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.
So, Kim, we're here and you're going to be interviewing me and we're going to banter back and forth.
So yeah, per usual, everybody's going to be in for a treat. The topic of conversation today is pricing and margins. I just got done talking to Kasey Brown, who I texted to see if she would attend our workshop. We'll see if she's going to be able to because we're going to be having a workshop on pricing, which you've got a cool name for it. But the kind of just springboard into our conversation, Kim, is she talked a lot about the pricing strategy and holding the line on pricing from the sales people's perspective.
And she very clearly delineated that the pricing strategy of when and how to raise prices and how is not what she's doing. So that's kind of for anybody listening and that listen to the Casey podcast. This is what Kim and I are going to be talking about is on the mechanics of how to raise prices.
Keep your margins to your clients smile without pissing off everybody. So that's kind of the. Anything else you want to add to that?
[00:01:16] Speaker B: No, I think you have a perfect story to give an example of how not to go about raising prices.
[00:01:25] Speaker A: All right, I should almost pull up my text string with my good buddy Michael Conzemius, who is sorry, him and I have a protein powder that we both landed on that we like because it's grass fed and it is like all the clean stuff because I eat it, I have a lot of it. So anyways, I convinced him to get some and I texted him and I said, I can't blank believe how much our protein costs. If you're still getting that Pro mix protein, it's $122, a 5 pound jug or 101 with subscribe and save. It was $62 when I started.
And he goes, wow, I didn't realize that they increased by $40 from February to March.
And then he sends me a screenshot of their I should, I should, I should screen share. Well, I'll just read it. So.
And it says, hi, Michael, I completely understand your frustration and I'm truly sorry about the surprise. We did send out a mass email when this change occurred. However, unexpected price changes are never easy to hear about and your feelings are totally valid when nice Little like. Yeah, you're, you're not wrong. When manufacturing costs began to climb, we chose to increase our price. We, we chose not to increase our prices immediately assuming these costs would eventually normalize.
Unfortunately, dairy prices have continued to rise to ensure that we keep working with the premium dairies that are meet our strict quality of standards. Thank you. Appreciate. That's why you're doing it. And making the difficult decision to update our pricing. Here's what's happening. We updated our pricing for the protein products to reflect our current manufacturing costs. This is reflected on the following products.
Beef protein whey isolates. These updates reflect our current costs and will apply to all subscriptions going forward. We appreciate your continued support more than you know, exclamation point.
[00:03:21] Speaker B: So I think it's a perfect example, perfect example of how a. Not to roll out new pricing. But also the driver to why we're talking about pricing in our, in our upcoming workshop. Right. Like it touched upon all those different food inputs and, and that's why we're having Alex come and join us because it's a, it's a huge problem. It's only going to get worse.
[00:03:42] Speaker A: So I just want to digress into so many different things, so many feelings about that. That text. As consumers, none of us want that.
As business owners, we need to have a plan to make sure that like the 1:20, like as a cons, as a. I'm going to put it on the business owner. Like if I was an investor, it's obviously legit.
[00:04:03] Speaker B: Right.
[00:04:03] Speaker A: Like a company can't afford to sell things below cost, otherwise no one has jobs and they can't survive. So like, I think the way that we all need to think about this is both from the consumer, which is your customers, and then also from you as the owner and the balance and that threaded needle, I think, Kim, is the gross margins, which is the percentage, you know, gross profit being the dollar amount, the gross margins. Like we need to maintain healthy gross margins for business.
[00:04:31] Speaker B: Yeah.
[00:04:31] Speaker A: In all of. We have to take all of reality into that, which our input costs are what the pricing ceiling could be with our clients. Because maybe, I mean, like, I can guarantee you there's not a lot of people that are comfortable. I mean, I go through a bin a month, so it's 120amonth.
Yay.
So anyways, I think that just kind of frames up like there's a lot to be said inside of all this, which is why we're gonna have this conversation. But from revenue pricing ceiling to margins to communication, to like why are we doing this? What impacts it a lot there?
[00:05:03] Speaker B: Yeah. Well, it all comes down to what you were just talking about. The profit. Right. The margin. And so that's why we've named this the Profit War Room. So that way, it really is. You need to come in and form a battle plan. Inflation is real. It's going to continue for the foreseeable future.
And businesses need to have scenario plans and battle plans, if you will, in place to manage through it so that way they can meet, maintain those margins.
[00:05:31] Speaker A: You mentioned the word, or not the word. Well, the name. Alex, I want. Maybe I'll start with you of why we're doing this, because you reached out to Alex for specific reasons and you have said that inflation's coming. Maybe, like, instead of me just going off on a. On a rant, like, why do you think that this is necessary right now to talk about, like, what's going on, to make this a relevant conversation? And then who's Alex and why is he interesting in this conversation?
[00:05:58] Speaker B: Definitely. So Alex is a colleague of mine. We met when we both worked at ITR Economics. He was an economic speaker for ITR for many years. He has since moved on. And one of his main speeches is the geopolitical landscape. And that, as most of us know, or at least I hope so, and if not, hear me now, is playing into what's driving this need to pay attention to your price and your margins. Because inflation, it's the. What's going on in the geopolitical realm is driving inflationary pressures in different areas that's going to impact businesses in different ways. And so why I'm so passionate about it is just my many years of looking at economic forecasts and knowing what is coming. And now you and I, Ryan, have the opportunity to collaborate and actually roll up our sleeves and help owners put plans into place, instead of just warning them we're here to help them say, all right, no, come to the war room. Let's roll up our sleeves. Let's put battle plans into place. So that way we're ready to handle what's coming.
[00:06:57] Speaker A: And so the. The Profit War Room that you've named it so beautifully is going to be a workshop that we're doing. It's April 27th. We'll put the links in there. We'll tell a little bit more. This is the. The conversation we want to have right now is just a fluid conversation around why this topic is so important. Because if people want to spend their time, like, rolling up their sleeves, I think this conversation is helpful. And I, I think talking about the why Kim and then we can talk about how and the what. So like how do we actually hold our margins? Because we can have this whole conversation right now like what are the ways that we actually build the plans behind this? But so your dad and you did a business cycle rates of change presentation to the quarterly IBD workshop community. Was it last week? Last week. And why I'm interested to talk to Alex and I think he's gonna be putting the podcast next week. All three of us will be are gonna be doing it again is geopolitical environments and this war that's going on right now. Like Ray Dalio even said this is the start of World War 3. I mean like so I think he actually verbatim said that. And like if he didn't it was maybe just a world war, I don't know. But like it's here and I think that there's a lot of unknowns of like from a lot of and a lot of unawareness of like the true impact because like we went in and out of Venezuela, no one even knew about it. Like the morning brew never even like barely covered it. Like this is different for so many reasons.
And it's not going away from what I've gathered. I've got a hundred hours into this in researching this last last month. It's not going away anytime soon. Even if there was a true ceasefire and like it went up. Like it's going to impact supply chains and the US dollar in ways that we probably can't even grasp right now. And it's kind of like the phrase that some of these economists have been using is it's baked in the cake.
