Selling Your Brand - Bertus Albertse - Fractional C-Suite Retreat - Episode # 35

Growing a business is hard, but it does not have to be.

Once a week, we take a break from the hustle and bustle in business to talk about innovations and what's new in the C-suite. This is the Fractional C-Suite Retreat, and I'm Joseph Frost. Pull up a seat at the fire, grab a drink, smoke a cigar, and just join me as we relax, learn, and get inspired. This retreat is sponsored by Your CMO, helping organizations grow with better marketing strategy. Welcome.

I'm very excited about today's guest. He's founded an award-winning fitness franchise in 2013 that has since expanded to 7 international territories. He's been a leader in the health and fitness industry for over 14 years, has a passion for people and a love of fitness, and he's president of Jabs Boxing. Welcome, Bertus Albertse. How are you, Bertus?

Joseph, happy Friday. I'm doing fantastic, and I hope the same your side. Thanks for that grandeur of introduction.

Oh, I think you probably wrote it. No, you're a very impressive person. I enjoyed our call earlier and excited to get into some of that detail today. But let's start with the first question I like to ask, and it's simple. What's, what, what's something that you see is an opportunity for the C-suite out there that maybe other C-suite members, business owners might not be aware of, or, or should be more on their radar?

That's a fantastic question, Joseph. And I think one of the most exciting things for me, you know, as a founder myself and as an entrepreneur, I didn't come from the C-suite world, so it made me look at my business differently. And in franchising my concept, I kind of saw the value in turning your kind of intangible assets, that intellectual property, your know-how, into kind of a tangible revenue stream through licensing and franchising. So I think that's kind of an untapped opportunity for most business owners and for C-suite members all around is to, to ask yourself, how could you monetize, um, your trademark? How could you monetize your operational IP, right? And how can you potentially license that to someone else who could benefit from it? So think of it almost like a new revenue stream opportunity for your existing business.

Yeah, I think that's interesting. And, and when you mentioned it, uh, before, you know, my first instinct, uh, is, well, that's what a patent's for. But that's not at all what you're talking about. Can you explain the difference between, you know, a patent protection versus what you're talking about, which is licensing and monetizing your IP, right?

Well, I think in my— again, I'm not a legal expert in any way or form, in fact quite far from it— but in my interpretation, you know, it's not that different from a patent in the sense that it might not be legally registered or officially registered, put it that way, when you talk about operational IP. But most of that is typically put in form of kind of best practices in a manual, right? A step-by-step guide on how to do something more effectively. And everyone has that in their business, right? You have learned a, you know, best way to do something that kind of is a shortcut to success, either through the customer experience that you render or through your actual service itself in terms of how you do it that's uniquely different and makes you more proficient and effective at doing it. That how-to in a guide, in a manual format, you know, it's essentially what I'm talking about. Like, these people could benefit from that. And that's essentially what happens when you franchise. Ultimately, you give those best practices to the franchisee, who then has a higher likelihood of success because they're following the formula, right? So think about baking a cake, right? There's step 1, step 2, step 3. And if you get any one of those steps wrong in chronological order, that could actually make the cake a flop. Similarly, some businesses are flops purely because they don't have a recipe. They don't have any strategy. It's not been tested. It's not been tried out, not just on one cake, but over many bakeries, if that makes sense. So it's really about how do you, first of all, you know, put that recipe on paper, because a lot of good cooks and chefs and bakers out there do things from memory. And by the way, that's not that different from entrepreneurs and small business owners who just kind of do things instinctively. But those instincts have been guided by a lot of information and learnings and background and experience. And the question is, how could you take that experience and those learnings and monetize it, not just in your current operations in terms of running a profitable business, but potentially beyond that by giving someone a kind of recipe on how they could improve their own business? I think, Joseph, it's not that different from what you do in terms of fractional C-suite, where you bring a lot of that experience that you shared with your other clients to that company that you render as fractional C-suite service to, you know. So it's just instead of rendering that consulting service, you're essentially licensing them that know-how on how to do it. And the reason you might want to license it instead of just selling it as a service is to have some level of control over it, you know, so that you can actually make sure that the recipe is being followed and that it remains original in, in the way it's been presented.. And therefore you typically get better buy-in from the client because of that, because it's almost like when you render a service to someone, they need to be fed. Like, it's like you're shoving it down their throat and hopefully they buy it, they swallow it. But in fact, when you make it as part of their identity and help them turn what they have into a kind of a licensing business, they then ask different questions about the business. Smarter, more robust questions about, oh, how, how would I create a consistent process here, which I've not even thought about? You know, I used to just schedule my stuff like this, and now that I think about it, this is not very scalable, it's not very efficient. But I didn't ask this question before because it was only— I was only trying to solve my problems. I wasn't trying to solve the problems for other people who would want to do what I do, if that makes sense. So it really starts— makes you take you out of that kind of weeds and gives you that helicopter view of how to run your business. And it helps you think about that business development process, um, differently.

So does it, uh, does it have to end with a franchise, or can it stop with more of a license or just selling a playbook? What is that? What are the different variations of what you're talking about look like?

