The Chris Voss Show - The Chris Voss Show Podcast – Steve Preda – Buyable: Your Guide to Building a Self-Managing, Fast-Growing, and High-Profit Business

Episode Date: March 15, 2021

Steve Preda - Buyable: Your Guide to Building a Self-Managing, Fast-Growing, and High-Profit Business TURN YOUR BUSINESS INTO A VEHICLE TO REACH YOUR IDEAL LIFE Do you own a business that isn’t living up to its potential? Are you feeling frustrated by your company’s lack of growth, profit, or value creation? Do your employees wait for you to make decisions, instead of driving your organization forward? If you are facing one or more of the above scenarios, Buyable shows you a way out of this joyless rut. You can remodel your business into a self-managing, fast-growing, and highly profitable enterprise that allows you to live the life that you desire. The secret is to build Buyability into your business—and to do it before your company succumbs to the natural forces working against its success. When you consider that the life span of the average small business is less than nine years, that most companies never mature into the valuable businesses their owners intend, and that only 1 in 10 ventures ever finds a buyer, you can understand why it’s urgent that you transform your organization into a Buyable Business now. The good news is that any viable enterprise can be turned into a Buyable Business, by methodically following the guidance laid out in this book. And when you finally own that Buyable Business, you may find you never want to part with it. Keep or sell, Buyable shows you the fastest, straightest, and simplest route to Buyability. 
 By reading Buyable you will learn: • Why you need to build a Buyable Business regardless of whether you ever consider parting with it. • The difference between proactive and reactive entrepreneurs and how their approach determines their financial and emotional success. • How to design the ideal future state of your business, from which you can reverse-engineer the steps to getting there. • How to determine your personal financial goals, which your business should help you achieve. • How to estimate the value of your business right now and how you can determine the value your company must be worth in the future to allow you to harvest the cash you need for your Next Chapter— Your Ideal life. • The Seven Management Concepts that you need to master to orchestrate your business into a well-oiled machine. • What a Management Blueprint is, the major principles involved, and how to pick one that is right for you. • 10 Management Blueprints that can help you create the vision alignment, execution, and team cohesion needed to build a self-managing, growing, high-profit, and talent-attracting business. • A recipe for mastering the basics components of your business so that you avoid landmines that could impede its future buyability. • What the major value drivers of your business are, and how to engineer them into your company to create the most value in the shortest time. • The ways to groom your business into a product that attracts investors and buyers who will value it highly. • How you can harvest your business, with or without selling it, to achieve financial security, your desired lifestyle, and the purpose that drives you. • What your potential future roles in the business are and how to pick the one that fits your needs and personality. "Buyable is a framework for creating a self-managing business and shaping it with the ideal buyer or investor in mind. I highly recommend it!" -- Gino Wickman, author of Traction and Entrepreneurial Leap Praise for Steve Preda's earlier books: "Steve's experiences and anecdotes are immediately applicable to anyone running a business. His points of view are provocative, enlightening and a lot of fun to read." -- Matt Williams, Managing Partner, Brand Federation "Steve Preda has accomplished an impressive feat with a book that's full of insightful, valuable perspectives on business, while presenting a vulnerable look into his own experience. This book offers something to every businessperson." -- Clyde Northrop,

You wanted the best. You've got the best podcast, the hottest podcast in the world. The Chris Voss Show, the preeminent podcast with guests so smart you may experience serious brain bleed. Get ready, get ready, strap yourself in. Keep your hands, arms and legs inside the vehicle at all times. Because you're about to go on a monster education roller coaster with your brain now here's your host chris voss hi folks chris voss here from the chris voss show.com the chris voss show.com hey we're coming to you here with another great podcast we certainly appreciate you guys tuning in thanks Thanks for being with us today. And oh my gosh, we're just having the most awesome guests lately. They're just blowing our mind, lining up the boards, and now you get to listen for free. But guess what? If you want to watch

the video version of this, you can go to youtube.com forward slash Chris Voss, hit the bell notification. You can feel like you're part of a special family or part of a special family. Your choice, You choose. Go to goodreads.com forward slash Chris Voss. All the groups on Facebook, LinkedIn, and Instagram and all that good stuff. Today, we have a most amazing author. His book is coming out. This is going to be a brilliant read. You're going to definitely grab the pre-sale on this. He is the author of the new book called Buyable, Your Guide to Building a Self-Managing, Fast-Growing, and High-Profit Business. I heard those are always good to take and have, those high-profit, fast-growing

businesses. The name of the author and the gentleman we'll be talking today, Steve Pereda, his passion is to help entrepreneurs build great businesses. He's helped more than 250 businesses become more valuable and viable as an investment banker and a management consultant and a business coach. He built, scaled, and sold his own business in Hungary before moving to America, and he's written three books about his experiences, including Biable, Your Guide to Building a Self-Managing, Fast-Growing, High-Profit Business that's coming out soon. He lives in Virginia, and welcome to the show, Steve. How are you? Thank you, Chris. What a wonderful introduction.