So it's not like it's not like oh if this happens it's all gonna be fine. It's like there's stuff like every day that just goes on like we can't go back to normal anymore. So we can see this stuff coming and why I'm interested to talk to Alex and how it's different than I see what Alan and ITR used to do is geopolitical stuff nowadays is what's changing business climate versus just the normal debt refinancing every four year cycle. And like you know the, I, the, the PMI index, I'm like there, well that's a fine business cycle if the straight of moose is open.
Like what if the main artery of the global supply chain has been shut?
So that's, I don't know, like I want maybe we have you respond to that but why, Alex, and geopolitical events is different than maybe what you and ITR were doing. Any, any thoughts or comments on that?
[00:09:32] Speaker B: I think it's just, it's a broader perspective and it specifically. And, and in addition to that, what we're discussing. The geopolitical environment has more of a direct impact on the pricing strategy that businesses need to employ to protect their margins. Right. Like when looking at. You still need to be looking at the business cycles, you still need to be looking at economic indicators, you still need to be looking at the macro landscape around you still need to be dialing in and looking at the regional economic landscape around you and understanding where you fit in all of that. But now compounding.
So in addition to all of that, we have this sense. Sensitive sensibility. I don't, I don't know. Sensitivity.
[00:10:11] Speaker A: Sensitivity, yeah.
[00:10:13] Speaker B: I'm trying to think if that's even the right word. But to the whole.
[00:10:15] Speaker A: It's another variable.
[00:10:16] Speaker B: Right? Right. To the whole financial system.
And you're. With your input costs increasing pretty drastically and consistently year over year for the next few years. I'll just say few to stick there.
That requires a whole entire different way of thinking because to your point, you have to remain profitable, but you also have to keep in mind what the market can bear.
So you can even have a pricing strategy to increase current products, but it may even reach a point. Can you remain profitable and still should
[00:10:48] Speaker A: you keep that product?
[00:10:49] Speaker B: Right, exactly. Like should you start looking to substitute products and other things to be meeting market demand. So there's a whole broader thought process that goes into this that I'm not sure businesses are taking the adequate amount of time to think through and put some thoughts down on paper.
[00:11:07] Speaker A: So what I want to do in our conversation is I'm hoping that people listening in.
What I hope I can do with your time as you're listening is give you an understanding of why I think it's worthwhile paying attention to. I am not predicting any outcomes. I'm just saying that to you, Kim too. Like, I don't have any effing clue how this is going to unfold. But what I do there is a certain set of things that I do know that are like facts and, or things that we could adjust according to the real time information. I mean like the macroeconomist that I follow, like Lyn Alden and Luke Roman and Michael Howell. Like they say we're in a headline world now where like it used to be more of the business cycles and stuff like that, which still are important. To your point. But like, if the thing, if the straits open versus closed, it's a big deal and the headlines are the ones telling us whether it's open or closed. And I do want to pull up that chart to show you where people can actually see some of that data. But I think what I would hope to do, Kim, is explain more of what we mean by these economic issues and the geopolitical issues. Like, what do we like, frame this up? Like, okay, what are the things that I'm paying attention to? And we can go, you know, through that.
[00:12:17] Speaker B: Yeah.
[00:12:18] Speaker A: How does that actually result in inflation? And why would it. If you're not experiencing that level right now, that's okay. Like, and then what do we do about it to like, what data do we look at for our margins, Rates of change, input costs, communications with our employees, with our customers to avoid that joke that we had at the beginning about my protein powder. So, like, I say all that because I think one of the jobs that I hope we do is I don't want to be sensational.
I don't want to be clickbait.
I want people to understand that there's thought that's going into these conversations. And even if all this shit is it's best practices. So that way you can avoid like whole text strings that I had where you piss off a bunch of your customers.
[00:13:05] Speaker B: Well, yeah, and I like how you ended it there too. Because the whole point of having these types of plans is that you have them if they're ever needed. It's not saying that they're definite, rather than being reactive and saying, oh, shoot, now what do we do? We've found ourselves in this situation. So the goal is that you'll never need it, but if you do, you have it ready and your team is aware. And I think, and to your point, talking about all the economic factors and drivers and all of that, I know we'll definitely do an even deeper dive into that conversation with Alex next week when we talk with him too. One of the things that you and I also said we want to talk about is why is this pricing and ownership issue? Like, a lot of people think this is a sales thing, I'm going to leave it up to my VP of sales or my like, whoever that may be and this. And so just touching on more so why this is an ownership issue.
[00:13:56] Speaker A: Would it be helpful, Kim, do you think, if I just walk through a series of decisions that I see in a board meeting because I was on a call with one of my board clients and we Were just talking about like what information do we want to make, what decision? We were kind of walking through this and it's like, yeah, that's what I want, all of that.
What do you think that would be helpful for us?
[00:14:17] Speaker B: I think so, yeah.
[00:14:19] Speaker A: So in one of my, whatever company you own, whether it's E Commerce, distribution, services, manufacturing, I mean it applies to all of us. We have revenue, gross profit is the dollar amount, gross margins, the percentage.
And then we have SG and a net income normalized ebitda. So that's all the income statement.
And the income statement is the operations. Right. So the cash flow statement, how we use the balance sheet is ownership on working capital, debt, taxes, distributions.
So the operations exist to solve ownership's objectives. That's capitalism. Whether it's crony capitalism now or if it's just real capitalism, like capitalism exists to provide profit to the shareholders.
So the shareholders need that profit based on the risk that they're taking with their capital. So then we have to go back up into the income statement, say, okay, well how much cash can we generate from what we do, products and services? So every company should have a line item for their revenue broken out products and services and then their cost of goods matching the correct revenue line. So that way what we can do. Kim is in like a quarterly board meeting. It's like, okay, what's the gross profit? And what I care more about is what's the gross margin per product and service line Like, I just think it's very straightforward how. And I think everybody listening in knows that. I think most people struggle with shitty data and their, their financials don't match it. We're like, I know that all of the costs that touch pro this product are all in that gross margin.
Right? If you don't trust it, then it doesn't mean. And we need it all separated. It can't be just revenue cost of goods. Okay, well if you have four product lines and three locations, I mean that doesn't do.
So it's like kind of there's this like larger leap of faith. Let's assume it's all accurate to get straight to the point of like, what do we want to see? I want to know that if the straight of Hermus is closed, which it is, we can look at the website. And I know that the, the oil and the fertilizer and the sulfate and the helium and the urea and all the stuff that comes from that straight 20% of that and it's like 50% of the helium. I mean it, it's going to impact AI chips, data centers, energy. All the nitrogen is screwed. So farmers making a decision right now, beans or corn. I mean, this shit is a humongous deal.
There's a ripple effect on all of these costs for everybody.
Well, if we want to have a certain amount of distribution and a certain amount of working capital, debt and taxes tied to evaluation, and all of a sudden, the costs go way up.
The hell are we going to do?
The visibility that one of my clients, when Pat and I had our business, it was 20. We started working with them in 2019. And then it was like 2020. And we. We got an emergency call in 2020.
[00:17:14] Speaker B: Right.
[00:17:14] Speaker A: It was like.
