WEBVTT NOTE This file was generated by Descript 00:00:00.870 --> 00:00:06.600 Welcome to Resilience Talk hosted by Paul Spencer of Second Nature Solutions. 00:00:07.020 --> 00:00:07.860 Let's dive in. 00:00:09.230 --> 00:00:11.870 Paul Spencer: So I hope you're getting some value from the conversation that 00:00:11.870 --> 00:00:13.940 we've had around the ownership series. 00:00:14.270 --> 00:00:19.820 Um, we've talked about a lot of different things and for, for me, I'm 00:00:19.820 --> 00:00:26.540 hoping and expecting maybe it would be a better word, I'm expecting all of 00:00:26.540 --> 00:00:32.060 you to be taking some lessons from the conversation that we're having and, uh, 00:00:32.090 --> 00:00:34.190 to be applying a lot of those things. 00:00:34.910 --> 00:00:40.040 Into your, uh, daily thoughts into your daily work and then 00:00:40.040 --> 00:00:41.840 into your, uh, strategic planning. 00:00:42.440 --> 00:00:46.160 Um, I know I've heard from some of you about, um, some things 00:00:46.160 --> 00:00:50.000 might be a little confusing or there there's a couple of Yeah. 00:00:50.000 --> 00:00:55.670 Buts in, um, some of the conversations that we've had so far, and that's okay. 00:00:55.700 --> 00:00:56.000 Right. 00:00:56.030 --> 00:00:59.210 Uh, not everybody is, uh, exactly the same. 00:00:59.210 --> 00:01:01.490 Not every scenario is exactly the same. 00:01:01.820 --> 00:01:04.280 Not every industry or business is the same. 00:01:04.610 --> 00:01:07.670 Uh, we have, um, different people, different cultures. 00:01:07.670 --> 00:01:11.150 We have different processes, we have different imposed inputs. 00:01:11.720 --> 00:01:14.240 Um, and that's expected, right? 00:01:14.630 --> 00:01:18.530 And so there could be some yeah, buts, but I will tell you that even 00:01:18.530 --> 00:01:19.670 though you may have some yeah, buts. 00:01:20.645 --> 00:01:24.395 The principles and the thinking around everything that we're 00:01:24.395 --> 00:01:28.625 discussing is 100% valid, right? 00:01:28.925 --> 00:01:32.045 And applicable for you and for your business. 00:01:32.135 --> 00:01:34.685 Now, you may be able to tweak it, you may be able to apply it in 00:01:34.685 --> 00:01:36.395 a slightly different way, right? 00:01:36.575 --> 00:01:37.625 That's the point. 00:01:37.895 --> 00:01:41.915 The point is for us to become aware, to have some understanding and then 00:01:41.915 --> 00:01:46.925 to be able to apply it, how it would fit into our own environments, right? 00:01:47.435 --> 00:01:48.365 So, um. 00:01:48.650 --> 00:01:51.950 Keep coming with the thoughts, keep coming with the, the emails. 00:01:52.370 --> 00:01:57.590 Um, um, I get some different, um, uh, whatever they're called. 00:01:57.710 --> 00:02:00.800 They're not dms on LinkedIn, but messages on LinkedIn. 00:02:01.160 --> 00:02:03.350 Um, and yeah, keep those coming. 00:02:03.350 --> 00:02:06.320 It's good conversation and I'm here to help you, right? 00:02:06.620 --> 00:02:11.600 So I'm here to serve you and if you have questions or um, you have a particular. 00:02:11.915 --> 00:02:15.845 Scenario that's playing out, I'm always happy to to have the conversation. 00:02:16.325 --> 00:02:20.075 So if we think about the ownership series, we've talked about financial 00:02:20.075 --> 00:02:25.835 performance, growth, potential key dependencies, recurring revenue, 00:02:26.135 --> 00:02:30.155 right to win, corporate structures, what we talked about last time. 00:02:30.155 --> 00:02:32.710 Today we're gonna talk about key management and leadership. 00:02:33.260 --> 00:02:36.845 And then the last one that we'll talk about next time is owner involvement. 00:02:37.205 --> 00:02:38.680 So today we're gonna talk about. 00:02:39.230 --> 00:02:40.850 Key management and leadership. 00:02:41.180 --> 00:02:42.710 This is one of the top three. 00:02:43.040 --> 00:02:48.320 So we have to have, from a buyer's perspective, um, these are the things 00:02:48.320 --> 00:02:52.190 I'm gonna evaluate where you are and what's the value of your business. 