In this episode, we have our guest Damon Pistulka from Exit Your Way, who discusses why word-of-mouth or traditional marketing strategies are no longer enough for business growth. He also touches on his growth secrets and how they have been able to rule the market through the network effect. Finally, we touched on what strategic buyers or private equity look for when business owners try to sell their business.
- [0:18] Intro
- [1:52] Personal journey and current focus
- [7:20] Perspective on growth
- [12:52] The network effect
- [20:21] The shift to e-commerce
- [28:53] The predictability of value on a weekly basis
- [31:42] What buyers look for in a business
- [36:15] Closing thoughts
- [39:19] Outro
- COVID really changed their effectiveness because those same people that were the road warriors that were out there visiting these potential clients and moving them down that funnel in person, we’re not able to do that this year.
- When you’re sitting down with a web design person, your problem will be that your web design isn’t good enough. Or if you sit down with a cold calling person, you’re cold calling is not good enough. But the reality of this is that’s not the case. It’s not a one solution fits all. You have to really figure out what your core problem is. And it could very well be that it’s one of those, but it could very well be that something else.
- You need to be measuring where you’re at consistently. And when you talk about how you translate operational performance. And I say all the way from the initial contact with the lead all the way through capturing money.
- Only about 20% of the businesses that are put on the market generally sell in it simply for that key thing is that the owner is too much too heavily involved are too much the value of the business and it’s gone when they leave.
- If you look at the statistics, less than 10% make it to the third generation, but those that put these kinds of systems in, they go multi-generational, and you know, sometimes they’re 100 years or more, but so these kinds of things are where we’re really the investment in this has such a huge long term payout, because succeeding the business, hey, you can you’re leaving the legacy you want.
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Helping business owners and executives create legacy businesses, Damon is focused on identifying and executing opportunities to increase business value. With 20+ years of building and managing businesses in extreme conditions and diverse industries, Damon is committed to helping clients be their best, crush competitors, and dominate markets provides an unwavering focus.
Damon developed his skills as a business value and operational improvement specialist. He is an expert at engaging internal & external teams to develop game-changing solutions that foster business success. He continues this work today with Exit Your Way® clients scouting the path ahead and keeping them on track while they work towards their goals.
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Damon Pistulka 0:00
Business is not growing. I say, well, what are you doing now to do more outreach to potential customers? How are you trying to get yourself in front of those people? And I get a blank stare back, and they go, oh, it’s always been word of mouth. And that comes out inevitably in every conversation where I’ve had growth problems.
Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.
Sam Gupta 0:54
Hey everyone, welcome back to another episode of The WBS podcast. I’m Sam Gupta, your host, and principal consultant at a digital transformation consulting firm, ElevatIQ. If you’re an SMB lifestyle business and have had growth challenges, your end goal could be selling to an investor or a PE firm if you are a second or third generation with this, your business chances of survival would be slim. If you don’t follow the modern procedures for running your business. Operating a business has become even harder as the game has completely changed in the last three years, especially with COVID.
In today’s episode, we have our guests Damon Pistulka from Exit Your Way, who discusses why word of mouth or traditional marketing strategies are no longer enough for business growth. He also touches on his growth secrets and how they have been able to rule the market through the network effect. Finally, we touched on what private equity buyers look for when business owners try to sell their businesses. Let me introduce Damon to you.
Sam Gupta 1:52
Helping business owners and executives create legacy businesses, Damon is focused on identifying and executing opportunities to increase business value. With 20 years of building and managing businesses in extreme conditions and diverse industries, Damon helps his clients beat their best competitors and dominate markets. Damon developed his skills as a business value and operational improvement specialist.
He is an expert at engaging internal and external teams to develop game-changing solutions that foster business success. He continues his work today with Exit Your Way clients scouting the path ahead and keeping them on track while they work towards their goals. With that, let’s get to the conversation. Hey, welcome to the show, Damon. Thanks, Sam. So just to kick things off, do you want to start with your personal story and your current focus?
