Service Based Business Society Podcast

Hey guys, welcome back to another episode. Today, we are talking about an analogy for business that I've been talking about for a long time and it really brings into perspective why as business owners we go through some of these challenges as our business grows. So you've heard about me talk about the Valley of Death before. And while we're not talking about the Valley of Death today, we will talk more about it in an upcoming episode because the Valley of Death really resonates for so many business owners.

And what is it, if you haven't heard me talk about it in a previous episode, the Valley of Death happens just before you really start to hit that next level in your business. And that Valley of Death is the point where your expenses, your team, your infrastructure, all of these, these pieces of your business are ready for the next level.

So maybe they're costing more, maybe they're bigger, they're more complex, there's more management, all of these things, but your business isn't quite there yet. That's one side. That's one side of the valley of death. So you've planned, you've grown, you've trained and whatnot, and so you are expense heavy or investment heavy, and you don't yet have the money coming in. So you can't see the size you are.

because you can't sustain the expenses of that size. So you must keep going. The other side also still in that same valley of death just before you grow is when everything, you're going flat out because you are not quite the next size. So you're taking on more clients, you're bringing all these things, but you haven't hired that next team member yet. You haven't made the jump in infrastructure yet.

And so, you know, there's this time right before you shift. So, you know, the first Valley of Death typically happens around $100,000. That when you go from, you know, five figures to six figures. Another really notable Valley of Death is right before the million mark. But you're going to hit many other Valleys of Deaths in that period. You know, typically around $600,000.

you know, a minor one around 300,000, where you're really pushing the limits one way or another, and you think, I can't do this. And you typically have two choices. You can either go back or you're gonna go forward, but you can't stay here. And it really depends which...

side of the situation you're on because if you have already invested so that one of the things we see is people will Get new equipment or new systems or what and they will have made some kind of long-term commitment Maybe they purchased a new car truck piece of equipment Um, and so now they have a lease payment or they've rented a bigger office You can't go back Because you now need to sustain the payments that you have committed to

Anyways, like I said, we're not diving entirely into the Valley of Death today, but I want you to know where this episode kind of comes from. We have talked about the Valley of Death before, I've chatted about it on social media. Ultimately, that is the time period right before your business levels up where things feel messy.

whether it's chaotic, whether it's a cashflow crunch, I'd like to remind you that the businesses that are most likely to run out of cash are not the businesses that are not profitable. It's the businesses in high growth because growth costs money, training costs money, infrastructure costs money. And so sometimes those who grow too fast simply run out of money and can't keep going. So that's a cautionary tale in terms of if you're feeling that, if you're feeling...

the cash crunch, if you're feeling like, oh my goodness, we're going really quickly, be mindful of the cash balance. Be mindful of where are you in the business cycle and are you coming up to or in one of the valley of death that really challenges the business owner. In that moment, you will question why you started, why you're doing this, are you crazy?

it happens to everyone. But we're going to talk a little bit today about how we can really think about some of these shifts as the business grows. So I want you to think about your business as a boat. Now it's a funny analogy because I don't like boats, I don't like water, but it is the perfect analogy for this. And I want you to think of your business as a boat and when your business is small, it is a small boat.

It's less complicated to run. It's less complicated to manage, but it is also easier to drive. You can be going one way on your boat, decide you want to go back the other way and you just turn and go. You know, thinking about like a speedboat, a wakeboard boat, um, you know, small, small boat. You can turn a kayak, the smallest.

I think. I don't know much about boats, but the smaller, think of a kayak and how nimble it is. How people take them in all sorts of places and they can maneuver them and control them and really be in tune. But as your business grows, so does your boat. You know, you've got your ferry-sized boats, you've got your cruise ships.