And it was after the lockdowns, and it was like. I want to say it was April or May.
Mayday, Mayday, Mayday. I won't give any specifics because you could probably back into what they. They were manufacture with stuff that came from Asia.
And the containers went from 2,500 bucks to 20 grand a piece.
And they're like, what the fuck? They call us up and they're like, we don't know what to do with this. We had to figure out a way, I think about, like, this golf ball going through a garden hose. That's what inflation is. With the supply chain issues. That. It started with the containers, and they were buying something that one of their input costs, that their container went from 2,500 to 20 grand.
We had to figure. Yeah, I know. Came in, we were sitting on the call, and like, if we don't fucking pass this on, we're bankrupt.
[00:18:03] Speaker B: Yeah.
[00:18:03] Speaker A: So we had to have a whole conversation of, like, based on the financial model and all the goals and all the stuff that they had, we were able to wait. It was like three and a half million dollars in cost that we had to appropriately pass on to the clients, otherwise they would have been bankrupt. And they did it. They ended up selling their company for insane amount of money at the end of 2020. But my point is, like, they had like, a complete. Like, what do we do? And then they passed on that golf ball so they didn't get the ones stuck with it. And so I say all that because if we have an ability to measure our input cost, plastic, aluminum, labor, whatever consumer, you know, whatever cost that you have, and we can see rates to change, and we can see, is there something trending? So that way we don't wait seven months to, like, then look back and go. Our margins went from 42% down to 37%. And at 37% they don't work anymore. Like this whole line of business doesn't work at that. Like we can't wait. We have to like be ready in our monthly and quarterly meetings. Paying attention to that data, it was lucky at least I think you know my last comment I'll shut up. Is that client had a, an immediate obvious situation that we could immediately react to. I think what's worse, Kim, is the 43% down to 37% over seven months and no one knows. It's like the boiling frog. It's like, oh great. The one thing that about that client that I was saying, like it was reactive and it was immediate. So they were. We immediately knew that there was a big problem. Like to go from 2,500 to $20,000 is like an obvious situation and we had to panic, react and actually we had a whole plan and we had the financials so we were able to course correct, which is hard, frustrating, stressful, but we managed it and to the point where they sold their company for a shitload of money. I would say what's worse is to go from the 43% in gross margins and over six months go to 37% where all of a sudden that product or service line doesn't make any sense anymore and you're bleeding cash and it's like the boiling frog where like you wake up and you're like, where's the money? And you have like a, you know, two month recon trying to gather the data, try to understand what's going on. You don't know if it's this product line or that product line. Like the whole point of having this plan and having the data is to like course correct along any back to your rates of change going. If we have three, you know, monthly meetings and maybe two quarterly board meetings where this slippage is happening.
Then after two board meetings and call it like maybe it's 90 days or six months depending on the urgency, then we have a recon plan or an actual, what did you call it?
[00:20:41] Speaker B: The battle plan.
[00:20:43] Speaker A: The battle plan on. Here's what we do if we see these things. So like I said, that was a long rant. But like what are your thoughts like on how to that. Cause that's the information that we all want. I think it's not rocket science what we want.
It's difficult for people to understand. Should, should I pay attention to this? Is it urgent?
How do I get the information and is it worth that time? And when do I pull the trigger? I think is the harder part.
[00:21:11] Speaker B: No I agree. And I think I liked your boiling of the frog analogy because I think that's a.
What's happening for a lot of people right now, because it's almost like I've been thinking about it as like, death by a thousand paper cuts.
It's kind of what it seems like, because you just mentioned all these different types of raw materials and such that are impacted. There's also, like, aluminum. Dad was talking about that on the podcast. And the huge impact that that's going to have to the industry.
And it's just.
I mean, we can take it even further. Labor, the. The increase in labor cost and how expensive that's becoming. Health, healthcare, the health insurance, your employment costs, like, all these areas are increasing at the same time.
And doing so by. We'll call it like 3 percentage points or 7 percentage points or 2 percentage points. So it doesn't seem like it's a huge thing, but when you combine it all together, all of a sudden, yeah, you are slowly slow slipping into.
[00:22:08] Speaker A: You have to send your protein clients $40.
[00:22:12] Speaker B: Oh, shoot. We just realized this isn't going away now.
[00:22:15] Speaker A: $121. I'm like, what the f. This.
[00:22:18] Speaker B: Oopsies.
[00:22:20] Speaker A: Oopsies.
And like, again, like.
And they're going to learn. I would give anything to, like, what's the pricing elasticity with their clients.
My guess is there's a significant chunk of people that can't afford $121 protein powder every month. That's a lot of money.
And so I've got a couple charts up here. Let. Let me know when you think it's appropriate to pull them up. One, is that straight?
The, like, the. Just the chart that I'm looking at. Is it open or closed? Like, I think it's just like, that's like, none of the propaganda or matters. It's either open or closed. And so we can talk about the ramifications of that. And then I also have another chart that shows, like, what comes from the straight, which could be interesting, but let's do those now.
[00:23:04] Speaker B: I think that makes sense before I
[00:23:05] Speaker A: move on because I, you know, for everybody listening and I have personally struggled with this Kim of like, I don't want to be sensational and I don't want to be clickbait. I have a visceral reaction. Like, the YouTube titles that people have and, like, the freaking screaming Chicken Little is nauseating to me. And I'm an internally optimistic person. So this is a struggle for me, talking about hard things that are doom and gloom. And so I just Want to put that through there because, like, I don't like. But I also get really excited about being able to navigate and make a bunch of money while things are shitty. So, like, I don't know, it's a very complicated thing. And I say that because as I pull this stuff up, I think for everybody listening, it's like, what does this mean to me?
I want you, the listener, to make your own decision. I'm not telling you how scared or how not scared you should be, but, like, what I would want to know, Cam, is like, what is the implications to me if all of a sudden these things stop flowing or I have to outbid other people for this price of this thing?
What's my plan? You know what I mean? How realistic is this situation is something that everybody can make their own decision about? Well, what I find it fascinating about this war, compared to the Ukraine war or the Venezuela or any other shit, is the largest artery of energy was shut off.
It wasn't like, oh, Ukraine and, you know, Russia are in a drone war. Okay, I'll go to Sam's club and still get my toilet paper. It's like, this is a big potential problem that every day becomes more and more real of, like, how this is going to, like, the golf ball is coming down, right? And so I say that because I just. I struggle with like, the doom and gloom stuff, but plant a seed and then I'll pull up the charts is the payroll and the stuff like that that you mentioned. I think it's fascinating because there could be a bigger problem because that doesn't spike unless it's contract labor or like, you know, outsource vendors where they have to, like, you kind of see their increase. Like, you control the people that are listening and you control your payroll. Where I think that shows up is really effing unhappy people that are broke because the 3% CPI is total bullshit. Because it's complete bullshit. So that happens when all of a sudden customer service sucks. Your. Your service sucks and everybody's pissed off all the time because they're broke and can't afford shit, but you're still giving them the 3% because they're not quitting or they're quietly quitting and all. It's like it's getting ahead of it where, like, I've got clients that have done just a blanket 7% raise because they know that they can afford it and they're looking at revenue March. So I just. We come back to the payroll thing because I think that's a trickier Thing.