00:02:52.550 --> 00:02:55.850 Um, but also from an owner of an asset. 00:02:56.360 --> 00:03:01.550 Um, this is one of those key things, which is I have to have a good foundation, which 00:03:01.550 --> 00:03:03.920 is your financial performance, right? 00:03:03.920 --> 00:03:06.860 I have to be able to have some kind of market. 00:03:07.220 --> 00:03:08.600 Which is the right to win. 00:03:09.020 --> 00:03:14.030 And then I have to have some kind of structure within my organization, which 00:03:14.030 --> 00:03:16.490 is this key management leadership aspect. 00:03:16.850 --> 00:03:24.650 Um, I will tell you that, um, this one is, uh, lacking for a lot of 00:03:24.650 --> 00:03:27.680 you, um, as family businesses. 00:03:28.250 --> 00:03:36.205 Um, in that, let's see, probably in that, that 4 million to even probably up to the. 00:03:37.310 --> 00:03:41.450 30, maybe close to 40 million revenue. 00:03:41.990 --> 00:03:47.630 Um, the idea of building out your key management and leadership, 00:03:47.840 --> 00:03:53.060 your executive team as I would call it, um, is very immature. 00:03:53.930 --> 00:03:58.190 And, um, and I mean that in a, in a way that says that, uh, you haven't 00:03:58.190 --> 00:03:59.870 spent a lot of time thinking about it. 00:04:00.170 --> 00:04:03.800 You haven't spent a lot of time experimenting with it, you haven't 00:04:03.800 --> 00:04:09.620 spent a lot of time growing it and in, in, um, building up the 00:04:09.620 --> 00:04:12.860 capability within your executive team. 00:04:13.640 --> 00:04:16.520 And so you're very lean at that, at that position. 00:04:16.760 --> 00:04:22.790 And most of the time, from my understanding of how you operate 00:04:23.120 --> 00:04:25.100 and the thinking that you have. 00:04:25.655 --> 00:04:27.215 That's very intentional, right? 00:04:27.695 --> 00:04:29.975 Um, it's family business. 00:04:30.065 --> 00:04:33.425 Uh, we have a few people up here that are, that are making decisions. 00:04:33.425 --> 00:04:35.735 Maybe even the founder is still making decisions. 00:04:36.245 --> 00:04:38.195 And so that's intentional. 00:04:38.345 --> 00:04:42.725 We let the, we let the staff, the employees run the business and then 00:04:42.725 --> 00:04:44.825 all manage everything else up here. 00:04:45.305 --> 00:04:50.555 Um, that may be well and good for some portion of the business, but as. 00:04:51.200 --> 00:04:57.230 In the aspect or the lens of building an asset, um, it's taking over, over 00:04:57.230 --> 00:05:03.500 the long time, over the long period as you get on the back end of either, 00:05:03.530 --> 00:05:06.890 um, the, the succession of yourself. 00:05:06.890 --> 00:05:11.870 So let's say you're 50, and that's towards the back end of your 00:05:11.870 --> 00:05:13.280 career of owning the business. 00:05:13.280 --> 00:05:18.290 So now you've got say, 10, 20 years at the most to start to. 00:05:18.680 --> 00:05:20.120 Build an asset, right? 00:05:20.120 --> 00:05:21.650 To build your key management team. 00:05:22.040 --> 00:05:26.270 And the longer that sits, the longer you take to do that, the, 00:05:26.540 --> 00:05:29.750 the less valuable your business is. 00:05:30.290 --> 00:05:34.100 So the one of the key questions that we ask is, does the business have 00:05:34.100 --> 00:05:40.670 long-term key employees that can operate and continue to operate the 00:05:40.670 --> 00:05:42.890 business over a long period of time? 00:05:43.430 --> 00:05:43.730 Right? 00:05:44.270 --> 00:05:48.050 And so when we're thinking about that, um. 00:05:48.710 --> 00:05:55.460 And if I'm to ask you that question, you, if we have value in your business, 00:05:55.460 --> 00:06:00.260 meaning your asset has value, you'll very easily answer that question. 00:06:01.190 --> 00:06:09.200 I have, uh, three, four, maybe even five people who have, um, longevity. 00:06:09.230 --> 00:06:11.570 Now, it doesn't mean that they've been here for 30 years. 00:06:11.570 --> 00:06:12.860 They could have been here for. 00:06:13.190 --> 00:06:14.360 Five years. 