Damon Pistulka 2:45
Sure, Sam, I can do a little bit about that. My story really starts growing up on a large family farm in the Midwest. It’s something that not many people have the opportunity to do. When I started, it was smaller than it was when until my father grew up quite a bit. And my brother did. But you know, we had several 1000 acres that we took care of cattle and other livestock that depends on us. So from a very early age, I understood what it was like to have to take care of things, have to figure out a lot of things. And you know, in my early years, and through my teens, I really enjoyed learning about how things work from the standpoint that I was a mechanic of sorts; you had to be growing up on a farm like that.
Damon Pistulka 3:42
We were literally 30 miles away, almost from the nearest car dealership, and things like that. And it just, for example, I think even now the nearest Walmart is probably 40-50 miles away. So you know, the town I grew up in had about 300 residents, and I graduated with a class of 16. So I grew up in a much different environment than most other people that you’re going to talk to in business simply because of that. And what that is given me throughout my career is a foundation of when I’m in a manufacturing company, or I’m in a construction company or something, and I’m helping them with or e-commerce with those kinds of companies. I can relate to the people that are actually doing the tasks in the business, whether it’s someone sweeping the floor, running a machine, or driving a truck, I can understand what they’ve done and understand that position that viewpoint and I think that’s always helped me to really think about business holistically.
Damon Pistulka 4:45
And you know, after I grew up there, I went to school, got an engineering degree, did a fair amount of graduate work and industrial management, and then I was often and running facilities and then businesses mainland. The manufacturing space and ended up doing that for 10-15 years with investment-owned businesses and private equity-owned businesses. And ultimately, after I finished that in about 2009, I started doing my own consulting work. And then, in 2015, I started working with an old business associate Andrew Cross from Northwest.
At that time, I was a business brokerage that he had started shortly after we’ve worked before. So he and I did that for about a year and a half before we really started to look at how we were helping people in selling the businesses and what we really wanted to do, and what my vision had been since I was in my mid-30s.
Damon Pistulka 5:48
And running businesses for private equity investor-owned companies was to bring that same kind of focus into other non-investor-owned companies. So you know, the focus that they always have is we are growing this business to a certain value because there’s a definite exit point for us out there in the future. I saw how that worked. And I saw how much we were able to change those businesses and how much value we are able to create. And I wanted to do this in my 30s. But I really didn’t have the network around me to do it and with the right people. And that came together for us in 2016. And we’ve been going down that road very hard since helping people grow their businesses to the size they want, prepare them to sell, getting them sold, and just growing businesses, not just but and growing businesses, so they run better and helping business owners do that.
Damon Pistulka 6:39
So that’s, in a nutshell, me from where I started to where I’m at now. And I just, I’m so grateful that I get to do this on a daily basis helping these business people realize their potential, whether it’s a business team, a management team, helping them or people in the business, helping them reach their goals, or the business owners themselves finally getting their business to the point that they have toiled over for many years, to the point that it’s actually now providing a return for them, allowing them to step back from the business and really continue to, to grow without as much help from them. So it’s, I’m just thankful I get to do this.
Sam Gupta 7:20
Okay. And it’s interesting the way you mentioned the word growth because that is typically the second question that we like to ask every single guest that we have. So Damon, from your perspective, tell us what your perspective on growth is?
Damon Pistulka 7:34
When I look at business growth, there are two things that are slowing people down on business growth. One is squirrel syndrome. We, as entrepreneurs, are naturally attracted to shiny objects. And that is one of the first things that I usually have to myself. For myself, personally, we have to focus on what really is going to generate more revenue for the business, right? Because typically, someone goes into business because they’re good at something. So I’m going to open a plumbing business because I’m good at plumbing. And I know I can make more money than I was working at my plumbing job, and I’ll have more freedom. And I’ll do all these things. That’s why they get into business. It doesn’t matter if you’re a plumber, if you start a sheet metal manufacturing company, or you’re doing high-end aerospace machining, you know, these people get into business, typically, because they’re good at doing that thing, right?
