Lululemon founder Chip Wilson shares his hard-earned wisdom about all things business.
Host Roland Frasier sat down with Chip at Traffic & Conversion Summit 2021 to pick his brain about anything and everything that has made him successful in life—above and beyond lululemon. From his philosophy on goal-setting to reading 100 books a year to inventing barbecue shorts and dog walker pants, Chip always has plenty of opinions, both popular and unpopular.
Listen in to their brilliant rapid-fire conversation.
Why does Chip have a thing for the number 43?
Chip says everyone gets glasses at 43. When people get glasses, they think, “Oh my god, I’m getting old.” Couples look at each other. Their kids are teenagers and don’t need their parents anymore. “Who are we together?” they ask. “Am I married to the right person? Do I live in the right city?” Chip thinks everyone should change their name at age 43. Unless they have a really cool name like Chip.
What is Chip’s philosophy on personal development and goals?
Chip says people tell you “a smart goal is achievable.” But he wonders if maybe we should fail at about 50% of our goals, as part of a training program to learn how to fail in life. When he first started setting goals, it was all about him. Life now is nearly perfect for him in every way. So, in order to stimulate himself, it has to be about other people winning. He moved from everything being about him to giving with no expectation of return. The Law of Attraction kicked in, and he started attracting people who were in it for something bigger than themselves.
What are Chip’s favorite business books?
When Chip was 19, he was working a construction job and had an opportunity to read the top 100 books. When he was 42, he listened to the top 100 business/health books as audio books and came to the conclusion that there are a handful of books that say it all. His top three are: Good to Great (Jim Collins); 7 Habits of Highly Effective People (Stephen Covey); and Psychology of Achievement (Brian Tracy).
What does Chip mean when he talks about linguistic adaptation?
Words are always changing meaning, and we have to adapt. As far as culture goes, the term “values” is out, Chip says. “Vision” is out, and “purpose” is in. Chip took 30 terms out of those books he read, and that’s what he runs his companies on. “Conditions and satisfaction.” When he’s discussing a project with somebody, there’s no end to the conversation unless they have conditions and satisfaction and a done-by date. “Integrity.” Integrity means I do what I say I will do when I say I will do it, and if I can’t get it done, I’ll go clean up my mess and reset new conditions and satisfaction. When everybody knows the terms and what they mean, then we’re all on the same page.
What did Chip do as a lead magnet that was a huge success?
A lead magnet used to be called a loss leader. Roland says, if you call it a lead magnet, you can charge a lot of money to sell information about it. Chip had a lead magnet with yoga mats to get people in his lululemon stores. Yoga mats were easy to make and while other people needed to make a profit, he didn’t. He owned his manufacturer. He just needed to get people in stores or online to get people to buy the clothing.
What was it like to sell lululemon?
When Chip was getting ready to go public with lululemon, the board of directors said he had to divest from the manufacturing, but the manufacturing was a critical part of the vertical retail model. Boards of Directors operate out of fear of the U.S. litigation system, Chip says. They become mediocre and fail to become great. At the time, Chip had three very young boys and two older boys. He had missed a lot of his older kids’ lives and didn’t want to do that again. So he traded in this amazing company to be a family man.
What avatars did Chip create that became so successful?
He created Ocean, a 32-year-old single professional woman, who owns a condo, is super stylish, travels, is athletic and super healthy. Ocean’s male counterpart is a 37-year-old man named Duke. You reach these people by perfecting the concept of vertical retail.
The ultimate vertical business is where you make something in a factory in Vietnam, someone in Norway orders a piece, and it gets shipped right from the factory to the person. If you own your factory, your shipping, your ecommerce, your marketing, you can take all those margins instead of contracting it out.
What’s the advantage of bootstrapping compared to having a lot of money?
Chip started a company six years ago called Kit and Ace, cashmere you can put in the washer and dryer. He says they had too much money and threw too much at it. He bootstrapped lululemon for a long time. When you’re bootstrapping, that’s where the very best creative ideas come from. When you have a lot of money, there’s no necessity to drive the invention.
What are some of those creative ideas that came from bootstrapping?
Back in the day, he couldn’t compete with Nike and Adidas with getting celebrity athletes, but he figured out that there’s a level of athlete right under that not getting anything. They’re the heroes in their community and have the most authenticity. Because he didn’t have the money Nike did, he spent one-millionth of the money and offered free clothes to yoga instructors. They were in front of 40-50 people every day and more authentic than a rich athlete. Other past creative ideas include BBQ shorts and dogwalker pants.
If you want to find out more about Chip, check out his website. He’s technically on social media, but someone else runs those accounts for him. “I don’t need an extra dollar,” he says. “I don’t need another friend. I’d rather be home spending time with my wife and kids.”
