Speaker 1: 0:00

This is the Empowering Healthy Business Podcast, and I'm your host, cal Wilder. Each episode, we'll dive into topics important to folks who want to run businesses that are both nicely profitable, sustainable and scalable, and who want to achieve balance in their lives and realize their potential inside and outside of work. This show is sponsored by SmartBooks. Provider of bookkeeping and accounting for businesses let's get started. Provider of bookkeeping and accounting for businesses let's get started. So I'm really intrigued by today's guest.

Speaker 1: 0:35

Most of us, founders and business owners, have this story ingrained in our heads that we need to sacrifice to build a business. We need to invest money, we need to invest time, we need to invest mental energy and effort and at some point it's going to pay off in the future. We have this story of delayed gratification and sometimes it works out great, and other times like we're perpetually delaying the payoff right. And so today's guest is going to challenge that notion. Today's guest is the CEO and founder of the Business Accelerator Institute and Perseverance Squared, where he's currently working as a business consultant with a strong background in law. So he started out as an attorney. He built a significant practice on managing small law firms, including founding the small law firm university, growing it to millions of dollars a year in revenue, building out a whole program associated with that. So, without further ado, I'm really excited to introduce James Brown. Welcome to the show, james.

Speaker 2: 1:38

Thank you, Cal, for having me today. I'm excited to be here.

Speaker 1: 1:43

So did you. When you started your business, did you share this belief that you needed to sacrifice in order to build a business?

Speaker 2: 1:52

I did at first, mostly because I didn't know any better. And I think that's a lot of what business owners go through is you don't know what you don't know. You don't know what you don't know and you hear from you know colleagues, mentors, other people that you know you got to put in the hours, you got to be there 24-7. You know you got to be involved in every part of it and something just didn't sit right with me about that. And the reason it didn't sit right with me was at the time I started my first business. I had a five-year-old, a two-year-old and a one-year-old and I was like I am not looking to trade away my time, that I'll never get back with them, you know. So, going into it, my most precious commodity to me was time, and so we set out to how do we build a business that allows us to buy that time back and challenge that doctrine of sacrifice myth that's out there?

Speaker 1: 3:02

And so how long did it take you to uh figure out what you think you figured out?

Speaker 2: 3:09

um within the first six months really yeah, because I mean, obviously you know when you, when we started, it was just like everybody else. I mean, my wife quit her job and came to work for me, so it was just me and her, but we had the three little ones and you know, we had to pick them up at 430, daycare closed. So it could either be okay, she's going to go pick them up and then I'm going to stay there till all hours of the night, or we're going to figure out a way that we can structure this business where we don't have to be there, and so that's one of the first things we did. I made it a commitment that I would not be in the office past 4.30 on any day, and I would not be in there on weekends unless I absolutely had to, and by absolutely had to I mean that there was an emergency and we had a defined set of emergencies. Other than that, I was going to maintain those boundaries. So how did I do it? And it was when we first started business. We're wearing all the hats right and everything is involved in us, and the sooner that we can start firing ourselves from those roles and removing the hats and hiring people that are actually better at those things than you are, the sooner that I can get my time back and I don't have to be there, the sooner that I can get my time back and I don't have to be there.

Speaker 2: 4:46

So initially, when we're first getting started, it's all about marketing and sales. Right, I'm trying to do both. But then, as we started signing up new clients, now we're having to do those sales conversations. We're signing them up, my wife is preparing all the work product. We're filing cases with court. Now it's requiring me to go to court three to four days a week.

Speaker 2: 5:11

So guess what? I had to start marking off the book where I couldn't do sales. So sales started to take a dive, revenue starts to take a dive. And so, as I was talking with a mentor at the time, he was like you need somebody to replace you and appear for you in court. And I'm like, well, I can't afford to do that. And his comments stuck with me to today. He said you can't afford not to. And sure enough, I got a contract attorney. I had her just do court appearances for me. Now my sales went back up, my marketing was back up, revenues coming back in. But then a funny thing happened and marketing started taking off so well that I couldn't do all the sales conversations Okay. And the demand for our services. The demand for our services the busiest time of day for us was between 4 pm and 7 pm. Well, that doesn't work out if I want to go home at 4.30.

Speaker 1: 6:12

Why is that? Because that's when people get off of work and call you because of legal problems.

Speaker 2: 6:16

Yep. Most of the time they were off work. I did consumer bankruptcy cases, so you know most of these people are blue collar, working two or three jobs. Sometimes they're coming to us between jobs and so that was the busiest time of the day. So my next hire was getting a salesperson and training them to do that role. Now I could be open from 8 am to 7 pm and do sales, and open on Saturday from 9 to 2 and do sales, but I didn't have to be there, and so that started that process of me taking those hats off.

