Hey, now use Savages. This is the Saturday side hustle, and I'm Dave Lorenzo.
I'm solo today. Nicki G will be back with me tomorrow for the Sunday special.
This session that you're about to hear is a
seminar that I conducted for the Vistage Coaching Organization.
Vistage is the largest coaching organization in the world.
This is the first few minutes of that session.
My goal with this segment of the session is to
get the CEOs who are in the room.
Everybody in the room is a business owner and a C E O.
My goal is to get these folks to think about who they want to sell
their business to,
and who they need to influence to increase the value of their
business, to get the maximum price for their business.
When they're ready to sell,
how can they get from where they are now to creating a
business that is incredibly valuable that will give them the most
options when they're ready to exit? So I've asked these people to
think about a person who they can connect with that can improve the
value of their business.
And I put up on the screen a slide that has
the different drivers of value. So if you listen to the show regularly,
you'll know there are 10 key value drivers.
Nicki g and I have discussed them with you over the last few weeks.
I put that slide up and I say to the folks in this room,
look at these 10 value drivers.
These are the 10 areas that you must improve to be able to
sell your business for the maximum profit.
Who do you need to influence to improve these drivers to have the
most options when you're ready to exit?
And I've asked them to think of a person.
Some of them have told me that that person is already in their business.
It may be they're number two.
It may be the second in command of the business that they're looking to
influence to get them to do a management buyout of the business.
Some of them have told me, listen, I need to improve these drivers,
but I want to sell my business to a competitor,
and I need to know how I can influence that competitor to buy my
business. One person said they wanted to sell their business to a supplier.
Another person told me they needed to influence a specific
person in their industry to help them create a
strategic alliance so that they could increase the value of their
business for exit strategy that would provide them with maximum
value. So all of these folks have a person in mind,
and now I'm taking them through ways that they can influence
the folks who could buy their business. I'm taking them through the core values.
We're talking about the experience they need to create with that person so they
can get the most value when they're ready to exit,
have the most options when they're ready to exit. Now,
the recording quality here is not fantastic.
I'm taking this from a recording that the gentleman who leads the group
is giving me,
and this was recorded on his computer from people
who are on Zoom. So he had, I think we had about 15 people in the room,
and then he had another 30 people on Zoom watching.
This is the recording from Zoom,
and we weren't using any sophisticated equipment at all.
We're basically shouting into a computer.
So you'll be able to understand everything I say and all the
questions that I'm asked,
but the recording quality isn't as high a level as we would like. It isn't
the same quality that this segment of the show is recorded at,
but you'll be able to get a real feeling for what these people are thinking
about and how the CEOs who we all work
with think, if you're a ceo,
put yourself in this boardroom with me and with these folks,
and put yourself in a place where you have to influence someone in order to
get maximum value for your business.
So come with me now inside the boardroom with the c e o,
and we'll be back after the show to discuss what
we uncovered in this session. Here's the session. Enjoy it.
I want you to think for a minute about how influence and
persuasion can help you with all the different aspects of your business.
Those of you who have seen Vistage speakers a lot know that this is the
Vistage Wheel of business or Wheel of Life, or whatever they call it, right?
They've never seen this. I never show this. You never show this, okay?
I'm the only speaker in Vistage that does what they tell you to do. Anyhow,
all of these different areas,
Vistage makes us put this slide up for everybody except for Harvey.
So what we're going to talk about today will help you with hiring top talent,
negotiating agreements, planning leadership succession,
getting things done with your team, attracting new customers,
deepening share of wallet, and increasing lifetime value. Now,
here's what I'm going to put up. I do a lot of work.
My team and I do a lot of work in helping companies prepare for the eventual
sale. They exit, right?
We do this from 15 years in advance all the way back.
This is our checklist of drivers of enterprise value, alright?
You can also consider this if you're going to sell your business a due diligence
checklist.
What I want you to do while we're looking at this checklist is I want you to
pick one of the items on here and have someone in mind that you
can persuade or influence along this chart,
and we're going to use that avatar through the rest of our presentation today.
So I'm asking you to pick one person in mind along the lines of one of these key
drivers so that you can have somebody in mind to use the system that I'm going
to share with you.
So I'm going to teach you a system to persuade and influence people,
but pick one person that will help you with one of these things. So for example,
increasing and improving your revenue streams, right?
If you only have one type of revenue in your business,
maybe you want to acquire another business that can help you provide an
additional revenue stream,
that's the person that you'll want to persuade or influence leadership
development or management retention.