Well, I think all of the variations, all three that you mentioned, is viable. You know, licensing and franchising, it's actually— there's very little difference between them. I think most people just associate a franchise with kind of something tangible, something they can feel, smell, touch. But it is essentially a license. It's got the same terms as a license agreement would. This is how you use it, this is how you shouldn't use it, this is my obligations, these are yours, you pay me a royalty. You know, those things are consistent across franchise agreements and license agreements. But yeah, it's in short, you know, from my interpretation, it's not very different, uh, in terms of selling the handbook. You know, I, I, I take caution. I'll throw caution to the wind to sell anything that you create, right? And I think that's what makes licensing so powerful, is like they don't own it, they get to use it and benefit from it as long as they pay your royalty. Where, you know, it's like, oh, give me all— you know, as an entrepreneur myself, I've seen how people have given me super valuable info and intellectual property so to speak, which I've just absorbed as my own. I was like, oh, this is amazing. This is like a hack, like a business hack, right? And it's like being given away for free and people don't value it. What I'm talking about is understanding when those hacks actually are differentiators, when they make a huge difference, when they are a tipping point to success, then you should be cautious of just giving out. My dad always used to say, if you're good at anything, don't do it for free. I feel the same way about giving out intellectual property versus licensing intellectual property. It's like, well, if you'd like to benefit from it. Here's a license, and I will serve you similar as a service provider. I'll service you with my intellectual property, not with my time. And that is a different measure because, you know, owning someone's time doesn't mean you value what they know. You know, it's like— and also you could change the terms of that quite, quite easily. It's like, oh well, now I need you to do this with your time, right? Where within the license you have a bit more of a rigid framework which to maintain your posture as a service provider.

What do you say to somebody or an organization that says, well, I don't want to, I don't want to create more competitors out there. I don't want to give our secret sauce away or even sell it away because it'll, it'll start to cannibalize what we have here. What would you say to someone who brings that objection?

It's a fair objection if you're willing to expand to those markets by yourself. I mean, if you're going to be in, you know, if you buy based on the East Coast and you want to open the West Coast, you should probably not license your intellectual property to a competitor. However, if you don't want to do it yourself, that's a different growth strategy. So that's the short answer.

Yeah, so it's a strategic decision whether to license or grow organically into a different market, right?

And it all depends on your, your appetite to operate those operations, you know, remotely, because you can't be in all places at the same time. And that's what makes licensing so powerful. Um, you know, similarly, if you have the finances to do it, the nice thing about licensing is if you license an idea, a concept that someone else finances, then your capital exposure is less, you know, your financial exposure is less. And therefore, think of it also like a finance plan. Think of it like a finance strategy as well, because you're financing your brand, you know. Because when we talk about licensing, it could be an operational IP, but usually it's packaged within kind of under a brand umbrella. For example, you go buy McDonald's because you know it's going to taste like this, it's going to cost this, it's going to smell like this, And that is essentially a recipe that's been given. It's not like they take that building and that food and ship it from McDonald's head office to the actual location. You know, the location, most of the recipe is actually being put together at the location, if that makes sense. So, you know, it's an idea, it's an identity that gives the McDonald's or that makes that McDonald's McDonald's, right? So it's really about packaging that idea into a revenue strategy, how to monetize that. Because that's what franchising essentially is— it's a monetization of your brand identity, of your best practices, of your recipe for success.

Yeah. So how do people go about, um, gaining awareness of their own IP and opportunity and start to wrap their arms around what it, what it may look like in a licensed fashion or a franchise fashion?

Well, it's a great question, Joseph. I, I think obviously that journey of exploration looks different for everyone depending on where you are in your business life cycle. But I will say that it started recognizing that the most valuable asset in the world is intellectual property. That's a very good start because— and then also understanding that you could turn that idea, that know-how, into something tangible. For example, write a manual, write a playbook, write a best practice, right? Put it down in something tangible and then understanding how do you then repurpose that to be able to monetize it to a client. And for that, you'd need things like a disclosure document, an agreement, and really understand what is the service you're going to render. Because it's not just, oh, here you are, here's all the info, and hopefully you know how to use it. As you can imagine, a good recipe comes with instruction, comes with training, comes with ongoing training. Comes with future iterations and improvements. So, you know, these are— you must start asking yourself, okay, if I had to license this, what would the client need to succeed? That is a good question. And then I think the biggest takeaway from that is not necessarily making a lot of money through licensing your idea or your brand, but almost through going through that exploratory process, how does that impact your existing business in a positive way? So I almost feel there's something to uncover by doing that. That's not only because of the benefit of monetizing your intellectual property, but almost trying to strengthen your intellectual property. And actually, because you're valuing it, you're recognizing it, you know, it's almost one of those things that if you don't see it, it doesn't exist, right? And if it doesn't exist, how could it support you? How can it be better, right? So by bringing it into your peripheral and saying, well, wait a moment, and I'll tell you why this came for my business, right? I was doing something that I thought anyone else could do. I honestly felt that way. I was like, well, I don't manufacture this. Yeah, I, I only render a service with this, and if someone wants to copy me, they can do it very quickly. So eventually I was like, well, then what made me successful? Why is other people not doing it? There must be something that I'm doing that's different than what other people— and it's not because they didn't try. There's some competitors who try and fail, might still be around but not as big as we are. Um, and then I realized, wait a moment, in the way I do it there's, you know, there's nuances that makes me successful. These are all little small tipping points, like, like compound— and tipping points are like compounded interest, right? They— the 8th wonder of the world, um, if you ask Einstein, right? So it really adds up when you start asking those questions and you start going, okay, well, clearly I'm better than anyone else at what I do, so therefore how I do it must be the differentiator, because it's not really the product itself. In terms of I don't manufacture it, I only use that tool, or I use that as a tool in my service. So therefore there's something in how I render. So that's why I think a service business lends itself quite a lot to this. I think so. And back to your question in terms of patents, you know, usually patents associated more with like products, right? Where services is exactly where licensing becomes interesting in terms of that operational IP on like, oh, when someone, client walks in, how do you approach them? How do you communicate with them? How do you— what is step 1, what is step 2, and what systems do you use to automate some of that, right? So as you start thinking and asking those questions about your own service business potentially, I think you, you built a better business with more value because it also passes what we call the school bus theory, which is like if school bus hits the founder and he dies today, like what's the chance that the business will survive? I can guarantee you if you ask these questions, the likelihood of that business surviving is much higher and therefore the value of that business is much higher because it's also It's fallible because of that.