I wish my mother heard it, but hopefully she'll tune in and she can listen to it. We'll be giving you copies so you can send it to your mom. I'd love to have your mom be part of our great audience. So there you go. So give us the .coms where people can look you up, find out more about you and order up your fine book.

Okay, the book, it's on Amazon pre-order. It's going to come out soon, but you can buy it at a 50% discount. I also have buyablebusiness.com where you can download the introduction, the first chapter. And you can also go on buyabilityassessment.com if you want to figure out whether your business is viable. There are 40 questions and six different approaches. And it's going to tell you exactly where your business is strong, where your business is weak, and what you need to do to make it more viable. That's pretty cool. So what motivated you to write this book?

I tell you what, so I was an investment banker for the first, you know, starting about 20 years ago and until about eight years ago. And I often have the regret of selling some companies too early before they became more viable because I didn't know all that stuff. Plus myself, I was in a situation where I wanted to sell my business and it wasn't viable. So I had my own experiences. And this all together, being an investment banker, management consultant, business coach, and all that experience I had the last 20 years or so, I put it into this book. And my motivation was to help other people make their business viable. So when the time comes, whether it's a health issue

or whether it's a family issue, or they just feel burnt out or they want to do something else, they have a next chapter in their life that they want to focus on, then they have options and they have a viable business and they can move on or they can step back and they don't have to run the business because it's a viable business.

There you go. And so you give them a walkthrough guide in your book on how to do that. Give us an overview of some of the details that you have in there and what you cover. So making a business viable, it's not about selling the business. So first of all, I'd like to make this point. It is about creating a business that other people want to buy. And if you create that business, then you might never want to sell because it's a great business that is self-managing, meaning that you as the owner, you don't have to labor in it day in, day out. You can be on the board or you can be just a visionary of the company.

You can have all the fun with a lot less of the stress, or you can sell it. And basically it's a process. It's a four-part process that I explain in the book. And the first one, the first part is nothing to do with the business. It's all about you as the business owner. So what do you want with your life? What is an idea? What does an ideal life look like for you? Is it being the entrepreneur and running the business? And that's fine. If that is, that's fine. Is it a visionary that sits on the board and doubles in the business whenever they want that for the stimulation, for the social interaction, for you having the status of owning a company? Or do you want to do something else?

Is your ideal life maybe focusing on a hobby or spending time with your loved ones? Or is it a philanthropic endeavor? For whatever it is, first figure that out. And when you figure it out, there's one of the tools in the book called the Magic Number Calculator. You can also go on magicnumbercalculator.com. So you can calculate your magic number, which is the amount of money, what you need in order to transition to your next chapter, whether it's retirement, another business, or a hobby, or philanthropy, or whatever it is.

So the first is, what do you want to do? Then what is it going to take you to get there? And when you have your magic number, then we look at your business. And we also have another calculator called valueandgrowthcalculator.com. You can do that too. So you can value your business now, and you can use your magic number to figure out where you need to take your business. You know what your time horizon is. So we figure out where you are, where you need to be, and then how you're going to get there.

So the second part of the book is all about orchestrating the business because having a business, maybe you have a business which is self-managing, but I see that most businesses, most business owners I meet, 95% of them don't have a self-managing business. So first you need to orchestrate the business to make sure that it is well run. You've got a great team that runs it for you. You've got a great culture. You have goals.

You have a vision. You're hitting your goals on an regular basis. You measure your people. You have a good way of attracting talent and retaining talent. And you're growing the business and being profitable. That's the second part. The third part is increasing the value of the business.

So maybe orchestrating the business is not going to take you to where you want to be. Then you need to engineer the value drivers to make sure that this business is growing its value over time and you can take it to the value where you need it to be. And the last part, when you go there and you groom the business so that it is putting its best foot forward to the buyer and investor, then it's all about what do you do? How do you harvest your, your business? There are different methods of harvesting. You can sell it or you can recapitalize it when an investor comes in and gives you money and

becomes a part owner in your business or you can even take money out and refinance your business with a bank loan there are different ways of approach you can go to private investors who become minority investors we also talk about the transaction what it takes to to create one of these transactions and what to pay attention to. And then finally, what do you do with your life? So are you going to want to hang around this business and be part of the business in what capacity when you're not calling all the shots or what you're going to do outside of the business? So it's the whole idea of figure out what you want to use the business for. The business is really a vehicle to take you to your ideal life.