[00:25:45] Speaker B: Yeah.
[00:25:45] Speaker A: Because like, you don't have to address it right away. And that just is a slow bleed.
[00:25:50] Speaker B: Yep. No, I fully agree.
[00:25:52] Speaker A: All right, so this is a chart that I laugh because it's like a kind of a sad, scared laugh of like, this is from the IMF port watch.
I, I look at this and I go, it's closed.
So everybody will look like listening in.
We were like the straighter from always.
I'm always. I can always. I can never pronounce it right.
It is 20% of the world's oil and like 50% of the world's urea and then like helium and sulfate and fertilize, all that stuff, making fertilizer and, and, and, and, and, and, and, and it's shut.
It's just shut. Like it's not like whatever our politicians say. You can go up to this. Like Luke Roman says, I wake up every morning, I pull up the chart and it's like nothing's going through.
So everything on X or Instagram or Facebook or in New York Times is all bullshit. It's shut down. That would be like, what's the CEO say when we don't have a line of credit? Whatever the CEO says is one thing.
The line of credit doesn't exist anymore. They took it off. They took it away.
And that's, that's where this is just that objective truth where it's shut.
And then the question is, well, what, like, what does that mean? And all if there's one takeaway from this conversation for anybody is you understanding what this means to you should be the most important thing that you're doing.
[00:27:27] Speaker B: Yeah.
[00:27:29] Speaker A: Any questions on this? Really?
[00:27:30] Speaker B: Before I, now you and I have talked about this. I really like your golf ball analogy that you're using because it cannot, it can feel like things are normal right now, but that doesn't mean three months from now things are still going to, to feel that you, you're still going to feel that normality.
[00:27:48] Speaker A: So because this is shut and then because the question would be, is like, well, yeah, but Kim, you're making a big deal out of all that stuff.
The straight shut the K. You know what I mean? Like, versus, like, okay, like everything else has been propaganda. Where like, do people have a twist of. Because like the way like, like Lynn Alden and Lou Groman talk about this is like when it's a paper money issue, propaganda and derivatives in the repo market and this. And then that vehicle is always money printing it always to cover up a bunch of stuff you can't Print molecules.
Molecules do not bend to Jerome Powell's laws, nor Trump's, nor Scott Bessants.
You can't print oil.
It comes out of the straight out of the ground, and people have to get it out of the ground and then ship it through the fucking world. So like, okay, then the question is, what does this mean to me and what I would like as I go down that rabbit hole, I would want to know what, what does it mean to me? So here's a, another chart that I've, I came up with, or not I didn't come up with, but like, it just shows you that like in this bottom left hand corner is what comes out of it. Well, it's coal and then petroleum and then all that stuff makes everything else. So you go look over here, it's packaging and building, construction and automotive, electronics and household textiles and agriculture and others. And it just, it's our economy. And so if, like Lyn Alton says that if the whole global economy is that upside down pyramid, and your dad laughs at me when I do this. The upside down pyramid. The entire economy is the upside down pyramid, which is the dollar Ponzi scheme. But the bottom of that pyramid is the US Dollar, which is pegged to oil from the petrodollar from 71 after Nixon decoupled from gold and Henry Kissinger and everybody negotiated. The whole world has to buy oil in dollars so they can keep funding our deficit.
That's over. It's over. I mean, like, it's like we have proven that with our military we can't open the straight.
And like, people don't have to buy. Like, no, you got people in Europe now negotiating with Iran about buying, you know, in yen and then like, or is it one and buying any Chinese one. And they're trying to figure out Iran said bitcoin. So they're trying to sub outflank the US Dollar, which is the bottom of that pyramid. And so, and if we, if everything makes, the stuff that we make comes from this and the dollar is forced, like, that's what was forcing everybody to buy dollars, was the oil coming out of that straight and everywhere else. And now they're, they don't have to, because we can't open the straight right now. Why is it not open?
[00:30:30] Speaker B: Right?
[00:30:31] Speaker A: And so then you go, okay, well, the US Dollar has a major issue coming up which is going to result in inflation and then not only as the dollar being an issue and the bond market being an issue, but also the physical goods. So it's like, you know, and the people I follow, it's like the great financial crisis plus Covid supply chain issues come into one.
Because it's supply chain issues and financial issues which all result in like, we're going to be printing money in an oil spike where every other crisis was. We were printing money when oil was like 25 bucks a barrel.
So we're going to be printing money when the input costs are also going up.
And again, people could be listening to me going, you're a bunch of bullshit, Ryan. I'm like, okay, well, the straight's not open, Right.
[00:31:21] Speaker B: And even if so, to the point earlier that we made, this isn't meant to be doom and gloom. This is, do you have a battle plan?
Like the what ifs, right? Like this is a. I would rather be prepared than and have some sort of idea of impact to my business. Like all the facts that you're stating lead to a scenario that business like business owners are not currently living in. It's not the environment they're currently living in. I think that's the whole point is what does this potentially mean to you? And have a plan, multiple plans, not just one, having a battle plan.
[00:31:58] Speaker A: We're like, what, what's. It's the scenario planning. Because I think, you know, where I get stuck, you know, and you and I talk a lot is like, is the, like there's the bucket of how much should I care?
Like, I said a bunch of stuff. And you could go like, I'm thinking about a couple of my clients that we also share together.
It doesn't mean shit to them right now. They're in professional services in an industry that's not going to impact this for at least a long time.
Okay, let's not pay attention to it right now.
[00:32:26] Speaker B: Right.
[00:32:27] Speaker A: Isn't that nice to know that all that stuff, that headline clickbait, I don't have to worry about right now. If you're in manufacturing, they get some of your supplies from there, you should probably care a lot.
The battle plan is the same looking at your revenue, your rates of change, of your costs, to manage your margins. So the action plan becomes the same.
I think it's trying to segment should I care and what do I need to know about what's going on to figure out whether I should care and then when and how do I adjust and what does my plan look like is different.
[00:32:58] Speaker B: Agreed. And also I would even say, though, so focusing just on the supply chain side of things, then it may not impact certain other people. But if we go back to the employment Cost side of the equation. Then those people get sucked back in to the same potential headwinds.
[00:33:15] Speaker A: Inflation hits labor at a leg of like 18 to 24 months.
The moment that I had that conversation about that supply, like, this is. It's so fast. I love this shit so much because I love being able to see into the future. Like that conversation, that client of mine, he said, ryan, this is so the call, like, May of 2020. He's like, because they were trying to think of how not to give away what they do.
They're the. What they. They were part of the supply chain of things that go into, like, potted plants as well as, like, like the agricultural world and. And like, landscaping stuff.
And he looked at me and he said, your potted plants at the end of next year are going to be 70 bucks a potted plant.
And I was like, whatever, dude. Oh, my God, was he right?
Because he was at the beginning of the supply chain of the body plants.
[00:34:15] Speaker B: Yeah.
[00:34:15] Speaker A: And he was just like, it's gonna be a fact.
