Business Innovators Radio - Ep. #37 – Alan Miltz – The Big Success Podcast with Brad Sugars

Starting point is 00:00:00 Welcome to the Big Success Podcast, cutting edge conversations on business and personal success, as well as how to level up. Here's your host, number one business coach in the world, Brad Sugar's. All right, today on the Big Success podcast, you know, some of our podcasts, it's like, wow, it's amazing. Others, it's like, dang, I needed to learn that. This is one where you need to learn this stuff. Growing profitability, becoming successful in business. When Alan Miltz, talks. I mean, this is a guy who has built multiple companies, invested in multiple companies, written massive bestselling books. When it comes to profits and when it comes to cash and it comes to understanding that, his seven levers, and he's going to teach you those in just

Starting point is 00:00:45 a moment, his ability to get his 1% rule and get your bottom line profits up and your cash flow up in the business and get full value for the business. One of the things he does is he talks about and by the way, his software is in like 500 banks. His software is run by companies all. over the world to help run their whole thing. And whether it's a business, a sports team, his philosophy's unsuccessful, change the way you look at things. He's helped hundreds of, well, actually, thousands of companies, he teaches at this. You've got to do two times profit, three times cash, and ten times value.

Starting point is 00:01:18 You're going to learn that today. Alan, Melts is our guest here on the Big Success podcast. All right, Alan, on the Big Success podcast, first thing I ask you is, what is your definition of success or what does success mean to you? Thanks, Brad, and absolutely a privilege to be on your podcast today from beautiful Melbourne, Australia. To me, success is if everyone or every company in the world, whether you small or large, can start to love the numbers. So I've dedicated the last 30 years of my life to convert. the complex into simple by taking off my accounting brain and putting on the brain of storytelling.

Starting point is 00:02:08 Got it. You come, you're in a beautiful place, Las Vegas, and it's about storytelling over there. And my philosophy is the exact same. Every business has got a story. The story belongs to everyone, not just the accountant. So what about you personally? How do you personally define success? Forget business for a moment. I am such a driven person, Brad. I get up very early in the morning. So for me, it's called life balance. Are you balancing your life? So family is number one. And what I say to people, do you know what family stands for?

Starting point is 00:02:55 F-A-M-I-L-Y, father and mother, I love you. So I tell my son every morning, never forget family. So that's number one to me. Number two is obviously my health. So I try to go to the gym most days. And then from a work perspective, I absolutely love what I do. So people say you work and you travel six months of the year. But to me, if I can help change the world and get beautiful,

Starting point is 00:03:28 emails every day of how I'm impacting, that is my success. So family health and definitely how I'm impacting the world. How did that change over your lifetime? Was it always that way? Or as a young man, did you start out different to that? Well, as an emigrant to Australia, so I'm South African. I'm not even sure if my accent is still South Africa. Yeah, it's still enough. So I came here. I came here. I came here. in the late 80s. I was in the fashion industry, so I've got an accounting background

Starting point is 00:04:05 but worked in the fashion industry. And since a young immigrant, I realized that it's the amount of effort you put in every day will be the amount of benefit you will receive. So I had to recreate a life. And Australia has been amazing to me because I've really given it 100% effort every day.

Starting point is 00:04:28 Yeah, yeah. So where do you think that, like that move was where you chose success or do you think success? Like a lot of people choose success when they're very young, some wait till later. Where did success become the choice for you? I came from a family where I had an older brother who was absolutely a genius. Unfortunately, he passed away about 20 years ago of pancreatic cancer. He was a professor at Cambridge. And I was always in his footsteps. He was one year older, the most incredible inspiration for me. And I realized whatever he did, I had to probably work twice as hard. So success is having a person who you can model your life on, an inspiration.

Starting point is 00:05:21 And even in Australia, I've met, and globally I've met some of the most inspirational people. I've had the privilege of modeling the way I actually live my life. Yeah. Yeah. So over the years then, you must have developed like a formula for success or this is how success happens or these things have to be present. or there to be success. What's your formula for how success happens? Repeat, repeat, repeat.

Starting point is 00:05:52 So every single day, you say to yourself, what is the number one thing I need to do for today? And you focus on the number one thing and you repeat, repeat, repeat, but you have disciplines. So the first thing I do when I get out of bed, I make my bed. And I know my day started. I'm not going back to bed.