Yeah, so it sounds like you have to almost start a new business to license your existing business because of the support requirements that you're going to have to give to a licensee or a franchisee. Is that a fair statement?

Very fair, Joseph. I think it's a very smart question or statement as well in the sense that you'd want to separate it from your existing business because it's a different business essentially. This business serves your clients who's actually experiencing your service, your product that you sell on the ground. But when you're going to license it to someone else who wants to service clients like you do, then that is a separate business. And also you'd want to protect that intellectual property. Now, for example, I can tell you today, and most people probably own their trademarks if they even have their brand trademarks, you know, they own it in the existing operating company, which means that if you have any debts or liabilities, that people could actually attach to that trademark. You know, if you kept that trademark in the holding company where in fact the brand identity is protected through that holding entity that doesn't have any operational liabilities or any risks, you know, so non-trading entity just holds your intellectual property. That way you can protect it separate from your operational business. So I would do two steps. I would probably incorporate two companies, one for holding your intellectual property. So you assign your trademarks to that new company company and also all the copyrights and everything you ever developed in terms of best practices and operational IP, and then actually license from that trading holding company to your operating company, who then licenses to your licensees. So it's almost like a two-step process, I would say. But definitely do not license out of your existing brick-and-mortar service or product business because it serves a different purpose and it has different revenues and expenditures and risks which you want to separate from your intellectual property and the way you want to monetize that.

So you might end up with 3 entities really then. You've got your own operating company, you've got the licensing operating company, and then you've got the holding company for the patents and the intellectual property and—

right, all that. Spot on, exactly. And again, I mean, I'm not an attorney that can help you structure or count into structures. I look at from an entrepreneurial perspective, it makes sense to me because ultimately you want to create value for the operating company who actually has the revenue streams. But you also want to be able to monetize potentially separately that revenue from actually the asset, and the asset being the trademarks and the copyrights and the patents, right, which in themselves hold— and as you know, people who make real money do not make money by selling time. They, they make money through capital. Now, most people think capital is money, but capital is not just money. Intellectual property is also intellectual capital.. And that is a good way of turning your intellectual capital into actual, you know, hard cash eventually, you know, through potentially monetizing your intellectual property or selling it eventually, which usually has a pretty high upside if you, if you prove it to be successful, usable, and scalable, most importantly. Then you can get price-to-earnings ratios that an operating company could never achieve. Right.

So what is the typical time and investment for something like this? I mean, it sounds like it's a big lift, uh, just an equally good opportunity, uh, but is it 3 months, 12 months, 3 years? Is it, uh, $10 grand, $100 grand, $1 million?

Like, what does that look like? Yeah, that's an interesting question. I think it will vary from one situation to the next. It all depends on really what you have today. Maybe you've already asked these hard questions when you started, you know, and you're very diligent and conscientious in terms of how you develop those best practices and those manuals and those standards, those operating procedures in your business. And you could easily then just repurpose that and then develop a disclosure document, license agreement, support training, and systems that your licensees could use and then kind of launch it 6 to 9 months from today, right, in the very best case scenario. In other scenarios, this is a process of ongoing development where it might take you a year to 2 years, and, and someone might even end up never actually licensing their business because the road might lead them somewhere else. But I do think it's a road that you should travel irrespective of where the destination takes you.

So where does someone start if they're interested?

Um, you know, I would start with reading a book. I think a really helpful one, and I forget the author's name, so you're gonna You know, what is it called now? I mean, it kind of came to the top of my mind, but it's kind of a business development book. It's called— and I'm going to have to get back to you on what it's called.

Yeah, we can add it to the show notes afterwards.

No worries. Okay, great. I've got there. Absolutely. There's a specific book that speaks to this very, very well, and it speaks to how to go about this development program, essentially, of your business and think like a franchisor. And I'll definitely send you those notes. But I think the second thing is getting yourself, you know, if you have some money to spend, I would consult with a franchise attorney, a licensed attorney, because, and again, it's not because you need legal advice, but they can guide you and tell you that, well, listen, realistically, let's look at, you know, what do you want to achieve and if what you have today is the right step, if that's the right step for you. But maybe even before that, also start understanding, you know, I have a little bit of a criteria of what I look at when I look at a brand and the concept that is like corporate owned and small business that has the potential to scale as a license or franchise business, I look for things like, do you have proprietary services or products, right, that's very hard to copy, for example, and that you're really good at? Do you have some economy of scale? Because that's incredibly important, right, to benefit from, because then your licensees benefit from that supply chain, from that kind of vertical integration opportunities. Do you have a good founder that has leadership and takes extreme ownership incredibly important. Do you have good single unit economics? Meaning your business currently doesn't operate really profitably, and, you know, if you want to license something, that implies that you're going to take a royalty from your clients. That means that they have to have enough margin in the business to validate you taking a royalty from them. So, um, I always like to think that the business needs to at least achieve a 30% operation— operating margin and over, right? Because if you you're going to take 6 or 7% off of that, then you're already at 20%, right? And that's really where you want to be, not much lower. But let's say your business operates at a very low margin, like 10 or 15%, that might make it really hard to license to someone else because it just doesn't have enough fat there for them to be profitable and for you to get a good enough royalty to validate your licensing model in the first place. Because again, intellectual property doesn't just pay for itself. You have to service that client. You need to provide them with support. Training, a new system development, you know, because when I say systems, every business and operator has a system, even if it's a manual system, right, on Excel. You know, it's a way to do something and you want to continuously develop that so your licensees benefit from it. And unfortunately, it's a bit of a chicken and the egg. So a lot of times you can't really— you were asking me like, how long could this take you? What I would warn people is don't try and be perfect, you know, try and be good at perfection. Could potentially be the enemy of your success. You need to get to a first licensee with enough for them to succeed, of course, but that feedback loop is probably what's going to make you who you are eventually. You know, I, I can't speak for the big Subways and the McDonald's, but I'm pretty sure the first couple of franchisees looked really different, and their best practices and procedures and their systems developed over time. So I will say this, expect that you will be in the midst It will be very hard to see. You have zero clarity. You probably won't even see your hand in front of your face. But that's why you crawl. But you need to crawl. Don't sit still just because you can't see. Crawl until the mist starts clearing. Then you stand up, start walking. And then as you start walking, hopefully it opens so that you can essentially start running and sprinting eventually as the mist clears. So you won't get clarity unless you step forward right now. I say that to a lot of entrepreneurs generally, is that clarity comes from action. Clarity doesn't come from thinking. Now you can think as much as you want, but it's not going to give you the feedback you need to really understand if it's going to work or not. So I would say start doing work. So ask yourself, what do I have? What do I need? Um, ask the right questions.

