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How to Love Your Business - With Guest, Debbie King [Podcast]

Episode 128: Michael and Kathryn interview Debbie King, the author of Loving Your Business, about how to rethink your relationship with your business and make it work for you. Debbie shares how to start loving your business so you can successfully scale. If you've been running your company for a while but have reached a place where it's making you miserable, then you'll definitely want to get the practical tips and insights in this episode!

Podcast size Debbie King HV Podcast


In This Episode You Will...

  • Discover what it means to actually love the 4 corners of your business (Yourself, your team, your customers, and your solution).
  • Find out how Debbie changed her mindset so she could effectively grow her business and reach her strategic goals.
  • Learn the key points of loving your business and what specific areas you need to be mindful of as your grow over time.
“Try to focus on where you want to go, instead of on what you want to avoid. The energy is entirely different. When you focus on where you want to go, you feel excited and energized, positive and motivated; and when you focus on what you are trying to avoid, you'll feel worried and anxious and tired. This is why mindset is so important."
- Debbie King

Resiliency Quiz

References:

Debbie's Quiz

Loving Your Business (By Debbie King)

 

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Michael:
              Hello, and welcome to the HaBO Village Podcast. I'm Michael Redman.


Kathryn:
               And I'm Kathryn Redman.


Michael:
              And this is a podcast dedicated to you, the business owners who are trying to build companies full of passion and provision, or what we say is full of profit, purpose and legacy. We know you want to have a company that you enjoy, you want to have a company that's successful. And we want to equip you as much as possible to do that and encourage you along the way. All right. So, for those of you who have been listeners before, you know that sometimes we have folks on the show, sometimes Katherine and I are just going at it at ourselves and use our banter.


Kathryn:
               But today, lucky you, we have a guest.


Michael:
              We have a great guest. And Debbie King is our guest today. She's written a book called Loving Your Business. Kathryn, do the honors, please.


Kathryn:
               Absolutely. So first of all, Deb, welcome to the show. We're excited to have you.


Debbie:
                Thank you so much.


Kathryn:
               Let me just read a little bit about this bio then that way everyone can be like, whoa! Are you ready? So, business mindset coach, Debbie King, successfully transformed her business, Association Analytics, from a service based technical consulting model to a leader in the field of productized solutions. You'll get to explain what that means later. After scaling and selling that business, Debbie created a coaching company, Loving Your Business, and now teaches business owners how to escape the owners trap by loving their business while turning it into an asset that has value beyond the revenue it generates, creating both freedom and security.


Kathryn:
               She has a master's degree in leadership from Georgetown University, more than 20 years of experience as an entrepreneur and a coach. And Debbie is an expert at applying mindset tools based on cognitive psychology, whoa, ah, to transform your relationship with your business while you scale. Super, super fun. Debbie has recently published a book called loving your business, which is how we met.


Michael:
              Yes. Rethink Your Relationship with Your Company. I like that subtitle a lot.


Kathryn:
               Well, the idea that we run a podcast about how to run a passion and provision company, it makes sense that we would author or interview an author who's writing about what it means to love your business. I mean, there was an instant connection. So, Deb, we're very, very excited to have you. Welcome.


Debbie:
                Thank you. Thank you so much, Kathryn and Michael. It's a privilege to be on your show.


Kathryn:
               And congratulations on your book-


Michael:
              The book launched everything.


Kathryn:
               ... just published in September, yeah.


Debbie:
                Yeah. So, I'm very excited. I found out that, we hit the bestseller new release in the category for organizational psychology. And so that made me happy. Because this idea of bringing love to business was one I wasn't sure how it would be received and I'm really happy.


Kathryn:
               And, well, we were like passion and business. That's an interesting thing. So, yeah, we get in.


Michael:
              So what made you want to write this book?


Debbie:
                Well, it seems to me that most of us start our business because we think we're going to have more time, money and freedom. And somehow around the five-year mark, if not sooner, we start to realize we don't have any time or freedom. And if we even do have some money, we're worried about it all the time and we can't spend it because we're so busy. So what I noticed is that the bigger that we grew, the less freedom that we had, and it was a recipe for a trap. If the business is based on scaling with people and scaling with services, then the bigger you get, the harder it can be if you're not systematizing.


Debbie:
                So, when I reached the limit of my ability to continue to handle the chaos, I resented my business, right? I felt like I was held hostage to this thing I created. And, honestly, I had a coach at the time who told me, you have got to love your business. If you don't love it, no one else will. Not your clients, not your team, and not the market. So that's what made me stop and think about, what does it mean to love your business?


Kathryn:
               So, just to put in perspective, when you kind of hit that place where you felt like you were held hostage, you were overwhelmed, how far in were you and how many employees did you have? How big was your team?


Debbie:
                I made it to 10 years before I really felt like I was completely trapped and miserable, to be honest with you. I was miserable. And I had 20 people. And by this time, I had all the accoutrements that go along with being a successful entrepreneur. I had all the fancy things and I was traveling around the world. And, really, if I'm honest, and I was honest in the book, I was just trying to escape how miserable I felt in the business. So, taking a three-week trip to New Zealand to ride horses on the beach, it wasn't like this thoughtful thing that I had planned for a long time and that I had made arrangements for it. No, no, it was running away from my business.


Kathryn:
               I need to go ride elephants next week, I am so done. And I can afford to, yay, but then I have to go back.