Speaker 1: 6:56

I think a lot of people listening may think, wow, that sounds good, but I just can't afford to do that Kind of like you initially thought I just can't afford to do that, to do that Kind of like you initially thought I just can't afford to do that. And so part of this is like the core business model and pricing and cost of delivering service. Right when you start a business, if you're doing the service delivery yourself, you might think, ah, it's cheap to do service delivery because I don't cost anything, I'm the founder. But once you start employing or it's cheap to do sales because I just need to spend a couple hours a day talking to people and signing up clients. But if you have to employ somebody else and pay their wages and payroll taxes and benefits and everything associated with that, it looks like it gets expensive. So how did you overcome that hurdle and make it affordable?

Speaker 2: 7:43

Yeah, cal, that was a mindset shift that I had to get over, and this happened in two areas of my business. One is what you're talking about right now, in hiring people. The other is in marketing the business. We initially most business owners will initially look at that as an expense. Oh my gosh, that's an expense I can't bring on right now. But what we really I had to switch my mindset to that's an investment and I expect a return on investment. So if I can put a salesperson in there, I'm having to mark off the book because I'm going to court, so I'm losing sales. Every sale that I lose is $4,000. On average. I was not taking probably 10 to 12 sales calls a week because I was in court and we're closing around 65%. So let's say seven, seven people times an average sale value of 4,500, you know that's almost $35,000 a week. And I can hire that contract attorney for um. At the time I was paying her $25 a case to go and she would do maybe 10 to 20 cases. So let's say 20, she's you know she's making 500 bucks a week. But now I'm closing seven more clients a week and I'm making 35,000. That's a pretty good return on investment, right.

Speaker 2: 9:21

Then what was happening with the salesperson was the same thing. I started getting away from marketing, so sales opportunities were less. But by bringing in, my hours were restricted. So by bringing in a salesperson and expanding my hours I can add more consultations. So we increased the number of sales and that sales person I was getting around a five X return on his salary cost. After it's upped by 20% for benefits and taxes, I was getting about a five X.

Speaker 2: 9:59

So when I had that epiphany I started hiring people in such a way where we structured their compensation so that we would get a four to five X return. So, for example, an attorney I'm going to hire a full-time attorney. It's going to cost me 120,000 a year for that person, but I bill them out at $350 an hour and they're required to do 1500 hours a year of billable time times 350. That's $525,000 of revenue and he's costing me 120, right? So as long as I hold them and I give them enough work to bill 31 hours a week, then I'm getting a 5X return on that employee. So why wouldn't I do that all day long? And that's how you have to look at that.

Speaker 2: 10:58

Marketing is the same way A lot of people be like well, I can't afford to market because it's an expense. Well, I look for a 10X return on my investment on the marketing. So I ask people this question all the time. Cal, if I asked you to give me $1,000 today and I give you back $10,000 next week, would you do that? And everybody's like, yes, okay. Well, if I ask you to give me 10,000 next this week and I give you back a hundred thousand next week, would you do that? Yeah, well, then it's relative, right? So as long as we're getting the ROI, I was spending $25,000 a month on marketing just in the St Louis office, but I was bringing in 360,000 a month in revenue.

Speaker 1: 11:43

So I think the challenge there's two challenges with this One is you've got to have a business model built out so that you know you get your 5x or your 10x return on different kinds of spending. So you have to model it out like you did. And then you have to somehow get confident enough that if you hire these people to do these things for you, the business will come in. Because the nightmare is, you hire these people, you've got this big model, but then you don't have enough business coming in and you cannot support this infrastructure of staff that you've hired and it looks good on paper but you can't bring in the business. So how did you screw up your? How do you get your heart? You know, how do you get? How did you screw up your confidence enough to get to the point where you made those decisions?

Speaker 2: 12:31

Well, one of the things I realized was that if I'm going to fire myself from the busy work, that's not profitable.

Speaker 2: 12:41

The lowest and worst use of my time is actually working in production of whatever it is we sell Right, when I can hire an attorney for much less to do that or a paralegal.

Speaker 2: 12:53

So once I take that work off my plate, if I fill it back up with busy work, then you run into that situation you just described right Now. If I replace it with the highest and best use of my time, which is always marketing and sales, then that's when you start having those quantum leaps in revenue. So we have to be careful, like if I hire somebody and then I'm just over here doing production just a different kind or I'm doing admin work. I had one person tell me they spend about 20 hours a month doing their bookkeeping and I'm like why, right? That's busy work, that's not what am I doing today to grow the revenue of this business. That's the highest and best use of my time and it will always be for the owner. So when you hire that person, replace it with the stuff that is the highest and best use of your time and you won't run into that issue that you just mentioned.