And how do you go through figuring that out, orchestrating the business, growing the business, and then harvesting and transitioning to your new life? Wow, that is brilliant, man. You really encompass everything. I never thought of the term of harvesting and some of the different options. I used to build companies back in the day with, I just plan on keeping them for an empire. But there's a lot of people now that, especially in the startup scene in Silicon Valley, they're looking for exits because they like the thrill of building something.

I used to like the thrill of building something. And sometimes when it gets to a certain scalable point where you're not really the guy anymore, it kind of loses its value. But I never really thought about some of the different harvesting methods you've talked about, about refinancing, maybe taking it to the next level, bringing other investors, like Shark Tank, where you could go up to the next level and everything else. I really love those ideas. Yeah, I didn't mention Shark Tank. I don't think that's really an option for most investors,

and I don't think it's necessarily an attractive option. Sure. Because you don't want to sell your business to a shark because the shark is going to take advantage of you, right? Yeah. It's great for the shark. It's not so great for you as a business owner. You actually want to be in a position where you are a shark,

where you are calling the shots and a viable business will attract a number of potential buyers, investors, and they are going to be fighting to be the one that you choose to buy your business. And that's when you can really run a process. And this is what investment banks do for you. They run a process for you and they will sell your business to the highest bidder. If that is your goal, that may not be your goal. This is also something I talk about in the business that you might want to maximize your price, the sale price.

You might want to maximize the cash payout when you are harvesting the business at time zero, or you might want to maximize the relationships with the people that you build this company with. And a great story, one of my clients, which was a great company, it was a technology company, and they figured out a cybersecurity solution. And they were a company that's been around for a long time, and they were stable. They had about $50 million of revenue, 10% profit.

And they wanted to, the owners were thinking about transitioning to the new chapter and they hired us and we went out and we beat the bushes and we found over a hundred different investors signed a non-disclosure agreement to look at the book and the information. And eventually we only got five offers out of a, and they were all very lowball offers. And this was crazy because very attractive business, but very few offers. And what turned out was the company had what we call a concentration problem. They had too many eggs in the same basket. They had one big customer that they were selling 80% of their revenue to.

And the buyers were all taken aback. Okay, there's too much of a risk. Maybe it's the relationship. We won't be able to maintain it. And they're going to lose that customer. Even though they had this kind of global customer, they had served them in 15 different countries. So it was a very solid relationship, but nevertheless, and there was one buyer who would have bought it, but their condition was that they one buyer who would have bought it,

but their condition was that they just wanted to take over the customers and fire the employees. Oh, wow. And the owner said, no, we want to maintain this business. We want our employees to continue to prosper. And they decided to turn this company into an ESOP, an employee stock option program. And they created this and they are transitioning. They transitioned the company over a number of years to their employees. And they didn't get the highest payout, but they got the emotional side. They felt like their legacy was secure. They were known as a builder and not as a destroyer. That's pretty awesome.

I've had companies where we built them and then we moved on to other companies and we just would get residual income from our ownership in them. And we put in other managers to take care of it. It was really nice because you get like a check every month and you're just like, wow, I didn't do anything with that today. So that's pretty brilliant. I like how you, a lot of business owners don't go into business thinking about selling their companies. And I like how you have put the package together in the book where people can look at the different aspects of how someone would buy their company, because a lot of entrepreneurs don't think about that. They don't think about like what you talked about where they had too many eggs in one basket. There's always that 80-20 rule where you have a large bunch of

your income comes from a core group of clients. And if you lose a lot of those, you lose the business. A lot of people don't prepare for if you get sick or get hospitalized or you die, is that business going to live on? A lot of people don't build out managers and other people that could succeed them. So give us a little bit more aspects of how you treat that in the book. So the idea here is that the business is a separate entity. And that's an obvious thing that we all know that we have to make sure we document our LLC

because otherwise the lawyers will say that, or the courts will say that this is the same one and the same, you are the same with your company. But on a bigger scale, this is a huge problem because companies that depend on their owners are not viable and you're not going to be able to sell. So let me tell you my own story. So in 2011, I was still living in Hungary and I was running a business, which was, we were advising business owners on how to sell their business. And we had this Eurozone currency crisis in 2011. And countries were going under Greece.

You might remember Portugal, Ireland. It was a huge debacle. Banks were not lending money. No one was doing any deals. And we were looking at a great harvesting year, but it turned out that this crisis was going to kill all our transactions that we were working on. And my wife and I, we were on vacation and in our vacation home. And we basically saw the 2008 crisis repeating itself. And we had exactly the same things. Everything closed down. And we said, are we going to wait for strike three?