Debbie:
                Exactly, it's a short term fix and it doesn't solve anything and so-


Michael:
              Okay, so when you say that, the first thing that comes to my mind is there's a lot of entrepreneurs out there who make a fair amount of money, who just, that's just the way it is. I can imagine them saying right now, yeah, that's work. It's not like something you love to do, you go to work so you can go ride the horses on the beach. But you took it beyond that when it doesn't have to be that way, right?


Debbie:
                Right. Because if you think about it, what is a business. So, a business consists of you, your team, your clients or customers, and your solution. So there's four corners, like I draw a little box in my mind. There's four although I'd rather think of it as a circle. But there's four corners, you, your team, your customers and your solution. And so, when I talk about loving it, it means feeling connection and appreciation to each of those four corners, and both ways. So it ends up being a 12 connection thing.


Debbie:
                You and how you feel about yourself as a leader, how you feel about your team, how you feel about your clients, and your solution. And then how your team feels about you, your clients and your solutions. And how your clients feel, and then how your solution works for you, for your team and for your customers. So, this idea of having to white knuckle it and use willpower and grit as your energy to add value into the world is the losing proposition I found because it left me exhausted afterward. So it works but it's too high a toll.


Michael:
              So, okay, like I got three things going on in my head. So, it's like to me is I'll just-


Kathryn:
               Pick one.


Michael:
              I'll stutter here for a moment. So, as time went on, what was the transition for you to go, I've got to fix this and I'm going to fix it.


Debbie:
                Okay. Well, basically, what was happening is we did a fairly complicated work, right? We had a technical services company doing predictive modeling and data analytics and data warehousing by hand back in the day. And so, every time we want a new project, it was a very complicated, detail oriented struggle, if you will, to take out everything right. And it really wasn't scalable, right? So, it's almost like I picked the hardest thing that I could think of to do and then tried to do as many of them as possible. And I like to think of it like, I was building Star Wars for every client.


Debbie:
                And, I started to think, well, this is just taking my life force, my everything from me. My marriage was suffering. The effort it took to build a full scale production, like Star Wars for every client, wasn't worth it? And so that's when I had the, aha, to build a solution and then sell tickets, right? And so I looked for what was in common in all of the clients that I had, what was the 80% solution that they all needed? And then I took all my energy and directed it into systematizing that and my team into systematizing that instead of scattering our energy across all the clients.


Michael:
              And that worked for you?


Debbie:
                Well, it wasn't as easy as I'm making it sound, I can tell you that for sure.


Kathryn:
               Thank you for that.


Debbie:
                The first thing that happened was I decided that in order to do this, I had to hire somebody to run the business for me so that I could do all the thinking about how to do this. And that was an abject failure and a really painful one, right? So I hired somebody, MBA, really smart guy, came in, but I didn't want to spend any time with him. I didn't onboard him. I expected him to solve problems that I didn't even [inaudible 00:09:07]. And I thought, well, I did it so he can do it, right. And you guys know because you're leadership experts, that's the worst possible thing you can do. And so that-


Kathryn:
               You know what I love? I love that somebody with an MBA and leadership from Georgetown makes that mistake, which just makes you extraordinarily human because we all fall into those kinds of traps no matter how equipped and read and whatever else we are.


Michael:
              So a slam dunk for any of us, yeah.


Kathryn:
               It happens, so.


Debbie:
                Well, I wish I could say that was the only time I made that same mistake. But I made it two more times. So three times, I hired the wrong person, or they might have been the right person but on boarded them wrong. In any event, I had three failures over 18 months. Now, can you imagine the embarrassment of introducing this person to all your clients and your staff and turning over things. And then every time it failed, I had to take it back and I've had even less energy.


Debbie:
                So, back to your original question about loving your business, these things you think I thought that the reason I resented my business was because of these kinds of things happening, right? I thought it was because I had three failed hires. It was because the work was really complicated. No, it was because of my thoughts about those things. The fact of the work that we did and the fact that the people I hired were neutral. It was how I thought about and how I felt about those things that changed how I acted.


Debbie:
                And so, this idea of loving your business starts with a decision that you make on purpose, that you decide to look for what you will appreciate and feel connected to. And so instead of pushing away from all the things you don't like, you're looking for what's good and what you appreciate. Because we know from psychology that confirmation bias is then going to show us more evidence for the things that we look for. So it's like an inside job.


Michael:
              Yeah. So, when you had these folks that you were going through, they weren't working out, they were the wrong hires, and you had the wrong thoughts, what were some of those thoughts you had that eventually had to change?


Debbie:
                I don't know what I'm doing. I can't do it right. This is never going to work. I should just give up. Everybody else seems to know how to do it. There's something wrong with me. Usually, it always came back to I'm fundamentally flawed in some way. And after years and years as coach, I can tell you that that is one of the things at the core of many of us as leaders that we don't talk about, that I'm not enough, I'm inadequate, I can't do it. And we can't show that we think to anyone, right?


Debbie:
                Because people quit their jobs and come and work for us. Banks loan us money. We can't like tell them, we don't know what we're doing, we feel bad all the time, and we're always worried about whether we're good enough. And so, we stuff all that stuff and then we start having the imposter syndrome. And what I came to this idea of loving your business is loving yourself too, like there's nothing wrong with us, nothing.


Debbie:
                We have more courage. Entrepreneurs are the modern day gladiators. We built this country and we're going to save it again. So, yes, we make mistakes, that doesn't mean there's anything wrong with us. And so, I think that being appreciative of our own self and our own courage is one of the main lessons I learned.