Speaker 1: 13:59

You know it's. It's interesting because, as I hear you say, that brings back a lot of memories, a lot of situations I was in where you said the highest and best use of time with the founder and the owner is sales and marketing. And a lot of us who start businesses we're technicians. I mean, I'm a finance guy, you're an attorney. I got clients at SmartBooks who are software engineers. They're marketing professionals, they're technical people. They don't view themselves as marketing salespeople. So for them it's like I don't want to go sell, I'm kind of introverted. Can I just hire salespeople, make it work? And it's challenging.

Speaker 1: 14:40

And I did a whole episode episode number 33, challenging. And I did a whole episode episode number 33, the founder as chief salesperson with Chris Filipiak and we went through this in detail about how important it is for the founder to really master marketing and sales. And then, once you've built it all out and proven the model, then you can hire other people to step in and do it for you. But you've really got to master it yourself first. So is that kind of your experience? You had to master the sales and marketing process and then you could bring people in to replace yourself.

Speaker 2: 15:13

Yes, I would agree. I think anything in business, when we first initiate it or implement it, the owner has to be involved in it or implement it, the owner has to be involved in it. I want to understand how it works and how to dial the numbers into where I want them, and then I can train somebody else to step in my shoes and take it over. There's a couple of reasons to do that. Number one I need to understand enough of what's good, what's bad, what works, what doesn't, so that if I hire employees, I know enough that they can't pull the wool over my eyes, right, if I hold them to certain KPIs or expectations and they come in and say, oh well, certain KPIs or expectations, and they come in and say, oh well, I'm just so overwhelmed, this is taking a lot longer.

Speaker 2: 16:08

I know, no, I know exactly how long it takes because I've done it. I know what the sales closing rate can be because I did it for the first six months and I'm closing 70% of the people I talked to. So I know that that's physically possible. And now, as I train other people and remove myself, and then I train people to have redundancy so that if salesperson A is not there, salesperson B steps in. Now I've got a team that is meeting the expectations that I set up meeting the expectations that I set up, and so I always want to understand and I'll jump in when we do something new, but for it's for the purpose of understanding and then being able to properly train somebody else.

Speaker 1: 17:29

So you kind of had to do this because you had young kids and you just kind of made that decision A I've got young kids. I have to help out my wife can't do it all. And B I want to spend time with them. I don't necessarily have to, but I want to maybe. But you kind of had this catalyst. You had to figure this out pretty quickly.

Speaker 1: 17:49

And then others of us maybe we have the luxury of time where, you know, maybe we don't have a young kid we have to spend time with late afternoon, in the evenings, before they go to bed. Maybe we've saved some money and we don't have to pay our low bills out of this year's income from the business. So we have this luxury. But then it becomes you can kind of get feeling like you're stuck right. It's kind of we're stuck. You know, in theory we'd stuck. I don't. You know, in theory we'd like to do these things, but we don't have to. We don't have a catalyst. Nobody's putting a gun to our head to make us do it. Like this inertia thing is a big problem with a lot of people, I know. So did you feel like you just had to do it and you did it because you had to, or was? Was there a lot of inertia that you felt like you had to overcome?

Speaker 2: 18:39

No, I think I just felt like I I did it because I had to. And was it always easy? No, it's, it wasn't there. I mean I.

Speaker 2: 18:49

I tell people now I probably made more mistakes than you've even thought of, um, and been through it and learned the hard way Some of them.

Speaker 2: 18:58

You know we lost a lot of time and a lot of money in figuring it out, but at the end of the day, that goal of building a business that served me instead of the other way around when I look at it in hindsight, it wasn't that hard to do. It's that most people have that limiting belief that it can't be done that they're required to be chained to that business. And to me, if I've got a business where I have to serve it in order for it to survive, then what I mean I might as well go work for somebody else, you know, and be able to go home at the end of the day and not worry about all that stuff. And unfortunately, a lot of business owners will find themselves in that position. Now. They've got a business and they're chained to it 80 hour weeks or more, and they're making less money than when they were an employee, you know, and that's not a good situation to be in.

Speaker 1: 20:03

Yeah, there's that old saying of do you own a job or do you own a business. Right, and I think we're all trying to get to the point where we own a business with independent enterprise value that can stand on its own, but a lot of times we're stuck feeling like we own a job that we can't get away from.

