Unlocking Success: Navigating the Scalable Impact

26:18Yeah, right now, turn to the person next to you, take one minute. I'm going to tell you how we're going to do this. We're going to keep going, so don't get up and go. Tell the person next to you, this is the exit. All right, this is the exit that I want to take. Do you want to exit the line, exit the staff, exit the org chart, exit the board, or exit completely? Which exit do you want to take in the next 12 months? All right, which exit? Tell the person next to you. And if you're at home, drop it in the chat. Hopefully you got to share all of your deepest, darkest aspirations with a total stranger.

26:49That's always fun. Hopefully you got to do that. Hey, by the way, is anybody else out there an introvert? Are there any introverts in the room? Yeah, I am too. If I had asked me, if somebody had asked me to do what I just asked you to do, I would have died a little bit inside. So thank you very much for participating. I can tell you what we're going to be doing is a lot of workshop, a lot of interactivity. I know this is us throwing a bunch of stuff at you. When we finish this, and we're getting into building stuff and working on things together, so you're going to get to know your neighbors. I'm not going to ask you weird back rubs or any of that crap, but I'm going to ask you to, unless you want to, I guess, I mean, it's a free country, just make sure the person next to you is cool with it too.

27:24All right. I made it weird. All right, let's keep going. So how do you do it? How do you do it? How do you ascend the seven levels of scale, and how do you become exit-able? We've talked about what it means to become scale-able, right? What it means to become scale-able is to have a flywheel spinning, to have an operating system installed. What does it mean to become exit-able? Those first two are a part of the puzzle, but they're not all of it. And so what we have here, and you have this sheet in front of you, is a framework that we call the Scalable Impact Frameworker SPV. Let me say one thing, too, about...

28:00because exit able or exit ready to me, I like better because you don't have to exit. But if you set your business up so that you can, it will be a better business. Like you really, at some point, should be running a mock due diligence as if you were going to be dealing with a buyer. Because you'll find the weaknesses in your business that will make your business stronger, that will generate more sales, more profits, less risk of litigation. All of the things that a buyer would be concerned about, you as an owner should be concerned about as well. And we really don't do that nearly often enough.

28:43So think about that, you know, if you're, because we know, because we talk to people about this all the time, sometimes people have an objection to, well, I don't need to be exitable because I'm never going to exit. You know, you don't know. You don't know, right? I mean, literally our$2 billion friend, right? They did not plan to exit at all. And they got an investor that came in and was supporting them with the growth capital that they needed. And that valuation was about 180 million when they came in and they figured they were good and they were working towards, you know, building up to maybe a half a billion or something like that.

29:2118 months later, somebody came in and said, How about$2 billion? Which is more. They weren't, I mean, literally when those people came in, they said, I'm not sure. It's almost double. It is almost double. Almost, yeah. But think about that, right? There is a number probably that would make sense to you and your family and the people that you love for you to exit. But even if there wasn't, there is leakage going on in your business right now. Every single one, we have it too, right? We go through that same challenge and going to think about being able to have a company that is ready to exit, that's exit ready, means that you have options and options win every time.

30:05So just think about that. Yeah. So what does it take to be scalable, to be exit ready? Number one, hopefully this goes without saying you have to have leveraged sales. It does start with sales. All right. And leveraged You do need to have sales, but not just any kind of sales, leverage sales. Yeah, leverage sales are different, right? So sales and think about how can each thing that you do, like you want the activities that you take and the investments that you make to create sales to be disproportionate. You want to say, how can I make one little change, take one little action, and actually get huge results?

30:47Not just, do I run more ads? Do I speak on more stages? Do I do more SEO? Those are very linear. What are the big moves that I can make that will actually create leverage? I think we go into that in detail later. We won't do it right now. But that's really important to think about how does my little act actually generate whole new markets or whole new groups of customers or whole new categories of value ladder that I can sell? Yeah, and how do the efforts that we make actually compound upon one another? So you need leveraged sales. You also, and this is important, we've talked about this, need bankable profit.

31:25Not just my accountant says that we made profit. I mean actual bankable profit, distributable profit, profit that you can put in your pocket. That's an important difference. We talked to one of our friends who's a business owner not long ago and said, you know, how are things going? And he said, I'm going to make$2 million in profit this year. I was like, that's fantastic. And then I said, is it real profit? And he said, yeah, of course it's real. And I said, well, are you reinvesting that in the company? And he said, yeah, I got to reinvest all of it into the company. I said, well, that's cool because it is profit, right?

32:03Right. Congratulations. You get to pay taxes on all of it that you can't write off and then put it in the company. Right. So maybe you'll get a million three in there or a million five. But it's not bankable. You can't decide what you want to do with the money. I think that's the big thing with bankable profit is that you should be able to decide what you want to do with it and not need to put it back into the company. That's really important. So do you have profit? And that doesn't mean that you won't reinvest in the company at all. I'm not saying that. I'm just saying, we are saying, you've got to have bankable profit.

32:39Profit that can go outside, that can do the things that you want to do outside the company. That's really, really important. In addition to leveraged sales and bankable profit, you also need transferable values. This is what we call the SPV, right? SPV, leveraged sales. That's the S, bankable profit. That's the P, transferable value. We like to say the transferable value comes in two forms. both the ability for you to transfer the value creation process to somebody, not you. So the value creation process, meaning how do we make sure that the running of the business can be done by other people?