Or are we going to make a change? So we decided to try to come to America. And as I was getting ready to basically packing our luggage, figuratively speaking, I got a call from a private equity fund manager. His name was Christian. And he said, hey, Steve, I really love your business. And we are running this successful private equity firm. And why don't you merge and become partners

and then create a big powerhouse in Central Europe? And I said, hey, Christian, that's really great that you mentioned this. And thank you. It's an honor. But actually we decided that we were gonna emigrate to the United States. So I'm not able to be your partner. I'm not going to be around. However, good timing. If you want to give an offer from a business,

then feel free to knock yourself out, give me an offer. And ever since I said that I've been regretting that sentence, because in fact he did give an offer. So a week later I got his email and basically it was a devastating offer to me. It felt like the cobbler whose son is going bare feet. I was that cobbler. I've been telling these companies for the previous 10 years how to make their companies viable and there I was, I got this offer. And the offer basically said that you're the chief cook and the bottle washer. You're the CEO. You bring them in the business.

You find the investors. You're the marketing. You're everything. So if you leave, then yes, we're interested to buy your furniture. You've got some nice computers. We're going to buy those too. And oh, yes, if you close your deals, we give you a commission. Oh, great, great thing. So that was a big wake up call for me. So obviously I decided to hunker down and I put together my, my team. I had a great team, but I just didn't empower them.

And, uh, one of them last law became the managing director for the office. And then Robert became the guy who ran execution. And I had Levante became the head of sales. And Thomas became the head of marketing. And then Elizabeth became head of administration. And we had our call every Monday morning. And basically, I just delegated everything and moved to Virginia. And I was very scared. I thought, is this going to work?

Who knows? And my team actually were super excited. They were running with it. And within a year, the business became self-managing. And Christian came back to the table. He wrote me a nice check and I was out of there. So that's what is making a business viable all about, that when the opportunity comes, and I was out of there. So that's what is making a business viable all about,

that when the opportunity comes, and I was lucky, I only had to commute for a year. Every three weeks, I was on a plane to Europe, and we had an office in Romania as well. So I was going to Budapest, Bucharest, Washington, D.C., and I was lucky that I could turn things around. But most people don't have the second chance, and they are not able to turn things around, but most people don't have the second chance and they are not able to turn it around. Yeah. Some people don't think out of the box in a lot of those different ways.

My career company, when I moved to Las Vegas, my partner stepped down after 13 years and I finally found myself free to go do what I wanted. And so I moved to Vegas and ran our Utah corporations for a couple of years. And yeah, I had to go back and forth, but it was a way for me to go live my life and let other managers take it over. I like how you've gone through the book and you've, you've, you teach people how to design the ideal future state of your business where they can reverse engineer it. And they're looking at it from a buyer's aspect. I never really did that when I was an entrepreneur, where I looked at it from what a buyer see in here. And what would, what are some of the different aspects that a buyer would look at? Just like you talked about

in your story. So listen, the buyer is very, very simple. So what the buyer wants to buy, they want to buy a money-making machine. That's what they want to buy. Ultimately, they, they want to have a business, want to buy a business that they look at and say, okay, I understand this, how this business makes money. And I understand where this business is going and how it's going to continue to grow and make more money in the future. And that's what I want. So what the buyer doesn't want is here's a business I'm leaving. Here are the keys. You do whatever you want. We don't really know where we're going, but you'll figure it out. That's not a great investment because the last thing the buyer wants is to have

a headache, right? They want to invest in companies because they have a lot of money and they want a good place for that money. They want this money to make a good return, but they don't actually want to do the heavy lifting of doing this. So what they want is they want to see a leadership team at the helm of this company that has a vision, that has a plan, who is executing on that vision and who know what they are doing and who have processes and they know how to attract talent to the organization and keep it and how to grow this business in infinity, basically. And if they want to make a change,

if the owner wants to make a change because they are a private equity group and they want to tag on another company or they want to consolidate, it's their business. They might want to do this in the future, but they don't want to depend on their own work to make it successful. They want to buy a ready made company that works without the owner. That's. They want to buy a ready-made company that works without the owner. That's what they want to buy. Yeah. And if you're the key hog in the wheel, making everything go around, and you haven't delegated to your staff, once you leave, that business kind of comes to you. And that's what the turnaround investors,

that's what they do. They say, okay, it's a bunch of risks, so we'll have to figure everything out. So we are going to give you two or three times your profit. And even that will probably not pay you out upfront, but we'll pay you over time. So you share risk. And it's a completely different story. If you are a company, which is a ready-made package, which has a great future, then they're going to pay six times, eight times, even more. For public companies, it could be anything. The sky is the limit.

