Overcoming Limiting Beliefs in Business

0:00So typically when we're setting goals with clients, we like to work in three year targets. We've just found that three years is a really good sweet spot for entrepreneurial companies. It's long enough to get something really meaningful done, but short enough to still be somewhat predictable. So we don't just like annual plans. We don't need these five to 10-year crazy BHAGs. So we think in terms of three-year target. And it's one of the questions we ask, hey, where do you want to be in three years?

0:26Hey, everybody. Welcome to another episode of Business Lunch. This is our second time through because of technological difficulties with microphones randomly not showing up. But here we are. And I am one of your hosts, Roland Frazier, with the inimitable Ryan Dice. I cannot be imitimated. No. No one can imitate you. But hey, unlike you, I don't suck at microphone. So I got that going for me. I think it's teenage engineering. I really do. I think it's on them. I think they look beautiful, but then they're persnickety. But that, I guess, is what teenagers are. So they're true. Indeed, exactly. They're beautiful, but generally worthless.

1:05No, I'm as the owner of a handful of teenagers myself. Yeah, no, they're great. It is interesting. This is one of the rare moments where simply turning it off and turning it back on again did not work. But here we are. I know. So you tried like freaking everything. To our credit, it's like, is it plugged in? Yes. Is it a bad cable? No. Turn it on, turn it off. Nah. Restart the computer. Nah. We did all the things that the most advanced tech teams do to fix 99 % of the problems that people have with their computers and things, but none of that works. Highest paid tech support on planet Earth right here.

1:45And then ultimately it was like, just get a new freaking microphone. Here we are though. So what are we talking about, Roland? So I thought it'd be kind of fun. We did, as you guys probably know, we do consults and we have our evil plan is basically we come in and help businesses by doing these half day consults. And then we identify what their goals are and help them create a plan to get to them with the evil plan of that leading to hopefully razzle, dazzle, frazzle them enough that they want to work with us in their businesses through a program we have called 2020-20, where we take some ownership and stuff like that.

2:25But we met with these folks, and I don't want to say what the industry is, I think, unless you do. Let's say business services at large. How about that? Business services company. And they came to us and they had a pretty, a pretty outrageous goals. I'm going to slightly change the numbers, but only slightly. So they were doing a million and a half in sales. And Ryan, what would you expect someone who's doing a million and a half in sales to say that they would like to be doing, was it three years? down the road or two? Yeah. So typically when we're setting goals with clients, we like to work in three-year targets.

3:06We've just found that three years is a really good sweet spot for entrepreneurial companies. It's long enough to get something really meaningful done, but short enough to still be somewhat predictable. So we don't just like annual plans. We don't need these five to 10-year crazy BHAGs. So we think in terms of three-year target. And it's one of the questions we ask, hey, where do you want to be in three years? And typically when we're working with clients, at a minimum, at a minimum, we would like to see them double their top line and double their bottom line. Because one of the things, if you can just increase 24 % year over year, three years in a row, you'll double.

3:40People don't realize that, but that's the power of compounding. So 24 % compounded year over year, three years is double. And if you're not growing 24 % per year, we just feel like you're probably not trying hard enough. So that's kind of the minimum goal that we'd have for any of our clients and portfolio companies. on the high end, kind of the gold standard is top line to bottom line. Can we take your current top line revenue and make that your future three-year bottom line take-home profit while maintaining or maybe even slightly improving your margin? Now, in this case, their margins are pretty strong, million and a half dollar business.

4:1833%, right? Yeah. Yeah. I think it's like 35. Yeah. Something like that. So So assuming a 30, let's say they were able to maintain a 30 % profit margin with 1.5 million, their current top line, if we were going to set a goal and say, okay, what we want you to achieve, what would be an outstanding goal, very ambitious goal, would be to turn that into a$1.5 million bottom line at about a 33 % profit margin would mean that they would need to go to about 4.5. Yeah, 4.5. Let's call it five just to round up and make it easy. So, you know, we're thinking going into these, we've got a general sense of where the clients want to be.