Speaker 2: 20:20

Yeah, and I don't want anyone to have like a misconception that you can get it to this point and then you can just abdicate your responsibility and never show up to the business. I don't think that's a responsible thing to do. I think that the difference is I can choose to be there or I can choose not to be. Now, 80% of the time I chose to be there during my hours that I wanted to be there but I didn't have to be. Wanted to be there but I didn't have to be. And so that allowed me, like when my 12 year old uh, he was a, uh, a goalie in ice hockey and he tried out for a team in Minnesota and made a team USA. And then they, they traveled to Norway and played hockey for three weeks at Olympic um uh uh venues and I was able to go with them, you know, and be gone for three weeks and the business doesn't miss a beat.

Speaker 2: 21:20

We did a lot of volunteer work with the Red Cross and we would go on deployments when there's a hurricane or something like that and when they ask you hey, can you go? You have to leave within 24 hours and you're going to a place where there's likely no electricity, no phones and you're gone for 30, 35 days, and that business doesn't miss a beat. Right To me, that's the, that's kind of the culmination or the definition of that business serves me, you know, and so that is what I think a lot of business owners are striving to achieve. They just don't know how to get there. What were the?

Speaker 1: 22:03

first couple steps that you took.

Speaker 2: 22:07

The very first step was setting it in my mind that I'm not going to accept anything less than that. I refused to miss their childhood. I refused. I think part of that was because I grew up where my parents didn't come to any of my events. You know, I remember I was a senior in high school before. I remember my dad being at one of my varsity football games and I was like I'm not going to do that. And so now it's paying dividends, right, because my adult children have kids and they're showing up to all their events and they talk about it to this day how they remember we were always there, and to me that's more important than any money that the business can put in my pocket, you know. So that was number one was just creating that. I'm not accepting anything less. We're going home at 430. That's it. Now how do we build this around that when everybody's telling you that you can't right? No, I don't accept that. I think that created.

Speaker 2: 23:19

The number one rule I have in business is be different, be different. Don't just accept the norm, be different. And by always having that in my head, I always looked for ways to do things differently. That would be much better. Then I'd say the second step, the very next step, was deciding who that next logical hire would be. That would allow me to convert more of my time to hire in best use.

Speaker 2: 23:54

Going to court for me, you, literally I would go for, let's say, 20 cases. I would be there for four hours. I don't do anything but take notes. If I could send a legal assistant there to do it, I would, but an attorney had to be there but they didn't ask me any questions. They asked the client questions and you're. You know, not only are you there for three hours, but you have an hour each way to drive. Now my whole day is pretty much gone for me just to sit there and I hate to say it, but babysit, that's. There's no reason for me to be involved in that right. So that's how. That's number one. Look for ways that you can get that stuff off of you and push it down to the lowest paid competent person so that you can concentrate on higher and best use.

Speaker 1: 24:48

So when you work with clients now as a consultant, right, yes, so what's the process you go through to help them figure out how to get unstuck?

Speaker 2: 25:02

you go through to help them figure out how to get unstuck. So the first thing that I want to know with them, the very first thing, is what is their why for doing what they do right? Why did you choose to own a business rather than just get a job somewhere? Why did you choose your specialty over every other specialty you could choose? And the reason I want to know what that is is because there's going to be those hard days where nothing goes right and you have to have a strong why.

Speaker 2: 25:31

To fall back on on why you're doing this, I had a very blue collar background and I worked at General Motors for 11 years in undergraduate and law school and I worked with guys on the assembly line. I built 500 cars a day and, through no fault of their own, I saw a lot of people getting laid off and losing property through no fault of theirs. No-transcript. How much do you need to make a year personally to live the life that you want to live Right? Maybe it's $100,000. Maybe it's $500,000. Okay, whatever that number is, now we can reverse engineer into how much revenue the business has to generate for you to pull that kind of money out. How many sales need to happen, based on your average sale value, how many leads we need to get, based on your internal conversion rate, and we start building that business plan. Then, once you have your marketing and sales kind of lined out, then it's okay.

Speaker 2: 27:19

If you're going to double your sales next year, what's going to break first in your factory? Do you need to upgrade technology? Do we need to do something there? If your factory is good, what about your people? Do we have enough people to do that amount of business? If not, who's the next logical hire and when? Right? So then we start, we go through all that. Once we have that all planned out, now it's execution time and we start holding them accountable. To where are we at in regards to our business plan? Are we on schedule, behind schedule, ahead of schedule? And why are we behind or ahead and do we need to make adjustments? And that's what I do most of the days in working with the business owners one-on-one.