00:06:14.690 --> 00:06:18.290 Um, but they know how to operate their, their section of the 00:06:18.290 --> 00:06:23.480 business, and they also know how to integrate with the other executives. 00:06:23.750 --> 00:06:26.690 My ex, my other executive leaders within the business. 00:06:27.020 --> 00:06:31.580 And if I'm not around for two months, three months, six months, 00:06:32.090 --> 00:06:33.590 they, the business just runs. 00:06:33.590 --> 00:06:33.860 Right. 00:06:33.920 --> 00:06:37.220 I'm not, I'm not dependent on, uh, they're not dependent on me. 00:06:37.640 --> 00:06:37.910 Right? 00:06:38.330 --> 00:06:41.030 So, so some of those questions we have to ask ourselves is. 00:06:41.630 --> 00:06:44.930 What is the capability of my current executive team? 00:06:45.230 --> 00:06:51.050 And I know a lot of you are going to say what executive team, and 00:06:51.050 --> 00:06:52.700 that right there is an issue. 00:06:52.790 --> 00:06:56.780 That's a big problem and you need to practice hiring. 00:06:57.170 --> 00:07:01.640 It's not easy to hire, especially at the executive level. 00:07:01.790 --> 00:07:04.520 You guys are really good at hiring at the staffing level. 00:07:04.760 --> 00:07:06.980 You've been doing that for for years, for decades. 00:07:08.315 --> 00:07:14.405 What you're not good at is hiring an executive who could be your, uh, right 00:07:14.405 --> 00:07:19.025 hand person, your COO, and you don't have to give them these titles, but 00:07:19.025 --> 00:07:23.735 essentially they become an operating manager or a director of sales, right? 00:07:23.885 --> 00:07:27.755 Um, could be more of a, a vp, a number two type position. 00:07:28.235 --> 00:07:34.445 And this is really important because you may not win on the first, 00:07:34.565 --> 00:07:36.695 second, or third round of hiring. 00:07:37.400 --> 00:07:41.660 An executive and it's gonna take you some learning on one. 00:07:41.870 --> 00:07:47.120 What, what, how do I, how do I define this position to how do 00:07:47.120 --> 00:07:52.730 I, um, qualify the people, the interview process into this position? 00:07:52.970 --> 00:07:55.790 How do I onboard this position? 00:07:56.240 --> 00:08:03.710 How do I sustain this position over a month, two months, six months? 00:08:04.160 --> 00:08:06.345 These are all things that you don't know how to do. 00:08:07.205 --> 00:08:10.745 And you can't just snap your fingers and assume that it's 00:08:10.745 --> 00:08:12.095 going to work first time, right? 00:08:12.095 --> 00:08:13.595 It's gonna cause disruptions. 00:08:13.745 --> 00:08:16.445 It's gonna cha change the way your processes work. 00:08:16.625 --> 00:08:18.245 It's gonna change the way you work. 00:08:18.665 --> 00:08:20.555 Um, all very important. 00:08:20.765 --> 00:08:25.415 But once you get over that hurdle and you hire the first executive, 00:08:26.165 --> 00:08:27.605 now you have some learnings. 00:08:27.845 --> 00:08:29.645 You can hire a second executive. 00:08:30.095 --> 00:08:33.305 And when I call them executives, it doesn't mean you have to have C-suite. 00:08:33.605 --> 00:08:34.655 It just means. 00:08:35.030 --> 00:08:39.170 That, uh, you're hiring leadership within your organization 00:08:39.170 --> 00:08:40.820 that can run the business. 00:08:41.360 --> 00:08:48.260 So there's also a balance between tenure, meaning years in the business, 20, 30 00:08:48.260 --> 00:08:53.690 years, and, um, the amount of time they have remaining in their career, right? 00:08:53.690 --> 00:08:58.400 So again, when we're talking about value within your asset, you could 00:08:58.400 --> 00:09:02.570 say, well, Paul, the capability of my executive team is very high. 00:09:02.570 --> 00:09:03.860 I've got three. 00:09:04.385 --> 00:09:06.005 Really high tenure. 00:09:06.335 --> 00:09:08.015 Really very competent. 00:09:08.225 --> 00:09:13.235 Been in the business for 30, thir, some 35 years, and they're 00:09:13.235 --> 00:09:14.915 a very strong executive team. 00:09:15.365 --> 00:09:20.855 And then I get to say as the buyer, well how many more years before they retire? 