4:59And oftentimes they're coming to us because they've been flat or a little bit down. And so they're saying, yeah, we're at 1.5. I mean, really, if, you know, if we could just be like at two or three in three years, that'd be great. We're kind of having to say like, oh, yeah, you got this. We can do more than that. You know, we'd really like to see you get to 5 million top line and 1.5 million bottom line. Right. But that's not what happened here. What happened here is they said, yeah, we're doing about, you know, 1.5 million, dropping about 500K to the bottom line. And in three years, we really think we can be at, drumroll please, what was their number, Roland?

5:3435 million. 35 million dollars. 35 million dollars. That's more than the 5 million high-end target we would normally have. It's at least twice as much. Certainly more than the 1.5 that was going on. So that was interesting. So it's a good lesson in limiting beliefs, though, because there is often a line between crazy, unrealistic expectations and what is possible. And so I think, and you can speak for yourself, my initial reaction was, what the hell? I mean, that's setting us up for failure. at setting them up for disappointment. Even if we knocked it out of the park and got to 15 million, they'd be like, I wasn't even halfway to our goal.

6:25We're not happy. And so then that was the initial reaction. What was your initial thought hearing that? My initial reaction was, let's figure out how we can remove the crack pipe that has obviously been lodged somewhere into an orifice and then get down to reality. And what I think is important here is that we're acknowledging what our first reaction was. Yes. At the same time, neither of us said that, which there was a time when I'd have been like, well, that's freaking ridiculous. So let's talk about why that's ridiculous, why you're wrong and how we can do that. And I do think that shows some level of maturation.

7:08And so what we really want to talk about here in this episode is how do you approach truly audacious goals? How do you approach limiting beliefs? And when presented with an audacious goal, how do you use it as a thought experiment? And we're actually going to work, we're going to walk through the process that we went through. We said, you know what, screw it. Let's see, can we figure out for this client what it would look like, what would need to be true to get them to, you know, 35,$37 million in that period of time, remove our self doubt, remove any reference to crack pipes. That's again, that's my own limiting belief.

7:48So client, if you're listening to this, that's on me, not on you. That says more about me than it does about you. I'm acknowledging, you know, my own kind of failures there and what we came up with, which we're happy to kind of share as much as we can, you know, what we came up with for this client. But I think that there's a greater lesson here in how can you approach and utilize audacious goal setting to, in many cases, in the same way that Disney utilizes their imagineering process where they say no constraints. We're not limited by gravity. We're not limited by time and space. What could we do and then work backwards from there?

8:24Because where we wound up with, and we don't know where this client is going to go, but we wound up with three possible ways that conceivably you could get there. Now, none of them are easy and we'll see what they come up with. But what I do believe is any one of them, if pursued, would get them further in three years than just$5 million. So I think we want to talk about audacious goal setting, its role and kind of the approach that we had to it. I also would have, you know, I don't know, 10 or 15 years ago said, you know, it's been great talking with you. It's just, this probably just isn't going to happen, which is a limiting belief.

9:05And so I think for us to recognize that our gut reaction, our emotional reaction was this is cray cray, ain't going to happen. And, and you do when you're working with people have to try to have some sort of reasonable expectation, but then acknowledging and recognizing that that was a limiting belief, even if it's, even if it's true, it's still a limiting belief, right? That, well, you can't go from 1.5 to 35 in three years. And then we started thinking about it. So that's the initial reaction. Then we said, okay, check yourself before you wreck yourself. What's the - Because we were indeed about to wreck ourselves.

9:43Yeah, what is the, you know, what is causing me to feel that way? Well, because it's a really giant, giant leap. And, you know, even logistically, you're going through different types of managers to get from there. And this is an owner-operated company right now with very, very limited staff and some but not much capacity. And you're talking about pretty massive scale to get there. We know this because we recently scaled a similar business like this from$2.5 million to$28 million in about 18 months. And they went from about$400 ,000 in profit to$10 million. and we'll talk about how we did that as well.