Michael:
              Interesting. Okay. That's really cool. I like it. One of the things that makes me think about is that I'm thinking about two different types of people. The people who are in business and doing this all day long and they're going, yup, yup, that's me. Yup, that happens, yeah. And there are certain people that I should never tell, I don't think I know what I'm doing.


Michael:
              It's like, if you have gates that are never open and you're not communicating any of those things to anybody, the next step is not to open all of the gates until everybody you're talking to including the cabbie you just got into, let me tell you how crummy I am or let me tell you how, I don't know what's going on, and let me share with you all the pieces.


Kathryn:
               Actually, the cabbie is probably the safe bet.


Michael:
              Well, that's probably true because he's like-


Kathryn:
               Probably. He really doesn't care.


Michael:
              Just leave me a tip, brother. Just leave me a tip.


Kathryn:
               Don't tell your secretary who expects a paycheck from you that you don't know-


Debbie:
                Exactly.


Michael:
              But there's boundaries right there and you're not suggesting that we don't have boundaries. You're just suggesting that we have healthy ones.


Debbie:
                Yeah. And I'm suggesting that we love ourselves first. I'm saying that these thoughts, that's all they are, they're not facts. See, this is why it's all based on cognitive psychology is that I can't do it, I'm not good enough, there's something wrong with me. These thoughts we have when we fail, especially as leaders in the high profile positions, they're not true. So, I'm just questioning that we think they are. And that instead, we can choose to think, oh, that's just a remnant of some earlier thought I used to believe and then we love ourselves instead, which just means we appreciate and feel connected and proud of what we're trying to do.


Debbie:
                So, I do think it's important to have someone that you can work with like you guys help leadership teams and it is important to be able to be authentic to someone. But, no, you can't come out of your office and tell your staff, I have no idea what I'm doing and I doubt myself every day. No, I'm not saying that. I'm just acknowledging that it happens.


Michael:
              I didn't think you were, and I just want to make sure we said that out loud because I know there are some folks, I've had these conversations with leaders before. They're like, what are you suggesting, this is insane. And they go to the extreme immediately because we tend to as entrepreneurs, we pick up extremes immediately and we go, like it's not going to blow up so why can't I just push all the buttons?


Debbie:
                Yes. I'm an example of that, like I'm pretty extreme. So, when you would ask me a question that I don't think I actually answered, sorry, which was when did I decided to truly make a change? So after those three failed hires, you know what the conclusion was I reached?


Michael:
              What?


Debbie:
                I have to sell it. I have to sell this company, cut it off, amputate, run away, go do something else immediately.


Kathryn:
               Ride horses in New Zealand?


Debbie:
Yes, but like immediately, like not a thought out plan to gradually, it was like, that's it, fire sale, just get rid of it. And so, that's a pretty bad decision, so-


Michael:
              But if I remember correctly from our conversation we had a few weeks ago, that was actually part of the transition for you of what you discovered there gave you an option to something else and it locked something for you, what was that?


Debbie:
                Yes. Michael, you're right. That was exactly the time when I met with M&A advisor. And I said, I've got this business, it's been profitable for 18... at this point, I guess it was 15 years. So it was five more years after I first decided I was done, right? Because we have sticking, we use willpower and grit. And so, 15 years then and I met with the M&A advisor and I said, "I want to sell it." He looked at the financials. He talked to me about my management team. He asked me about my solution.


Debbie:
                And by the time we were done, he said, "You can't sell your business. If you sell it, it will be literally a fraction of what you're making now." And I said, "Well, what do you mean," like I flipped out. It was the worst day of my life. I went from a business very, very profitable for the whole time I had it to this guy telling me I couldn't sell it.


Debbie:
                And he goes, "Well, if you'll agree to stay for five years, you might find somebody that could maybe give you one times revenue and pay you over time. I'm like, "No, no, no." Can you imagine what could be worse than being an employee in your own company with a new owner telling you what to do in order to get the rest of your money? So, that-


Michael:
              That would suck.


Kathryn:
               Sounds no fun.


Debbie:
                I mean, it just makes my heart pound even now talking to you about it. And any of the friends of mine who've done that have all regretted it because you just end up walking away from the money on the table for the earnout because you can't stand having somebody else tell you what to do. So, I said, "Well, there has to be a solution. What do you mean, I can't sell it? Now, what do I have to do?"


Debbie:
                And so, it took about two weeks for me to get over the shock and to reconnect with the actual steps I need to do, which I'm happy to share with you. And in fact, you guys already know these things. But to me, I put them in a way that I could tackle and that's when everything changed.


Michael:
              Okay. So, did part of this come from the M&A person or did you walk away from the M&A person and go, there's got to be a different way for me to get to a place where I can sell it. How was that relationship?


Debbie:
                Part of it happened from the M&A person saying that the way he asked me questions made me realized that I couldn't answer them the way he was wanting them answered, about how much time I spent making decisions, for example, how the business ran when I wasn't there, how long could the business go without me? And then other questions about the nature of my clients and the works that we did?


Debbie:
                So, I was able to see where he was going. And then he didn't tell me what to do about it, okay? He just said, "Call me kid," right, "Call me later, kid." And so then I went looking online for books and courses and stuff like that. And I found a really great book called Built to Sell, which I highly recommend BY John Warrillow. And I read it cover to cover multiple times.


Michael:
              Is that the blue cover book?


Debbie:
Yeah.


Michael:
              Yeah, yeah, yeah. I've only about two chapters in so the rest of the book is worth reading?


