EP 66: How to Improve Earnings to Maximize Business Value, with Bill McDermott, The Profitability Coach

Ed Mysogland  0:12  
Welcome to another episode of how to sell your business podcast, I had the opportunity to visit with Bill McDermott, who's known as the profitability coach. And, you know, I'm really skeptical on those consultants and people like that, and I and it came from a referral, who actually from Business Radio X,

John Ray. And, and he first thing he said was what a quality guy he is. And this is such an understatement. And so I'm thrilled to death, about about the time that you're getting ready to spend here on the podcast, because Bill really helped provide some cold clarity on number one how to identify an advisor, or, you know, what, if you're going to hire somebody, what, what's the difference between signal and noise? Who, how do you when should you expect a return on your investment? And so, as, as we went through the podcast, you know, not only is was he well versed in, in so many different attributes of the selling process of what creates value to, you know, actually the whole exit process. So I think you're gonna find that bill, as the profitability coach really helped provide some some really helpful nuggets on how you can make some immediate changes to your business, to increase the value that the transferable value. So I hope you enjoy my conversation with Bill McDermott of the profitability coach.

I'm your host, Ed Mysogland. I teach business owners how to build value and identify and remove risks in their business so that one day they can sell at maximum value, how they want to whom they want, and at maximum value on today's show, I'm so excited to to welcome Bill McDermott, who is known as the profitability coach. And for anybody that is at all follow me that are that are small business owners, they know how important profitability and earnings are to the success of their business. And so I am so fortunate to have this guy, I was connected by another mutual friend, John Ray at from Business Radio X. And he connected us and boy, what a what a great opportunity. This is. And I'm looking so forward to learning a lot about about earnings. And so, Bill, welcome. And can you tell us a little bit at the beginning, I shared a little bit about your your bio before we started recording.

So can you just kind of give just a little bit of lead land how you how you got to be the profitability coach? 

Bill McDermott  3:34  
Sure, sure. Absolutely. Well, Edie first let me say thank you for having me.

Ed Mysogland  8:16  
it's hard. It's hard to make that leap of faith, like I'm going to increase prices, and oh my gosh, if I leave if I do this, you know, what's the likelihood I'm going to lose? I'm going to lose customers. So I totally see that that's low lying fruit that you can do. But I mean, if I'm a if I'm a business owner, how do you how do you coach me into just go ahead and throw caution to the wind? And let's, let's, let's increase price by 15%. How do you do that? Yeah, well, excellent question. So the way I approach that with my clients is

Bill McDermott  8:57  
I'm going to use let's pretend I go to Walmart. When I go to Walmart, I'm prepared and I go there because I'm going to get the lowest price.

But I'm generally not going to be able to find any kind of help in the service aisle, so I have to know exactly where it is. And then when I get to the checkout, I have to wait a long time in line because the lines are so long. And by the way, because the parking lot so full, I even have a hard time finding a parking spot, but by golly, they got the cheapest prices. On the other hand, if I go to Ace Hardware,

Ace Hardware, the guy meets me at the door, what are you looking for? Well, I need some fertilizer for my garden. Okay, it's on while aisle three. And by the way, these are the three types that we have. This one has a fertilizer and a weed killer in it. And by the way, most of my clients like that one, I get a whole lot of service, a lot of value. And so therefore, I go to Ace Hardware because I want to help you

I want the expertise, and I pay for that in the price. So we as business owners have two choices, we can either be a Walmart, or we can be an Ace Hardware. And the value that we create for our clients, either in time savings or money savings is worth the increase in price. So a lot of business owners, I think, position themselves as providing a commodity, and not really diving into the value that they're creating for their clients. And they're afraid to price accordingly. And I think a lot of that is a mindset issue. And we all have self limiting beliefs, that maybe our business or our product or service just isn't worth the price. And everybody else is telling us we're silly, because it really is. And so I think it really boils down to more of a mindset issue.