Speaker 1: 28:10

I'm sure it wasn't all easy for you. I'm sure there's a lot of work, a lot of stress, mistakes, problems along the way. What were some of the biggest challenges as you started to delegate and bring on staff and extricate yourself from the day-to-day?

Speaker 2: 28:25

I think the biggest challenge in myself and the one that I see in business owners since 2018, I've worked with like over 450 business owners and and the biggest challenge I see is is in, in, right in here, it's right in here. Um, it'll either be limiting beliefs that we've developed the doctrine of sacrifice is one of them and to be able to break through those, because that's what keeps you stuck. I had one lady that her voice, her words, told me she wanted to be a multimillion dollar business owner, but her revenue levels kept hitting like 900,000, 950, 925, four years in a row. And I'm like what's the deal? Like why can't you break the million dollar mark? And she's like I don't know, I just can't figure it out.

Speaker 2: 29:24

And as we started digging into it, I said let me ask you a question what was your childhood like? And she goes well, what do you mean? I said did you have siblings? She said, yes, I go. How many? She said I had five and I was the oldest of the six of us. And I said okay, what do they do for a living? And she's like well, they're all like, they're all blue collar, I think the one the most. The one makes is like 50,000 a year.

Speaker 2: 29:54

And I said do you think that they would think differently of you if you were a millionaire? And she was just dead silent and she goes. I think you might have a point there, because I've always been the one they looked up to and I've always felt bad because they're working to make an hourly wage, you know, a 40, $50,000. And I said well, let me ask you this question how would you change personally if you made a million dollars next year? She said I wouldn't, I'm like, so why aren't we doing it? The next year she hit 1.8 million and she did right and it was a mental block that she had. And so mindset is one of the biggest challenges we have If we don't get out of our own way.

Speaker 1: 30:51

So how do you help people get out of their own way?

Speaker 2: 30:57

I've certainly been in my own way more times than I would like to admit, yeah yeah, I think it's first trying to figure out why it is that there's a block there. I would say the majority of the time it is either result revolving around a limiting belief or a terror barrier. Right, she was a, hers was a terror barrier. She was afraid to break the million dollar mark because she thought that they would think less of her. And so whenever we and that's natural, right, our body is wired in such a way where your brain is designed to keep you safe and comfortable right, all of a sudden, I want to take my business from where I'm comfortable to multi-million dollars. That's a scary thing. I need to hire 10 more people? Oh, that's a really scary thing, right, and so you start to do actions, whether it's subconsciously or consciously, in line with your brain trying to keep you comfortable. So you stay stuck.

Speaker 2: 32:05

So whenever I recognize something like that in anybody, I'll say let's take a step back. What is your fear of moving forward? And is it based in illusion or is it based in reality? Right, and we'd figured out with her that it was an illusion. She thought that they were going to think less of her, and that was actually the farthest from the truth. And so when you do that you step back and you go. Is this an illusion or is it like based in fact? And if there's nothing you can find in fact, then move forward and push through it. Right, and that's how you break through those terror berries and have those quantum leaps in your business.

Speaker 1: 32:50

So people listening, they could hire you and call you up and hire you, but you also wrote a book. If somebody just wants to tiptoe their way into exploring your approach, tell us about the book that you wrote.

Speaker 2: 33:02

Yeah, the book itself was called oh my gosh, what am I trying to think of? The name of it was Shift Happens, and basically it was at a time in 2008, 2009, when the economy really started to tank, the housing market crashed and I was asked to write this book on how business owners should approach an economy like this and what they can do about it, and so that specific book was written for that specific purpose. That specific book was written for that specific purpose. That one went to bestseller in three categories. The one that I have now is just a free one that I give away. It's the top 10 mistakes that can destroy your business. It basically goes through what are those top 10 things that I've been through, or I've seen people go through, that really has had a negative impact on the growth of their business?

Speaker 1: 34:07

Well, we don't have time to go through all 10, but like give us a hint.

Speaker 2: 34:16

What are. The first couple is when you go into marketing without understanding who your avatar, your A-plus client, looks like. Not only what they look like. A lot of people will tell you that, oh, they're 25 to 45-year-olds and they're, you know, mostly married or whatever. You know, whatever the demographics are. But a lot of people keep it short, that's it, that's all they go into, and I think that's one of the biggest mistakes. So then they take their money and they throw it at something where they get these demographics from a radio station or a print publication or Facebook or whatever it is, and so they throw their money at it and then they lose the money, and it's almost an approach where we're gambling with our marketing dollars because we don't truly understand our market. What I ask people to do is not only understand the demographic information of your perfect client, but what keeps them up at night. Number one what truly keeps them up at night? That you can solve that for them.