Yeah, we, um, at Your CMO, we went through the— this process, um, just a couple years ago during the middle of COVID We decided we were going to take this opportunity to franchise our business model and So as someone who's gone through it, everything you said makes perfectly good sense. Our experience was we reached out to a franchise broker, not a broker, more of an attorney consultant, and they asked us all those same questions that you were sharing, and it forced us to look at, you know, what we already had built and ready and what we had to, you know, invest in to build out and ready. And the one thing I always remembered that was— that stood out to me is they mentioned— someone mentioned along the way, I don't know exactly which person I talked to— you need to know you're going into a completely different business when you get into franchising. You're no longer in the business you're in. You're in the business supporting franchisees, and that is an entire different business. And you need to be prepared to separate the two and focus on both. And so you got to— and a lot of times that's where I think franchises struggle is they can't— they're trying to operate and franchise, and that doesn't work well, because you can't serve two masters that way. You've got to figure out how to build the scale internally or partner with somebody that can help you scale on the franchising side. And I think that's kind of what you found is that you can be that partner for some people, right, that you've found that are interested in scaling, you help them do that by taking the ownership of the scale of the licensing side of things.

Is that correct? That's right. I think, Joseph, you summarized it so beautifully. It's very difficult to serve two masters, and undoubtedly you're going to have two masters in that scenario where you try and maintain your current clientele while trying to license what you do. And everyone goes through that experience of needing to pivot, you know. So pivot is a change in strategy fundamentally, right? And you can't serve two separate and conflicting strategies. But there needs to be a period of overlap. You can't almost pivot out of it because who's going to buy a license if the prototype concept doesn't exist? Very few people are willing to take up something that someone else hasn't done themselves, especially if you need to trust that person. But yeah, very good observation, Joseph. It's definitely tricky. And I think you've been through that yourself where you had to make a decision. Do I stay with what I do, which is very profitable and very successful at it, But it comes with limitations. It's not very scalable. It requires me to work the business. The business is not working for me. Now, I will say this. If you're going to license your business or franchise your business to get rich quickly, that's the wrong approach because it truly is the ultimate get rich slow scheme, right? Franchising, because you're taking a small margin off of other people's success. However, theoretically, at some point that should take care of itself to a certain degree where you have the right systems and processes in place to service those franchisees that you could be less hands-on. I say theoretically because I've not gotten to that point myself, but I like to grind, so it might just be my own habits.

Yeah, yeah. Well, sometimes we do the things that we like to do, not the things we're supposed to do.

I would say most of the time.

Yeah, most of the time. The, you know, the other thought I had on, on the whole franchising thing is we thought about it when we started our business. So that was a good time to think about it. We wanted to build our operating business, but we documented and built the processes and did that along the way so that when we were ready, we kind of had a head start, which is really nice. Some people they've been in the business 10 or 15, 20 years when they start thinking about it. So when, you know, I don't know when the best time, but is there a worst time to be thinking about it?

That's a good question. Is there a worst time? No, I think the worst time is not thinking about it at all, because even if you don't, if you sit here and listen to our conversation and you're like, well, I don't really care, I don't want to franchise my business, I think you're missing the point. You know, the point is that when you think about these things, you become better at what you do because you're trying to address a larger question, which is how do I help someone do what I do? And by doing that, you effectively developing a system on what you do every day and why you are successful. And weirdly enough, if you look at people like Tony Robbins, and there's so many people who, you know, self-help books and the business development books, and all of them, all of those books really comes down to how do you develop your own best practices, your mind system, or your thinking process, or the questions you ask yourself. How do you do that to get better predictability of success? And even by just asking those questions, it makes you better at what you do. And I think licensing and franchising is a mechanism for you to ask those questions. And by the way, just, I would, I would agree with you. I just wanted to say that you were saying that you went to a franchise consultant. And I think there's fantastic ones out there that I do think it's probably even a better start than my suggestion. I will retract what I said. I said go to an attorney. Sometimes not the best thing to do because not all of them are very business savvy. Some of them can tell you legally what these documents should say and shouldn't say, but they're not going to help you develop a business system. And that's maybe where a franchise consultant could come in handy. I'm thinking of people like iFranchise. For example, who do this for a lot of big brands as well. Because this is what they do, they help you develop those processes, or at least will help you ask the right questions to do so. And they might even make a good recommendation on which franchise attorney knows their stuff. Because like in all industries, you get good ones, you get bad ones, right?

