In this strategic episode, Justin Goodbread, CEO of Relentless Value Coaching, shares systems for building transferable businesses. If you struggle with low valuation or exit planning, you won’t want to miss it.
You will discover:
– What mindset shifts drive decamillionaire success
– Why systems reduce owner dependency for stage 5 exits
– How to optimize eight key areas for higher valuation
Episode Transcript
Scott Ritzheimer
Scott, hello, hello and welcome. Welcome once again to the start, scale and succeed podcast, the only podcast that grows with you through all seven stages of your journey. As a founder, and I’m your host, Scott Ritzheimer, and we’ve got a great episode today for those of you who’ve had some success in this entrepreneurial journey, you’ve reached stage four, stage five of the journey, you’ve got a business that’s working, and you’ve got an eye toward the future, asking yourself, what’s next? And so here with us today is Justin Goodbread, and we’ll get to his bio in just a second, but he’s gonna help us think about our exit, not just in terms of the dollars and cents, which is helpful, but the team that’s gonna help us get there and what leadership looks like through this changing process. So who’s Justin? He’s spent the last 30 years of his life building, growing and selling businesses. His dedication landed him at a decimal millionaire status before the age of 40, he spends his time now helping business owners to discover the proven system, to make more money, grow their market and get their life back. He’s a respected keynote speaker, Best Selling Author and coach of high performing financial advisors. Justin inspires advisors to rapidly scale their companies to seven, eight or nine figures with transferable values. Apart from being a successful business coach, Justin is also a YouTube personality, a top podcast host, serial entrepreneur and dynamic business educators here with us today. Justin, I love the book. Got me with the name your baby’s ugly as fantastic introductions. Very true. It doesn’t have to stay that way, hopefully. But in the as I was reading, there was this illustration that I’ve probably seen it a million times in a million ways, but it just stood out to me. It was this tale of two companies. And so for those of you who haven’t had a chance to read the book, we’re going to show you how you can read the book. But basically it’s this idea that there’s two companies, same revenue, same profit. Let’s assume the same industry, but then the similarities stop there. So one of the companies has, it’s got the systems and the processes, the software, the financial reporting, but the other doesn’t, and so out of the gate, Justin, to start us off, how big a difference does that make in an exit, you know, is it? Is it like 80% is set by the profit and revenue and revenue, and 20% by everything else? Or is there this a bigger part of the equation than we’re giving it credit?
Justin Goodbread
It could literally be seven, eight or nine figures in valuation between the difference of those two data points. So, as you illustrated and Company A, they have done vast improvements to modernize the company, to decentralize the owner, to create harmony and balance across the 256 metrics that a company can operate on. Whereas Company B did not, they are still founder LED. They are still founder choking. They are still working with old, archaic systems, probably more than likely trying to maximize profits for the shareholders or for the founder. And while in a lifestyle business, the vast majority of business owners love that idea of, Hey, how can I bring home more income? How can I create more liberty for myself if I’m able to make $2 million this year, $500,000 this year? Man, I’m living high on the hog, so to speak, as we would say here in the south. But whenever you look from a buyer’s perspective, they want to buy ROI, they want to buy a return on their purchase. And so they do not. They aren’t necessarily looking for high income in so much so as quote the golden goose, the old proverbial golden goose. So yeah, I mean, it could be, it could be significant valuation differences between a company that has prepared for the exit and one that is reactive in nature to your exact percentage point. There are studies done by the Academy and mergers and acquisitions advisors that so as much as 80% of the value could be attributed to the intangible assets of a company. The intangible assets of a company our systems, processes, people, things of that nature that we cover ad nauseam in the book.
Scott Ritzheimer
Yeah, yeah. So you lay this out, and it was just a real simple, helpful way, and it kind of sets the foundation for a couple more questions that we’re gonna ask here, but just walk us through. What are these? What are these ace eight aspects of taking care of our baby that we need to be paying attention to. And then we’ll one pack, a couple of these that I think are particularly important for our audience.