Speaker 2: 35:32

In my law firm I did consumer bankruptcy cases. So if somebody got a foreclosure notice, that's not their real concern. What's keeping them up at night is if they lose the house. They don't have anywhere they can go. They'd have to move in the middle of the night. It would be embarrassing. They may have to pull their kids out of school and they'd have to leave their friends. One of the things I've heard from people is my wife doesn't even know we're behind in house payments, right, that's what's keeping them up at night. So now I can craft my marketing messages that are directly targeted towards those things to keep them up at night. The second thing I want to know about them besides that is where do they get their information from? Right, if I can understand where they get their information from, now I can tilt the odds in my favor and choose marketing channels that they are participating in.

Speaker 2: 36:32

I learned that lesson. I was in a mastermind group and a bunch of lawyers were talking about doing radio. And I'm like, taking notes, like a young, naive business owner, and I'm like what stations are you on? They're like oh, we're putting 10 grand a month into news talk and sports talk radio. And I come back to St Louis andI throw $10,000 in news talk and sports talk radio and I got nothing, not a single call. Talking sports talk radio, and I got nothing, not a single call. And so I'm like why would that be that it's working like them, for gang bite, like gangbusters.

Speaker 2: 37:06

And so I started asking my prospects when they're signing their retainer agreement and hiring me. I said, hey, I got a question for you Do you listen to the radio? And they're like, yeah, we listened to the radio, okay Well. And they're like, yeah, we listen to the radio, okay well, what stations do you listen to? And they started to tell me Jazz 101, magic 108, jazz 101, magic 108. Those were the top two stations across all these people. And so I took that same $10,000 and put it on those stations and the phone rang off the hook. Right, and that was my biggest lesson in you you need to understand more about what keeps your prospects up at night and where they get their information from, and when you can do that, you have a much higher likelihood of getting that return on your marketing investment instead of just throwing it against the wall and seeing what sticks.

Speaker 1: 38:06

So if you, with the benefit of hindsight, everything you've learned so far in your career, you can go back and do it again, you know 10, 20 years ago. What would you tell yourself to do differently? It again you know 10, 20 years ago, what would you?

Speaker 2: 38:21

tell yourself to do differently. I would probably tell myself earlier on to pay attention to certain ratios in the. I didn't understand the financial data, and so my business wasn't as profitable as it could have been early on. Plenty of money was coming in, but plenty of money was going out, and so, along the way, I started learning about ratios, and there's three big expenses in every business. These are the biggest expenses in every business One is your payroll cost, two is your marketing expense and three is your occupancy expense.

Speaker 2: 39:10

I need to keep my payroll ratio between 33 and 43% of revenue. I want to keep my marketing, my marketing dollars, between nine and 11% of revenue, and I want my occupancy expense to be no more than four to 6% of revenue. As long as I manage those ratios, my net profit stayed between 35 and 40% and it stayed consistent. So as I grew revenue and I maintain ratios, then my net margin stayed the same. I have a lot of business owners that'll be like look, I doubled my revenue from last year to this year, but I didn't make any more money. And that was the biggest thing was they didn't manage ratios and I didn't do that early enough.

Speaker 1: 40:03

Yeah, those ratios are key. I mean, I look in my book, the Financial Operating System, step number three, and it is defining metrics and targets. So it's all about those ratios. Your labor, like I use the labor value multiple term, which is basically how many dollars of revenue or gross profit per dollar of direct labor costs. So in your business if you were trying to keep it in the low 30s, then you know you needed like a three to one, a 3.0 labor value multiple every dollar of service revenue. Yes, you know you could pay 30, 33 cents of that out in payroll and that was the ratio right. So it informed your staffing decisions, your pricing decisions, informed a lot.

Speaker 1: 40:47

Like one basic ratio. Like that it kind of gets to the core profitability of the entire business model and you can bring out a whole bunch of new business. But if you don't have the core ratio right in service delivery it won't work. So you could, like your example, your, your, your friend doubled his revenue but didn't make any more profit. Well, he didn't have the ratios going Right. And so I think that's that's really the key is trying to figure out what the short list of three to five key ratios are. Maybe it's only one ratio, but you know what are the top handful of ratios that really drive profitability in your business. And if you doubled your business over the next couple of years, what ratios do you need to keep in place to make sure you've doubled your profit at the same time?