So yeah, well, yeah, we went to— so I went to a lot of different sources to just do research, which is free, and anybody should should take, take that time if they're interested. So we talked to attorneys, and yes, the franchise attorney just started talking about this giant legal document we had to build and how much it was going to cost, but they never once asked me about my business model and to understand if it was even scalable. They were—

that—

so you're— they, they definitely didn't have the kind of business approach. We talked to the, the franchising consultant we went to was SMB Consulting. They were terrific. I would highly recommend them. They were the ones that looked at our business model and said, you know, we turn away a lot of businesses at early stage because they're just not ready, and, and so let's, let's do some diligence on you. And, and, uh, we were ready. And, um, then they also were able to refer us to another attorney that was less expensive and kind of worked in their system. And so that worked out well. We also talked to franchise brokers that sell franchises to understand how to market and sell these because that is a big part of the game as well. And all of that feedback helped us make the strategic decision either go or no go. And I would— I think that's important. The book that came to mind to me that was really helpful is the book called The E-Myth.

I don't know if you've ever read that book. We are speaking about the same book. Thank you.

Same book. Okay. Yes. So The E-Myth by Gerber is like— there we go. Written in the '60s, it's all about how to build your business using a franchise prototype model. And it's the best small business entrepreneur book I ever recommend anybody. Right. And so that's why I guess I was ingrained in my mind when I started this business, we were just going to build it that way. And it definitely made us ready, more ready to launch a franchise when we—

It feels so good when you brought up the book. I couldn't remember. And by the way, his name would be pronounced Kerber. If you, if you ask Dutch people or the German people. But yes, I remember, yeah, it's a stunning book. I agree with you on your observation that that is— I would honestly, before you do anything, just read that book. It will give you the essence of what we're speaking about, because to me it was also equally impactful. It was— and funny story, it came later on in my franchise journey. I was like, wait a moment, if I had this up front, it would have answered quite a few things I had to explore and discover by myself. And obviously I paid the school fees and got the bloody nose for all the mistakes that I made. But sometimes it gives you a unique perspective, I think.

So I'll take it. So think about when you first decided to— when you discovered you have IP and you first went down the path of licensing it or franchising it. What was that like? And you've learned the hard way, it sounds like. So you had to go through it on your own, like Tell me about that journey a little bit.

Well, it's messy, ugly before it becomes even worse. And then at some point I'm like, okay, wait, now I remember why I did it. Um, no, so it's very painful. I will say that because again, I think pivoting is painful. And just speaking about a pivot, I mean, like a lot of people understand how to optimize the business. This is not optimization strategy. Like optimization is changing a process or system, right? This is a change of strategy completely. So It's literally a realignment of how you've done things. Who's your client? What business are you in? And you said it better than I did, Joseph, which is that you've changed the business you're in fundamentally. So it is very messy. It is very painful. And I've been involved with a couple of kind of startup franchises now, and I've never seen it being painless. Like, no matter how they want to sell it to you, if the consultant tells you that it's much better to just go into it and expect the worst because I can probably— it's probably going to be even harder than what you expect. But is it going to be worth it? Absolutely. It's— I like the challenge. And if you're someone who likes the challenge, the journey, that's great. If it's about the riches that you're after, probably quicker schemes that can make you money. Like, you know, I don't know what it is, but this is not, not it. You know, this is something that's going to be proven. It's got to work., and your licensees are going to be successful because you might think, oh well, I'm going to get an upfront license fee to sell this to this person, but that's not going to last you much because you are only getting a very small margin on their sales as a royalty. And that really only works when you reach scale, and you can't wait until, you know, if this person doesn't succeed, you're never gonna— you know, your termination rates can be higher than your growth rate, and you're never going to get out of it. You know, you're never going to see the upside of this business. If it doesn't work. So it's not a business that you can just wing it, that's for sure. It's a business where you could be very diligent, conscientious. I mean, you are selling people something that ultimately they might even invest their life savings into. So you should ask yourself really, do you feel strongly that other people could succeed at using your formula? That's of course the very first question you should ask. Could they do it better than they're doing it now using your formula? That's also a good question. And I think if the answer is yes, they could do better, because they could do better, it validates the royalty I'm charging. You know, that's a— absolutely, that gives you merit to potentially license to that client. But it is going to be a painful process. It's going to be a process of like shedding your habits, almost like peeling the onion a little bit. Like you've got to peel your own layers back and ask very hard questions on The things that you don't like to do, you can't ignore those things anymore. And by the way, the things that you're bad at doing will become hurtful to your franchisees or your licensees because they inherit your weaknesses and your strengths. So it's just good to recognize that. I don't know if there's a way to avoid it other than, you know, there's another book we're speaking about books, you know, From Good to Great is another great one which I would recommend, which speaks about First, who, then what, right? So I think in this case that's very valid. First, look for the right people to help you before you try and figure it out yourself.

Yeah, well, I think it's, uh, definitely a worthy endeavor for people to explore, if nothing else, to understand the fundamentals of franchising. That'll help you with your existing operations by itself, and then The upside might be to pivot to a franchise or licensing model or just stay with your better business now that you've done the exploration.

I mean, there's no downside to it at all, right? None. Exactly. It's almost like a thought process. I think about it like a thought process that helps you develop your existing business more effectively. And there's a reason why franchise businesses have generally a higher likelihood of success than a small mom-and-pop shop. Because it has asked those questions. And it's because you're asking smarter questions, you're going to probably lead you to better answers, or so in theory they say.

