A fantastic conversation with Marty M. Fahncke and Doug Wick on the topic of Building a Business Operating System. If you’re serious about building a business that can operate profitably without your day-to-day involvement, or you’re looking to sell your business for the highest possible price, do yourself a favor and tune in!
Books Recommended During The Interview:
The E Myth
Why Most Small Businesses Don’t Work and What to Do About It
https://amzn.to/3zhIC4F
Mastering the Rockefeller Habits
What You Must Do to Increase the Value of Your Growing Firm
https://amzn.to/3zwqcgp
Metronomics
One United System to Grow Up Your Team, Company, and Life
https://amzn.to/3Twy8oS
Simple Numbers 2.0
Rules for Smart Scaling: A Play by Play Analysis for Pure Growth
https://amzn.to/4emNLXW
Double Double
How to Double Your Revenue and Profit in 3 Years or Less
https://amzn.to/3XzCqx4
Vivid Vision
A Remarkable Tool for Aligning Your Business Around a Shared Vision of the Future
https://amzn.to/4d3IyDb
3hag Way
The Strategic Execution System that ensures your strategy is not a Wild-Ass-Guess!
https://amzn.to/3Xvdsyy
What follows is an AI-generated transcript of our entire conversation. Please excused any typos!
[00:00:00] Doug Wick:
The only businesses that really thrive are those that realize we have to get our people to perform predictably and consistently, otherwise we really don’t have a business. We have a bunch of people running around, uh, doing their, uh, you know, changing the muffler one way. And not having any consistency and predictability.
[00:00:18] If you look at an automotive business. So really the operating system allows you then to predictably and consistently deliver on your promise and, and, and develop a promise, develop a vision, many businesses fail to even get to the point where they create a vision. And, and so they’re operating from no system at all.
[00:00:41] The people don’t know what they should be doing or what to follow. Um, and so that just leads to confusion and chaos and why more businesses fail, because there is no system to deliver the promise of what their customers want.[00:01:00]
[00:01:05] Dude Walker:
And now it’s time once again for the show that gives glorious voice to 25 million business owners across the fruited plain radio free enterprise with Frank Felker.
[00:01:20] Frank Felker:
Thank you, Dude Walker. Yes, indeed. I am. I’m Frank Felker. Welcome back to Radio Free Enterprise. Today I bring you two guests, Marty Fahncke, who’s a mergers and acquisitions expert with Westbound Road in Olathe, Kansas, and Doug Wick, a strategic business consultant with Positioning Systems in Cedar Rapids, Iowa.
[00:01:45] Gentlemen, welcome to Radio Free Enterprise. Thank you, Frank. Glad to be here. We have an unusual show for you guys today. Uh, regular viewers and listeners will know that Marty Fahncke is a frequent flyer here on the show, and he’s also co author of with me of our upcoming book, Boomer sells the business.
[00:02:08] And it’s through, uh, Marty’s good offices that we have Doug here with us today. Uh, Marty invited Doug to join us to talk about What’s called a business operating system. What a business operating system is and why it’s so powerful. And Marty, I know you include writing an operating system as one of your seven steps to sale ready condition for any business owner that’s looking to sell their business.
[00:02:38] But my understanding is that you were not always such a big fan of the idea of business operating systems. And in fact, Doug was the person who got your thinking turned around on that. So if you would, let’s start with why you weren’t a fan and what happened that caused you to. Turn around on the idea and then invite Doug to be with [00:03:00] us today.
[00:03:01] Marty M. Fahncke:
Yeah, absolutely. I’d love to do that. Yeah. So, uh, thanks for that introduction. Um, yeah, so in my 30 year career, I’ve had, um, a lot of great successes and a few failures, but mostly successes, which, which have been primarily kind of running businesses, uh, by the seat of my pants, and, uh, I always figured. It’s working well.
[00:03:21] Why change anything? Um, well over a decade ago though, um, I was working with somebody at a business and, and the CEO said, uh, you know, I want you to read, read these books by, by Vern Harnish and, uh, and about the Rockefeller Habits and okay, I’ll check it out. And so, um, next thing I know, um, we’ve decided as a company that we’re going to employ this kind of Rockefeller Habits operating system and which involves like.
[00:03:50] These very intensely structured meetings and we’re, we’re, we’re going to go to, you know, we’re going to, we’re going to travel once a quarter to do these things. The structure [00:04:00] was just, I’ve never been a big structure guy. And so, um, we started doing these, these quarterly meetings with, with Doug, who was hired to help the company, um, go through this, go through this process effectively.
[00:04:13] And I was, I don’t know if I was your biggest pain in the butt client you’ve ever had, Doug, but I know I was, I gotta be top five. I gotta believe I was top five. Um, I just resisted so much of the structure and well, you know, the, the way it all kind of works didn’t make sense to me. And I caused, I caused a lot of problems, but it.
[00:04:37] I started to see the benefits and I started to see the results and I was like, Oh, now I, now I understand this. And, um, I eventually in my acquisitions career started working with, you know, hundreds and hundreds of different business owners who, um, were, were preparing or hoping to sell their businesses.
