Freedom. I could stop my blog there, however I like to write too much…

Freedom to do what I want, when I want, how I want. If I find a motorcycle for sale 1500 miles from home (as I just did) and I want to take off a few days to go pick it up and ride it home (as I’m doing this week) then I want the freedom to do that. In other words, freedom with my time. Nothing is more important then that. You can always get more money, you can never get more time.

Financial freedom. This one should be simple to understand. After all I can only do the things I enjoy (traveling, photography, motorcycling, coaching, reading, writing, adventure-sports etc.) if I have the money to afford those things. Is there a better way to get both financial freedom and control of your own time than being a business owner?

So that explains the Buy and Build portion, but what about Selling? What does that have to do with freedom? Most businesses have a certain point at which they’re about to hit “critical mass”. Simply put, that business is ready to explode and just needs the right leader at the helm to guide it along. Rarely do businesses have 2 different points of critical mass, however. In other words, if you find a business that has a great need, is in a great market, and has the potential to double or triple in under 2 years, the chances of doing that again at the end of those 2 years is very slim. However, there are always other business’ available where that is true. You just have to find them before the point at which they hit that critical mass and then sell them at their peak (since the sale price will be based on that most recent sales history).

The other reason for selling is that it gives you complete freedom with your time once again. If you buy, build, and sell a business and cash out a short while later with a few hundred thousand dollars (which is very possible) now you can go buy another business, do the same thing all over again, and make more money… Or you can take a vacation. A trip around the world. A missions trip. Buy that car you always wanted, etc. etc. etc. As Timothy Ferriss points out in The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich, the New Rich don’t save their whole lives so they can hopefully retire and, at 65-70 years of age, start enjoying life. The New Rich understand the goal isn’t a certain amount of money in your bank account, but the amount of freedom you have with the money you make. The New Rich don’t save up for retirement because they take mini-retirements all the time. It could be every year, every 6 months, or every other year. That mini-retirement could be for a month, a year, or 10 years. Now is the time to live your life. Not when you’ve saved up enough vacation days or have $1 million in the bank.

Since buying my 2 most recent businesses, I’ve taken trips to Pennsylvania, Florida, Texas, and am taking another cross-country trip this week. All of those trips required me to be out of the office for anywhere from a day to 7 days (the total will be about 3 weeks). They’re all within 5 months of me buying my first business. In the interest of full-disclosure, when I have been at the office, 7 day work-weeks with 14 hour work days are quite frequent.

So how does one setup their business and life to have those freedoms?

1. You have to be willing to step away from a mistake.
2. You must never lose track of your goal.
3. You must be able to work remotely.
4. You must empower your people.
5. You can NOT be the expert at the product or service of your business.

In a bit more detail:

1. If you buy a business, work 60-80 hours per week, and 6 months later haven’t made any significant progress, you need to get out. Take from that experience what you’ve learned and apply the lessons to the next one. Don’t toil for years. It doesn’t take that long to start seeing specific improvements (i.e. more cash in your pocket and more freedom with your time).
2. For me this is easy. When I was 19 I was diagnosed with Hodgkins Lymphoma. I didn’t think it was that big of a deal. I went through chemo for 6 months and radiation for 3 weeks. It wasn’t fun, but I survived. It never felt to me like it was a near-death experience until 3 years later… My friend, Lindsey Popelas, was 17 at the time of her diagnosis which came within 2 weeks of me learning the same news. After battling for 5 years, it took her life. Why didn’t it take mine? For whatever reason, the Lord wants me here and I KNOW its not to work for 60-80 hours per week for the next 40 years to save up $2 million to retire. Lindsey reminds me of that every day. For that she may be the most influential person I have ever met. That’s a lesson I will never forget. My goal is to have freedom – not job security. Don’t wait till you acquire a deadly illness to resolve to start living your life.
3. Blackberry’s, servers, ubiquitous internet, GPS tracking, Virtual Assistants, IP phones, etc. etc. etc. make working remotely on almost any business a reality. Start making it your reality.
4. If your whole team must look to you to take care of every customer complaint and handle every supplier issue and tell them what to do every day, then you have no freedom. Empower your people to make decisions they can effectively make and then use technology to encourage and monitor them.
5. If you’re the salesman, serviceman, customer service specialist, designer, engineer, doctor, lawyer etc. for your business then what happens when you’re not there? The goal is to leverage the talents of others so that you don’t have to be an expert at anything – except leading and leveraging the talents of others.

