DC Fam –
After I sold my business a year ago (Link to Podcast), I’ve been on a journey to uncover what the next stage in my career would be.
One of the things I realized I wanted to get more involved with was investing and helping other entrepreneurs. I love to teach and have repeatedly had success getting the systems and people in place to allow companies grow and eventually be sold.
But not just investing cash as a passive investor.
Investing my capital as well as time/effort/connections/resources into the business that I was involved with to push them forward as much as possible.
6 months or so ago I invested (with Travis) in fellow DCer Brent and AMZ Pathfinder.
Whereas Travis prefers to be a passive investor I wanted to be more involved working with Brent to push the business forward.
So, my involvement in the business is not just providing capital. I’m like a strategic partner with skin in the game.
Brent and I engage in weekly calls (plus ongoing whatsapp/slack support and communication) and my team has also gotten involved to aid whenever possible with the execution.
In the last 6 months we have made huge strides transforming the business from basically Brent and a contractor into the foundations of a legitimate organization with clear goals, structure, proper accounting, and a team.
Brent now operates as a “business owner”, where previously, he was a scrappy “self employed” entrepreneur.
When I first came in, it was basically Brent and a contractor (or two).
He had a solid service offering and was bringing in some money..
But Brent was wearing basically ALL the hats, involved with all parts of the biz, couldn’t take any time off because the business would fall apart. If he wasn’t there.
Most of his time was spent putting out fires.
Now, the business is at a place where we can handle more growth and scale. Which is the plan for Q3.
Brent’s time is free’d up to focus on the most valuable things, strategy and direction, and the biz is projected to grow.
We’ll be able to handle our aggressive growth goals because we built the foundation and put the right systems in place.
Recently, Brent went on a 3 day bike trip with no internet access at all. This was the first real “vacation” Brent has taken in years.
It’s now possible for the business to run without Brent because of the systems and people in place to run the business.
Below are the steps we’ve taken to turn this scrappy business into something that is scalable and on the path to being able to be sold for a high multiple.
1. Vision/Goal Setting
One of the most important aspects of any business is clearly defining its priorities so that it can focus on and execute on the most important ‘one thing’.
This was an aspect that we focused on when I first became involved in the business.
Brent and I had specific calls to clearly identify the goals for Q1 and Q2. To focus on the lead indicators which would be the foundations for our future growth.
More specifics on some of the goals we focused on/achieved in the later steps..
2. SOP/Organization
In our first quarter as partners getting the core business processes documented was a key priority.
Without proper documentation, you simply do not have a real business that can grow and operate without you.
So, my team got involved working with Brent to get the core processes of the businesses documented.
We learned that while Brent had a good process for the service delivery… it wasn’t well documented. So, onboarding new team members would be very time consuming . Further, proper documentation could ensure quality and consistency in the tasks that the team was executing on.
Another process that was low ROI that was taking Brent a lot of time was client invoicing. So, that was another low hanging fruit that we could document and hand off to a bookkeeper to unplug Brent from that time consuming and low ROI task.
We found out the things that were taking Brent’s valuable time and got it automated/turned into process.
This is so important for every business!! If they want to be able to grow and scale and eventually sell.
3. Setting up the foundations of the company structure
When I first invested in AMZ Pathfinder, Brent (like many founders) was wearing many hats and doing many things in the business.
This hustle was crucial to get the biz initial traction but does not allow the biz to scale.
So, after we got many of the important SOPs in place, we got to work identifying the roles we needed to bring on to the team to allow brent to unplug from many of his tasks and remove himself as a bottleneck for growth.
The roles we identified were someone to handle the bookkeeping, native language speakers to be able to deliver high quality service in all our language markets, and last (but not least) a high level client facing project manager to allow brent to unplug from many of his time consuming customer interfacing activities.
Once we identified the roles and structure of the biz, we were ready to move on to..
4. Hiring
Hiring can be one of the most daunting tasks for founders. Especially if they have been hustling on their own for a long time and don’t have a ton of experience hiring and delegating.
Fortunately for this biz, my team and I have extensive experience hiring and developed our own effective hiring funnel.
At its peak, i’ve managed distributed teams of 15+ from all over the world. We’ve onboarded 5+ people in just a few weeks and have been able to do so with ease. Because of our strong hiring process and funnel. The best part is that personally the hiring takes so little of my time ???? Because my team understands our process and knows how to find the best candidates at the most reasonable prices.
So, my team was able to aid Brent in sourcing candidates for many of the roles we needed to hire.
We worked with Brent to get the right job posting, and then got to work finding candidates and putting them through our hiring funnel. So at the end, brent had a clean list of a handful of candidates with multiple rounds of interview questions answered that he could cherry pick the ones he wanted to engage for an interview.