And then you've got your big container ships. So these are the kinds of ships that go all over the world. They're gone for weeks, months on these ships. They can take miles to turn. If we think about even something like the Titanic, I recently watched the Titanic with my daughter. It's funny when you watch old movies as a side note.

you forget certain parts of the movie and then you're watching it and you're like, I really forgot about this. I don't know if you've ever experienced that watching a movie either with a... I remember having the same experience with my mom in the theater at one point as like as a young teen and there was something like inappropriate going on the screen and thinking like, oh I wish I wasn't watching this with my mom. I had the same experience watching Titanic with my daughter completely forgetting about several of the scenes in the movie. Anyway.

I digress. In the movie, The Titanic, they see the iceberg.

They see the iceberg, they know it's there. Too late to do anything about. They can't actually steer around it, although they tried. They were unsuccessful because the Titanic was not a small ship. The Titanic was not a kayak. It was not a speedboat. And therefore, they could not turn fast enough. As your business gets bigger, as there are more layers of people, as you have more complicated infrastructure.

it takes more to turn. You know, a container ship...

that travels the ocean, you know, bringing containers from continent to continent, they turn miles ahead of where they need to turn because something that size doesn't just turn on and done. And it's the same thing as your business. And if you look at some of the bigger businesses, corporations out there, you know, if you look at if you follow any specific publicly traded businesses. So it's very interesting in terms of

So if there are businesses that are traded publicly in your industry, sometimes there are, sometimes there aren't, they issue a lot of reports, some more frequently than others, but you can actually usually find a lot of the reports online. And you can see what they are discussing and the projections and the timing.

of some of these decisions because most publicly traded businesses are big corporations, not always, but mostly. And if you look at some of the decisions and how long it takes them to execute a decision, it's often because first we have to discuss it at an executive level, then we need to go back and forth and decide if that's the right thing to do, then we're going to talk to our next management level, we're going to decide what the...

rollout looks like, we're going to decide, you know, is there new staffing requirements, what is the cost, we're going to talk to legal, we're going to decide, you know, is this an effect on HR, policies, procedures, we're going to go through all of these different pieces, we're going to talk to the accounting team, discuss with the bank, you know, cash requirements, all of these types of things. More people, more layers of the business, more complicated.

slower to turn.

There's nothing worse in your business than seeing something coming, knowing it's a problem, and realizing you can't really do, you can't course correct in time. And, you know, it's often these times where, especially if a business has grown quickly, where there's this, you're used to being a little more nimble, a little more agile.

And it almost as a business owner, as a leader, it becomes challenging because you want to keep the agility of the small boat, but you want to grow and be the big boat. Because what do we think of when we think of bigger business? Well we think more profit. More bigger business. But here's the thing. Oftentimes, bigger businesses are less profitable.

when it comes to actual margin. Because when you start adding all of those complexities, legal, a bigger accounting team, discussions of this, all of the meetings to discuss these changes, all of these different things, more people, more difficulties, more management, more training, more investment. And so we have to be mindful to know really where we are. You know, we talked a little bit at the beginning about the Valley of Death and knowing where we are in our business journey.

but also being super clear about where we're going. Because if we can sell less with less stress and make more, does that fit your objective? It may or may not. If you're trying to take your business and eventually, you know, we're chatting about businesses trading publicly, maybe that's your goal. Maybe you wanna take your business public.

and maybe you want it to be a giant corporation that takes over the globe. There's nothing wrong with that objective, but we have to realize there's, there's challenges that go with that. There's also challenges that go with staying small. And so, you know, we always talk about what is the objective and when it comes to planning out and really realizing how agile is my business and almost taking that kind of quarterly,

in your quarterly review saying, where are we at? Where is the team at? Where's the understanding at? How are the actions that we are doing right now supporting our objective? And not just the objective for the year, but the bigger picture. If you have a business where ultimately you want to work for the next few years and sell your business, that's one objective. If you want to pass your business

to your family, that's an entirely different objective. You know, if you want to go public, again, very different objective. And it's not to say that you can't change your mind later. It happens. The world is built based on people changing their minds. But the most successful journey will often be one that has a forethought in terms of

Where is this going? What is our end objective? Because, you know, I actually talked to a business owner just this week and they were looking to make some changes to their marketing and they were investing into some branding. They at this time were not wanting to do any kind of website. They were not wanting to do any social media. They really wanted, you know, they were taking, they wanted to do.

new business name, they wanted to get some business cards, flyers, this kind of stuff. More what we would call that kind of old-fashioned boots on the ground marketing. For the industry they're in, totally fine.