Damon Pistulka 8:27
They’re not in business because they’re good at selling typically, or they’re good at business typically. So when you come back to why the first thing that’s limiting growth usually is you’re simply not focusing on growth and not executing the fundamental things that you need to do.
I mean, there are, I can’t tell you how many people you walk into, and you go, okay, talk to them about their business, and they go a business not growing like my one, I say, well, what are you doing now to do more outreach to potential customers? How are you trying to get yourself in front of those people? And I get a blank stare back? Yep. And they go, Oh, I’m not really, you know, my, it’s always been word of mouth. And that comes out, inevitably, in every conversation where they’ve had growth problems has been word of mouth. Or I used to have a really good salesperson, or they moved on or retired or something like that.
Damon Pistulka 9:20
And the fact of the matter is, is most businesses or if you say some businesses have not made the transition to really how people are buying today. And when I was actively selling in businesses in selling as a salesperson, General Manager, salesperson in these businesses back in the early 2000s. There weren’t social media really to speak of. You had a website, but it was more just a placeholder. It wasn’t a place where you could go and really get information about things and all the things now, and the buyer demographic at that point has changed completely from then until now.
Well, when you look at that, The ownership in these businesses, a lot of them are the same age as I am, they’re in their, their 40s, and 50s. And they’ve, they have not really moved forward to the point that they understand the way that the private equity buyers that are buying now from them really want to find out about them, research how they help people with their specific situation, and then get 75% of the way through the buying process, before they contact you all digitally, that I don’t care if this is an e-commerce business that sells shoes, or a CNC machining businesses, for the aerospace industry, it all happens the same now.
Damon Pistulka 10:41
And that’s where we come back to these companies. When we go, listen, you have to make sure that that part of your business is at least functioning. And then you have to make sure that you’re handling that input the leads that you’re getting from that the right way with a process that really works because the business owners have often relied on a salesperson or one particular sales process that seemed to work for them.
But they really don’t treat it, especially in some of this business, like manufacturing or something where you’ve got really high ticket items, right? Because let’s face it in manufacturing, if I close the sale, it can be 5 million, it could be 30 million, because of the length of the relationship and the contract sizes and everything like that.
Damon Pistulka 11:26
So we’re not talking about 100 or 1000 transactions. We’re talking about 10s of transactions here, even in 100 million dollar businesses, right? They’re going to bring on the big clients. So But what they don’t do is they don’t apply the same principles that you need to develop a good sales process like, okay, who do we have in our funnel? And where are they at?
And how are we helping them answer their questions, educating them on how we could potentially help them, and moving them down the funnel or funnel or out of the funnel because of the nature of manufacturing or large construction work, right? This, to me, the businesses are very similar.
Damon Pistulka 12:05
It was often the salesperson that had the contact that went out there and established that relationship and did that stuff. And, and still, those salespeople are still around today. But I think that 2020 and COVID really changed their effectiveness because those same people that were the road warriors that were out there visiting these potential clients and moving them down that funnel in person, we’re not able to do that this year.
And I think the companies that are actually taking the time to figure out how you’re going to do that, with a hybrid of digital and person-to-person to move people through that process, are much better off. But that’s one of the things that I really see is that they haven’t prepared digitally. And they haven’t figured out how to integrate the old and new into a more effective solution.
Sam Gupta 12:52
Yeah, and I could not agree more, especially with respect to some of these industries, manufacturing and distribution. Obviously, they are very traditional in the way they operate. And I want to go back to your personal story a bit. You mentioned that in 2015, you didn’t have much of a network, but you worked really hard from 2016 onwards, and it seems like you are in a good place. The way you are present, as in my opinion, digitally. I think you guys are doing amazingly well.
So obviously, when you come from a similar background as these manufacturers and distributors, and you had to figure things out yourself. So tell us your entire journey, how you started? What is the network? Number one, what was the network effect? What is the advantage of developing this network? So walk me through the entire journey that you have gone through in building your Exit Your Way?