Ed Mysogland  10:58  
Not raising prices is a scarcity mindset. And the reality is there's an abundance of clients out there that appreciate you and value the product or service that you offer. Yeah, I get that. And I'm an Ace Hardware guy. I will I love Ace Hardware. And one of one of the things. I recognize that I'm I'm willing to pay a premium for for that. But I guess the follow up to that is, is I'm already paying a premium because, you know, Lowe's and Home Depot and Menards. You know, they've got lower prices, but like you said, I'm paying for the service. So if I'm that Ace Hardware, you know, and how am I? I'm already doing service. How do I how do I stress test what that threshold is, before I start losing customers? You know what I mean? Yeah, absolutely. So

Bill McDermott  11:58  
I adopt the idea that I'm going to ask my clients, am I continuing to deliver the value that they expected when they first hired me?

And also, as I'm putting my services or putting my products out there?

If no one is telling me I'm too high, I'm going to automatically assume I'm too low. That's a good point. But that's totally good. So where is where is that area? You know, back when I was in banking, I had a client, it was great. This client told me Bill, my loyalty to you ends with a quarter of a point on my interest rate.

I only make sense. Yeah. And so I knew that I could get another quarter, but I wasn't gonna get a half. And by golly, I better be right on with that loan fee as well.

Ed Mysogland  12:56  
Yeah, and I'm with you on the the scarcity versus abundant mindset, I think the race to the bottom is is always a losing proposition. And I know it's the default position for a lot of owners to that they feel that they have to compete.

Bill McDermott  13:15  
But boy, but like you were saying on mindset, that is a real big ask for it is. And so to your point earlier, if we kind of reverse engineer the conversation, those business owners that aren't driving earnings, through revenue, want the want the multiples to be hire, to make up for the profit that they could be getting by charging more, but they're not

Ed Mysogland  13:43  
100% The reality is, if I doesn't matter what multiples I use, if I have a dollars worth of net profit, that equates to in a five times multiple, five times $5 of business value. Right. And so, yeah, if I'm not driving the earnings, I want the multiple to be high. But that's the wrong focus to your earlier point, the focus on earnings. Yeah, so when you focus on earnings, and you and you increase it to, you know, a 20% increase, you know, and you put a five multiple on that, versus a put the same, you know, increase on the multiple, I mean, it's two entirely different results. So the earnings, taking advantage of the number of turns on the multiple is is always superior.

Okay, so there's four areas of profitability improvement that that we typically see. So it's reducing costs, increasing turnover, inventory turnover, increasing productivity and increasing efficiency.

Those are big, big components of a business. So, but what is what are you

You think is the biggest area? Like I should focus on business? Or I should focus on it? And I suppose it's it's company specific. But But generally speaking, in your experience, where do I focus my attention?

Bill McDermott  15:16  
Yeah, so I'm going to

I'm going to go back and maybe share a story. But

this saying did not originate with me. But revenue is vanity. Profit is sanity, the cash flow is reality. So I was working with a company that was a management consulting firm, international firm. They were doing incredibly well. But they got into trouble during the Great Recession, because nobody was introduced was doing much if any management consulting, when when, you know, the downturn came. So this company had to do a pivot

basically did and went from losing a half million dollars a year to making a half million it was a million dollar swing and a year was absolutely fabulous.

But this business owner said, Bill, I made a half million dollars in profit this year, where's the cash? And basically, I said to him, I said, Randy, look, you see that big honker accounts receivable number that's sitting on your balance sheet, I said, there's your profit, if you go out and collect it, then you'll have the cash. So certainly focus on profit. But I also think focusing on cash flow, I mean, profit doesn't pay payroll, cash does. And so I generally try to focus on profit.

But if you aren't doing to your earlier point, turning the inventory, collecting the receivables,

Ed Mysogland  17:02  
you're missing out on cash that could be sitting in your bank account, instead of sitting in your clients or your vendors bank account. Yeah, and, and a lot of business owners fail to understand that when a buyer goes to buy their business, it is there's two checks that they write first one is for the business. Second one is for the working capital. And, and I don't think that they recognize or I think they have a hard time recognizing that there's a lot of that the more that's tied up in working capital, and like, to your point that's not in cash. And it's going to cost me to to fund the working capital, more than it should because, you know, I'm letting you know, I'm not collecting receivables in in a timely fashion or what, whatever the issue is, whether it's dead inventory, or whatever, that's a bit that impairs a company's ability to sell. And I think you probably have coached a lot of people on, you know, if you if you hone in on your working capital, you're going you're reducing your risk, which is increasing your value, right? Yeah, to your point. So recently, we successfully completed a management buyout where