[00:04:55] And one of the things that I realized was that businesses that [00:05:00] had A written, documented, and structured game plan, um, whether that be through Rockefeller Habits or EOS or any, any other operating systems out there, um, are much better run businesses. The owners are, you know, Making much happier, they’re making more money and they’re a much more sellable business.
[00:05:22] And so having an operating system became one of the keys to effectively selling a business that, you know, that I’ve been talking about for, for many years. And now we’re including in, in the Boomer sells the business book. And so, I’m a believer. I fully understand now that why it’s so important and, and, and, and how, how critical it can be.
[00:05:42] And so we were talking about, you know, who should we bring in to, to, uh, uh, talk about these types of things. And I’ve since come to know many, many consultants who do all sorts of different, you know, everything from strategic coach to EOS and everything else. But I thought, you know, the person I need to bring in is Doug Wick.
[00:05:59] Cause [00:06:00] after what I put him through in those early years, uh, Um, he deserves to be the guy that gets, uh, that gets to tell his story about the whys and what’s of having, um, written strategic plans and written, written operating system for your business. And so that’s why I brought him in. So Doug, I’m so glad you’re here and I’m looking forward to you sharing your wisdom with everybody.
[00:06:19] And hopefully the audience is much nicer to you than I was back in those earlier days.
[00:06:24] Doug Wick:
Thank you, Marty. Thank you. I, you know, now that I remember, I recall you being a little, uh, Skeptical . It’s been a while. It’s been a while, but yes. Yeah, you’re bringing back some good memories. .
[00:06:41] Marty M. Fahncke: Well, and even back then, we were betting on football.
[00:06:43] I think The Chiefs, the Chiefs won something and you, you lost a bet and had to wear a,
[00:06:49] Doug Wick: I think it was, uh, the Vikings with Joe
[00:06:51] Marty M. Fahncke: Vikings. Yeah. And I have
[00:06:52] Doug Wick: to wear a five uniform, uh, Viking. Oh, .
[00:06:57] Frank Felker: That sounds painful.
[00:07:00] Doug Wick: It was. Very painful.
[00:07:03] Frank Felker:
Well, Doug, the prodigal son returns, Marty has reached out, and I really appreciate you joining us today.
[00:07:10] And I’m looking forward. One of the things I love about doing these interviews is I get to ask the questions I want to know the answers to. So it really helps me learn a lot. Let’s start from the beginning with your definition of what a business operating system is and why would we want one? And what makes it so great?
[00:07:31] Doug Wick:
Yeah, the, the value of, you know, and one of the reasons I think Marty, because he was in the creative area, we tend to think of creativity as being something that’s less structured. And so, um, what people don’t realize is the power of discipline and structure in. Helping, um, people be creative. And so I think that’s why most people battle against it.
[00:07:58] But in reality, [00:08:00] without that structure, you, you fall prone to, um, having very little consistency. Very little predictability and very little accountability as well in your business. And so the value of an operating system provides, um, a meeting structure, uh, a structure for how, um, the operating, uh, Uh, procedures in your business should run.
[00:08:27] The first coaching I did was with a gentleman by the name of Michael Gerber, who wrote the E Myth Revisited, uh, and why most small businesses don’t work and what to do about it. And the whole intention of that was that most business owners who start a business really are, um, nothing more than, um, uh, small business people who think that, you know, mechanic, who thinks because he knows mechanics.
[00:08:55] He can operate a business. And what happens is they end up working in the business. And [00:09:00] so the only businesses that really thrive are those that realize we have to get our people to perform predictably and consistently. Otherwise we really don’t have a business. We have a bunch of people running around, uh, doing their, uh, you know, changing the muffler one way.
[00:09:15] And, and not having any consistency and predictability if you look at an automotive business. So really, the operating system allows you then to predictably and consistently deliver on your promise and, and, and develop a promise, develop a vision. Many businesses fail to even get to the point where they create a vision.
[00:09:38] And, and so they’re operating from no system at all. The people don’t know what they should be doing or what to follow. Um, and so that just leads to confusion and chaos and why more businesses fail, because there is no system to deliver the promise of what.
[00:09:58] Frank Felker:
Their customers want. I have some excellent definition and explanation of the value of it.
[00:10:04] So if I could, what you’re saying would, the value of this would apply. Whether someone were choosing to position their business for sale Or if they just wanted it to be able to grow and to Allow them to remove themselves as much as possible from the day to day operation. Is that a fair statement?
[00:10:26] Doug Wick:
That is I I think you know I i’ve worked with a number of customers recently that they don’t even have a vision And and and without a vision for the business You don’t even know when things are, you don’t know when things are going right, and you don’t know when things are going wrong.
[00:10:43] It’s almost, it’s almost unfathomable to me to think that somebody wouldn’t think of that. But I think I can remember the very first, um, sales management job I had. I was, you know, I was, um, I became a sales manager after being a salesperson. And I think the very [00:11:00] first year I didn’t have any structure at all.