Debbie:
                Got to read it. I read it multiple times. Got it on Audible. I would listen while I was running. I mean, it made a lot of difference in my life. In fact, John had me on his podcast about a month ago, so-


Michael:
              Oh, neat. So, is he a nice guy?


Debbie:
                He's a wonderful man.


Michael:
              It sounds like he really has a perspective there. So, okay. So elaborate what you we're learning, we don't need to talk about John right now, we're talking about you. What were some of those key things now that you started learning about and what was that system that allowed you to wrap your arms around it?


Debbie:
                Well, so I came up with six things, six buckets that I put it into. And the first one was, and you could even make it bigger buckets of mindset and strategy. And the mindset stuff is the stuff I'm talking about with feeling love and affection toward the people that you work with, the clients you serve, and what it is you do. And if you don't feel appreciation and desire for it, you either need to stop or create it. You cannot successfully sell a business or even keep a business and scale it that you don't feel connected to without collateral damage, I believe that wholly.


Debbie:
                If you keep it and you still are able to scale it, you're having all kinds of collateral damage if you don't love it, like if the energy is resentment, you're going to pay a price. So there's the mindset piece and then there's the strategy piece. So the strategy piece, the first part of that, is your niche, niching down, constraining focus. I served a lot of different clients doing a lot of different things. And even though I was focused in one particular market, it was still broader than it needed to be.


Debbie:
                And let me tell you the price for that. You already know, but maybe your listeners it will be no. The biggest price I paid for serving too many different kinds of clients was that my marketing was not as effective as it could be because I didn't speak to them as though I intimately knew them and their problems. I was trying more of like a spray and pray like approach. I couldn't communicate in ways that told them, ahh, she gets me, she knows what my problem is, I got to work with their company. And that's what you want.


Debbie:
                So, in order to get that kind of loyalty and desire from your customers and clients, I think the only way to do it is to niche down and constrain so that you can be unique. And the number one factor and the price that you get for the sale of your business down the road is how differentiated you are in the market. Because if you're highly differentiated in the market, you can charge a premium price. And if you can charge a premium price, you make more profit and then you can take that profit and do more marketing. So it's the ultimate virtuous cycle.


Michael:
              So let's talk about that really quick. Let's talk about the differentiate in the marketplace. How would you explain that to an eighth grader, that term?


Debbie:
                Being different is just simply having something no one else has. So, differentiation sounds like a big fancy word, but I just like to say be different than everybody else, either with exactly how narrow your niche is, okay. So, like how many kinds of shoe stores are there, right? I mean, I don't even know. And how many kinds of shoes. So like, if you just say I sell shoes, that's not a very, yes, it's better than I sell shoes and clothes and hats and coats, but it's not as good as I sell running shoes to triathletes, right, or whatever.


Debbie:
                And I mostly focus on the services side, not the product side, so I probably shouldn't pick a product example. But how narrow is your niche. Like I, for example, worked with associations. And so, what I learned was to narrow all associations to sort of like those that focused on medical. And so then once you narrow your niche, narrow what you do for them, so that I, right.


Michael:
              No, no, no, you're doing great. So, if I were to summarize that from my perspective, because sometimes when people get stuck with this differentiation, it's like I have to be 180 degrees different than everybody else. Really, you can still be a marketer who's serving or whoever, whatever you're doing, serving an association, serving a medical association, because there's always competition in the market space. But when you start using your gifts, talents and skills, you start saying, I'm going to pick an audience. People are always also terrified that there's not enough business in that audience. And it's amazing, really there is. And you can actually find more.


Debbie:
                It's just a thought?


Michael:
              Yeah. So that's-


Debbie:
                It's just a thought.


Michael:
              So that's good. So, one of those things you did was differentiation, okay. Let's talk about the next set, the next step-


Debbie:
                And next one that is the second most important to me anyway and for any services business, is to turn your services to solutions that you market as products. And I'm serious about this, like I get very gung-ho on this point because scaling with services is very difficult to do because it means that you're hiring people. Scaling with people is much more difficult than scaling with systems because people are variable. They're different, they're unique. And I run into a lot of clients who say, "But we like doing custom work. We are designers. Each project is different."


Debbie:
                And I'm like, "That's great, I get it." It just doesn't really scale. So, take all the pieces that will scale and systematize them and just carve out the one or two creative pieces that are unique for each type of engagement. But systematize everything else, as the owner especially, take all of your life force energy and instead of directing it towards solving a particular thorny problem for a big important client, which we all do, take that energy and solve a system so that your business can scale and help more people.


Debbie:
                Because the reason that I felt trapped by my business, it wasn't just my mind, it was also that it wouldn't scale. The business didn't scale without more time and effort. And that's not something that's easy to sell. And that's what the M&A advisor did not tell me but what I learned is that people acquire businesses that can run without them too, right? They want to acquire an asset, something that can scale.


Debbie:
                And so, take every piece of your business that is possible to systematize, give it a name, call it a solution or a product, and market that then you can charge in advance because people are used to paying in advance for a product, and you've got a positive cash flow then at that point, you're not using your own money to fund operations. Your clients are basically funding your business.


Michael:
              Yeah, like positive cash flow.


Kathryn:
               Me too. Okay, so let me ask a couple questions because I'm always curious what happened between here and there. So you go through this, you narrow down, you decided you're going to focus on your niche. Are you firing clients along the way?


Debbie:
                Yes.


Kathryn:
               You're just like, I'm done. I'm not doing what you need anymore?