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Mais episódios de "Business Lunch"
Creative Ways to Acquire Businesses and How to Invest with No Money Down with Joey Gilkey
21:08When it comes to acquiring businesses, the best (and most fun) way to do it is to think outside the box. On today’s episode, host Roland Frasier sits down with Joey Gilkey, Founder and CEO of Sales Driven Agency, a company that builds sales operations specifically for digital marketing agencies. Historically, marketing agencies are creative strategists, Joey says, not sales people. They’ve never built a sales operation or hired salespeople successfully. The agency space is unique in that they don’t have the same kind of margins as other companies and need to operate differently. They need the kind of help Joey has to offer. There’s more to Joey than what he’s doing now. He says he picked this niche because he has a grander plan than just helping agencies with sales. His big plan involves acquiring businesses in some pretty creative ways. Listen in and be inspired. The Bigger Plan Joey has been in the agency space for a decade. He knows agencies super well. He even has a mastermind for 7- and 8-figure agencies. He knows how to grow revenue. He can add 7 figures to an agency by building out a sales operation, but there are areas where he can’t help—operations and fulfillment, for example. That’s his next problem to solve. He personally doesn’t have that background, but he can buy a company that does. His bigger picture is to become a super company for agencies. He wants to do it all—sales operations, fulfillment, sourcing fractional accounting that serves agencies, etc. He’s acquiring for growth. Someone else has put in the hard work of building an audience and trust, and they don’t know how to use/monetize it. Joey has plenty of offers. He would love to cut a deal and work something out, where they either drive their people to his offer or he just takes it over completely. The Offer In the Works He’s done a lot of creative deal structuring. For example, he once bought a Facebook group from someone. Talk about an innovative way to acquire someone’s work and audience. How did he structure the deal? He offered them 10% of everything he makes from people in the group. He’s under contract right now with a company that does fulfillment and operations. They serve the same clients he does, but they have a bigger list. They’ve been working together so well that he thought to himself: instead of making a referral fee, why not own the company I refer people to? He threw out a simple offer to get the ball rolling ($3.9 million), and they came back with $4.2 million. He said it wasn’t worth that and got creative. He offered a 10-year seller finance, 10% down payment, 5-year balloon, 4% interest, at a $4.5 million valuation with a 6-month deferred down payment. They said it was too complex, and they went back to his original offer but kept some commissions. They made a few other compromises and had a deal. Moral of the story? Get creative and get it done. RESOURCES: salesdrivenagency.com OUR PARTNERS: 7 Steps to Scalable workbook Get a free proposal from Conversion Fanatics Get 3% cash back on your ad spend with AdCard Get Roland’s book, Zero Down, FREE
ESG, DEI, and 8 Other Business Trends for 2022 (Part 1)
20:01There are a number of trend-based marketing strategies you can implement to achieve profit breakthroughs in 2022. In today’s episode, host Roland Frasier gives us the inside scoop on a lot of cool things going on right now in the business world. He walks us through the first five today and will share the rest in an upcoming episode. Listen in if you want to stay on top of both what’s happening now and what’s coming down the pike. Trend #1: ESG This is one you hear a lot about in the investment banking world. ESG stands for Environmental, Social, and Governance. There’s a tremendous focus right now on sustainability and corporate responsibility to keep the environment healthy (E), doing social good (S), and building in protections against the companies doing bad things (G). There are a lot of funds right now set up to do ESG investing. The more focused we are on being sustainable, environmentally-conscious, and socially responsible, the more we’ll get business from these bigger companies focused on it. Consumers are demanding this too, so you’re winning on both sides. Ask yourself: what could I do in my business, or what business could I acquire to become more sustainable? Things like rethinking your supply chain, reducing your carbon footprint, and giving back environmentally. From a social perspective, what can I do to contribute? Give back to your local community or the world at large, or specific organizations like Black Lives Matter. Trend #2: DEI Yes, there are a lot of acronyms to keep track of. DEI stands for Diversity, Equity, and Inclusion. From a diversity (D) standpoint, when it comes to the people working with us—at all levels of the business—we should be diverse both racially and socio-economically. How can we get people of different genders, however they might identify, to get involved in the company so we can get different perspectives? How can we be friendly to the LGBTQ+ community? Not just people we’re selling to, but people in management, in executive positions, on the board. Studies have shown that diverse companies are more profitable, come up with more ideas, and are more innovative. The equity (E) part is how do we give people ownership and have stakeholders that are diverse? Stakeholders who will profit and be uplifted by their involvement and the things they contribute to the company. Inclusion (I) is very broad. How are we going to be aware of all these different interests out there, and how can we serve them? What opportunities do we have in the company to bring these diverse viewpoints in and how can we facilitate this? There’s a lot of money flowing to companies that are DEI-aware. This is a huge trend and theme in 2022, and will probably go for the rest of this decade. Trend #3: The Great Resignation There’s a whole flow of people, mostly young people, leaving their jobs saying, “I’m not happy with where I am. I’m not happy with the progress I’m making, with the prospects I have of getting to do something profitable and fulfilling and socially responsible.” People want to contribute to the world, feel good, and take care of themselves. The Great Resignation is creating real problems for businesses. The opportunity here to think about is: how do we serve all the people who are leaving the workforce and starting businesses for the first time? People want to be entrepreneurs and go into business for themselves. Starting a business is really hard, so you’re going to see people wanting to reenter the workforce, but in better jobs. We’ll need career counselors, headhunters, people to help those who failed in businesses and have challenges, business coaches, career training, etc. Anything that will serve the significant portion of people who are working remotely. Trend #4: Reallocating the Supply Chain For the past two years, there’s