Output Thinking with John Seiffer

The gold at the end of the rainbow is you get what you want from your company. You get the money that you want, you get the schedule that you want, you get the kind of work that you love to do. If that means the company needs to grow or wants to grow, then great, you get to do that. There's a concept of exiting your company without selling it. And if you systemize it properly, you can have the work being done by other people, still own the company, still make the money as an owner from your investments, but not work there a lot.

Welcome to Peter Lohmann's podcast. I'm thrilled today to introduce John Cypher. He is a published author. And a CEO whisperer of a sort, and I'm excited to get into conversation with him. John, why don't you start by telling us a little bit about your background and sort of what you've been up to recently?

So I've never been called a CEO whisperer before. I've been called a company shrink and a company rabbi, and I sort of go by CEO coach, but I am also mostly a consultant. I got into it. I've always been an entrepreneur my whole life. I had a company and I moved. It was in Texas. And 2 years later, I moved to Connecticut and ran it long distance from there because it didn't make sense to move the company. And I wanted 4 seasons. After that, somebody said, you ought to look into coaching because you'd be great at it. And I said, what's that? It hadn't become a buzzword yet. And so I got into it, helped found the International Coach Federation. Was their fourth president. And I've been coaching business owners ever since. And that's where I've gotten a lot of the stuff, the stories that I put into my book Output Thinking, and the approach that, uh, that I've helped other people do so they could get away from the day-to-day work of their companies, which I know is something that you're, you're good at too. So looking forward to our talk.

Yeah, me too. I'm excited because, uh, yeah, I mean, I'm kind of famous or infamous for taking my month off every year and in reading through your book and chatting with you, this aligns very closely with sort of your, what you preach, so to speak, or how you like to see CEOs start to level up. And one of the first pieces of content I ever saw from you and immediately got me hooked was this thing called the stages of company growth. You put together this really awesome chart and we'll link to it in the show notes if we can. And it talks about the 3 stages of companies.— and what everything looks like in those different stages. I'd love if you could— I know we're trying to sort of explain over audio what a nice graph looks like. But in your own words, would you mind explaining that a little bit? And then I want to kind of dive into that some more.

I got the concept of stages from a book by John Brown about exiting your company. And what he said was, as the company moves through these stages, it's worth more. The first stage is what he called hands-on, head-down owner, and basically a company that depends on the owner for everything, and there's not much wealth outside of the owner. I took that and expanded it based on the work I've done with business owners, focusing on what is the person at the top really doing? And in stage 1, what they're really doing is the customer-facing work. They're doing most of the selling. They're doing most of the production or servicing. They may have employees, but those employees help them do that work. Stage 2, they have people that do that work and are responsible for that work. And the chart has a whole lot of other things about accounting services and energy and other things that change as the company grows. Stage 2 is a big shift because the owner or the person at the top is now focused internally. On making the company better, designing workflows, hiring people, training people, making sure everybody's in the right positions, that kind of thing. And then stage 3 is more what's commonly called now a holdco, where you're looking again outwardly, but you're looking to buy and sell other— buy companies, sell parts of yours. You're becoming a regional or national powerhouse with a brand. And so it's a shift from external to customers, internal to the company, and external again, but focused on the industry at that point.

Yeah. And I want to actually read some of these to really paint a picture because I want to ask you a few questions about it. And for those listening who haven't seen this, which will be almost everyone, I want to at least give them a flavor. So under stage 1, the focus is owner or CEO is focused on making and selling product. And you touched on that. For stage 2, focus: owner or CEO is focused on building the company, others build and sell the product. So this is the classic working in your business versus working on your business. And for stage 3, focus: owner or CEO is focused on building an organization or brand, often by acquiring companies and organic expansion. Okay, so that's focus. Let's talk about people. Under stage 1, employees are directed to the owner. They are they usually do production. Personal effort gets results. Uh, sorry, employees are directed by the owner. Under stage 2, people, managers are hired. Processes are in place to support people's best work. And under stage 3, directors are hired. Some have P&L responsibility. And then under time away, this is relevant to what we were talking about earlier. Stage 1, when the owner's not present, things go haywire. They own a job, not a company. Under stage 2, owners can get away for personal or business reasons and things are fine. Stage 3, no problem. Time away is often required for business reasons. So I think if you're listening to this, you kind of get the point of these 3 stages of company. And to be brutally honest, most of the property management company owners that I meet, or most small business owners in general that I meet and chat with, are actually in stage 1. And some of them may have started to cross over in different areas to that stage 2. So as I, as I looked at this chart and reflected on it, I realized that there's 2 transformations represented by the 3 stages, right? If we assume everyone starts in stage 1, there's a transformation from stage 1 to stage 2, and then there's another transformation from stage 2 to stage 3. So that actually is a little bit, um, reassuring. Even though there's 3 stages, there's only 2 transformations required. I'd love to hear you talk first about what are the things that need to transform in order for a business and a business owner to move from stage 1 to stage 2?

