Why Do Some Small Businesses Scale When Others Don’t – With Leslie Hassler of Your Biz Rules

0:00Leslie Hassler is my guest today. She's the founder of Your Biz Rules, which helps small businesses scale. Leslie describes it as hiring a fractional C-suite before you're ready to hire full-time. And we talk about her specific approach and recommendations for addressing issues like working capital, hiring strategic visions, selecting products and services. And I feel like she didn't say this part, but I feel like it's based on pattern recognition on working with hundreds of clients and working backwards to say what works for companies that actually scale and versus the ones that don't. I think you're going to really like this episode.

0:42Hi, Leslie. How are you? Great to see you. Howdy, John. It's good to be here. Yeah, thanks. I'm really excited to talk about small businesses today and how to unlock scale for them. On the one hand, it feels like it's easier than ever to start a small business. You know, you can hop on Zen Business, get your legal Zoom going, do other things, and voila, you have a business. Yeah. But it's maybe harder than ever to scale. Maybe there's competition, more fish in the sea. Do you agree with this statement, I guess, in principle? Easier to start, harder to scale? And if so, what would you attribute this to?

1:18So I think it's twofold. I do think it's tremendously easy to start a business. But I will say 18 years ago, I had to look at the year. I'm like, what year are we in? 18 years ago, when I started my first business, I started it in three days. You don't necessarily have to prep a lot to functionally start a business. The reason that I think that's even made easier to do is the available resources. The resources at the startup market, they're just tremendous. I mean, everywhere you go, there's a free program and quality free programs that really can help you develop and go. And then resources like we have with business.com, those aspects make it super easy to actually start a business.

2:05But here's the other reason why I think it's actually more complicated to scale a business, because when you're starting a business, the problems are simple. How do I get clients? How do I do X? How do I? Like what you're, the problem you're searching for is very specific. It is very basically simple. When you've been in business three, five, 10 years, and maybe you've been in a period of growth, maybe you've been in what we would call recovery, and you go to do things again, suddenly it just gets hard. There's something standing in your way and you can't quite put your finger on it. So up till now, you've Googled, how do I fix X?

2:47The problem is you don't know what X is. Oftentimes, it's not just one thing. And we talk about, you know, with your biz rules, we kind of consider ourselves a fractional C-suite before you can afford it. Somebody goes, well, why do you like to do that? I was like, well, because for our clients, a marketing problem generally is never just a marketing problem. It's a money problem. It's a people problem. It's a skill problem. It might be an attitude problem, right? It's complex. And I think that's really one of the largest obstacles that business owners have when they've been in business for a while and they're looking to scale or grow their business beyond where they are today.

3:27So it sounds like your sweet spot is working with businesses that have already, to a certain extent, have some type of product market fit. They're up and running. They're proven on some level of scale. They're getting a certain number of clients. And they're saying, I feel I should have more. I just don't know. I just don't know how to how to do it. And also, there's probably like, like a risk reward aspect of it in terms of what if I just had more money, if I just borrowed money, you know, I like like maybe I could, maybe I could scale that way. But I don't not sure I know, I know how I was thinking prior to this conversation, I was like categorizing the different types of challenges that a business might have.

4:07And I imagine one common challenge is like access to working capital. Is that kind of like, is that the disease? Is that the symptom? Is that the cure? How do you think about that part of the equation? Oh, it is complex. So I will say eight out of the 10 reasons that people go out of the business is related to money. Most people do not come into business with enough capital or working capital. And most people don't ask for capital when they don't need it. Like the best time to ask for capital is when you don't need it. And that's counterintuitive. So what sends people to asking for capital, looking for funding is probably a cash crunch of some source, or we'll call them a cash imperative.

4:55I need money now. Well, when you need money now, you're not attractive to funding because a lot of times you just don't have a way to pay. And I was speaking at an event a couple of weeks ago and they asked the same question. I was like, at the end of the day, the other thing that complicates this is that for most business owners, they abhor paying taxes, which means from a financial management standpoint, your strategy is to break even. Well, breaking even means you have no money, you have no cash, you have no ability to pay. And so we're huge proponents of taxes are privilege of profit. They are the thing that you need to have.

5:42And when you have a focus of profit and intention of profit versus just breaking even, you can fix a world of sins. And what we have found is for our clients, especially that once we fix the profitability, which is why we always start with the money of the business, then oftentimes we can self-fund that growth. But we like to have safety nets. So we get a good, if I can see a business in good financial position, one of the first things we're asking is how fast and how big do you want to grow? And then we're like, okay, your cash position is pretty healthy. Please go get a line of credit. Let's just start there.