Bill McDermott  18:24  
this professional services firm, sold the company for $13 million. And it was a combination of seller financing, and bank debt financing. But when the negotiation on the purchase agreement came, you know, the seller wanted basically to take as much cash out of the business as they possibly could. And so the, the broker stepped in and said, you know, timeout, we need to have adequate working capital, we got payroll, we got purchases, all of this. And so, the owners were thinking about their pocket, they should be thinking about their partner, but also since they had seller financing involved by stripping out all the working capital, you know, they put their their debt at risk to a certain degree. So, yeah, working capital is incredibly important.

Ed Mysogland  19:21  
And the funny thing is that they too, they look at that, and one of the best things that you've said today is just that, that they did, that the the seller financing, and the working capital, that they put the, the, the seller financing note at risk by by how they were treating the working capital. That's a and if I'm a business owner, that that's a big takeaway right there that you, you, you don't understand, or you need to understand that

that they all, they're all intertwined together, everything is intertwined. And, and each each component of a business has risks and benefits. And by by not acknowledging one, you're putting another at risk. That was awesome.

Bill McDermott  20:20  
Good. I'm sorry, I was just gonna say. So in my banking career, as I was talking to business owners, I coined a term called bank speak. Okay. And what I found was happening is I was throwing out terms working capital being one, cash flow being another inventory turnover being another, I caught myself using terms that my clients didn't understand. And so I think you and I take for granted, everybody knows what working capital means, Ed, but what I found is many business owners because nobody taught them accounting in school, and there's no on the job training, when you're a business owner, I have to be careful to define terms that I'm using, because a lot of times I use terms people don't understand. Now, that's a that's a great point. And that was one of my questions is with with all this information out there with the with everything that's all over the internet with

Ed Mysogland  21:22  
just the content, the vast amount of content? How? Or why do you think that business owners aren't more versed in basic accounting?

Bill McDermott  21:34  
Yeah,

I think everybody starts out.

If you're starting a business from scratch, it's because you're a great technician, at whatever it is that you do.

So for example, coming out of a banking career of 30 years,

I saw a lot of business owners

that ran businesses, but I had never run a business myself. Again, I was never one that had to go out and basically do everything that needed to be done for me to have a paycheck. And so I think they're great technicians, a CPA is a good accountant,

an architect, you know, somebody like me, who's a business consultant. Now, thank goodness, I had a lot of accounting and finance in my background.

But they're good technicians, they just haven't learned how to become business people. And so if you haven't taken accounting and finance classes in school, or gone to some seminar, or maybe a community college to take some courses,

Ed Mysogland  22:52  
you don't really feel like you're well versed in how to how to manage or how to run a business. You're good to ask, you're just not a business person. Yeah, and I agree, I agree with you. And one of the challenges that we bump into is just that is how do you

you're a great technician, but you're not a great business owner. And as a buyer of your business, I really need you to be a great business owner, because that's who I'm replacing. I'm not the technician. You're not I mean, yep.

One of your claims to fame is is is your, your coaching that you're able to,

you're able to coach people through complex matters. And I guess, I'm, I'm curious to know how you get over the pushback of time. And as a, as a guy with not a lot of it, I'm sitting here going, alright, if if he asked me to fix a component of my business, how do I how do I

make more time to do what you're asking? And you can have all the empirical evidence that it's going to fix all it's going to fix everything in the business or fix this part of the business? Do I have to wait till the pain is great enough? Or do you have some secret sauce to help me overcome that? Yeah.

Bill McDermott  24:22  
No secret sauce, but I think maybe just some common sense. Again,

I think business owners tend to want to be all things to all people.

They might also be very high control. It's not going to get done well unless I do it. And so the business owner becomes, for lack of a better term at the choke point in their own business. They're their own worst enemy. And so statistically

Do you know how many companies break through the $1 million revenue barrier and the $10 million revenue barrier? Now, only 10% through the 1 million barrier? Only 3% through the 10 million barrier of all businesses that ever start? What's the number one reason delegation.