00:09:21.845 --> 00:09:24.005 And that's a risk for me as a buyer. 00:09:24.455 --> 00:09:25.625 So I need to have a balance. 00:09:25.625 --> 00:09:28.655 You need to have a balance between tenure. 00:09:29.180 --> 00:09:34.100 And then also the runway of the remaining time span of their career, right? 00:09:34.310 --> 00:09:38.570 So if I've been here for 10 years, but I've got another 15 years in 00:09:38.570 --> 00:09:42.860 my career and I plan on staying at this particular business, that's 00:09:42.860 --> 00:09:45.890 adding value into your asset. 00:09:46.370 --> 00:09:49.940 Um, if, if my whole executive team, again, using that same example, 00:09:50.150 --> 00:09:53.030 20 is more like 30, 40 years in. 00:09:53.930 --> 00:09:56.450 They're gonna retire within the next five years. 00:09:56.900 --> 00:10:00.650 I, that's, no, that's no value to me as the, as a potential buyer. 00:10:01.100 --> 00:10:08.240 So very important to have some mix of seniority versus junior, but also 00:10:08.240 --> 00:10:12.920 capability within the leadership aspect of how, how the team is working. 00:10:12.980 --> 00:10:13.220 Right. 00:10:13.220 --> 00:10:16.610 Your leadership team, and then what are the aspirations? 00:10:16.610 --> 00:10:18.200 What are your aspirations? 00:10:19.175 --> 00:10:22.265 And what are the leadership's aspirations? 00:10:22.265 --> 00:10:25.835 So then when I ask you about the executive team, and let's kinda 00:10:25.835 --> 00:10:29.135 run through this and you're like, Paul, we have high capability. 00:10:29.405 --> 00:10:30.695 We have four. 00:10:30.695 --> 00:10:30.755 Um. 00:10:32.075 --> 00:10:36.365 Great executives, um, leadership positions, management positions 00:10:36.605 --> 00:10:41.345 that are running the business, and they have a nice tenure, um, 00:10:41.375 --> 00:10:43.655 remaining career balance, right? 00:10:43.655 --> 00:10:45.485 So it's a good team, it's a good mix. 00:10:45.485 --> 00:10:48.575 We have some legs, we have some runway with that team. 00:10:49.085 --> 00:10:53.345 And when I say, well, what are their aspirations for themselves and for the 00:10:53.345 --> 00:10:56.675 business, those have to also align, right? 00:10:57.155 --> 00:10:59.435 Because as a buyer, if they say. 00:11:00.305 --> 00:11:04.565 Um, that I really love working with Paul, who's the owner. 00:11:05.105 --> 00:11:08.915 And, uh, as soon as Paul leaves, I'll probably look for something 00:11:08.915 --> 00:11:12.905 else, or I have aspirations to move on and do something else, and 00:11:12.905 --> 00:11:16.805 do something different, or I have aspirations to build this company 00:11:16.805 --> 00:11:18.845 into something even bigger and better. 00:11:19.265 --> 00:11:23.825 Those are all valid aspirations for them, but they add or 00:11:23.855 --> 00:11:25.565 discount value to the company. 00:11:25.565 --> 00:11:29.195 If, if I'm a buyer and you have a great team. 00:11:29.585 --> 00:11:34.445 But their aspirations are beyond this organization, meaning 00:11:34.445 --> 00:11:35.975 they're going to eventually leave. 00:11:36.395 --> 00:11:40.745 Um, then again, I'm losing my leadership capability as a buyer. 00:11:41.285 --> 00:11:46.205 So then let's talk about, um, lean versus corporate. 00:11:46.205 --> 00:11:52.415 So this is really important because family businesses own, um, they don't own, they, 00:11:52.715 --> 00:11:54.785 they have a mindset of running lean. 00:11:55.730 --> 00:12:01.430 They're not going to be, they're not gonna have lots of top heavy, um, high expense 00:12:01.460 --> 00:12:04.970 overhead, um, indirect labor costs. 00:12:05.000 --> 00:12:05.600 They just don't. 00:12:05.870 --> 00:12:08.750 Um, and that's why they're very successful 'cause they're very good, 00:12:09.230 --> 00:12:11.300 uh, financially in that regard. 