[00:11:02] I kind of went, you know, these people know what they’re doing. They can do it on their own. And what I almost got fired, you know, my, my, my general manager sat down and said, Doug, you’re too good to fail here. Either you got to improve or, and so I got a mentor. I. And, and, uh, followed, developed a system on how to get them to create their goals, create their own system for how they were going to get there.
[00:11:29] And then it was simply a matter of, uh, on a weekly basis, sitting down with them and saying, okay, are you doing these things? And most of the time they weren’t and they needed to be reminded. And when they got back on track and we’re following this, the activities, the system they had set up to achieve their goals.
[00:11:46] Lo and behold, they were, they’d stay on track and, and succeed. And so it’s that same idea. You got to have a vision. You got to have, uh, systems and activities that you follow [00:12:00] rigorously, just with, with discipline. And that allows you to stay on track and for yourself, deliver on the goals. By attending to the activities and therefore satisfy your customers, which ultimately the only reason to be in business is to satisfy your customers.
[00:12:18] And when you do it consistently, they reward you.
[00:12:20] Frank Felker: That’s what it’s all about. Isn’t it?
[00:12:23] Doug Wick: Yes.
[00:12:23] Frank Felker:
You know, you talked about moving from salesperson to sales manager. Those are two entirely different jobs, obviously. You found that out. And it’s similar to what you talked about, the auto mechanic who wants to open his own shop, or from my background, the printing press operator who wanted to open his own print shop.
[00:12:40] It’s a completely different, uh, job. And I love, uh, Gerber’s book, and I love that subtitle, What’s Wrong With Every Business and How to Fix It. Um, but, uh, I guess what I’m driving at is. Do sometimes people come to the realization that maybe they want to go back to being a [00:13:00] mechanic instead of running an auto shop?
[00:13:02] Do you ever run into that?
[00:13:04] Doug Wick:
I have, you know, a number of times we had a, um, a value guarantee with, um, all of my, um, coaching. I’ve had a value guarantee. If you’re not satisfied within, in one case, it was three meetings. And now it’s usually within three minutes, three months, I will, um, you know, I will give them back their entire investment.
[00:13:26] If that’s, they feel that, or, or whatever they feel it was worth at that point. And I can recall a couple of customers. One, uh, one was a restaurant owner who’s. Um, wife was the cook and she decided to divorce him. So he said, I’m going to, yeah, that was, that was a difficult and another one who simply told me he ran a, um, a school supply and he said, you know what, this is too much work.
[00:13:51] I don’t want to do it. I’m I’ll just run my business the way it was. And now I’m, I’m going to get out of it, you know, because it was to him, [00:14:00] too much of an investment of his time. Compared to what the way he had been doing it. So those were the two cases I can recall where I own, where I had to, uh, give back the investment that they had provided.
[00:14:12] Uh, and usually it was very shortly after I got started like one or two meetings in.
[00:14:18] Frank Felker:
Now, what types are, or let me put it a different way. Is an operating system more effective or make better sense for certain vertical industries and, or. Businesses of a certain size.
[00:14:33] Doug Wick:
Well, if the only size that I can think of that it wouldn’t make sense for is or and even then I think it would make sense just one person, right?
[00:14:43] You know how to do it. So, you know, but if the minute you start hiring one person or two people or three people, the complexity. Of your business, more than doubles with each person you, you add. And so [00:15:00] somehow I, if you want to run a consistent, predictable business, you need to, you need to have documented systems so that people follow that procedure, because otherwise they’re going to fumble around.
[00:15:18] If you’ve been doing something a certain way and it’s been successful, then why would you, why would you not want the next person to do it as well that way? And, and then the documentation also allows you the opportunity to go, well, it isn’t working. Let’s look at it and evaluate it. And maybe we can tweak this.
[00:15:41] Maybe we can tweak that. And you can make those adjustments. And actually what you should be doing then is measuring the outcomes, of course, as well to determine did that tweak help or not. And that’s something too frequently that businesses don’t want to take the time to [00:16:00] do. And in doing so, you know, they fail to learn and fail to grow.
[00:16:06] And in many cases, that’s why businesses fail.
[00:16:09] Frank Felker:
So Doug, you coach the Scaling Up system, also known as Gazelles, and it contains four components, uh, or four decisions, uh, people decisions, strategy decisions, execution decisions, and cash decisions. Now, let’s start with the people decisions. I love this.
[00:16:33] Getting the right people. In the right seats, doing the right things, right is the first order of business. Let me read that again. Getting the right people in the right seats, doing the right things right is the first order of business. So, that seems pretty, uh, self explanatory, but what, what does that really mean for a, If you could give us like a sample business.
[00:16:56] Doug Wick:
When I introduced those four decisions, I usually [00:17:00] share with those, with my customers, what’s the outcome of getting people’s strategy and execution right. And I define people by a harmonious. Uh, culture of accountability in essence that helps people understand and in fact when I go through all four of them and give the definitions, we usually arrive at, um, one of those four.
[00:17:27] That is giving them the most pain. It’s like the rock in their shoe that constantly is aggravating them. So in the case of people, a harmonious culture of accountability tells you, are you people getting along and are they accountable? Are they, are they getting things done? And in order, um, to achieve that.