been a big challenge in getting goods. We’re seeing huge inflation rates. A lot of it has to do with a catch-up period after production was reduced or completely stopped when the pandemic hit. There are 96 cargo ships in the LA/Long Beach port right now backed up. This will be worked out, but will probably take a couple years. Big opportunity: how can I reallocate the supply chain? A lot of companies that were acquiring supplies from overseas don’t want to get blindsided again and will move some/all of their manufacturing to North America (Mexico or the U.S.). If you can look and find markets where labor and location is inexpensive, this will be profitable. Trend #5: AI A lot of humans are being replaced with AI (Artificial Intelligence) right now and this is only the beginning. There’s a huge need for companies with the ability to integrate AI with humans. We have AI agencies where AI is writing campaign ads and copy, and it’s coming out better than what the humans were writing. The AI is winning. We’re hitting the point where computer intelligence is exceeding human beings. Where’s the profit here? Get involved in AI verticalizations. Be part of the companies that are providing AI solutions, AI integrations, helping companies integrate AI, training people to service and work the AI as an AI technician, displacement training to help the people being displaced by AI. These are five of the biggest trends Roland believes will provide some very profitable opportunities in 2022 and beyond. Stay tuned for Part 2! OUR PARTNERS: 7 Steps to Scalable workbook Get a free proposal from Conversion Fanatics Get 3% cash back on your ad spend with AdCard Get Roland’s book, Zero Down, FREE Join Roland's next EPIC Challenge
Using Data to Grow Your Business with Phillip Stutts, CEO of Win Big Media
28:41What if you could use the same five-step formula that helps candidates win elections to win big at digital marketing? On today’s episode, host Roland Frasier sits down with Phillip Stutts, CEO of Win Big Media to talk about using data to grow your business. Phillip worked in political campaigns for years, using a systematic formula to elect candidates (1433 victories!). When he turned 40, his answer to the stereotypical midlife crisis was to start a business in a new-to-him industry. Five years ago, a business owner, a large landowner, came to him. He had hired a marketing agency and spent $50k on a marketing campaign and got one lead, not even a sale. After working with Phillip’s team, and spending just $5k, they got him over 700 leads, and he converted a bunch of them. Phillip realized that the same formula used in successful political campaigns could be used in companies’ marketing campaigns as well. They just needed to take 5 simple, important steps. Step 1: Know Your Customer’s Data (What They Care About) Phillip can’t count how many times a business owner has come to him and told me they spent so much money on marketing and produced no results and fired a marketer. It’s like a broken record. He always asks them: what did you know about your customer data before you built your brand? In politics, before he spends any of his candidate’s money, he has to make sure they know what the voter cares about. The voter doesn’t care about a 25-issue platform. You can do a survey, get some data in the field, and figure out the two main issues they care about, that would get them to vote for you. Phillip is obsessed with Step 1 and formed a partnership with a data and analytics company. Before you spend any money, he can tell you everything you need to know about your customer. The data is the most important thing. He won’t work with any client who isn’t willing to do a deep dive understanding of their customers. It’s just not worth it to him. His team started working with a title company that wanted to be #1. Their customer is the real estate agent, not the house buyer. Phillip’s team found that 61% of the realtors in their target market owned dogs. They started running campaign ads with dogs, and now they’re #1 in their region and #3 in the state. Realtors come into the title company to close on a house and say, “I saw your dog ads and loved them.” It’s all about making meaningful connections, because you know what they want. Step 2: Put Together a Strategic Plan Phillip says that Step 2 is where everybody screws up. Almost everyone is running a marketing campaign based on tactics. You have to put a strategic plan together that aligns the vision of the company with what the customer wants. You have to align your budget with where your customer actually is. Step 3: Build the Brand Building the brand is not Step 1 like a lot of people think. It’s a waste of time to build your brand haphazardly without first studying the data to figure out what your customer wants and putting together a strategic plan. Step 4: A/B Testing You’ve got to run test ads before you launch your campaign. You’ve got to compare at least two versions of something to see which one performs better. Successful political candidates run all kinds of test ads in all different versions. It’s the best way to get it right. Step 5: Launch Your Marketing Campaign Now that you’ve eliminated your risk in Steps 1-4, you can launch your actual marketing campaign. Phillip says that any company of any size can use data. He was criticized when he first started his agency, because people told him he needed to go niche—all SEO, all Facebook, all YouTube, whatever. He had a problem with that, because he believes in following where the data tells him to go. He has no dog in the hunt on any certain platform. They’re going to do what’s best for each client based on the data. They use data in messaging, marketing, and targeting. And they’ve already found ways to get around pesky issues like iOS updates and other privacy concerns. RESOURCES: phillipstutts.com (get a free data assessment) winbigmedia.com The Undefeated Marketing System: How to Grow Your Business and Build Your Audience Using the Secret Formula that Elects Presidents The Undefeated Marketing podcast OUR PARTNERS: Get a free proposal from Conversion Fanatics Get 3% cash back on your ad spend with AdCard Get Roland’s book, Zero Down, FREE Join Roland's next EPIC Challenge
What to Consider When Buying a Company (Part 3)