00:12:11.720 --> 00:12:17.990 Um, but regardless of the size and whether you, you run lean or 00:12:17.990 --> 00:12:22.280 you do have more of a traditional kind of corporate structure, um. 00:12:22.865 --> 00:12:27.095 You have to understand where's the cohesion of leadership? 00:12:27.095 --> 00:12:30.365 And that's my term cohesion of leadership at all the levels. 00:12:30.695 --> 00:12:37.025 So if I was to evaluate your organization and, um, and you look 00:12:37.025 --> 00:12:41.645 at the staff, these are the, the, the bare metal staff, the, the people 00:12:41.645 --> 00:12:44.285 who are boots on the ground, um. 00:12:44.900 --> 00:12:50.090 Hands doing the work, whatever it is, whether it's a service or it's, uh, 00:12:50.120 --> 00:12:55.100 more of a product, or you're building in a, say a manufacturing company. 00:12:55.460 --> 00:12:59.840 Um, those are the people, that's staff, those are the people doing the work. 00:12:59.930 --> 00:13:03.560 And then typically you have a management layer that sits on top of them. 00:13:03.590 --> 00:13:07.100 Those could be some, a leadership aspect, and then you, as you 00:13:07.100 --> 00:13:09.980 go up, um, the organization. 00:13:10.505 --> 00:13:12.755 You have different levels of leadership. 00:13:12.905 --> 00:13:15.875 So you'll, you'll branch over into some operations things. 00:13:16.085 --> 00:13:20.105 You'll branch over into accounting, financial aspects, you'll 00:13:20.105 --> 00:13:22.145 branch over into sales, right? 00:13:22.145 --> 00:13:24.905 And then those start to have different leadership capabilities. 00:13:25.145 --> 00:13:30.485 So as I'm looking and listening and maybe even interviewing the, the, 00:13:30.590 --> 00:13:32.675 the folks in your business, I'm. 00:13:33.440 --> 00:13:38.120 Trying to evaluate the cohesion of leadership from bare metal 00:13:38.120 --> 00:13:42.530 staff, the actual workers, all the way up to the owner. 00:13:43.430 --> 00:13:47.420 And you may have good cohesion of leadership at the top, but you 00:13:47.420 --> 00:13:54.470 may lack cohesion from say, a, um, kind of a, a director of operations 00:13:54.770 --> 00:13:57.320 down to the, to the staff itself. 00:13:57.380 --> 00:14:01.610 And so that's a discount because I need to have cohesion all the way up. 00:14:01.925 --> 00:14:06.215 And so when I'm thinking about key leadership and key management, I'm 00:14:06.215 --> 00:14:10.775 thinking from bottom all the way up to the top, and how is that all connected? 00:14:11.225 --> 00:14:15.095 Now, it doesn't mean that I have to have lots of managers at each level, 00:14:15.095 --> 00:14:19.865 and I don't need to have this, this very heavy and stuffy corporate structure, 00:14:20.165 --> 00:14:22.985 but I should be able to answer, you should be able to answer the question 00:14:22.985 --> 00:14:27.125 as a buyer about how leadership is tied. 00:14:27.725 --> 00:14:31.415 From the bottom all the way up, and what does that flow actually look like? 00:14:31.505 --> 00:14:33.395 And there's processes involved in there. 00:14:33.455 --> 00:14:39.305 And then again, the question is asked if the person at the top is not available, 00:14:39.575 --> 00:14:41.255 how does the business function? 00:14:41.375 --> 00:14:45.935 And the business should be able to function for a period of time because 00:14:45.935 --> 00:14:47.735 of the cohesion of its leadership. 00:14:48.335 --> 00:14:50.045 So hopefully that makes sense. 00:14:50.435 --> 00:14:52.625 Um, this is the. 00:14:53.315 --> 00:14:58.775 Um, like I said, this is one of the top three aspects of building, 00:14:58.985 --> 00:15:01.475 um, value into your business. 00:15:01.565 --> 00:15:04.145 So you wanna be thinking about that financial performance. 00:15:04.145 --> 00:15:06.785 How do I prove historically where we are? 00:15:07.175 --> 00:15:08.675 Um, what's that right to win? 00:15:08.675 --> 00:15:11.885 What's that differentiator that I have within my industry? 00:15:11.945 --> 00:15:14.465 And then what's my key management and leadership? 00:15:14.645 --> 00:15:19.115 The cohesion of leadership from the bottom staff all the way up to the founder.