6:20If we know that we're going to need other assets, we can definitely look at different kinds of funding, but we have developed our network to include all types of funding partners, you know, regional banks, community banks, big banks, PC, you know, venture capitalists and private equity. We know that there's always a sweet spot for each of these investing partners. I haven't found the one place, the one hit wonder where you can go and find somebody that's willing to invest in anything. Most of your funding partners have very, very specific needs that they're looking for, interests that they want to invest in.

6:55So we could likely talk the whole hour just on this one concept, but let me just summarize it into a couple of things. Big problem, you're not profitable. Profitability has to be a priority. Second big problem, you're not aligning your funding needs with the proper funding partner and understanding how to do that. And then three, your financial management, the cash flow management probably has been very laissez-faire. Out of all of our clients, I can say one, maybe two has ever set their numbers, people. And the rest of everyone kind of shies away from it. It's not really going to be a habit that you can continue if you want to scale profitably.

7:42because otherwise you'd run the risk of scaling yourself out of business, going broke in the meantime. I think you work with a lot of founders and or a lot of small business owners. And I wonder if they're essentially their superpower is the one thing. It's expertise in the market. It's customer service for the coffee shop. It's legal expertise for the law firm, whatever it is. So the strategy is almost like, I don't know whether it's playing defense with the things that you're not great at or hiring somebody for things that you're great at. I guess when you look at the patterns of businesses that scale successfully versus the ones they don't, how do the people that scale successfully think about the HR and people management part of the equation?

8:35I guess I'm not necessarily talking about culture, although I might ask about about that later. I'm more I'm more. Yeah, I'm more talking about how do you actually hire people? How does a how does a small business owner identify a good marketing leader when they don't know marketing? It's really great question. We have some clients going through that right now. Our firm's belief is hire fast, fire fast. Now, that isn't to say that we're callous, that we're not doing the work that needs to be done. Like you should see the onboarding plans. We help collaborate with our clients and how detailed they are.

9:11But the reason why they're detailed is that most owners aren't phenomenal at communicating all the nuances. And so we take the time to get all that detail locked down and create a process out of it. The second thing that we're looking at is that gives us the ability to have constant feedback. So if week one, something's off, you're like, oh, something's off. Why do you know it's off? Because the onboarding plan is really off or the demonstration of skill set is off. It gives you the ability to not over invest in players who won't be there the long term. Now, it is challenging to hire at the moment.

9:53It's we're going through some growth ourselves. I experience it just as much as the next business. But I'm doing it in such a way that I know that I can move on to the next person as quickly as we possibly can, because otherwise I'm spinning my wheels. I'm just throwing good money after bad. And I am fiscally conservative in some ways, I guess. I don't want to do that. That's how you waste money. you waste time, you waste opportunity. So with that, I think you have to be willing to hire fast and fire fast because I've seen too many people just hem and haw. And I'm like, it's a resume. It's a snapshot.

10:36We can do assessments. They're valuable. It's a snapshot. So great. Now we can see 3 % of a person. You get resumes. It's a snapshot. Who's going to give you a resume that said, or a reference that says, no, nobody's going to give you a reference. It's going to say, oh, they're horrible. Actually, I have had that happen once. That was unique. You know, again, it's a snapshot. So by the time you go through interviewing, even if you interviewed them five times and had the whole team look at them, right? You only see 10 % of a person. How are you going to know if it's going to work? You got to get them in.

11:08You got to be able to get them to relax the persona a little bit and see if there's proof to what they said they could do. And if there's not, then you need to manage them up or manage them out. That whole process though has to be super quick and efficient. I just think for a lot of business owners, it feels so taxing and you get so disappointed when somebody doesn't work out. And yes, I agree. I get disappointed too, but it's, I take a moment, I have my little grief party, you know, my little pretty party. And then I pick up the phone and we start over again. How are we going to do this? Because the nature of the game, if you want to be able to grow and scale fast, is to be able to take quick action.

11:52Hands down, the people that scale quicker and more successfully don't do it because they necessarily make less mistakes. They're actually willing to make more mistakes more frequently to get to the solution. And I think that's the undercurrent to it all. You're right. HR and team, big, another big, complex topic that we could talk about for hours. But I do think there's this attitude in here of quickness and action and leaning into things like maybe your intuition or, you know, assessments of, man, they're not performing against our job description or our onboarding plan. That's a really interesting pattern because I've seen or thing that you mentioned, because I've seen this in technology, the businesses that seem to perform best were like when I was at Amazon.