[00:17:48] And if you’re, you’re not achieving that, we have tools and resources to help you do that. First of all, it starts with hiring and we, we, uh, uh, provide. Uh, [00:18:00] resources to help them use the top grading methodology, which is what, uh, GE used to hire a players at their, uh, when, when Jack Welch was there. Uh, and it’s a, it’s a very thorough process that helps people identify, uh, you know, what are the job accountabilities, what are the, the, uh, metrics that they should have?
[00:18:19] What is the cultural, um, makeup? In other words, you’ve got a, you’ve got core values you should be interviewing to make sure that the people you’re hiring. Have the same values that your business has and so all that is incorporated There’s a it’s a long interview process And and then there’s elements of that as well that we go through in the performance appraisals and so forth that use that same Scorecard that we hired the person for to help with the evaluation process I’m not a big fan of Believer in having evaluations on an annual basis.
[00:18:58] I think people should be [00:19:00] evaluated every week if possible and, and certainly no less than monthly. And it should be based on a objective and subjective criteria. The objective being, these are the metrics. The accountabilities you have and the subjective being the ones that are the core values of a business.
[00:19:19] So that’s, that’s in essence, the people part of the business. I, and how to achieve the, that, uh, harmonious culture of accountability.
[00:19:30] Frank Felker:
That is wonderful stuff. I learned a lot from you right there, Doug. I, uh, I produced a number of years ago an online course called How to Hire and Keep Great People, and, uh, I’m hoping to get that also turned into a book at some point in the future.
[00:19:44] But the idea of doing, uh, Uh, evaluations that frequently, uh, that, uh, that sound, it makes a lot of sense, but I could see where a lot of managers and owners would shy away from that. I’m sorry, I don’t want to go down a rabbit hole on that. And in fact, so many things that you said [00:20:00] we could spend an hour on each point, but unfortunately we can’t do that.
[00:20:04] So the next, uh, group of decisions are strategy decisions. And from the research that I did, I found that. Gazelles has something called seven strata of strategy. Now, we don’t have time to delve down into all those strata, uh, but can you give us just sort of an overview of what areas of strategy you develop as part of the creation of this operating system?
[00:20:30] Doug Wick:
Yeah, strategy, um, going back to the idea of what’s the outcome. Strategy is, uh, the outcome of getting strategy right. Is top line revenue growth. And, and really what we mean by that is you should be growing faster than your industry. Um, probably about 10 times faster if you have the correct strategy. And so, um, not 10 times, 10 percent faster.
[00:20:57] I’m, I’m sorry. Thank you for correcting me [00:21:00] there. And there, you know, there’s a number of pieces in that, what, what Vern found in that, uh, to briefly talk about the seven strata of strategy during, uh, during 2008 to 2010 when the country was going through a recession, he looked through, um, the, um, uh, the businesses that were doing well at that time, despite the recession.
[00:21:22] And what he found was that those businesses that were doing well had these seven elements included. They had, um, a distinction in terms of a differentiating extinction. They had a one phrase strategy. They had a brand promise and several other things. And so, um, one of the other tools that I use is, um, from, um, uh, metronomics that, um, is very closely related to, um, um, scaling up.
[00:21:48] And there’s a key attribution framework, very similar to what, how a key, uh, And Southwest Airlines determined where are we going to be? What you have to do is identify [00:22:00] how are we different and then plan for the next three years, how are we going to exploit those differences and, and really then project that over to the future.
[00:22:11] The next what it would be, um, uh, 12 quarters, how are we going to take this advantage, um, that, that we’ve identified, we usually try and identify three to five different, um, attributes that you have a distinct advantage over your competitor and then expand upon them. So within three years, you have an idea, this is where we want to be in three years, which helps that gap increase and therefore increase.
[00:22:43] The value customers perceive you at that’s part of the idea of top line revenue growth and how you can build yourself. What another one is, um, an X factor, um, which is having a, uh, a 10 time advantage, which is difficult to do, but most companies don’t [00:23:00] even start looking at that. I had a car wash that was able to actually determine, uh, I can remember him struggling at, this is a long time ago before I think car washes realize the value.
[00:23:11] Of, um, the, um, carwash memberships. And, and he was in a, a, uh, workshop where he was thinking about getting rid of, because he said, well, these people have, um, credit cards and every month, I don’t have anybody to call them. And, you know, a lot of them are having problems with their credit card. They’ve been, uh, defrauded or whatever.
[00:23:32] And so we just don’t even, we’re thinking about canceling it. And when he went through and looked at the value. Of those customers who are membership customers paying him, you know, um, a membership fee. Whether the car wash was open or not, and they would pay him at the front front part of the month. Every month, he recognized those customers were 10 times more valuable than his [00:24:00] regular customers.
[00:24:00] That was back in like 2009 or 2010. And I think you’ll see, I think you see if you go to a car wash now, they’re almost all Uh, trying to get you to be a member. And what he did was he revamped his whole business. He says, Doug, I’m not in the carwash business. I’m in the membership business. And he focused on customer satisfaction and, uh, he has.