And like, the whole 18 months that that went on, Kim, I watched Jerome Powell buy $80 billion a month in US mortgages. I'm like, what the are they doing? And I'm like, watching this, and I'm like, and wham.
Inflation on all the wages. And I'm like, oh, my God. So to your point. Yes, Agreed. And I think back to then the rates have change.
Right. And like, thinking about your own input costs from. What's the trend to figure out, like, don't send the email like my protein company did.
That's what we're trying to avoid.
[00:34:54] Speaker B: Yeah. All right. So then we talked a lot about some of the. The forces and everything that are driving this. So why is this an ownership problem and not a sales problem?
[00:35:05] Speaker A: How much damage you can handle on your margins is a valuation decision.
It's just that simple. Like, what's this company worth?
The equity holders and the shareholders get to choose whether they keep a division, sell a division, whether they're willing to burn cash to keep a division going because they see something in the future, or everything has. It's an ownership decision. Because, I mean, for example, we chose to sell copiers, the equipment line of business, below cost because we got the maintenance, which is 52% margin.
Only ownership can make that decision because it has to do with cash. Like, what are you willing to do? But the whole math equation of all of the income statement has to yield, then into the balance sheet and the cash flow statement to say, well, the free cash flow to owners equals what, over five years? And then what will the valuation be in five years? To look at the discounted cash flow and the market multiple, to say, you know, I could hear all the argument like a minute, I was on a call with a client this morning, like, we might shut down this division and this location if things get really bad. We're not going to do that right now. Right. So we were having these exact conversations and he, as the owner is making that choice because like right now he's like the industry hit, the reputation, hit the company morale. I mean, it's a significant cost to make a decision like that. Right. I mean, in all the effort and the sunk cost fallacy that went into building those divisions, it's not a small decision.
He's bleeding money right now.
So the question is, well, how long do you let this go and what's the upside? And the thought process is if we keep these things going, even though it's not great right now, if we have demand that comes up because things get better, not having these will be, we're cutting off our hand despite ourselves.
And all that goes through the lens of the owner in the boardroom going, how much cash can we have? How much can we tap the line of credit? What's going to be the distributions? And how does this tie to our valuation?
[00:37:16] Speaker B: Yep.
All right, so what about for people that aren't feeling any negative pressures right now? Like, what are the thought, like, why should they be considering all of this now
[00:37:29] Speaker A: if people aren't feeling the pressure? And the things that I had talked about so far aren't, like if they're professional, if you're professional services and like, cool, that sounds like a lot of BS that I want to deal with right now because I'm going to go to the cabin. It's Friday as you and I are recording this.
It's a math problem.
All of the reality, like you have been talking about for rates change and the business cycles for decades too, Kim, like, at some point this stuff comes back and we want to look into the future to say for those people that aren't feeling something right now. The question that I would put back on to them, Kim, is like, okay, well, what's your time goals, your cash flow goals and your wealth goals in five years, what's the valuation target and what's the distributions between now and then? The only way to see that is the five year three statement forecast we talked about at a workshop. That's the only way to see that. Once you can see it, then the question is, what's your probability of hitting that?
And if you're totally guessing because you don't pay attention to shit, I would say, how does it feel to not pay attention to anything? And how does it feel to have your head up your butt like, okay, well, we want to constantly increase the confidence and our visibility into hitting our goals. That's all we're trying to do. So for someone that doesn't feel it right now, it's like, hey, that's awesome.
Probably worth starting to put the building blocks in to say, what's my gross margins? What's the trailing twelve months of my gross margins? What's the trailing twelve months of my input costs? What's the rate to change of labor or aluminum or vendor costs or whatever it is? So that way I can maintain my 42% margins every month, every quarter. So I'm increasing the chances that I have the confidence and increasing the confidence that I hit my goals and then I can adjust accordingly if something actually comes up.
[00:39:23] Speaker B: So what are some of the tools that you. We have in the toolbox that we're going to be going through during the workshop on the 27th?
[00:39:33] Speaker A: Well, I know, and this is probably more of a question for you because I've got like, cool, cool PDFs and stuff like that. I got the, you know, that we can walk through and we're going to help people think through their, you know, what are the numbers that we need to see?
That's going to be like helping people like, okay, identify and isolate the numbers that we need in front of us. What does accurate and good look like? I'm going to maybe throw it to you because I know this is something that we're working on in the financial model is like having those rates of change on the input costs. Do you want to kind of walk through, like, because like, like you and your dad have really bought me into.
Like, we need that to spot the trends. And it's not just on the business cycles and the revenue, but like, let's do it on our input costs.
So then we can act. Because if, if the margin becomes, we want to hold the line on the margin and every product and service line, we need to then monitor certain things. So you do want to, I don't know, I'd throw it back to you and say, okay, how, like, what are ways do we actually get to that rate of change? And how does that rate of change work? And then how could we use that data?
[00:40:31] Speaker B: Well, the rate of change is mathematical calculation of your 312 and a 12 12. The 312 is your quarterly growth rate year over year, the percent change and then the 1212 is your 12 month total number of whatever the data series is compared to the same 12 months one year ago. So it's just a year over year percent.
[00:40:51] Speaker A: Do you have that slide available or
[00:40:54] Speaker B: is that not readily available?
[00:40:56] Speaker A: Yeah, that's too much clicking. Okay. Because it's just such a cool concept that is daunting if people aren't familiar with it. But it becomes pretty straightforward when you get you and your dad were walking through, you're just taking that quarter, taking the growth rate and it's like how you have that spreadsheet is just pretty cool. And we can maybe we put a screenshot of that in the show notes.
[00:41:14] Speaker B: Yeah, we can just throw it in the comments and stuff too. So that's fine too. But what it does is it shows you, like you said, the overall trend of the data set that you're looking at. And your 312 is actually a leading indicator of what is to happen in your annual number, your 1212. So if you're throwing your input costs in there, you're going to see are they trending up, are they trending down and how like what is that growth rate or that decline rate on your quarterly basis and an annualized basis so that we can see again the overall trend. Are we headed into some bad water here or are things pretty like I'm just bouncing across the middle of the chart and with like some little ebbs and flows. It looks fine or it's like no, actually the 312 has been creeping up and I haven't felt it yet because I haven't felt it in my annualized number yet. So it starts to give you some of that early warning signs if you will. Kind of just like a little buzzer on a dashboard that's like hey, something in your engine's not working right like there. You just might want to check it. Low tire pressure, right? Like low tire pressure in my car isn't going to total my car. But if I let it get low enough like I could be in some hot water when I'm driving down the highway. So it just kind of starts giving that early indication
[00:42:27] Speaker A: a trend versus a anomaly. Can you walk through like, like when do you, like when do you back to like I'm explaining kind of the narrative of what's going on but then you're then talking about the data. So that's where we're taking the sensation away from it. And we're looking at the data. That's how we're kind of smashing this together.
When is it a trend? You should like, like what, when and how do you go, okay, the tire pressure is the lights on. And then I have to now stop and pull over. Like I can, I can go for another hour with this light on. But like, how do you, how do you pay attention to those numbers? And like when do you actually look at it and start doing something that's different?