The only exception to selling your business is to keep it if your business is on auto-pilot and can work without you or with very minimal input from you. Neither of my businesses are at that point yet. However if I can’t get them to that point then you can be certain I will sell them, take a mini-retirement, and keep my eyes open for the next opportunity.

To your success, Bryan

P.S. In previous jobs of mine I have earned the ability to work remotely from my basement, take vacations when I want, travel extensively, and still make a considerable living. The hardest thing for every business owner is to find and rely on great quality team members. If you’re one of them, then you’ll be amazed at the freedoms your boss will be willing to provide for you.

Ok, I didn’t exactly pick the fight on purpose… It just sorta happened because in my normal read-a-book-and-instantly-implement-a-great-idea method I didn’t bother to inquire of the team what they thought…

Anyway – maybe I was a bit over-excited about Sam Carpenter’s suggestion about PTO (Paid Time Off) in his book, Work the System… After all, as I stated before, that single idea was worth reading the entire rest of the book (yes, including his hippie woodstock stories). So why didn’t my team love the idea as much as me??? Did I present it wrong? Not explain it well enough? Not review the benefits clearly? Possibly I should have asked them to participate in the decision to implement PTO to improve team buy-in…

Possibly all of those… Or possibly none of those… Actually, it doesn’t really matter to me why they hated the idea. Let me explain.

First off, PTO is simply paying someone immediately for their vacation and sick time so they don’t have any “accumulated” sick or vacation days. In other words, if you pay someone $10 per hour, they earn 40 hours of vacation per year, and you pay them bi-weekly (26 times per year) then each paycheck will include a PTO Earned bonus of $15.38 (40/26*10). That means that they earn 1.538 hours of Paid Time Off per paycheck and multiplied by their hourly rate of $10 they have earned $15.38 hours of “vacation” that I paid them for immediately.

For my business, I loved the idea for a few reasons:

1. Since people are paid ahead of time and generally aren’t great savers, the chances they can afford to leave the office and take a 2-week vacation all at once are pretty slim. When someone who is an integral part of the business takes such a long vacation all at once it hurts the business, stresses the team, and our customer complaints instantly go up. In theory I thought PTO would take care of that.
2. We offered Sick/Personal days as part of a perk. That always seemed silly to me… How can I know how many Sick/Personal days a person will need at the beginning of the year for that year? And if they don’t “need” any then people feel obligated to take them which negates the whole point of a Sick/Personal day. It’s not meant as a day to just use even when you’re not sick since you have it available. With PTO if they take off a day, they don’t get paid since they were already paid ahead of time… So according to Mr. Carpenter, in his office absenteeism dropped 80%. Makes sense to me.

Lucky for me, the Team Building exercise the week after I implemented the PTO was a review of The Five Dysfunctions of a Team as taught in the book of the same name by Patrick Lencioni. Part of that was a review of the first rule being, “an absence of trust”. Without getting too caught up in the lessons of that book, one idea is that a team that trusts each other is not afraid to “argue” and bring up points of disagreement. It’s important that everyone brings up any frustrations or varying point of view during meetings so that an open debate can ensue and everyone knows that their opinion matters. That allows everyone to then buy-in to the final decision discussed whether they originally agreed with that or not. You see where I’m going with this?

I implemented PTO unilaterally. Some team members hated the idea and several others were indifferent. No one was on my side. :-/

So we hashed it out. I let everyone speak their mind and then I explained the 2 reasons listed above that were important to me as benefits that PTO provided. I then asked them to give me a better program or system for allowing the above 2 goals to be met without PTO. So they did. They suggested to adopt as policy that no one could take off 2 weeks of vacation at once and that no 2 people in the same department could take off a week of vacation each back-to-back during peak season. They also suggested that we just ditch Sick/Personal days altogether. Seriously – I never even hinted at that. Someone suggested it and I verified with everyone that, that was acceptable. Everyone agreed.