[00:24:21] He told me when I talked to him just about two months ago, he said, I have a million dollars in revenue coming in every month just on my memory. Yeah. He’s got nine car washes out in the San Francisco Bay area. So he’s doing very well.
[00:24:36] Frank Felker: God bless him. That’s amazing.
[00:24:39] Marty M. Fahncke:
So it sounds like chime in here really quick.
[00:24:42] Sure, because this is, it’s incredible that you’re talking about car washes, Doug, because I actually use this as a case study for a whole different reason, which is, um, a regular service based car wash, valuation multiple of a business is probably going to be around three [00:25:00] times, maybe three and a half times its profit in value.
[00:25:03] So if it’s doing 12 million a year and it’s profiting, Let’s say 2 million a year, the, the owner could sell that for probably 6 million, but here’s, what’s interesting is by turning that into a membership business, um, that same 12 million a year doing 2 million a year profit is worth somewhere between seven and nine times its profit.
[00:25:28] So that business could be sold for between 14. And 18 million, the exact same business. So there’s a whole other reason to, uh, to do that. So I didn’t know you were going to talk about a, uh, a recurring revenue model case study, Doug, but Oh my gosh, it’s so huge. If you, if you’re a business that can do that, and by the way, any business could do it.
[00:25:51] Um, people don’t think about it, but any business could do it with a little creativity. All right, sorry. I’m going to jump back out, but there’s a massive difference in those two business valuations for [00:26:00] the exact same.
[00:26:00] Doug Wick:
Yeah. Yeah, we have a, we in, in the strategy element, um, of our scaling up work, we have a specific slide deck that we look at the different models of recurring revenue to help our customers build that and, and, and actually locate or identify an opportunity with a recurring revenue.
[00:26:21] Frank Felker:
phenomenal. Good point. That’s amazing. So, uh, thank you so much for, uh, joining in with that, Marty, because that’s what it’s all about, is the value that you’re building, the asset that you’re building over time, uh, and what a difference in terms of leverage, when really, the nuts and bolts of the business changed very little.
[00:26:44] Um, what I was going to ask you, Doug, it sounds like, uh, everything under those seven strata, it relates to marketing. Is that correct?
[00:26:53] Doug Wick:
Pretty close. Although, um, you know, as an example, identifying your X factor is not necessarily a, [00:27:00] um, uh, a marketing function as much as it’s a financial function and being aware of how your, um, your, um, business operates, but they are, they, a lot of them are very related to, uh, to marketing.
[00:27:13] Yes.
[00:27:14] Frank Felker:
Okay. I just, I’m always trying to make sure I understand what we’re talking about here. Um, okay. The next set of decisions. Uh, revolve around execution. So what is it you’re referring to in that group of decisions?
[00:27:30] Doug Wick:
Execution again, the outcome, uh, or the result of getting it execution, right, is What I’d call profit or efficiency and profit is the best measure of whether or not your business is being efficient.
[00:27:44] And so what, what we need to do there, a lot of this is systems related, but very much so it’s involved in the meeting rhythms. We call it a cadence of accountability where you have, um, meeting rhythms, uh, [00:28:00] daily huddles, weekly meetings, monthly meetings, quarterly meetings, annual meetings, then you have a dashboard that.
[00:28:07] Monitors the goals for the year and for the quarter. And most importantly, you know, once you break down the year, then you divide it into four quarters with the idea of we’re going to focus on this one thing with some associated, um, priorities as well. But usually every quarter has a one thing focus and the rest of the objectives or.
[00:28:32] Priorities. I think I use that term loosely are hinged on making that one priority so that you’re moving the needle, so to speak, on the business, improving and performing better. And so again, a lot of times what we do at the very beginning is decide which of those four decisions are the most critical.
[00:28:58] And that’s then [00:29:00] what we decide, okay, we’re going to focus on people this, you know, in hiring the right people. And so then we break down into themes. And quarterly priorities, each of the, the quarters so that we’re focusing on an aspect of probably hiring people, um, uh, motivating people, coaching people and so forth as we go through the year.
[00:29:21] Frank Felker:
You know, one thing that occurs to me is that, uh, I use the expression sometimes, uh, when trying to coach somebody who’s thinking about, uh, becoming a business owner, uh, an aspirational, uh, entrepreneur, shall we say. And as I use the expression, it’s serious business. And the reason I bring it up here is as I’m listening to you.
[00:29:45] A business owner who would implement this type of stuff is serious about their business. They’re not playing around. They’re, they’re serious about execution. And, um, so it’s something again, like, uh, you mentioned those two people who decided they didn’t want to be [00:30:00] in business anymore. It’s not for everyone, is it?
[00:30:03] Doug Wick:
No, it isn’t. I, I, and I find, you know, unfortunately that some of the, you know, I, I have one client who’s been, um, back and forth as a, a customer and his biggest problem is he, He, uh, I think he likes the drama of being interrupted constantly. And so he never, he never, he cannot, he can’t get into routine when we’ve been, when I’ve been coaching with him, it’s been frustrating.