10:27But so that was then the first thing is like, okay, impossible, crazy. Then, all right, is this me? Is this a limiting belief? And then I like the what would have to be true to me is a very, very good statement to get you in line. What would have to be true for this to happen? And is it actually possible? It is not possible for me to grow another three feet to be able to potentially, if I got in significantly better shape, be a pro NBA basketball player. I feel like that is an impossibility. But there are many companies that grow way more than what these guys were talking about growing. And so it is possible.

11:09And not only is it possible, but it has been done many times. So what the heck and who the heck are we to say that this is crazy and can't be done? That's on us. And so that's the first thing. You definitely don't want to be found guilty of thinking too small. And so usually as I watch big leaps around me and as I watch leaps that I've made or that Ryan and I have made together, it's always that we were thinking too small. That's why it always goes back to mindset, which is why it's so annoying to hear people talk about mindset because you want the tactics, but the true thing is that's in the way is inside of you.

11:48So all that said, yeah, I've heard somebody say pessimists look smart, but optimists get rich. Yeah. And and I think that that's important because we could have looked, I think, very, very professional. Have we said, you know, really, I don't think that's realistic. I mean, if you look at kind of, you know, the average growth rate of people in your industry, which is astoundingly Googleable and Chad GPTable, you know, we could have made a very strong case for why what they were asking for was, quote unquote, ridiculous or impossible. And so I do think that the first step that you should take when faced with an impossible goal or an impossible request is not to immediately reject it and then to build a case for why it's wrong.

12:29Step number one is to say, OK, to your point, what would need to be true that isn't true today to make this true, to make it to where, oh, yeah, this is obvious. And that's when we said, well, and then you make a list of those things. And that is basically what we started doing. Well, for them to be able to go from here to there, what would they need that they don't have today? Let's make a list of those things. Well, they would need a significantly larger and more professional executive team. They would need more budget to go and invest in media. They would need a branding shift because the brand that they had was more regionalized and they need to go international.

13:15So they need to do a branding update. They would need perhaps a strategic partner to do all those other things. They might need capital. They might need to change their product. And before long, you start to create just a list of things that would need to be true. So I think that's the first step. And then the second step is what you were saying is now to go and evaluate all of those things that you've listed and say, well, are these possible? I mean, back to the example of, you know, for me truly to be a professional NBA player, what would need to be true? Well, I would probably need to grow two feet.

13:47I mean, realistically, come on, I'm freaking five, six, right? Maybe two feet is, but I mean, more. No, I need to grow a lot. Okay. Realistically, is that possible? No, it's not. Okay. My skills would need to improve so much. Realistically, is it possible for me to up-level my skills having never really played basketball? Realistically, it's not. And finally, and this feels good to me, you're actually too old to do it now. Bingo. Yep, exactly. They won't even let me do it because they know I'll break a hip. So at some point, you do need to evaluate, okay, yeah, we are somewhat limited by gravity and physics.

14:27but don't do that until you've created that list of what would need to be true. These are the things that would need to be true. Now let's not evaluate the goal. Let's evaluate the constraints each one at a time. And when we did that, we were like, all of these things could be made true. And then it's what would need to be true to make the things that would need to be true. True. Exactly. And, and so like, before you get to doing that analysis, I think you say, where would the company be if we look at the company now and say, okay, what does the company look like right now? So we basically went through and said, how does the current revenue happen in terms of like, what does it look like?

15:15And so the the products and services that are offered by a business are typically referred to as product range. And you'll do a thing called a product range map that shows the different products and services that you have. And then what percentage do the sales of each of those products make up of your total sales? So here we said there's 1.5 million in sales and there were five different products. and one of them was 31 % of revenue, one was seven, one was 60, one was two, and one was a new product that was zero, but had been launched, but hasn't been activated, let's say. So we looked at those products and said, what's the product range look like right now?