And so what I, what I tell that business owner is, look, your time is valuable. You know, I calculated

an effective hourly rate for a business owner by taking the profit in their business plus their salary. And, and it came out to about $150 an hour. And so I said, Look,

any activity in your business that can be done less than $150 an hour, you need to hire somebody to do it, because it will allow you to increase your hourly rate to 200. Then to 250. Yeah, and so the ability to take on those things that they're not taking on is is basically just giving those tasks to other people, and allowing them to focus on more revenue generating activities versus administrative activities. Yeah, I, I hear you. And, and I, I can hear the business owner going, Yeah, where am I going to find this person? You know,

Ed Mysogland  26:30  
it's such a challenge. You know, everybody, everybody that's working for me is that everybody's complaining that they're overworked and underpaid? If I add another person? Where am I going to find them? And how, you know, how does, how do I, then I shouldn't say how do I then then it's throw your hands up? Screw it, I'll do it myself. You know, and, and that's the default position because of the difficulty of what you're asking. I totally agree with you. I think I think the the next generation of business owners, it's about delegation and automation. I totally, totally believe that that's the path that we're going toward, and those that either go from first generation to second generation or, or a successful third party sale, I totally believe that those buyers are that next generation, those people that that have a command have

to delegate, whether that's to third parties like Upwork, or, you know, some of these some of these organizations that have, you know, the gig economy or you can find help, or

Bill McDermott  27:46  
I personally, I think that's that. That is the long term of the successful business, I think, yeah, so quick story on that I work with a client. Their books were an absolute mess. They were a multimillion dollar company. And they had a accountant, who was Moonlighting, doing their books.

And the financials weren't done on time, there were errors. And the owners were spending their time going in and correcting errors. And I said, Look, go out and find somebody who's QuickBooks certified. They can be a CPA, they can just be an accountant, but somebody who is really, really good. And so I referred them to a service that I use, because you find people based on relationships.

And, and so they brought this accountant in, this person has straightened out their books in the span of two months. We just had the second month in close, nice. Bank accounts reconciled financial statements were timely and accurate. And this client now has clarity in his financials where before that they had confusion. Yeah. And again, and that's back to

knowing where to look for for the talent and most like said, it's the, I think most business owners are faced with the pain of, of making the change as opposed to the change itself. You know what I mean? Well, it's the principle of inertia, right? A body at rest, tends to stay at rest. A body in motion tends to stay in motion. You know, my business owner client was stuck accepting that moonlighting accounting person getting subpar financials and basically just made a decision. Okay, I'm drawing a line in the sand. I'm going to upgrade my

my requirements and get somebody in here to do a better job.

Ed Mysogland  29:56  
Now and again, and that's to your point.

went earlier on, on having good, good records. And being able to have clarity of, of your cash position or your financial position is, you know, that's an that's an important thing, reading your email and Dell and trying to figure out what to do next, somebody probably can can do that a little bit more effective than you know. Yeah, the other thing I'll say on that topic,

Bill McDermott  30:27  
I'm a big believer that your balance sheet is more important than your income statement.

Your Income Statement certainly measures your profitability. But there are three other things that you care about, you care about your liquidity, how much cash you have, that's on your balance sheet, you care about how you're collecting your receivables, and turning your inventory that's on your balance sheet. And you care about your leverage how much debt you have relative to the net worth of your business. And so three out of the four things that you track are on your balance sheet.

Ed Mysogland  31:00  
Most business owners don't look at that. First they look at they look at their income statement first. Yeah, we're, we face we face that, we face that too, and helping, you know, when helping these business owners, they there is a disconnect between the two, it's, it's what's my, what's my net income versus, you know, let's look when we,

when we do value work, you know, one of the things that we do is, you know, this is what you're going to put in your pocket. And that that and that's part of liquidating your balance sheet. And, you know, oftentimes, that's, that's more than, than the tangible and intangible value of the company. You know, once you once you start liquidating current assets and retiring debt. That's a whole nother that's a whole nother event.

Bill McDermott  31:54  
Oh, God, start dinner, I was just gonna say the other thing that comes to mind, as you're mentioning, that is also most business owners, when they're selling their business, focus on the growth on the gross amount they're selling. But they may not be factoring in taxes, if it's an asset sale, as well as debt.