Justin Goodbread
Yeah, Scott, I grew up in the South man. I’m a country boy at heart. That’s who I am. And I can remember, you know, in this in the South Georgia heat, we would go to the playground, and there’d be this thing called a merry go round. I don’t see many of them anymore. You know, I’m showing my age here, but a merry go round was a big, round piece of metal that had these welded bars onto it, and you if you could get it spinning fast enough, it got fun. We were holding on for dear life, and he fell off. You laughed and giggled whenever I was growing up. Man, we had this guy named bubba. He was a typical bubba. You can almost see him in his mind’s eye. He was a man’s man. Big old guy. I mean, he was bigger than everybody else inside the group, and he he loved to use his size to his advantage. And so oftentimes we would get Bubba on one side of the merry go round, and us kids would be on the opposite side of the merry go round. And then when Bubba fell off, man, merry go round got out of whack. As business owners, I want you to use my little, simple example of Bubba in your mind. Now, in a business, there are eight areas that have to be in harmony for us to maximize the enterprise value, or the transferable value of business. There’s eight key areas. And every business has these eight areas. So the eight areas begin with leaders and with planning, where specifically you’re going to go every every company out there, every business owner, is doing some sort of planning. We might call it strategic planning, annual planning, something of that nature. Then you have leadership. How are you how are you imposing that vision to others, whether they can take the charge of the mantle and execute on the vision? That’s leadership. We have sales and marketing. That’s number two, and that’s number three and four, two different things, two different purposes. Oftentimes, small business owners will combine those two together, but they have two different purposes. So you have sales and marketing, you have people and operations. So that would be your internal people, your customers, your vendors, all the people who work within the business or touch to the business and operations is how we delivery upon the product, the service that the customers bought. And then the final, last two is finance and legal. Finance is basically a P, A, R, accounts payable, accounts receivable. You know, looking at almost like through the mind of a CFO, a chief operating officer and a CFO together. And then legal is all the risk things right? That would be insurance or legal documents. When you go to exit the company, definitive documents, things of that nature. What happens in business is we all start out we’re founders, as you said, phase one, we’re founders. And, you know, we roll our sleeves up and we’re tenacious, and we charge hell with a water pistol. We’re out there making it happen as we move through your seven phases, at some point, we’re going to reach the point to where everything is stagnant because of us, our abilities have caused us to hit a glass ceiling. Our leadership has caused us to hit a glass ceiling. Our market, whatever it may be, somewhere within those eight areas, we as founders find ourselves in the center of the merry go round. That’s the safest place to be, dude, whenever a bubble was on one side and somebody else on the other, if I could get to the middle of the merry go round, I’m not falling off. I’m sitting there watching everybody hanging off the side, waiting for them to fall off, right? So we as business owners get to the center because it feels safe. Reality is, is that’s not safe. It’s costly. What we want to do is totally exit the merry go round and have our friends, our big clients being offset by small clients, our dynamic key players being offset by maybe not the dynamic key players. You’re trying to build a business that is in harmony. And if you can do that without you, the owner, riding the merry go round. Am I a simple metaphor? If you can do that, then, dude, you built a business that an investor will literally line up and pay you bank for. Or you may say, You know what good brand, I don’t want to sell the company. I’ve been there. I’m right there. I’m on one of my own companies right now. That’s cool. Now, instead of an investor paying you bank, now you sit back and you’ve got the golden goose created that can operate without you, and you can collect your dividend, or you collect your income, and just sit back and enjoy the business from a different angle.
Scott Ritzheimer
Yeah. Speaking of different angles, you took a different angle in the book that I really, really appreciated, for folks who are familiar with the work that we do, we do a lot around leadership styles and how those relate to the actual tactics and strategy and planning of the business, and you do something very similar using the disc model. So why do these different personalities matter for these eight areas?
Justin Goodbread
Yeah, so the disc is one that, I say, is an owner’s simple barometer. It’s, you know, we could go to the Myers, Briggs, we know 16 personalities we can do. There’s a plethora of different types of personalities exams out there. To me, the disc is the simplest one that a founder, that an owner can look at. Don’t have to know all the details, but can recognize what’s happening in the company. So if you take those eight areas and we go back to my merry go round, there was one merry go round that when I would go to the park, one quarter of the merry go round was painted blue, one quarter was painted red, one quarters painted green, and one quarter quarters painted yellow. So we had this. You can look at the merry go round, and you could tell that it looked like a piece of pizza that had four different types of pizzas together, right? The same is true with with business. So you have planning and leadership. Is a quadrant that, let’s call that blue, sales and marketing are in alignment. People and operations are in alignment, and finance and legal are in alignment. But if we look at a company, the personalities needed to be the leader and the planner is different than the company than the personalities needed to handle people, HR and deal with operations. The personality is different between the sales and marketing team than that of legal and finance. And so if you take the disc theorem, disc stands for dominant, influential, steady and conscientious. So four different personalities without diving into the details of disc. Here’s a simple way to apply it. D is dominant. Oftentimes your CEO or your leader is going to be a higher D than any other personality type. And so if you understand that you have somebody in a leadership position and now they’re an high s personality, we’re gonna have some misalignment. There’s gonna be some problems. Or if they’re leaders, maybe they need to be leading the operations department, because that’s where the S would sit. So D is dominant, I is influential. Those are the fun loving people, right? They’re the life of the party. You walk in the room, their personality is bigger than the room, and you just love to be around. They make you feel good. They’re just fun, right? That’s not me, by the way. I’m like a high off the charge. D, so these people