Damon Pistulka 13:43
Yeah, what I really like I said, from ours, I was 35 or 36 when I envisioned the company. And what the vision of it was at that time, it is to see a company that was helping business owners grow their businesses, get them to the value they wanted. And then you can do what you want at that point. You can sell it. You can keep it. Or you can give it to your kids wherever you want to do and. And then I realized at that time that I didn’t have the network of specialists and people and resources really, that we’re able to do this, you know, I had done it with the teams that I had in these businesses, but to do it, like I envisioned with multiple companies at a time and creating extreme growth. It really took a lot more specialized resources. So I started as I said and 2015 and realized that I didn’t have enough resources.
Damon Pistulka 14:38
I was one of those business executives that had gone their career as many do. You’re focused on the businesses you’re working in. You’re not building that network. And You’re not getting those specialists around you that can really help you, and I recognize it kind of got slapped in the face with it. And I started working on LinkedIn, and I was lucky enough to start getting connected with some very knowledgeable people. I started working on it.
And I grew my network a bit. I met some other advisors and things and really started to get things moving. So, I went from a few 100 connections in 2015 to 2016, 2017. I probably had 10-12,000, something like that, and some advisors that I’ve met that really good. And then, fast forward that to 2019 is when I really took another look at it and said, okay, we were moving forward with our business, we had moved through some clients and really done some extreme growth with people that I’d met on LinkedIn.
Damon Pistulka 15:37
And I was like, for us to really take this to the next level we had talked about in 28, late 2018-2019. And we wanted to go national, and I said, Listen, I think there are two things that we’re going to have to do to go national. My partner and I were talking about partners. At that time, we were talking about it, we said, Wait, we got to be virtual. First of all, this isn’t the end of 2018. So we got to have a better network than anybody else.
I said, Okay, so that means that we have to either meet them in person, meet them online, get to know them, figure out what they do, and better than anybody else. That really is in started us down a journey of massive amounts of time on the road, massive amounts of time and LinkedIn. And ultimately, in 20 late 2019, I met a few people on LinkedIn that really, really unlocked the gates for me, so to speak of LinkedIn.
Damon Pistulka 16:30
And that was Ira Bowman, Mike O’Connor, a couple of guys. When it comes to LinkedIn, I respect them a lot because they understand how to grow a network and how to connect with that network and engage with them, and really do that. They helped me a lot in seeing how you can build a solid network and then how you help those people to then begin building those relationships.
And then I met people like Nick Dorsey, who taught me he was Nick was really one of the first people that I ever met online, and then on LinkedIn, and then met in person, and it comes to be now he’s a season ticket holder at the Seahawks as I am we go to games together when we can. We sit across the stadium. It’s a lot of fun. And you know, once I figured that out that LinkedIn is not a place for you to click your keystrokes in and message back and forth. But it’s a place for you to meet like-minded individuals.
Damon Pistulka 17:26
So you can take those relationships offline, and do them in video calls or in-person meetings, wherever you can do to get to know those people better and really build the relationships that you can and that you can on a much larger geographic scale with a platform like LinkedIn. And for me, honestly, that was in 2019, when that started to happen and started to gain some traction.
Well, fast forward to the first quarter of 2020. And COVID hit. Well, what happened, everybody that was working in the offices had to work at home, and now the user base on LinkedIn or the actual time on LinkedIn skyrocketed. Yeah. And efforts in the first few months of 2020. Well, I took that opportunity to really aggressively go out and meet people. And to the point that at the beginning of COVID, for us at the end of March or something like that, we were sitting there, it just hit me one day, I was like, Listen, these business owners, these advisors, these people are having trouble, they don’t understand, you know, this is just a new situation for so many.
Damon Pistulka 18:34
And I talked to Andrew, and part of the work I did was in turnarounds where you know, they put me into an investment group and put me into a really horribly poor performing company in a turnaround, right. So this is similar to what was happening with a lot of these businesses and COVID. I told Andrew, we were talking about it, I was like, it hit me over a weekend. I was like, dude, we got to be talking to people about this because they don’t understand the gut-wrenching decisions they’re gonna have to go through to save their business to keep, the employees employed, and all these different kinds of things. And we started having weekly video calls. Pretty soon it was, you know, we had two people on it, and we had six people on it.