[00:30:29] And I’ve finally decided I can’t work with you unless you’re going to dedicate the time and get him providing one hour or an hour and a half for us to meet. And then for him to set those times up to have his team, his leadership team me. It’s just, um, something you just, you know, it, it, um, it doesn’t work for him because he likes to be either a free spirit or not be governed by, um, [00:31:00] that kind of regimen and that kind of routine.
[00:31:02] And
[00:31:03] Marty M. Fahncke:
I’ve seen something in business owners where they, it’s a, it’s almost an ego or a, or a self, um, confidence thing. It’s like, um, If, if, if everybody doesn’t have to come to them for everything, then they feel like they’re not important. And of course we know how successful a business is where the owner has to decide every decision.
[00:31:26] Doug Wick:
It’s usually not, but I don’t think they don’t get it. That that’s not, you know, when, if everybody’s coming to you, That’s not a business, you know, right.
[00:31:34] Marty M. Fahncke:
But they think that if I’m not needed, then I’ve lost my value and self importance. And so I think some of, I see business owners who almost self sabotage success for that desire to be needed, everything to go through them every day.
[00:31:49] Doug Wick:
Yeah, it’s kind of odd because this guy goes, I’m a smart guy. Why don’t, I’m trying to tell him, but it’s just like, It just hasn’t clicked with him that [00:32:00] that’s um that that he needs to let go, you know And he needs to hire people to take care of the things that he’s right being bombarded with constantly
[00:32:11] Frank Felker:
I worked for a guy one time who uh Was the ceo of a 400 million dollar privately held business and he Always, uh, showed up for every meeting on time and, uh, and any time, whether it’s a client or you name it, I’ve got somebody telling me they’re too busy, uh, you know, to show up or even call and let you know they’re not going to make it.
[00:32:36] I think about that guy and think, yeah, nobody was more busy than that guy. Uh, so the final, uh, group of decisions revolve around cash. There’s a whole list of them here. One that I thought was great. I love the expression, had not heard before. Harvesting the profits and distributing them as dividends. I really like that expression.
[00:32:58] So, in addition to [00:33:00] that, what, uh, sort of cash decisions is. Will we codify in our operating system?
[00:33:06] Doug Wick:
So, you know, cash is really, um, again, going back to the idea of what’s the outcome of getting cash, right? That, that decision, right? The cash decision is about oxygen and options. I like to tell my customers that when.
[00:33:26] Newborn, uh, is in, you know, is brought into the world. Love is like oxygen to a baby. All right. Well, to a business, oxygen is cash. You can’t operate your business unless you have cash. And I think too many business owners don’t realize how valuable cash is to the growth of the business. If you don’t have cash.
[00:33:54] You can’t keep funneling the growth of your business. I learned that very early on in [00:34:00] my career. When I was in radio, we were, we, we set out, um, one year, the very first year to, I think, do a half million dollars in business, you have to put up a radio tower, you have to put up a building, you have to hire, you know, like 10 different people, well, all that sucks cash and growth sucks cash.
[00:34:20] So you have to figure out how are you going to. Cashflow this business. What kind of funding do you need up front? And most importantly, how do you get your customers to fund your growth? You know, Marty knows this more than anything. The cash part of the business is really what determines the value of your business.
[00:34:42] And so when you have cash. You have options. You have options to, you know, my other, that, that customer I was talking about, they, they literally buy every one of their competitors because they have a lot of cash and that’s been working, but I don’t know how long it’s going to continue to work for. So if you have [00:35:00] cash in the bank, It increases the value of your business.
[00:35:05] And so what we try and teach our people with, we have something called the cash flow story, which is a, is a software that, uh, an Australian company has put together that looks at a business and helps them decide there are seven levers that either lead to greater profit or cash or both. A lot of times what people don’t realize is that just raising your price can have a significant effect on, um, your cash and your profit, but significantly on, on your, uh, cash flow.
[00:35:40] And most owners are really reluctant to do that and don’t evaluate the business that they have and recognize that they’re That some customers are losing money on or making such a margin You know a paper thin margin. They’d be better off not having those customers and [00:36:00] so that gets into the marketing aspect of two of that two is which is identifying who are your Best customers who are your ideal customers who buy you for a profit?
[00:36:12] Rewards you with loyalty as well. So there’s a lot to the cash flow process, but understanding that is so Important particularly for selling a business but for growing a business because if you don’t have to cash funds You’re constantly going to the bank and that’s gonna they’re gonna quit giving you money At some point, if you still don’t start showing a profit,
[00:36:36] Marty M. Fahncke:
I’ve got a, I’ve got a comment.
[00:36:37] So one of the businesses that I own, we just had this conversation, Doug, because of the process, as you’re talking about. And so I was working with my business partner on it. And that’s not this one that we’re talking about, but it’s a different one. And, um, there was an employee and he was like, well, I’d kind of like, you know, I’d kind of like to get rid of this employee, but if I, if I lose this employee, they’ve kind of got these dedicated clients that they’re [00:37:00] working with and I’d lose these clients.