16:04And then what's their relative contribution to profit margin. So now we've got an idea and we created this product range map. Then we said, okay, so now we see what we've got. Now let's look at how do these products and what we, our services and what we charge for them currently compare in the market. Is there a price increase opportunity because we're underpriced, which is usually one of the first places we go because that's just 100 % of a price increase generally falls to the bottom line because there's no increased cost of goods sold. There's no increased customer acquisition cost. It's just extra money you get to keep all of.

16:46So we went through and we found that the first product was on the higher end of the range. So they already had premium pricing. The second product was mid-range and competitive. So potentially an opportunity to change that a little bit. We'll talk about these in more detail in a second. The third one was competitive within the range. The fourth one was lower mid-end. So there was the potential to increase the prices slightly. And then the last one was competitive. So they were generally high, mid, competitive, a little low, and competitive. And then we look at those things and we say, okay, what can we do with respect to pricing?

17:29And so one of the things we did was we said, there's a potential to offer a tiered structure. So basic services at one level and then premium at another. That was the first product. The second one, we said, keep the pricing the same, but let's target higher value clients that will benefit from more customized services. The challenge with that, of course, is that the more you customize, the more people you need, because it's hard to do bespoke. Although I'll talk about how to automate that here in a second, too. And then the third one was creating higher tiered options priced significantly more with multi-year contracts, multi-year strategies, industry-specific verticalization so that they could become like, who gets more, the general practitioner or the vascular surgeon?

18:21The vascular surgeon does because when somebody's looking that's got something going on with their heart or something like that, they're going to say, hey, I want the expert, right? So how could they become the expert and verticalize and thereby justify higher fees and jump from this tier and this perceived value to a higher tier with a higher perceived value. And then the fourth one was basically raising prices and offering flexible packages that were based on scope. So there might be, you know, a low end that was half the price of the highest end. And then the last one, it was retaining the pricing, but evaluating the opportunities to up-level the services by adding additional high perceived value and high ROI for the client value stuff.

19:16And that was like the first level. So now then we said, okay, if we do that, if we do that, then, um, and we use the, the revised suggested pricing, and then we do a product range distribution in the same, in the same, uh, level as it was before, how many clients would they need each year to get them to this 35 million target? And does that seem possible? Going back to what Ryan was saying earlier. So we built the chart and said, okay, here's the five products or services. And then year one clients would be on the front end because the front end client brought people in. And we would have to go from about, I think it was a 4Xing of the number of clients.

20:19So we'd have to go, excuse me, from about 400 to 1 ,200 clients. Then we'd need about 25 % of those to up-level to the first ascension, about a third of those to up-level to the next ascension, and about 80 % of those to go to the next one, and about half of those to go to the next one. And if we did that and added 1 ,200 clients in year one, 1 ,500 clients in year two, and 2 ,000 clients in year three, we'd actually hit the goal. And so that was kind of revelatory for us. It was like, you know what? Yes. And in this particular market, from a total addressable market perspective, those numbers are realistic.

21:01Like, they are there. They're out there. It doesn't mean it's easy, but we're not talking about defying gravity. You know, we are, it is, it's work, but it's doable. So again, it's, it's saying what would need to be true? Well, your product mix would need to kind of shift this way. And you need to acquire these number of clients based on this product mix to get to that number. That is what would need to be true. Is it easy? No. Is it possible? Yes. Okay. So we're going to evaluate that and say, that's a possibility. Now, what would need to be true to achieve those numbers? And each one is just kind of going up another level deeper saying, well, what would need to be true to do that?

21:39Well, what would need to be true to do that? What would need to be true about our business? This is kind of that deeper strategy, peeling back the layer process. So we then we said, OK, well, what would be the strategies to effectively 3 or 4x our current front end clients? And so we talked about focusing on the ascension path. How do we get more of these people that are coming in at the lower level thing to ascend to the higher? How do we maybe change our target marketing on the front end to attract clients that are more likely to do that? So can we segment off the clients that ascended and then build audiences around that that look more likely to ascend than the average client?

