Episode Transcript
[00:00:00] Speaker A: Welcome to the Independence by Design podcast, where we discuss what it means to be a business owner and ways to get unstuck from the day to day so we can design a business that gives us a life of independence.
Have you ever been listening to a podcast maybe like mine, or reading a piece of content or talking to someone and thinking to yourself, does this information even pertain to me and my situation, my size of company, or the stage that I'm in? Well, I can tell you what, you're probably like a lot of people, and that's one of the efforts that I've been having with this podcast. But I was recently on a panel with bizval. It was hosted by Kyle and Graham, and I was accompanied by a few other advisors and people. And I got into this productive debate with a guy named Mike Finger, who I respect the hell out of. And we're having round two on today's podcast because we really focus in on, like, who are we talking to? And his argument is that 98% of companies are below a million dollars in revenue. And things like ESOPs, free cash flow of owners, distributions and capital allocation just don't pertain to them private equity, because they're just not big enough. And that's 98% of the market, which, in his words, is the whole market. I have no disagreement there. But then there's certain things that also are very obscure for the people that are in the 2%, which are the people that I work with, where they actually have enough of a resource or an infrastructure of their company, where they can actually invest in the operations to decouple themselves from their job and then sit in the boardroom and actually capital allocate, where then ownership, distribution, forecasting and private equity, and ESOPs and phantom stock. And all the stuff that I talk about is extremely relevant. And in both camps, the amount of propaganda misinformation is abundant. And I think everybody gets lost in the noise. And so Mike and I are both coming at this conversation from our lens of where we're coming at it, where I'm coming at it from the 2%, Mike's coming at it for the 98%. And what information is relevant. And I think this whole word exit planning is super dysfunctional. And Mike is not an exit planner. He calls it exit readiness. I think it's a lot of play on words, as you're hearing me talk about, but I think that this is a necessary conversation that is should exist in the marketplace to figure out where are you, what information is relevant to you, what should you be thinking about and most importantly, where should you spend your time and energy and what would the return be from? Cash flow or wealth? Mike and I are both talking about different, different implications of that based on the the 2% or the 98%. So I really think you're going to enjoy this. The reason we decided to have a round two is because everybody said that Ryan and Mike's banter back and forth was very helpful for them. So I said, all right, let's give ourselves two hours to fully unpack the macroeconomics, the landscape, the demographics, the size of companies. So that way we can get into the nitty gritty. And I think we accomplished that big. Thanks to Kyle and Graham from Bis Val. They do a great job at making sure that Mike and I are staying on track. Everybody's spoken for and it was super fun to do this with someone like Mike who we both have respect for each other. I guess I'm claiming that he has respect for me, but I really enjoyed the conversation. I respect him, I respect the, the unapologetically small business, that lens that he has. And I thought it was a very well thought through conversation. So if you want to go check out very detailed material on business valuations, I've got a newsletter out. I'm continuing to launch whiteboard videos where I'm teaching about these business valuation concepts. Go check it on the newsletter tab on my website, Ryan tansom.com thanks everybody for tuning in and I hope you enjoy this conversation.
[00:03:41] Speaker B: Welcome everyone. I'm so excited to be here today. A few weeks ago we held a podcast or webinar, should I say, where we unpacked the Bisval 2025 SMB report. And we were really fortunate on that panel to have Ryan Tanzan and Mike Finger join us on that panel. And in that conversation we really got into some like raw discussion around the state of SMB businesses in the US in 2025. And one of the things that came up in that discussion was, you know, this definition of what an SMB is. You know, are we talking sub $1 million businesses? Are we talking, you know, 20 to $50 million businesses? And feedback from our listeners. And our audience was like, hey guys, this is something we really need to unpack a little bit deeper. So today I'm joined by my co hosts, friends, colleagues Mike and Ryan and obviously Kyle from Biswell. So guys, maybe you want to do a quick intro and then we can, we can get into the meat of today's discussion.
[00:04:46] Speaker A: Go for it, Mike.
[00:04:48] Speaker C: Thank you, sir. Mike Finger. I run a business called Exit Oasis where I help small business owners prepare their business for sale.
I'm an eight time owner, exited successfully four times, failed twice and still own two small businesses. So that's me in a nutshell.
[00:05:07] Speaker A: Brian Tansom. I've got a ownership coaching program called Independence by Design and I help middle market companies try to extract themselves from the operations into the boardroom so they can become more of a capital allocator and create options.
As an owner of a company I got here through probably similar to you, Mike is a lot of hard work and a lot of failed attempts. I sold a family business for eight figures in 2014 after gutting the company and had a lot of regrets. I read Bo Birling's book Finish Big and sent me on a decades long journey with the podcast and three different companies tell me figure out what I would have done differently. And what I realized is that small middle market companies, which we're going to get into the definitions there of, you know, we started our companies for independence. A lot of times we get stuck in this owner operator trap where it's our job but it's our asset and our time, cash flow and wealth are all interconnected and there was no through line on how to actually get that independence other than looking at arbitrary growth and net income. And so the framework I put together is the ownership playbook that complements systems like eos scaling up. Great game for the operations. This is just for the ownership.
[00:06:14] Speaker D: Well, thanks.
[00:06:15] Speaker B: Awesome. Carl, do you want to introduce yourself?
[00:06:17] Speaker D: Yeah, sure. So Carl McCulloch, I'm the Vice President of Biswell for the US markets. Background started as a trader, worked in global macros, very heavy focus on risk, geopolitical risk, and then worked for a small business before joining Biswell.
[00:06:31] Speaker B: Fantastic. Well guys, I'm not going to introduce myself. I mean most of you. Well, I mean hopefully there's a new audience listening to this, but I'm the founder of Bizville and you know, we're really passionate about empowering small business owners, private company owners, to make better decisions for themselves. Whether that's a sale, whether it's staying in the business, but really unlocking and understanding value and then making the right choices so that they can get a better outcome from their business. So I think let's dive into sort of the context for today and I'm going to start with some data and Ryan and Mike, I'm going to ask you to chip in a little bit. But if one looks at corporate filings and I'm going Back a few years. In terms of the IRS, there are about 7 million corporate returns filed in the US and 75% of those were under 1 million in receipts between 1 and 5 million, about a million returns and you know, under 5 million turnover, let's call it that is 6.2 million returns. So almost 90% of all corporate filings in the US are actually I guess what we would call really small businesses.
So the context of this is when we talk about SMBs, we talk mid market.
You know, is there a difference between you know, a sub $5 million or even a sub million dollar business versus a 20 to 30 to 50 million dollar business.
And you know Ryan, I know you've also done quite a lot of research in this space and Mike, as have you, you know, I mean let's just talk some of the numbers first and then maybe each of you can kind of introduce kind of where you sit in that spectrum and what your focus is.
[00:08:16] Speaker A: Love it. Mike, what we were saying earlier, before we hit record, I'll give the data that I think both you and I can synthesize and calibrate. I'll let you then explain how you're attack, you're attacking the market or where you're coming from it. And then I'll, and then I'll do that because I think what we were saying before we hit record is we want to, for the audience here get to the what are the implications if this is what we see to be true? Because I think that's where I think was really fun is about the conversation. We're trying to get to the truth. And I'm really excited for this conversation because I think all of us, that's what we're all doing and it's, I'm excited for the conversation for that. So like when I the data that I'm going to get, I'm going to walk through and then after Mike goes, I'll explain what, how I've decided to deal with this data for my own practice and for my own like mission to help small business owners, which I think that's why we're all here is we have that in common. I got this, I synthesize this data from a couple of my other companies over the last decade of like I was in some investment management 10 years ago. I had a couple consulting practices that did like the value Opportunity profile, the Value Builder system, Extra planning, had a fractional CFO business that had hundreds of company financial exposures. And so I seem to real, it seems to me that these numbers Seem to be true with a margin of error. And so where I, where I'm getting these from is Ken Sanginario, who's the founder of the Value Opportunity Profile. He synthesized a bunch of data from the U.S. census Bureau and the Labor Labor Statistics. And you know, and maybe it seems to hone in right around Graham, what you're saying where there's 27 million privately held entities in the US and those are privately held. Right. So they employ around 150 to 160 million Americans. So like why I think we're all here is like 60, I'm sorry, 78% of the labor force is owned by is underneath the small businesses. Not Amazon, not JP Morgan, which is why we're so passionate about this.
Of those 27 million, 21 million have no employees. So they're like literally a solopreneur. They've got whatever they're you know, 1099. So that's around 6 million employer led businesses.
There's only around 21 to 25,000 that are above a hundred million. And that's like to the right of the decimal point of percentages of how many people are above 100 million. I just did a Vista presentation last week too is everybody wants to be 100 million. It's like well of course, but like it's the implications of that. Are you literally to the right of the decimal point between 5 million and 100 million?
I'm sorry, let me back up. The people that work for 100 million, it's around 56 million Americans. So they have a large percentage of that employment base. And again these might, these, this math might not reconcile a hundred percent. But then between 5 million and 100 million it's around 350 to 380,000 companies that employ around 35 million Americans.
And that is around 300, you know, like 350 to 380,000 companies. And then the rest of the 5.6 to you know, up to 6 million, like you said Graham, have under 5 million in revenue. And like the way I like my brain applies like thoughts on this is like the Pareto principle of the 9010. So even in that, in that I think Mike, go into your, probably your part of your data is like of that 5 million and below, most of them are probably around the million bucks and they employ around 30 to 35 million Americans as well. And the average age of these people is the boomers.
And so then we have to like lay around so there's two more layers and then I'll shut up because again, this is the lens that I'm analyzing. Everything from is like, okay, if that's the landscape. And then you say, okay, well the average age is now like 65 because it's the boomers.
Because you can look at the demographic cliff from Peter Zion or Iter Economics or Ray Dalio and we are in this demographic cliff that is happening. So it makes sense that most of the people would be boomers. Well now we have the top.
There's the wealth inequality of all of the assets are with the wealthy people who are also boomers. So now we go the wealthy people on top of then the boomers, which kind of lays into this Pareto principle of kind of what we're seeing with the demographics. Another thing that is really important to me as I make decisions is looking at M2 money supply growth. And this is going to get into like the valuations. As we talk about how valuations and risk and return are applied is the government prints around 7 to 8% new money every year and that is this hidden inflation tax on all rates of return that people are not factoring into the valuation returns. Which I think we'll get into like what's worth our effort to do. But the, you know, I think what the, some of the implications that I think we want to, I'm excited to unpack is like this 10 trillion dollar baby boomer. Well, Tsunami I think is a little bit more of a farce than everybody thinks. And we can talk about why, but I think that's kind of the, the land, the data as I'm seeing it right now. And Mike, I don't know if you have any adjustments, any things that you've seen that contradict any of that.
[00:13:07] Speaker C: No, I, I certainly wouldn't contradict anything that either of you have said. I tend to approach, I tend to try to approach this topic as simply as I can.
And the, the info piece I go to is a release by the Small Business Administration a year or two ago and they, they roughly identified around 33 million small businesses in the U.S. that's the number that, that they float.
Yeah, 98% of those businesses per their data have less than 20 employees.
That's my cutoff.
That's what I use.
So when we talk about small business owner truth, I often find myself identifying 2% truths.
I'll be at a seminar and I'll be talking and then someone will say something and it's true, but it's a 2% truth.
It applies to a fraction of attendees. That's this big Right. It's literally two guys sitting in the corner that need to hear what that guy's saying. The problem is, and really my reason for being here today is that this entire marketplace is defined by content that will say things like, small business owners need to know about private equity.