33:11That's the exit number three that we talked about. But it's also the second type of transferable value is how do we transfer the value of the actual company to somebody else? In other words, how are we in a position where somebody might want to acquire it? Which means how can you make it appealing to somebody else? Which means that you need to be thinking about how can you remove all of the risk that an investor buyer in your company would be concerned about to the extent that they will actually make the investment. Because if you're an owner operator right now, if you can't do that, and I'm for sure on this one, if you can't be gone from the business for a year, you are an owner operator.

33:49And you're going to be stuck in the company with a consulting contract, an employment contract, or some other thing that I will bet you, because I've seen it happen a lot of times, makes you very unhappy because you're going to be answering to about a 23-year-old MBA graduate that's a junior associate at the private equity company or the company that bought your company. And that is a terrible place to be. And your multiple is going to be significantly lower. The average multiple for owner-operated businesses across all industries is 2.5. 2.5, the average multiple for a business that is not owner operated in the same exact industry is 4.5.

34:33That's pretty significant. So if you've got a million dollars in profit and you're ready to sell, it's the difference between getting two and a half million and four and a half million. But, and we'll talk about this tomorrow or on day three, it also changes the the definition of what your profit is. You go from a definition of profit that's called SDE, or seller discretionary earnings, to a definition of profit called EBITDA, which is earnings before interest, taxes, depreciation, and amortization. And so you actually, instead of going from about a 2.5 to a 4.5, you're really going from about a 2.5 to a 5.5.

35:11And so the difference between exiting or not being able to exit at all, which is also true of most owner operators, from not being able to exit at all to being able to exit for significantly more, about three times more. That's a big deal. Let me translate that for those of you who don't have a background in legal and tax accounting. Mo money and Mo freedom. All right. Those are good things. So why does this work? Why these three things? Why these three things? Why do they combine to make the magic happen? because simply when you have leveraged sales and bankable profits, these two things combine, you got momentum, okay?

35:51You're a giant, trugging, massive freight train that nothing can stop. Lots of sales and lots of profits so you never run out of fuel, okay? You're just, you can if you want to pump it right back, you know, pump it right back in, nothing's gonna stop you. If you've got leveraged sales and you've got transferable value, now you are scale able, okay? So we talked about, you remember what two levels you need to go through to become scale-able? Specifically, level two, remember what level two was? Call it out. Having your growth flywheel spinning. Sounds a lot like leveraged sales, doesn't it? Level three, having transferable value.

36:26Sounds a lot like an operating system, doesn't it? Right? If you've got leveraged sales and you've got transferable value, congratulations, you've passed to and through levels one, two, and three. You are now what we call scalable. You've crossed the scalable line. And when you have bankable profits and transferable value, you, this is when you have the most glorious thing to entrepreneurs, period, and that is options. We said it before, you could sell, you could not sell. It's up to you. We just want you to have the option. Because I know for me, I'm the kind of person who, when I get stuck in traffic, I will leave the freeway, go the back roads, knowing good and well it's going to take me longer, but at least I'm in control.

37:01Okay? Will anybody else drop a grenade at your own feet to keep somebody else from telling you what to do? I know this guy will. I've watched him freaking do it. It's terrifying. All right? But that's us. That's what we do. We crave options almost above all else. But the beautiful thing is, if you've got momentum, if you're scalable and you have options, now you can achieve what we call scalable impact. What does that mean? It just means the impact can be as big as you want it to be. The impact on yourself, the impact on your inner circle, the impact on your community, the world at large. You get to do whatever the heck you want to do, as big as you want it to be.

37:32Okay? It is totally up to you. And the other thing you have in addition to scalable impact is your exit ready. Okay, you combine all of these things and you're exit ready, right? So how do we do that? How do we make that happen? We're going to talk about it, but let's talk about what happens if you don't have one of these, specifically if you don't have leveraged sales. We talked about this. You know what it feels like. This is when you're that hamster on a wheel. If you lack leveraged sales, you could have a lot of profit and you could even have a decent operating system, right? But it's still hamster on a wheel.

38:01If you lack bankable profit, we talked I think it's good. Back one X up. So I like looking at what you lose when you don't have one of these because we really notice it, right? Think about what you're losing. If you don't have leveraged sales on the left side, you've lost momentum. Yeah. And momentum is critical. As we go into the recession that we may or may not have, but I've seen 92 to 100 % likelihood in all the last things that I've looked at, right? It's great. We're excited about it. Are there like Vegas odds? Where are you hearing that? Because it's the seven leading economists and McKinsey and a couple of others.

38:42And what do they do? All the people that have lots more degrees than we do. But momentum gets lost in recession because what usually happens is businesses let people go. And most importantly, they cut back on marketing because they think that's the easiest thing to cut back on. And study after study after study shows that the people that doubled down, the companies that doubled down on marketing in a recession come out of it significantly more profitable than the others because you're able to capture share of voice. You're able to capture market share that wasn't capturable before. It was lots of noise or it was too expensive to acquire a customer.