Maybe there's somebody that you want to persuade to stay with you for the long
term. Maybe it's your successor operations,
standard operating procedures.
Maybe you need to persuade a member of your team to create SOPs,
human resources, standard operating procedures.
Maybe you need to implement a new policy and you need to persuade everyone to
adopt that policy, reducing legal exposure,
increasing brand reputation, sales and marketing systems and support.
Maybe you need to improve your sales in a specific area,
want to attract a new type of client into your business,
and you need to influence a group of people to do that.
Improving market industry or supplier conditions,
financial conditions and reporting and cybersecurity risk and information
technologies. Maybe you have a cyber policy you need to implement,
and you need every user to adapt that cyber policy and you need
to influence them to do that.
This is a checklist if you want to improve the value,
the overall value of your business,
all of these things are areas that are key drivers of value.
All of these things have people involved in them.
So pick one person in one of these areas to influence,
to connect with,
to help you improve the overall value of your company. Okay?
Does that make sense? I don't want to see that. You want to see it for longer?
Keep it up there. There you go. Okay. While you're looking at this,
I want to highlight revenue streams and diversity and quality. Harvey,
do you mind if I use that flip chart? Can I use that book chart real quick? No.
Okay. Take it over you. No, no. We'll bring it over.
Here's no camera on me or anything, right? So
there's four types of revenue in any business, right? First type,
I call it ad hoc, right?
Ad hoc revenue is you go out, you find a client, you do the work for the client,
client goes away. You go out and find another client.
We're all familiar with this, right?
This is what we all chase all the time for and over again.
The second type of revenue in your business
is revenue, right? Revenue. Revenue.
That's repeat revenue. I love doing that. Nobody laughs with me.
Repeat revenue is,
yeah, took me a minute.
So repeat revenue is same client, different work,
different product line. It requires an investment of trust,
but not the same investment of trust as acquiring the initial client in the
first place. Think about that ad hoc revenue.
Got to invest a lot of trust or somebody who has to invest a lot of trust before
they do business with you. Repeat revenue. They trust you.
They've seen you do this one thing.
Now they got to trust you to do the second right.
The third type of revenue
Is recurring revenue. Same client, same work,
same thing over and over and over again. Manufacture widgets. It's widget,
widget, widget, widget, widget. Not a lot of trust required. Thank you, Harvey.
Not a lot of trust required because they've seen you do it.
They know you can do it. You're competent at it.
They believe in you and they believe that you can. And the final is,
oops, passive,
Right? You go passive. You go to a place and speak.
You tell people what you do, you demonstrate your knowledge.
People call you. They drop a bag of cash on your desk for your widgets.
I trust you. You seem like the best widget manufacturer there is.
I would consider that passive revenue.
You have a strategic alliance partnership.
Now I'm going to drive you nuts and I'm going to go back over there.
Is that okay? Explain. Say the difference between repeat and recurring. Again,
repeat, same client, different type of work, different revenue.
So repeat is widgets and crankshafts. I've seen you do widgets.
Now I need crankshafts. You go, I do crankshafts. And they're like, oh,
we've been with our crankshaft guy for 30 years now we've got to trust you to do
crankshafts. We'll give you a one. You do a great job.
Now you're doing widgets and crankshafts recurring is widget, widget, widget,
widget, widget. I've seen you do widgets. I trust you. You can do widgets.
Could be for different, I would say recurring revenue. For our purposes,
recurring revenue is same. I'm talking about investment of trust, same client,
same product or service,
because the investment of trust is not necessary because they already trust you.
They don't have to make an additional investment of trust and then passive
revenue. Think about a strategic alliance partnership.
You and I are strategic alliance partners,
and I say to you, okay, I made the widgets.
Now you make the widget add-ons. I'm going to send them over to you.
Customer may not even know I'm sending them over to you.
That's passive revenue for you because every widget I make,
I need you to do the widget add-on.
What we focus on most in our world is this ad hoc,
and we don't spend a lot of time focused. We don't spend a lot of
time focusing on these.
But what I'm going to talk about today and what adds the most value
to your business from a revenue stream standpoint are these three
things, repeat, recurring and passive.
And the reason that that's so important is because in some
ways, in a lot of ways, these three are predictable,
especially recurring revenue or passive revenue.
If you have a strategic alliance with somebody or you're the bolt-on
manufacturer for the thing that bolts on the widgets,
that revenue is predictable. And when somebody's going to buy your business,
when there's an exit,
everybody wants to know how much they're going to make in the future.