[00:43:03] Speaker B: So I think that comes down to what we've been talking about with the planning. You have to do the math. Like you gotta do the math problem. You have to sit there and say, okay, if this reaches this percent, what does that then do to my margins? Okay, now let's do it at say 15% and let's see what that does to my margins. Right, like, so it's, it's an Excel file math problem for you to just plug in different percentages and then you have the actual data that's sitting there and telling you, okay, you've been bouncing between like 2 to 4% for X amount of period in time. Well, that just spiked up to 6%. That's dangerously close to getting to my first, my first tier. That's going to start ringing some alarm bells, which is 8%. So now I'm going to dust off the plan for my 8% plan and start discussing it with my leadership team.
[00:43:55] Speaker A: It's, it's so important because as you're talking about the percent, it's the rate of change for people listening and versus the actual gross margin. That's where these terms and the numbers all get kind of convoluted. Where like it's understanding the velocity of that situation.
You know, I mean like, and that's where I think it's like the, the rates of change that you're talking about are so helpful to understand. Like what is the level of urgency we should apply to this.
When I was looking over here, I was trying to find that chart in that sample three statement model that I've got. It's an older one, but people listening. You can kind of visualize this. There is a chart that shows the trailing 12 months of gross profit dollars. So you can see this like bar chart came just going up the whole way. And then there's a trailing 12 months of gross margin.
So like one side of the axis is dollars and one sides percentages and then there's the dates for everybody on the bottom. And so then what was happening with the gross margins is they Were declining. So you could see this visible while
[00:45:01] Speaker B: the revenues were going up, but the profits.
[00:45:04] Speaker A: So, like, gross profit. Gross profit, dollar amount. So, like, $2 million. 2.2, 2.8, 3.1 million bucks. Like. Like, those are big numbers, people.
[00:45:14] Speaker B: Like, yay.
[00:45:14] Speaker A: More gross profit. More gross profit. But you could see this steady margin erosion.
And, like, we literally. The. Like, the. The bar chart was higher going up, and then the. The other line came through the bar chart, and it literally was like, oh, my God. So if we took that plus your rates of change, we're like, what's going on here? Labor part, you know, I mean, then you start asking the right questions. Like, this has been going on for a while. Right. So it just became. I was going to see if I can. I'm going to pull up another chart. That's not what that I was showing, Kim, but it's a different way of looking at that.
So this is gross profit and gross margin. This is more of what we would want to see. So everybody listening in the. The gross profit is the bar chart, and it's going up and down and kind of volatile, Kind of like a. Like a business cycle type thing. Kim, this is only. It's a few years. So business. Let's say this is a business cycle. And then, therefore, the margins are kind of holding around and they're lumpy, but they're. They're holding on the same because there's, like, a little bit of correlation there.
And so what the other one was showing that I was telling about, like, the. The. The gross margin line was, like, going down to the right versus the profit was going up and to the right.
[00:46:26] Speaker B: Yeah.
[00:46:27] Speaker A: So it's the.
[00:46:29] Speaker B: Which is telling you that your operations are getting way too expensive.
[00:46:33] Speaker A: Yep, yep, yep.
[00:46:35] Speaker B: But at that point, it's kind of too late. So I think that goes back to your point of watching the input costs in a trend regularly. Like, that should be one of your monthly KPIs that you're looking at. So that way you can know, like, again, like, I know. All right, so I'll say my tire is supposed to have 35 psi or whatever it is. I know that if it gets down to 15, I'm pulling over because I'm riding on rim. Right? Like, and then I'm gonna know when I get to, like, 22, then I can make it another four miles. And there's a gas station two miles down the road. So I'm gonna keep going to the gas station where I can fill up my hair, like, well, and I'll add
[00:47:09] Speaker A: to that just kind of like spot and like, like making decisions like being in Minnesota. If I have my car parked for like a week and it's like below zero, it'll all jump in and it'll be 24 psi. But if I start driving, the air warms up and it ends up getting to 30. So it's not an issue. It's not like it's going down to flat.
I just know it's cold, you know, I mean it's just having that level of data and intuitiveness to those KPIs.
I was going to go a direction with a question. I'm curious if you had anything else top of mind.
[00:47:40] Speaker B: No, go for it.
[00:47:41] Speaker A: I you in our what is a CRO podcast? Fantastic feedback on that conversation.
You talked about sales and marketing have a contract. The CRO is above both of them, you know. And you as a CRO are managing internal communications as well as external communications. But the CRO's job so if we were to take the ownership's job is to spot and make decisions on what's acceptable versus not acceptable and like how when to be urgent, when not to be urgent. That's ownership's decision.
And in conjunction with the CEO, let's say there's a conversation about we need to do something about this and hopefully it's not a 40% increase to your customers like I experienced.
So that way you become the case study of a podcast.
[00:48:33] Speaker B: It was a good one though. I mean it was really fitting.
[00:48:37] Speaker A: I'm super resentful if anybody has like figured that out yet.
Communication to customers, communication to sales and marketing people.
That's why I wanted to you know, get Casey Brown into this conversation at some point. But like you from the bird's eye view for overall revenue womb to tune customer journey. What's your thoughts on communication? Who to communicate to?
[00:49:00] Speaker B: Well, the people that you mentioned and there's different communication strategies based on the the audience that you're communicating to. So like with your customers you want to segment them so that way you have different tiers so and even segment them based on product. To your point way earlier when we were talking about making sure you understand your margins by your product and service that you're offering, that's going to have a different communication strategy. So it's not just a blanket. Everybody gets a 30% price increase.
Like that's not the right way to go about this. And it's also looking at to see like how long they've been a client, what is their annual spend with you, what Is the really the health of the relationship, all the things and the margins and so on and so forth. And so you end up putting them all into their own segmented categories. And then from there, based upon the sensitivity of the category that they've been placed in, it's either in person phone calls, it's either a personalized email directly to them from a senior member of management, or it can be just down to the account manager based upon the level, it's an individual outreach and then it can be a mass email that goes out based on the level of the segment that you're placing them in.
So like the how you go about communicating the mechanism that you use is based on this, the segmented lists, but the actual messaging, the same is really, this is really pretty much the same across the, the, the list. It's really, you just want to be concise, you don't want to be apologetic, you want to be very clear and upfront at the very beginning in your core message as to what is driving the change.
And then in any way that you can end with a value statement of how you are doing something in a different way that might be an intangible and a non cost driving way to strengthen said relationship that you're there for them, and so on and so forth. So there's a very. And there's some pieces in between all of that. So there's a very specific way to go about creating your messaging.
[00:51:09] Speaker A: Like I think that what you just mentioned is probably at the root of what most people have, which is fear.
And Casey Brown and I talked a lot about this because she helps within this entire picture, specifically helping sales teams make sure that when someone goes, I can't remember how she said it like, because it's specifically salespeople making sure they don't buckle right when someone says, well, Yep, it's a $35,000 project, I'll sign it for 29. Okay. She's like, we're just trying to avoid that situation through power statements, confidence, psychology, training, all that kind of stuff.