I think that's the hardest transformation because you're used to getting, getting results immediately from working with customers. And you're used to the energy and the excitement that comes from that.. And then when you move to stage 2, you have to get those results through other people. And that's more, that's more frustrating for a lot of people. It requires the change from what I call the grandmother in the kitchen who has great food but doesn't follow a recipe to systemizing things. Melissa Withers called it moving your company from people to process. And you have to be able to get those processes and that experience and that wisdom out of people's heads and into systems that other people can replicate. And entrepreneurs, often people, especially people who start a company, they tend to be very intuitive, very quick, but not necessarily procedural. And so that's a huge shift. And it's one of the reasons that people stay small. Until I moved downtown to this high-rise condo that I was telling you about. I had a 120-year-old house, so I had lots of contractors come in at different times and do stuff. Many of them didn't have websites. And I said, well, why don't you have a website? And they said, well, I don't want any more business. I've got a small crew. We do a lot of work. I get to take a vacation once in a while. Basically, they would shut down when, when they were taking a vacation, but they were happy with that and they didn't want the hassles and the shift of moving into stage 2. Stage 3, I think, is an easier transition because you have now built an organization that is working without you. And then you can decide, do I want to take that extra time and build the company? Do I want to open other companies? Do I want to just take time off, do philanthropy, politics, whatever it is? If you want to grow into a stage 3 company, then you probably are out there looking at the industry and different markets you can get into. Maybe other companies you can buy, tuck-ins or acquisitions, things like that.

Yeah. And a couple of thoughts on this. The first is I love the idea that you were talking about the contractors. I love the idea that some folks are in stage 1 and they're there on purpose and they want to stay there. And I actually have a dream or sort of a fantasy of when I eventually retire, I don't know if I ever will, but if I ever did, I would probably start a wood window restoration business. This is something I had a little experience with a few years ago with my own 120-year-old house. I would start a wood window restoration business and I would stay in stage 1 forever. I would never bring on a big team. I wouldn't raise money. I wouldn't expand. I wouldn't, you know, upgrade my workshop to a bigger workshop. I would just keep it super small, super simple, just dealing directly with customers. There's something like almost, I don't know, it's like a throwback to an earlier age or something.

There's something great about something you do physically, you know? And so you should look up— I can't remember this guy's name, but there's a guy— must have been 20 years ago— did PBS stories on woodworking with old-fashioned tools.

Oh, I know who you're talking about. Shoot, I can't remember his name.

But there's an episode that he has of this one tool that made window frames and it cut the mullions and it cut the angles and it did the whole thing in different parts of the same tool. It was awesome. Yeah, you should, you should make one of those and retire. Just sit there making windows. Yeah. I've had clients who, when we get to this point and I explain this difference to them, they say, you know, I really want to stay. At a stage 1 company. My advice typically, you know, without knowing the details obviously, for people who want that is first of all, get really, really good at what you do and then charge a lot of money for it. Charge at the high end of the market because everybody wants good work, but not everybody wants to pay for it. But if you do good work, you can afford to work for only those people that are happy to pay for it. And then go from there. You'll probably need to hire some people to support you, or maybe even contractors or outsourcing for stuff like bookkeeping and maybe marketing and that kind of stuff. But it's certainly a way to make a decent, sometimes more than a decent amount of money, sometimes actually a pretty good amount of money. You just don't have the wealth in your business, but you can make more than you need to live on and sock that wealth away in a nest egg.

Yeah. And in some ways that's kind of what I see you doing right now, John, with, with one-to-one coaching and yeah.

Yeah. I'm retired mostly. And so I, but I don't have a boat and I don't play golf. So I keep doing this stuff and people, you know, I'm not building a coaching company. I'm building a practice and I, I just love working with business owners. So that's what keeps me going.

And I love that you're super clear on that, right? You're not feeling frustrated that it's not growing and you're not getting more calls. You're like, no, this is kind of my thing. I like doing it. If I get more calls one week than the other, great. If not, no big deal. I'll just go, uh, watch a video on PBS about Windows or something. I mean, it doesn't like, it's, you're, you're not, um, bothered by it or, or maybe you're not even, I don't know if I'm explaining that very well, but no, I'm not bothered by it.

And, and I have had companies in the past that have been, uh, sign stage 2 companies that have had been significant wealth producers and I've got a nest egg and my wife and I love to travel, so I don't wanna work too hard and, uh, You know, it's a great place to be. I, you know, I, it's fun.

So for folks who are in stage 1 and they're trying to move to stage 2, they're not in stage 1 on purpose. There's a couple things I see holding folks back here. There's a skill component, right? You need to, you need to develop the skills of delegation and you need to develop the skills of how to hire well and things like that. So I want to set that aside for a moment because Those are things that you can read about, you can learn about, you can listen to a million podcasts talking about that. What I want to talk about though, and get your perspective on, is the mindset shift that has to happen here. And I want to be a little specific. There's a, there's a way of being that I see a lot of property management business owners have, and it goes something like this: if you want something done right, you got to do it yourself. Right? That is, that sort of embodies a lot of the approach here. Well, if I hire people and they mess it up, then it's, I might as well have just not hired them in the first place. It's too much work. And they're in, and sort of going along with that is this idea that if I'm the one making the money, making the most money, I should be the one working the hardest, right? I mean, that only seems fair. So how would you, how would you deal with some of those objections or mindsets?