Ed Mysogland  32:18  
highest price is not always the net. Yeah, it's not the we we bump into that a lot, that it's not the highest price, that's the best price now that allocation of purchase price is really, really important, really. And

so I know, you know, everything we read, it seems as though we're heading into a recession. All right, that that there's some level of downturn. So granted, it was your greatest blessing, that it banking, you know, you got displaced, and here you are. But, like, how, how did you make that pivot? And, you know, because I think there's gonna be a lot of people that are in similar situations, or are finding themselves in similar situations right now. How did how did you make make that effective change into entrepreneurship, and your case, you started the business versus, versus buying a business. So how was that? How did you? How did you get comfortable with the risk that you were taking? I guess? Yeah, so

Bill McDermott  33:28  
necessity is the mother of invention. My wife had two daughters in college, we had a mortgage to pay. And she was the preschool director at our church preschool. And that was not going to be enough to do so. And I was I was financially motivated.

I read a really great book. It was called the E Myth by a guy named Michael Gerber. Michael Gerber says, establish a prototype of the business that you want to build, which in effect is really if you are going to franchise your business, this is what you would show a potential franchisor. And so I also believe,

so I'm a person of faith. Part of my prayer time after I was laid off, is, you know, I would say to the man upstairs, okay, you close the door. Would you open a window? And by the way, would you put a little neon around it so I can see.

Right? But I found that business owners really struggled with financial management. I was passionate about helping them

become better financial managers.

Next,

I found that I'm a pretty good teacher. And so teaching these business owners how to be better financial managers, was something that I was

good at, and then figuring out how to monetize that. So this is a page out of Jim Collins his book Good to Great. If someone's thinking about becoming an entrepreneur themselves, what are you passionate about? What are you best in the world at, in what drives your economic engine? And the where those three circles intersect is your greatness. And so for me

it's passionate about making business owners better financial managers, teaching them how to run more profitable businesses with healthy cash flow, and then monetizing that as a as a business coach. And that's kind of how I did it.

Ed Mysogland  35:46  
Yeah, well, you know, what, and that, that whole leap of faith thing. And also I'm, I'm, I'm a guy of I'm a red letter guy myself. And so I totally believe that, you know, there's some, there's some divine intervention that that goes into entrepreneurs where, you know, you're doing,

you're building the kingdom, you know, and I totally, I totally believe, you know, no matter where you're at on the on the spiritual spectrum, you know, whether it's the universe or God, or whatever you want to call it, you know, there is some level of wind, but behind your back to make door these doors open. And so yeah, okay, I,

I'm guilty of this too. As far as hiring consultants, I am not I, I am horrible at it. And one of the things is, you know, when should I expect a return of my investment? It's not writing the check. It's when am I going to get repayment for it? You know, what I mean? Yeah. Great question. So

Bill McDermott  36:54  
I think, in my experience,

let me,

let me use. So I've worked with quite a few professional services firms, I can think of

one,

psychology firm, three locations, very well established practice. This firm hired me for two years. And essentially what we did is we did an analysis of the business, we looked at the areas where we could really accelerate financial growth.

And then, after a two year period of time, first we focused on collections, a lot of their, a lot of their receivables were from insurance companies, insurance companies are notoriously slow pay. So we basically had them pick up their pace on collections, which put another $50,000 of cash in the bank,

then, I'm a big believer in the power of 1%, looking at ways where we can increase revenue 1% consecutively over periods of time. So the cumulative effect for this firm is, over a two year period, we increased revenue

45% total, so roughly a little over 20% per year, for 10 years, the profit that was generated, paid 100% of my consulting fees, and gave the owner another 100% return on their on their spend. So it took two years in this case.

You know, I know for me, I hired a marketing firm, to come in and help me with my brand messaging. I did that two years ago. This year, I'm having my best year ever, in the 14 years that I've been in business. So I would say, you know, when you buy a stock, you're interested in buying quality stocks that aren't big gainers, because big gainers also can be big losers, that if you can earn 10% year over year, your money compounds every seven years, roughly. And so I'd say

slow and steady wins the race. You know, if you can get a decent return in the first year or two, I think you've hit a homerun.