But it has to be a good company. And the other thing is that if it's a bigger company, then the options are even larger because a bigger company attracts more investors because investors know that they will do the due diligence and they will invest in studying this opportunity and they're not going to get all of these opportunities. But if it's big enough and they go after big deals, then they can amortize the cost of looking at $100 before they get that five. Whereas for small business, you either buy it or not. It's not worth spending time on it if you don't have a high probability to be able to buy it. So that's why you need to make it bigger. And when you make it bigger, then the multiples are high. So a small company would sell for four or five times profit and a big company can sell for 20 times profit or more. Yeah. And you show people through the aspects of how to make sure they have everything balanced

out. One of the things you talk about in your book is the seven management concepts that you need to master to orchestrate your business into a well-oiled machine. Tell us a little bit about that. Yeah. So in the book, I talk about these management concepts. There are seven concepts that have been developed the last century or so, a little bit of the last century, starting in 1911, when Frederick Winslow Taylor figured out, he wrote scientific management and he talked about processizing organizations. And there are different characters. So there are actually seven different characters I talk about who came up with these concepts, but there are different characters. So there are actually seven different characters I talk about who came up with these concepts, but there are actually three areas.

So think about your business as a kind of a circle and the three areas, first, the foundation. So you have to build a solid foundation for your business. And the two concepts that go into there, first is the culture and then the structure. So culture and structure. And Jim Collins, who is one of the major business thinkers the last 50 years, he talks about this idea of,

first, you have to make sure you get the right people on the bus, you get the wrong people off the bus, and you put the right people in the right seats. So that's the idea. First, you have to look at and have a great team. If you don't have a great team, you're never going to get anywhere. So you have to make sure that the culture is right

to define your core values that you operate against and that you have the right structure for your organization. So you've got the right people in the right seats. So that's the foundation. Now, if you have the foundation down, then the next one is the direction. So where are we going?

What is going to be our direction? We've got a great team. We've got a great structure. And the direction has two components. One is the vision. What is our vision? Where are we going long term? And it includes your mission or purpose.

So what is this company? Why does this company exist in the first place? What is this company? Why does this company exist in the first place? What is it doing? You need that because you want to energize your people so that they are part of a big story. Tesla helping the world transition into a sustainable energy. That's a huge story.

Being part of that story, it's essentially changing the world. Or the other company of Elon Musk, I mentioned that because he is the biggest visionary of our time. So he wants to colonize Mars. Can you think of a bigger story? It's a huge story.

If you can be a part of that, that's fantastic. So the vision. And then how do you bring the vision down to the ground? You want to set a long-term target. What's going to be your, Jim Collins calls it

the big, hairy, audacious goal. So you have a long-term target that everyone is striving for. And then you bring it towards the ground with your vivid vision. So what does the organization look like in three to five years in full color? And that's the vision.

And then the strategy, how are you going to get to that vision? How are you going to create that company that you visualized with your people? That's going to be your strategy. How are you going to compete? What kind of resources do you need? How much money you need? What kind of people you need? And then how are you going to manage this whole process? So that's your strategy. And then the

third piece of this, of this puzzle piece is, is the production. I call it the production. So it, how do you execute? So you've got your vision, you've got your, you've got your culture, you've got your structure, your vision, your strategy, and now it's time to execute. I have this cadence of execution that you set goals and you execute the goal. It's also systemizing your business so that you have processes in your business, which allows the leadership team to delegate and allows them to elevate themselves and to work on strategic issues and higher level issues and build the business. They don't spend their time on, on the daily running of the business. They spend the time on growing the business. And the last one is the alignment. So it's really critical that you have everyone aligned because if you don't have alignment, then people are rowing in different direction.

And when you get this energy channel to one direction, your vision and your strategy, then it becomes a very powerful force. And then you can just move ahead. And alignment is tricky. And most companies don't get it because it's about over-communicating your vision. And you just have to make the time. You have to keep telling people. And to the point where the people who don't want to hear it, they just leave.

But you're going to attract the right people. And they're going to stay. And they're going to want to be part of your vision. Damn. My next company, I need to read your book and then really apply these things. Most of the companies or most people start a business, they're mostly just trying to get going and just get the basics, get the product launch or design and everything else. How important is one of the foundations you talked about with structure? How important

is deciding on the right? If you're thinking about selling your business in the future, is it good to go with a C-corp or an LLC? Clearly, if you do a partnership or if you're doing a sole proprietorship, that might be harder to sell, maybe. I don't know. I'm the wrong guy on this topic. This is a text. I actually had a guy who I asked exactly the same question on my podcast.

So I don't know. I don't want to get into it. I'm not sure. I have two types of companies and I'm using both. It's not, it's, I'm still trying to figure that out. Yeah.

And there's always, you got to be careful about piercing the corporate veil and all that good stuff. What is, in your book, you talk about a management blueprint. What is that and the major principles involved and how do you pick the right one for you? Yeah, that's a great question. So I talked about the seven management concepts. So, you know, culture, structure, vision, strategy, execution, processes, and alignment. So these are the concepts, but how do you implement these in your company? If you're a small business, you probably don't have five MBAs on your leadership team who will implement it for you. You want an easier approach, right? You want a model, a framework for that. And these frameworks, I call them management blueprints. Some people call it business operating system. I call it management blueprints. And I talk about 10 different management blueprints in my book.