Yeah, first of all, I like to start, and I do this with my clients, to say, what do you want from your company? If your company was a genie and you asked it for wishes, what would you ask for? So everybody wants money. Most people want more money. Most people want time off, actually. Most people want work that they love. And then I've come up with about 20 other things that are not so universal. Some people want to be famous. Some people want to leave a legacy or have a mission or live in a different place, whatever. There's a a lot of different things. So, start with what you want from the company. And then we build the company around that. The biggest mindset change is that, is to separate who you are from what the company, who the company is and what the company needs. And the company needs certain things, but it doesn't need all of them from you. It needs sales. It needs customers. It needs to be able to provide customers what they want.. It needs bookkeeping, it needs paying taxes, it needs marketing, it needs all that stuff. If you grow the company or if you take over a company when it's small, you are doing all that stuff, but the company needs it, but it doesn't have to need it from you. Now then you have to say, well, you, the, you address the question of nobody can do it as good as I can. First of all, that's not true. There are lots of people in lots of other companies that are doing lots of things as good or better than you. You know, there's probably people a lot stupider than you that are running good companies. So it doesn't have to be you.

Did you ever hear the joke about the father who's talking to his son? Or the father who, yeah, he's talking to his son and the son says, Dad, I've come to realize that I'm not that smart. You know, my grades aren't very good and I didn't do very well on the SATs. I mean, what's in store for me in the future? And the dad says, well, that's okay, son, you can always go into real estate. The real estate guys are laughing because they know that all the richest people and the dumbest people are in real estate. And you don't have to be a genius to make a lot of money in real estate.

Yeah, there's a lot of people dumber than you that are doing okay. So the trick is to think about what you do and the outputs that it produces. And that goes back to what I wrote about in my book. It's, it's thinking about the outputs that the company needs done or needs to have done, and then work backwards and say, how can I get somebody to do those? And who's the best person to do those? And if you have tacit knowledge, if you have intuitive sense about how to do that, how can you take that information and put it into a system? It's like taking grandma's work and putting it into a recipe. Now somebody else can make Thanksgiving dinner or can make part of Thanksgiving dinner. And she doesn't have to do the whole thing. And really those, those, the outputs of those systems are very similar at the highest level across all companies. You have to sell, you have to make something or, or some service that people want to buy. You have to do the bookkeeping, track the money. You have to make information available to people. All kinds of things like that that I cover in the book, Output Thinking, but you don't have to do it all. And in some cases, you will be able to find people who can do it better than you. In some cases, you can break the system down into subsystems and other people can do parts of it, and then you can do the stuff that only you can do with your experience. So that's called everybody works at the top of their game.

Got it. And we're going to dive into, um, thinking about business as a system and the outputs and the inputs. Uh, this is right up my alley as a former control systems engineer where I was literally designing code to modify outputs, which would then modify the inputs, right? It's a closed loop system. And that's, that's actually how I think about business. And I think is part of the reason that my approach to building a property management business was a little different than most of my peers. Even going back 10 years when I started, I was really bringing that systems engineering thought process to how can I make this, how can I make this business function without my effort constantly being required? So we're going to come back and get into some more detail there, but I wanted to jump to another topic. You've got a great concept called CEO time. And I'd like to hear, what is CEO time?

And after that, I've got a few follow-up questions. Sure. CEO time is the time that you spend producing the outputs that are typical of a CEO. It makes the distinction between the job title and the output. Most companies of under, you know, 300, 400 people, the CEO is not a full-time job actually. The outputs that a CEO needs to produce don't require 40 hours a week. So, those people spend time doing other things. They do some sales, they do some hiring, they do some production even. The CEO outputs are the strategy, the plans, the workflows, basically what you said before, working on the company.. And you need to take time away from your day-to-day work to do those. I recommend you start with a couple hours a week. Block it off in your calendar. Have it be the same time every week. Maybe it's, you know, Monday afternoon, Friday morning, sometimes Sunday evening. And the other thing I recommend is get away from your normal office. Don't do it where you normally do your work. If it's— even if you work at home, do it in a different part of the house. Maybe go to a coffee shop, maybe go to a library, go to a park, take a notebook and write down your thoughts, write down your ideas, turn off your phone. You're not doing email, you're not making calls, and just think about how should the business work. The only rule about what to write down is you should put date, a date on every entry. That way, when you look back, you can go, oh yeah, that was that day. And that will help you. But it's the kind of stuff that's important, but it's not urgent. And that's a shift from people who are used to being in there day to day, fighting all the fires, doing all the heroic work. A well-run company doesn't need heroes most of the time. And you want to get that information out of your head and into a process that you can then put to other people. And that's what you can do in your CEO time.

