George explores Referral-Driven Sales Process with Mike Garrison
Hi. This is George Salmon. I'm the founder and CEO of Growth Drive. Growth Drive is the number one best selling business advising platform, and this is our podcast, the business adviser hot seat. Now in the hot seat, you're gonna hear from industry leaders, thought leaders, your colleagues who are gonna share tips, techniques, war stories about building a thriving advisory business based on delivering client wins.
Speaker 1:We're gonna get into it. We'll get into it about the growth drive methodology, the clarity software, what we see out in the world, so much more than, than just the system. And I'm also the author of The Growth Driving Advisor, is based on over a decade of being an advisor to advisor, working with you and your colleagues, helping them build their practices, helping them through client engagements, and it it's, really proven strategies for leading businesses from stud to best in class. Check it out. So strap in.
Speaker 1:We're gonna light this up. Here we go.
Speaker 2:Good morning, Mike. Good morning, George. Let's get to it.
Speaker 3:Owner dependence. Owner dependence. Such a toxic, toxic trait in a business.
Speaker 2:And we're just really doing
Speaker 3:a teaser, aren't we? Well and because this is at the end of the day, you know, let's look back at the statistics. 62% of CEOs wanna grow. How do we know over 50,000 of them have told us? 21% wanna make their business easier to run or dependence, and 17% are preparing to sell.
Speaker 3:Somebody say it with me, owner dependence. And what is the biggest value killer? The number one reason that a business cannot successfully complete due diligence? Owner dependence. Owner dependence.
Speaker 2:As I like to say, guaranteeing a discount.
Speaker 3:You will get a discount guaranteed. Yeah. Which is which is,
Speaker 2:you know, on the one hand It's not joke
Speaker 3:about it, but it is horrible. What is this doing to business owners, their families, their stakeholders, their suppliers, their distributors, and their communities? Instead of saying it's for sale, you're saying it's on sale.
Speaker 2:Really? I like that. Think about it. Let's go ahead. Let's not bury the lead.
Speaker 2:Dear listener of the Sandman Growth Drive podcast. Right? So George and I have been known to have conversations.
Speaker 3:As we did this morning.
Speaker 2:At various times. And, and one of the things that came out and George brings out the best to me. Yeah. The best to me Brings out the best of me at all times, especially when unsupervised with wine. I blurted out something and I still believe it to be absolutely true, which is I think the number one factor for guaranteeing owner dependence is a lack of confidence by that owner in their sales.
Speaker 2:And I think the number one cause is outsourcing your source of confidence for your sales results to your marketing department if it exists. Right. And I think so much of this is like, Hey, I've got an effective senior leadership team. I designated one of my people as a marketing manager. Okay.
Speaker 2:Okay. That doesn't mean you have a marketing department. That means that you have filled a position in an org chart, but, like, how much strategic capacity does your marketing department have?
Speaker 3:Yeah. Well, and that and that brings me back to and I don't care if you have the best marketing department in the world If you do not have a sales process, dimension one, sales process, predictable profits and cash flow, sales process, getting sales off of the owner's desk, sales process, then you can have the best marketing team in the world, but you don't have a sales process to turn those leads that you paid a lot of money for into In one way or another. In one way or another.
Speaker 2:Right. And so, like, when you look at it so I think I think there's a couple of big endemic problems. The number one problem is is if you're a for profit company, which is I think the vast majority of your audience, you are a sales organization, period, because that's how you measure success. You measure success based upon sales, and then, of course, your ability to run the business so that you have profits from
Speaker 3:sales. Right? Yeah.
Speaker 2:Well, you know, like, it's what what are the three things? Profit. Right? Profit. Like, revenue without profit, not so helpful.
Speaker 3:Well, and as Mike Michalowicz says, you know, profit is the part of the cost of doing business. Right? Profit first. Totally. So, like, when you look at it, I think I think one of
Speaker 2:the problems where you have owner dependence is because you still have an organization that's running a mythology of sales. Right?
Speaker 3:Yeah. Tease that out. Would you?
Speaker 2:And so I, this just came out of a client, a conversation with a client I was having earlier a week. Actually, it was a round table I was doing in Charlotte and somebody was talking about sales and I go, you're actually talking about mythology. You're not talking about sales. Right. You're, you're talking about personality and things like that, which, which are a factor, but limited.
