service down and the company came out as a way better business. I had probably 50% of the services that I was offering were just eliminated. And then the energy was put into the places that I decided to excel. And one of the things that I go through with people when we talk about profiling is asking yourself a question about your customer. And that question, a series of different questions, and one of the questions is, what is your customer willing to do themselves and what are they not willing to do? And where do you want to excel and where are you willing to let your competitors take the lead? And if you look at Apple as an example, you know, Apple doesn't care about Samsung's number of phones because that's not their ICP, that's not their ideal customer profile. They let them have the market all they want. All Apple wants is the people that fit Apple's ICP, and they don't even try. So they give way on price to Samsung for those customers, and they take what they want, which are high-valued customers that are willing to pay more for a higher quality product. That's Apple's position. So when you do this evaluation of your business, What I did is really break down every piece of what people did because I had to lay off a lot of people. I just simply couldn't offer the same service anymore. So, I was forced to reevaluate every single thing I did and make sure that I only did those things that the customer really valued.

Great point. You know, and it's a great time to look inside, right? And look within. And I think prior to a crisis, a lot of us are working in the business. You know, solving the day-to-day tasks, just making the business run. When a crisis happens, it's a good time to step back and work on the business, look at it from a strategic perspective and optimize your plan, making sure that when you get out of this crisis, right, and return to deliberate, you're that much better at that point.

Yeah, Greg, I think there are a ton of opportunities inside the business. And to play on what Randall said, of the mid and large size companies we work with, Having talked to them recently, a lot of them, when things are going good, people are afraid to change. Because anybody that does make a change, if it doesn't work out, then they get blamed for it. But once the crisis is thrust on you, it's an opportunity to do things that everybody already sort of knew needed to be done or be done differently. Because you have that opening where the social pressures of conforming to what worked yesterday are gone because it isn't working anymore anyway. So, it really is an opportunity to try new things and as you said, reinvent yourself on the fly.

Yeah. I mean, my process went down. I mean, it was crazy. I couldn't even believe. And at the same time, what I realized, and this was a very difficult decision for me at the time, half of my customers did not fit my ICP. 50% of my customers. Imagine you're in 2008. Half your customers canceled already overnight pretty much, and you have to lay off all these people. And then you move into this really small— it was basically the upstairs in a barn that we moved into. And at that moment, you realize when you really drill in that another 50% of your customers don't fit exactly what you realized once you went through your products, that the customers, uh, your customer profile, right? So you go through all your products and then you go, okay, this is the products that everybody values. And by that definition, these are the customers that I want. And then you compare it to the customers you have and half of them don't work. And I actually swallowed a big pill and terminated 50% of my customers. And at the time, everybody thought I was crazy. You know, it's just like, what are you doing? And what I found out is exactly what I thought. And that is that if you put your energy, if you limit the energy, you focus it like a laser beam, the wider you go, the less energy there is, the sharper you go, the more focus you have into a specific ICP and a specific customer, then you can supply a level of service to those customers that they simply can't get anywhere else. Randall, when you were developing that marketing company and you spent a lot of time on ICP, I want to just spend a little bit of time on segmentation, ICP, and that sort of thing. I think that this is a really good opportunity for people to sit back And look at their customers and look at their products and define this. You're going to lose a certain percentage of your customers anyway. You're going to have to change your business. You're going to have to financially change the way you operate. There's less risk in making a move like this. Like when I did it during that recession, it was less risky for me because everything was risky at that moment. So maybe you could give folks some advice on how to shape Their go-to-market strategy, specifically who they're targeting and what they're targeting them with?

One of the things that's important to do ahead of even identifying who your buyers are is understanding the accounts that you serve. And so this is a good exercise for folks to do that, you know, in the day-to-day business may have not had the time, but in a crisis may, like we're saying, may present the opportunity to do this. And it's called account segmentation. So the idea is that you look at your accounts within your serviceable addressable market and you come up with different factors to measure these accounts by. And accounts are simply the companies that you actually sell to. And so propensity to buy factors would be things such as the number of employees, the geographical location, the target audience. It could even be things like what sort of existing systems and infrastructure they have or existing current contracts they have. But the idea is coming out of the crisis when money is typically tight and everyone's racing to spread their message to the market, it's important to be very targeted with your approach. So if you could assign propensity to buy factors to each of your accounts and understand what are the best accounts to reach out to, essentially putting these propensity to buy factors into a grading scale. For your accounts. This allows you to look at your budget and step back and say, of the accounts that have the highest propensity to buy factors, am I directing most of my energy and resources towards those accounts? And what companies often find, kind of like what Greg was talking about in his previous story, is a lot of our efforts are going just into the ethos and not hitting anybody. Right? We kind of feel like activity is good enough, but targeted activity and making sure that you have the right message to the right account through account segmentation is something that best-in-class companies do better than anyone else.

I think that the objective here is to help people through this really critical time, right? And get you focused on what you can do, those things that are in, in your circle of influence. And your ability to actually focus on a limited number of things, because the more you try to do, the less you get done. I think that in closing, I'm hoping that you can take what you've learned today and really apply it. Our objective is to help more entrepreneurs succeed. I want to thank Scott for the time that you spent with us. I mean, you are an incredible guest with a hell of a bio, and Randall Laveau as well. And I really appreciate it. Thank you guys so much.

Thank you, Greg.

Thanks, Greg. Thanks, Scott.

Thank you, everybody. And I wish you the best.

Thanks for checking out the BOSS Podcast with Gregory Shepard. Get more on Greg's Business Operating Support System, BOSS, at GregoryShepard.com. This has been a production of Forbes Books Radio.