You know, it strikes me that most people are smarter than they give themselves credit for, real estate joke earlier notwithstanding. When I chat with folks and I really start to ask them questions about, you know, what are you struggling with? How have you thought about solving it? What do you think needs to happen next in your business? My experience is that people know they're actually quite intuitive and they do a lot of reading and they do a lot of educating themselves about business and their company and what needs to be happening. And, but what, what, what goes on is that one, they don't set aside the time to really crystallize these ideas. Into concrete action items, uh, and two, they lack the confidence to forge ahead with their plans, even if they did have the time to do that. And actually, I've done a little bit of coaching, not maybe less than 1% of what you have, but even in the little bit that I've done, I find that my role is one of, um, almost like a hype man. Like I'm just giving people confidence to do what they know they need to do. I'm not giving them any secret answers. And so the CEO time idea, I love it because it forces people to get away and gives them time to crystallize and distill what they already know. They've, you know, if you're listening to this, you've listened to enough podcasts, you've read enough books, you've gone to enough conferences, you know what needs to happen, or your brain does. And if you give it time, those things will surface for you. And let this be the encouragement and confidence that you need to act on those plans. Plans. Um, so yeah, CEO time. This is something I've been doing for years. I didn't have a name for it, but I would literally go to libraries just like you said. I would sit and write things out. And when I would come out of there, inevitably I would have a full-page list of things that you, just like you were saying, important but not urgent. I just kind of slipped my mind. And it is fun to go back and look through some of those pages from many years ago. It's amazing what, you know, you forget how far you've come until you go back and look at a page from 2 years ago and realize literally everything on that list has been done and your business has been taken to the next level.

Yeah, and one of the great things that a coach does for somebody is helps them take those ideas and put them into action. Coaching is about action. And so, you know, at the end of every coaching call, I say, what are your action items from today? And then when should we talk again based on when you need to get those done? But it's really about holding people accountable to doing the things that they know they can do. When you're away from the day-to-day stuff, that's where those ideas can come up. Then you get back into the day-to-day stuff and some of the urgency, some of the emergencies pop up and sometimes you forget. And so you should take those ideas and put them in actually in a calendar. And say, I'm going to make an appointment with myself to do this or to think about this.

And that's what CEO time is. Now, what would you say if somebody, they like the idea here, but they just, they feel guilty getting away? Like, let's say that they set aside 3 hours on a Thursday afternoon. The idea of driving away from the business and going and sitting in a coffee shop and thinking deep thoughts and sipping on a latte, to them, that just sounds ridiculous, like, well, everyone else is working. What are they going to think? What are they going to say? How is that fair? Like, how would you address that?

So first of all, it is working. It's a different kind of work. It's not urgent work, but it's important work. It's planning. It's giving direction for the company so that when the other people do their work, they get more results. There's a picture I show in some of my talks about a coxswain in a crew boat. So there's a little guy facing the opposite direction of all these 6 or 7 big guys who are rowing the boat. And he's not rowing. He's actually facing the other direction and he's just telling them when to do it. And he's actually directing the boat. He's the only one facing forward.

Everybody else is facing backwards.

Gee, what a lazy bum. Yeah, right. And, but that's why they pick small guys for that job because they don't weigh as much. But he's the— he's doing work. It's just a different kind of work. And your company needs CEO time work. It needs that planning and that direction if you want to grow. Yeah.

And imagine if that guy turned around and grabbed an oar, right? What would happen?

I mean, the boat—

nobody know where they were going. They were going— it would really throw off the cadence.

And yeah. Yeah. And there's a great quote in a book called Titan by, about Rockefeller. And there's not a lot of stuff that Rockefeller did that I emulate, but this one quote is, he said, this is, his admonition was for his new employees. He said, as soon as you can, teach another guy to do what you do, then sit back, put your feet on the desk and think about how to make us money. Love it. So yeah, it's definitely a need if you want to grow.

Yeah, well, some of us are naturally lazy like myself, so I have no problem sneaking away to a coffee shop and sipping on a latte. But I did want to give voice to those, uh, who have maybe a little more work ethic than myself.

So I would, I would encourage them to think about the fact that they are actually working. It's just a different kind of work and a different cadence of work. And You know, you mentioned before your ability to think about things as an engineer. And I kind of— I'm not an engineer, but I fell into that way of thinking as well. That's hard for a lot of people to do. And your company also needs that, and it needs you to direct that. You don't have to become the engineer of your company, but you should find— if you can't do that, you should find people either in the company or consultants or coaches who can help you do that.

Sure.

All right.

So speaking of work, you've got a great quote that I pulled off of, I forget where, I was listening to you somewhere and you said, "Management is getting work done through other people." And I love the simplicity of that line and how it distills so much about what it takes to transform your business to a stage 2 or stage 3 company into a few words. So The skill of getting work done through other people, it strikes me, is quite different than doing the work yourself. Right? It's, it's the, and we ran into this back when I was an engineer, we would see this a lot where the best engineers would end up getting promoted into management and they made the worst managers. They had not the first idea about how to manage a group of people and get work done through others. So for someone who recognizes that that's a skill they want to develop, What are some resources or how can they start thinking about getting work done through other people?