Small business owners need to know about ESOPs.
We get these things that are thrown out that are true, but they're 2% true. Because if you have 20 employees or less, you don't need to know about ESOPs and you probably don't need to know about private equity. And this, this monster of misinformation grows and grows and grows. And so completely agree with the data.
I would define it as, I will refer today just out of simplicity to 98%.
That's my small business owner number. And from my perspective, if I have a pizza and there's onions on 2% of it and the rest is cheese, I have a cheese pizza.
[00:15:37] Speaker B: I love that analogy, Mike.
[00:15:38] Speaker A: I do.
[00:15:40] Speaker B: I think it's something we can all relate to pizzas, you know, I mean when, when you order the Abbo and the pizza and you get one little sliver of avo, that's not a bacon and AVO pizza.
[00:15:50] Speaker A: I completely resonate with how you frame that up, Mike. And so here I'll see how I can respond to that. So I agree with that 100%. And to give another analogy, and then I'll talk about how I'm approaching this and how I'm thinking about this, because that is the true problem. I actually completely 100% agree with you. But then, okay, so I'm trying to, without losing my total marbles. Here is that's the wealth inequality and the debasement and everything is extracted to the top. So literally every single industry is trying to figure out how to sell to the people with money. And I saw a data point that like 45% of the consumption, which we're a 70% consumer based economy, 45% of that is based on the top 10% because they're the only effing people with money.
So I sit here and go, that is the problem, 100%. And then what I have personally struggled with you all is like, how do I make a business selling to people that have no money?
And it's a really big problem. And this is where maybe we can get into business models, Mike. And I've like, I've had three different business models, but like couple other layers into this is like when I think about health, if 56% of Americans are overweight, get eight hours of sleep, quit drinking, lift something, pull something, go for a walk and eat well. That's your advice? Don't go run an ironman? And that's that 2% advice where, like, don't go concern yourself with ice baths and meditation and saunas, all that shit. And so I agree with you. And I have found it a challenge with three different business models serving the people in the lower market. And so, like, when I think about SMBs, it is truly people that have. And we can. And I think maybe what I could do right now, if you're okay with this, I can frame up one of the biggest challenges I've seen with even the lower end of my clients where I think this will put maybe some context around the capital constraints of what the hell's actually going on and the real conundrums. You guys cool if I, if I do that?
[00:17:49] Speaker B: Ryan, Ryan, Ryan, go for it. I mean, and if I can, maybe before you do that, just to kind of add to what you're saying, you know, I think there was a fairly famous podcast, podcast, I won't mention any names, but had sort of three rock star entrepreneurs on fairly recently. A diary of something.
[00:18:05] Speaker C: Yeah, yeah.
[00:18:07] Speaker B: The one big piece of advice that came out of that was like, sell.
[00:18:10] Speaker C: To the wrist, Graham. I listened to that and I heard him say it, and I'm like, I apologize for interrupting.
[00:18:18] Speaker A: Yeah, it's like it's in Taki Morris saying it, Hermosi saying it, Cody Sanchez is saying it, and like, all the private equity saying it, and like, I mean, even asset. Yeah, I mean, that is the problem. I mean, like, that's what happens. August 15, 1971, Nixon decoupled from gold. And the whole, like, go to what the F Happened in 71 is a website with like 400 pages of data.
So here's what the actual problem is that I'm seeing. And then I. I think we can maybe we'll. We'll continue to get more context behind this. So normalized EBITDA as a metric for value of proxy for cash flow.
Right. So again, they're technical, but, like, it's a proxy for annual cash flow. The multiple is a proxy for how many years of cash flow that company is worth.
So what I look at, like, the conundrum of even a business, and I've watched inflation hit advisory services, Mike, where like, even the good investment bankers on ESOPs private equity, like, they're like, oh, you know, million, 2 million in normalized EBITDA. We're interested now. It's like 5, which is like now on $5 million in normalized EBITDA, you're talking to the right of the decimal points, the 0.1% of the 1%. And like, so like the capital continues to.
[00:19:27] Speaker C: Ryan, even a million or 2 million of EBITDA, we're still in 2%.
[00:19:33] Speaker A: No, I agreed with you. But like, right.
I think that is so crucial, Mike, to, to, to get to. Because at a million. So like at 500 grand to $2 million, I call it the no man's land. You're completely effed from almost all options and you have like a good company and completely.
[00:19:51] Speaker C: I disagree with what you just said. Not again.
Purely contextually.
My entire adventure with small business owners is getting them to realize the fundamental difference between a business that breaks even on the bottom line because they do creative tax planning or those sorts of things, and a business that actually shows a half million plus dollars of profit every year.
I watch those businesses get sold every single day.
I watch the ones that don't get to that basic place. Now, again, I think what you said is True. From the 2% perspective. If I've got a business with EBITDA from 500,000 to 2 million, there's probably all sorts of tools that I can't take advantage of, but for the 98% of the market, it's even less.
[00:20:47] Speaker A: Tools?
[00:20:50] Speaker C: What do you mean?
[00:20:50] Speaker A: Well, because if, if I'm talking about the, the clientele that's in the 500 to 2 million and they can't attract ESOP advisors because no one gives a. The conventional banking system for buyouts is a complete shitstorm. Private equity doesn't care because they can't put enough debt on it because debt's too expensive. There's not enough cash flow in the 5 million to $2 million in normalized EBITDA to even get deals done now.
[00:21:12] Speaker C: So like again, I, I can't, I, I can't give you an opinion from your side of the river. What I mean by that is looking down from mid market, you might be a hundred percent correct.
Looking up from Main street, you're absolutely wrong.
[00:21:32] Speaker A: But, but I.
[00:21:33] Speaker C: There's buyers out the same door for those businesses.
There's lines of buyers for those.
[00:21:39] Speaker A: See, this is where I. But that's for your, your perception, looking up what. Do what you just said. So, but there's not. Is my point, Ryan. Again, let's lay the groundwork for like, why? Because I guess I want to back to like. We have to figure out if we're arguing about the same Truth.
So on a million dollars in normalized ebitda, people go oh, it's worth a five because they're listening to podcasts and shit. So like when I say okay, like let's just do some real quick back then. So I'm going to, this is gonna be about five minutes. I'm gonna just lay the groundwork of like okay, why I think the connect the concepts that I'm proposing are similar to the people that the million dollars as they are in this million ish range. Because on a million dollars normalized ebitda, here's the numbers that I'm going for. You see, let's say the person says I'm worth a 5 multiple which is probably overvalued because on a $5 million valuation with an SBA loan that's 70 grand a month in debt service at around a 10%.
Great. There's no cash flow for working capital, which is usually 15% of revenue debt.
Re working capital debt and taxes and reinvestment. So you are completely suffocating the cash flow of a million dollar company at a $5 million. It's not worth that. So here's the, here's the conundrum. Now you go, okay, well that person that owns that company has been used to making 250 to 300 grand for their whole life. They've maybe got 800 grand to a million two saved up, they can't fricking retire and they're stuck in the middle. They got 25, 30 company or employees and it's a good business and it's way better or way better bigger than the ones that you're talking about. Which perception of option. But SBA loan is a mother effort. Conventional loans of five to seven years will suffocate the debt even or the cash flow even more. The executives who could potentially run the company don't have any money. Then you have these searchers and then the acquisition entrepreneurs and the search funds. Private equity firms will only use that as a bolt on because they need to gut the company to bolt it on to get the cash flow ESOPs. Now they're not even looking at ESOPs until like 3 to 4 million to normalize EBITDA. So ESOP's not an option. You know, you might find the perfect acquisition entrepreneur, but SBA loans are now becoming even more stringent on those people, private equity firms, not interest. So it's a strategic buyer that guts the company like my dad and I did. And that's not fun. And if someone goes, well, it's my legacy. So you're back to. Then I'm trapped in this owner operator trap.
So, okay, now let's talk about what would be the options to get out of that trap, which I'm helping my cohort of people from a million to 5 million in normalized EBITDA. Think about, because they're in that trap is you have to take and reinvest your distributions to build out an executive team of two hundred and some thousand dollar people. You have to buy more inventory, launch a new ERP system with 300 grant. You have to like reinvest all your distributions. And if you said, okay, well, we're going to do that, first of all, it's going against your lifestyle. So you actually don't have the cash flow to do that. Unless you go get a, you know, line of credit or some way to get over that capital gap. Then you say, okay, well, it's going to take you seven years, Mike. And you go, what the hell, Ryan? I just told you I'm tired. It's like, because you're talking about your job, not your asset, you're tired of your job. But now let's just say, okay, let's say you said I got the time. You know, I go, okay, I've got the energy, I got the time. And for God forbid, I actually have the ability to reinvest all that cash flow. You fast forward seven years at 8% debasement, your company, if you went from a million dollars in normalized EBITDA to 5 multiple and you went to a $2 million normalized EBITDA to 6. So you go from a $5 million to a $12 million valuation. It's the same effing value because of the debasement of the dollar. So you literally wasted seven years of your life to do the exact same to get out of that situation.
[00:25:23] Speaker D: I think the important thing.
[00:25:24] Speaker B: Can we jump in here, Ryan? I mean, sorry to interrupt you, Kyle, but I mean, before we go on, I think, Mike, it's important for you just to kind of paint your picture because you said up front you're seeing lots of deals getting done and people in the space. But maybe, Mike, if you can just take a few minutes just to kind of flesh out your perspective and then, Kyle, I think it would be worthwhile for you to jump in maybe with a bit of a, a macro view and then let's go into some of the, the strategies. So Mike, yeah. I don't know if you want to take the floor and just, you know, cover some of Your sort of starting points.
[00:26:00] Speaker C: Yeah, and it's a. It.
It's a. It's an odd conversation, as it often is for me, because I don't disagree with anything that Ryan just said.
I just don't think it applies to most people sitting in the room.
And again, when I say that, what I'm picturing is 100 random business owners in a room. And, Ryan, what you just talked about when you talked about 500,000 to 2 million of EBITDA leaves 97 of them out of the conversation.
So we can spend time talking about the 1% or the 3%.
But what I'm pushing back on, and I think why we're here today, is during that podcast that we did together, there was a point at which I rudely interrupted you, Ryan, and asked, who are we talking to?
[00:27:01] Speaker A: Yeah. And Graham and Kyle didn't answer because.
[00:27:04] Speaker C: You appropriately said, hey, Graham and Kyle.
[00:27:07] Speaker A: Which is why we're here. Right?
[00:27:09] Speaker C: Yeah. Because I'm like, you're saying things that are true, but they're only true for the 2%.
It's not true for the 97 or 97.5%.
And that is the nature of this topic writ large, is that we say things like business owners should, and it applies to that narrow band.
But what about the plumber with three guys who's never earned more than 250? What can he do?
That's the audience. That's the market, that's the pizza.
So I'd like to talk to them when we talk today. That's who I'm talking to. I am unapologetically small business.
[00:28:03] Speaker A: What is it that you like? What.
Let's frame up. I love it. And I. I agree. And this is why I think it's like when I said before we hit record, is we're providing the yin and the yang to provide the full picture here. And like, neither of us. And that's why neither of us are disagreeing with each other, because we're trying to figure. And. And it took me 11 years, by the way, Mike, to figure out how to find my 2%. So that way I'm not speaking to the. Like, I would. That's why I go to Vistage workshops, and that's why, like, all of my clients are in that space. But no disagreement of, like, how do we. And this is why I'm really, truly intellectually curious of, like, how are you economically for yourself, providing services to people that don't have the wherewithal to do that? Because, like, when I think about the challenges of those people, it's like, okay, you finally get burnt out to that plumber and, like, have you saved any money? Can you actually retire? So then this like, oh, by the way, you might get a couple hundred grand, and, like, you're like, how long is that going to last you? So can you actually even get out of the conundrum that you're in? So I'm curious, how do you approach that situation?