22:31Emphasizing the high ticket services, optimizing delivery, installing the scalable OS, which we use in all our companies. and then developing a sales pipeline, expanding their lead gen efforts. We talked about different content marketing that they weren't doing. We did talk about strategic partnerships, who's already aggregated the attention and eyeballs of their ideal customer profile. And so we do very often start with ideal customer profile. And I know Ryan, that's one of the big things that people don't seem to have dialed in as well as you would think, or they've done it, not really ICP as much as avatar.

23:10Here's 17 avatars. We had one client recently. Here's who we have. It tells a great story of who you have, not necessarily who you should have. Speak to that for just a second. Yeah, I mean, so avatars, which is very, very common in marketing is essentially clarifying who are the different customer segments, the different personas that you're currently marketing to and attracting. And it's not that it isn't valuable. It's just that it answers the question, who do we have today? It doesn't answer what I think is a more important question. Yeah, but who do you really want? And so while avatars and personas can be helpful and interesting, I am way more interested in understanding what is your ideal client, your ideal client.

23:54So if you think about all the people that you could serve as a target, right, in the center, that bullseye, that is your ideal client. If you go one rung outside of that, well, now you have your available market. Like these are people who you could help. They're maybe not ideal. And occasionally you're going to be aiming for the bullseye and miss just a little bit. And that's okay because you can still help them. And then beyond that, you've got the addressable market. These are people who you could generally talk to, but they might very well be a distraction. They might be people who, from an average client value perspective, they're not worth enough to be worth bringing into your organization.

24:36So getting crystal clear on this is exactly who it is that we are talking about is so incredibly important because the mistake that most businesses make is they think, oh, but if I narrow who we're talking to, I'm going to wind up talking to less people. And in reality, it's when you try to talk to everybody that you talk to nobody. and it's the businesses that talk and they're very precise in their messaging, they wind up actually talking to more people because you get two groups when you talk to just your ideal, what we call your Goldilocks client. You get the aspirational folks who aren't quite ready for you, but they want to be.

25:11They're just on the outside looking in. So you get kind of those aspirational upstarts, those people who are just there and you can kind of foster them. but you also get the humble people who maybe are a little bit beyond where you are, who you would typically serve, but they're excited about what you can do and they're willing to kind of come back. So that's what we say. Don't think about avatar and persona, at least not initially. Who's your ideal client? So you only need one for now, one ideal client. Like, oh, I've got multiple ICPs. Then you don't. Who's your one? Who's your one? I like that.

25:46So, so then we basically said, okay, um, here's all the different strategies. And there were about seven of them that can accomplish these things. And they went into how to staff up, how to develop the executive team that you needed to get from where you are to where you're going, how to, um, how to grow, how to build the ascension path, how to identify the right people, how to do strategic partnerships with people who had aggregated the attention and eyeballs. And then we talked about acquisitions for growth, because particularly for what they are doing to be able to get the staff that they needed, not the executive team, but the actual staff that they needed along with the customers, it made sense to think about acquisitions.

26:33I think it always makes sense to consider them. But here particularly, because if they could acquire people, companies or businesses that already had the staff that they needed to handle the volume, then that would be a big, big, big constraint that would be removed from the business. So we identified because they are currently regional. And we said, let's start regionally, and then we'll look to probably acquire and more than to do what's called geocloning, where you would just take like a copy of the business and open it the next place. Because it takes a little bit to build a brand and recognition, and because they had a very localized brand, we, rebranding, by the way, was another thing that Ryan mentioned earlier.

27:18That was one of the things that had to happen too, because they were branded regionally. So we looked within their region and identified their top 50 competitors by sales volume and by service provider count. And then we went down the list past the larger ones and the global and nationals and said, okay, if we go down to about number 19 in size, that's acquirable. And so 19 all the way down would get us 19 to about 32 in the rankings became our target list for acquisitions so that we would start reaching out and having conversations with them about possible acquisitions. And even if it didn't turn into an acquisition, you've started the conversation.