You two, I would love to hear both you two banter back and forth about those power statements, which is essentially just explaining your value. And I say all this because I think most people probably agree that they're not charging enough.
Even if we were sitting here and it was a beautiful, it is a beautiful sunny day, but there again.
So like I'm not going to feel it until the input costs go up. But even if there is like a peaceful economic environment, to Casey's constant point, you're probably not charging what you should.
So having this communication strategy that you just walked through, why wouldn't we want to do that? Because one of the largest or one of the, one of the levers we can impact the most is our margins and our revenue that everything else flows back down from there. So like what you just said and how you walk through that, I bet you people would. I mean I know it's one of the biggest sticking punch. I don't know how to communicate this or how to think about this.
[00:52:47] Speaker B: Yeah. And it, it's not a one and done or once every three year initiative. I mean this is a you as you mentioned in the boardroom, you're talking quarterly about your margins and keeping an eye on that. And then it, I would say at least once a year a full analysis segment the customers and come up with a pricing increase plan. So that way every year you're doing something different in terms of your pricing. And so that's why the segmented list becomes so important. Important too because year one you might hit segments A through C in a specific kind of a way. And then year two maybe you hit D through F. And then year three you hit I lost place my letters but ghi whatever you xyz.
And then come year four, you're back to your first list again, your first grouping again. Right. Like so you're always managing the bit like the business holistically by segmenting it out so you, you're not crushing everybody, but you're always constantly improving your pricing.
[00:53:45] Speaker A: And the monthly meetings with the leadership team on the CRO, CFO and COO and the CEO talking through this is allowing us to then see the trends and talk to the COO and be like, okay, is this because of you had extra training? I mean like you can start to figure like you're trying to synthesize the truth with all those different functional leaders.
I just think it's so fantastic on how you explain that other things that are on our list about this whole concept. I'm trying to think if there's anything
[00:54:15] Speaker B: that we're just expand upon the Casey Brown side of things, like what she does is really neat because it really is. If you are leaving your price increases up to your front lineman, your boots, your troops on the ground, if you will and you're leaving this whole we need to keep our margins and like we said, that's an ownership responsibility to be looking at this. And that's. And then all of a sudden you go down the organizational chart all the way to a Sales rep. And you're like. And it's up to you to make sure that happens.
[00:54:45] Speaker A: And you and your. And by the way, if you don't sell it at this, you're fired. And so they're sitting there going, it's me and my family versus the company in that moment.
[00:54:54] Speaker B: Yeah. Yeah.
[00:54:55] Speaker A: The customer's against me, the company's against me, and all I want is to pay my bills.
[00:55:00] Speaker B: Yes. And I'm not getting paid enough to do this job.
[00:55:05] Speaker A: And accounting hates me. And I over promise and service doesn't deliver.
[00:55:10] Speaker B: Yes. It's the worst spot to be in. And that's why I love what Casey Brown does because she's empowering and teaching and helping these. Like, being in such a bad situation, because it really is. It's psychology.
Like, most salespeople, they wouldn't think to have in the conversation state, what's not changing.
Right. Like, we're not changing this. Like, you. You love this. You value this. Like, and this isn't going away like that right there. You're anchoring your together. And so, again, this is why, like, what is doing is so, so critical. Because it doesn't just stop with the owner. Like, the owner is working to come up with the battle plans, but then the troops are the ones that have to execute the battle plans. So that
[00:55:58] Speaker A: Kasey works a lot and mainly with the salespeople. Explain how marketing can empower that situation, too, in internal communication and external communication. Because I think it's super cool how you thread the needle.
[00:56:09] Speaker B: Yeah. So I'll start with internally, because that's kind of where I was headed. The. The internal communication. It can be anything from where I'm struggling with this right now, Ryan, is because employees are so disgruntled over pay. And so the internal communication really has to be more so empowering the salespeople and investing in them to make them and educating them to help them see why. Like, Bob, we need to train you on how to execute on this to the nth degree, because we need our margins to stay at this point, and right now they're not. And if they continue on the trend that they're on, I can't pay you anymore. Like, how many open conversations like that is happening versus it goes from owner to CRO to sales leader. And sales leader hands and says, hey, you got to increase prices on this book of business by this percent. Figure it out. You do it on your own. Like, they're never given the why.
[00:57:10] Speaker A: And it's like, well, a CEO owner drives up in a New car?
[00:57:13] Speaker B: Yeah, let's hope not.
[00:57:17] Speaker A: I'm only laughing because it's happened. I've seen it.
[00:57:20] Speaker B: Oh, that's awful.
[00:57:23] Speaker A: Yeah.
[00:57:23] Speaker B: I don't know. But yeah. So it's just educating them. So marketing can help in educating them the why and putting the emails together. It helps them see the why and then training them on how to actually be successful in that role. And so marketing can put together training materials and again, email communications and stuff like that. Externally, it is extremely important for the marketing team to be very clear on the value proposition. And those power statements that you were mentioning that Casey says, like, you have to. I call them quantitative competitive advantages. Power statements works, too. It's the same thing. You got to be very crisp and clear on your value and the why you versus the competition.
So that way you're educating subliminally out there to the marketplace that you're worthy.
And then it helps to set you in a good spot when your clients are like, okay, like, I will take it because you're right. You do this better than your next competitor.
It's.
[00:58:25] Speaker A: It's so awesome because I just.
I've watched the impact when this is done up the right way.
I mean, I. I don't say it lightly. Like, I mean, I think we can increase our prices, get the margins that we need and want while our employees and our customers smile.
Because, like, in the. I. I think what's really fascinating, too, came in that that is my experience is, like, with all the data and the information that we're talking about, it allows the CEO and the owners to tell the truth from a position of facts, not subjective.
We need to do this because I need to make more money. And I think that, like, what's really cool about the people that you and I work with is they're actually the bottom of the totem pole because they're the ones that, like, get paid last on their equity and their distributions. They're not getting the distributions that they need. They're, like, putting in more effort than the value that they have, which is why we want to help them.
And that leads to burnout and leads to a fire sale or something because they go, f this, I don't want to do this anymore. And that's not good for anybody. We want them to put their oxygen mask on first and to be able to have the conversation that you just said, which is, we need 42% margins, so that way everybody can get 7% raises and we can have a good culture with. You know what I mean? Like, and, like, and this, this. And then everybody's in it together versus employees versus owners, which I think there are reasons that, that class warfare exists, especially in the big public companies, and a lot of other stuff that we see all day long that we're privy to. And so the employees that we all have have reasons to think that I think the people listening in, the people you and I work with, it's absolutely not the case.
The employees don't know that because they're like, we did 30 million last year.
It's like, well, it doesn't mean we made any money. And the owner's holding all of that in isolation by themselves. And by being able to explain, if we hold these margins and we do these things, then it goes back to the payroll situation. I've watched people, I had a couple clients, but they went to 5 to 10% raises because they looked at the income statement and the forecast, looked at that payroll line, said, if we do this, how much do I get in distributions?