Debbie:
                Yes.


Kathryn:
               And did you do that like as you could afford to? I mean, how did you make that happen as you were transitioning from having a bunch of clients that didn't necessarily fit what your new solution was going to be to being in a place where you no longer serve those clients, especially if we talk about cash flow?


Michael:
              Was there a gap there too on your cash flow for that?


Debbie:
                Yes, there was. But many services business are profitable. I mean, we can be profitable in services businesses if we're running it well. The problem is, for me and many of my colleagues, we create almost a lifestyle business, right? We're taking distributions out of the company, legal ones, but instead of reinvesting the money, all of it in the business, we're taking out enough to have the nice house, send the kids to the private school and the beautiful cars and the trips.


Debbie:
                And so, what I realized is that those decisions I was making were part of the trap. Instead of taking the big profit and investing most of it into the business or holding it in reserves so that I could take a small dip, small dip, because remember, the dip is also offset by the fact that your clients are starting to pay you in advanced. Because I was in a model where people would give me, I mean, I get 30% of the project maybe upfront, but then I'd get milestone payments.


Debbie:
                And then there was always the last payment at the end that was hard to get on time. So, the new model was one where they were paying all of it up front so that was better, and we'll get to the recurring model in a minute. So I took a small dip but because I kept in reserve some of the profit from the previous year, it wasn't really noticeable. But I absolutely fired clients and turned work away.


Debbie:
                And that took courage which is why the first step I mentioned was mindset. I had to manage my mind every time my mind had a thought that wasn't true. It was just an optional thought that said, this is a mistake, it's never going to work, you're doing the wrong thing, all the same things, right? This little monkey mind talking to me. And I said, yes, it is going to work. I'm going to make it work. I know this is the right way to build an asset.


Debbie:
                And so one time, I had a client come to me with a million-dollar implementation. This is where the rubber met the road for me. I didn't want to do it. It was a very complicated engagement. It was basically us doing what they wanted us to do rather than us solving a problem for them. Do you know what I mean? Rather than bringing them into my system, they were trying to make me fix their system. That's not scalable either.


Debbie:
                I just don't think it's the best idea for us to build businesses where we're going into their system and fixing it if you want to scale it as an asset and sell it. Instead, you want to bring your clients into your system and then scale that. So I turned away this million-dollar implementation and I just never looked back after that. I had to manage my mind. I said, it's the right thing to do and it was.


Debbie:
                Because you know what the lost opportunity cost would have been? It would have taken a whole year for much of my team to execute on that engagement and it would have meant a whole another year would have gone by before I built the system that eventually allowed me to scale. So the lost opportunity cost would have been a lot higher than a million dollars.


Michael:
              Yeah. No, that's good. Good for you for doing it. I remember the day we turned away $500,000 a year to start-


Debbie:
                Good for you.


Michael:
              ... for a client. And I think we ever once in a while we'd look back and said most of the time we were happy we did it.


Kathryn:
               Yeah. And it was for totally different reasons. It was about a bad, just a really bad culture fit like he just wasn't, just a mean human being.


Michael:
              It would have been-


Kathryn:
               You're like, no, just the toll emotionally on serving a client like that with more than our team needed, more than we wanted. It was toxic, so-


Debbie:
I applaud you. I applaud you. So you're living your values.


Michael:
              We're trying to.


Kathryn:
               And real hard.


Michael:
              We wrote that chapter going, we're doing the best we can to actually live this stuff out. So, okay, so the next step?


Debbie:
                Yeah. And by the way, can I just say that everybody thought it was crazy like-


Kathryn:
               I would imagine, yeah.


Debbie:
                Like literally, my husband, the staff, you have these dark nights of the soul. But if this was easy, anybody could do it, okay? We're business owners. We create reality. We were leaders and so, anyway. So the next thing was to take from services to solutions that you market as product because then the third thing that is important is that the positive cash flow that comes from charging in advance and looking to see what can you turn into recurring revenue.


Debbie:
                Remember, I'm not laying out a ground work plan here for everything about how to build a business. I'm just focusing on the things you need to do if you want to sell your business. And the reason I think everybody should pay attention to these things is because the same things that make somebody want to buy your business are the things that will make you love it. So I like to say, turn your business into an asset that you love and that other people want to buy because then you'll never feel trapped again.


Debbie:
                You'll have options. You can keep it and scale it. You can sell it and do something else. Or you can just become a passive investor and have somebody else run it once you learn how to hire the right person. But that's your guy's domain, you're experts in some of that leadership stuff. But I'm just focused on, these are the things that I did to turn my business into an asset, I got multiple offers to buy it. And that's my goal is to help people understand that if you begin like Stephen Covey used to say, begin with the end in mind, and it's never too late to begin again.


Debbie:
                These are the things that will make the business not feel like a trap because you'll have options. So, after you've turned your services, most of them into solutions that you market as products and you've narrowed your niche so you're solving problems for a specific narrow market, then you start charging in advance for them and you look for what can you get on a recurring basis. Recurring revenue models are the darling of acquisitions. Even if it's a small part, even if only 10% of your revenue, 20% of your revenue can be recurring.


Debbie:
                The multiple that you will get, which is the amount that a buyer will pay for the part of your revenue that's recurring, is exponentially higher than what they will pay if it's just services. So, for example, the average that you can get when you sell a services company anyway is 3.7 times EBITDA earnings before, you know what EBITDA is, you guys probably... So, basically pre-tax profit is how I explain it simply. It's not exactly accurate. So 3.7 times profit.