16:37The final steps to acquiring a company are very important. Do them well, and you’ll be the proud new owner of a business. This is the third and final episode of an invaluable series where Roland Frasier has been walking us through some important questions to ask when buying a business. All three episodes are important, but this one in particular will help you finish strong. Listen in, take notes, then go connect with Roland on social media (Instagram, TikTok, LinkedIn). He’d love to hear what you took away from these episodes and what you’d like to hear next on the podcast. Target Questions to Get the Data You Need In the previous episode, you were finding common touchpoints and building rapport with the owner of the business you want to acquire. You showed interest, asked questions, got them talking, so you could take notes to help you craft an offer. Once you’ve had that conversation, the next set of questions is more specific. Roland has a target data information sheet he fills out. You don’t need a financial statement to get these questions answered. Here are some of them: What is the top level sales? What is the profitability of the company? What are the assets and liabilities of the company? What kind of cash is in the company? What are the accounts receivable/payable? What is the long-term debt of the company? Does it own any real estate? What other assets does it have? Does it have inventory? How many employees do they have? What is the owner’s reason for selling? What will they do going forward? The reason you ask that last question is because you want them to get excited about life after business. Then you’ve built a common goal. How Do You Start the Research and Outreach Process? A lot of people believe businesses to acquire can be found through online and offline brokers of businesses. The truth is, those are really the worst deals. Here’s why. Think about when you list a house. You’re emotionally invested in it, so you typically think it’s worth more than it really is. When someone goes to a broker to sell their house or business, the broker will say, “What do you want for it?” They’ll either say, “I don’t know” or “I want x.” The broker has to think of how to keep the seller’s expectations reasonable and get the deal. There’s a compulsion to let someone list something for sale at a higher price than they can actually get for it. You’re fighting against a seller’s expectation. Plus they need to get enough to pay the broker. If you have someone who has received multiple offers they’ve turned down, that will be helpful for you, but you’re still going to pay the highest price the broker can get. Wouldn’t it be better if you could get off-market deals that aren’t listed? Or deals that were listed but the listing expired? They’ve gone through the “expectation curve” process and are much more reasonable in what they’ll accept. Keep in mind that 80% of businesses listed do not sell. Roland recommends finding businesses organically. You’re probably not going to find businesses by running an ad. Most of this happens through word of mouth and networking. The more you meet people and tell them what you’re doing and what you’re looking for, the more likely it is that you’ll meet someone who knows someone who can refer you to someone who has that business you’re looking for. Some places to ask about businesses for sale: Friends and family Email signatures Social media contacts Networking groups Meetup groups Angel groups Contractors, employees, consultants Join masterminds Investment bankers, accountants, attorneys Trade shows/trade associations. The more you plug yourself into the industry you want to acquire a business in, the more likely that you’ll get referrals. Referrals are the best, because you’re getting introduced to the person with someone’s arm wrapped around you saying, “This is a good person to do business with.” Letting your whole world know is the best way to start. If you’re doing cold outreach, there are several things you can do. The easiest in the U.S. is to go to secstates.com. This site lists all 50 Secretaries of State where filings of business entities are done and registered. You can also find businesses on hoovers.com or zoominfo.com. Names, phone numbers, and addresses are often available. Call the company, ask who the owner is, and say you have to send them some information. Or go to the website and look at the About Us page or Team or Contact Us. You can also Google information about business licenses. Then send them information like Roland talked about in the previous episodes. LINKS AND RESOURCES: meetup.com secstates.com hoovers.com zoominfo.com OUR PARTNERS: Get a free proposal from Conversion Fanatics Get 3% cash back on your ad spend with AdCard Get Roland’s book, Zero Down, FREE Join Roland's next EPIC Challenge
The 7 Levels of Scale: Doubling Your Take-Home Pay
25:52Over the next few podcast episodes, we’ll walk through the 7 Levels of Scale—everything you need to know to grow and scale your business. Today is about MONEY—doubling your take-home pay. Co-hosts Roland Frasier and Ryan Deiss have developed a powerful and proven framework for scaling your business. It’s been a long labor of love. They had all the pieces, but they needed to tie it together in a simplified way that was transferable and repeatable. And they made it happen. Here are the 7 Levels of Scale: Level #1: Sell and serve 10 customers. Level #2: Build a growth flywheel. Level #3: Build an upgraded scalable operating system. Level #4: Double your take-home pay. Level #5: Build your board. Level #6: Complete an acquisition for expansion. Level #7: Hit your number. They covered Levels 1 and 2 in Part 1 and Level 3 in part 2. Today is all about Level 4. Listen in for some actionable strategies to double your take-home pay (AFTER you’ve hit levels 1-3). Scared Money Doesn’t Scale People hear “double your take-home pay” and think, “If I do that, I’ll go broke and not have enough money to grow. Shouldn’t I be putting that money back into my company?” Ryan says there are two things at play here. One is nerd finance stuff (which Roland loves and Ryan is learning to like). There’s a big mindset shift that needs to happen for many people at this point. It’s time for you to be feeling more abundant, feeling some of the gains of owning a business. Ryan’s first mentor back in the day once told him, “You’re doing well, but you’re not taking enough money. You need to pay yourself well, because scared money doesn’t scale.” This step is so important. Roland and Ryan want you to have a plan to personally bring twice as much money home. If you haven’t brought home anything up to this point, you need to do more than twice, more than enough to pay for your basic expenses. “But I could lose everything,” you think. “I need to make another sale or I could go out of business.” That fear is really good in the early days. The intensity of the lion chasing you is great for launching a business, but not great for scaling a business. That fear will hold you back, keep you stuck in short-term thinking. You need to make more money so you can start thinking longer-term. One of the obstacles you face in business is feeling guilty taking money out of the company. You do have a tight situation when you’re boot-strapping, so you’ve got to think about your people you need to take care of, and the growth you need to get, and the resources, media, inventory, people you need. You’re spinning plates, and the plate that gets ignored is you. You actually deserve this. You need to take care of yourself. If you don’t build in some profitability for yourself, any ding in the company could end it. Don’t Over-Parent Your Company; Let It Soar Your company won’t scale if you don’t let it grow up. You’ve got to let it go out on its own and live and survive and perform at a level it needs to perform at for you. At level 3, we separated the founder/entrepreneur from being the brain of the business. We