And these management blueprints have been around since the 1980s. The first one was the E-Myth, Michael Gerber. And he talked about most people are working too much in the business rather than on the business. And he also talked about technicians who start businesses. You expect that it's all visionary entrepreneurs that start businesses, but most businesses are started by technicians who maybe they lost their job or they figured out that they can provide a service better than the other person. And then they were doing the thing, but they were not building a company. So there are the classic management blueprints, the e-myth, the great game of business, Rockefeller habits. And then the second generation is, actually, these were the pioneers.

And then you go to classics. So the classics management blueprints are traction that probably many people heard about, scaling up, the advantage, Lencioni. So these classics, so the pioneers, they were all about the concept of, okay, you have to implement stuff in your business. You have to implement processes. You have to have a vision. But the classic blueprints, they actually talk about tools. So they created tools that you can just take and implement in the business. It became a kind of packaging exercise so that it's even easier to implement that and it's more comprehensive.

And then you have the third wave who are this higher level approach where you try to either focus on one part of the business like execution there's the four disciplines of execution it's one of the third wave concepts where it gets really deep in one area or there is also the three hagway which is is all about strategy and how do you get deep in strategy? So there are altogether 10 books, at least 10 books. I talk about 10 books in my book. And you just pick one or you pick a combination of these and then you implement it in your business. And that allows you to orchestrate the business so that you come out at the other end with a very own business, which is self-managing, which is growing and profitable. And that helps you create that great vision alignment and everything else that you need to come out the other side with.

You also help people. Let's talk about what the difference is between proactive and reactive entrepreneurs and how that approach determines their financial and emotional success. Yeah. So like in all areas of life, if you are reactive, then you have to improvise. When a crisis hits, then you will have to improvise. I had a client many years ago who was running a niche business in the automotive sector. And she was basically running it single-handedly. She had no other, even college graduates on the company.

It's a small company, about $5 million revenue, but half of it dropped down to the bottom line. Very profitable company, a niche player. And suddenly the owner got diagnosed with a potentially fatal illness. And it was obvious that she had to get operated on. And her doctor taught her that she has to dial back the stress. She has to transition maximum one year. She has to have the operation. So she called us and on first glimpse, it looked like a great company, very profitable

niche, dominating in their niche. So we thought that's going to be a great company to sell. And then we looked at, we did our due diligence. And what we found was that there were some big issues in the company. First of all, there was no management team to speak of, not even college graduates on the team. It was that one person. There was a major customer concentration. So like in the other example, 80% of the revenue went to one big company.

And they depended on that person. And then their books were a shambles. So there was a bookkeeper, but he was very sloppy and there were cash transactions all over the place. So it was a messy situation. And I told the owner that it's not going to be pretty. We might even not find anyone, but even if we do, it's going to be a low multiple deal. And eventually we ended up, I knew a retired CEO of an automotive company and I caught him and he happened to be interested. He wanted to get back in the game. He was mid sixties. So he was interested, but he had no money. So I found another company, which was in an adult entertainment industry, and they wanted

to develop their profile because they couldn't talk about the adult entertainment, very profitable. They needed other investments to talk about. So they said, okay, we'll invest in this. It's a profitable company. We don't know nothing about it, but you've got a good guy for us, a CEO and he's going to run it and we trust you. So they put the money in and we sold the company probably three times multiple. We could easily have sold it at six times if the owner was prepared. If she had a year to prepare, she could have hired a replacement for her. She could have fixed the books. If she had a couple

of years to prepare, she could have diversified the customers and the company would have been diverse at least twice as much. So that's a proactive, that's a proactive, that's a reactive entrepreneur. The other example is another client of mine was a company, a toy, it's like a Toys R Us in Central Europe. And it was run by two couples, two best friends, Hall of Fame hockey players, Hall of Fame in Hungary, but still local celebrities. And they married a pair of sisters. So very close-knit family.

And they started this company. They grew it to about 50 million and it was very profitable. They ran it on an IT system. I think it was SAP. So it was very well run and they had their ideal future. So the CEO, he wanted to get back into ice hockey and to be active in the federation. Another person, one of the ladies or the women wanted to go and climb the Himalayas. She wanted to go to the Arctic, the Antarctic. And they decided that, okay, this is how we're going to get there.

We're going to sell this company and then we can do whatever we want to do. And it was a very easy process. We had multiple offers. We sold it. They could even leave without having to stay for even a few months. And they got what they want. They actually got more money than they wanted for it because they were prepared.