Debbie:
                So, if you're making $500,000 a year in profit, that's, I don't know what the math is, almost 2 million. But you have to consider that after you pay taxes, capital gains, taxes on a sale which are 20%, you have to decide, can you live on that for like the rest of your life? So my goal is to make sure that I could sell my business for enough that I would never have to work again. And so, to get 3.7 times, I wouldn't have been able even to get that at first until I started taking these steps. And then once I took these steps, I was able to get closer to 7, so 7-


Michael:
              Oh, wow, 7x?


Debbie:
                Seven X and that's pretty powerful.


Michael:
              That's extremely powerful.


Debbie:
                And I wasn't even a pure software as a service company. If you can find a way to build a part of your business that is completely Software-as-a-Service, you can get 15X and stuff like that. So, the point that I'm making here with the recurring revenue is that if you take your revenue, and even 10 or 20% of it is recurring, that portion is going to be exponentially more valuable. So you could even get up to 10X for that piece. And then three and a half X for the rest of it. Does that make sense?


Michael:
              Yeah.


Debbie:
                And it could be anything. It could be a membership where they get a monthly training video. I mean, I hear a lot of times from clients like that won't work for me. That won't work for me, I can't do that. And I just say, question that thought. Question whether that's true. There's like recurring revenue models now for things that I never would have thought of like wine, socks. I mean, services and all kinds of things like different kinds of clubs and things that you do. You can even take the training that you do and turn it into masterminds and all kinds of things.


Debbie:
                So, I asked people to put that idea in your mind and ask your brain to be thinking in the background, how can I create some recurring revenue because it will pay off?


Kathryn:
               Yeah, makes sense?


Michael:
              I like it. I like it a lot. So how are we doing here on our six?


Debbie:
                Okay, so we still have two more, I'm sorry.


Michael:
              No, no, you're doing fine. Let's keep moving. This is really good stuff. It's about five podcasts worth of stuff which is the way we-


Debbie:
                Oh, I'm sorry.


Kathryn:
               Not on me, it's perfect.


Michael:
              No, no, no, you don't, that's actually the way our listeners love it. Well, if you keep coming back, they'll love it because that's what we give them on a regular basis. Let's give them the good meat and let them digest it and work on it for a while because this is important. And I think holistically what I like about what, and this is probably a good time to say this, holistically I really like what you're saying. Because when we talk about mindset, some people are just mindset. I mean, even those of us who believe in mindset, we know that there's a bit of a woo-woo out there.


Michael:
              And I've talked to lots of business people who go, "Yeah, well, they're really good people but they're into the woo-woo a little bit. And yet sometimes that's true. But when you pair a good solid thought of I'm going to worry about my thoughts, my mindset, my ideas, how that can take me and discourage me, it can shut me down, it can sabotage me.


Michael:
              And I build that with also solid principles of what does it take to productize. What does it take to scale? I like the fact that you found your way into bringing those together. Because if you hadn't done your productization and you had to figure out how to systematize, no matter how many good thoughts you had and how much you loved your business, you weren't going to get there were you?


Debbie:
                Amen, brother. You definitely hit the nail on the head. I'm not just going to sit and meditate and look at my navel here. I had to have a strategy. And the reason that the mindset piece was important was because as we get to do the things that are in our strategic plan, to scale the company, the mind gets in the way, that's all. We have to manage the thoughts that our mind has about how we can't do it, nobody knows how, it's going to take too long, we can't afford it, it's not going to work, all that stuff.


Michael:
              We've been around that mountain way too many times.


Kathryn:
               Oh, so many times.


Michael:
              I'd like to not go back to it.


Debbie:
                Me too, so.


Kathryn:
               Yeah, it's super powerful. What you said earlier, it's like, the battle always especially in the leadership world that we live in. It's like, why do they need what I have? I mean, there's so many good things out there. What do I have to contribute? How can I possibly give anything that hasn't already been given, et cetera, et cetera, et cetera, right?


Debbie:
                I know and you know what, the killer cancer is in those thoughts. We think like, you just said, that I have often thought in the past is that our minds are programmed to answer the questions we ask ourselves. So when we say things that are disempowering, when we ask ourselves, why is this always happening to me? How come I can never do this? There's no reason they're going to like my solution better than somebody. There's too crowded, too much competition. Our minds start going, yeah, that's right, or it starts coming up with reasons why it's true. It looks for evidence.


Debbie:
                And so, I hunt those things out like a big game killer and I try to be, and it's not Pollyanna. It's just trying to focus on where I want to go instead of what I want to avoid. And I think the energy is entirely different. When I'm focusing on where I want to go, I feel excited and energized and positive and motivated. And when I focus on what I'm trying to avoid, I feel worried and anxious and tired. So, that's part of the reason I think mindset is important.


Michael:
              Well said. Okay, let's move on to the next two points.


Debbie:
                Okay. So, measuring, what gets measured gets done. So this is the fifth one, old saying cliche but, oh, my goodness, I cannot tell you. I immediately, oh, I can just tell you. I got one B in college ever and it was in accounting. And so when that happened, I made up my mind that I sucked at accounting and that I could never do it. And that, it was the bane of my existence and that carried all throughout all. I mean, I've had a lot of education and it still sticks with me that I can't do accounting.


