In this week’s episode, Ed chats with Dan Lacy about the importance of investing in people, identifying the endgame, planning the exit, and everything about maximizing business value. A lot of ground was covered in a fairly short amount of time, so enjoy this insightful conversation!
0:36 – About Dan Lacy
2:54 – Dan’s Consulting Practice
3:44 – Four Areas that Affect Value
5:40 – Why People is the Most Important
6:50 – Where and How to Get Good People
9:45 – Tips to Identify People That Are Good and Not Flight Risk
11:20 – What’s the Goal
16:15 – The business Is The Identity of The Person
17:05 – Why Plan the Exit
18:15 – What Causes Business Owners Not to Plan the Exit
20:45 – How Do You Make Your Business Consistently Improve
23:18 – How to Find the Time to Plan
27:00 – Ed’s Advice to Business Owners
29:35 – Habits Business Owner Needs to Diversify their Reliance
36:25 – What It’s Like Working With Dan Lacy
41:10 – Connect with Dan Lacy
Learn More From This Podcast
Who Is Dan Lacy
Dan Lacy is the owner of Dynasty Business Consulting. He is known in the business circle as The Prophet of Profit. For the last 25 years, he has consulted with all kinds of different businesses. He focuses on cost-control performance, improving growth, maximizing profit, all the things you need to maximize value.
Dan coaches business owners to help them build value by improving cash loan revenue. He developed a proprietary system that enables business owners to get the results they want in their business and make money how they want to.
His one-on-one monthly coaching has enabled his clients to increase revenue by a hundred million dollars, he has improved profits by 6.2 million dollars, and entity value by 52 million over the last 15 years. His clients consistently received, on average, a 35% return on investment annually.
Dan has authored the following books:
- Six Stages of Business Growth
- The 7 Core Elements to a Rock-Solid Business
- Business Owners Cash Flow Handbook
- Stress and Business – the Primary Causes of Small Business Stress
Profit and Loss
- How to Create an Exit Strategy for your Business
- 5 Year Study of Rich People
And, Dan has been married for almost 40 years, has 3 children, and 5 grandchildren.
Dan’s Consulting Practice
Dan’s consulting practice revolves around helping business owners get to where they want to go. It has 3 main steps.
Step 1 – Identify what is it you want to accomplish in your business. Establish the Goal.
Step 2 – Identify the landlines. How do we get there? What road do we take to achieve the goal?
Step 3 – Identify the accountabilities. Ensure ways to stay on the road.
Four Areas That Affect Value
All these four areas are important. A business owner has got to balance so many balls in the air. Keeping them in the air all of the time. Everything is tied together.
Why People is the Most Important
Out of the four areas, people are the most important thing. If you have a great sales manager, you have good sales. If you have a good CFO, you got good financial records that could tell you where you’re going. If the owner is a good leader and is mentoring the people beneath him, he is bringing his people.
People drive all the functions. From an exit strategy standpoint, if you have a strong management team, if you can walk away from your business for months and the thing runs like a clock, that is a good indication of great management, good leadership, good mentoring, and good business.
Where and How to Get Good People
Business owners get good people through a combination of grooming from within the organization and sourcing from other places. Most of the time, people come up to the organization. These employees have a desire to do a good job, to grow, to learn, to be better, and to be accountable. And the owner is always on the lookout for people in the organization that is doing a great job because they know the importance of growing the person to grow the organization.
The business owners have to have a strategy for growing the people either through him or through outsiders. As the organization grows, business owners need to invest in some key people. If they can’t find people that can grow, then they go outside of the organization and hire somebody. And as the organization grows, it can financially afford to get better people.
Tips to Identify People That Are Good and Not Flight Risk
They say that the reason an employee leaves the job is more of a problem of the manager than it is the employee.
First, the business owner must have an objective as to what he wants to accomplish.
Where does he want to take the business? Is it a lifestyle business? Is it something he wants to grow and leave for his kids or sell in the market? What’s the reason for doing it?
Second, the business owner needs to identify the strategy to accomplish the objective.
Third, the business owner must identify how to man the organization to get the purpose and for the people he needs. He needs to identify the financial accountability to each one of those primary functions. He needs to have a plan. It’s wiser to go to a place with a plan than to go to a place without a plan.
What’s the Goal?
How will you position your company so that you have flexibility at all times, regardless of what happens?
If the objective is to grow the business and create liquidity, business ownership is, by far, the best way to build equity liquidity and riches than any other option a person can do.
The objective has got to be: What’s your endgame? You can think about what your endgame is 20 years before you’re thinking about exiting.
Planning the sale of the business is right before pre-planning funeral services. There’s such an attraction to the business’ identity that they have. Unfortunately, most business owners we talked to haven’t gotten at that point yet. They can’t see that if they can just go through the step of getting the people in the right places, they can then turn and scale the business and create more of an investment as opposed to a lifestyle.
The Business Is The Identity Of The Person
The business is the identity of the person. And that is the big hold up because most business owners don’t know what to do after they sell their business.
If a business owner has a good and decent business, the person that buys it wants to keep that owner around for a while for a whole bunch of reasons e.g. the contacts he has, the technology he has, all the things he learned as the business grows is highly valuable to a buyer.
The business owner is not going to lose his identity before he makes the transition, but he has to plan when that will happen.
Why Plan the Exit
Just like you never know when you will die, you never know when you will sell your business. You can exit at any time, but you need to have a plan.
Planning helps you think about what the endgame is.