Damon Pistulka 19:15
And then the next thing, you know, we were, we were at 50 Plus, and, you know, the zoom wasn’t really working for us. And we had to change platforms, we moved over to remote because it was a little better platform for us and what we’re doing, and here we are with that, you know, 30 or 40 of those events later, we still are doing them weekly, we still are got a really good group of business owners, executives, advisors that we talk with every week where we’re, we’re building relationships, we’re talking about clients, we’re sharing speakers that that that teach us all something every week and in throughout this, we were able to build our network, and this is what I hadn’t been able to do before and we knew we needed to do this to go national and really do it the way we wanted to.
So 2020 for us was a tremendous growth year for us internally as a company. Not only were we successful in selling some of the companies that we had been working with, and we have clients this year that were, you know, I’ve got a larger oilfield services client that they were down significantly, but they still made money.
Damon Pistulka 20:21
You know, and I’ve got, we’ve got ecommerce clients that that, you know, up 60-70%, and they could have been up probably 80 or 90, but we honestly that ecommerce companies in the year 2020, if you haven’t grown that much, I don’t know what you’re doing. Because this shift to e-commerce is so strong, so strong, we’ve got another client, that’s, you know, they’re up almost 200%.
And it’s the e-commerce businesses that are really struggling just to keep up with demand, right. So this building, this network, turned into a lot more for us because once we started doing that, we started doing a video with it. And we started building, building our video content on our website, we started then live streaming to LinkedIn, we started to do live stream shows two times a week, because, hey, we wanted to, to provide more information for business owners and executives that would help them grow, prepare their businesses, make them run better, and get them ready for sell if that’s what they want to do.
Damon Pistulka 21:24
And, and you know, so our, our weekly roundtable, we call it that we’ve had on Thursday mornings at 7:30 pacific that, as I said, it’s going and then we also had, I don’t know, we had 35 or 40 other live interviews that we do on Tuesdays and Thursdays at three o’clock Pacific. And I’ve really been fortunate to interview some fantastic people, some fantastic business owners, and share their stories.
Because through sharing those stories that they for some of the business owners that we interview, I mean, their stories are so amazing, because you can talk to a business owner that that started a business and their business today can be $50 million. But I will guarantee you without fail that it has not been a smooth road. And when you talk about growing a business and you talk about, you know the things that business owners need to do, I think people that are in business now need to hear that they need to understand that, hey, it’s not sunshine and rainbows it all the time, you’re going to have some great wins, but you’re going to have some challenges.
Damon Pistulka 22:31
And as you’re growing those businesses, I think hearing those things helps people. So for us, 2020 in the network building really exploded our ability to help others and just came to fruition and some things, and we talked about I had a client this year that had a really specialized software need. Through LinkedIn, I was able to find the exact resource they needed in literally, I put a post up I had within an hour, I had a few, I don’t know, five or six different suggestions, and one was the right one, and away you go.
This wasn’t available to me 24 months ago. Now that has helped us so much more because really for what we do. And when we’re helping a client grow, we’re not looking for a five-year relationship. But if we have those, that’s great. Our real goal is to take a business from point A, which could be that they’ve got, you know, 10 million in revenue, and they’re worth about 2 million or 3 million or 5 million or whatever the number is.
Damon Pistulka 23:31
And the owner really wants that to be $20 million and worth two or three times that that’s what we do, we go from point A to point B. So that is not a long-term thing for us. That is something where we want to be doing that as quickly as possible. So it takes specialized resources, right? Because you don’t want to haphazardly do that. And as many business owners know, they’ve, they’ve spent countless dollars on stuff that didn’t work.
So we try to go through those things ahead of time and knowledge to be really, really good at diagnosing what they actually need and set of the solution that’s in front of them trying to fit their needs. Because I forgot, I was reading a book earlier this year. It was. I can’t remember the guy’s name. But he coined it very well. He said when a digital marketing person that specializes in email marketing, and I don’t know if he uses web design or something like that.