Starting point is 00:06:11 and it's having these basic routines of discipline. And I'm not a great sleeper because I travel a lot, but I've got the same routines wherever I go. So habits create success, I think. Now, did you, I mean, where did you learn that? Is that something that you just said, yep, that's the way it is, or is there a process to learning that?

Starting point is 00:06:35 And is there, what are some of the other habits that make you successful? also your environment. My father, I remember at 6 o'clock every morning, I had his footsteps past my bedroom, going to work. He loved what he did. He had a ladies' footwear manufacturing plant in South Africa. We employed about a thousand people. And he was so dedicated to what he did and to his family

Starting point is 00:07:01 that he was such an unbelievable icon in my mind. Yeah. And a lot of people have always got a reason why they can't do it. But the people who I've tried to surround myself was that if you see the invisible, you can create the impossible. Hang on. Say that again. If you see the invisible, you can create the impossible. Tell me more about that. A lot of people look at life as a what am I seeing. I look at life as what am I not seeing. So what are the opportunities that you're not actually seeing and you focus on what other people haven't seen? The same thing when I look at a business, everyone's interpreting it one way because they follow a process.

Starting point is 00:07:50 I try and say, what haven't I seen? What are people not seeing? And it really helps you achieve success by trying to focus on almost the impossible. Love it. Well, let's flip it over then. I've always sort of ask people the question of, you know, how do you learn from your failures or even more? How does failure teach success? How does failure teach success?

Starting point is 00:08:19 Brad, I've made so many mistakes in my life through being naive. I've created so many great opportunities which didn't achieve the goal that should have because I was either inexperienced or didn't surround myself with the right minds. And as I'm getting older, the companies or the people who are mentors, so I sit on about 20 boards around the world. And I'm trying to warn people, this is what I learned over my career, don't make the same mistake. Yeah. And one of the biggest mistakes was we had one of the great startups in technology, in banking software. It's one of the biggest banking systems in the world today. and we got so diluted along the way because we kept on raising capital.

Starting point is 00:09:11 If I reversed it, I would have gone slower and maintained the control. Yeah, yeah. You know, sometimes those mistakes that lead us to being the great thing that we have, how do you find that, you know, because every business you've done, Alan, has gotten better and bigger and better and bigger. how have you turned that knowledge into future success? Like, how do you do that? By backing the best people.

Starting point is 00:09:42 So, in other words, when a person or a company meets me, I'll always say, do they have the right people? And if the people are completely wrong, I know I'm going to have an absolute nightmare of a job to assist. So number one is in all the businesses or all the investments that I've got, I make sure I'm surrounded by the best brains who I believe are smarter than me. Love it. Love it. The other interesting thing, once a year, I work at a university in the US, MIT University.

Starting point is 00:10:24 They run a master's program for entrepreneurs. And one of the professional. who spoke once said the attribute number one of a great leader is to listen. And listen and silent have got the same letters. And again, observe when you're sitting in a meeting, you will notice the smartest person in the room probably speaks last. And it's very interesting. It's a great observation. But the best leaders are the best listeners. Got it. Perfect. You're on the first. the big success podcast. I'm Brad Sugars. We'll be back with Alan just a moment. We're going to talk

Starting point is 00:11:06 about loving your numbers and how to make more profit in the business, not just more revenue. Join Brad Sugars' landlord event and you will quickly see why real estate investing has long been the backbone of serious long-term wealth for so many. That said, so many try and fail at creating wealth because they simply don't learn how. Visit Bradshuggers.com and attend this program as a stand-alone or as part of a Brad Sugar's is entrepreneurial university. All right, we're back with Alan and we're going to ask these, well, Alan, there's a saying you have that is revenue is vanity, profit is sanity and cash is king or queen. Explain that one to us a little more.

Starting point is 00:11:44 Yes, every business I'll go into very eloquently describes their revenue, their margin, their profit. and I then ask the next question, you've done well, your revenue, your margins, your profits up, tell me your cash flow. And around the room, I get multiple answers which are always wrong. And one of the biggest issues for me in business is I hate surprises. And cash flow is an absolute blind spot in every business. The accounting profession which I'm part of is amazing.