It helps you communicate the people underneath you what you want to accomplish so they will know what their goals are.
The planning process is really important to anybody who owns a business, but the problem is that 85% of business owners don’t do it.
What Causes Business Owners Not to Plan the Exit
Life circumstances all of a sudden show up and, unfortunately, business owners get stuck with the reality that their company has substantially more risks than perceived, and as a result, expresses value.
It’s a tough spot to be in when a business owner is forced to consider exiting. You never want to be forced to have to exit your business because you never getting any value out of it.
Imagine that you are 45 or 52 years old. You are not thinking about exiting your business, but your business is consistently improving. It is a lot easier to make a transition than one that is just a lifestyle business and your revenue is flat and you’re taking all the money out of business. It goes back to the plan: what do you want to accomplish.
If you don’t have the time to think about what you want out of the business should you retire or should you exit the business someplace down the road, then you deserve what you get. Because there are a lot of people out there with money that will take your business and make it a lot better than you’re doing it.
Just like how people are afraid to buy their funeral plan because it means they’re going to die, some business owners are afraid to plan their exit strategy because it may mean they are exiting.
But if your business is consistently improving in profitability, it means your management is getting stronger because you have the resources to invest in people.
How Do You Make Your Business Consistently Improve?
It goes back to the objective. If you plan on selling your business in the next 15 to 20 years, what should you do tomorrow to improve the value of your business?
If the key indicators are all going in the right direction, the value of your business is going up.
What are the key indicators?
Revenue is going up
Profitability is going up
Debts are going down
The key management team is going stronger
Those are all positive things.
But, you need to have a plan for that. You have to have an organizational plan, a training plan, etc. to improve the value of your business. As an owner, identify what you need to do to improve your business while improving yourself. You have to have an awareness of what you need to do.
How to Find the Time to Plan
At some point, you have to carve out some time and you have to plan it. You can start with just 30 minutes during the month. Just sit, without your phone, and figure out what is your next step on the planning of your business regardless of the sale.
It’s an issue of priority. Figure out what you want to accomplish. Then spend a couple of hours a month to plan and accomplish that goal.
Ed’s Advice to Business Owners
There is nothing wrong with running a lifestyle business nor is there something wrong with developing an asset that gives passive income and runs by itself. Either path is fine.
When you go to sell your company, you need to understand where the risks are. We don’t want people showing up into the market thinking that they have some great investment when in fact someone’s simply buying their job.
Again, there’s nothing wrong with it. It’s a real challenge to get the benefit of an investment when in actuality someone’s buying the job.
Habits Business Owner Needs to Diversify their Reliance
Invest in People. Look for and find good people and bring them to the position. Let them learn the basics and work their way up. Allow them to make decisions and let them learn from their mistakes. Spend a lot of time with them so that they will have the confidence to run the business.
Overall, identify and execute the plan. What’s the plan? How do we implement the plan? How do we communicate the plan? How do we know that we’re doing the right thing on an ongoing basis?
And, if a business owner says they don’t have the time to grow the value of their business and they don’t want that big payout at the end of the term of their business, that’s a missed opportunity. The value of cash flow is four to six times when it’s worth on an annualized basis. So, why not work on improving the value of that cash flow?
If you invest in your people, and you’re thinking of where you’re going, and you’re planning your process, and you’re evaluating your performance on an ongoing basis, you will see dramatic results. It may take you 15-20 years to get there.
Just like if you are a smoker. Your possibility of getting lung cancer is X, but if you quit smoking in 3-6 months, your life expectancy dramatically improves. It’s the same way with business ownership. If business owners just spend a little bit of time thinking about where I want to go, how do I get there, what obstacles will I face, and how do I hold myself accountable, they can achieve phenomenal things.
What It Is Like Working With Dan Lacy
Dan Lacy believes that revenue is important, but it is not as important as the answer to these questions:
Does the business owner have the desire to grow, to improve, make a mark, help his employees, help the community, help his customers? What’s his motivation? Does he really have the desire to do that?
Do they accept outside input? And if they will take outside input, he would love to sit down and talk with them the four questions:
What do they want to accomplish?
What do they have to go to get there? (What does the market look like; what does the product look like; is it realistic; what’s the game plan)
What obstacles are in the way? (People obstacles, financing obstacles, cash flow obstacles, market, competitor, and other issues)
What process do we put in place to ensure that we are on the road that gets us where we want to go.
And if a business owner says “That’s me”, “That’s what I want to do”, then Dan can work out something that could help the business owner accomplish what he wants to accomplish.
Dan classifies himself as a business coach, not a consultant because instead of focusing on the problem, Dan comes alongside the business owner to make them better then they will be on their own.
Dan helps business owners develop their strengths, build the strength of his team, help them identify and attain their goals, and help them grow.
In a growing business, things change all the time. There are always opportunities, there are always risks, there’s always a landmine or either way. But, like John Wooden, Dan believes in practicing the fundamentals and being consistent in what you do.
He believes that if a business owner will take 2-3 hours a month to sit down and think through, sit back and look the 35-thousand-foot view, and evaluate where the business is going, the business will operate smoother, they business owner will make more money, will have less stress, will sleep better at night, everything improves because they are working on their business, not in their business.
Connect with Dan Lacy
Dan will happily talk to anybody who has the desire to improve their business. He wants to help small business owners become better.
Visit his website and download his books at https://dynastybusinessconsulting.com/.
You can also email him at email@example.com.
Or reach him at 317-678-6310.