[00:29:06] Speaker C: It's great, because I think it speaks to why I turn a little bit attack dog when this subject comes up when I'm in a generalized podcast talking about something else.
And that is because that same plumber who hasn't saved anything went to his financial planner two years beforehand and had that planner run him through a valuation tool, goes equity.
[00:29:35] Speaker A: So just a B.S. yeah, I'm just kidding.
[00:29:39] Speaker C: That showed a $7 million value for his business.
[00:29:43] Speaker A: I know.
[00:29:43] Speaker C: And so why would he save anything? He got told that his.
And he gets. He gets flyers every day and emails and phone calls from brokers saying, right when you're ready to sell your business, call us, because we'd love to talk to you. Now, that broker never says that. I reject 90% of the owners I talk to because they have unsellable businesses, but the broker's got to talk in order to find out what's behind the curtain. The whole system's freaking broken.
[00:30:12] Speaker A: Yeah. So a question for you on this, because I agree with you, Mike. And so I had a stupid attack 10 years ago after we sold the business and I got my securities license. And when I went into wealth management for 18 months, and I thought I was.
[00:30:25] Speaker C: Got to write that down, by the way. Stupid attack. I love that.
[00:30:28] Speaker A: I like and like, it was like, what the hell am I doing here? I got my series 65, got my investment license, helped a small RIA build their book of business. And I was like, fiduciary fee, only 1%. Everyone's effing you over. And then I realized, like, no one's got any money. I was like, no one's got any money. So everybody that, like, on a million and so on, 500 grand, which is the minimum assets under management at that time, you're talking 5,000 bucks. You can't even afford to meet with the people, really. And you're. Because you're not selling insurance. And I'm like, well, everybody needs this. And I'm like.
And I like, I hate, like, the Northwestern mutuals and, like, all the people slinging annuities and they're jamming shit. And, like, Back to like, here's your financial advice person that's making 300 grand. Spend less than you earn, max out your 401ks for you and your spouse, your HSA, your FSA, and have a nice life.
[00:31:20] Speaker C: Right?
[00:31:20] Speaker A: And so, like, when I looked at it, I'm like, well, but then they have no help and no one that. Then no one does it. So then I'm like, is there. And I had to come to this weird grips. Like, is there actually a place in the world for the people selling the random products and shit? Because they can afford to work with these people.
And then I look at the exit planning community, Mike, and I really want your thoughts on this is like, I look at like, okay, you go to the exit planning events and it's the insurance salesperson and it's the CPA and it's the wealth manager, it's the broker, and it's everyone trying to suck fees off that 97%. And all of that's misadvice and misinformation for the person that you're trying to help. So totally recognize what you're. And I just couldn't figure out an economic model to figure out. Like, how do I actually help these people avoid all of those problems?
But then I was going to go broke doing it. And I.
[00:32:06] Speaker C: It's all fair commentary. I would, I would add to the comment about the exit planning environment.
I think most of them are chasing that top 2, 3, 4%. Right. That's. That's ideally, but.
[00:32:21] Speaker A: And they're the ones confusing everybody though, right, Mike, to your point?
[00:32:23] Speaker C: Well, them, the brokers, the attorneys, the accountants, everybody chasing upscale. Everybody speaking to that room of 100 people and talking to the two guys in the corner.
[00:32:39] Speaker A: But I don't even think I agree with you. But I don't even think the community does a good. Because I got out of that community like eight years ago. I was like, all done. And it was because no one clearly articulated it.
And like. And like, there was all this fee chasing that, like, but still people weren't doing what you're doing. Like, like, this is why I was so excited to have this conversation. It's like, hey, I'm acknowledging the facts and I'm choosing Elaine versus, like, making it com. Like making it more obscure to find the random person.
[00:33:07] Speaker C: Yeah.
[00:33:08] Speaker A: That is confused. So they can make their fee.
[00:33:10] Speaker B: Yeah.
[00:33:11] Speaker C: Great.
Before we go on, Ryan, I need to hit rewind because I feel like you caught the key earlier. I feel like you said a truth that's really important for us. To highlight, you said nobody has any money. And I think that by and large that's true.
And that's why this topic is so freaking important.
Because if a small business owner can change their business and navigate to an $800,000 exit or a $1.3 million exit, that's freaking life changing.
It's life changing.
And we forget that in this space where we are told that seven figure, eight figure, nine figure, when every exit we read about is, you know, I sold my business in 18 months to Google for before we made a single. It's just, it's M and A porn is what it is. But these exits are life changing for owners who can achieve them in the real world. The problem is, is that most don't pay attention to the topic at all. So they simply wait and fail. Those that do pay attention to the topic end up getting sucked into this vortex of misinformation.
And those few rare that are able to find information and change their business get to change their life for the better. So I didn't want to lose that because I really think that is the thing that we forget that for the hairdresser who can make a $300,000 exit on her business because she lined things up right, that's, that's life changing. That puts your kid through college. I mean, it's just, that's how we keep up.
[00:35:06] Speaker D: So reframe things a little bit and just pose a question to everybody. If you think about the, the drivers of valuation, you're looking at risk, you're looking at cash flow, and you're looking at growth rates.
So does it not make sense? I mean, obviously in the coming years, these small businesses are going to get squeezed more and more and more as the years go on. I mean, as Ryan, you touched on, we're adding 8% every year to the M2 money supply. It's the most evil hidden tax that nobody's talking about thinking, putting on like my capital allocator hat here.
Does it not make sense for some of these small businesses to start thinking about growth rates and thinking, what alternative assets can I invest my distributions into that will outpace the growth of, you know, of a traditional exit? Because if you think about it, you exit for, call it 1.2 million after taxes, after legal fees, after you've paid your distributions to the M and A advisors, you kind of left with a down payment for a house.
Whereas if you start investing five, ten years earlier with call it five grand compounded for a year, so you call that like 60 grand going into going into an investment vehicle, you might actually outpace that growth in the long term. And I think that's maybe a different way to frame things and look at.
[00:36:30] Speaker B: Things before, before Ryan and, and I'm sure Mike respond to that. I just want to use a couple of personal examples and I think we can apply it to business context. So I mean, as everyone listening can yaba the accents. You know, Kyle originally and me still come from a country where things like inflation and risk and that are part of our daily lives.
When US inflation has been running at 1, 2%, our inflation where I live has been running upwards of 7, 8, 9 double digit inflation for a number of years.
So we're used to dealing with these things and how you need to outpace that. But I don't think the economic system is geared to support some of the stuff. And sometimes, you know, as you say, it's about extracting value rather than creating value. A personal example. My dad is 75 years old. He's just, he had a stroke a few years ago and he had a, he had a, he had a risk policy which paid out in the event of a dread disease, okay, which was a stroke. And at the end of the day he had been contributing to this for 20 odd years. And the payout basically was less than a month's salary, which I'm earning in current day.
And my dad is one of the people that Mike refers to. You know, he was basically got redundant in his 40s and was a handyman ever since, you know, climbing ladders, fixing things. A one man business with a helper. Anyway, back to this policy.
When I actually unpacked this policy, there was fine print in that that said, hey, your insurance premium is going up 7% every year, but the benefit is only going up 3% every year. So literally it was completely skewed for him as a small business owner. He took this because if anything happened while he was still working, you know, he needs to provide for my mom and what have you. But actually within three years, the way that policy was structured basically screwed him over.
And I think that's kind of what we're talking about here with, with, with small business owners is they don't have access to, you know, the right advice at the right fees. And it's a conundrum that you speak about, Ryan, is because, you know, it's simply too expensive and nobody wants to serve that market, you know, so, you know, all these things kind of converge. But I'd love to hear your thoughts on that. And then, and Then I do want to move on to kind of, like, how can we, you know, like. Like, what are some of the principles? What are some of the things that guys in this space can do? Because there are a lot of principles that apply to both the. The low end and the top end, and are true for both, but equally, there are things that are dangerous that if you apply to the top end, they don't work at the bottom end. So maybe let's explore that a little bit.
[00:39:13] Speaker A: Yeah, I like that. And what I can do is because I do think as I'm about to explain, like, what? Like what? Because I'll tell my personal experience about how I handle this. And I do think that even though the numbers are bigger, the conundrum is still the same. The owner, operator, trap, whether it's a million dollars or if it's $10 million. I think because of the debasement of the dollar, we're now seeing the middle market. Like, the middle class is gone in America. Like, it's 15 grand to manage a, like, middle class. Like, no, no, like, Disney trips. I mean, like, it's a very fricking expensive. Before we hit record, it's 3500 bucks a month for daycare.
I mean, it's a fricking joke. Health insurance is 24 grand. You go through it. It's. It's 15 grand a month. So, like, it's. The CPI is junk. M2. Money supply growth is what I look at. So, like, I'll explain what I decided to do, because now I am in the cohort of what you're talking about, Mike. Because, like, what I. And this is what's cor. My. Like, my framework of how to think. And it's all about how I've managed my own decisions. Like, all I care about you guys as a individual.
If I wake up and I do shit, is it worth it? The only thing I want is more independence. I want to do whatever I want every freaking day because I'm professionally unemployable. Like.
Like, I'm not good in a boardroom unless I'm helping chair of the board, right? And, like. And so I think that resonates probably with a lot of our audiences. Like, I just want to do whatever I want to do, and I'm willing to take ridiculous risk and actually work harder on my own terms than work for a $250,000 salary in the corporate ladder. So how I'm. How, like, what information I needed and what framework I needed to make that decision was my time, cash, Flow and wealth. It's this, this Venn diagram. And I say it's the independence flywheel where we wanted to use the theory of constraints for forward up momentum where like if I invest my time and my cash flow, I better be growing equity and it has to be worth it or I'm going to take more cash flow today and less equity tomorrow. I mean like, or like there's, there's always a trade off of one of those three. So to answer the question for me, is it worth Ryan's time?
So I had, when I turned around the family business where there was a big infrastructure in this and it was 20 million Mike. So it was, it was like in that the 2%, there was enough shit to turn around and enough machine to like do things with.
[00:41:32] Speaker C: Yep.
[00:41:33] Speaker A: I've started two businesses since. Oh my God, it's 10 times harder. Like, it's so miserable. I hate it so much. So my last company, I'm sitting there on this flywheel and all of a sudden we hit the seven or the seven figure mark. Like, I'm like, I'm broke. I have no money. I'm going like. And then there's three of us and I'm like, oh my God, like if we all want to make six figures, there's no money to reinvest. I'm like, well, the only way to have enough money to reinvest is to grow, to raise some money that dilutes my equity. And I'm like, and I'm going through this whole decision tree. I'm like, if I did all this and I got it to 2 million in normalized EBITDA and 5 multiple in 2029, and I split it three ways, debt and taxes. And I get $3 million and $3 million worth 2 million. I'm like, I'm fucked. I'm like, I'm screwed no matter what. And I'm going, so like what I came to. And there's a, there's a lot of loaded thoughts behind this and like thousands of hours of research when I. The whole system so broke.