Speaker 2: 41:31

Yeah, that's absolutely true and a lot of people they think the solution to that that gentleman that we just talked about his payroll ratio was 69% of his revenue, right, and then his other overhead was 47%. So if you add those two together that's 116%, right? And that's why he's not making money. And I said, look, you know, his solution for that was bring in more cases, more sales. I said you realize you're just bringing in more unprofitable sales, right? So we have to fix the ratios or you're not going to make a profit.

Speaker 1: 42:15

Yeah, you got to get the pricing up or the staff utilization percentage up, Correct, Correct, Correct. And in a service business there's only a few things that can really change. So luckily manufacturing is very complicated, but in a service business there's only a few variables. There's your pricing, your utilization, your overhead rate, your client pension, cost of client acquisition. There's like a handful of ratios that really matter in service businesses.

Speaker 2: 42:43

Yeah, I would agree.

Speaker 1: 42:46

So let me ask you this what kind of businesses do you ideally consult with these days and what specifically do you do with them?

Speaker 2: 42:58

The ones I consult with are mostly in the professional business, professional services sector, so not so much product-based businesses. I have one right now. It's a manufacturer and distributor of hard cider, so I have that one, but most of the other ones are doctors, lawyers. So I have that one, but most of the other ones are doctors, lawyers, accountants, tax strategists, therapists. So it's really the professional service businesses that I work with and you know I do a lot of one-on-one calls with them. We do three calls a month where we're going over that business plan, we're making sure we're implementing the things and they walk away with action items in order to implement in their business, to really drive that progress, you know. So that's really where iSh shine is in service-based businesses.

Speaker 1: 44:02

Okay, cool, and I want to ask you a little bit what you like to do outside of work. I know you mentioned volunteering with the Red Cross and that sounds kind of exciting doing disaster relief or emergency relief. Tell me more about that. How do you get into that?

Speaker 2: 44:16

Yeah, I love doing it. It happened to be where a tornado came through the St Louis area. I remember that day we were in, we went to the basement of our home and you could literally see the tornado out the basement window. So it touched down about a mile from us. It went through and it actually went across Lambert International Airport, blew all the windows in in the airport remembered international airport. Blew all the windows in in the airport, and so we tried to go out and volunteer and help clean up and the one organization that we thought we were helping out.

Speaker 2: 44:53

When we got into the neighborhoods they said, well, you can go in this one, but you can't help that one. You can help this one but you can't help that one. And I'm like, why is that? And it had to do with faith-based and they were only helping certain people, and that just kind of hit me wrong. So I was looking for another opportunity where there wasn't those restrictions. We're just there to help. And so Red Cross fit that bill for me.

Speaker 2: 45:22

Locally we work every Friday night from four to midnight my wife, my daughter and myself, and we go to the Red Cross headquarters here and there's a ready room and all of the fire scanners are in there and you're listening to the fire scanners, and if there's a residential fire, we go and we, during the fire, we canteen the firemen, you know, juice, coffee, snacks to keep their blood sugar up. And then we help the homeowners by getting them into a hotel and giving them a debit card with money on it for food and clothing until they can get a social worker assigned to them. And so we do that every Friday. And then we got involved in the national deployments because you know, when a disaster hits, you know you see those images on the news where people are just kind of like walking around their property in a daze because they don't, they don't have anywhere to go, they don't have it. So it's opening shelters, it's establishing, um, uh, feeding kitchens.

Speaker 2: 46:31

When we worked Hurricane Harvey about four or five years ago uh, as, actually longer than that, seven years ago we got down there. We drove what's called an emergency response vehicle. It looks like an ambulance, but basically these vehicles go to these Baptist church feeding kitchens that they set up and you pick up lunch and you go out into these neighborhoods that are destroyed and you provide meals and water and snacks, these neighborhoods that are destroyed and you provide meals and water and snacks and we would. We would feed maybe, uh, there'd be like 30 of these vehicles just for one kitchen and we would feed 50,000 people a day out of those kitchens.

Speaker 2: 47:11

And when we went to hurricane Harvey, we showed up and they're like what are you guys here to do? I said, well, we were here to drive an Irv. And they said, okay, what's your background? I told them I owned my own business. Okay, I'm going to have you in charge of setting up the kitchens. And I'm like, excuse me, like I've never done that before, but literally within five days, we had six of those kitchens set up, serving 300,000 meals twice a day. Um, and that that in and of itself just to walk into somebody's driveway and hand them a case of water and hot food, um, when they're trying to like put the pieces back together has been the most rewarding experience that I've ever had and it's something that we just have always continued to do.