Debbie:
                And so, I took it to another level. In fact, I even have an undergrad in statistics but I have this thing about accounting, right? And so, it's just a story, right? That's why mindset is so important. But it made me not want to look at a lot of the numbers. And so, I would always look at the income statement and the profit loss, like I would look on that like a hawk, right? But I wasn't paying attention to the balance sheet and I really didn't look at the cash flow statement.


Debbie:
                And I didn't really have KPIs, key performance indicators. I wasn't really trying to measure the ratio of one thing to another over time. And I think that's a mistake. Because the mind when it focuses on something, it can achieve it, right? So when we're not paying attention to something, when we don't care about something, we don't pay attention to it, right? And so, I say that why love is important and how it relates to your businesses, when you love something, you prioritize it, you pay attention to it, you notice it, you set expectations, you communicate.


Debbie:
                So, when it comes to money and numbers, I had to start loving the numbers and the money. And I had to start intentionally deciding that there was nothing to be afraid of. So, one of the things that I encourage people to start looking at when it comes to metrics or numbers is your customers acquisition costs.


Debbie:
                How much it costs you each time you get a new client and compare that with the lifetime value of a customer because sometimes it can really get out of whack. And you start actually analyzing those two numbers, how much does it cost me for each client? How much in the marketing and the effort that I spent? And then how much does the average lifetime value of that client? If it's not three to one, like if you're not getting close to the lifetime value being three times the amount to acquire it, you want to tinker with that and figure out how you can either increase your prices or decrease your costs.


Michael:
              I think that's a great way of saying it too. I like that. The way you're talking about it makes it sound really approachable. And it's, let's call it an ancient wisdom. It does sound like, oh, yeah, yeah, yeah, yeah, measure what you measure gross but it's just so true.


Kathryn:
               And people get in their heads like I want to grow this part of the business because this part of the business is what I think we should be growing. And then you look at their overall business and you graph everything out and you're like, okay, but 80% of your profit comes from that piece of the business.


Michael:
              Oh, we've done that sometimes.


Kathryn:
               Do you maybe want to maybe focus there and leverage that, right. So, yeah, that's really again-


Michael:
              One of our other companies that we have is in the pet food industry. And I remember, we had been selling on Amazon as one of our channels for over a year. And we finally realized from our accounting that we had never made a profit.


Kathryn:
               We're losing. Every time we sell something on Amazon, we were losing money.


Michael:
              We were in negative X. I mean-


Kathryn:
               We're paying them to sell our product. Thank you so much.


Michael:
              It was so awful because we thought, okay, this is going to be great. We'll give them more money and we'll pay them for more ads and it's going to work. It looks like it's working. It's got, yes, oh-


Kathryn:
               Yeah, the gross is going up. It was just the net that was a problem, so, yeah.


Michael:
              So, paying attention to those things and how much the acquisition cost and the lifetime value cost is phenomenal. We talked about it in online marketing. If you can try and find from your online ad spend a 3X value, return on investment when you acquire that customer right then and there, then you actually have a much better chance of creating something that is going to thrive as opposed to just be a deadweight you're trying to drag along.


Debbie:
                Yeah, and I just think that taking the courage sometimes to just really even look at these numbers is the first step to loving what you're doing. Because the other way is kind of like three blind mice, right? And you're not, I don't know, it's just amazing to me. And you know how I can always tell whether someone is doing it or not is when I asked them in the beginning of a meeting, what was your revenue last quarter, last year, and the previous year, and they can't tell me.


Debbie:
                If they can't tell me within a reasonable range, it tells me that they're not making it important enough to pay attention to it. And then I say, "And so how much does it cost you for each new customer that you get," and I get a complete blank look. So, I just think the idea of starting to notice these things, it's just the beginning of the process. So that's number five.


Debbie:
                And then the last one is building a business that can run without you. And we all know this, like we hear about it. But the number of times, almost all of the businesses that I work with, the owner is still doing really key things like, for example, selling. When the owner is doing the selling, I did that, even right before we sold the business, I was still doing a lot of the selling. And you know why? Because I liked it. I liked doing the selling. I liked meeting with the customers. I liked explaining what we did. It was fun for me.


Debbie:
                But the problem was, because I did it, other people didn't learn. And that meant that anybody who bought the business was going to want me to stay on as a salesperson. That wasn't going to work for me. So, it's really important that if you want to build an asset that you could sell, not that you have to, but if you want to turn your company into an asset that has intrinsic value beyond just the revenue that it generates, that somebody else would want to buy, it needs to be something that you offer that sales people can sell, not that the owner of the company has to sell. So you can see right away how that relates to this idea of a system.


Michael:
              Yeah, absolutely.


Debbie:
                And turning your services into a system that you market as a product. When you turn your services into a system that you market as a product, then it's easier, much easier for a salesperson to sell that. But when you're doing a lot of custom one offs without a system, you have to have really high paid people with a lot of expertise doing the selling because they have to explain it all. And it isn't just that the company can run without you as the owner, the company needs to not be dependent on any one client, any one employee, or any one supplier.


Debbie:
                So that's the last part, is to take a look at the dependencies that exist in your company because anybody who comes to look at buying your business is going to discount what offer they give you by how dependent you are on those things.


Michael:
              Nice. Okay, so a couple of last questions here because we kind of come in for landing. So, you didn't like your business. At 10 years, you had enough. It took you until 15 to try and sell it, that didn't go well, that conversation didn't go well. You turned around and made some decisions to change, learned these six different steps and all the nuances that go with it. How long before you did sell the company?