And I found it to be true. Yeah, I wonder if with larger organizations that have many divisions or many departments, if they can almost do a departmental approach to the same, same thing. Like if you were to franchise this department, your marketing department as an example, right, or your accounting department. If you asked your departmental heads and teams to think this way and build a scalable model that makes it better, if you would see those efficiencies right away within your own organization just by taking on that thinking of how do we build this more scalable?

I would think so. I think that's a very, very interesting approach, and especially if you feel that there's a division in your company that's stands out beyond the rest and has more potential. And there's something, there's a secret sauce there that you feel you want to maybe package up, wrap it up. And a lot of times the secret is in plain sight, right? It might just live in one of your divisions where you've discarded an innovation that could easily be licensed and monetized, right? And the question is, what is the problem that you solve? It's probably the first question you should ask, you know, what is the problem that I solve that is hard to solve if you've not done it before. Yeah. The follow-up question to that then is, how do I package that and what would I need to provide that as a service, license as a service, to my clients or potential clients? And then would someone even be interested, or how many other people have this problem, right? That's— you were saying franchise sales, like, ultimately, like any business, licenses don't just come to you, you've got to find them. Yes, sure, maybe some of those early adopters might come to you and say, well, listen, I want to franchise what you do. And that's amazing, that's unsolicited interest, but you can't sustainably grow from that. You need to have a sustainable growth engine. By the way, another book that I'd recommend talking about sustainable growth engines is The Lean Startup. The Lean Startup is, I think, Eric something, I forget his surname. Eric Ries, I think. R-E-I-S, maybe. Yeah, you're right, that's it. And also phenomenal book. I mean, honestly, one of the better ones. I would put it in the same category as The E-Myth as well.

Yeah, when I actually taught a class or two on entrepreneurship to the MBA program here, and one of the— and I was able to build my own curriculum. And part of the curriculum was comparing and contrasting The E-Myth and Lean Startup. They're both great books. They both are fundamentally solid for entrepreneurs. And there's a lot of similarities, but then there's a lot of differences. And one's kind of a Nord, I guess, a technology startup, and the other is the old school, you know, service bakery service startup. Right. It was so great to see those discussions about the differences and the similarities.

Two of my favorite books. Absolutely. No, it's so weird, you and I, I think that's why we kind of connected, I guess, because we see things so similarly. But we also inspire, you know, these concepts we didn't create. Like, let's, you know, I just want to make sure the listeners and viewers recognize that.. It's like sharing my experience with dealing with this concept in context of my own journey, my own business, that it's really become interesting. And like, I've become so passionate about it that I love sharing it. I just want to shoot out, oh, you should read. Someone the other day said, reached out to me and said, you know, Bert, I want to do something great. I want to franchise my business. And the first thing that came to mind, like, the only thing I have to offer to you is like, these are people smarter than me who write these things and spend a lot of time on these concepts. Here you go, this is what you should be thinking of. Think and Grow Rich, Napoleon Hill. Like, you should think of EMAs, you should think Lean Startup, right? Like, that's almost the only value I can offer you other than my biases and my own experience, right? And then I will say this, you need a lot of grit. You need to believe that the only way to succeed is through failures. And you were asking me, like, how did that journey go? It's like, you're gonna feel— there's a bit of a law of large numbers that's going to kick in. Right? Like, if you start licensing, the first 5 to 10 actually need you to grow quickly. They have to— because the reason they license with you is also partly because you have a budget, you have the resources, pooled resources, that is giving them leverage, right? Um, in order to get better margins, get better, you know, information, that, that shared dollars for marketing dollars, right? And all of that only really benefits them when you succeed at scale. So a lot of times people are like, oh, listen, no, I don't want too many licensees, I need to start slow. And the problem is actually what you're selling only works at scale. So if you do not grow fast enough, then your franchisee will outgrow you and they will run over you. It's like a bus moving at momentum, right? Like the quicker it moves, the harder it is to resist that momentum. Where if you're going to have only 10 franchisees and you have a conflict with 1 or 2, 10 or 20% of your network that might be in conflict with your best practices or the way you want to do something. If you have 50 and 1 or 2 don't agree, then of course it's much easier to get buy-in generally, which creates more momentum and more buy-in, more momentum, more momentum. Momentum is like— I would say that there's a leadership book that I would also recommend written by Malcolm Gladwell for that matter, but it speaks about momentum and tipping points and etc. I don't know if you know Outliers, He writes Outliers, Tipping Point. I like his books. He's phenomenal. He's one of my favorites as well. But talking about momentum is almost like a great exaggerator. It makes someone like Apple, like a company like that, look like, how do you come up with all these innovations every year, year after year? But the amount of momentum behind what they do, it makes it look easy. Okay, but momentum is easy to steer but hard to start, and I will never forget that. Right. It's so true. It's like to start momentum is incredible. It's like pushing a bus that's standing still, right? Like once it starts moving, then you look so powerful because this one person is pushing this bus that's weighing 100 times his body weight. But meantime, it's momentum that's allowing him to do that. If that one guy had to push that bus when it was standing still, it would not have moved and the guy would look like an idiot. Right? Like, and that's also true for me when I look at organizations that struggle to, you know, and talking about Good to Great speaks to this. I actually think they've got a good model and a good system. They talk about a flywheel. The amount of times you go through the circle, through the flywheel, that's what's going to create that momentum for you. And I thought that's incredibly insightful about how do you create that momentum that then becomes all of those innovations and the successes you see it stems from the momentum more so than from your own efforts. Although, of course, effort leads to momentum, but in effect, you must understand that momentum is that accumulation of all the effort. And, you know, and it can't just be effort by itself, it's going to be effort with strategy. And this is, I think, the best way to sum up our entire conversation is success in battle relies on both strategy and effort. And what you and I are speaking about is strategy. That is effectively what a franchise or licensing model is. It's not necessarily doing something different, it's doing it better in a different strategy perhaps. And therefore your effort is then elevated and therefore more productive, you know, and over time that momentum builds. And at scale, that momentum is unstoppable, which is why you see people like Orange Theory, my industries of boutique fitness, blow up with like thousands of locations. And guess what? It's called momentum, you know. And of course they did good stuff to get there, but now you look at it and go, well, they have 1,000 in development, I'm struggling to develop 10, you know. And just don't discourage yourself from— believe it's possible, because by taking those incremental steps, that compounded interest will eventually create that momentum that you need, as long as you don't give up.