Speaker 1: 48:05

Yeah, that's really inspiring. James, I'd like to understand a little bit more how you go about getting engaged with the Red Cross for this, because I know where I live. You know people love to put out lawn signs, make things their social media background to support different causes, but they're not actually doing anything. They're just expressing that they have good intentions or something, but you're actually out there doing stuff For people who actually want to do stuff. How do you engage with the Red Cross and get into the situation where you're actually going out every Friday night or every couple months when there's an emergency somewhere in the country? What's that process like?

Speaker 2: 48:47

Yeah, that's a great question. So every what I found out in the process, in researching it, was that every major city will have a local chapter of the Red Cross. We had our St Louis chapter, and so I reached out to them and I said you know, what kind of volunteer opportunities are there? Well, there's all kinds. There's the blood work side of the Red Cross, where you could volunteer on that side, or there's the disaster action team is what it's called. And so that appealed to me. So they said you just you got to come and take a two-day orientation class and you know, once you pass that, then you'll be on the local disaster action team. And then, once we were doing that, we shadowed some, some current Red Cross members, the volunteers, until we took over a vehicle of our own and then I became a disaster action team leader by doing that.

Speaker 2: 49:48

And then they have all of these online courses so that you can take courses in food safety. You have to take a course in food safety and then you have to go out and do a defensive driving course in order to qualify to drive one of those emergency response vehicles. You can if you want. If you don't want to drive an emergency response vehicle. You could set up shelters. You can work in this shelter. Medical personnel are coming out there.

Speaker 2: 50:16

You'd be surprised when we were at Hurricane Harvey coming out there, you'd be surprised when we were at Hurricane Harvey, there was areas that were flooded so bad that we literally would back our emergency response vehicle up to the water's edge and all of these John boats would come and we would load them up with the food. And then there was a guy back there that was out of oxygen tanks and you know he's 80 years old and he can't leave, he can't go anywhere, anywhere. So we were able to say, hey, call back to the, to the disaster operation center, and say I need to get some oxygen bottles out here. So they sent a nurse out with us the next day with 10 bottles and we had john boats come in and take him with the nurse and take him out to this guy, know, and so it's just to start that process. You just call your local chapter um and find out what training they have and when for new orientation.

Speaker 1: 51:10

Yeah, that's really inspiring. The older I get the, you know, the older I get, the older my kids that, the more I feel like I need to find something to uh give back to the world, so to speak, and get my children kind of ingrained in that habit as well.

Speaker 2: 51:28

Yeah, yeah, my kids love doing it. My daughter and my son do it with us. We've been on 15 deployments now, everything from wildfires to earthquakes, to tornadoes, to hurricanes, you know, and it's a pretty amazing experience to go through.

Speaker 1: 51:53

So, james, if folks want to follow up with you about anything from how to get more engaged with Red Cross or other organizations to you know your consulting services, what's the best way for them to reach you?

Speaker 2: 52:05

Yeah, we created a Cal, we created a welcome page just for them. If they go to businessacceleratorinstitute and then it's forward slash EHB for empowering healthy business, all right. So it's a joint landing page, just your brand, my brand, on there, they can go there. They can get the free download of the book Top 10 Mistakes to Destroy your Business. They can also set up a free discovery call with me if they're struggling with any aspect of their business and they want some quick pointers on that.

Speaker 1: 52:46

Well, that's great. We'll definitely get that into the show notes. But everybody listening that's businessacceleratorinstitute forward, slash EHB and check out all the resources that James is making available, you can tell he's very genuine, really cares. So if you're struggling with any of the things we've talked about, trying to take your business to the next level, want to get involved in the Red Cross, whatever it is, james is the man for you. So thank you, james, for spending the time with us all for this past hour or so. I really appreciate everything you've shared, certainly motivating for me and hopefully for listeners as well. Us all for this past hour or so. I really appreciate everything you've shared, certainly motivating for me and hopefully for listeners as well.

Speaker 2: 53:26

All right, Cal, I appreciate being here Looking forward. If you ever want me to come back, just let me know.

Speaker 1: 53:31

All right. Well, this has been another exciting episode of Empowering Healthy Business. We'll see you all next time. Another episode in the books. Thank you so much for tuning in For show notes and more. Visit empoweringhealthybusinesscom If you would like to have a one-on-one discussion with me or possibly engage smart books to help with your business. You can reach me at cal C-A-L at empoweringhealthybusinesscom or message me on LinkedIn, where I am easy to find. Until next time, this is Empowering Healthy Business, the podcast for business owners. Signing off.