Speaker 2:Right. If your sales results are dependent upon one person and their relationships with other people because of their skills or whatever, you don't have a sales process, right? You've got something, right? Cause you've got results. But I think, I think a lot of the business owners in these closely held companies have mythologized or kind of created this fantasy around their sales acumen when in fact, they've just been able to survive because they were in charge of all the expenses in the business.
Speaker 2:And so you've got this faux concept of effective sales structure when really it's a owner who had all the advantages that most professional salespeople don't. Right. Which means that they can take money from anywhere in the business, who's by virtue of survivability created
Speaker 3:a sales organization. Yeah. Is that too controversial? No, that's not too controversial. And you know, I'm I'm actually guilty.
Speaker 3:You said let's not bury the lead and you brought us back and and let's let's go one one one diopter out The I got diopter into a sentence. How do you like that?
Speaker 2:I yeah. Okay. Pause. Okay. Pause.
Speaker 2:Did it work? Did it pause? Alright. Diopter. What the heck is a diopter?
Speaker 3:Well, let's just let's just keep it simple. What I'm talking about is opening up open up the aperture so that we know, we're going out one exponential level. And getting back to it's a conversation that actually started with didn't start with, but was most recently brought to mind by your friend of mine, Larry. And Larry has is working with several CEOs. Three of them have said, Hey, the biggest thing I want to solve for is owner dependence.
Speaker 3:Now that you can read that a number of different ways. We're choosing to read it as, Hey, make my business easier to run, or allow me to increase my make my business easier to run, and potentially give me the ability to exit the accountabilities chart. Well, now whether that's exiting the business or not, but I want to exit the accountabilities chart. Now, you and I started this morning was, know, a lot of these this manifest often in terms of sales emanating from going across the business owner's desk. Absolutely.
Speaker 2:Yeah. And the greatest example multimillion dollar financial services business are. They own all the relationships. Yeah. They own all the relationships.
Speaker 2:And and it's really interesting because if you it's it's one of the few. And the reason I bring this up is it's it is the outlier when it comes to valuation because it is horrifically owner dependent and yet the market pays huge multiples. And so what I've come to realize is that the market isn't always stupid. Right? And so the owner dependence is typically, I think, overinflated.
Speaker 2:Go ahead. Meaning that a lot of these business financial advisors have really deep, relationships with their clients. And because they're not really running a business, because they haven't looked at strategic capacity, because they haven't looked at it in, like, going through a clarity level one and really understanding, hey, senior leadership team and things like that. And so I think that the market will catch up a little bit, for example, right? You might have something that's a five X right now.
Speaker 2:Maybe five years from now, maybe that's not a five X anymore straight based upon AUM. Right? Because I think that the markets are going to mature and you're going to start seeing due diligence come into the valuations for the sales of financial services firms. Well, that's a
Speaker 3:really interesting point. Can I ask a question? Is part of what you're getting at there the fact that some of the strategic components of valuation are going to erode from specifically financial wealth advising firms.
Speaker 2:Yes. Like, and that that's a bigger
Speaker 3:mean, not awesome, but cool.
Speaker 2:Yeah. And here's why. I think a lot of that underdependence is emotionally driven by the owner in those firms. I mean, just not that many businesses where you can have seven employees and have a valuation of 25,000,000, right, and easily be able to get to 100 or 200,000,000 without adding employees. Right?
Speaker 3:Well, what's interesting is let's talk about there are at least two models for a wealth advisory firm being acquired. Model number one let's focus on model number one. I come in, I want your AUM, I do not care about your people, and I am going to simply buy your book of business, and you and the rest of your employees can just have a nice day. Thanks for that. Clear out your clear out your locker, son.
Speaker 3:Turn in your jock at the cage.
Speaker 2:Your calendar is now open. Yes. But you
Speaker 3:have been released to the industry.
Speaker 2:And if you're the owner, your wallet is fat.
Speaker 3:Yes. That's that is true. Now what's gonna be interesting, and I think am I anticipating your point, Mike? How does that play out from the clients? And we've seen private equity make this mistake time and again and again.
Speaker 3:How did the client experience then erode? Right. So so and this
Speaker 2:is where, like, what is it? So I'm going through I'm going through c three d right now, so my brain is just crushed with terms, but it's like, what are we looking to do? We're looking to drive.
Speaker 3:Your mind is aglow with terms, Michael.