Ed Mysogland  39:36  
Well, one of the things that that I that we bump into is that everybody's an expert. Now how do how do you get between what signal and what's noise? You know, everyone likes it. And I was telling you before we started, you know, my wife, my wife's a therapist, and she, you know, there's all kinds of noise in her industry of

You know, solving problems, when in fact, you know, they,

there's a lot of, there's a lot of complex trauma and different things that they have to deal with that requires specialization. So my point is that anybody can write a blog article about, about profitability in this that neither How do I find people like you, that are going to give me that 10% return year over year over year? Yeah, I subscribe to the philosophy of people do business with people that they know and they trust. Alright. And so I always put relationships first at

Bill McDermott  40:37  
just think we were all put on this earth to figure out a way to live together and to help each other. And so I find that relationships follow a progression, you know, first, I get to know somebody, and they get to know me, then we like each other,

then we try each other, then we trust each other. And then we refer each other again. And so going through that relationship progression.

Ed Mysogland  41:08  
I think it's totally based on relationships, you sort the noise from the people that you really want to do business with, based on the quality of the relationship that that's developed. Yeah. 100% I mean, we're, we're, I was just looking at, you know, the, our deal flow and, and we spent so much money on external marketing. But all I'll bet 80% of our revenue comes from referrals, people, people doing business, you know, that we've done a good job for that have referred us, you know, though, and so I'm, I'm with you.

But so there's not like, Yeah, this is how you sniff out. I don't say a fraud. I don't mean a fraud. This is this is how to sniff out who's best in class versus those that probably should be on Junior Varsity have anything?

Bill McDermott  42:01  
Yeah. So

I'm sure you've probably had this experience. There are a lot of people on LinkedIn

that basically put relationships last. Yeah, you know, you're their best friend. They don't even know you, you don't even know them. But by golly, they have a solution to a problem that you didn't even know you had. And we all get those, those emails and just messages on LinkedIn. And so I think, to kind of sniff those out.

Who approaches me trying to sell me something rather than getting to know me? I mean, you don't have the right to sell me unless you know me. And I know you.

And so yeah, that would be one easy. The other thing I usually do is when I'm going through and looking at my LinkedIn feed, if there are people that are really making some really solid comments, or suggestions in a in a LinkedIn exchange,

Ed Mysogland  43:16  
I kind of determine, hey, I'd like to know more about that person just based on some of the insights they're sharing. Yeah, I agree. I mean, that providing some meaningful comments versus just broadcast broadcast stuff. I get it. Yeah. So I know we're pushing on time. But so if you have a couple more minutes I got Yeah, absolutely. All right. So I know you do you do some Exit Planning work. And so I wanted to focus a little bit about

Bill McDermott  43:51  
you know, are you seeing business owners that that are coming prepared to sell or, or are they are they playing catch up and you're trying to fix things before they go to market? Definitely the ladder. As I said earlier, that business owner is so busy working in the business. They're not working on the business, all of a sudden business owner, maybe that has run a business for 20 years, he or she finds themselves, gosh, I'm 6061 62. I'm not going to be doing this a whole lot longer. And by golly, I have done nothing to build the value of my business. So

the default is the business owners that I run into, have done little to no planning.

And the other concept that you and I probably both deal with, is that business owner that has not created transferable value in their business

Unknown Speaker  44:59  
and

Bill McDermott  45:00  
How'd They Do That?

is, you know, is a way that that you can truly drive value but very little to no plane.

Ed Mysogland  45:12  
And that's what's heartbreaking is because that that either I don't say tragedy but circumstances life circumstances come bumping into them and now they're forced into a decision on how to make this illiquid asset liquid. Yep. And and boy that that is a heartbreaking situation when when you know that it like said it's it's not necessarily that you can't transfer the business. But the problem is it's not going to transfer for what you want. And so that creates a lot of the challenges that at least we see.

I wanted to ask you, you know, what makes Exit Planning effective? I mean, what, what, what, what are the, what are the things that you're doing that makes an exit? Yeah. Whether whether you I mean, granted, if you have a lot of runway, that's that's a that's an easy layup, there's all kinds of things you could do. But the people that that are hearing this gone, man,

I really want to sell my company, I haven't done anything. So what what are the Are there any things as the profitability coach? Is there anything that you can you can suggest that would that lead would lead me to a better than average exit? Yeah. So I'm going to try to answer that question and try to tell a story at the same time.