It's so broke that I can't even spend seven years to grow a valuable business that would put me in the 2%. And it still is not worth my time because I could do other things. And then I stumbled on Bitcoin. And Bitcoin is what I think is perfect money. And it is completely sound, incorruptible, completely decentralized. And it is very, it's volatile because it's a slower growing or it's A growing market. But bitcoin is the new risk free hurdle rate. So I believe through generating more cash today with more freedom of time. So instead of reinvesting for equity, I'm actually earning income to stack into wealth generating assets that have on average a 30% CAGR over four years. So I believe that there is a way out where like, and that's the whole point of Bitcoin. It's releasing the pressure valve of all of these inflated assets. A Costco is a 55 multiple right now. It's not a fricking growth stock. It's the most overvalued stock market in history. Because again I go back to then that when I look at my clients and say okay, if you got a million, $5 million of fiat shit at closing, what are you going to do with it? And then we have to go through the buildup and go well anything below 8% you're locking in a loss. The public markets are there's only five companies that over exceed the M2 money supply growth. Then you go to private equity companies and you go all the way back down to wouldn't it be really nice to own a plumbing business that kicks out 300 grand in cash that has a better balance of my time?
And I. It's the same conundrum for someone with a million dollar business and a lifestyle that's trapped in it as a million dollar business or ten million or million dollars. And it because like the, the treadmill is going up a notch every single day on us and we have to grow faster and faster and faster just to keep in the same spot. So I don't know that's that there's a lot of loaded concepts in there but like that's how I figured out a way out for myself.
And I feel like there's a. And again there has to be like the I believe that's true button that's hit in order to actually do that. And that's not for everybody. But Mike, there's a lot there.
[00:44:27] Speaker C: Let me ask you a question. Based on what you just said.
We're looking at that room full of a hundred owners.
How many of them do you think what you just said applies to many of them can use the solution you just advocated for.
[00:44:47] Speaker A: Every person in the world can dollar cost average and the savings finally works again.
If you saved $10 a day for the last 16 years, you'd have 1.7 million bucks of bitcoin. And I'm, and I'm not, I'm not.
[00:45:04] Speaker C: A crypto Guy, hear me out, because again, I don't disagree with, I can't speak to anything that you're saying from that side of the river.
But for the 98 owners in that room who are trying to figure out if they have a way to create value with their business, what you're saying is no buy Bitcoin.
[00:45:29] Speaker A: No, what I'm saying is.
[00:45:30] Speaker D: Can I just reframe this, Let me see if I've got this right. Because I think it goes back to what I was saying is, Mike, maybe is the question not if a business is generating cash flows, does it make more sense for that owner operator to reinvest in an asset that's going to outgrow their business over the five or ten year period?
Does that, is that resonating with.
[00:45:55] Speaker C: Are you saying as opposed to reinvesting in the business?
[00:45:58] Speaker D: As opposed to reinvesting in the business and potentially not making enough of a hurdle to actually get rich at the end when they do eventually exit and.
[00:46:07] Speaker A: What, and if they get the 800 grand, what are they going to do with it? It's still, it applies to everybody because like even people that have $100,000 salary and can't figure a way out to retire, there has to be a solution. Otherwise everyone's on that melting treadmill.
[00:46:27] Speaker C: And if instead everyone's chasing to either get into the 2% or, or plug as much money as they can into bitcoin, I don't see how that framing helps our 98%.
[00:46:40] Speaker A: Because I'll put it very clearly from my perspective is for someone that's got $1 million revenue business, let's say they've got five employees and I mean, are they pulling down 200 grand pre tax, post tax? Like how much is someone making on a million dollars in revenue?
[00:46:55] Speaker C: Like, it depends on the business. Let's just make some, let's make some generalization to half million dollars dollars.
[00:47:02] Speaker A: What do you want to have as the, the bell curve assumption? 200.
[00:47:07] Speaker C: Yeah, let's do it. Let's do that.
[00:47:09] Speaker A: Is that after tax?
[00:47:15] Speaker C: Okay, sure. Let's say after tax.
[00:47:18] Speaker A: So then they're probably. So they're, I mean we have to look at, you know, Kyle and Graham, you guys can jump in of what. Because I think it's helpful putting a frame around. Like, and there's going to be deviations from this for sure. Because we're trying to like if there's a bell curve and we're looking at, hey, like if someone's in the million dollar mark, what are their options?
So Like I believe to say, okay, well I'll just explain it from how I handled that question over the last 10 years with the three companies I've had do I reinvent? I have to take less money today to reinvest to over to get my equity of my wealth. And if I don't do that, then what?
So then, so then there's a couple different, like there's only a couple solutions to getting out of that trap. It's like, okay, well I reinvest. So it's seven years of my time and cash flow to get to the 2%, which still mathematically actually doesn't really make any sense. But we could, we could assume it does to get to the 2% because now you can be on all the awards and whatever and it's an ego reason and great, but it still doesn't mathematically make a bunch of sense. But if you don't, then you say, okay, well I still need to retire, like, and then like what kind of lifestyle do I have? If I'm making 200 grand and my lifestyle creep has hit that and I've got my write offs and I got all that that's going through the business and I need effectively if you did the, you know, how much money would you need to retire? And you go, you probably haven't saved a ton. And by a ton I mean like the, you know, the, the, the stats out there, it went from 800 grand to 1.6 million for a safe retirement now with Social Security and like, and if you look at like the lifestyle that people are talking about, it's a bunch of, it's like, says who that that's a meaningful lifestyle. And I'm not begrudging someone that saved a couple million bucks. That's a lot of money. And based on my, you know, my wealth management from 10 years ago, that's you're in the 1% if you got a couple million bucks. So this whole conundrum is real. And so then like I think that there is an a, a thesis that I, and again, I don't work in the space, but I think this still applies to some of the people on the lower end of the people I'm working with, which is if you were to design a business that is decoupling your time from it over time.
So you're like, you're looking at the different ways, like what's the opportunity cost of reinvestment versus just putting in systems to generate a decent amount of cash flow as an annuity while working 10 hours a week.
There might be some way to then save some money while you're solving the burnt out phase where if really you're, you're burnt out of your job, it's not, you're burnt out of your asset because the asset's not really there yet.
[00:49:56] Speaker B: Ryan, if you don't mind, I want to jump in here and I want to give Mike the floor because I'm just going to play back a couple of things if what we talking about here, okay, And I'm paraphrasing on the one hand what you saying is, hey, what's quite interesting actually is that we're talking about micro, we're talking about small business. But actually, Ryan, you're talking a macro discussion. You're talking about actually where the economy is going, okay? The whole sort of an approach to economics, whether it's in the US or globally or whatever. Okay, so there's actually a whole separate discussion around that. But if what you're saying is true, then the question I've got, is it futile? Is it futile for the 97%?
And I simply can't believe that it's futile for the 97%.
And Mike, I think if we can, I mean, I think it's really important that, you know, you may just take the floor because you working with the 97% on a daily basis and it's not futile. There are people there that are living good lives that are fulfilled and you know, but is, is that a short term thing on, you know, with the backdrop of what's happening, you know, from a, from a, from a global or macroeconomic perspective? I mean, Mike, maybe take five, ten minutes just to kind of talk through that. What are you seeing on a, on a, on a sort of daily, weekly, monthly basis.
[00:51:15] Speaker C: Yeah. Thank you, Graham. I'm a pragmatic guy by nature and so I don't want to talk about the macro. In response to your question, I want to talk about Carl.
Carl's an owner that I worked with who when I sat down with him, he had a modestly successful, very small business, three, four employees kicking $170,000 a year to sellers discretionary earnings works harder than he wants to.
Three years later, Carl's business is probably 30 or 40% larger than it was. So we've increased it in size.
His seller's discretionary earning is up at 350 to 400.
He's not doing 80 hours a week anymore and he's a couple days from signing his sale document.
Now that sale document is going to put 1.2 in his pocket from, you know, down payment and some payout along the way.
That's life changing for Carl.
Does that satisfy his health insurance need? 25 years after he retires? I don't know.
[00:52:39] Speaker A: How old is Carl?
[00:52:40] Speaker C: He's in his late 50s.
I don't know how to solve the macro problem.
I know that my life changed fundamentally when I was able to go from an unsellable business to a sellable business.
When I sold, I didn't make never work again money, but I may never work at a job I don't want to money.
And that's a freaking miracle compared to that burden of financial stress and overwhelming anxiety of having credit card lined credit cards lined up on my desk where I'm using the check I got from this credit card to pay off this credit card because this one's at 0% for three months. And then if I push this over to go from that to a place where I'm debt free, where I have investable income, where I have investable capital to decide to do what I want to do next, where I can actually prioritize how do I want to spend my time equally with how do I make money.
Guys, again, I know we live in an Instagram world where I'm supposed to worry about my private jet, but we're talking about life changing realities for that 97, 98 people in that audience that we're talking to.
They are the entirety of the audience. They are the market.
I like to talk to them. And it's easy to get discouraged looking at this stuff. But the reality is that small business owners can make incremental changes in their businesses that create the opportunity for a real world, life changing exit.
Or to your point, Ryan, and it's a great point.
Change their business enough so they can keep owning it without consuming every ounce of life resource and energy they have.
Ownability and sellability are the same thing. I love that outcome. It's part of the reason I don't work based on commission is because I've had too many owners fall back in love with their business, decide that working 20 hours a week and making more income than they did before is a great outcome for their business and they're going to do that until they get ready to retire. Great. Fabulous.
But the 97 in the audience that are listening here that want to know that there is a path to change their business and change their life. I'm a firm believer that path exists.
[00:55:31] Speaker A: I do agree too. I just want to make sure that I like I don't think it's futile either. And I think that's why we're, we're having this conversation. But I can understand why some of the convert, like the comments I made made it seem like that. And I, and I respect everything you said, Mike. Go ahead, Graham.
[00:55:46] Speaker B: Yeah, I mean, I, I, what I was going to say is that, you know, I think, I think at the end of the day, when you strip everything away, it's actually not about evaluation or a number. It's actually about giving people choices in terms of how they want to live their life. Okay. Whatever the economic system is. And I think what is quite interesting in this, let's call it, I don't use the lower end of the market. Let's call it the whole market, Graham.
[00:56:10] Speaker C: It's the whole freaking market.
[00:56:12] Speaker B: Yeah, yeah, actually you're right. In terms of numbers, you're absolutely right. Okay. But I think, I think the point is, is that for a lot of these guys, yes, it's life changing, but selling at a, three times on discretionary earnings or whatever the number is in many instances is not going to be enough, as you say, to cover health insurance for the next 25 years and all that. What it might be enough to do though, is to give somebody a reset for three years, you know, and do something. What happens?
[00:56:42] Speaker A: Do you guys know a lot of 65. There's 68 year olds that want to reset, though, and a new identity crisis. I mean, I went through that at 27. It was a. And that's where, like I want to know, like, I, I, I so agree with you, Mike. And like at 55, like, you're, like you're capable of having more Runway.
[00:57:05] Speaker C: Let's let, let, I'm sorry to interrupt because I don't want to lose our agreement.
And I think we both agree on the first seven steps.
Now we're talking about what happens after that. Right. What has to happen first is you've got to change how you approach your business. You've got to increase the profitability, you've got to grow, you've got to make it less dependent on yourself.
All of that is true. And then you get to a place where you're putting 3, 4, 7, $800,000 away. Okay. Now, we might have disagreement about what comes next, but.