Yeah, I think it's well said. I think, uh, I think that's, um, the hard work is real. And what's interesting is if you've been an operator of a business and then you go into this aha moment where I'm gonna start IP licensing, my IP, the strategies can be really clear, but you forget about the hard work that when you started your existing business, you had it, and then you have to do that hard work again. It's not incremental work. It's the same hard work again, 'cause it's a new strategy. It's a new business that just doesn't take off.

Without that, that really hard upfront work. Right now, if someone's looking for something that's easy, this is definitely not it. 100%. Yeah. So it's a, it's a big lift like any business is. But I will say that's consistent. It doesn't matter which business you're going to be in, you're going to work hard. The question is, what is the benefit of that? And that's where the strategy comes in to make sure that you get the ultimate benefit of it. And that's why intellectual property is capital. It's, it's like turning something into nothing. It truly is. But when I say something— sorry, the other way around, of course, nothing into something. But, you know, I'm not saying, you know, people think nothing, it's not truly nothing, but it's nothing because people don't know to value it. You know, if you've not done it before, you wouldn't value the fact that how do you do it, the way you do it, your process is unique, distinct, and also makes you succeed. That if you have that, then there's already something that you should be valuing And even just by license, by the way, the other thing is, if you look at kind of general accounting, acceptable accounting practices, GAAP, right? If you talk about conservatism, you can't really value something that's not been monetized. Like, so if you've never sold it, it doesn't actually have a value, right? Like, unless there's been a kind of benchmark price for it. So for example, one of the things I benefit from as a tax reduction is contributing my intellectual property as a capital contribution, right? Because of course that's like making an investment into the business. And that's amazing because effectively that doesn't cost me money and I'm getting the tax benefit of that intellectual property. However, my accountant's first question is like, well, no, that we can't do that because it's like goodwill and we don't know what it's worth. I said, no, but wait a moment, I know what it's worth because someone paid me for it. This year I have 20, 30, 40, 50 license agreements that show you that my license is worth upfront this amount, and ongoingly on average, this is my royalty. I can actually validate it. It's been bought at that price. So then the question becomes, how many people do I think could buy this license still from me? Because that's the potential value of this intellectual property, right? And after they did the diligence, they're like, well, listen, you're right. We can actually put this into your books. And that was a game changer for us when it came to when we sold, we were able to get the upside of that tax benefit, right? Because we actually did contribute. Because effectively, if you contribute intellectual property that was worth zero at the beginning and then you sell it, then of course capital gains on that is no, right? But it wasn't worth zero at the beginning. And that's the point. It's not worth zero, but it is only worth something once you're able to monetize.. So even just going through that process, it puts a value on that intellectual capital. And I find that very interesting. It's like, I've never made great money from working for myself. I've only made great money through selling my intellectual property capital or licensing it.

But for my time, I'm still very poor.

Yeah.

Yeah. Well, what do you— let's, let's pivot ourselves a little bit.

What do you like to do for fun, Bertus? Wow. Mountain biking, reading, playing guitar on the odd occasion. I used to play much more when I was younger. I also have young kids, so, you know, they keep me busy doing things that I wouldn't— I say young, my kids are now 9, 12, and 15, so maybe not so young, but it's fun. You know, I get to skateboard with my son. I play a bit of cricket. I guess that's not something that people in the US might be too familiar with, but I think baseball, but the ball's got to bounce first. So yeah, no, trying to keep myself busy with the kids and playing, you know, riding mountain bike, play guitar, but mostly work. I love work. Work for me, not because I do it for myself, it doesn't feel like a burden, you know.

So my, my wife would tell you that I should stop and be more present sometimes. I get that story once in a while. It is true, and it's important to be present, especially around kids. Yeah, I've got 4 kids. They're all Hello.

Um, 18, 20, 22, and 23. So, oh wow, so you guys have an empty nest now.

How's that? Almost. We got one left, uh, she's a senior, but they're actually all going to be home this weekend, so I'm kind of looking forward to that. We're taking a little family vacation, uh, up to Lake Okoboji just north of here for the, for the weekend, so it'll be nice to see them. Um, but we won't be getting any cricket in. Uh, we play some soccer, football, football, football. And, uh, but how do you play cricket with— like, can you put—

can you get a pickup game of cricket going? Yeah, you need two people. You need a bowler and you need a batsman. That's it. That's it. Um, that's it. And the bowler will play a fielder as well, so And then the batsman try to run, run 4 points or hit a 4 or hit a 6, which a 6 would be like hitting a home run, right? So yeah, and then you just add up the score and see who wins. And then, you know, you give each other— if you bowl him out, it's your turn, you know. So it's actually really fun to play as a one-on-one.