39:21So that's what's coming for us and that's exciting. And so momentum is really important. right? The ability to continue pushing and not lose momentum and get started again to just add gasoline or gas pedal to what's already working is so much easier than starting from scratch. So that momentum loss is really important and the ability to be scalable. I mean, I think we're all pretty clear on that. That's right. An event called get scalable. So you want to get scalable. Yeah. Because you're at an event called, you see how that works? All right. If you don't have bankable profit, we talked about it being kind of all hat, no cattle.

39:55Another way I like to think about this is the toothless chihuahua. And I thought about this when I was actually at Roland's house and we were building this because Roland has chihuahuas and he's got one chihuahua in particular, the most yappy, loudest, and obnoxious, has no teeth. He has one tooth, which somehow he manages to get the ankles of almost every other. But when you think about a toothless chihuahua, what are you dealing with? All bark, no bite. All right. Nicely done, gents. All bark, no bite. We don't want to be a business. We don't want to be entrepreneurs with all bark, no bite. We don't want to be all, you know, all have no cattle.

40:24And that's critical too, because look at what you're losing. You're losing optionality. And let's talk about what that means. If you don't have bankable profit, that means you have to go to someone else for capital. That means that to continue your business, you're going to have to go to a bank, God forbid, or a credit union, or angel investors, or private equity, or private money, or, you know, hard money, friends and family, God forbid too, right? Hard money. I mean, it's expensive. They do with a baseball bat. So, and then that means that you have runway with an end. Because if you can't change that, you're living on borrowed time.

41:03You're literally living on borrowed capital, right? So that's important to know. And you're going to either give up flexibility because you're going to get into a tough cycle where the interest and the payments on the loans that you get and the covenants, covenants are the things that they then say you can't do. Like, you can't pay yourself. You can't pay yourself at all. Or you can't pay yourself any more than what you were paying yourself over the last 12 months. And so then you get really in a tough hamster wheel there, too. So it's very important to have transferable value so you can go and get money to grow.

41:38But that's the reason to get that, right? Not to sustain. Bankable profit's really, really critical. If you don't have the transferable value, again, we talked about it. That's when you're the dancing bear, right? And when you're the dancing bear, that's when you've lost all optionality. It's when you're definitely not scalable. And it's when, frankly, we don't own our businesses. Our businesses own us. I say this a lot. You're going to hear me say it again. The more valuable you are to your business, the less valuable your business is. That's a really important thing to write down. That's a writer-downer.

42:14The more valuable you are to your business, the less valuable your business is. oftentimes entrepreneurs, we pride ourselves in being able to swoop in, save the day. We can do anything. We can do everything. And therefore we do. Right? Cool. You're trapped. You're captive. Okay? You don't own your business. Your business owns you. So what does it mean to get more leveraged sales? And if we're going to zoom in, you know, specifically on leveraged sales, and we will actually zoom in in just a minute. So I'm going to go through kind of the outer ring and what you specifically need, and then we'll delve deeper into all of them.

42:47But number one, you got to have that growth engine. Okay. That growth engine is critical. You also have what we refer to as authority amplifiers. I don't know. Okay. I don't know if you mentioned it, but I see people writing down, but you guys do have a sheet with this on it, which I would encourage you to take out. Right. Cause that's what this is for. Yes. Yeah. I thought I mentioned that earlier. If I didn't, my apologies. I may not have heard it. Um, did I mention it? Huh? He didn't. I was being, some people said yes. And some people said no. You can't have it both ways, y 'all. All right.

43:16You got a sheet out in front of you. It looks something like this. Make sure that you're filling it in. And if you're at home also - You have the sheet as well. Yes. You have the sheet as well. So be sure you get that out and start filling it out. Yes. So leverage sales, you need the growth engine. We talked about that. You need what we call authority amplifiers. Okay. This is the right messaging lining up in the right channels. We'll talk about that a bit more. You also need to have what we call a scalable model. You need to make sure that the growth of the business is not constrained by the model, right?

43:42You don't want to be in a situation where where you could go, go, go, but your business doesn't allow it to grow anymore. Right, and we'll talk more about that. If you want bankable profit, you need to have what we call a zero dollar budget. Good news, tomorrow morning, we're gonna work with you to create a zero dollar budget. We'll talk more about that as well. You also need to have margin maximizers, right? Now would be a good time if you haven't done so to test raising your prices. Because guess what? The entire world just raised their prices, okay? If you did not follow suit, that is a problem.

44:14You are falling behind. And it's 100 % to the bottom line. That's the nice thing about raising prices. It all goes to the bottom line. There's no additional cost to raising your price. So much about bankable profits. Yeah, we want to increase margins. We want to make sure that we're budgeting effectively. But it's also good cash management. So having a cash waterfall in place is critical to not just having paper profits. Paper profits where your accountant says, you were profitable. You can pay taxes on that. And you're going, taxes on what? I didn't get it. And just to kind of bring this home, how many of you have found out that if you don't take money out of the company, it finds a place to get spent?