They knew what they wanted to do afterwards. And they had their ducks in a row. And it worked like clockwork. So that's the difference. That's awesome. And so you've got to prepare for this. Like I said, it was something I never thought about before. Most of my businesses originally I thought about building as an empire, but then I found one of the things changed, markets changed. My 20-year-old mortgage

company was wiped out by the 2008 recession when it killed all the mortgage companies. And I had no idea. I did not see that one coming. And so I really probably should have sold out somewhere at the top and exited that and then moved on to some other things. I didn't really have a love for that business. Now you were talking about MBAs being on staff, college people, things. Is it really important when investment bankers or when a buyer comes around that you have really high skilled or high educated people like that on staff? It depends on the company.

You need to have people that understand the business and can grow the business at least to the next level, because the new buyer is going to come in and they want to know that, okay, I'm buying this business for $10 million and I'm going to want to sell it for $30 million in five years. And I want this team to be able to take me there. Or maybe I make one or two changes, but basically I want to see the path

how I'm going to get there. And if I don't see the path, I'm going to discount the price. So that's the ideal situation. Obviously it's not going to happen all the time. Now it depends on the company. If it's a restoration company, maybe you don't need people with MBAs for sure. Because what you need is someone who understands what the customers need and can serve the customers.

You need people who can market the business and who can manage the business. And they may have come up through the ranks and you don't need an MBA. But if you want to turn that restoration company into a franchise, a national franchise, you probably need someone who's a savvy business person who has done this or who is able to learn it and do it. And that's going to be a challenge.

If you want to take this restoration company through several mergers and do a. And that's going to be a challenge. If you want to take this restoration company through several mergers and do a buy and build process and make the platform and roll up the industry and take it to an IPO, then you probably do need an MBA because it's going to be even more complex.

So you need someone who has done it before. So it depends on the situation and depends on the size of the company. And often companies outgrow their management. The management who take you here is not going to take you there. And sometimes managers grow with the company and sometimes they have to be replaced because they are not able to keep pace or they just don't want to. It don't, it's, it's too much for them. It's too much stress and they check out at some point. That's awesome. So you, you help in the book,

it helps people determine the value of their company from, from a financial aspect and break it down. Yes. So we have, if they go on value and gross calculator.com, then it will calculate the value of their business based on their current profitability and industry multiples. It's going to be a rudimentary valuation because the information is limited information, but it gives kind of a good idea of the ballpark number. And it can also calculate the growth that they will need, the value growth that they need to achieve over their time horizon. So let's say right now their company is worth 5 million and they need 50 million for the next chapter and they own 75%

of their business, then they will have to take the value to 20 million. And they want to do this in 10 years, then the growth internal growth rate is going to be somewhere around 20% or something like that. So they know what they're up against. If they want to grow their value 20%, they can do this by growing maybe revenue 10% a year and increasing their margin and repaying their loans. So it doesn't have to be a revenue growth 20%. There are different elements there, but they can grow. I had a client,

the company wasn't a client, but I kept an eye on them. In 2004, the company had, I don't exactly remember exact numbers there in the book, but something like they had something like 40 million revenue and $1 million profit. And the valuation would have been $5 million. And then they also had a lot of debt on the company, which reduced the valuation.

And within a 10-year period, they only grew the top line by about 7% or 8% a year. But they improved their margin. They repaid a bunch of debt., and essentially they 10-time the value of the company in 10 years. Oh, wow. It's a 10x valuation because there are many, many levers that you can pull to make your business more valuable. That's pretty amazing.

Now, I imagine people that want to get in the buying business, the buying business and different things of that nature, might also be a great audience for your book, correct? Yeah, it could be. It gives them a roadmap as to how they can transform their business. So maybe they are going to be the one that buys at a three times multiple for an opportunistic seller that may be sick or burnt out and they have to be out. And then they just introduce a management blueprint.

They orchestrate the business. Then they engineer value drivers. They groom it. And then they harvest it. And off they go into the sunset to the next chapter. We reached. Go ahead. Yeah.

No, I just want to say one more thing. So this next chapter thing, entrepreneurs have their life cycle like any organisms, right? Like we have a life cycle, maybe it's 90 years if you're lucky. But there's a thing called the entrepreneurial life cycle. And Gene Landrum talks about that in one of his books. And basically what it says is that it takes about 15 years for an entrepreneur to break through and to be really successful. And he looks at famous entrepreneurs like Jeff Bezos and Zuckerberg. And I think Zuckerberg is not part of the group of the book, but he looks at many entrepreneurs who are well known. And it took all of them 15 years to break through. And sometimes they started really early. So maybe it's a guy in their 20s,

but like Zuckerberg is a good example. He was an entrepreneur at the age of 12, 13 already. And okay, by 30, he became a billionaire, but he had his run. So there's this life cycle. And what happens when an entrepreneur achieves their vision, maybe they have this huge vision, 15 year life cycle, they make it finally. It's very rare that they would look at the next pinnacle and they would be able to march up another bigger hill. It satisfied. And then it's a good time for them to leave because the company is basically blocked.