So, the first thing to do is to define the output of the work. How do you define good work? And that's relatively easy with physical work. If you hired me to paint this room, we would both know when I started, when I was half done, when I was finished. That would be obvious. It's harder to do with knowledge work. And that's where one of the hard jobs of management is to define those outputs properly so that there's agreement with what a good job looks like. If you hired me to do market research on one of my competitors, for example, if that's all you said, I don't know what that means. Do you want me to do a 10-minute Google search and that's it? Do you want me to hire McKinsey for a quarter million dollars and do secret shopper stuff? I mean, you know, What do you mean by that? You know, you have an assumption of what that looks like. Put that into definable words. If you were hiring a contractor, in the contract, you put scope of work. That's the output. So, the first is to define that. And then the second is to say, okay, what does somebody need to do that work well? They need time, they need tools, they need training. It's your job as a manager to provide that so that that person can do their best work. And then the other piece is you need to align the work that they do with the overall goals of the company so that somebody isn't doing work that ends up being wasted. And as a manager, you have often a different perspective on the whole company and where that's going that other people don't have.. And that's part of your job too. So those 3 things will help you become a better manager.

Got it. So define sort of the end state or define what the work is, provide the resources and tools and training so that the person is well equipped to do it, and then align their work with the overall goals of the organization. Did I capture that right? Yeah, yeah, perfect. There's a couple things that came up for me there. One is, I think as important as aligning their work with the goals of the organization is also telling them how their work matters to the overall organization. I find that people who are just executing on their jobs day in and day out can lose sight or lose focus, or maybe they never knew how it connects to the larger work that the organization is doing and the importance of what they're doing. So for example, in property management, you may have someone who is sort of in the back office doing accounting somewhere, processing rent payments and closing out the books at the end of every month. And for them, it just seems like a kind of a mindless exercise that no one's ever going to see. And you as a manager need to step in and remind them, hey, I need to let you know something. At the heart of property management is accounting. Literally, we are managing the books for 300 individual properties, each of which is basically a micro-business. And the owners of those businesses have hired us to do this right. And they're looking at these numbers every month. There's actually nothing more important to a property owner than clean books and regular disbursements. So the work you're doing is actually the foundation of everything that happens in our business, right? So you get the idea, right? Building them up and reminding them how the work that they're doing is connecting.

So now, you're actually transitioning into leadership versus management. Management is that disbursement of the work and getting it done through others. Leadership is having a vision of where we're going and explaining to everybody what that vision is and what their part in that vision is. Gallup organization did a great study on leadership, and they found there's leaders in every personality that you can find. There's boring leaders, charismatic leaders, introverts, extroverts, all that kind of stuff. But they all had these two things in common. They had a vision of where we were going, and they kept repeating that vision over and over and over again and making it make sense to people. It's been said that in the 1960s, when NASA was working to put a person on the moon, that even the janitors that worked for them felt like they were helping put a person on the moon. While they're cleaning toilets. That's the whole thing of leadership. And a lot of it is what you just said, explaining why that work fits, how that work fits into other stuff and why we're doing it and why it's important. This comes up a lot with deadlines. I need you to have that thing out by Friday afternoon. Okay. If you don't say why it needs to be done by Friday afternoon, then somebody's just gonna feel like they're being bossed around. But if you say, well, I need it by Friday afternoon so that next week we can do X, Y, Z so that it can affect this person or that person. And you know, And ultimately, all of those reasons go back to affecting a customer somehow. And that's why we're all in business. One of the things that people don't often understand is that the customers pay all of our paychecks. And no matter who signs them, of course, nobody signs paychecks anymore. But, you know, it's the customer. If we don't keep customers happy, none of us have jobs.

Yeah, that's a great reminder. So we've talked a lot about what you should do. You should do this, you should do CEO time, you should move your business from this to this. I want to talk now about some of the mistakes that you've seen folks make. What are some of the common errors or problems that come up over and over? I want to be specific here. Let's, let's discuss business owners who are trying to, who are trying to take their business from, say, $250,000 a year in revenue to over $1 million. So that specific phase of the journey, what are some of the common errors or mindsets that are holding people back as they try and make that, that, that journey?