44:56Everybody, right? We did that. It was like, so we're very ruthless with our companies now and saying this cashflow waterfall thing, it needs to deliver this or it's going to get fired, right? The company is going to get fired. If it can't pay us, it's going to get fired. Yeah, I told the story. We slow burned about$2.5 million. Little bits at a time. Little bits at a time over a couple years. Didn't care for it. Roland liked it less. You know what I say? We didn't have to pay all those pesky taxes. It's true. All right? We didn't have to pay him. He saved us a million dollars. Saved us like a million dollars in taxes.

45:26Take that, Obama. All right. Transferable value. Yeah. Transferable value. All right. So we talked about cash to the waterfall. In terms of your transferable value, you've got to have the operating system. Okay, you have to have an operating system. You also have to have a high output team that is running the operating system because any system is only as good as the team that is running it. I'll say it again. Any system is only as good as the team that is running it. We've got to have the systems. We've got to have the team. And we've got to have the right structure. An exit ready structure. I'm pretty sure we're going to be talking about that on day three.

45:59We are going to talk about that on day three. Talk about that on day three. So I want to play a game. We're going to move through this pretty quickly. but I want to play a game and the game is called Let's Find the Red. Cue the game show music. Don't actually. Or you could. They're pretty quick. Yeah, we're finding the red. Thanks. I knew they'd have it. All right. So here's what I want you to do. Hopefully you filled this out and on the table you'll see there are highlighters. There's not enough highlighters for literally everybody. so you're going to have to share with your neighbors. Which is by design.

46:34Yeah, it's by design because we want you to make friends, all right? Remember, it's about being in the room, asking for the fish, all that fun stuff. So as we're going through each one of these, I'm going to want you to highlight the section. Green is, we're crushing it. We got this one on speed dial, if anybody even remembers what that is, all right? We're crushing this one. Yellow is, meh, it's okay. Red is, oh my gosh, this is an absolute train wreck, all right? So let's start with leverage sales and dive in. Here we're talking about growth engines, authority amplifiers, and your scalable model.

47:06So if the words were too small before, there they are in big form. With respect to your growth engines, what we're looking at here is this is your ability to generate a consistent, predictable, and growing flow of new leads and customers each and every month. Here's your biggie, largely on autopilot. Okay? Largely on autopilot. So do we have at least one growth engine, documented growth engine, not I think we have one. You have a documented growth engine that's directly responsible for at least 10K in sales at least three months in a row. What do you mean by documented? What I mean by documented is if I say, hey, how do customers happen?

47:39You can visually show it to me. You can visually show me this is how they happen. Okay. Not you'd be like, well, they kind of do this and junk and stuff. No, no, no. Documented. You bring in somebody new in your sales and marketing department, you can show them and be like this is how we acquire customers. This is where you fit in with that. All right. So many of you are crushing it. You know, you're doing, there's people in this room who are doing well, high eight figures, but you have not documented this part. So you don't get to say green. You're looking at like pish posh, 10 ,000 a month. Come on.

48:10That's what we spend in paperclips. If you don't have it documented, all right, you don't get to say that it's green, right? Really the only way that you, that you can go green is if you've got one or more growth engine with seven figure momentum, so you got a million dollar flywheel, seven figure flywheel spinning, and it is absolutely documented, that's green. Okay? So what's the difference between green and red and yellow? It's green, if you got a seven figure flywheel documented spinning, it's yellow, if you're like, oh we got some documentation in places, I could probably find it if you made me do it.

48:41So maybe if you have an undocumented, partially documented. If you have an undocumented, partially documented, maybe it's yellow, and if you're like, we ain't got none of that crap, you're red. Okay? Some of you are going to be like, I don't want to ask that person for the red one. And by the way, I realize it's pink, by the way. Good luck finding red highlighters. Some of you are not going to want to ask the person next to you, can I borrow the red one? Do it. This is a safe place. This is a judgment-free zone. All right? One of the things we're trying to model up here is that we don't have it all figured out.

49:11Right? The bigger you get, the better you get at this stuff, the thing that amplifies the most is the level and volume of your mistakes. It's a judgment-free zone. And you're stupid if you don't take a red pen from your partner. Totally stupid. All right. We're judging you if you don't do that. No. All right. So, I want you to highlight the outside. I will tell you my very first growth engine that I ever mapped was on a napkin. If you've heard my million-dollar napkin story, this I would consider to be documented. It doesn't have to be a fancy flow chart. We're going to show you how to do it using just post-it notes on the board.

49:44So you will have this. You will have this. But depending on where you are, no documentation, no seven-figure flywheel, red. Got me? So highlight it in that section right there. Y 'all following? All right, let's move on. Authority amplifiers. This is our ability to clearly communicate our value through multiple channels, multiple channels, and become known as the de facto leader in our industry. So what are we talking about here? We're talking about not just our content, social, not just our channel, traffic strategy, messaging. Does your content and core message drive organic viral growth? And are we dominant, sorry, I got cut off, in more than one channel, okay?

50:27Are you dominant in more than one channel? Apologize for that cutoff there. So you need to know, like, if Facebook, Instagram, were to kick your butt off their account tomorrow, what would happen to your business? If it would drop in half, feeling a little reddish, yellowish. You're green if you're dominant in multiple channels and the majority of your customers are seeking you out, finding you because you are the de facto dominant brand in your industry. That is when you are green. You're everywhere all at once. And where you're not, they're trying to find you. That's what green looks like. That's what green looks like.