Starting point is 00:12:26 The more complex we make reporting, the more sophisticated business thinks we are. My philosophy is the opposite. Imagine if everyone understood your story and we taught them the techniques how to make the story better. And the story, the result of your story is your cash, not your profit. Cash is king or queen. So let's go to the seven levers then. Explain to everyone what are the seven levers and how can they use them to get more bottom line profit and cash? So the technique which we came up with at Cashflow Story, there's only seven levers that can improve your profit, your cash and your valuation, financial levers. They're four profit levers.

Starting point is 00:13:18 so price, volume, margins and overheads, and in working capital, your collections, your inventory, or work in progress in a service company, and your payables. So in every transaction, every person in your company should be thinking, how many 1% or one-day changes do I need to make? It's the repetition of these changes over and over that will deliver the company. you've dreamt of. So let's dive into the for-profit drivers then. Take us through each of those and give us what and one or two things we can do in each of

Starting point is 00:13:56 those areas to be more successful. Okay, so about 50% plus of companies I see, you compare the relationship of price to volume. What does a 1% price increase do versus a 1% volume increase due to profit? and cash. And in many companies, price might have a 10 to 20 times more impact than volume. Your salespeople are then going out and saying, let's give a discount to sell more. Everybody needs to understand. So if you think about the seven levers, price and volume are the KPIs of the sales and marketing people. Cost of goods are the KPI of operational people and overheads is everyone. How can everyone not know how they can impact your performance?

Starting point is 00:14:55 So the power of one is such a simple concept. And that's why in the global best selling book scaling up, which I'm a co-author, the power of one became the heart of the cash section. Because these are the levers that every person can understand. Well, hang on. Let's go back then. Teach people that one percent. power of one rule. I think that's an important thing to focus in on. Yes, and every single business, the first thing I do is I run a, what I call a masterclass on finance, but using the concept of simplicity. I then say the DNA of your company's the power of one. So imagine you've trained the people and then you put the seven levers up on a whiteboard

Starting point is 00:15:45 and you have a meeting with sales, marketing, operations, finance, and lever by lever you workshop, where can we put prices up? And then you rank from most to least sensitive. And you go through lever by lever and then you choose the top six or seven ideas. And you repeat this over and over again on a daily, monthly, quarterly basis. You will not believe the turnaround in your business. you'll have a completely different business. And that 1% per time, I think it's really important, Alan, because a lot of people seem to think you've got to get 100% difference or a 50% difference, but you go through in detail how 1% can make such a massive difference.

Starting point is 00:16:32 How did you, did you stumble across that or is it just a, what's your thinking there? How did we come to that thinking? So I'm a co-founder of a company called Cashflow Story. We had, so cash flow story is aimed at the storytelling of the business. What do the numbers mean and how do you improve it? It's all about improvement. And our philosophy is about simplicity. The numbers belong to everyone.

Starting point is 00:17:03 And then we thought, how can we create a concept in the most simple way that would drive profit, cash and valuation uplift. And after many years, I can promise you tens of thousands of hours, we created the power of one concept. I can teach the most non-financially literate person to understand the power of one and to say, I get it. My role is critical in improving profit, cash and value. I can see what I need to do. So let's talk about that whole value thing, the value of a company. First of all, why don't business owners focus on the value of their company? Why are they so focused on revenue and profits?

Starting point is 00:17:55 Because revenue is vanity, profit is sanity, cash is king. That's the fundamental. As CEOs, we're typically non-financial. Your management team is typically non-financial. Everyone understands the concepts of your profit, revenue margins, profit, and interpret it the same way. So because of the way we've been educated, we focus on simplicity being profit. And Brad, there are four chapters to a financial story. Chapter one is profit.

Starting point is 00:18:34 We all get it. equally important is chapter two your working capital, your collections, your inventory, or work in progress and how you pay your suppliers. The rest of the balance sheet are called chapter three, and this is what your management team cannot control. And I call that your other capital. The result is cash. So what I say to business is your company, your story is like reading a murder mystery.

Starting point is 00:19:09 You read chapter one of a murder mystery, you never know who commits the crime. You guys are reading chapter one profit of your story. You never know what happened to your cash. And you want to understand your business become a four chapter company. You fix the four chapters by the power of one. So hang on, we got to chapter three being the rest of the balance sheet, which is chapter four. The result, your cash flow. But let's go back to the value of a business.