12:43They do 100 experiments, not not because they know which one's going to work. They just know if I do enough, I'm there's going to be one. I'm going to get gold sometime. Yeah, yeah. Not to say that they don't have a hypothesis for each one, but the pattern where I see it doesn't work as well as you pin your heart on this one test. And just like the resume where you only see 3 % or 10 % of the thing, you have such limited visibility into how a test might perform. That's really, really interesting. If a leader or a small business owner is, um, is sort of self-aware enough to know that like, that like managing people and managing people up, it isn't my sweet spot.

13:27Yeah. Would you, would you recommend that they focus more on, on hiring someone in for HR or hiring like a COO or, or president or someone that is good at managing? How do you think someone who's self-aware of that should, should address that part of the equation? As a rule, I think a firm practices hire to your weaknesses and then slowly delegate your strengths because you're going to get a better return on result or return on your efforts if you hire somebody that's strong in your weakness. But who that hire is, right? You said, could it be an HR or could it be a COO? Well, that depends on the scale of your business.

14:07HR is a highly specialized role. It has a strong place. It is a very needed place, but you're probably not going to get there until you're at 20 or 30 or 40 employees dependent. Right. So in that realm, that HR person's a specialist. On the other hand, your COO, they tend to be a little more of a generalist so they can wear many hats. If you're a smaller business, COO might be the person. And I know for us, when we're growing and scaling, and like I said, fractional C-suite before you hire, but oftentimes we'll get to a point with a client where like, it's time to hire a CEO. It's time to hire an executive office manager.

14:51It looks a little different depending on what business type they're in, what industry. But there is this point in time that it is the next hire. And I would say I'm very rarely ever saying it's the HR. Because like I said, HR is highly specialized, needs some scale of team to be able to really fully support and warrant that position. Although you can fractionalize it out for sure. But typically the COO comes first for us because we're going to have to take a lot of the systems and the operations off the plate of the inner. We're talking a little bit about the growth side so far. But I also wonder about the cost side of the equation, because getting getting to profitability can be cutting, you know, cutting costs on services.

15:36And, you know, in some of the research we've done at at business dot com, SMBs have a lot of a lot of pain in knowing how to select financial software, how to how to what security system should they get? et cetera, and these costs can really add up. What do you recommend to folks that are sort of hyper looking at the cost side of their balance sheet? Cost is just one component of profitability. There's multiple components to profitability. I will say that I see more business owners cutting off their nose to spite their face in the realm of costs than I do see business owners that have a lot of fact.

16:17Most business owners actually aren't investing enough. They're not investing into systems that they can grow into. They purely think about the price point. Now, we don't have any straight up vendor affiliations or anything like that. So I'm not getting paid to say any of this. But hands down, when it comes to selecting a technology, selecting a system with our clients, we are hand in hand with them with that and really thinking about the full implementation and the full impact. And I see the mistakes come down to a couple of things. One, you're making the decision based upon the business you have today, not the business you're trying to grow into.

17:00So that tends to mean you choose based on price, not on impact. Second thing is you're not focused on the longevity of the technology. And there are certain technologies that will tell our clients, don't overinvest in this. The rate of change, the rate of adoption, the rate of new companies coming online is just too exponential right now. So we're going to find something today and it'll be outdated tomorrow. So let's do this stopgap. Then on other hands, we're looking at people going, there's no way you're going to be able to go on your trajectory if you don't choose a more enterprise level solution.

17:45And then that way, I know for our lawyers, we tend to go to things like Clio. Why Clio? Because it's so robust. It has automations. It has AI. It has component trees. You can grow into it. You can scale it per users. Like there's a lot of variabilities. We personally use monday.com. Absolutely adore it. It has changed our business and we've implemented it with various clients, too. We know why. Because Monday can be this small or it can be this big. You can use it as a simple to do list. And if that's what you're doing, great. You're using something. But there's so much more. Right. And you can do it all within this environment.

18:21So we're constantly trying to help our clients make decisions based upon the business they're trying to grow into and not only the business that they have today. But you're right. A lot of clients just don't have the time to invest, don't have the time to learn, don't have the tech, maybe the tech to do it. And that's why we tend to work not just with the business owner, but kind of in hand in hand and getting their teams on board with it. I have one of our team members who's doing just that. She's going in and improving the system for a client and then teaching the team how to better be able to manage that.

18:56So I think you do need a partner in a lot of ways to be able to make some of these multifunctional decisions. Because if you get to the end of the day and you can't figure out what's happened for dinner, you might have a really hard time figuring out what's the next project management software you should be implementing. Yeah, it's true. I mean, how the heck is a business owner going to know that Monday.com can grow with you or HubSpot or any of these programs? HubSpot's another great one. They can do small, they can do large. You're talking about visualizing the future. I think of that a little bit as strategic vision.