51:02Incidentally, it's really hard to focus on authority amplification until you got your growth engine and your model dialed in. And your brand, which I think you're talking about as well. Yeah, that's factored in. So I mean, all of these things. They should know, like by authority, we mean that they should know what your company is and what you do. When they think of whatever the thing is that they need, your name comes to mind. And your name comes up in the minds of people they're asking about it, in addition to different channels of advertising, right? Exactly. We're talking brand here. Brand and omnipresence.

51:37So where are you there? Maybe you're like, hey, I've been following this company, Digital Marketer, we're crushing it here and we're green. Probably not true, but I'll give you that one. I'll give you that one. But what is it for you? What is it for you? Do you feel like you're doing well here? Your scalable model. This is our ability to innovate our business model and positioning so we can deliver improved and differentiated solutions to an ever-expanding addressable market. And we'll go through an exercise on this tomorrow. but really the question you want to ask here, I think, is if I know where I want to be and I know where my business is now and what it's likely to be able to do to grow or what it's done growth-wise historically, will it get me to where I want to be within my target time period?

52:26Can I get through the model I've got right now without any change? Can I get to the place that I want to be? If not, then you're going to have to find new ways to grow. Yeah, we like to ask the question, could you metabolize a two to three X spike in sales without dramatically impacting your profit margins or the customer experience, right? Remember back when like Oprah would do her favorite things and stuff like that, right? Or book club kind of deal. Like they would call it the Oprah effects. And it's like, boom, now everybody knows about you. What happens, right? What happens? Could you be like, bring it on, bring it on.

53:00Is sales and marketing limited by out of capacity to fulfill or is there ample room for growth? And here's an acquisition tip for when we get to acquisitions. This is a great due diligence filter for seeing whether somebody has a company. You can tell that story that you might want to acquire. Tell the story. The rapid. Yeah. We're like, can we? Yeah. So the very first deal that we did together an acquisition before we were business partners, I like to always say, and this to me, it's really worth you thinking about too, is I like to do a transaction with somebody before we create a partnership or a deeper relationship.

53:35Just get a transaction done because there's nothing like doing something together. You are actually blessed if the first transaction doesn't work out, in my opinion, because then you get to see how is this person under stress? That was certainly our model. Yeah. And that's, we did fail there intentionally because we didn't. But what happened was we went in and I remember Ryan said this was a water filter company. And Ryan said to the guy, he said, and it was somebody that was in his Vistage group. So that was how that deal came about. So he told the guy, he said, you know, we're looking at an acquisition.

54:10This fits to help us scale something we've got because we're already selling water filters to people. You sell water filters to companies. Seems like great. And maybe we can take our manufacturing onshore and other good things. He said, but I just want you to know that what usually happens when we go into a company is that we're really good at marketing. We own Digital Marketer and we kind of know a thing or two about it, that the wheels fall off. So can you handle a three to five times sales increase in the next couple of months? And I was like, absolutely. He's like, and I remember really, we rode out for God knows how long.

54:49When I looked at this place, what was the name of the town it was in? I don't even remember. Coleman, Texas. You go to nowhere. It was in Coleman, Texas, which I Googled and there was nothing around Coleman, Texas on the first thing. And I zoomed out and there was still nothing. And when I zoomed out two more times, I think I saw Abilene or something. It's like, daggone. And we, it was, we ended up driving for like three and a half hours in a car with our entire due diligence crew to go and have this, the first meeting with them, which was fun. But yeah, he was like, yeah, no problem. I got it.

55:24I can totally do that. No problem at all. Look at these machines. I can do that. We got it, man. One rebrand and one blast through a automated dialer system to leads and they fell apart. Machines broke down. Spoiler alert. Filing cabinets overflowed. They don't got it. He did not have it at all. He did not got it. But this really does serve a fantastic due diligence. I wish we had done this. I'm a little mad at us for not inventing this, you know, 12 or 13 years ago. And then a time machine first and go back and fix it. But it's a great due diligence for you when you look at acquisitions as well as for your own company.

56:06So where are you there? If you absolutely could metabolize and you know for a fact, not just you think you know because then it's green. Maybe you're like, you know what? We could grow a bit, but yeah, there's probably some limitation. We're going to talk about kind of the first step to having a scalable model is also to have your fulfillment engine documented. To be clear, this is how we fulfill once we've sold. We understand, we can visualize it, which means we can optimize it. Okay? So that's leveraged sales. Hopefully you're starting to look a little bit kind of colorful. I don't know if some of you have all greens.

56:35We're going to talk about what happens if you get that. Let's talk about bankable profit quickly. That was that$0 budget. That was that margin maximizers and also the cash flow waterfall. So the$0 budget, this is our ability to create budgets and expense projections. And guess what? Actually hit them. Okay? To make a budget and hit it. Weird, right? So do we have a$0 budget? By$0 budget, I mean you have a plan for every dollar that comes into your business. Every single stinking dollar has a plan. That's what I mean by$0. You know how all of them should be spent. It's all got a name. It all has a plan.