Speaker 2:That's it. I'm learning. It's amazing. Like my brain isn't melting, but like one of the things that we're doing, the three areas of critical growth, right, is we're growing the transferable value of the business. Right?
Speaker 2:And I believe that we are at the latter end of value for financial services firms. And what I mean is, is the best are going to retain amazing value. The best are going to retain amazing value because they are going to become business owners and they are going to focus exclusively and heavily on how do I, how do I reduce the business's dependence upon me so that I can drive strategic capacity at all times. Right? So we're gonna focus on profitability, driving sustainable profitability, and we are gonna be working on maximizing the growth of the transferable nature of our business.
Speaker 2:And, and then what subscription revenue is going be sought after because instead of having these huge hedge funds just buying AUM, what I think you're going to start to see is you're gonna see a couple of gifted leaders that want the teams. Yes. They they are like, hey. I want branch offices that are up and running with great teams that are empowered senior leaders, and that's what they're going look for. When they find it, that business is never going to the public market.
Speaker 2:They are going to seek them out. They're going to find them. They're going to, they're going to create a graceful and wonderful exit for the business owner, but they're also going to empower like, very much like a really great PE firm or an a firm.
Speaker 3:You're basically talking about a roll up.
Speaker 2:Yeah. I'm 1000000% talking about a roll up, and it's something that if you and
Speaker 3:I had spare time Why do we talk at six in the morning? But, like, know, if you and
Speaker 2:I got licensed, this is what we would do. Yes. I mean, this is would roll up as many of these boutique firms in these different markets and be an incredible amount of money. Yes. Yeah.
Speaker 3:Can I can I cover a point that you just made that I wanna make sure that the uninitiated have?
Speaker 2:And the other thing real quickly is like, we we would be looking to grab the employee talent.
Speaker 3:Yes. Like, businesses are you've heard this in South, so I'm gonna repeat two things that I say. I feel like every class in c three d. So c three d is me, but it much more importantly is pros like Mike. We have a faculty.
Speaker 3:You know, you're you're you're, as I say, blessed to not have to listen to me for twenty hours. The so thing one, businesses is businesses and people forget this. Businesses is groups of people executing a process to generate revenue. Yes. That is all that a business is.
Speaker 3:And we are social animals. We crave people. And anyone who thinks that they can buy AU AUM and robo service it, it will be right, but probably not for a decade. Right? Or or maybe more.
Speaker 3:And it will play out well to a certain extent. But, man, there's a reason that I go to the Four Seasons if I have a choice between the Four Seasons and a Motel six. Motel six, comfortable bed, clean towel, clean shower, we're good.
Speaker 2:Bring your
Speaker 3:With ritz, I'm getting a different experience. And it is that experience when I'm walking around with real money to place, I want someone and I do not want your 28 year old college graduate with all due respect. Right? I want someone who gives me confidence. Now that's thing one.
Speaker 3:Thing two is you use the word strategic capacity. I use the word strategic capacity. What is strategic capacity? It is a measure of a business's ability to predictably and sustainably grow FCF, free cash flow. Predictably and sustainably grow free cash flow.
Speaker 3:And what do the private capital markets you know who I'm talking to. What do the private capital markets want? They want businesses that will predictably and sustainably grow FCF. Period. Please, people.
Speaker 3:Write it in Sharpie on your arm. As I say, I think in every single class in c three d also. Alright. I'm off my stump.
Speaker 2:So we gotta wrap it up because we have someplace else
Speaker 3:to be in. We have the coffee clutch. One minute.
Speaker 2:But this is the teaser. If you like this, send us some questions, especially from business owners. George and I'll maybe do an extended version, and maybe we pull in Larry.
Speaker 3:Yeah. We should absolutely pull in Larry.
Speaker 2:Let's do that.
Speaker 3:Alright, brother. Alright, man. I'll see you
Speaker 2:in the clutch. See you, man.
Speaker 3:Bye. Be good. Thank you. Goodbye, people. Thank you.
Speaker 3:Impromptu, but fun. I hope you got value from it. We'll talk soon.
Speaker 1:Hi. This is George. Thanks for listening. If you like what you heard, you can subscribe, like, and please take two secs to leave a review. It tells the world that you like what we're doing, and it helps us understand how we can improve this show.
Speaker 1:Thank you, and see you next time.