One of the biggest is not to understand the bookkeeping in their business, not to understand the, the insights that are in their financial. Even if they had— they pay their bills on time and do all that stuff, there's insights there that they don't get. And if their books aren't properly organized, then they won't get those insights. So that's the first thing. The second thing is, I would say, detach emotionally as much as you can. One of the biggest complaints that I find is people get frustrated with their employees. Well, guess what? Your employees are probably frustrated with you too. But try to detach from what you feel to what you should do. Often your hunches, your feelings, that's a good idea of where you should look for problems, but that's not always a good idea of what you should do about those problems. So detach emotionally. And one of the ways to do that is just name your emotions. Are you frustrated? Are you angry? Are you happy? Are you excited? Those are all slightly different nuances. Write it out. It doesn't have to be a big journal entry or anything, but just say, "I'm feeling this about this." Now, what are you going to do about it? That might be something different. And that's where your brain kicks into play. It's like Daniel Kahneman's book, Thinking Fast and Slow. And then, moving from that stage, what you said, say a quarter million dollars to a million, you may have to make investments in people, or in systems that might tend to slow you down at first so that you can grow faster. And you see a lot of companies get to this point where they call it the valley of death, where your overhead is higher than your revenue. If you just take it a step at a time, you can fall into that valley and not know where the end is. If you do the financial analysis or get somebody to help you do the financial analysis, you'll see the end of that tunnel. And you can decide, do I want to go there or not? How many people do I need to bring on? Maybe you bring on one person, things aren't as profitable, but you might have to bring on three. Well, how long will that take and how much are you willing to invest to see where the end of that valley is?

Love that. Some ideas. Yeah, those are, those are some really great thoughts. You mentioned first bookkeeping and two thoughts came up for me there. One, Profit Coach is a great group in our industry. That has helped countless property management business owners gain clarity in their financials, including us. We had a great experience there. Two, there was a shift that I made early on, you know, when I first started my business and, you know, the end of that first half year of operating came and I had to do my taxes. I was like, oh my goodness, I got to go back and like reconcile all these accounts and fill out all these entries and do all this stuff in QuickBooks and send I'll send it all off to the government and then send it to my accountant. They'll tell me how much I owe in taxes. So in my mind, bookkeeping was very much tied up in the idea of paying taxes. And I thought, oh, the reason QuickBooks exists and the reason we have to do all this accounting is to figure out how much we owe in taxes. To me, that was one and the same. It was like, that's why we do it. If it wasn't for that, we wouldn't have to do any of this work. My goodness, wouldn't that be great? And as I got a little older and matured in my business knowledge, I came to realize that, of course, we have to pay taxes, but that's not why we do bookkeeping. We do bookkeeping and accounting to figure out what's going on in our company, who— what customers are making us the most money, where's our capital going, how does the cash flow conversion cycle look in my line of work, what would it look like if we hired on— like you were saying, what would it look like if we hired on 2 high-level executives to help us break through this plateau that we're in, like how many more units under management would it take for us to be able to pay for that and come out the other side? All of that starts to become possible when you have a deep financial insight into your company, and all that starts with clean books. It's not a thing just to do for the government for taxes. There's, there's actually incredible value to the data that's, that's kind of locked up in a bunch of boring looking spreadsheets.

Yeah. And that's, that actually starts with proper chart of accounts. And one of my gripes with QuickBooks is that people do exactly what you said. They start doing it because they have to pay taxes. Almost any chart of accounts will work for paying taxes, but most of the chart of accounts won't work for giving you the analysis that you were talking about. And so you need to have somebody, if you can't do it yourself, help you set up a chart of accounts that gets you the information that you need. One of the things you mentioned that's relevant to property management is this idea of unit economics. Each unit, which is a typical transaction—

which conveniently for us is actually a unit, like a residential unit.

Exactly. Yeah, that really works out. The terminology is great. And each of those units has to pay two things. It has to pay for the cost of servicing that unit, which in accounting terms is variable costs. Those are the costs that will go up by a factor of 10 if your business increased by a factor of 10. Then there should be some leftover, and that should cover— should go to your fixed costs, which are things that don't necessarily grow by that same factor of 10. You can grow by a factor of 10 and your rent not increase at all in some businesses. So that's the fixed cost. So you need to understand where those numbers go. And unit economics is a great one for that. And your chart of accounts has to be set up properly for that. Yeah.

And I can't go a moment longer without mentioning the NARPM accounting standard, NAS, which is a standard set of accounts, chart of accounts for residential property management companies in the United States. It was developed by NARPM, our trade organization, and Profit Coach together released a few years ago and has been a huge boon to business owners who are looking to get more insight from their data. This episode is not sponsored by Profit Coach, at least I don't think it is. I haven't laid out the sponsors for the, for the season 4 yet, but, um, that is exactly what you were talking about, John. We've got metrics that have been defined things like revenue per unit and other standardized metrics where you can actually look at others in, others in our space in property management and say, oh, why is their revenue per door this? Here's what the benchmark is. Here's what mine is. And it really gives you a diagnosis to figure out what do I need to be focusing on if I'm not profitable in the way I want to be. A couple more topics I want to touch on today. One is coaching. So you're a coach, you're, you mentioned you're retired, but you do some coaching. You have a long history of being a business coach and even helped further the industry as a whole through your work. Uh, it's been my experience that most business owners have never worked with a coach and they don't really know what it is. They don't like, why would they hire a coach? What would an engagement look like? How much would it cost? Uh, what are some things they should look for in a coach? I'd love to hear with your vast experience in this area, maybe to help shed some light on this.