[00:57:42] Speaker A: Yeah. Well, thank you very much for re grounding us. And I think what hit me just now, Mike, as you were saying that, and I'm curious on your thoughts about this. So we talked about the misinformation, the convolution, and no Owner knows. No owner knows what the F they're listening to and why. I mean like I got boilers and commercial cleaners and H vac technicians and they're like I don't know what the hell these suits are talking about.
And so like even the, you know, if all those advisors are actually trying to speak to the 2%, which is kind of what you said, right? Because everybody, no one's acknowledging it like we are. But like if that's in reality what's happening, which confuses the hell out of everybody. So everybody's trying to reorient themselves. Like is this applicable to me? Is this not applicable to me? Which is complicated because if you're the boiler tech or the commercial cleaner or the, the plumber, you still don't know if you're part of the 2% that it's relevant or not. Because they don't know what the hell anybody's talking about. And so like there's still just left confused as regardless. And so why I. Okay, so let me know if you think this is true or not because I put, put some notes on it. It's like in your situation with your side, with your side of the market that you're working in, I think the words exit planning potentially do apply because it is the job and the asset comingled into one. And you like that is a good. Like people are probably generally burnt out.
So they're looking for a way out of the whole, the whole situation.
And so I could see because you've been hearing me say like I think exit planning is a concept is a bunch of shit for my audience and why I think that is. And so like all of those advisors that are preaching to my audience, I think they can go pound sand. And here's why. Is because when you have enough cash flow like that, it's a effing asset. And your job and the asset are not the same thing. So it's a complete false choice of this exit planning. So like what it kind of came to me and back to this whole relativity of the seeing the size is like I can completely see on your end exit planning being a completely coherent thought process.
But when you get to that certain size, I just can't subscribe to it all being one thing because the asset and the job are wildly different because you got to a certain size. What are your thoughts on that?
[00:59:58] Speaker C: I have no pushback on that. I'm not a fan of exit planning as. As phrasing anyways. I'm an exit ready proponent. I think the key for an owner is to build a business that they can sell tomorrow or keep forever.
It's not, it's not to execute a decade long plan. You know, I'm going to, I'm going to sell then and then I end up with a diagnosis in two years. Right. The goal is to get to exit ready.
I think the framing that you're talking about is an important learning step for even small business owners.
But it comes after other basic things. Like it comes after you stop using your bank balance to make budgetary decisions. It comes after we start to evolve away from the basics that just way too many owners bring into their ownership of a small business and navigate to a place where we're looking at that business differently. But yeah, I can't disagree with what you're saying.
[01:01:07] Speaker A: I think that's why it's so helpful for myself and hopefully for all of our audiences is that just understanding if the person listening where you're at in this spectrum of the journey. So then you can place yourself to say what resources can I afford and what should I, what do I have? Like, and maybe what I can do as we get into kind of the how, Mike. And I'm really, really curious on your how in your practice. And I can maybe I'll, I'll kind of just start to lay the groundwork of like what, what I found is, the challenge is I was like flopping around not quantifying or not articulating my market, which is the valley of death for a business. Like I couldn't figure out who my ideal client profile was. And it took me, you know, a decade to land on apparently the like Clint Fiore calls it the whale sharks. It's like, okay, now I've got mine.
The challenge that like, because I have a heart for all the people that you do too. And like I, and I just do. I couldn't figure out. It's the same thing with like all my service. Like everyone needs all this stuff but like if they don't have any money, what is the right economic business model to satisfy how many people and how grow like how scalable is that business model? And when I think about like the challenges that some of the biggest challenges I saw with people in that honestly of all company sizes, Mike, I mean like 3,000 people in Vistage have been through my workshop.
10% have a three statement forecast.
I mean billion dollar companies, like they're making shit up. And so when we look at, when I see like when I.
If I was in that spot, I would need to see a Forward looking forecast to say I need is Ryan tansom to make 200 grand and if I do these things I don't have 200 grand and I have my bills to pay. So it's that forward looking forecast that actually needs, is needed to make those decisions. But then when I tried to build out a CFO business, I couldn't actually build out the CFO business, employ the CFOs, get my gross profit on the company side, pay my taxes to make it worth it for me because it was still five to seven grand a month. And then they would need a bookkeeper and they would need all this stuff and their data would be and I'm sitting here going, I can't figure out a business model to help those people that don't have any money even though like the numbers and that trade off decision so they don't run out of their own personal income was the biggest constraint that I saw. But what it like, how do you approach someone that's got that 175 and they don't like they've got how much to work with you and then they're going to have to spend more money on other things. How do you navigate that?
[01:03:36] Speaker C: Well, it's a fair question and it's a real question because I can talk about the 98% but the truth is, and I don't know the number, what percentage of that of those owners are actually showing a, showing a profit in their business and making more than market rate salary for themselves. We probably just lost 50 or 60% of the audience.
Right.
If we use that as a cutoff, they could go somewhere else and get paid more doing the same job for someone else than they're doing for themselves. So I mean for me when I.
[01:04:18] Speaker A: Now we're at 47%.
[01:04:19] Speaker C: Yeah, exactly, exactly.
We keep cutting the pie.
It's a good question.
I think for the purposes of the topic today where I land on that is when I look and ask the question how do you sell medicine to people who don't know their sick?
I don't think there's a lack of need out there for this information or for this service.
I think there's a lack of understanding with small business owners around how they can make things better, make things different.
And so when I sit down with an owner, it's usually a function given the content I put out, they usually know what they're getting before I ever sit down with them. So but having them in a place where they have a sustainable business, even if it's not a Wildly successful business I found for myself. That's the starting line, Right. I've done turnarounds before, but I don't want to be a turnaround guy.
[01:05:26] Speaker A: Amen to that.
[01:05:28] Speaker C: And so if you can start from sustainability, we can start to look and ask some basic questions that can reframe. And let me give you one example.
We talk about what I want in the future, we talk about what enough is. And one of the exercises I'll go through with an owner is paint me the picture. Show me what happens after you sell this business for what you're targeting. How much are you going to spend on X? What's your household budget? How are you going to do? Because part of. And that's to the forward looking forecasting that you're talking about, right? Because I've had more than a few owners go through that exercise and realize that the lifestyle that they actually want, the freedom that they want, takes a smaller number than they thought it was going to.
And their exit and their opportunity to start living the life they actually want to be living happens way faster. So I don't know if I answered your question.
[01:06:31] Speaker A: Yeah, I think you're getting close and, and I'll reciprocate and then I maybe we can get into some specifics. So like.
Or more specific. So over the last decade I got my value builder certification. Tried different ways, the Value Opportunity profile tried different ways with that engagement. So I like, you know, I tried to bake it in, you know, again, 2014 and 15 into like a planning fee for the asset under management. I got the hell out of that because I hated it in the business model. Like it's only on liquidity. Like wrong incentives. And so back to the, there's wrong incentives everywhere. So I couldn't figure out a business model too. So Carl, who's got 175 grand where how much can I charge Carl so I don't go broke.
While also Carl needs to guess what like Mike Michalowicz is like, you know, profit first is great, but like we're still like breaking a financial, like breaking your financials into bank accounts as a company is still pretty elementary. Like you need at least a forecast. And then it's like, well, your data.
So like, so let's say we do what you just said, you know, and so like I had all these different certifications, all these different consulting, you know, ways of going about this. And then I land on the fractional CFO services. I'm like, well, I couldn't even do that, Mike, because everyone's data is shit. And I'm like, you have nothing that we can even like. So then it was like, well maybe not a cfo. Maybe we could do this dashboard thing. We can connect the dashboard to your QuickBooks. I'm like, well your QuickBooks is shit. And I'm like, well then you need to hire a bookkeeper at three grand. And like I don't have enough money. And so like it was like, it was just every time I turned there was not enough money. And so where I landed in it. And so I'll walk you through exactly how it took me this long to figure out this opportunity of this business model. So I landed on a coaching business, which is different than a consultant or an advisor where I don't do anything.
As in like I'm providing the playbook and the education.
And so there are three ways to work with me. So I have one on ones that's three grand a month and it comes and they, I have Monday trainings, Tuesday group Q&As, and then I have a one on one with people on a individual basis to run their ownership meeting and then do a quarterly board meeting. And then there's the group program which is 1500 bucks a month.
But the entry point is what I call the boardroom blueprint, which is 10 grand.
And so it's literally, you have to clarify all your goals. You gotta get a three statement model, you gotta get a business valuation. So at the end of the 90 days we can talk to each other like owners.
But like that pricing for the 2% is still hard to swallow. So instead of me going as a CFO at seven grand a month and then only getting one piece of the puzzle, what I'm trying to do on the. And I'm curious if this applies down market is like I'm, I believe and it's been proven to be true if I can help them make better decisions with their like. But they're making the decision and they're doing the implementation because they see what good looks. Like. It's like you still got to go hire the bookkeeper, you still got to go put in the executive recruiter. Like, but like the pricing reduction of having a coaching model that's leveraged like that allows me to work with these people. Otherwise like when I was doing the consulting practice I was like 40 grand.
[01:09:34] Speaker C: And they're like that's my boat, right?
[01:09:37] Speaker A: 100%. So like I'm curious like where I'm going with like the, the, the bigger market. I'm like, hopefully that my free education can start having people thinking like this, like you, you're saying. So that way they can work with you. Or then, you know, maybe they work with you before they work with me. But like, how are, how have you solved that economic issue for yourself and what processes or tools have you come across?
[01:09:59] Speaker C: You know, it's interesting, when I, when I started the business, I started with a curriculum model in, in mind.
And what became very clear very quickly. Again, back to that question.
How do you sell medicine to people who don't know they're sick? Right? Yeah. $79 a month.
[01:10:17] Speaker A: Give their doctors commission.
[01:10:18] Speaker B: Yeah, exactly.
[01:10:20] Speaker C: Thank you.
I didn't find a curriculum answer. I landed on the coaching for the very reasons that you just described. Because ultimately, especially for the 98%, the only way the business changes is through the owner.
They're just, it's, it's, they're too tied to the business just because of its size in most cases for it to be anything other than that. But well informed, engaged, energetic owners can freaking change just about anything. And so that exercise with them of helping them see the impact of making some of those changes, that, that's where the model had to come down to, would just became too clear that anything that was canned might be able to inform, but it was never going to engage.
[01:11:16] Speaker A: So did you try some of those systems like I was talking about?
[01:11:19] Speaker C: I didn't. I made my own and it was very helpful for me relative to the coaching I do because that's the curriculum I use.
[01:11:29] Speaker A: Got it.
[01:11:29] Speaker C: But the idea, and again, part of this is what kind of business are we trying to build? Right. I like the work that I do with the owners that I do it with. I'm not looking to build and scale a platform.
[01:11:43] Speaker A: Your practice.
[01:11:44] Speaker C: Yeah, yeah. This is, this is what I do so well.
[01:11:48] Speaker A: I think that's why it's so fun what we're doing here because I don't know how many people like I, I've, I've t. I tap out my one on ones at 15 and then everybody else has to grow into the group because my time is the constraint that I work everything from.
[01:12:00] Speaker C: Sure.
[01:12:01] Speaker A: And then like so then the group is the only other way for me to help more people. Then everything after that is my content. But like have you. So like when you go in and you, you've got your select people, like that's what we're trying to do with this podcast with Graham and Kyle here is like more people need to hear this. So that way when they're talking to another advisor. And you and I can't work with anybody else. They still have. We still want to help those people, the Carls and the Bobs and the Jans of the world.