I call these three types of revenue, repeat, recurring and passive.
I call that relationship revenue because those three types of revenue
can be acquired into your business through
relationships.
Repeat is the relationship with the customer, with a client.
Recurring is a relationship with the customer and the client,
and also making sure that everybody in the industry knows.
So you have to have a relationship with people who are influential in the
industry. And then passive is strategic alliance relationships.
So you can engineer these in your business.
So as you look at these drivers of enterprise value,
and when you heard me talk about these three as relationship revenue,
think about the relationships in your business and who
maybe the correct word is whom you need to influence and have that avatar in
your mind as we walk through our time together today. Okay?
So while you're thinking of your avatar,
these are some ground rules for the presentation. First and foremost,
I'm not telling you what to do and it's important that I say that, right?
I'm just giving you what I've experienced that works.
And my hope is that you take away one thing from our time together.
So if you hear something that doesn't fit with your business,
it doesn't fit with your personality or that you disagree with,
I want you to treat it like a buffet. Take what you like and leave the rest.
Okay?
So just get one thing that you can use that can add more value to your business
or make your life a little bit easier.
This relationship operating system is going to give you options.
Basically.
One of the things I like to talk about with entrepreneurs,
and Pete and I got into it, and it was Pete's doing,
it wasn't mine. Within the first five minutes of our conversation is the first
question I usually ask an entrepreneur is How
be the end of your business?
And my whole goal as a consultant these days in working with entrepreneurs
and business owners, particularly mid-market business owners,
is to make sure they have options when they're ready to exit. Right? Harvey,
there's nothing worse than having to exit without options because if you have to
exit without options, it drives the valuation way down.
So this relationship operating system hopefully will give you options for when
you have to exit or when you have to hire somebody from your management team all
the way through that list of value drivers.
This system is going to give you options all along the way. And then finally,
the reason why you should consider what we're talking about today and
implementing at least one thing is because my whole philosophy is that we
put relationships first and putting relationships first. It just feels good.
It feels like it's the right thing to do because it is the right thing to do.
It's how we were all brought up.
So what do people miss about relationships and particularly
influence? We only influence people we care about.
Think about this. We can only influence people we care about.
Now,
immediately your mind's probably went to a situation where you thought to
yourself, well,
somebody who stole from me or somebody who manipulated me in
some way, exercised some influence over me,
and I know that person didn't care about me because they took something from me,
or they did something that was unethical. I want to point to number three here.
When you think about that, in my world,
influence is I'm helping you see something that's good for you and
good for me. Manipulation is when it's only good for me.
So I don't want you to think of influence as a dirty word.
I want you to think of it as getting people to eat their peas and carrots,
getting people to do what's good for them.
A strong relationship makes everything easier.
From the context of an exit strategy,
a strong relationship with a person who's going to potentially buy your business
someday, maybe it's a competitor, makes it easier when you're ready to exit.
Strong relationship with the number two in your business makes management
succession easier.
A strong relationship with a prospective client makes doing business with them
easier down the road. So we're going to talk about how to make your life easier.
And then finally, and this is the key point.
This is receiver based. We don't sell stuff to people.
We don't sell our ideas to people. We don't sell widgets to people.
People buy stuff from us. People buy into our ideas.
They buy into you as a leader.
Your people in your business buy into you as a leader.
So influence is about helping them see that you're a person of
goodwill, helping them see that you want to help them,
helping them see that you want what's best for their future,
helping them see that you have a vision that they don't have,
and you're going to help them get there.
So here's your relationship operating system.
This is what I'm going to show you today, okay?
Harvey and I had a conversation last night briefly about e o s,
the entrepreneurs operating system,
that dashboard with all the key performance indicators and drivers and stuff
like that. This is your relationship operating system.
This is the counterpart to that. So
the best way for us to get what we want is by giving people or
helping them get what they want. Here's a little pie chart I put up.
Very unscientific for those of you for engineering types,
if you want to help people,
you have to understand that when we're going to influence them,
there's a portion of what we try to accomplish by
helping them get what they want by focusing on how they
get it, by how we help them get it.
And then there's the overall relationship experience.
As a consultant,
and I was a consultant with the Gallup organization for a number of years,
we're really focused on our methodology all the time.
We fall in love with our methodology. In fact,
we claim that our methodology is a key differentiating factor.
We'd love to talk to our clients about our methodology.