And Kim, that's what we did is we said, okay, if we increase the pay by this, which is significant, and. Or we. There's another client that I, we, we've. We've leveled up the executive team significantly and like, whoa, inflation's hit the C suite.
Seriously.
Question is, how much do I make in distributions? And then is the valuation that we have as a target more probable or do we believe it more?
And I would say a couple different ways of saying that would be, is if you showed me your financials with 2% raises for the next five years, I'm like, I don't believe the revenue as much because you're going to have so many pissed off people that are crabby and delivering shitty customer service. I mean, like, it just doesn't make any. Like, it'll catch up at some. So, like, what, what I'm saying is, like, the assumptions are wrong.
[01:01:40] Speaker B: Yep.
[01:01:41] Speaker A: You know what I mean? So what we're trying to do is refine the assumptions to be correct. And it's like, with a higher pay, not only is everybody more happy. Like, the question is, what's the, what's the trade off on the distributions?
[01:01:51] Speaker B: We.
[01:01:52] Speaker A: Well, we would be burning more cash today, but I would be more confident in the valuation tomorrow.
[01:01:57] Speaker B: Yep, exactly. And I think what just popped in my head when you were explaining that Ryan was, I'm trying to think of our fun slogan that I love so much, and I'm going to put it on everything. You're going to get something with the
[01:02:08] Speaker A: truth is not up for debate.
[01:02:09] Speaker B: The Truth is no longer up for debate. Yes, like, I love that, but that. So you're right. It comes down to just, I think the hardest thing that I find with business owners is making the time to sit there and go through these thoughtful exerc exercises.
Right? Like they're like, yes, we should think about this. Yes, we should do this. And so making the time is probably one of the most common reasons that I'm hearing people don't do these things.
[01:02:35] Speaker A: I don't know if that was intentional or not of us utting us up for the workshop pitch. So everybody listening and we don't do pitches that much. The whole what we're trying to do with these workshops, I've got my, the ones that we do in the community that Kim, you're now a huge part of as well, and a constant face. I'm so excited about our partnership and the workshops and these are like one offs that we're going to be doing. Like so Alex coming in. So I'll let, let you give a little bit of a overview of him. He's going to come in on the podcast next, next week. We want to provide the space for the doing so instead of just, you know, the old go to, you know, go to meeting Citrix webinars. Like it's like people are experiencing where they're writing stuff out, they're going through the, you know, like we want it to be more interactive so you walk out knowing more and having more clarity. And it's not like we're not going to be building out a set of financials. So I don't want to lie to anybody here. Like it's empowering them with, okay, here are the numbers I need. Like, you know, I, I, you did some writing down of stuff that you know is important that you can then go take to someone to continue the thought exercise.
[01:03:37] Speaker B: Yeah, no, I'm looking forward to it. But so I think one of the things, Ryan, I'd love maybe to kind of put a nice bow on everything that we've been talking about too. This is all rooted in, this is just another, what is the word that I'm trying to think? Not thing, but another thing people have to work on in order to manage their, their time, their cash and their wealth. And I'd love just to kind of hear your reflective thoughts on all of that.
[01:04:04] Speaker A: It's all just decision making, Kim.
Like should I insert problem, raise my pay for my employees, Should I raise my pricing, should I kill this product, increase this product line? You know, I don't Know, I don't know, I never know. Tell me what your goals are, you know what I mean? And what's the trade offs? So the trade offs from what I've gathered is time, cash, one, wealth. Like we only have so much time on this earth. What do you want to do with it?
How much cash flow do you need in the form of salary or distributions, however, and what's the dollar amount that you need now and over time? And then what's your wealth now and over time? And the reason I say five years is because we want to know how it evolves over time. Not just a point in time.
Right. Because like I think people, if they, well, if I do that, then the other thing, it's like, okay, well you're going to, if you increase payroll, people's pay right now, you're going to have less money today.
Okay. How does that impact your valuation? I believe your valuation now more than I did before.
You know what I mean? So it just kind of goes back and like, I don't care what people do, I just want them to know what they're doing.
That's it.
So it's, you know, just kind of putting it back to empowerment through clarity, empowerment through data.
So then people can decide and they can decide and reconcile that decision against their time, cash flow and wealth and that becomes the backstop for decision making.
So that way, like the only way we can see our trade offs is if we reconcile our decision against a goal.
[01:05:45] Speaker B: Now I love that. And so to kind of summarize all the thoughts in my head of things that we've been discussing. So Empower through Data. We've been discussing a lot of the facts. You brought up charts. We were looking at things, inflation is real across the board in all sorts of different areas. And so that's something people need to be planning for.
Yeah, I think it just boils down to something as simple as that. And price increases are going to need to happen and people need to have the right way to go about doing it so that way they don't end up like your protein powder people.
[01:06:15] Speaker A: Yeah. And I, I can't predict the future. I don't know what's going to happen.
I just try to take every day what do I know to be a fact. Like Shoe Dog by Phil Knight. Awesome book. If people haven't read it, it's like one of my favorite business books. I mean, that guy deserves a lot of his success. He ate shit for like 40 years building that company. And he's got Phil Knight's Got this one phrase, kind of, what do I know?
And like, he would go through this exercise. Well, I know this and I know this and I know. What do I know to be true?
The straightest shot.
Okay, and we can go back, like. And I, I just encourage everybody to stack one block of knowledge on top of each other. I know this to be true.
What does it mean to me? I know this to be true. What does it mean to me? And then we can eliminate the sensational BS and then clickbait and just go, okay, what's. Because all of that is to pay attention to how urgent is this? And then we can then reconcile it against the data and the rates of change, and then we reconcile it against our goals to determine whether we should do something about it now or pay attention to it for the next. Next board meeting.
[01:07:21] Speaker B: Yep, exactly. And if you have to do something about it, make sure you put together
[01:07:25] Speaker A: the right communication plan, a war room battle plan, whatever. So give everybody some details. We'll put the link to the workshop in the show notes below. What do you want to give them? A little cliff note of the workshop?
[01:07:38] Speaker B: Yeah, I'm looking forward to it. So Alex is joining, as I mentioned earlier, a colleague of mine when we used to work at itr, he's still out there on the circuit doing lots of presentations, economic forecasting, and just really specializing lately in the geopolitical environment. So he's going to be joining us for the morning session, and then afterwards we're going to have just some pretty serious exercises so that we can roll up our sleeves and work on some of the stuff we talked about today and then leaving room for breakout sessions. So that way you guys can, or those that are attending can chat through what they're working on and kind of just bounce the ideas off of each other and then having some working session time at the end for us to wrap up and make sure that people leaving the room are more informed about input, cost, future, the impact on them, and how to build a proper communication plan.
[01:08:29] Speaker A: A hundred bucks. Nine to noon, April 27th, right?
[01:08:33] Speaker B: Yes, yes.
[01:08:35] Speaker A: Confirming the link below in case we change something when this is out.
[01:08:38] Speaker B: But there'll be a link.
[01:08:39] Speaker A: Yes.
Thank you for keeping me on track and being someone that I love working with. I appreciate it so much.
[01:08:48] Speaker B: Yeah, likewise. Fun to chat.
Ra.