[00:37:02] And I, I, I did some math and I said, well, guess what? You’re losing money. The amount that you’re paying this really overpaid employee is actually more than the profit margin of your, the clients that you’d lose if you lost that employee. So it fits exactly what you just said, but without doing that cash analysis, that never would have come to light.
[00:37:22] It was just like, oh, I don’t want to lose these, these clients. So I can’t get rid of this employee. And so we were able to make the right decision about a plan to do that. And part of that actually was raising prices because I, I submit here, we are in late 2024 that there is a, never been an easier time for a business to raise prices.
[00:37:41] And every business should be looking at where their prices are because we’re all getting, we’re all getting hit with, I mean, everything’s more right. Gas, bread, everything else, but even on professional services. There’s not a piece of software that I subscribe to that hasn’t had a price increase in the last 90 days.
[00:37:56] There’s not anything that I do that people have. I mean, well, sorry, we’re having to [00:38:00] raise our rates. Guess what? We’re almost getting immune to it, unfortunately. But for fortunately for a business owner is right now you can raise prices and people like, yeah, it makes sense. Like cost more, you know, you got to pay 10 percent increase or 15 percent increase.
[00:38:15] And there’s almost no resistance. A lot of business owners are like, Oh my gosh, if I raise my prices, all my clients will flee. They won’t. Maybe you’ll lose one, you know, more than make up for it by raising your prices. So your advice to raise prices, Doug, now’s the time to do it.
[00:38:30] Doug Wick:
Yeah. In fact, in fact, if you, um, if you don’t lose customers when you raise your prices, maybe something else is wrong with that.
[00:38:37] There’s a, um, there’s a, um, video. I. And, and it’s from Greg Crabtree. There’s a great book he has called Simple Numbers. And, uh, there’s a way to go in and look at your financials and determine what each of your employees is actually producing. So you can get a number on, we used, um, uh, one of my clients, we used [00:39:00] to his, um, formulas.
[00:39:01] When they were looking to hire a salesperson to figure out how much, um, is this person going to need to produce if we pay them 125, 000 and that kind of, um, uh, value when you can determine before you even hire the person, what they’re going to produce, what they need to produce. you know, helps you make decisions as you move forward.
[00:39:25] And if they’re not doing it in six months or nine months, maybe you need to reevaluate that higher and so forth. But there are so many ways that you can look at your employees numbers, your customer numbers to evaluate them to determine are they as profitable? Do you think they are? What value are they bringing?
[00:39:45] And maybe you even need to, uh, restructure your business to focus on a different customer because that’s where you’re making the money and you’re not putting enough resources to it versus putting resources to something that you’re losing money on or making [00:40:00] very little. So those are the types of things we do and help within the cash area.
[00:40:07] Frank Felker:
That’s great stuff, gentlemen. I really, every business could benefit from listening to what you two just had to say. I, uh, I have a thing I encourage my clients to do sometimes, which is fire the customer. Um, and it’s for that very reason, you’re either not making enough or For the amount of hassle they bring or you’re actually losing money.
[00:40:31] But you know, the old joke is making it up on volume
[00:40:37] Well, we are running short of time here I wanted to I Figured many people are watching and listening or thinking. Okay, I get it. I want the Benefits that come from having an operating system, structured ways of doing things, uh, being able to exit myself, uh, from the business, being able to maximize the value of my business for [00:41:00] sale and so forth.
[00:41:01] How do I get started, Doug? Where do I get started either outlining or writing my operating system?
[00:41:09] Doug Wick:
Yeah, you know, there’s any number of ways that, you know, the traction EOS, um, scaling up, um, uh, we, I naturally prefer scaling up, um, metronomics, uh, three egg way is another. Uh, example which follows very closely the same formulas, a lot of the same formulas that, uh, Scaling Up does.
[00:41:31] Uh, you, you could argue you could even go to the E Myth Revisited, although that probably is a little, that, that’s probably suitable for, for smaller businesses, but anything you can do to help systemize your business, uh, hire a coach, um, hire me. Thank you. Uh, but there are A lot of different operating systems out there and scaling up metronomics, um, EOS, those are [00:42:00] examples.
[00:42:00] And I would recommend just reading the books that are out there because if you read the book, you probably will go, this makes sense to me. This is what I’d like to, I could, uh, this process, this, uh, reading this book makes exactly what I think I could implement in my business. And, and then choose from, uh, either the book you’ve read or the options that you have to determine which is the best operating system.
[00:42:28] And, and then I would say even more is just as important is finding a coach that you feel you can work with somebody who’s going to hold you accountable. And that’s going to ask you the right questions to move you forward because that’s really what a coach is about. Asking the right questions and keeping your feet to the fire and making you accountable to achieving the results that you set out to.
[00:42:52] Frank Felker:
Wonderful. Well, the last question that comes to my mind is, let’s say we, we as the [00:43:00] business owner, Have decided to move forward with this and we’ve written our operating system and now we’re going to implement it. What sort of challenges are we going to run into? Uh, with, let’s say, our employees, our business partners, with ourselves, what, what sort of challenges do we need to be prepared to overcome as we move forward?