upgraded from you being the operating system to having an actual operating system. You’re no longer the brain; now you have to stop being the beating heart of the company as well. There’s always another expense. If you don’t pause and say, “I’ve got to pay me,” you’ll never do it. Roland taught Ryan this lesson. Back in the day, he told Ryan to just double his salary, and Ryan freaked out. “I can’t,” he said. He set his first salary at $10k/month and thought to himself, “This is all I could ever need or want.” He has since changed his mind. Four kids and all the other stuff later, that money goes pretty quick. He doubled his salary, and wouldn’t you know it, there was enough money. That felt good, so he doubled it again. The business didn’t miss it. The business grew. Because the person running the company was no longer terrified about paying his bills. He could think out into the future more strategically, less scarcity-minded. If you don’t set that money aside, then the business is a gaping void that will suck up any extra money you’ve got. Your salary has to be like rent. The business can’t go on if it can’t afford to pay you to be there. You’ve got to take care of yourself. It’s not optional. Seriously. Take the Money. People always fight this. The guilt can be strong. “I need to put the money back in the company.” Ryan says that, when people are struggling, he asks them why they started their business. “To make money,” they say. “To make a difference. I’m passionate about this. I wanted freedom and to be my own boss.” All of that is great, and it requires money. “We can’t afford it,” they argue. You need to structure the business in such a way that you can afford it. Look at your finances. Look at your expense ratios. Where is your money going? What changes can you make? Do you want to scale or not? You can’t go to level 5 until you’ve doubled your salary. Also, go back and look at levels 2 and 3. What does your growth engine look like? Is it the right growth engine? Did you follow it correctly? Should you tweak it? Is your OS operating correctly? That’s the cool thing about the 7 levels. Each level supports the rest, so you can always go back to do simple tweaks and add in some things. You really can have a lot of fun at Level 4. Roland and Ryan say that helping their clients solve the “problem” of doubling take home pay is a blast. If you’re early in this journey, you want to sprint to Level 4. It’s not just where you start to get paid more. It’s where your company starts to professionalize and become more profitable and grow. It’s where we can share the good stuff, because you’re scalable. When you make the decision to double your take-home pay, you become a better leader, and your company becomes better. RESOURCES: 7 Levels of Scale Workbook Take a brief assessment to see where you’re at and what’s next. scalable.co (sign up to work with Roland and Ryan) The Richest Man in Babylon (book by George S. Clason) Profit First (book by Michael Michalowicz) OUR PARTNERS: Get a free proposal from Conversion Fanatics Get 3% cash back on your ad spend with AdCard Get Roland’s book, Zero Down, FREE Join Roland's next EPIC Challenge
What to Consider When Buying a Company (Part 2)
11:43Acquiring and selling businesses is one way to live a rich and happy life, but how do you convince someone to sell you their company? In today’s episode, Roland Frasier walks us through some important questions to ask when buying a business. This is Part 2 in a series (be sure to check out Part 1!) where he’ll be sharing some of his extensive knowledge and acquisition experience as well as tactical strategies you can go out and implement right away. Acquiring businesses is Roland’s specialty. He’s actually written an entire book on it. Listen in as he talks about the two questions he asks the target company’s owner as he’s starting the conversion about acquiring the company. Question #1 to Ask the Owner Roland says a lot of people create more friction than is necessary at the beginning. They jump in and say, “Hey, do you want to sell your company?” When you’re ready to talk to the owner of the company you want to acquire, hopefully you’ve determined your acquisition criteria and the profitability level you want. But “Hey, do you want to sell your company?” is a walls-up question. If you’re going in cold, you might get this common angry response: “Who told you our company was for sale?” The question Roland likes to ask instead is more investment-related. “Hey, I’m an investor. I’m looking for a company in [specific area] that sells [specific industry] and makes [x level of sales]. Would you be interested in having a conversation about the possibility of investment or working together?” Coming in as an investor is very non-threatening, because almost all businesses need investors and capital. You want to be coming from a place of authenticity, so get clear on what an investment means to you. An investment doesn’t have to mean you have a pool of cash available. You can have other resources and assets to bring to the table. If they say yes, another mistake people make is asking for a financial statement or tax returns. Don’t ask for that upfront. You don’t want them talking to their accountant or attorney and getting their walls up again, before you even know if you want to buy the company. Instead, just say, “That’s fantastic. I have a few questions to see if we’d work well together. I’d love to know some basic numbers. Could we meet now, or do you need a few days to gather that information?” Question #2 to Ask the Owner This brings us to the next question: “Can you tell me the story of the company?” This one helps build rapport. You’ll get the long-form narrative response about the history of the company and how it has evolved. Take notes here, because they’re giving you priceless information. And it’s so much less threatening to them. While they’re telling you this history, find places you can build rapport with them because you have commonalities of experience. Find common touchpoints that will build trust. Bring them up when they’re done talking. Then say: “That’s great. So interesting. I love learning more about the company. I’d also love to know more about you and your entrepreneurial journey.” People love to talk about themselves. Find more commonalities. Ask more questions. Build more trust. And you’ll be well on your way to acquiring this company. Stay tuned for Part 3! OUR PARTNERS: Get a free proposal from Conversion Fanatics Get 3% cash back on your ad spend with AdCard Get Roland’s book, Zero Down, FREE Join Roland's next EPIC Challenge
The 7 Levels of Scale: Dialing In Your Operating System