When you're going in there, I'm really curious like, of your curriculum. Like, I feel like there's probably a huge overlap of the same dumpster fire. There's just an extra zero at the end of my revenue clients.
[01:12:37] Speaker C: That's almost certainly correct.
[01:12:39] Speaker A: So.
But there's less resources because I think you're probably.
I again, I think there's a lot of. There probably is even way more parallels where like even my client base after working capital debt, taxes and reinvestment. None of them are like filthy jet rich. None of them. I mean like, and there's, and, and it's all about expectation setting. If someone expected to have $10 million, but they only have four, they're unhappy. Whether you, you know, it's like, I think that the sediment is probably similar to your clients as is to mine going, I'm just not there yet. And I was promised I could get there. And this is way harder than I thought.
[01:13:17] Speaker C: Right.
[01:13:18] Speaker A: How are you going in there and like, looking like, what's the state of the situation, the operations, like for the financials? How does Carl make a decision of like, hire the bookkeeper? Do you have preferred people or do you show what Carl what, what good looks like on bookkeeping and then like what, you know, employee reviews look like? Do you like, subscribe to something like eos? Like, what are the different things that you're telling Carl to do to go from 170 to 350?
[01:13:44] Speaker C: It's really a, it's a really a great question. And the answer is, is that we're probably not talking about the technical business stuff until we've been working together for four or five months because we're going to start on what do you want want?
Where are you actually trying to get to with this business?
And what is a realistic expectation? And this is where our friends at Bis Val come back in. What is a realistic expectation for what the market is going to require your business to look like in order to create the value that you say you want to create? Don't give me dreams. Don't give me fantasies. The rule of thumb, two times revenue garbage. Give me, tell me what you're trying to get to then. As I alluded to earlier, here's an exercise to tell me why.
Because if you want to, you want to live in a farm on north in northern Iowa and Stay home with the kids and raise animals. You probably don't need 15 million on your exit, right, to do that.
[01:14:47] Speaker A: So maybe not even 4, right. Maybe 1.2.
[01:14:51] Speaker C: How do we get. What do we want?
What does the business look like now? What does it need to look like to give us what we want? And then that's the path we start to walk together.
[01:15:02] Speaker D: So just a question for both of you. I mean, obviously defining success is always. I mean, it's the cornerstone of, of. I'll almost say it's the. The cornerstone, happiness, in a sense, when it comes to like, you know, getting an exit because you don't know where you want to go and you don't have a success thing to plan to get there.
[01:15:19] Speaker A: Any road will do. Said Alice in Wonderland.
[01:15:22] Speaker D: Yeah, of the people that you speak to, I mean, Mike, it sounds like you have a process once someone's engaged to figure out what that looks like. But how many people would you say, on average, actually have that figured out before they engage?
[01:15:37] Speaker A: You both might go for it.
[01:15:40] Speaker C: Oh, I would say comprehensively, almost never.
But to be fair, that's part of why they're coming to me in the first place.
[01:15:52] Speaker A: Yeah, I can't think of how to answer that because I think if I were, I'm gonna answer it two ways.
Everyone I know that's a business owner, after 450 plus podcasts and all the workshop attendees, everyone just wants independence that I've gathered. The general. I'll call it the 98%, not the 2%. The 2% might want something else, but like ego, reason, but like it's. I just want independence for whatever is driving me. It could be validation that I'm a good person because I had a bad childhood. It could be because I didn't, like the employer that I quit from. It could be because I lost my job and I had to figure something out, but like, somehow it's rooted in. I want to own my outcomes and I believe that I can get a return, hopefully of time, cash flow, equity on those outcomes of the hard work that I'm willing to put in. So, like, I'd say, like most people can't say it just like that, but it's like I want freedom. It's all the BS freedom, financial freedom, and it's all these. These, you know, you know, bumper stickers. But at the root of it, it is like, because I switch, I just want to do whatever I want. I want to be able to like, put my daughters on the, on the bus and I want to be able to go to their conference tomorrow. And I think other people have that. And then the business operation swallows them up, up. And I think to your point, Kyle, like I, I say this thing in my workshops where if the bottom. So for the people listening, and I've got this bottom, like horizontal axis, and then there's this, you know, call it 45 degree angle. And there's this gap in between where the top, you know, 45 degree angle is expectations. And then the gap is resentment and unhappiness. And we're trying to correlate expectations and reality.
And so most people, like no one I would say that I work with, with, can articulate specifically what does that mean of that independence, which is what I then spend time going, okay, well how do you want to spend your time? What do you want? What? Like how much you want to be in the operations versus your ownership and your personal time. So I have this time equation and what your role is. And then I say, okay, out of your cash flow. So if you're making 250, Mike, right now in salary, no distributions, a lot of my clients, they want to say, okay, after these exercises, like we want to, to flip that to 250 in distributions. While Graham's running my company, I can afford his W2 in my income statement. And then we go to the wealth side and say, okay, well, I have maybe $1.5 million in retirement outside the business, and now I need one and a half million dollars in equity in the business in four years. So like, that's the frame, the time. Cash for wealth, how I double click it, make sure that it's calibrated. But then what? I have found no one understands valuations, which is why I've spent a disproportionate amount of my time over the years explaining how they work and coming up with frameworks on how to think about valuations. Because if you're going to, like, I have so many insane examples, like my dad and I being one of them, like, we're waking up and eating shit every day and having no idea whether we're growing value or not.
It's insane. It's like you wouldn't just pile money into your 401k if you didn't think it was going to go up. And like, to just do that and just guess is insane to me. So what it sounds like both Mike and I are doing is like, is what you're going to do worth it? Bridging the expectations in reality. And so I spend a lot of time Explaining the valuations, how they work. So that way you say if you take your cash flow and reinvest it because you're foregoing cash, here's how it would bump your equity and in what timeline? Well, I don't want to work that hard. Okay, you can take more money today, but you have less wealth for tomorrow.
So like, I'm kind of doing the same thing. But I, I, Independence is, I'd say, like they could answer that, but they can't answer like, okay, what is the actual landscape of the rules of the game?
Like, I always, my last comment is, you know, when I, before understanding all this, I felt like I was playing soccer but like I got shoved out onto the field and no one told me the rules. So I was playing game, the game of business. And I'm like, I don't know, I'm just like, do. I'm chasing everybody else around and I think we only use our hands sometimes. And like, so it's like I just wanted to get the complete understanding of the rules in order to actually make better decisions.
[01:19:59] Speaker C: 100%, Ryan. And let's bring it back to the, the main topic of today.
How many of those misconceptions that you end up coaching owners away from came to them through the content that we're talking about? That was driven, written, you know, projected by someone targeting a very specific. I don't know how many owners I've come across, but it's more than a few whose first introduction to Exit was a two hour luncheon on ESOPs put on by their law firm.
[01:20:36] Speaker A: Or you got generational equity, they got a machine of salespeople.
[01:20:40] Speaker C: Yeah, it's, yeah, they can't define sellers discretionary earnings. Right. That same owner can't. Or they're, well, gee, how much profit do I actually need to make to be able to afford this esop? Because we've been breaking even every.
[01:20:56] Speaker A: It's just the ESOP journey is not worth it because it's going to take you 10 years and you're going to have to raise money or whatever the hell it is.
[01:21:01] Speaker C: I mean, but hold on one second, Ryan, because just this example, I brought it up, I looked before we got on the call. There's less than 7,000 ESOPs in the entire country.
Not 7,000 a year, 7,000 total 34 million small businesses, 7,000 ESOPs. Why does any small business owner know what an ESOP is?
Because someone else has an agenda that they're pursuing that language, that information starts to permeate and then we shouldn't be surprised when that same owner comes to us with a misunderstanding about value.
[01:21:47] Speaker B: Well, and I, if I may jump in here, Ryan, and sorry to talk over you, but you know, it's fascinating.
I think before the show we were talking about the certificates in the background, and my wife was a chartered accountant, or CPA as we call it in the US for many years before she think she got it right because she went and studied psychology. So she's a psychologist now. And it's funny because we started off this discussion with a monetary framing, but as we're chatting, it's actually more of a psychology framing, which is, which is super interesting to me on the one hand, but I do want to tackle that.
And what I want to tackle is, you know, we talk about this 97%, we talk about where they getting the information, and there's a big misinformation, let's call it gap year. You know, the noise that is out there makes it incredibly difficult for the 97% to get access to the right kind of information. Okay. As we've spoken about this is first of all, that they need to want to help themselves. Okay, but how do we change that? I mean, that's maybe the question we're trying to answer is how do we get the 97% to hear the right message?
When everything you see, whether it's on LinkedIn, whether it's on mainstream news, whether it's, you know, lawyers, CPAs, whatever the messaging that's putting out there is, you know, the 2% message is, is what's being amplified. So how, how do we change that? Is it, is it podcasts like this?
I mean, that, that I guess is, is part of the question. I mean, Mike, I mean, do you have a view on that?
[01:23:23] Speaker C: Yeah, it's a really discouraging one too. I don't know how we overcome the financial incentive of the content creators in order to address this issue. Because to Ryan's point from earlier, if those folks are chasing that 2%, they're going to speak to that 2%. They're going to educate into that 2%. They're going to say things like, if you're a small business owner, make sure you understand how family offices work so that you can see them as a potential purchaser.
It's a non starter, it's a non solution. But I read that and again, let me talk a little bit about my embarrassing journey I spent.
I grew my business from zero employees to 50 full time.
And in the last two or three years of that first decade, I focused exclusively on growing revenue because I had read an article that said companies in my industry were valued at 2 times revenue.
Now I thought I had done my homework right. I had spent some time searching and learning and only to find out at the end of that decade after broker after broker said nope, can't help you, nope, can't help you that this didn't impact my value that that's not how a business was valued.
I worry about the well intentioned, overworked business owner, the one who would genuinely like to learn about this stuff but has a half an hour a month to give to it or an hour a month to give to it. And I think Ryan, if I'm hearing correctly, that's where our coaching practice offer comes in right is it's all right, let's carve this aside. We can target it for you specifically but if they don't choose that or they don't want that, even if they just set aside one lunch hour a month to focus on doing that themselves, maybe over time they'll penetrate through some of that surface garbage and get to a place where they're learning about things like sellers discretionary earnings and how are real businesses value mute.
[01:25:51] Speaker A: I like it a lot and makes I I, I resonate with that the way that I would answer that and I do want to come back I put a note let's come back to that psychology versus the mechanics because I think it's a fascinating topic too but the the way that I so I you know Mike, we keep talking about like if everybody's marketing to the 2% I still think that the way that those people are marketing to 2% is complete it like because it's the wrong words they're using the words exit planning for the people that it doesn't apply to and so how I'm trying to tackle this Graham, is the only other analogy I can use and it is I'm going to relate it to health care.
I personally believe this is a a testimonial of one that the United States healthcare system is a a complete dumpster fire. I hate it so much from all of my personal experiences that the moment that I realize out of pure exhaustion that every doctor and healthcare provider is an insurance salesperson is the moment that I had liberty to go. This is my responsibility. The only person that owns the outcome of whether I feel good or my family members feel good is is us.
Otherwise we're getting My dad was wrongfully diagnosed by rheumatoid arthritis by the Mayo and he was on biotrax for four years about effing killed him, my wife and her back. My. I mean I could go on and on and on.
And so then what did I do?
Unfortunately, like, and this has been like, it's a skill set that is not for the faint of heart.