[00:43:23] Doug Wick:
You know, I think any business, just like Marty shared, there’s going to be people that are skeptical and you’re going to need to just ask them to devote time to it. 90 days to the system to follow it. There, there are a lot of software programs out there. You know, when Marty and I were working together, we didn’t have the software programs that we do now.
[00:43:49] Metronomics is a very good Um, software system that, um, it follows the process of they, they, they include the [00:44:00] job summary scorecards, the meeting rhythms so that people can go in their weekly meeting and type the information in for the meeting. It streamlines the whole process. It also then. Uh, keeps track of the revenue, the, um, uh, priorities that they have.
[00:44:18] And, and you, in fact, you go in there every day if you want, and you probably should be updating what you’re doing in terms of, um, the metrics for your business and it makes it really simple. And in most, uh, no time at all, that becomes kind of the Bible. For people to watch, to, for attending meetings, to keeping track of their, their metrics and achieving their, um, objectives and priorities for each quarter and that system, uh, because it’s a software system.
[00:44:51] Just makes this whole process a lot easier and, um, and simple to follow. So, um, I don’t, I’m not sure what Align has. I know, [00:45:00] um, uh, I shouldn’t say, uh, EOS has, but ScalingUp has another software system that they recommend, which is called Align, and that works very well, uh, to, uh, uh, they’ve, they’ve upgraded that and it’s very good as well to help keep.
[00:45:15] The people in the business and I would, uh, you know, aligned and consistent. I’d start with the leadership team and then cascade the system down to everybody else, because if the leaders don’t know what they’re doing and how to follow it, it’s going to be hard to get everybody else to follow it.
[00:45:35] Frank Felker:
Great, great advice.
[00:45:38] Now, uh, If someone did want to reach out to you, Doug, and ask for your help, what’s the best way for them to contact you?
[00:45:46] Doug Wick:
Yeah, my, my email address might be the best way. I can give you my phone number as well. That might be a little more difficult, but dwick at positioning systems. com and 319 [00:46:00] 393 2565.
[00:46:01] Again, 319 393 2565 is my phone number. Feel free to call me. I’m, um, you’ll either get my voicemail and I’ll call you right back. So, but email, email might be easiest and say it fastest way.
[00:46:15] Frank Felker:
I think your, uh, radio and broadcast experience came in there with that number again.
[00:46:23] Doug Wick: Thank you.
[00:46:26] Frank Felker:
Before we go, I always like to ask my guests if there’s a question that I have not asked you, but that I should have, or if there’s a thought that’s come to mind that you want to share before we go.
[00:46:38] Doug Wick:
You know, maybe it’s because of a couple of clients didn’t do this. That I, that I recommend that they do it. I would say one of the very first things you should do is write out a vision. Um, um, trying to, I can’t think of, uh, I think his name is Cameron Harreld. He has a, um, book [00:47:00] called, uh, double vision, I think it is.
[00:47:02] And he talks about being very specific about. Writing out your vision. Where are you going and why? Why are you doing this? I think a lot of times we forget about the why that we’re doing it. And when you combine that vision of this is where we’re going. So not only does the owner know, your employees know, you simplify by telling them the vision, how to act.
[00:47:34] And so, and the why does that as well. And when we don’t have those two working together, that’s where I think a lot of issues come in. If you know why you’re there, what your intention is in terms of what the business is supposed to produce, and why it’s producing that. You solve so many problems, so many issues, and not only that, [00:48:00] I don’t believe in motivation, I believe in inspiration.
[00:48:03] And the why provides the inspiration. So why are you in business? Communicate that. And I believe you’ll, you know, you’ll build a successful business.
[00:48:14] Marty M. Fahncke:
So Doug, it looks like Cameron Herald has two books that you might have been referencing. One is called Vivid Vision. And the other one is called double double.
[00:48:22] And you said double vision. So maybe you were combining the two.
[00:48:26] Doug Wick:
The one I, they’re both good, but I, the one I liked was double double, which is really about how to double your business. And he gives some very, it’s almost an operating system in itself there. Yeah.
[00:48:37] Marty M. Fahncke:
Yeah. The subtitle is how to double your revenue and profit in three years or less.
[00:48:41] So, um, interesting. I haven’t read that one before. It’s going on my reading list.
[00:48:45] Doug Wick:
Yeah. Cool. I think it’s very similar to, um, Metronomics, uh, Shannon Susco’s 3 Hag Way, which is in essence the same thing, although, uh, they get very good results. But the whole idea is to map out, [00:49:00] here’s what we’re going to do year one, here’s what we’re going to do in year three, and have a very, very, um, vivid vision on what that is going to be.
[00:49:08] Yeah. Well,
[00:49:10] Frank Felker:
Marty Fahncke and Doug Wick, thank you so much for joining me on Radio Free Enterprise today. Thank you. Thanks very much, Frank.
Thanks again to Marty and Doug, and thank you for joining us. Until next time, I’m Frank Felker saying, I’ll see you on the radio.
[00:49:29] Dude Walker: You can’t seem to turn a profit? Is that what’s eating you, Sparky? Well, you’ve come to the right place. Radio Free Enterprise.