57:11And then do you consistently hit your targeted expense ratios? That last thing is be sure that you're tracking. Because if you're not tracking and comparing your actual to projected budgets, then it's not serving you as well as it should. Yeah, and we're going to show you how to set that up tomorrow morning. So if you're saying, oh gosh, Ryan, I don't know what you mean by expense ratio and what's a budget. Well then, congratulations, you're red. If you have a budget, but you hit it occasionally, but not often, maybe it's yellow. And if, yeah, you're consistently crushing it, showing up, you got it.

57:42Founders board members, you know this tool. You love it. It's the expense ratio analyzer. We've got a paper analog version that, again, tomorrow morning, Richard Linder and I are going to be up here helping you all build and create. So you'll leave here, even if you're a yellow or a red right now, you should leave here at least getting into the yellow phase. In terms of margin maximizers, it's our ability to leverage value ladders. So selling more than one thing. Pricing, positioning, to improve gross margins while maintaining or even reducing operating expenses. How do we make the customers we got worth more?

58:17How do we increase our average customer values? A good question to ask is, have we raised prices in the last 12 months? If not, on the break, raise your freaking prices, okay? Have we tested high ticket slack adjusters, right? Have you tested an offer that is 10 times more expensive than your current average order value? If your current customer or client, on average, is worth$1 ,000, have you tested a$10 ,000 something or other, okay? If it's 10 ,000, have you tested$100 ,000 something or other? Because here's what we know. 10 to 20 % of your existing customer client base will invest 10x the average.

59:01If you get 10 to 20 % to take a 10x, you just, by the way, if you do the quick math, at least double your average customer value. I would ask a question also, not just have we raised prices in the last 12 months, but have we created additional value for our customers in the last 12 months? because one of the best ways to raise prices and increase margins and hit higher value, find things on the value ladder that you don't know about right now that are higher, is to say, what is the additional value? How can we serve our customer beyond what we're doing right now? If you're not always asking that question, you'll miss out on great opportunities to increase your value ladder.

59:39So where are you there? Maybe you're like, no, we're great. We're raising prices. Our average order values are tip top. Maybe you're green. Maybe you're yellow. Maybe you're red. Mark it in. Cashflow waterfall. our ability to cover all our operating expenses and asset investment needs. So sure, we're reinvesting some, that's fine, but it's all planned. And in addition to covering those, we have cash left over for reinvestment and distribution. So we're going to ask, do you have a built-up six-month emergency fund? Are you building retained earnings for future investments? Do you have sinking funds?

1:00:09And here's the biggie, are you making regular distributions? Are you personally distributing money to you and your other stakeholders? If you can say yes to all three of those, fine, green, right? If not, if you really can't say no, yes to any of them, then it's probably red. And maybe one or two, I'll let you decide if it's yellow or red, okay? One of the things that, again, we're going to talk about tomorrow morning is how do you set up what we call a cash sweep waterfall, okay? This is what dictates the movement of cash throughout your company. A way to think about it, if you've ever gone to a wedding and seen one of these or party and seen one of these champagne glass, it's like it pours in here and then it goes down, down, down, down, we're going to have you build something, a similar model framework for the cash as it flows into your business, right?

1:00:54So the cash is going to come into your operating account. Once you've built up at least some kind of funding there, we're going to make sure that we pay the tax man. Always pay your taxes. They have missiles. Once we got the operating account filled, we do want to begin to fund that. You call it emergency fund. If it makes you feel better, call it an opportunity fund. Call an opportunity fund, all right? Once we've built that up, now we're going to start rolling things into different sweep accounts, right? Maybe you want to save for long-term investment. Maybe you want to have some other sinking funds in place because you plan on, you know, making a big capital purchase later on.

1:01:30You want to have the money for it. Or maybe you just want to pay yourself, okay? This is an example. We're going to talk tomorrow about how to get more granular with yours. But the point is, you need a plan for the money. Because like Roland said, if it all just sits in your operating account, it will get spent. Okay, it will get spent. That's what I mean when I talk about a cash flow waterfall. It's interesting. One of our friends sold their auto dealership chain to Warren Buffett's group at Berkshire. And since they did that, every day, 100 % of the cash that's in the bank at the end of the day gets swept into an interest-bearing account.

1:02:06And he does that with every single company he owns. And then in the morning, it comes back. But during the 12 or 15 hours that it's out, it's earning interest at a higher rate than it would earn in the company. And he makes tens of millions of dollars off of that a day from the different companies just doing that sweep. So this cash management waterfall stuff that we talk about, real businesses use this and it can make a huge difference. That's really, really cool. Like down to the couple of hours. Let's talk about transferable value. This is where we're going to spend the bulk of our time today.

1:02:44Your operating system, your high output team and your exit ready structure. So operating system, our ability to build and install systems so the business can scale without an over-reliance on the founder. And this is big or any other key individual within the organization. You don't want to be owned by your business, but you also don't want somebody else to have black boxed what they do to where you're terrified if they would leave or quit. Do you have anybody in your team who you're like, oh my gosh, if this person leaves, I am screwed? And just in case you're wondering, we do. We do now. And we work.