Starting point is 00:19:40 One of the interesting things about a lot of business people is that they focus on that cash flow so strong, they forget to focus on how much the business is worth, what the asset is worth. How do you get them to focus on that? So again, typically a valuation is based upon three measures. Your profit or your EBITDA, I have to get technical, the multiple. So how many times profit can you sell your business for? And then when you sell your business, if you've got a lot of debt, you'll have to repay the bank. So your profit, your multiple, and how much debt you've got or cash in the bank.

Starting point is 00:20:22 Yeah. So profit. How do you improve that profit? Again, the four levers from the power of one will help you improve that. Your multiple, every single company, again, who I work with, my philosophy is how do you get to double industry benchmark? Because if you want to improve your multiple, you've got to demonstrate that your business is different to the industry, which is. a combination of your people, your strategy, your execution, and your management of cash. Can you articulate and prove that you've created a unique ecosystem? And then obviously, if you run your business by the seven levers, your cash flow will be better. And when you sell the business, you won't have a lot of debt. You'll probably have cash in the bank. Yeah.

Starting point is 00:21:17 Brad, every board meeting I sit on, the first board meeting of the year, I do. a valuation. And then I say to the company, what valuation do we need at the end of this year? And that's the journey I go down with is how do you uplift your valuation? Yeah. Yeah, I love it. I think it's the most important thing. You're on the Big Success podcast. I'm Brad Suggers. We're going to be back with Alan. We're going to talk about scaling up a business. What happens to cash when we start growing at massive speed? Let's keep learning together. We'll be back in a minute. Alan Miltz has dedicated his life to helping business leaders and everyone in their team love the numbers. Revenue is vanity, profit is sanity, and cash is king or queen are usually his opening words.

Starting point is 00:22:01 To learn more about Alan Miltz, please visit allanmills.com. All right, so how do we scale and keep control of the cash? Alan, give us the story behind that one. Okay, so as we've said, a story of numbers consist of. of four chapters. Chapter one is your profit. Everyone gets that. Equally important to a management team of the three items of your working capital. Your collections, your inventory, whip, and payables. And Brad, as you can see in this podcast, I'm using a technique called repeat, repeat, repeat. The more you repeat things, the more you're going to understand it.

Starting point is 00:22:50 Chapter 3, other, the rest of your balance sheet, I don't worry about. The result is cash. A management team controls two chapters, your profitability and your working capital, the three levers. I colored code a company. So cash flow is the result of growth when a company grows. when a company grows, there's cash flow impacts. When a company declines, there's cash flow impacts. But cash is also impacted by management.

Starting point is 00:23:26 Management, every day you're making decisions. You're doing transactions. There's seven levers that impact whether you're making a good one or a bad one. For example, put prices up good for cash, collect quicker good for cash, improve margins, good for cash. So I color code a company green, yellow, red. So for example, a company might say to me, this is my profile, a stake in the ground. Every dollar I sell, I want to make 40% margin, 15% profit.

Starting point is 00:24:08 My overheads are there for 25. I want to collect in 60 days, hold 90 days of inventory and pay supplies on day 60. That's colour code green. I then say, what is good? What's average and what's bad? And every month, every quarter, I show the team. How many greens, yellow, red have we got? You've been to London many times.

Starting point is 00:24:38 What do they say whenever you get? on a train or the underground in London. Daxie, I don't get on the underground, buddy. I don't know. What do they say? Mind the gap. Anytime you go to a station, that's mind the gap. What I'm saying to every person listening today,

Starting point is 00:24:58 what is the gap you need to fix? To go from the reds, the yellows to green. And when you're having your power of one discussions, that's how many 1% or one day. changes do you need to do to run your company in color code green. So cash is the result. Cash is the result of growth and management. I don't mind borrowing money to fund growth. I hate borrowing money to fund color code yellow or red. So you've got to teach your business what does success look like and how many 1% or one day changes do we need to make to get to

Starting point is 00:25:38 color code green. Brilliant. So, buddy, you've coached a lot of companies, invests a lot of companies, build companies. What's the difference between a company where, let's just deal with mindset. Forget strategy, forget the money, everything. How does some companies go for like making a million bucks a year and other companies go for making hundreds of millions a year? What's the mindset shift that has to happen?