Damon Pistulka 24:21
But he said, when you’re sitting down with a web design person said your problem will be that your web design isn’t good enough. Or if you sit down with a cold calling person, you’re cold calling is not good enough, he said. But the reality of this is that’s not the case. It’s not a one solution fits all. You have to really figure out what your core problem is. And it could very well be that it’s one of those, but it could very well be that something else.
So we take the solution agnostic approach going, listen, this is the challenge we need to fix. What is or the problem we need to fix are the things that we need to improve on. What are the best ways to do it, and we look at all the potential solutions?
Damon Pistulka 25:00
Because we’ve got this network now that I can do this, and we go, okay, let’s take this talk to these people, these specialists talk to the internal people work together to figure out what is actually the right solution, not just I was contacted by a great PPC person, they’re selling me Google ads, or I’ve got this great web designer that I know that tells me their web, my new website is going to solve everything we really go listen, in, our solution would look more like this.
It’s like, hey; you could redo your website. But that’s going to take you three months. And you know, it’s going to cost whatever, but really, your website has these key issues that we need to fix. Other than that, we don’t need to spend any more time because we’re here focus on growth in sales, because I don’t care about growth in visits to your website, it’s nice if it’s creating leads that are creating sales, everything we focus back on to is it’s got to be generating sales, those sales have to be profitable, that profit has to turn into value that the owner can realize, simple as that. So our solutions, like I said, are much more about,
Damon Pistulka 25:59
Hey, your website needs this work. We need to mix in some PPC. We need to mix in some social because data, we’re long term or some SEO, and do some things that are going to help you in the long term as well as the short term to get to growth you want because we got to hit your target, we got to be moving towards your target today. But we need to hit your target, which is even bigger, six months from now, or whatever we decide with that client. So when you get to network, you need a network like that.
Because if you don’t, then I know a good marketing person down the street, or that’s in your industry, and they’re going to, you know, do email marketing or whatever it is, it’s never a one-stop solution. And that’s putting those things together is where we really sell. And then as you grow the business that you know, we’re old school on the fact that we really believe well, old school, new school, wherever you want to talk about, I mean, in the private equity world, KPIs measuring performance has been the standard for many, many years.
Damon Pistulka 26:56
And in the private business, it’s not done for a large part just because those business owners don’t have the pressure that an investment owner does investment owner has a down month, they don’t, they have to go tell that to their investors, right, because they the investors get those updates they get those things are a public company, but I talk to business owners every week that have very good businesses might make them millions of dollars a year, but the monthly financials and the weekly or daily performance measurement falls off they’re don’t even consider that.
And that’s the basis of what we do. Because in order to make progress you need, you need to be measuring where you’re at consistently. And when you talk about how you translate operational performance. And I say all the way from the initial contact with the lead all the way through capturing money.
Damon Pistulka 27:50
When I say operation, I don’t mean that exclude sales, or finance or anything like that the overall operation of the business, if you are tracking that with KPIs from like I said, from that initial lead through the collection of cash, you are going to be much better off because if I’m sitting here today, and I have a have managed, you know, whatever you want to call it, you have a weekly meeting, to discuss with your internal managers, your internal teams, the performance in their areas, and then you talk about that from sales all the way to a collection of cash.
And you look at those metrics, and you see how they’re performing. And as an owner of the business, you can begin to rely on that. Because if those KPIs you’re using get you to a gross margin level of the business, you can then begin to predict your profitability each month. When you begin to be able to predict your profitability on a weekly basis, it drastically changes your business, the predictability of profits starts to turn it into a very desirable business.
Damon Pistulka 28:53
And this is where I really feel like the heart of how we help clients grow significant because you develop businesses that owners can then if you set up the team, right, and they’re able to do this, right, sometimes the owners have to be more involved and other times with the size of business and different things.
But when you put that predictability in on a weekly basis, and you start to understand that if I hit these numbers on a weekly basis, from A to Z, that my financials are going to look fine at the end of the month because you basically you’re taking your annual goals, you’re breaking them into monthly goals, break them into weekly goals, simple as that.