1:03:19I mean, it just happens as somebody takes ownership of something and is really great and you trust them to do it. But you have to be aware that that's a weakness in addition to being a strength. And so you really need to coach that person in, how can I pass that on to other people? So a lot of that has to do with the operating system and the parts of that that create redundancies. So are the company's core value creation processes documented? Are they accessible by team members? Could you take at least 30 days off? If you can check the box on those, green, right? If you got some of them, but not most of them, if you feel like you're okay, then maybe it's yellow.

1:03:52And if you're like, systems, what system? We definitely have like a checklist. checklist, then it's probably read. One thing we're going to talk more about, checklists do not a system make. Checklists do not a system make. They're an aspect of the system process. They are not where it begins. Again, I got to give credit. Josh, Taylor, are you in the room? There you are. Will you stand up real quick? Give this man a round of applause. You don't know why yet, but I'll tell you. Josh inspired this. He was telling us, he's like, hey, I got to take not just one month off, two months, right? Two months, we took your family to Costa Rica.

1:04:31And when you came back, while you were gone, your team didn't just do okay. They broke all the previous sales records, right? That's the goal. Now, do you realize you just got trumped though? You know somebody just beat your record? John Dominey, how many months off did you take this last year on a freaking cruise ship? Six months. My man was on a cruise ship going around the world for six months. Okay. That's the new one, y 'all. All right. That's the new record. Founders board members. All right. So I'm sorry that you've been dethroned, but this next year takes seven months. You got it. And he's doing it again this year.

1:05:14That's what we want for all of y 'all. All right. That's what we want for all of you. If you're not there yet, maybe you're yellow, maybe you're red. High output team. Our ability to build and lead a team of doers. Ooh, that's a big one. Build and lead a team of doers who execute effectively, seek accountability, and elevate our culture. Is the team able to manage and scale itself? And do team members consistently hit the goals, wait for it, that they set for themselves? Okay? If your management style is, I tell people what to do, they do it, I tell them the next thing to do, they do it, I tell them what to do.

1:05:48They do it. I tell them if they did a good job. I keep coming back. Okay. That is very transactional management. All right. That's not elevating these folks. We got Amara, you here? Hey, of course you are. Amara was telling us one of the tools that we're going to talk about this afternoon, the high output team canvas. There's an objective way to know for a fact if your team can do this. And weren't you saying, we got it up here, so it must be true. saved you about 80 grand. Yeah, so we're going to hear more about 80 grand, and this is big, in people she didn't have to hire. Okay,$80 ,000 in what was budgeted, just over one quarter.

1:06:25We're going to spend this to hire these people going through some of the exercises we're going to share later. Didn't have to do it. And right now, yeah, y 'all are dancing. That's nice. Yeah, so we'll talk about this tool here. So that's what we mean by a high output team. I bet a lot of y 'all are like, you know what, red, screw these people. I want to light them all on fire. If that's your feeling, the color of flames, friends, fire. Maybe you're like, you know what? They're okay. They're solid. They just need some help. We need some additional guidance. We need to build some clarity around it.

1:06:53I need to do that. They deserve that, right? I got good people. They care. I got to give them some clarity. That's on me. Okay. Maybe still red, but there you have it. Different perspective. And then exit ready structure, right? Our ability to exit some or all of the business at the highest possible valuation without disrupting the day-to-day operations of the remaining business units. So do you know what your business and your assets are worth? And does your structure allow for it to be sold off in bits and pieces if necessary? One of the things I'm most proud of, when we sold Traffic and Conversion Summit, we didn't have to sell Digital Marketer.

1:07:28And that kind of what we call the goose and eggs. You want to have a goose that lays eggs and you sell the eggs, but you don't sell the goose. That's what we want for all of you. And that's what I'm guessing you're going to cover some of this on day three? I am. So that is coming your way. We also think about it as an orbital portfolio model. So we've got kind of at the sun is our holding company, our holding group. The planets are the standalone brands. And then the moons are the business units and the moons are the standalone brands that could be sold off. So we'll sell eggs, not geese. We'll sell moons, not planets.

1:07:59Okay. This is what Roland's going to be talking about doing. If you are structured in such a way where you're like, yeah, I could carve off this little piece. We're structured that way. our accounting is set up that way, great, you're green, I bet most of you aren't, probably more of a yellow or a red. Okay, so I want you to look at your sheet, right? See the colors, because what we want to do, right, I mean, just to recap, right, we've got these five exits, and you've got a roadmap to achieving whatever of these five exits you want to achieve, right? We want to ascend the seven levels of scale, and we want to get this scalable impact framework, we got to get the red out.

1:08:39Okay, we want to get the red out. So at a minimum, if you've got a growth engine in place, we got to get that one to green. That's something we're going to talk about when we come back from break. We got to get the growth engines from red to green. It has to happen. If you don't have any budget in place whatsoever, we got to get that. Maybe we don't make it green, but it's at least got to get to yellow. We're going to work on that tomorrow morning. Cashflow waterfall. If your cash is going, well, you don't know where, we got to tighten that up and fix it. That's the fuel that's going to scale your company.