At any rate, we no longer have PTO, however we don’t have to worry about someone taking off 2 weeks in a row and we won’t have a problem with someone abusing sick/personal days. Moreover, the whole team made that decision together as a team so everyone bought-into the new policies and felt better about being able to reason with the Team Leader…

Maybe implementing PTO, even for its short-lived glory days of 1 week, was actually a brilliant idea…

To your success, Bryan

My best investment ever!

In less than 60 days I managed a 28% ROI netting me a quick $1400 in cash with almost no work and minimal risk.

Now of course these deals don’t come along everyday but you have to be ready for them when they do… And it wasn’t luck in the stock market, flipping a property (cause that takes lots of time and risk), or even growing my business. Nope – this investment was a motorcycle. One that I bought, put 1444 miles on and sold for a quick profit.

Ironically, the formula I used to make this deal work has a lot of parallels to buying, building, and selling a business. Here are a few:

1. The most important part is always the purchase. No matter how hard you work to build a business in a short time, the purchase price is what dictates your ROI.
2. I knew a good deal when I saw one and acted quickly. Honestly, I know a lot more about motorcycles and engineering then I know about business so even though I knew the price was right, I did my homework and verified that the bike was WAY underpriced.
3. I was in the right place at the right time. Granted, with business if you’re willing to travel you can always find the right place at the right time. If not, then sometimes you get lucky and find a no-brainer like I did with the bike.
4. The bike required some minor maintenance and cleaning that I knew how to take care of.
5. Selling the bike required knowing where to sell (i.e. craigslist), who the target audience was, and how to build value in the bike including negotiating a fair selling price and offering additional valuable services in addition to the bike (i.e a free helmet, thorough review of the bike, explanation, and inspection with an experienced mechanical engineer).
6. I had to get the buyer and the seller to both like and trust me. The seller wanted cash and all I had was a personal check and a bank statement so he had to feel comfortable enough with me to accept that and let me ride off with his bike. The buyer had to trust that I was accurately representing the bike over the internet (to warrant a 3 hour drive to pick it up) and that my knowledge and experience with bikes was legitimate.

Some of those ideas may be a stretch, however I can’t emphasize enough that the most important part is the purchase price. With that in mind, you better spend time educating yourself on EBITDA and Free Cashflow calculations. EBITDA, as I’ve pointed out, is a bit of a farce, however Free Cashflow times some arbitrary multiplier is more “acceptable” though it’s not without it’s flaws.

Free Cashflow is basically your net income (or profits) with a few allowed add-backs such as 1 owner’s salary, vehicle and other perks. Interest is also an allowed add-back along with depreciation and amortization. At least with free-cashflow we all agree that everyone has to pay taxes regardless of the quality of your accountant. My issues with the free cashflow method (which are important to know when you negotiate the purchase of a business) are:

1. Only 1 owner’s salary and perks can be an add-back, however what if the owner doesn’t take a salary because he has a great General Manager (Team Leader) in place? Isn’t that “automatic” business worth more then the one that requires the buyer to be the Team Leader?
2. Very few people buy a business without some sort of financing whether it’s from the seller, bank, or rich uncle so completely discounting interest can be kinda silly.
3. Depreciation as an add-back again is a bit ridiculous because those numbers represent legitimate expenses that had to occur before and will occur again (though hopefully not in the time it’ll take you to buy, build, and sell).
4. The multiplier is “arbitrary”. As a business broker informed me a business is worth whatever a ready, willing, and able buyer is willing to pay. Most business owners think their business’ are worth 1 times revenue and, when you go to sell, if you can get somebody to believe that then more power to you. In reality most small businesses are worth 2-3 times free cashflow which means unless your business is making a NET profit margin of 33%-50% it’s probably not worth 1 times revenue.

Granted, my understanding and even experience with all of these is a bit limited, however the most important things I’m trying to stress are:

1. Educate yourself completely
2. Everything is negotiable (there are no hard, fast rules)
3. Be willing to walk away if the seller doesn’t agree with your purchase price and go find another deal

To your success, Bryan

Part of building a business will always be building your team – that includes both the team you already have to work with and the new people you’ll be adding to your team. The recruitment process can be quite an arduous one and if my memory serves me correctly, Dave Yoho taught a few years back that the average small business loses between $30,000 and $40,000 for each “bad” hire or a hire who doesn’t work out! As of yet I haven’t put a pen and paper to that number in our business however when you add in all the expenses it starts to make sense – my time is spent writing advertisements, conducting interviews, reviewing resumes and employment applications, indoctrinating new hires into our culture, reviewing progress during the initial evaluation period, setting them up for payroll, negotiating compensation, etc. etc. etc. My team is also asked to train and work with them for an initial evaluation period and if they don’t work out then I have to go through the process all over again. I can start to see how those numbers can become very realistic. With that in mind it’s paramount that your recruitment process is accurate in its selection and systematized.