40:21Over the next few podcast episodes, we’ll walk through the 7 Levels of Scale—everything you need to know to grow and scale your business. Everyone always asks Roland Frasier and Ryan Deiss “Where do I start?” when it comes to scaling their business. Their new framework they call The 7 Levels of Scale answers that question. In the previous episode, they covered Levels 1 and 2. In today’s episode, they unpack Level 3, but here are all seven: Level #1: Sell and serve 10 customers. Level #2: Build a growth flywheel. Level #3: Build an upgraded scalable operating system. Level #4: Double your take-home pay. Level #5: Build your board. Level #6: Complete an acquisition for expansion. Level #7: Hit your number. If you haven’t listened to Part 1, go do that now. This framework doesn’t work out of order. Sequence matters in a big way. Then listen in for everything you need to know about Level #3: Build an upgraded scalable operating system. Two Big Errors Entrepreneurs Make The first error entrepreneurs make is setting up an operating system without going through the first two levels. You don’t need an operating system if nothing is happening in your business. The second error they make is just go go going without putting an operating system in place. If you build your growth flywheel, then fail to build and implement an operating system, you’ll grow your business into non-existence. It will implode from system overload. You can’t serve the people coming in, because it’s all happening too fast, and you don’t have a system in place to handle it. This will wreck you, wreck your family, and wreck your business. This happened to Ryan. He almost lost his marriage over it. To build something that’s actually working—but have it almost destroy you—is one of the worst things that can happen. What Is an Operating System Exactly? No one can actually agree on a definition, but Google says this: “An operating system is a set of algorithms and a common language that enables different components to communicate with one another in the support of the desired outputs of a machine.” It’s like a computer where the mouse, the CPU, the printer, and everything else has to communicate with each other in order for it to work. What do we mean by a set of algorithms? Standard operating procedures. What is a common language? Communications and meeting rhythms. What are desired outputs? Your goals and objectives.That forms the foundational framework of what it means to have an operating system. The business owner generally knows what the desired outputs are, but they haven’t really been fully flushed out. You need goals and objectives and a way to communicate them throughout the company. You need standard operating procedures (SOPs) where one person knows how to do something, and documents it so others can learn and repeat it. Roland and Ryan built a tool for their company internally and now it’s available to people in their Scalable OS Accelerator. Document Your Set of Algorithms Visualize how your company creates value. What is your growth engine? Once you’ve acquired a customer, how do you serve them? That’s the fulfillment engine. In the entire process, you might have half a dozen value engines. There might be 3-4 stages that are really important. These are the ones that need to be documented. Start with the customer and work backward. Go all the way back to Level 1: sell and serve 10. How do you do this well? Document the entire process value flow Identify the power stages and build step-by-step checklists/playbooks around those Assign accountability. Then use that to build company scorecards and establish the meeting rhythm. When will you meet as teams, leadership, all hands? Figure out your meeting schedule once you know about the scorecards. The meeting and scorecards are your common language. Map Out Your Weeks, Months, and Quarters Roland and Ryan do 90-day quarterly sprint plans. They look at their scorecards and ask: how are we progressing toward our goals? What’s working and what isn’t? What do we need to optimize? That determines the activities you need to do in the next 90 days. If you don’t have all these systems in place, then what do you do? Everybody just has their own ideas, their own pet projects, then no one can agree on what to do next. You have to have the OS in place. One you’ve got your growth flywheel spinning, you’ll need to spend 8-12 weeks building your operating system. While you build, you’re also tracking and measuring. That’s all through the scorecards. Then, the way you install the OS is to host your first quarterly sprint plan. Day 1 is a clarity day. Day 2 is your first quarterly sprint plan. You’re looking forward but also back. Every three years: clarity day Quarterly: sprint plan Monthly: business review Weekly: team meeting reviewing scorecards Roland and Ryan aren’t big believers in annual planning. They plan in 3-year cycles and execute in 90-day sprints. The 6 Primary Tools that Go Into a Scalable Operating System Value engine (visual representation like a whiteboard with post-it notes) Playbooks (step-by-step checklists that drill down into power stages) HOT canvas (High Output Team, assigning responsibilities) Scorecards (metrics and tracking weekly, reviewed monthly) Meeting rhythm (how often each team is getting together) Clarity compass (visually demonstrating desired outputs) Roland and Ryan want to create more Level 7 entrepreneurs. They want to help more entrepreneurs scale themselves so they can scale their companies. They’re sick and tired of entrepreneurs burning out and quitting on themselves. They want them to stay at the helm of their companies for as long as they want to. It’s better for the world. When you pass Level 3, you pass the scalable line. That’s when your company is officially scalable. Next up: making more money. Stay tuned for Part 3! RESOURCES: 7 Levels of Scale Workbook - Take a brief assessment to see where you’re at and what’s next. OUR PARTNERS: Get a free proposal from Conversion Fanatics Get 3% cash back on your ad spend with AdCard Get Roland’s book, Zero Down, FREE Join Roland's next EPIC Challenge
What to Consider When Buying a Company (Part 1)
14:57Acquiring and selling businesses is one way to live a rich and happy life, but how do you know which companies to buy? In today’s episode, Roland Frasier walks us through some important things to know when buying a business. This is part one in a series where he’ll be sharing some of his extensive knowledge and acquisition experience. Listen in as he talks about the first two questions you need to answer before you buy. How Am I Going to Define My Acquisition Criteria? That’s question #1. If you don’t know what kind of business you want to buy, it’s easy to get overwhelmed. You’re like a kid in a candy store. You’ll save yourself a lot of headaches by establishing criteria first. Roland uses a matrix for this. It can be as simple as a whiteboard or a piece of paper with four quadrants: What you enjoy What you have experience in What skills you have What connections you have Quadrant #1: Make a list of things you actually like to do. Being an entrepreneur is hard. It’s more motivating to go forward and deal with problems if you’re actually passionate about it. Take an inventory of your interests. Quadrant #2: What do you have experience in? Brainstorm all your prior experience and things you’ve actually done in the past. Write down all of it, even if it doesn’t seem relevant. You might see connections later. Quadrant #3: What do you have knowledge, training, skills in? This is similar to #2, but