We love to talk to clients about the results they're going to get and the
results that they're going to get are important because we'd be out of business
if we didn't deliver the results.
But if you look at what really matters to clients and
customers, what they're going to get, what they think they want,
that's important. But as a differentiating factor for all of us,
everybody, if they're in business and they stay in business,
can deliver on the value proposition.
Everybody can deliver what people want.
If your competitors couldn't get the results,
they wouldn't be in business anymore. Methodology, as much as we love it,
we've got the best mouse trap,
very small share of mind with the people you're trying to influence if they're
your customers.
But the relationship experience is pretty much everything.
So the way people feel,
the way you make them feel when you're trying to influence them,
it means everything. So you've got your avatar in mind,
the person you want to influence and persuade.
Maybe it's somebody you want to buy your business.
Maybe it's a key management team member, right?
Start thinking about it using this context.
So that key management team member person, who's going to be your successor,
what do they want? Well, they want to be the successor, okay?
What's going to influence them to be the successor?
Just making them the successor. Is that going to be enough? Well,
over the next five years, if you want to exit in five years,
no. The experience you provide them and helping them get ready
is what's going to influence them as to whether they want to take over or not.
The person who's going to buy your company.
If you're targeting a strategic acquisition so that you have the most options,
the person who's going to buy your company,
the competitor that's going to buy your company,
or the supplier that's going to buy your company so that they can vertically
integrate the experience they have in working with you,
you should consider yourself being evaluated the whole time.
And what is the experience you're providing?
The person want to influence?
You want to introduce a new product.
The experience that they've had in working with you over time is going to
influence how receptive they are to adopting the new product.
I get that. So in sales, it does. When it comes to your management team,
it absolutely does. Sure.
But for acquiring brand new clients who never bought food,
you say it applies the same proportions here,
I would say you can use it as a competitive advantage to if you decided to,
you could use it as a competitive advantage. And here's how,
and Vistage is a perfect example of this,
but I can give you other examples from businesses.
So Harvey goes out and he interviews prospective members,
and he thinks a prospective member is going to be a really good fit for the
group.
What's the best way for him to put that perspective member over the top,
to invite that person to participate in a meeting,
to talk to all of you and see the value that you've gotten from Vistage.
So for the brand new client,
to immerse them in the experience is an accelerant to the sale
because it deepens the relationship. Now, if your question is,
is it a hundred percent necessary? I would say no.
It's not a hundred percent necessary.
But if you want to accelerate the process with a new client,
I think you can use the experience by immersing them in it.
There's an old school clothes that people used to use
all the time. Some people still use it called the puppy dog.
Are you guys familiar with this? Have you ever heard of this?
So you probably know about this.
You go to the pet store or the Humane Society and you want to adopt a dog,
but you're not sure.
You don't know if you can handle the dog running around your house.
What do they do? They give you the dog and they go take it home for the weekend.
So you take the dog home for the weekend, right? Dog craps all over your house,
but you fall in love with it. And what happens? You don't give the dog back.
You keep the dog. Even the fostering foster program, right?
It's called the puppy dog clothes.
And smart car dealerships will do this too.
You take a test drive and you say, I love this car.
I really want this car,
but I'm just not sure that my spouse is going to be into it.
So you want to use the experience to accelerate the sale. What do you do?
Here's the keys. Bring it back on Monday.
So then you give the keys to your wife,
and she realizes you pull up in this huge suburban, by the way,
actually happened to me.
You pull up in this huge suburban and your wife comes out, she's like,
you bought this thing. I didn't even test drive it. Look how huge this is,
is a tank. I can't believe it. No, no, no, no,
no. We get to drive it for the weekend, but it's going back on Monday, right?
Okay, you take it out, go take the kids to the beach, go shopping, whatever.
Next thing takes the kids to the beach. Wow, all this stuff fits in the car,
right? Goes food shopping. Wow, I don't have to bend over in the backseat.
The deck is right here. I can put the stuff in, right?
Takes the dogs to the park. The dogs come back from the park all wet.
They shake off inside the car, doesn't get the seats wet, right? Opens the back,
it's inside. She comes in, does it come in blue?
That's it. Sold. Didn't want to drive the tank. Now, by the way,
she maneuvers that thing like she's a truck driver. She's fantastic.
She drives it better than I do,
but that's how the experience can accelerate the sale. So
anytime you can engineer an experience,
a really good experience into the process, you can use it for sales purposes,
for sure. Okay, so remember the word of caution, right?
The differentiating factor is how all these things will work together.