For this blog we’ll be reviewing some basic ways that I’ve learned to systematize my hiring process with the help of my father and some other small business owners.

In order to have the most likely success in recruiting the right person it makes sense that the more people who are interested in your position the better choices you have. So you write up the “perfect” recruitment ad (we’ll review how to write that ad in another blog) and place it in your front window, in the local newspaper, on their website, on monster.com and you let everyone on your team know you’re looking for some new positions. Now you have to deal with people coming in, filling out employment applications, tying up your office staff with questions, etc. etc. etc. However there’s a better, more efficient, easier, and possibly more selective way to handle this initial stage of recruitment. This is what I do:

1. Place an advertisement for an open position with a unique phone number listed.
2. Setup that unique phone number with my VOIP phone provider (or you can get one setup with onebox.com as my father does).
3. Record a detailed Voice Message on my new line that includes a more detailed explanation of the job position, responsibilities, pay, and 2-3 questions for the recruit to respond to about their experience and why they think they would make a good fit for our team.
4. The voicemails then get emailed to you for you to review at your leisure. Mine obviously also get sent to my Blackberry where I can listen to them and respond from anywhere in the world.
5. I call and ask them to come in an fill out an application (I haven’t really ever been a big fan of resume’s).
6. If my initial reaction to their job application and personality is positive I provide a copy of the Vision, Mission, Culture and setup a time for a more thorough interview.
7. Then I call references from the application and prepare for the interview.

That covers the “intial recruitement”, so why use this method? In a nutshell, it’s automated and it’s cheaper. The phone line costs me about $5/month and now I don’t take up my office staff’s or my own time fielding basic questions about the position, pay scale, benefits etc. etc. It also allows me to get an idea of the recruits oral communication skills through the voicemail instead of just reading their “skills” on a piece of paper.

The next time I need to recruit it’s simply a matter of rewriting and recording a new voice mail message with 2-3 more questions and writing a new help-wanted ad with the description of the position. Obviously as the business grows I’ll be recruiting new people for the same positions over and over again so those positions will become very automated with my time investment being listening to messages (at my convenience) and interviewing those who seem to be a great fit for our team. Eventually I’ll be replaced by another Team Leader and I can quickly teach them how to work our recruitment process.

It’s worth mentioning that our “14 Points of Culture” (yeah, I added 2 more points since my blog on the topic) are introduced very early in the recruitment process. As soon as I determine that the recruit seems to be reliable, well-spoken, and has the potential to be an asset to our team (i.e. he wasn’t fired from his last 3 jobs for not showing up to work) I pull out my business card with my title of “Team Leader.” Then I briefly explain that my position is that of General Manager, CEO, President or whatever other fancy term you can come up with – however my greatest responsibility is to help everyone on our team do what they do to the absolute best of their abilities. My responsibility is to LEAD the team, not manage it. Then I reach into my desk and pull out a copy of our Points of Culture, Vision, Mission, and Company Philosophy. These are not top-secret words that should be guarded. They’re very public documents that I have no problem sharing with anyone who might benefit from them. Besides, chances are very slim that any other interview they go through will include reviewing the Vision, Mission, and Culture so it immediately sets us apart. After all, you have to sell them on the idea that your team is the best one for them because if they’re as good as you hope, they will also have other job offers to entertain.

I believe Brad Sugar’s recruitment process doesn’t include spending time on Vision, Mission, Culture until after you’ve hired them, however I think that’s too late. The recruit needs to know before she wastes a whole lot of her or my time that this is what’s expected of her and if she think it’s just a bunch of “hog-wash” then I can quickly wish her well at someone else’s business. I guess only time will tell if my timing of the Vision, Mission, Culture review is optimal.

To your success, Bryan