this time you’re writing down specific skills you have. Quadrant #4: What are your connections? What networking resources do you have access to? What things are you a member of? What business contacts do you have? List all of them; don’t leave anyone out. These four things will help you determine what kind of business you want to buy. You’re looking for common threads among things you’re passionate about, have experience in, are skilled at, and have connections for. What kind of business makes the most sense when taking all four of those things into consideration? How Do I Select a Target Type? This is the second big question to ask yourself. How do I select a target type of business? The type of company you’re looking to acquire can fall into several categories: A company that no longer exists A company that exists but isn’t profitable A company that’s breaking even/profitable Roland recommends focusing on that last category, unless you have specific skills in turnaround. Not everyone is cut out to acquire failing businesses and turn them around. It’s hard. There are plenty of profitable companies to acquire. In the break even/profitable category, if he doesn’t see things that could make it profitable in 30 days, he’ll pass. How do you decide how profitable a company needs to be before you acquire it? Roland doesn’t care about sales. He cares about profits. There are two types of profit. The first is SDE (seller discretionary earnings). That’s how profitable an owner-operated company is. Then there’s EBITDA (earnings before interest, taxes, depreciation, and amortization) for a company that’s professionally-managed. You might want a company with an SDE or EBITDA of a certain amount. What do you want that amount to be? First, ask: how much do I want to pay myself for doing this deal on a monthly business? Let’s say $10k/month. That’s his new target type—a company that’s profitable and making at least $10k/month. In addition to that, ask: what am I going to do with this company? Let it go as is, or do you actually see growth potential and there will be a little bit of investment to help it grow, either to sell or to make more money to pay yourself more? And finally, ask: how much money do I want to budget to spend on increasing growth? Let’s say you want to spend $10k/month on growth. So you need a profit of $20k/month total. You need to find a company with an SDE or EBITDA of $240k/year. That’s how Roland selects the kind of company he wants to go after. He asks which businesses fit his four criteria and have a profitability of $240k/year or more. Stay tuned for Part 2! OUR PARTNERS: Get a free proposal from Conversion Fanatics Get 3% cash back on your ad spend with AdCard Get Roland’s book, Zero Down, FREE Join Roland's next EPIC Challenge
Kendra Scott on Fashion, Family, and Philanthropy
49:01Kendra Scott started her iconic brand with $500, a spare bedroom, and a newborn—and now her company is valued at over a billion dollars. The 1st Annual Scalable Impact LIVE took place in Austin, TX in early November of this year, and Kendra Scott was one of the big-name guests. She sat down with Roland Frasier to talk about how she started her business, how it became so wildly successful, and why she’s so passionate about giving back. Listen in for some inspiration and brilliance from this woman on fire. How It All Started Kendra’s first son was born on 11/11/01, just two months after 9/11. She vividly remembers what it felt like to be given this tiny human being in such an uncertain time. No one knew what the world was going to be like going forward, but there was an incredible opportunity for hope and connection. Kendra knew she wanted to be the best mom she could be, but she’d also loved fashion and design since she was a little girl. “If I could do what I loved,” she says, “that would be the greatest thing in the world.” Her first business failed, then her stepfather died, leaving her with this thought: “We have one life, and it is short and it is fast. While we’re here, we need to use the gifts we’ve been given to do good.” She started her business very quietly, because she didn’t want people to see her fail. She was terrified that people would laugh at her. How She Worked Through That Fear Fear is real, Kendra says, and it is okay to be scared. “I wake up every morning, leading a business that is bigger than it was the day before. I’m walking in uncharted territory every time I get out of bed.” It helps knowing she doesn’t have to do it alone. She’s not afraid to ask for help. Mentors are huge for her. And she has built “the most awesome team ever.” She has 3000 employees, and 96% of them are women. The brand is the DNA of all the people who work with her at her company. It’s her name, but they’re truly a team. She was alone in it for a long time. Now, when she has a problem, everyone puts their heads together and rolls up their sleeves, excited to help solve the problem. Choosing entrepreneurship means not choosing the easy route. It is so fun when it’s fun and so scary when it’s scary. Entrepreneurship is peaks and valleys, just like life. When you’re in the valleys, you think this is it. I’m going to lose my business. When you start realizing you can get out of the valley, and you have a team doing it with you, it’s so cool. You overcame something together, and your bond is so amazing. The Kendra Scott company is on a mission to do good. Their core values are family, fashion, and philanthropy, and their customers share those values. They’re caring, optimistic, and fun, and have a heart that beats for their community. “You can put your team and your community first and still have a fiscally successful company,” Kendra says. “And now I’m teaching others how to do it.” What 2020 Was Like For Her Business In a retail business where you have 120 brick and mortar stores, “a pandemic isn’t great,” Kendra says. She remembers all the news channels with their doomsday pronouncements of “brick and mortars have seen their last day.” She didn’t sleep for a couple days in March 2020. She and her team went back to the white board and started completely over. They changed everything overnight. The only thing that didn’t change was their core values. How do we stay true to our core values? was the only question that mattered. They did all their Kendra Gives Back events virtually. They created new connections with their customers—sending them letters, calling people and checking on them, making masks, delivering things to people’s homes. They fought the urge to over-strategize. “We have to paint this train while it’s moving,” Kendra told her team. They couldn’t stop the train. They knew they might make mistakes, but they were determined just to learn from them. You can’t be inflexible and unwilling to change your plans. You’ve got to be agile. You’ve got to pivot. Or you won’t survive. How She Managed Growth While Maintaining Control When Kendra first started her company, no one would invest in her. She had two small sons, went through a divorce, had no investors, and was doing everything on lines of credit. She signed everything she owned up for