But when you start tracking, you’re addressing challenges on a weekly basis, and you’re hitting those numbers, and you get about three, four, or five months into this, and you can see it change and the owners about how they begin to get a new comfort level with their business because a lot of them sit around and go okay, I want to see how I did at the end of the month with the financials or they’re looking at the bank account and both of those things are not good.
Damon Pistulka 29:56
I just say they’re just not good. I don’t know a good way to do it, but because the bank account is really, you know, you might have big bills, you gotta pay whatever you have to look at, you’re just not looking the right thing we’re looking cash in the bank. On the other way waiting for the financials, you don’t know what the hell is going on, what’s the what if it’s, it shows your worst nightmare, it’s you just did just waiting for something bad to happen.
On either of those ways, when you put this predictability from A to Z in a business, you can tell that, listen, if my salespeople are doing what they’re supposed to be doing, that generally leads to enough sales, which generally leads into enough profit, which generally I’m measuring on a weekly basis, which means that I’m generating enough money to cover my fixed expenses, am I and give me the profit I want, it’s a whole new world, and we put that together, and then you just you put the right pieces in place.
Damon Pistulka 30:47
So you go, okay, we’re stalling on this part of the business, you know, maybe the operations aren’t keeping up, or you’ve got to do you know, you’re, then you’re just, you’re just do bottlenecking areas and adding new solutions, which we often have to because, you know, when you take a company, and you double it, and in 24 months, you know, you go from $10 to $20 million or something like that, because these e-commerce companies and some manufacturers to have that ability to do it, you have to run through structural changes, and you have to develop and implement structural changes in the business because you might have a whole another level of management that wasn’t there before.
But in 2001, I’ve got three customer service people on the phone, or account managers, and now I’ve got 10, it was easy to manage three, but now I have to have a manager for 10. You know, those are the kind of things that you have to go through and, and really understand and keep changing your metrics and changing your structure your business to keep up with it.
Damon Pistulka 31:42
But in the end, if a business owner is looking to realize the value from their business, either by taking out profits over a long term, and you know, using that to retire on or fund whatever else they want to do, or to eventually sell their business, this predictability and systematic achievement of goals is what a lot of private businesses don’t utilize.
Because they simply weren’t in that situation. It goes way back to when we started talking about they got into it because they were good in manufacturing or good and, you know, had a good product ideal. Yeah. And that’s why they got business. They didn’t get into it. Because like I said, there are good sales are systematically building a business. And that’s, that’s where I think there is our application. And what we do it is it’s, it’s a ton of fun. I mean, when you see these business owners realize that man, my business is worth something now, and I’ve got enough money, I can go on vacation now. And I don’t have to freak out and throw up three times a day.
Damon Pistulka 32:49
Because, honestly, that’s what it is, is it for most business owners? Is their life chained to the business? Right? Are they chained to that damn business? Because they feel like if they leave for a week, that’s gonna fall apart? Well, I know. Yeah, exactly. Right. If you see them what was good the kind of work that you guys do, putting the systems behind them in the ERP systems and, and simple solutions for these, you know, when you look at all this measurement stuff I’m talking about relies on good solid systems behind it.
And we’ve talked before, I’ve implemented a number of ERP systems and then said, it’s like, eight or nine now. And when you look at these things, if these things can give you actionable information, these measures out easily efficiently, that’s really what we look for, and those because we can use that and move forward. But these business owners can then go on vacation. They can step back from the business.
Damon Pistulka 33:45
And if it’s set up, right with the likes of the team, and everything clear goals, they will see that that business can flourish, and sometimes even better, without them around as much. And what that does, then is that helps them they’re a, they’re more profitable, you’re able to hopefully take more profits home with them invested however they want, anywhere they want to do, but then when you go, now it’s time for them to decide what they want to deal with their business.
Because the thing that sucks is we all get old, we are going to have to do something with that business. Right? Yeah. When you get to that point, and you go, listen, now it’s time for me to think about what I’m going to do with that business. And you’re in the first case where you didn’t do this work, right. And I’m changing my business. I’m still working that you look at that from the outside buyer perspective.