are just fun to be around. That’s typically your creatives. That’s your marketing your s are your checklist people, right? They would like to look through checklists. That’s operations minded people. Step one, step two, step three. Step one, a little b, step 1b, I mean, they have this mindset that goes through this checklist, and then your Cs are often the very analytics there’s typically your CEO, I’m sorry, CFOs, your chief compliance officers, your attorneys, the ones who want to fuss over a penny, where did that Penny come from? For me, as a D person, I was like, I don’t get a fly on flip. It’s one penny. But for them, it matters greatly, right? I also say attorneys love to fuss over commas and exclamation points. It matters to them. So why? Why these personalities matter from a business owners perspective, is, again, we want to build a business where it can operate without us. So if I’m looking at the business and I have a strong, dominant leader on my team who is a D, A D, i that means they’re dominant and they’re fun loving, there’s going to be conflict between that leader and the SC personality, because the dominant person, they’re not in the weeds. The s personality is down there building a checklist, and the C personality is going super deep into the weeds. When the business, what we often will see is most handedly, is your marketing and sales people, because their eye personalities are not in the weeds. They’re not super detailed. They’re fun. They can just say things and they want everybody else to deliver on them. Oftentimes, they’ll have a great amount of conflict between your the C personalities, those extreme detail persons. If you’re building a team that’s transferable, that’s the key, Scott, you want a team that a buyer will adopt, and they’ll they’ll bring into the comp their their presence, and the company will operate without you in the center of that merry go round. If you’re building a team that is transferable, then those personalities have to be weighted, using my little silly example of Bubba, they have to be weighted to where you don’t have one personality so much heavier than everybody else on the merry go round that the merry go round can’t operate. So from an owner’s perspective, just simply looking and saying, hey, you know, we’re having some struggling in our operations department, where they’re closing some deals, the sales team’s closing deals. But now here we are in operations, and we’re just not delivering. We’re running lethargically. We’re not living on time. We’re having a lot of QC issues. There is a disconnect between the sales department and the operations department. I would almost guarantee you that it’s a personality misalignment in the organization.
Scott Ritzheimer
Yeah, it’s so true, and there’s so many things that this start, starts to set into order for us, but one of them is just the recognition that you know, your idea of it being transferable is up to this point, the team you’ve built around you has always been around you. It’s been the team that you need to do your job right and to do their jobs. And this is really the first time that we started thinking about building a team that’s going to be here after us, and you need a balance of all of these, and sometimes that means filling the void that you’re going to leave behind, which is something a lot of folks don’t quite recognize. And what they end up doing is pulling their their sales ops person, right? Or, I’m sorry, sales marketing person, who’s an i, and putting them in a DC, and the whole thing really starts to struggle. So I love that overlay. It’s again, it’s in there in the book, and just adds so much clarity and color to what would otherwise be a really rote process of trying to get all the pieces in place. It’s really a human thing.
Justin Goodbread
Whenever you’re a founder, or whenever you’re scaling a business to replace you from being in the center of the merry go round, what I would often recommend this is how we coach our clients, is find the person opposite of you first. Most founders are going to be dominant type of personalities. Why? Because you had to have the grit and tenacity in order to charge hell with a water pistol, against all odds, against every business plan out there and say, No, I believe we can do this. So more than likely you’re a high D, you may be a DI, a DC, one of those personalities, like I’m a high D with a C, which is why I love building businesses, setting up teams, and getting myself out of the way and let them work. So that’s my personality. So if I’m going to hire somebody, I’m going to hire an S personality, somebody. I can take those things off my plate that I don’t care to know. I don’t want to know the step by step process on how we’re going to deliver this is what I want to accomplish as the founder of the company. I want to go in this direction figure it out. So I have to have a dynamic for me, as dynamic as I am on my high D, I have to have an off the charts s, personality. So my chief operating officer has got to be a stud. They have to be so if I go my stud opposite first. Now I’ve got some balance. Well, my other two quadrants on my merry go round. They may not have to have the same dynamic personality, but they have to be balanced. Where the handoff becomes is whenever I want to replace myself with a president or a new CEO or a new visionary, that is tough, and here’s why. Title of the book is, your baby’s ugly. It’s not by accident. My dad used to say growing up, he would say, Son, you never tell a woman their baby’s ugly, but if you do, you better run her duck, because they’re coming after you. Throw something after you. They gotta chase you down, but you don’t, because it’s my baby, the same pride that we have, like we would look at our kids, and that pride swells up within us. It converts to a hubris, pride real quick with us, founders that no one can do this as good as me, and that’s just not true. And so as we build the systems out, there comes a point and where we coach our clients to do is say, Go away for six months. And whenever I say that, if you’re listening to me and your heart just fell, it means you’re not ready for this. Okay, so you can build yourself to the point, but go away for six months. Let’s expose the problems in a six month time period, if you’ve done great leadership and great systems, and the company is not going to flounder because of lack of leadership if you built the structure properly, but after six months, you’re going to need a dynamic president, are gonna need a somebody within the key position where I like to lean into is finding somebody like me. Now, here’s the conflict. Opposites attract, similarities often repel. So the problem is that I often see within myself and with other founders, is when we go to replace ourselves, we start micromanaging our replacements. Austin Powers used to have the stupid video. They have mini me on there, right? We’re literally finding the Mini Me, not in a comical sense, but you’re finding somebody who can replace you. And when you do that, we end up seeing all the things we don’t like about ourselves in that person, and we micromanage and that, I gotta tell you, Scott, I’ve seen that cost in founders eight figures before, just not able to least control.