Debbie:
                Well, I was two years after I finish reading the book, to sell, which like I said, I do recommend. And I worked with a coach. I needed some help with all of the reasons why I thought I couldn't do it. But you don't have to work with a coach. I mean, it's all just mindset anyway. How often do we know what we need to do and not do it, right? So, two years, I would say but it didn't have to take that long. It almost always takes at least a year. And I had three offers, so I was super happy about that. That's a really good thing because a lot of times at the finish line, deals fall apart.


Debbie:
                And the hardest part about, and that could be a whole separate podcast someday in the future, but if you do get ready to exit, the lesson that I learned is you must keep flying the plane. You have to keep your revenue going up during the year that it takes while you're under a letter of intent. Because if the revenue drops off because you're paying attention to all the due diligence stuff you have to do to make the sale, then the offer is going to decrease too. So it's like there's a lot.


Michael:
              So, 15 years, have the conversation. It takes you another two or three years before you can sell it, right.


Debbie:
                Yeah


Michael:
              Okay. So, that's an 18-year process. Let me summarize and see how well we've listened for everybody. You had a company in the SAS industry that was doing well. You made enough money to have a staff of about 20 people and go on a lot of, I got to get out of here, escape vacations that also sounded like they were pretty cool.


Kathryn:
               And you had a nice house and cars and...


Debbie:
                Yes.


Michael:
              You were able to do all those things and stuff for the family and everything else. But you were coming to the end of it. So you'd created this thing that was successful financially, it was robbing your soul.


Debbie:
                Yes.


Michael:
              And then you spent the five years being very intentional because that almost straight A student, except for that being accounting, was darn it, you were going to fix it. And if you just spend enough time studying and paying attention to showing up and doing homework, you were going to fix it?


Debbie:
                Yes.


Michael:
              And then at 15 years, you want to sell it and that didn't go well because you realized that the last five years really didn't help you prepare for that, did it?


Debbie:
                No.


Michael:
              And then you learned and you went, okay, I'm going to change the way I'm doing it and you paid attention to different strategies and mindset.


Debbie:
                Yup, that's right.


Michael:
              And got some good quote. I love the fact that you said, I took the time. I had to read a book. I listened to the M&A person. I got a coach. And then we changed things because the same old thing that you were doing was you weren't going to get different results by doing the same old thing.


Debbie:
                Exactly.


Michael:
              And then when you got to the point where you turned it around and you're getting ready to sell it, how much did you like your company?


Debbie:
                I loved it at that point. It was hilarious. I no longer had to escape it. Because I had built a company that would run without me, that was generating recurring revenue with cash in advance, that had services we sold as products to a very narrow niche. And I could have just as easily become an investor in the business and removed myself from the day to day. So I had options. So the ultimate irony was after doing all of that, I no longer had to sell it because I really did love the business.


Michael:
              That's fantastic.


Kathryn:
               That's really cool.


Michael:
              And then the coup de grace on this is, as you were saying earlier, the average multiplier, folks, not on gross revenue but on your EBITDA or roughly your net profit before taxes. That's what you multiply. If you sell $20 million a day, and you make a buck-


Debbie:
                Yeah, exactly.


Michael:
              You're going to get the EBITDA on the buck. And a lot of people don't understand that.


Debbie:
                No.


Michael:
              So, you were able to do that. You were able to go past three point something and go to almost seven which was phenomenal so you would actually beat the odds in those places too because a strategy like this created so much value.


Debbie:
                Yes.


Michael:
              So, this is this package of, so the book, Loving Your Business, is about that idea of how do you take those strategies and probably a whole lot more, and apply them in. So you can't say, do what you said at the beginning, stay in the business if you want to because it's not killing you anymore?


Debbie:
                No.


Michael:
              But you have an option to walk out.


Debbie:
                That's how you don't feel trapped anymore. I mean, anytime a business owner feels trapped, it's because of two reasons. The way they're thinking about the business and the way they're running it.


Michael:
              Yup, perfect. Folks, that's-


Kathryn:
               So good.


Michael:
              That's what we call a passion and provision business around here, Debbie King calls, Loving Your Business. If there's a way we can find out about you, the listeners can find out about you, Debbie, tell them how.


Debbie:
                Yeah. So, we've created a special page that you can go to on our website for your listeners. It's called lovingyourbusiness.com/village. And then we have a couple of freebies there about the kind of strategies I've been talking about here.


Kathryn:
               Nice.


Michael:
              Lovingyourbusiness.com/village, the perfect URL. Debbie, thank you so much for coming on the show today. This was great and the information is fantastic. And I love your attitude and the way you deliver it because it's so full of wisdom and yet you come across so approachable, and we appreciate that.


Debbie:
                Well, thank you so much, Michael and Kathryn. It's been a blast. I hope I didn't overdo it here. I get so excited. I just want to keep talking about it. But I just really enjoy the platform that you guys have created. And thank you so much for having me on.


Kathryn:
               Absolutely.


Michael:
              Well, we enjoyed the enthusiasm. We like a lot of enthusiasm around here at the village. All right, everyone, again, let me say that one more time, lovingyourbusiness.com/village. Check out Debbie King's book. It's also on Amazon, that she has a wealth of information and it comes from hard earned experience. So check her out, go take a look and get those free resources. And thank you for joining us today. We want to help you encourage yourself, your team to continue to grow and build passion provision companies. But today, we're going to say goodbye. I'm Michael Redman.


Kathryn:
               And I'm Kathryn Redman.


Michael:
              And this is HaBO Village. Have a great week. Bye-bye.