I have consumed everything health wise for five, six years. Huberman. Everything. I can listen to Peter Attia and I'm going to the people and I'm watching a three hour podcast on how mitochondria works, how dopamine works, how booze works. And I'm going, okay, like, and then coming up like, guess what?
[01:27:48] Speaker C: It's, I gotta sleep eight hours, I.
[01:27:51] Speaker A: Gotta go work out and lift weights, I gotta eat, not fake food. And like life is gonna be generally okay. And then it was just like, huh, everyone's lying. And I was like, and what I realized, it's like, it's not. I want to be very careful because I went through you guys and I'd be very honest about this, I went through multiple phases with the business community like this and then the healthcare where resentment almost swallowed me up alive. And it doesn't do me any good. It's negative energy. It didn't do people that were listening to me any good. And it has been one hell of a growth, personal growth journey to just be opportunistic in a system of complete, horrible misalignment of incentives.
And so I was just like, well this sucks. Like, I mean I still go like. And I think there's, there's relatable parts here. Like we've all probably been in a group meeting or family or get together friends and you listen to people like I have this ailment and then they talk about their lifestyle and you're like, oh my God, like you're a pharmacy.
And this is probably why. But they think they're getting help.
[01:28:53] Speaker B: Help.
[01:28:53] Speaker A: And like I think about that in the business community, it's like, well, you got this exit planner who sells insurance, you got a CPA who's doing quality of earnings for 50 grand, your assets under management, wealth managers trying to collect aum. So you sell your company, your broker wants to sell your business and you go all the way down. And it's like, it doesn't mean that the doctor or advisor is a bad person. They're trying to make their family and their ends meet. And it's like I just realized that the system, which is why I like figured out the macroeconomics, I'm like, so, so looping all the way back to your question. Graham, I believe the way that I can help impact the people that can't afford me or can't work with me right now is to provide free education through podcasts, through the newsletter for YouTube videos. So that way they know, like, Ryan doesn't care.
Like, I'm not trying to steal 40 grand for an insurance premium out of you. And, like, without doing it in a gross way where I'm trying to sell against someone else, I'm just like, here's what it is.
And then, then they can start, like, through breadcrumbs. And then, then you know what? I've been on a journey with Graham and Kyle and Mike would be interesting, as we're all collaborating here is like, where do we get that content out when we're all content fatigue and getting our voice out is even that harder? It's like, well, Vistage is a group, good group for me.
Industry associations I'll keynote at. Then they are like, oh, my God, Ryan might be worth listening to. He. Then they go listen to a podcast with Graham and Kyle, and it's like, it's really hard. But, like, like education to hopefully start changing that narrative. And education and messaging is the only thing that I've been able to land on.
[01:30:28] Speaker B: Mike, what's. What's. I mean, what's. What's your take? I mean, as I say, you know, I mean, how do. How do you. How do we change this. This narrative or kind of like get this message out through all the noise?
It's.
[01:30:47] Speaker C: I'm going to start by throwing a thank you to Graham and Kyle for reaching out for this conversation. Right. Because I think the big problem is that the incentive isn't there for this messaging.
Nobody makes a buck talking about the basics.
And that's really what we're talking about, right? We're talking about core basics. Ryan, you earlier used the analogy to general health. And we all know that eat right and exercise is the core message of maintaining general health. Well, what's the eat right and exercise of small business sales of business value?
I know any of us can give each other a dozen. Highly technical, but what is it at the core? I mean, for me, it breaks down to the three questions.
Are your results desirable? Can a buyer duplicate your results, and can you document your results?
That leads us to the my business buys itself. Right? That's the core of this. And getting to a place where owners can answer yes to those three basic questions.
If you can do that, if you can answer yes to those questions, then there's a line of advisors to Ryan's point. Who would be happy to list your business for sale or charge you 12 grand for the legal fees or do whatever.
I can't help Graham, but feel like the answer to your question is we just have to keep pounding.
I'd love to say that the answer is a public program where there's some. But I'm. I'm skeptical that, that the answer is there.
[01:32:41] Speaker A: I think about who funds the associations. It's all the same.
[01:32:46] Speaker B: Yeah.
[01:32:47] Speaker C: Right. You know, the. The sponsor for the event is unlikely to be.
When it's an ESOP provider is unlikely to be incentivized by someone like myself getting up and talking about how ridiculous it is that we know anything about ESOPs.
[01:33:02] Speaker A: Yeah, I don't know. Is there a way, like, a clarification, like, almost like. And maybe this is like, something we could all do is like, put a qualification down, like, who the hell is in the audience? And I think that's why we were here, right? It's like, I mean, me, Candace and Luke, we're all like, if we're Talking to sub $1,000,000, all of us should stop talking.
And we all.
[01:33:24] Speaker C: That's the whole audience.
[01:33:27] Speaker A: Well, not if they're listening to my channel, though.
[01:33:29] Speaker C: Okay.
[01:33:30] Speaker A: You see?
[01:33:31] Speaker C: Fair. Well, which is why I asked the question in the. In the webinar. Right?
[01:33:35] Speaker A: Yeah. No, which is why it was a great question too. Yeah. And.
[01:33:38] Speaker D: And I think.
[01:33:39] Speaker A: I think you know how I would answer. You know, I like, I like your couple isms that you gave out there, Mike. And like, with a couple startups that I've had and. Or my bigger business, I think that there was one rule of thumb that treated me very well that, that I accidentally did more good work. Like, it's kind of back to like, James Clear. What's your habit? Stacking that generally will lead to a good result. I hate doing things.
I hate doing shit that I don't want to do. Like, and like, I was told by the schooling system that that was not good, which is why I got bad grades.
And, like, yet the hilarious part about this is the less shit you do in your business, the more it's worth. And so, like, I was just like, wait a second. And that's why I love AI. Like, every time there's a new technology, I'm like, I don't have to do this shit anymore. Like, how can I outsource all of the things that I don't want to do? Because if I want to get on a mountain and go skiing with my friends, and I was Just in North Carolina last week with my wife. I don't want anybody talking to me and like it, like the default mode of most of the people listening in. If they listened to that gut and said, if you're doing something twice, what the hell are you doing? And then the question is, how much does it cost to buy this situation away? And it might impact your cash flow, but like it's probably going to grow the value of your company.
[01:35:02] Speaker B: Yeah, yeah, I think if I can, if I can jump in there, Mike, and sorry for talking over you again, but I think the one thing that's quite apparent in this conversation and you know, is, is one is, is that's when you talk about this advice and the incentive gap, you know, the incentives are completely misaligned in terms of advice into the business sector. Right. The economics behind it don't make sense. But there are some universal truths. And I think one of the things we can all do to kind of amplify the message so that the right people hear it and I, you know, I try to break things down is we need to simplify the messaging. You know, I think one of the big issues with advisors and we've all dealt with the sort of, you know, Ivy League blue chip advisors, I mean, some of us even come from the big four and the big five and all of those things is everybody's trying to be the smartest person in the room, okay? So we need to simplify things and forget about being the smartest person in the room. I think we need to recognize that, you know, running and building a business is first and foremost, it's a human thing. Okay? It's not a numbers thing, it's a human thing. So it's about connecting with people as individuals. Okay.
And yes, if you can do that on a one to many, through a coaching program, you've got to get a business model that you can do that. And we'd all love to chat to every single business owner one on one and you know, meet them where they're at. We know that that's not possible.
And the third one is, I'm using a different context to what, to what Ryan uses. It is independence. And I think independence is absolutely key, you know, like, why are you doing this? You know, and that's the problem that you get with brokers and attorneys and lawyers. They're not independent, you know, they're trying to give advice that they can get more work. We're all trying to make a living. How do you truly generate independent advice? You know, and like you said, Mike, there's three things that matters. You know, can you, can you make a cash profit, can you repeat it and is it documented? You know, those things seem almost too easy. But I'm emphasizing these points because I think when you take a step back, whether you are a sub million dollar business or whether you a 50 million dollar plus business, those universal truths still apply. Okay. How that message needs to get delivered, what have you, maybe is nuanced. But I think if we can agree on those universal truths, then it's a question of, well, you know, how do we deliver that to more people? So. More people, yeah, the message. Okay, so maybe as we come in to close, we can, we can spend a little bit of time just talking about like, so what are some of those universal truths? Okay, and, and how do we deliver, you know, maybe how is that message delivered differently or the same to, and I'm using the words, you know, loosely, smaller versus bigger businesses.
And then, you know, the second part is like, what are some of the things that we just need to be careful of? Where is there actually a divergence where, you know, maybe that universal truth doesn't apply to a $60 million company, that, you know, what are the things that, that are different? And maybe we can spend the Last sort of 5, 10 more minutes talking about what's similar, what's different, and then kind of bring it into a close. If you guys are okay with that.
[01:38:27] Speaker C: Like it sounds good.
Graham. I'm going to start by saying I don't care about the 2%.
Those guys are getting taken care of. Right? Those guys have the money to get the advisors that are going to walk them through this.
Is that too harsh? I don't think so. They're going to take care of themselves. So for me the question is, how do we help the 98%?
And for me, it starts with them accepting and acknowledging that they should forget everything they've learned up to that point. Because there's a pretty good chance that if it came from big business that it's at least off target, if not completely out of left field, learning that, that the journey that you're walking as a small business owner will probably be routine, but it won't be routine relative to the messaging and the storytelling that dominates the marketplace. Because how Google made its last acquisition doesn't apply to you. What private equity is doing doesn't matter. What matters to your point, Graham, and those, again, those are my core questions.
Are your results desirable?
Not from a $20 million perspective, but if I, if I'm a potential buyer and I'm looking at your business. Am I going to go, I got to get me some of that, right? Does it give me a decent lifestyle as an owner financially and does it give me freedom as a light, as an owner so that I can go to my kids baseball game?
Are the results actually desirable? Can they be repeated? Is it dependent on you as an owner? Do you have a team? Do you have systems? Right. These are core things. We all have heard these in 14 different programs or methods. But what it breaks down to is can a buyer duplicate your results? Because if they can't, I don't care how good they are, your sale is meaningless and so is sustainability.
Right. You want to own that thing, Ryan, to your, your observation, you want to own that thing without being involved? Well, if it's dependent on you, forget about it. And then again, last but not least is the can you document it? And those are probably the saddest ones because it's often a function of technology wise that's something that is getting easier.
[01:41:04] Speaker A: Right?
[01:41:05] Speaker C: I think that game has changed a little bit and I think it's going to change a lot more in the next decade. But, but yeah, if you're not down with those basics, and let's just take the first one, if your business doesn't make a profit, if you are not paying yourself market rate, salary and producing a profit that puts you in the average for your industry and relative business size, don't spend time on anything else until you figure that out. That's number one. Everything comes from that. Because all I care about as a buyer when at the end of the day is can I pay myself a reasonable salary so I can pay my, you know, pay my mortgage and can I service the debt that I incur to buy the business if I can't do those two things? If your results don't make that happen, forget about it.
We're having no conversation about exit. So those basics, they get buried under a sea of complexity. But that is what determines if an owner gets to go from step one to step two of exit. Whether that exit is a sale or a stepping away.
[01:42:22] Speaker A: Love it. So I will start with. I do agree with almost everything you said, except almost. The one thing that I do not, the one thing I do not agree with is that the people that are in the 2% are accurately taken care of. And I know that you're. That's not where and I respect the absolute hell out of you, Mike, for choosing your lane. And that's why I loved this Entire conversation is, I believe that 2% is married with a complexity that is just the same. And they don't know how this works either. And they're.