Yeah, coaching is a very vague word and it can run the gamut from almost therapy to almost consulting. And so you really want to find a coach that helps you do what you need. My work is primarily, I say it's probably about half and half coaching and consulting. My working definition is A consultant helps you with expertise that you don't have in-house. They bring insight and knowledge that you don't have. And a coach helps you maximize the expertise that you do have. And that's why in sports, individual practitioners, tennis people, swimmers, gymnastics, they all have coaches, individually coaches, not for the team, help them maximize their expertise. So, you want to find somebody that helps you do what they— what you want them to do and what you need at that particular point. My work is working with business owners who are either moving into stage 2 or in the early parts of stage 2 and want to grow into a bigger stage 2 company. And it's around systemizing them. Coaches, you usually talk over the phone or Zoom now, you know, a couple times a month.

My—

some of them, it's a set schedule. Mine is whenever we need to talk. So if you're going through something intense, maybe we talk every couple of days. When it's slack time, it's maybe every few weeks, things like that.

I don't know if that answers the question. And like, so when someone's looking to hire a business coach, do they necessarily need to look for somebody who has expertise in their area?

Like if I'm a property management business owner, does my coach need to have property management experience? Not necessarily. If you, if you are the expert in property management, you don't need them for that. But you might need them for how to be a better manager, or how to hire better, or how to, how to interface with your accounting people if you don't have a good grasp of your numbers. And so they should have some experience in business, and in business in general, and they should learn about your business. And, uh, there should be a chemistry. You should like working with them. They should you should like their style. Some coaches are more tell you what to do. Some are more like just asking questions. How's that gonna work? What are you gonna do next? They should all get you into action. And I like to have— I give a free coaching session because I don't wanna work with somebody that I don't feel like there's that chemistry there. Many coaches do that as well. So you could try that. Ask around, ask other people who have hired coaches. International Coach Federation, I think, has a website where you can search for people.

You can— Great. Things like that. And what would be 1 or 2 signs that the engagement is not a success or is not going in a direction that's going to be fruitful?

In my experience, it's been people don't want to take what we talk about and actually do something about it. So we end up talking about the same thing time after time after time after time. And it's like, okay, you're going to do this or we're going to take it off the table. You know, and if there's a feeling of— sometimes that brings on shame. People know what they need to do. Somebody's telling them they need to do it. I would never hire a diet coach because I need to lose weight, but I'm not— I don't want to. It's not that I don't know what to do. I don't want somebody telling me I need to know what to do because I'm not going to do it. When I'm ready to do it, then I'm gonna do it.

Um, when the student is ready, the master appears, right? Something like that. Yeah. Okay, love it. All right, thanks for that. Okay, so I want to, I want to take the last, uh, 10 or 15 minutes or so and talk about, um, systems, you know. So I, I love systems, right? Systems and processes, near and dear to my heart. And I didn't want to start with it because I know we'd end up talking for the whole time about it. So you actually wrote a book about systems and how to apply that in a business. Love to have you briefly describe what's the book about, and then we're going to get into some more of the details. Okay.

Well, the book is called Output Thinking, and it's because the output of a system is the reason you do the system in the first place. A company needs outputs to be produced. And those, those outputs can be produced in one of two ways, either with really good people who just have all this knowledge, this tacit knowledge and this experience, or with systems. And the systems are repeatable and scalable. And so it's easier to grow with systems and cheaper than it is to find really good people that have all the kind of experience that you're looking for and are willing to work for you. And not use that to go out on their own. This is, you know, what I've said before, the grandmother in the kitchen, great food, no recipe, that's the expert. A system is what you build a restaurant on. These are the people that prep the food. These are the people, the person that designs the menu. These are the people that cook the food. And the systems itself, there's 4 parts to it. There's the trigger, which is what starts it. There's the input, which is what you need to do the work on. There's the transformation that changes the input into the output, and the output is the reason you do it in the first place. So you actually start with the output and say, what are the outputs that we need? And then back that into what are the pieces that go into producing that? So the simplest example is payroll. Payroll is triggered by a date, usually every other Thursday or whatever day you do payroll. There are other triggers. Some triggers are an event— a customer places an order, that's a trigger. Uh, some, some things are a change in status— we get inventory down to a certain level, that's a trigger. So that triggers, um, the, the system. It can be on a frequency— monthly, quarterly, weekly, whatever. Then the input is all the stuff we need to do the work. So payroll, you need people's times, their salaries, all those numbers. You can't start without that. There's no point in starting your payroll unless you have all that stuff. Then the transformation or the calculations usually done by the payroll company to figure out where the money goes. And the output is money goes to people, money goes to the taxes, forms go to management, forms go to the tax people. Those are the outputs. So, each of the systems has those 4 parts to it. The beauty comes when you can break those systems down into subsystems. And again, using payroll, the transformation piece is usually done by somebody else. So, it's usually done by a payroll company. Very few people do their own payroll calculations. And so, that's a subsystem that you have now outsourced part of. And when you can do that, then you can hire people who are really good at that particular piece of it, and they're also usually cheaper. And then that's how that system can subdivide and grow your company faster.