Starting point is 00:26:03 Okay, so people strategy, execution, cash. You want to get a team of eight players, a strategy that's differentiated, execution excellence, so the elimination of leaky buckets, and then a meticulous focus on the seven levers and cash. You can survive with decent people, with decent strategy and decent execution, but run out of cash and it's game over. However, if you want to optimize your cash, you need to have, the right people, the right strategy, the right execution, and a business where everyone owns

Starting point is 00:26:44 cash, not just the accountant. Everyone is part of the story. And we need to teach everyone in your company how to make the story better. Let's go back to that people side of thing. How do you shift their thinking? Like when you meet with people, whether it's on the board or whether it's training or whatever it is. Ellen, how do you get people to think big, to think for the big goals and actually want and shoot for those? So again, the first question you would ask a company is how do you measure your people? And they always say to you, we measure our people on staff retention or we measure our people

Starting point is 00:27:25 on how happy they are. And then I say to them, okay, there are two areas. you need to measure your people. Are they living your values? And are they achieving in their particular role? Are they achieving their KBIs? So if you want to get a team of A players, high on values, high on performance, that's when you're going to optimize your performance.

Starting point is 00:27:52 So many companies, when you first do the exercise, don't have a high percentage of A players. An A player is two to three times more productive than a B or a C player. So a B player is high on values but not high on performance. A C player is low on values, low on performance. You need to focus on retention of A players, not staff retention. How do you attract A players and retain them in your business? Because that's when you're going to get great success. and a A player wants to be happy, challenged and winning.

Starting point is 00:28:32 We need to teach them how to win by using the power of one. Those three things I think are really important. Happy, challenged and winning. How did you learn that? How did you come up with that? Where did that come from? Again, that's just, if you read, I don't want to steal anyone's thunder in the book scaling up.

Starting point is 00:28:54 That's one of the sayings that they use, happy, challenged and winning, that's what I call an A player. An A player are the people you want to retain. These are the superstars, the people you need to protect, not the B's and the C's. Got it. So let me ask you one final question. What is the best quote or the best advice you ever got on how to be a success or how to be successful? So one of my mentors in life, lives in Singapore. He's now in his mid-80s. His name is Alan Pathmaraja.

Starting point is 00:29:36 He was the CEO of Great Eastern Life, one of the great insurance companies of Asia, and the advisor to the president of OCBC Bank. And he tenets his company. And when I interviewed Alan, I said to him, you were an amazing leader. What was your key? and he said to me, how do you spell leader? L-E-A-D-E-R.

Starting point is 00:30:03 And he said, the first thing I do is L, is I listen. And I listen with E, with empathy. I take off my shoes and I put on the shoes of the people I talk to. A, I've always got a positive attitude. D, I'm never scared to make tough decisions. E, as a leader, I need to be able to energize, enthuse a business. And then R is resilience. Every business is like a coil.

Starting point is 00:30:36 You go up and down. It's not how far you drop. It's how quickly you bounce back. So I love success, L-E-A-D-E-R. Perfect. Love it. Alamette, thank you so much for being on here with us today. This is the big success podcast.

Starting point is 00:30:55 Jump in the show notes, follow Alan loan from him, read the books, do all the things you need to do to make sure you get a better cash flow story and you start hitting that 1%. This is the big success podcast. I'm Brad Sugars. We'll be back next week focusing more on your success. And that's a big success podcast for today. Hopefully you took a lot of notes and hopefully you're going to learn the bunch

Starting point is 00:31:17 and hopefully you're going to take action on it and refer people. Remember, if you haven't subscribed, click that subscribe button now. Be with us every week on the Big Success podcast. B.S. Brad Sugar's Big Success. Take action. Check the show notes for all the links. I'll give you all the links for everything that your speaker had. Make sure you follow it through and keep the learning going. Remember, you've got to grow into your goals.

Starting point is 00:31:39 I'll speak to you next time on the Big Success podcast. You've been listening to the Big Success podcast with the number one business coach in the world, Brad Sugar. To learn more about how to achieve business and personal success, as well as how to level up or listen to past episodes, visit www.bredsugers.com.

Business Innovators Radio - Ep. #37 – Alan Miltz – The Big Success Podcast with Brad Sugars

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