It's quite competitive, I would say. I've always watched it like I'll click around and I'll see it and I try to watch what's going on and I have no clue. It's a completely foreign game to me, and I would like to learn more about it one day because it does seem to be interesting, but it's a mystery when I— just like it used to be curling used to be a mystery for me. I don't know if you ever watch curling on the Winter Olympics, you know, the big stones on ice and they're throwing it down, right? Until I started playing it about 3 years ago with some friends, and it is so much fun. But on TV, it's like, what are these people doing throwing rocks? And sweeping the brooms. It just, it looks completely, um, foreign and out of this, out of this. It doesn't have any context from, you know, it's not like roller skating or ice skating. It's throwing stones on ice.

But once you started playing it, you get a whole new level of understanding and respect. What I find more fascinating than the sport itself is that you've tried it and that you've done it, because it does sound like something very foreign to me, you know. I've also seen it and I was like, what do they do? They create friction with the eyes to smooth out the eyes for the speed of the ball.

So it's all a kind of a, kind of a, I guess, soft touch strategy. Yeah, it's totally— it's, uh, nothing you would be comfortable with. It's not even like shuffleboard. It's just different, but it's fun. It's enjoyable. And I'm sure cricket's the same. You know, if I was able to get down to Miami and play some cricket with you, I'd probably have a much better appreciation for it.

I'm sure you would, and you're welcome to. I know you're down here. Um, I will grab some coffee when you visit Miami very soon. I think you're here for entrepreneurship workshop or seminar, I believe.

Yeah, I'll be there for the Entrepreneur Organization's, um, one of their accelerator workshops for, uh, for the central region. So we're, we're meeting in Miami, and it's, uh, should be a good time. And hopefully, yeah, we can connect. It'd be, it'd be great to be in person. I find that to be a really important things these days is making more intention than we used to to get back in-person connections. Now everybody is used to Zoom and used to the virtual, and it's really easy to just stay that way. And our business, being a service business, we started out virtual pre-pandemic. We were doing remote meetings before it was common. And then as soon as the pandemic hit, everybody was doing them. But we realized that you lose a lot of trust and relationship, that capital that's super important in the service industry, by solely being virtual. And so we've started going back— new best practice for our franchise is we do the first kickoff meetings in person, and we do all the quarterlies in person when we can.

Everything else is virtual.

And, uh, strategic touch points. Yeah, yeah. We've already seen in 6 months that that fresh change has made a big difference on our NPS scores with our clients. Our scores are going back up, retention is stronger. And just one of those little nuances, you know, we realized things, looking at the numbers, and we put it in place. And we had to update our franchise documents to do it and make it official. But it's IP, right? Something we discovered, and it's important. And so that's why people join our organization is because we, we understand these things and we put them into practice and make it easier for them to be successful. And I guess at the end of the day, for a franchisor or licenser, the other side of the coin— we didn't talk much about it— is you're making somebody else a lifestyle, a business, easier to get to than you got there yourself. And there's huge value in that. And there's just generally some appreciation. You're normally not enough, but if you can do that, the, the, it's a win-win and it feels really good to have been able to do that for somebody else.

It does, right? It's kind of like that, that feeling of you've been able to remove some obstacles and on your licensee's journey to success. And I think that's important, you know, feeling that you made a meaningful contribution by, you know, helping them succeed, um, quicker than you did, right? Because you had to learn the hard way. And you were— what a great illustration what you just told me of why people are part of a franchise network. Because that learnings that you had by making this adjustment by a certain cadence of in-person meetings versus virtual meetings, you— someone else could have the idea, but how do they really test that? How do they test that and know if that's really the better way when you don't test it at a scale, right? So that that you could, right? So that's phenomenal. And that's okay. The feedback loop, that, that flywheel just turns quicker. Yes. And that's why it's like the collective power of everyone doing the same thing. It's like your ability to solve problems better because you guys are all thinking about the problem similarly. You guys are all committed to that one purpose and that one way of doing it. So therefore, when you're making an adjustment, everyone's committed to it. You get a quick feedback. Listen, it's really not working. Not just because in this one situation, but actually across the board, we're getting that feedback. So it doesn't mean you're perfect because you're a franchisor. It just means you're going to learn quicker.

You're going to learn quicker. I like that.

You're not perfect, you're just learning quicker. Right. Yeah. But for that, you need humility. And I will say humility is one of the things that's very important to keep top of mind. I will say I lost some humility along the way, and then I kind of found my way again. When you think, oh, well, I do know the best way, that's why people license this for me, and etc., etc. We eventually like, no, wait a moment, what got you there, you know, was your ability to grow, adapt, be creative, be flexible, be agile. And, you know, when you start looking at a franchise agreement, it's so rigid, right? It's like black and white, but the value really is in the gray, you know, in your ability to have those strong relationships, connections, that trust, that spirit of cooperation. That's really where the highest value lives, um, not in the fact that you know the best way how to do it, because As you know, that doesn't mean what worked today doesn't work tomorrow, and what works tomorrow doesn't work next year necessarily.

So got to be very adaptive. Yeah, well, I think we've had a great discussion. I'm really excited to come visit Miami and play some cricket if the opportunity comes. And thank you so much for being on the show and bringing your expertise and sharing all of your knowledge with us.

I really appreciate that. Thanks, Joseph. It's been lovely speaking to you as well. I look forward to our cricket game here in Miami.

Yeah, it'll be a short game, I could imagine. And thanks to our viewers and listeners. Appreciate you guys being here and can't wait to talk to you next week. If you are interested in cricket or licensing, please reach out to Bertus. We have his contact information in the show notes.

I'm sure he'd love to hear from you. And that's a wrap. There's another successful episode of the Fractional C-Suite Retreat. See our show notes and more episodes at FractionalCSuiteRetreat.com. This podcast is sponsored by Your CMO, helping organizations grow, save time and money with better marketing strategy and fractional execution. Visit them at Y-O-R-C-M-O dot com.

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