One of the most important (and often underutilized) parts of our hiring process is the paid test project. After the first two rounds of questions, we give our top candidates a paid test project that is as close to the actual job they will be doing as possible. That way, we can get a sense for how they actually work/execute before hiring. We don’t even get on a call with them until they’ve proven that they can rock the test project.
That way, when we hop on a call after the successful test project, we already know they are a rockstar and the call is more just to confirm they are a good culture fit.
Further, when we make a hire. They are all on a two month ‘trial period’. At the end of which we have a planned review and discussion if this is going to be the right fit for both parties. This gives us an easy out if things aren’t working.
5. Management + Company Culture
Simply getting the team in place is not enough. Once you have the team, it is absolutely crucial that you engage and manage them to push them towards success.
Bad team management and culture is like getting 20% out of your team vs good management and culture is getting 100% output.
Further, if you hire great people, but don’t manage them well. They will just bounce and you’ll have to start all over.
I can not stress the importance of good management and company culture enough for any business that wants to have long term success!!
The 80/20 of good management and culture can be broken into 3 things: 1-1s, Weekly Calls, Meeting in Person.
Brent has been a rockstar embracing and stepping up into his management role holding weekly 1-1 calls with the team to build trust/rapport/confidence and set clear goals and hold them accountable. This is THE MOST IMPORTANT step in good management.
Further, Brent implemented weekly calls so that everyone can stay on the same page.
Last, but certainly not least, Brent recognizes that while working online and from anywhere in the world is amazing and has its advantages – there still is no substitute for the bonds you can form meeting in person.
So, Brent invested in in person meetings flying his team and meeting them all around Europe in Germany, France, ETC.
Strengthening their bonds and solidifying their company culture to put him and his team on a track to long-term success.
One of the most notable improvements in culture after meeting in person is better understanding and communication when you are back working remote. Brent commented to me recently that his communication with a key employee (which at times was a bit of a challenge) had turned around night and day after they met in person for the first time attending an event earlier this summer.
6. Finance and accounting
Finance and account and some of my personal LEAST favorite things in a business.
But if you want to run a legit business that has the potential to bring on investors or sell you simply need to be on top of these.
This stuff is just important!! Knowing your actual profit, profit margins, cash flow projections etc are simply necessary if you want to make smart financial decisions, have a long-term prosperous business, and not go unexpectedly bankrupt.
Why else is this important? If you ever want to sell your business you simply need to track good finances. No legit investor is going to invest a penny if they can’t look back on clean, organized and accurate books. And on the flip side, messy books can literally kill a deal. It’s just something as a biz owner you need.
Brent had an awesome freelancer who was helping with some of his books already. So we worked with her to make sure that the books were 100%.
Having strong books allows us to put together accurate P/L and determine cash flow so we can make informed decisions about cap ex in the business and distributions.
7. Growth
The past 6 months the first priority has been getting the business organized so that it is in a place where we would be able to grow and scale it. Implementing the 6 above necessary steps has allowed us to get the systems and people in place in order for the business to be able to handle growth.
So now, growth is our priority.
We finished a rebrand of the website and some new marketing assets, and this quarter will be focusing on the traction channels that will be able to move the needle most effectively for the business.
We have some aggressive growth goals for this quarter, and will post a follow up recapping how things have gone.
This quarter we are implementing the Traction growth model and identifying our top 3 channels that we think have the most potential to move the needle for the quarter. Then, we will design clear and controlled tests for each channel to see if it indeed can ‘move the needle’. If so, we’ll max it out. If not, on to the next channel to test.
It’s a simple framework. But simple is good!! We don’t want to make anything more complicated that it needs to be. And this is a proven growth framework that can be applied to almost any business.
8. Exit
While we are not at all thinking about an exit at this time, many of the above steps that we’ve been implementing are so that the business, one day *could* be sellable.
If you want to be able to sell a business (and get a maximum multiple) you need to have a business that is well organized, has IP, can operate well without the founder, has good and reliable books, can demonstrate growth trajectory etc.
All of the above are things we’ve been working on and knocking out so that, if/when the time comes, we’ll be an attractive target for a strategic investor who will pay us a high multiple.
An exit however may not ever be a goal for AMZ Pathfinder.
The business produces strong free cash flow, in a fast growing market, (which were key reasons I was interested in investing) and with the business getting better and better people involved to run it, we could just hold it as a cash cow to pay dividends to its shareholders.
Not a bad option either ????
But the point is having options. So whether you want to sell or not. The above are steps that you should take to set your business up for long term success and opportunities.
It’s been an exciting first 6 months of 2018 for AMZ Pathfinder and I’m excited to be able to be a part of it!
Brent has been (and is) a total rockstar who has been crushing all of our initiatives. It’s truly been a pleasure working/partnering with him!
If anyone has any questions about specifics about what has been working for us or would like to chat about ways their business can implement any of the above steps please don’t hesitate to reach out.
Wishing everyone a strong Q3!