collateral. Her sister, who had a good job, moved in with her to help with rent. She couldn’t pay for her tiny team and couldn’t afford to lose anyone. She sold her car to pay a vendor for stones and jewelry. Looking back, she says she’s not really sure how she did it. But she would look at her sons’ little faces and think, “Failure is not an option. We are going to figure this out.” She didn’t get any investment capital until 10 years after she started her business. After 10 years, she wanted the cadence of going to a board on a quarterly basis and getting feedback. So she set up an advisory board with three people and gave them an earned-in, very small equity position over a four-year period. One of them became her first investor. He gave her a very generous $20 million evaluation and bought 5% of the company. Building a Team and Stepping Away from CEO Bringing on a COO changed everything for her. She read a book by Marcus Buckingham called Now Discover Your Strengths that talks about writing down everything you love and loathe. She loved the customers, engaging, design, marketing, and creation of the experience. She loathed dealing with vendors and negotiating marketing contracts. She knew she needed a team that loved the things she loathed. She hired a COO and everything elevated, because she was no longer doing the things that sucked the life out of her. She knew she wanted someone with a personality that fit with hers, a winner, someone with passion and drive, who gets excited about this age and stage of a business. He got an offer from Whole Foods at the same time that Kendra couldn’t match, but he saw something in the Kendra Scott company that he believed in. His equity position turned into $40 million. Kendra recently stepped away from CEO into a chairwoman position. After 20 years, her strengths have changed. “The biggest impact I can have is to be out there and focus on our core pillars,” she says. “I’m out in stores, I’m on calls. I want to learn so I can make this brand better every day. The philanthropy pillar is huge for me. My mission is to get more women entrepreneurs funded and help them be successful in their businesses.” She sees the Kendra Scott brand as a pre-teen. Ralph Lauren did men’s ties for 25 years before he branched into other things. This doesn’t happen overnight. She knows there are opportunities to expand beyond jewelry, but she doesn’t want to do just anything. She wants to do it thoughtfully. She wants to see where the white space is, where the gaps are. Where are things her customers need and desire that they can’t find? It’s got to be something disruptive, and that excites her. We all have the opportunity to change the world, she says. Lead with your heart. Let your team fly. Give them the tools to soar. When they become leaders like you, that’s how you’ll know you’ve become a true success. RESOURCES: kendrascott.com Now Discover Your Strengths ethicallyprofit.com Scalable.Co The Ready to Lead podcast DigitalMarketer Podcast Perpetual Traffic podcast OUR PARTNERS: Get a free proposal from Conversion Fanatics Get 3% cash back on your ad spend with AdCard Get Roland’s book, Zero Down, FREE Join Roland's next EPIC Challenge
5 Exits of Every Successful Business Owner
10:58What is often called “the five evolutions of a business” can also be thought of as “the five exits every entrepreneur makes in a business” over the course of their entrepreneurial journey. Today’s episode is another snackable one with Roland Frasier. It’s short and sweet, something you can listen to while you’re running a quick errand or getting something done around the house. This one is all about the five exits you make on your journey from solopreneur to selling your business. Exit #1: From Solopreneur to Manager When you first start a business, you’re wearing all the hats, doing all the services. You’re the CEO, CMO, janitor, sales team, and everything in between. Your first exit is from doing to delegating. Instead of you doing the basic thing the business does (offering a service or actual product creation), you hire someone (or several someones) to do it for you. When you hire your first person, you start this first exit. Exit #2: From Manager to CEO The next level of exit is going from manager to leader or CEO. We’re not talking about a CEO who does everything—that’s a solopreneur, not a true CEO. A true CEO is someone who has people reporting to them and getting their marching orders. The CEO is truly leading the company and figuring out how to implement the Board of Directors’ vision for the company. When you stop managing and delegating, and you’re responsible for bigger things and being an actual leader and communicating/channeling the directors’ vision, that’s the second exit. Exit #3: From CEO to Board of Directors The third exit is when you go from being the CEO to being on the Board of Directors. At that point, you’re really responsible for the strategic direction and vision of the company, how it’s doing in the world as a corporate citizen. You’re communicating with the CEO and saying, “This is our vision, and it’s your responsibility to communicate this to the company and get them to execute it.” You’re not the leader. You’ve stepped off the organizational chart of the company, but you’re still very involved in it. You may have sold a majority part of the company at this point. Exit #4: From Board of Directors to Investor Your fourth exit is when you go from the Board of Directors to investor. At this point, you might sell more of your company. You might decide you don’t want to be burdened with, or responsible for, creating the vision of the company any more. You’re interested in what the company is doing, and you’re a shareholder/owner, and you have the ability to impact who is on the Board of Directors, but you’ve moved back several levels to being a simple investor. Your main concern is: how will this asset perform for us in terms of income generation? Exit #5: Exiting Ownership The fifth exit is exiting ownership. You don’t want to be an investor anymore. You’ve gotten enough return on your investment, and you’re going to retire from the entire relationship you have with the company. Now you’re a free agent with your capital, moving on to whatever else you’re ready to do. It’s good to know about the different exits, the different levels of evolution. It’s good to know your options. Maybe you’re tired or burnt out or have other ideas to explore, and it’s time to start making those exits one at a time. Maybe the responsibilities are more than you want to shoulder as CEO, and you can move to the Board and still have impact, but less responsibility. You don’t lose the ability to impact the company until you go through all the exits. Seeing the big picture helps you figure out what fits best with your life and other business opportunities. RESOURCES: ethicallyprofit.com getepicchallenge.com Scalable.Co The Ready to Lead podcast DigitalMarketer Podcast Perpetual Traffic podcast OUR PARTNERS: Get a free proposal from Conversion Fanatics Get 3% cash back on your ad spend with AdCard Get Roland’s book, Zero Down, FREE