1:09:07We got to turn the red into yellow. In terms of your operating system, if you want freedom, we got to get this green. Okay, if you want freedom, we got to get this green. And your high output team, if your team is red, we got to get it to at least yellow or that will be your biggest constraint. Let me ask you a question. How many of you have just about all green? Anybody? And it's cool. Any of y 'all looking at it? Many, you have just about all green? That's great. Yeah, phenomenal. Here's what I will tell you. Growth happens when you turn red to yellow and yellow to green. Growth happens when you turn red to yellow and yellow to green.

1:09:42And that's our goal. That's what we want to do. Scale. That next leveling up happens when you turn green to yellow. When you turn green to yellow. What do I mean by that? When you raise your standards, when what you currently today consider to be good, tomorrow, next week, next month, you go, that? That's what I thought was good? Uh-uh. Not anymore. When you raise your standards, that is when companies scale. How do we raise our standards? Right? How do we raise our standards? We raise our standards by getting in the room like this. We raise our standards by networking, interacting, engaging, having people on our advisory board who have been levels beyond where, you know, we can even imagine.

1:10:26They go, no, no, no, you think that this is good. You know what's bigger than a million? A billion, right? Talk to Roland for five minutes. Getting around people who can elevate your understanding and your appreciation of what is possible, that's when scale happens. So if you're currently looking and you're seeing a lot of red, cool. What you now have is a name for the thing that is holding you back. You know what to fix. You know where to dial in. And we're going to touch on a lot of these to hopefully turn red to yellow. That's the goal. That's why we wanted to start here. You know, you've got that.

1:10:58If you see some yellow, you know where you need to work. But when you get to the point where you're like, green all the way around, high five, I guess I'm done. No, you're not. Raise your standards, level up, make what was green, yellow. I've talked a lot about how, you know, what it means. Like, you want to make sure that you're in the room with the people that can help you level up. In this room are our founders board members, right? Our founders board members, this is our high-level mastermind group. This is actually the group that for us replaced War Room. So War Room, we eventually just sunset that.

1:11:30And Founders Board really for us is the new War Room. This is the group where we're working with founders to help them scale. And while you're here, we hope that we'll have a chance to chat with you and have a conversation with you about Founders Board and how we can help you turn those red into yellow, turn the yellow into green. We've got tools galore to make this stuff happen. But what we want to do even more than that, we want to get you in the room and hanging out with people who are going to raise your standards so that what you today consider to be green tomorrow, you see it as yellow.

1:12:06Hey, Roland Frazier here. If you're looking for a way to grow your business exponentially, to get more customers and ultimately increase your wealth, there's no faster way to do it than to acquire other businesses that already have the customers, products, services, teams, and media that you want. If you wanna double your sales, just acquire a company that has the same sales as yours. It sounds simple, but far too many people end up starting new businesses that fail and forget that they could skip all the hard stuff and just acquire one that already exists. There's a reason why private equity firms, family offices, big companies like Apple, Google, and some of the smartest entrepreneurs on the planet do not start new businesses from scratch.

1:12:49They acquire already successful businesses. And when they do it, they instantly increase their sales, their profits. If they want market share, they increase that. They can get new products and services to offer all instantly. Hey, look, 90 % of new businesses fail. 90%. Why not acquire an already successful business and increase your chances of success by 900 %? What most people don't realize is you can acquire highly profitable businesses with no money out of your own pocket in pretty much any country in the world, regardless of your credit and without having to go find a bunch of investors or needing any experience.

1:13:26Look, I've been acquiring businesses for over 30 years now and I cover the whole process in my Epic Investing Strategy Training and I wanna give it to you 100 % free. Just visit businesslunchpodcast.com forward slash epic to get your free access to my Epic Investing Training right now while it's available.

1:13:50Ever wonder how some people build real wealth through acquisitions while others just sit on the sidelines? Well, I'm here to tell you it's not about luck. It's about having the right system, the right deals, and the right guidance. And that's exactly what we give you in the Epic Deal Fast Track. If you've been thinking about buying a business, but you keep getting stuck, whether it's finding the right deal, structuring the financing, or negotiating with sellers, You are not alone. Too many people waste months, even years, just thinking about acquiring a business while the real opportunities pass them by.

1:14:23The Epic Deal Fast Track is not another course. It's actually an implementation program and it's designed to get you from the idea to the acquisition in just 16 weeks or less. We work with you one-on-one to help you find, fund, and close your first or next deal. And once you do, we're going to plug you into our Elite Epic board community so that you can keep scaling through acquisitions. We install three powerful systems in your business. The first is the deal flow engine. So you always have high quality off-market deals coming to you. Number two, we give you our offer and funding system so that you can structure offers that get accepted and fund them creatively many times with no money out of your own pocket.

1:15:06And number three, our closing and integration system so that you don't just buy a business, you actually successfully run and scale it once you have acquired it. Plus, you'll have direct one-on-one support from an Epic Deal Advisor every step of the way. And that's people that have actually come up through the system and done these deals themselves. That's the only way to become an Epic Deal Advisor. And if you're serious about acquiring a business this year, don't just sit on the sidelines. Just text I'm in to 334-458-9034 and we'll get you in. So text I'm in to 334-458-9034. We'll get you in.

1:15:44No fluff, no wasted time, just real deal making from people that are actually out there doing deals right now. I'll see you there.