So here's how you influence the experience. You first have to demonstrate,
and that's a key word,
demonstrate to the person you're looking to influence,
that you are a person of integrity. After that,
you have to show them that you are competent.
So if you're looking to persuade or convince a client to do business with you,
you have to show that you're competent at performing the task you're
supposed to perform.
If you're looking to persuade a management team member that they could be your
successor, you have to demonstrate that you're competent to train them.
The next level in the hierarchy is empathy.
And empathy is critical because you have to understand what their
reasons are for wanting to do what you want them to do,
for what their reasons would be if they understood what you want them to do.
So empathy is the gateway to sharing your vision with them.
So you're looking to influence somebody,
and you have a vision for their future that they just don't see.
And you guys are CEOs,
so you probably have a pretty good vision of the future for a lot of things.
If you want to accelerate the relationship,
you can make them feel like they're part of a community. Community,
could be their work group, be your leadership team.
It could be an industry association,
but their feeling of belonging because achieved the level of status,
and they're now part of a community. It's critical.
And what this all leads to in the end is professional intimacy.
And what that means simply is the person you're looking to persuade.
They don't make a move without checking with you,
or they don't make a move without using your company's product or service,
or they feel so close and so comfortable with you
that they consult with you before they do things that are critical
or important to them. And again, Vistage is a great analogy for this.
Think about how you rely on Harvey, right?
If you've got decisions in your business that you're going to make Harvey's done
all of these things, these things, probably without even knowing it,
he's built on this foundation to a point where hopefully you guys are
willing to consult with him before you make critical moves in your business.
Does that make sense? Okay. We're going to look at each of these levels now,
and I'm going to show you ways that you can demonstrate these
core values. Again,
you wouldn't be in this room if you weren't people of integrity and competence.
So I don't want you to think of this as just having these qualities
you have to demonstrate to the person you're looking to
influence. You have to demonstrate these qualities to them,
or you're not going to be able to influence them. Good or good? Good. All right,
here we go. That was my little Pacman graph.
Alright,
so here's how this breaks down,
and here's how we're going to chunk these up.
The first two levels, competence and integrity.
They demonstrate authority, believability, and credibility.
Okay? So if you want to influence someone,
you have to show that you're an authority in the area.
You have to demonstrate that they should believe you and that you're someone who
could be trusted in this specific area.
Once you've overcome that hurdle,
once you've built on that foundation,
then they invest their confidence in you.
That's when they have personal confidence that, Hey,
Peter has my best interests at heart. He understands me.
He sees what my future should look like.
So once you've built on this foundation,
that's when they'll invest their competence in you.
And at this point,
you can feel pretty good that you can influence them and you can persuade them
if they buy into the vision you have for their future. However,
to take the relationship to the next level.
If you can make 'em feel like they're part of something bigger than themselves
in a community,
or you can deepen that relationship to the point where they have so much
trust,
so much confidence in you that they call you before they make any move,
that's when you really have relationship clarity.
And there are clients that we have who exit their businesses
and the person they sell their business to five years later still calling them
and saying, Hey, I'm going to do this. Can I bounce an idea off of you? Hey,
can we go to lunch? I want to bounce an idea off of you.
Think about that for a minute.
What a great potential relationship that could be where they feel so good,
so comfortable that they'll continue to call you. By the way,
you can get a consulting fee for that. All right.
Thanks for joining me for Inside The Boardroom with the c e O.
As you can see, or maybe as you can hear,
these folks were incredibly engaged and they are
thinking about these things for the very first time.
You have a great opportunity because you are
meeting me here,
and because you spend time with Nicola and me each day,
you're already thinking about your exit,
and now you've heard what other people who are in your place,
the CEOs, the entrepreneurs are thinking.
So I want you to take a look at the slide
that accompanied this show.
You'll see in the show notes that the slide with the hierarchy,
the core value hierarchy, is the cover for this episode.
I want you to take that slide, the pyramid,
and look at each of the core values and think about who you need to
influence using those core values in order to get the maximum
value for your business. If you're not a c e o and you are not looking to
sell a business, you can use this hierarchy,
this pyramid to influence anyone in your business or in your life.
But think about how you're going to demonstrate these core values to the people
you're looking to persuade, you're looking to influence,
and you can use it to help connect with people who can eventually buy your
business and offer you the most options when you're ready for an exit.
I'm Dave Lorenzo. This is the Saturday side Hustle.
We'll see you back here again tomorrow for the Sunday Special.
Take care.