Got it, okay. So this is all intuitive to me, and I had started on this journey just 'cause I'm a nerdy engineer in any case. But for someone who, who gets it in concept, let's say they read your book or they listen to this podcast or they watch some of your other videos and they're like, okay, I'm in, I see the value here. I see the value of having a documented business that's driven by outputs where everything has a trigger. Um, how do I get started? Cause it seems really overwhelming and like, what's the way in on how to get going with this?

The simplest ones to start with are actually accounting systems. So payroll, accounts payable, accounts receivable. The reason those are simple is because they're very concrete. The outputs are very definitive. The bill got paid or it didn't get paid. The invoice, you know, money came in or it didn't come in. And so break those down into those 4 parts. And then once you get better at doing that, then you can move on to some other things like marketing. Well, what is the output of marketing? Generally, it's defined as a lead. What do we mean by a lead? How do we define a good lead? And then what's the trigger that says, okay, we need to get more leads? What's the input that we need to start with? It's a definition of who we're going after. It's a definition of our message. It's a definition of our channels. And then what's the transformation? Is to put out so many social media posts a week or go to so many trade shows or reach out this way or that way. And then the output again is the lead. So you start with the output, define that, work backwards to say, what does it take me to do that? When you're looking at your own process and trying to systemize it, one of the things that happens is you run into a place where you have to make a judgment. So let's just take accounts payable, for example. Normally you just pay the bills. There's some, you know, schedule that you have. There are times when you have to decide which bills you're going to pay this week. Money may be tight. You may be waiting on more money to come in. There may be vendors that you want to pay quickly because it's good for the relationship. There may be others you want to slow down because it's good for cash flow. There's a judgment there. When you see yourself making a judgment, that's an indication that sometimes that's a subsystem. So with accounts payable, one of the subsystems would be to approve each invoice for pays, for being paid. Then the next piece is, oh, well, then you just crank it out to pay it. It's actually good to separate those for fraud reasons in accounting or in bookkeeping, but when there's that judgment, then you go, oh, maybe I can train somebody else to do that part of it. And if I can't train somebody to do the judgment piece, then I have to do that. But then that's all I can do. I can transfer the other stuff to somebody else.

Got it. And what I'm hearing here is a lot of documentation and sort of breaking down my business into component parts. Where would this go or where would this live? This sounds like something software can help with, and, and longtime listeners are, are screaming the answer that they know I want to give here, but I want to hear what you have to say.

So when I first started writing this stuff down in my first company, I did it in a Word document because there was no Notion, and that's what people are saying. Um, it was this one long Word document. It and the reason I kept it in one document was because I could search and I didn't have to remember, did I put that under this or under that or into this other thing? So it needs to be searchable. Notion is a great one for people that don't have anything else. There are companies that are totally Microsoft shop. They use Outlook, they use all the Microsoft 365 tools, and I— and Microsoft has just introduced something called Loop. That is—

looks—

I'm not that familiar with it, but it looks similar to Notion. If you're 100% Microsoft shop, I would look into that. So those are the two things, but it needs to be one place that's easy to find, easy to search, and easy to change.

So, so as we start to document our, our business in this way, we're eventually going to get to the point where The whole company is fairly well documented. We have triggers, we have end states, we have transformations and everything you've been describing. And let's paint a picture. What then becomes possible? Like, what's the golden— what's the treasure at the end of the rainbow here that maybe could serve as some inspiration and motivation for people?

The gold at the end of the rainbow is you get what you want from your company. You get the money that you want, you get the schedule that you want, you get the kind of work that you love to do, and then you get to— if that means the company needs to grow or wants to grow, then great, you get to do that. If it means you get to go make windows, then great, you get to go make windows. There's a concept of exiting your company without selling it. And if you systemize it properly, you can have the work being done by other people, still own the company, still make the money as an owner from your investments, but not work there a lot. Now, it's not gonna be 100% free of your time and mental burden, I guess is the right word, but it can be that way a lot. When I moved 1,500 miles away from my company, I got to the point where I thought maybe I should sell this thing. And I was working so little at it that when I looked at it and found a guy who could sell companies, he said, you probably get 3 times EBITDA. And I thought, well, that doesn't make any sense because in 3 years I'll have the company and the money and I'm not working that hard. So I never did. That's what's at the end of the rainbow is you get what you want from your company.

This is, this has been amazing. I appreciate you coming on the show today. If people want to learn more about you and your book and your coaching, where can they do that?

So I'm @BetterCEO on Twitter. I have a Substack, johncypher.substack.com, but the best place to go where you can see all this other stuff too is ceobootcamp.com, and there's a link there if you want to have a free coaching session. And you can learn more about my background and what I do.

Got it.

Thanks so much, John. Appreciate it.

Thanks for having me. Take care. If you like the show and want to get connected to the community, you can follow me on Twitter @PSLohmann and subscribe to my email newsletter on my website, peterlohmann.com. I try to share as much valuable property management content as I can on a regular basis. Thanks again for listening. And have a great week.