Scott Ritzheimer
Absolutely, absolutely. Justin, I think we could talk for about seven more hours, but I wanna be conscious of both your time and our audience’s time here. So before I let you go, I’ve got one more question for you, and that is this, what would you say is the biggest secret that you wish wasn’t a secret at all for those founders that are listening, that are in this place right now, what’s that one thing you wish that they knew?
Justin Goodbread
So we have a podcast called the DecaMillionaire Way. A new book is coming out. It’s gonna be talking about the DECA millionaire way. And the biggest secret that should not be a secret is the sheer amount of money that you’re going to need to have freedom. So I want you to think about it this way right now, you may be made paying yourself, let’s say, a quarter million dollars. That seems to be a number that seems to be a number that founders want to get to pay yourself. 20,000 a month, take home, pay more than likely, in your company. You’re also perhaps paying your significant other. You’re perhaps buying a car, cell phone, computers, trips, whatever else going through the company that your tax advisor has allowed you, when you start adding up all the benefits of your company in terms of compensation for yourself. It is not uncommon to see founders who are been to Finney economically at $400,000 a year, or $500,000 a year, or $600,000 a year. So I want you to think about this when you when you’re building a company, and more than likely 80% of your net worth is wrapped up in this company, and the only way that you’re going to gain true freedom is to turn this highly illiquid asset into a liquid asset. Because even if you build it to where you have the golden goose and you’re out on the beach one day, your still minds gonna be back there wondering, What if so, the only way you’re gonna have true mental freedom is to turn it from an illiquid asset to a liquid asset, which means that the amount of money you’re gonna need to say in your life is far greater than you ever imagined. So let’s per venture, say that you sold your company for $10 million by the time you pay Uncle Sam, by the time you pay the broker, by the time you pay the attorneys, the CPAs, the advisors, the broker, whoever else involved, it’s not uncommon to lose 1015, 20, 30% of the value. So let’s say it’s 10 million. And let’s just do some simple math, and let’s say that you lose 40% because you live in a high tax state and you didn’t do the planning right. You have $6 million 6 million times 5% is only 300 grand. The reality, the secret to what I’m the answer to your question, Scott, is this, you need to aim for a valuation of 10 million plus in today’s value if you’re even the least bit successful. And what got you to the point where you’re at today is not the same pathway that you’re gonna have to take to shift it from your current valuation to a DECA millionaire valuation. It’s a whole different amount of thinking. And that single thing that I wanna shout from the mountaintop and wave the Yellow Flag, the caution flag out there, is to say, friends, you. Don’t wait. Start building today. Start building your journey today. Figure out what that exit needs to be. Let’s backwards in calculating that data points and build that journey and then charge hell with a water pistol. Believe you can do it and make it happen.
Scott Ritzheimer
Yeah. So good, so good. Justin. Just fantastic, fantastic information, both in the book and here on the podcast, clearly an expert in what you do. I really appreciate your time and attention coming here and spending with us today, and for those of you who are watching and listening, you know that your time means the world to us. I hope you got as much out of this episode as I know I did, and I cannot wait to see you all next time, take care.
Contact Guest Name
Justin Goodbread has spent the last 30 years building, growing, and selling businesses. His dedication landed him at decamillionaire status before the age of 40. He spends his time now helping business owners discover the proven system to make more money, grow their impact, and get their life back. Respected keynote speaker, bestselling author, and coach of high-performing financial advisors, Justin inspires advisors to rapidly scale their companies to 7, 8, or 9-figure transferable values. Apart from being a successful business coach, Justin is also a YouTube personality, top podcast host, serial entrepreneur, and dynamic business educator.
Want to learn more about Justin Goodbread’s work at Relentless Value Coaching? Check out his website at https://www.justingoodbread.com/. Listen to his podcast DecMillionaire Decoded at https://podcasts.apple.com/us/podcast/decamillionaire-decoded/id1332958360 and grab a copy of his book on Amazon at https://www.amazon.com/Your-Babys-Ugly-Maximize-Business/dp/1732059934/ref=sr_1_1