But I said, before we get started, we should look if the domains are available. And he said, no, we don't want to do any website or anything. And I said, no problem. I said, are you keeping the business forever? No, no, just a few years. I said, well, do you want to sell it? At that point, he said, well, maybe. And I said, here's the thing. If you have invested into building the brand of this specific name, and you've

built this brand reputation and you've got this whole thing. And then another business grabs that domain and is now operating as you, if you will. That business is worth less. Even if you're not using the domains, even if you're not using the social media accounts, just grab them. I mean, ultimately, we looked in the domains were going to be less than $20 a year. Now, a lot of entrepreneurs collect domains. We'll do it.

episode on that another day. But you know, when we're talking about agility and we're talking about future planning, for something like that, where for $20 a year you just protect your assets. No one else is gonna grab that name because you have that name, even if you're not using that name. So worth it. So that's when it comes down to foreshadowing the future a little bit. And in this particular case,

even without a huge amount of thought, we realized, hey, that's a great $20 a year because now we can proceed with the branding. You don't have to use it. You could just own it. No one else is going to pop up on the scene using that domain, using those social handles. We can just carry on. But you've covered that base that if in a few years you do want to sell the business, you have those assets.

piece is ensuring that business has some agility. It could go more online. It doesn't have to, but it could. And so as businesses grow, whether it is adding team members, whether it's deciding to keep team members, one of the things as a business grows, a lot of times you have some people who've been there a really long time. We see it over and over again. They are those grassroots people. They have built the business with you.

invested blood, sweat, tears into the business. They are hugely valuable. They are knowledgeable about the inner workings of your business. But where is the challenge there? They also are less likely to be open-minded about big change. I speak, you know, that is a fairly broad statement, but those...

people who have been at the business for a long time are often less likely to be super innovative. They're often less likely to be super open-minded about change. They're also going to be committed to the way that things used to be. And so having a huge amount of those people, if they lean that direction. Now you could have, if you have a very innovative open-minded crew, this might not apply. But...

If you look at the people on your team and you look at those who have been there the longest, they will either be absolutely incredible because they've been there so long, or you will realize that they're starting to be, maybe they don't fit quite right with the team, maybe the business has evolved. You know, oftentimes we just have these people who have been there for so long and you would never think to get rid of them because they've been such a valuable part of the business. But oftentimes it really takes that

strategic planning, the foresight to say, hey, where is this person going in the business? What is the opportunity? And how can we coach, guide, mentor them to seeing the value of continuing to evolve with the organization? That's how we maintain agility, even though we're growing. We have to break down the pieces, the people, the tech. And by breakdown, I mean examine.

not break the people. We don't want to do that. We need to examine these pieces of our business and really determine how can we continue to grow? How can we mitigate the values of death? And by mitigate, I mean work through them quickly because they're an uncomfortable spot to be in. We want to keep going. We want to get through them quickly and maintain agility. We've all, you know, you've heard of businesses who

That's so big that it just took so much to get anything approved. You know, it goes through this person and that person and this and that. And we talk about like, Oh, it's just like such a big, like it just feels big. Multiple layers of this multiple. It takes so long to get anything done. We have to be mindful of that as we grow our businesses, we want to add the layers we need, but we want to continue to maintain agility, continue to maintain the ability to change the direction.

and make sure that we're still in alignment with our objectives. So one tip that a business owner can really implement right away is having a look at those parts of your business and deciding what maybe doesn't feel so good at this moment. And taking note as to whether you are in a time period in your business that just doesn't feel necessarily so good. Maybe you're in a valley of death. Maybe you're approaching.

And realizing what is not making it feel good is that you're out of capacity, is it that you're running tight on cash, is it that you're running tight on agility. That's all for today, guys.