Damon Pistulka 34:33
And that’s very, very hard to sell. That’s why only about 20% of the businesses that are put on the market generally sell in it simply for that key thing is that the owner is too much too heavily involved are too much the value of the business in most cases, and that just how do you transfer that value forward? It’s gone when they leave so by creating these businesses that can sustain themselves. And grow and do that, really the owner becomes the architect of the overall they really laying out the goals and then making sure the money is there to do it or whatever they got to do.
Well, that’s something that a buyer, a new buyer, can come in and take over. Right? They can do that. And the real thing is that benefits both, I mean, because then they can realize that on their way out and do it, even if that’s a succession, right, because you don’t, I don’t care if you’re the first generation, the second generation, third-generation, family-owned business, if you put good systems in early, that business has a tremendously higher chance of success through the generational change.
Damon Pistulka 35:38
Because you know, if you look at the statistics, I think it’s like, less than 10% make it to the third generation, but those that put these kinds of systems in, they go multi-generational, and you know, sometimes they’re 100 years or more, you know, but so these kinds of things are where we’re really the investment in this has such a huge long term payout, because succeeding the business, hey, you can you’re leaving the legacy you want.
But also, if your business is consistently growing, and you’re going to say transferred to your daughter who’s going to run the business, and she’s going to continue to go. Your daughter wants to take a good wage. She wants to build value and have her own value in this company, right?
Damon Pistulka 36:15
So if you’re building value, well, then there’s more money to go around. Because this is what we see on the other side of this is okay, I’ve got a business that’s doing 15 million and, we’re making whatever we’re making $2 million a year off the business and, and the owner that, once associated to their, their daughter and their daughter, okay, I’m going to be pulling 500,000 out whether instead of the business owner now taking out 2 million, they’re taking out 1.5 million, nobody wants to really do that.
Or you want to structure a long-term buyout from the daughter to buy out long term from the current owner, the father or mother, whoever it’s onerous, they have to take the cash flow out of business to do that. Whereas if you’re growing that business, it’s actually new cash flow that funds the purchase of the business and or new cash flow that helps to provide money for everyone. You know, those are the things where I think that growth in family-owned businesses, multi-generational businesses is often overlooked.
Sam Gupta 37:11
Yeah, I agree. That’s pretty much it for today. Do you have any last-minute closing thoughts, by any chance?
Damon Pistulka 37:16
No, you know, I just think that if you’re stuck in your business, there’s a lot of help. And if that is the case, I mean, there there are just so many people that there’s so much good information out there, right? Just keep looking for it. Keep trying, you know, it’s you’re in the same boat as everyone else. So that’s, that’s why they can say, um, you know, I’m just glad for the opportunity today to talk to you and to talk a little bit about growing businesses, man.
Sam Gupta 37:41
Yeah, amazing. Love your insight. Thank you so much for your time. This is going to be so helpful for manufacturers and distributors, the way you have paved your journey, we can do the same as well. And by the way, the time that you spent, it’s done in like, three, four years. So anything is possible. It is just that you have to have a plan. And you have to have real good execution behind that.
Yes, execution is key because a good plan is worth zero if you don’t execute it. Right.
Sam Gupta 38:09
Thank you so much, Damon. I really appreciate it.
Damon Pistulka 38:11
You bet. Sam, thanks a lot.
Sam Gupta 38:14
I cannot thank our guests enough for coming to the show and sharing their knowledge and journey. I always pick up learnings from our guests, and hopefully, you learned something new today. If you want to learn more about Damon, head over to exityourway.us. Links and more information will also be available in the show notes. If anything in this podcast resonated with you and your business. You might want to check other related episodes, including the interview with Nick Jackson from the Mendota group, where he discusses what private equity buyers look for in a business when they buy. Also, the interview with Jim Gitney, where he discusses how the need for people processes and technologies change at each inflection point our business grows.
Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I’ll try my best to respond personally and make sure you get help. Thank you, and I hope to catch you on the next episode of The WBS podcast.
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