19:34Do you feel that that comes naturally to most small business owners? If not, where do they struggle? struggle uh what advice would you give folks that are that are like what's how do i get bigger what what should my vision for the future be so i have found it's really easy to have a vision of what your business is when you're first starting up again this is almost like a startup versus been in business for a while but it's when the day-to-day grind gets you worn down a little bit i find that that vision and the ability to dream has gotten lost because then people want to be practical. And oftentimes while we're working on the money part of the business, the thing we're asking our owners to work on is the vision of the business.

20:15And I always have to say, don't talk yourself out of it. Nothing is too stupid, silly, frivolous, you know, unimportant. I need to know it all. I need to know if I could give you a magic wand, what would you want? because then our team knows exactly what to tweak, what to tailor, what system. I mean, you would not believe the vision would impact the technology we might advise a client to invest in. But we're always keeping the vision in mind. And I think that's harder to do when you're it's you, yourself and I, because you've got so many things bombarding you. And at the end of the day, you're like, OK, this this is hard.

20:57Maybe I don't want to be that big. Maybe I should just stay safe and calm over here. But the truth is in business, if you're not growing, you're slowly deteriorating. Maybe you won't be declining, but your profitability is going to go down. Your fulfillment is going to go down. The quality of life is going to go down. So it's super important that we have a strategic vision of what we're growing to and why. is just, it is one of those secret sauce things. For your client base, how many of them are thinking at this point about some type of exit? Whether it's, I love what I'm doing now, I don't want to do it when I'm 60, you know, whatever it is.

21:39I would say half, half are. And there's a couple of things that tend to prompt that, if you will. So for some of ours that come in and they're not thinking about it, it's because they haven't been able to grow past where they are. And so it's part of that dream that got given up along the way. Then if we have clients that come in and they maybe didn't have that as a origination and we will play a game like we do a business audit as part of our services with our one to one clients. I was playing with this one client. I said, I know you're about a half a million. I think we could get you to two million in nine months this year.

22:20And she was like, no, ain't happening. I've been doing this for 10 years. It ain't happening. And I was like, oh, I hear you. But here are indicators. Here are drivers. Here's why we think this. And like, no, I was like, well, wouldn't it be fun to just try? Like, just try. Sure enough. Boom. You get that happening a couple years and suddenly they're like, oh, I have something valuable. And we've doubled that business already from that 2 million that we got into the first time. So they're like, suddenly the perceived value for the owner is what triggers the fact that you might have something saleable.

22:58And then my other owners that are in their fifties, Hey, I'm in my fifties. I'll be honest. We're thinking about when's this going to stop? Is this what I'm going to be doing for the rest of my life? Do I want to do or not? You know, gone through that for myself. Um, I'm not selling anytime soon, by the way, I have a, I have a different taking offers. Okay. I'm not taking, Although I get offers, I'm not taking any offers currently because I know I'm actually growing to something much, much larger. So that's the strategic vision coming into play, right? I'm super clear. And that's where I think people get into this headspace.

23:34They may not start off with it. If you feel you're stuck, you're stuck at 1 million or you're stuck at 3 million, you're stuck at 5 million. I don't care what number you're stuck at. You still will feel like you don't have something of value if you're stuck. But when you get things flowing and growing, man, then you're like, oh, wait a minute. You know, you turn to start to have fun because you're not just so worried about covering your bills. If someone's listening to this and wants to know more about what you do and maybe they identify with some of the problems that you've articulated, how should they reach out to you?

24:06What does your firm do? Sure. So Your Biz Rules is the name of the firm. I mean, you can actually, we've set up a page just for you if you're hearing this right now. at yourbizrules.com forward slash builder. So you're going to see a free gift. I actually will have given a bit of a little masterclass on the nine proven ways to scale your business. And it's going to talk about your business in ways that nobody else is talking about them. So check it out. Remember I said, number one problem for scaling businesses is that it's very nuanced and very complicated and how you unpack that. That's what this webinar is going to help you with.

24:40But if you also want to talk to us, you'll be able to do that there. But in a nutshell, what we do, like I said at the beginning, is we are essentially a fractional C-suite before you need it. So our company is comprised of subject matter experts from finances to operations, HR, sales, marketing, systems, technology. We really do have a lot of expertise, which is why we can be so valuable in kind of a one-stop shop. Leslie, thanks so much for joining me today. We'll put all that information, listeners, in the show notes. So you can take a look and get that URL yourself. Awesome. Well, thank you for having me, John.

25:23Did you know that more than 20 million professionals and business owners visit business.com and Business News Daily? Why? It's the best place for resources, advice, and information about how to grow your business. And if your goal is to reach our audience, you should become one of our lead partners, sponsor a section of the site, or sponsor even this podcast. Reach us at business.com slash connect. That's business.com slash connect.