So if the visionary owner doesn't have a vision, the company suffers. So it's better for another buyer to come in and take this company over. And that's going to be their zero point for them when they buy it. And then they take it to the next level. And sometimes it happens with management teams that they can take it to the next level and then they don't feel excited anymore. They know how much work they had to put in to get it here and they don't feel like doing another 15 years of that.

And then it's better to bring in someone who is excited about this challenge. There you go. There you go. There was a point in our businesses where we started buying and investing in other businesses. And really what we were doing, I learned this from my commercial agent, business agent friends, is they were looking for, they get deals, pick off deals where someone's asset rich

and cash poor. And so we would step in, give them a first rider refusal thing, like a hundred bucks or 10 bucks or something and be like, first rider refusal if you decide to sell. And we get to see their books and look at them and your your book would have been a great blueprint for me back then because I could look at all the different aspects of balancing and what the value was nine times out of ten most of the stuff we were doing was was pretty small time usually it was the entrepreneur who just need to get removed from the business but sometimes they had a really good business they just didn't know how to run it and so we'd probably reverse engineer a book like yours so that's smart from both ends actually yeah it's often you know more often than not the bottleneck is the entrepreneur yeah because either they don't have the vision or they don't have the skills or they don't have the consistency

to make the business bigger one thing we always found is they would, they would, whatever their original model was, they would run that sucker into the ground and the bankruptcy court. Like they just would never change the model and maybe it worked for five minutes, but they would just, just keep burning cash right through. And you're like, maybe you should change the model. Maybe. And so your book gives people a great way to look at all the different aspects,

break down their business, understand parts of it they need to grow that might be the weak, imbalancing end of it, and all that good stuff. Anything more we need to know about you and your book before we go out? Yeah, you can read the book. I think that's a good way. Yeah, of course. I mean, I'm 54 years old, so there's a lot of stories that remained in me. I couldn't share all of them in this hour.

But if you invite me back on the show, I can tell you a few more stories. That's awesome. And is this your first book, or do you have other books? I have a couple other books. Okay. They are on Amazon, and they are available if someone wants to check them out. Now, people can hire you. You still do consulting and everything else in the investment banking field?

I'm not an investment banker anymore. What I do is I'm a business coach. I work with leadership teams, and I help them make them the number one in their category or to get them to the next level and take them and use some of these management blueprints to essentially improve their business, improve the value, increase the teamwork and help them execute better and orchestrate themselves and build that vision. There you go. So give us your plug, Steve, as we go out.

If someone would like to read, so the book is coming out June 1st. It's on pre-order. If you would like to start to read it, then you can go on BibleBusiness.com and download the preface introduction, the first chapter. So you can read my own story and you can read what the, you know, the kind of the outline of the book

and the first chapter. If you would like to get the book, then I recommend that you buy it on pre-order because it's 50% cheaper than when it comes out. So you will get the best ever price on it. And you can also check out the digital tools that come with the book. So if you want to assess the viability of your business, then viabilityassessment.com.

If you want to figure out your magic number, magicnumbercalculator.com. If you want to value your business and figure out how big you have to grow it, then valueandgrowthcalculator.com. If you want to value your business and figure out how big you have to grow it, then valueandgrowthcalculator.com. And I think that's it. If you want to go on my website and check me out and see my work and some of my clients, then tractionequity.com is my website. There you go, guys.

Thanks for spending some time with us, Steve, and sharing your wonderful information to make us all the more smarter. Thank you. Thank you, guys. Thanks for spending some time with us, Steve, and sharing your wonderful information to make us all the more smarter. Thank you. Thank you, Chris. Really enjoyed being on the show. And it's a great, great honor and great fun to be here and to chat with you on a Friday afternoon.

There you go. It's an honor to be with you too. Guys, check out the book, Biable, Your Guide to Building a Self-Managing, Fast-Growing, and high-profit business. I highly recommend this in my business experience. There were times where I just did not balance out my business properly. And sometimes you want to think about selling a business as opposed to just owning it forever

because it didn't work out well for me as market things changed. But learn and you grow. Thanks, my audience, for tuning in. Go to YouTube.com for Jess Crisfoss. Hit the bell notification button. Go to Goodread youtube.com for just Chris Foss at the bell notification button, go to goodreads.com for just Chris Foss. You can see all the books for reading and reviewing over there. You can also see all of our different groups on Facebook, LinkedIn, and Instagram as well. Thanks for tuning in guys. Stay safe, wear your mask, and we'll see you guys next time.