There's a higher chance that they're taking advantage of because they do have the money and it flows out their door without any actual meaningful progress. And then their timeline goes on and they're burnt out back to going to the doctor for four years and not feeling any better. So where I chosen to spend my time is in that space to solve the same reasons that, you know, things that you are have. But where I spend a lot of my education is on the technical stuff. So they can see how that stuff works, to pick the appropriate material to consume and ignore the rest of the other.
And I think, you know, the thing that I would say that is a universal truth, and this is like where I've chosen to pick my side of the Corner of the 2% is I think exit planning for the 2% is a farce word phrase because you have a job and an asset that is commingled and you like, I believe anybody.
And even when I had my own business from zero to seven figures, understanding that there are two roles that you are playing and you are literally not paying yourself for sweat equity because you want equity. Just understanding that, like, I want out is not a good phrase because you're not articulating whether it's your job or your asset. I think just adding that one layer of thought process helps people. Then better answer, what is it that I'm trying to solve for?
And I think the reason that the 2% get so screwed up with all this because most of the people that I work with, you guys, I mean, Graham and Kyle, you guys are Small Giants fans. They're a lot of the 2 percenters, right? So we're talking to the 2 percenters and small giants. They're not gravitating towards private equity or strategic sales because, like my dad and I, you'd have to fire. I fired 60 out of my 90 employees. I wish I didn't do that because I didn't know what ESOPs work because no one told me about them.
So I think it's important that were like, where. How I've tried to solve that is like by counteracting the exit planning vortex as you put Mike to say, this is ownership planning and capital allocation and you have to make decisions. I think I've. What I've proven to myself is I'm attracting people that actually have the Runway and the energy to do the hard stuff to get to the good outcomes because they have to reinvest their time in their and their capital to get the wealth to create more options.
And the reason that I, when I, when I had this business called the Growth and Exit Planning Collaborative, now using all, all of our framework here, I was still targeting to the 2% mike with a company called Growth and Exit Planning collaborative with a $40,000 consulting arrangement. And I attracted zero people because all the people that wanted to put lipstick on a pig and it was a shit business wanted to work with me. And there were all the turnarounds with horrible expectations and all the people that had the time and the energy didn't want to work with me because it said exit it. And I was like, I've engineered a business no one wants to work with. This is so awesome for me. And so, and there was a lot of things that I wish I would have learned about this podcast years ago to save myself that pain. But that ownership versus operator ownership framework seems to be a words that are resonating with people that have time and energy to make their meaningful step up from where they're at. And I think what Kyle and Graham, I'm very excited about the partnership and the, just the collaboration here is I think whether you're a hundred dollar company or one hundred million dollar company, it's insane to not understand how valuations work if you chose to be a business owner.
So we started everybody, hopefully with a good breadcrumb here, which is like decouple yourself, put systems in place, but like start thinking about that whether you want to sell or not because you're choosing to be a private equity owner regardless of whether you've said those words or not.
Kyle and Graham, I want to flip the scripts and be like, what the hell did you two think about this conversation? I think we've, if we hit, you know, end before getting to know what you guys think about this stuff. And I know you've got a lot of partners that you're working with, so you can dance around whatever you need to. But full disclosure for Graham and Kyle, they're not agreeing upon anything that Mike and I said here. They've been good moderators. But what do you guys think about what the hell we've been talking about?
[01:47:04] Speaker B: I'm gonna get Kyle go first and.
[01:47:06] Speaker A: Then I'm gonna cop out, wrap up.
[01:47:09] Speaker B: And, and then bring things to a close. But Carl, you go first.
[01:47:13] Speaker D: No, I mean, I think what's, I think what's really important is, you know, there's, there's synergies in, in both sides of these things. I mean, we've kind of figured out cash flow is important. Understanding your goals, understanding that there's a system that is pretty much engineered to work against you. And it's when you break out of the matrix and figure that out, which is going to take doing hard work on your own, consuming, as Ryan said, hours and hours of podcasts, maybe getting called crazy by some people, you know, that's actually going to be the most beneficial thing you can do. You know, I think, I think just in general, this is a great conversation and a necessary conversation and just one other thing, you've got to got a truth. I mean, speak it. I think in this world, especially the reason why we hearing the same things over and over again as everybody is jumping on bandwagons and just, you know, too afraid to be called out for being wrong, which is not a problem. If you're wrong, just acknowledge when you're wrong and move on and then course correct. And it's probably actually even more beneficial to then come out and say, hey, I was wrong. But this is, this is what I learned. Which, you know, I've heard from both of you on this, on this conversation. I think people respect that and you become a lot more trustworthy when, when you do that.
[01:48:33] Speaker B: Yeah, I mean, I think to add to what Carl's saying for me, I mean, I think this is a fascinating discussion. I think we need to have more of these kind of conversations.
I think there's a few things that I kind of want to highlight. One is it's important to understand where do you sit? Okay, are you in the 98%? Are you in the 2%? Are you between the 90?
Ryan, I think, are you between the 95 and the 99th percent?
Because that's the first thing as a business owner listening to this, you need to recognize where you fit in that spectrum. I'll use an analogy. I mean, Kyle, for those of you who might know was an elite level swimmer, nearly made it to the Olympics but got injured before final trials.
Now I'll use swimming as an analogy. If you want to be an elite level swimmer, you need to train in a particular way.
And believe you me, that's spending that's doing eight kilometers a day or eight, what's it, six miles a day in the pool, three times a day and what have you. But if you just want to be able to go paddle in the Bahamas and do a bit of snorkeling, that's a very different outcome. So understanding where do you sit is important. Number two, one is not better or worse than the other, whether you're a big business or whether you are a smaller turnover business. Okay? It's not better or worse. It's about a choice. Sometimes it's not a choice. Sometimes you go into business because of survival instincts, but no one is better or worse than the other. And I think we've got to stop believing this lie that you've got. You've got to have an eight or nine or ten figure exit to have been successful. So I think it's important to think independently and not just, you know, and, and be happy to kind of, you know, break away from, you know, the, the, the norm. I mean, I'm, I love, I love Roosevelt's speech. This is not the critic that counts, you know, it's the man who's in the arena whose face is, you know, marred by blood, sweat and tears. I'm paraphrasing, you know, so I think that's a big takeout for me. And I think it's also important that we can have divergent opinions. And actually, as we're having this discussion, I thought, you know, Ryan, you in the blue corner and Mike, you in the red corner. Sorry, I'm not, I'm not talking about your political.
[01:50:50] Speaker A: Green and y.
There you go.
[01:50:52] Speaker B: See, I wore a shirt today with blue, white, and red, so I'm safe. But the point is, actually the big takeout from me is there's actually so much commonality in what you're saying. Sometimes the words and how those are directed towards a particular audience make it feel as though the one side doesn't actually belong or there's a misalignment. But when we cut through all of that today, I think there's a hell of a lot of alignment. It's just around nuances and focus. So for me, that's been a key takeout from today. And I think we need to have more of these conversations. We need to be talking to more business owners. We need to be talking to more Carls. We need to be giving more of a platform to, you know, to guys across the spectrum, not just the Elons or the, you know, the billionaires, you know, So I think that's incumbent on us. If each one of us or each person who listens to this podcast just, just, you know, shares this with one other person who might benefit from that, that. That can have an impact, you know, and their communities, like small giants, you know, shout out to someone like, you know, they got acquired Alexis and Her team, you know, sharing stories of, you know, let's call it founders across the spectrum. So I think, yeah, I'm. I'm waffling on now, but for me, you know, that's been the key take. I love these conversations. I love bringing, you know, people together. I think there's a lot of opportunity for collaboration and to speak truth and not nonsense. I mean, I think that's super important. I mean, maybe to wrap things up, I think I kind of maybe want to leave Ryan, you and Mike with a final word, and I'm going to flip the script over here. Okay, so, because we started off with Ryan, you saying that, you know, you advocating for. Let's call it the 2%, and Mike, you advocating for the 98%, I want to kind of ask you, Mike, you know, if there's one piece of advice that you could give to a business owner who's in the 2% listening to this, what would that be? And Ryan, if there's one piece of advice that you could give to a business owner who's in the 98% in inverted commas, like, what would that be? And then, yeah, we can bring things to a close.
[01:53:01] Speaker C: Love it.
Graham. The immediate response that came to mind, if I were speaking to that 2% audience, I would encourage them to live in gratitude because the reality that they are experiencing while they have problems and challenges, come on back down to the lower end of the 98%.
If you want to see problems and challenges and life impact, many of us who are lucky enough to have experienced some degree of success, we can forget that.
[01:53:36] Speaker A: That.
[01:53:36] Speaker C: And I. I think everybody on the call here has. Has had the opportunity to crawl through that space. And I would speak to that.
That audience that way.
[01:53:49] Speaker B: I love that. Just that. That gratitude and humility and to not lose sight of that, you know, it's. Yeah, love that, Mike. Ryan, I'll give you the closing word.
[01:53:58] Speaker A: I would say that. That because I've. I'll just speak to myself five years ago, because I was. That person, is doing the hard work to understand the goals and what level of hard crap I'm willing to deal with to get to those goals and quantifying them, I'm just speaking to myself. Would have allowed me to make better decisions about what I'm willing to do for what reward.
And I believe that all of us are. If you're still listening in, we're all willing to do hard work. I think we all just want to know, is it worth it or not?
And so understanding is it worth it? Needs to be really unpacked, understanding how certain things work, how valuations work, what it. What is the. What's the path need to be in order for me to get to that outcome? Because I, the thing that I want for anybody is like, God, there's nothing worse where you get to that point where you're just like, I don't know if this is all worth it or not. I have no idea what it's worth. I'm just burnt out as shit. I don't want to be here anymore. Everybody relies on me. My family relies on me and my employees relies on me. And that, that's that horrible abyss.
Do like, do the thinking before then because then you, then you'll know why you're doing everything. And you know, hard work is part of the life journey, but it provides meaning to that hard work because the why is very clear.
[01:55:24] Speaker B: Ably love that. And that's just kind of reinforcing the point Mike, I think made right at the beginning. You know, it starts with, you know, spending four or five months getting to know that 98 business owner and their why before you even go further, you know. So, yeah, I appreciate that, Ryan, Carl, any last words from you and then.
[01:55:42] Speaker D: I'll, I'll, I'll wrap up.
Don't know if I could top. I could top those. So, yeah, I think we.
[01:55:48] Speaker A: Good.
[01:55:48] Speaker D: Good to wrap.
[01:55:51] Speaker B: Listen to our listeners. Thank you for, for tuning in. Those who, those of you who've sat through the full sort of two hours, you've got stamina, but hopefully I think this conversation is one that we need to have more of. To Ryan and to Mike, I just want to express a massive thanks to the both of you.
I think, like all of us in the room here, we passionate about what we do and I think that passion shines through in sort of strong views, strong opinions, willing to take the time to come and share this, this platform and have this debate and have this discussion. So to the both of you, really appreciate it and you know, thank you for, for your, your support and thank you for your partnership. So with that, thanks everyone.
[01:56:38] Speaker A: I'll do last last plug for the listeners here.
Check out Biz Val because it's the best valuation tool that I've come across and I've come across a lot. There's no, it's the only reason I'm here with these guys. So back to like, where do you. Where am I right now? I think it's a very easy hurdle to overcome with your guys's platform. So thank you, Kyle and Graham, for all the stuff that you guys been doing.
[01:56:58] Speaker C: Fantastic.
[01:56:58] Speaker B: Thanks, Ryan.