Bill McDermott  46:42  
So we've all sold houses. And when we sell a house, we get it ready for sale, usually fresh coat of paint, maybe some new carpet, in what sells houses, from what I've been told our

bathrooms and kitchens. And so you want to be sure that you've got everything updated.

Generally, you're not going to try to sell your house yourself, or you shouldn't, because what you think it's worth, and what that appraiser for that mortgage lender thinks it's worth or the or the buyer.

You always want to have someone between us. So Selling A Business sprucing things up is really creating a management team that can successfully run the business and transfer the value to that team. I've found.

Having that management team, being sure they're compensated in a way that they're not going to walk out the day the business gets sold. So you need to have some kind of arrangement where there's what I call stay pay. Yeah. Frankly,

financial statements need to be reliable, preferably audited, but at least reviewed by an independent CPA. So that you have financials that have been verified by an independent third party, just like when you get your house appraised, it's by an independent third party. I think it's ideal to have a business growth plan, that you can hand that potential

buyer to show how the business can be grown. And I think it's also important to have documented processes, so that that business owner knows how you make money, how you have a repeatable sales process, a repeatable

operations or delivery process, and then a accounting and finance process. So mostly, I'm looking for management with stay pay, reliable financial statements, and documented processes. I'm sure there's some other equally important things, but I certainly those are, those are the main ones. Yeah. And I'm gonna I'm gonna ask even a harder question out of arrows. Which one's most important?

Right.

You know, welcome businesses, businesses are,

Ed Mysogland  49:27  
are run by people, you know, because real estate's Location, location, location, I'm going to say companies are management, management management. So I'm saying having the management team is important. I got it, you know, one of the it would be great in your analogy of of selling a house, like you know, it's bathrooms and kitchens and, and there's empirical data that says you know, if you fix up your kitchen and your bathroom, this you know, your house will sell or it will be

You know, it'll, you'll get X number of dollars back. Unfortunately, to my knowledge, I don't think there's anything like that in business that if you know what if you, you add replace your, your antiquated legs, you know, you're going to get your money back, I don't think that's going to happen. And now

Bill McDermott  50:20  
I'm in agreement. You know when a when a buyer buys a business, they're looking towards buying that business and the income stream that comes with it. But they're entitled to a return on their investment. And at the end of the day, they have a return that they want to earn, based on the amount of the business that they're paying, and

pure and simple. When we invest in stocks, we're looking for a rate of return or and we're investing in a closely held business, we're looking for the same thing. And potentially, we're looking for an even higher return.

Ed Mysogland  51:01  
Because we want to get compensated for the risk of buying that business as well. Yeah, we said the same thing. Not only are you looking for a return, a return on your investment, you're looking to return of your investment. And yep, so it's it's two components. Yep. All right. So I finish every one of my interviews with this with the same question. So if there was one piece of advice, just one that you could that, that, you know, they they spent a half hour with you and me. What what would that piece of advice be that would have the most immediate impact on their business? You got one good nugget? I love that question.

Bill McDermott  51:46  
So I think what I would say is

where are the 1% improvements that you can make in your sales process?

In your cost of goods or cost of services process?

If you're a service business, your delivery process, and then your billing and payment process?

We've already talked about a 1% increase in your top line in sales?

What's the cumulative effect of those one percents? What if I can buy my materials or labor better? And reduce my costs that way? What if I can reduce overhead 1%? What if I can collect my receivables one day faster, or turn my inventory one day faster? The cumulative effect of all of those would be huge. And the way that you're doing that is you're shortening either that cycle times, you're eliminating your mistakes, or you're improving your business model. In each of those three aspects of your business. Doing that, I think you're well on your way to really having a game changer of a company.

So and I agree. So where can people find you? And do you do work throughout the country? I didn't do good. Clients in Seattle, Texas, all over the Midwest, up and down the East Coast. So know

where there's technology. I can I can play golf. So

you're based in Georgia, right? I'm based in Atlanta, Georgia. Yes. My website is www dot the profitability coach.net.

You can also find me on LinkedIn, my profile is Bill J. McDermott. I am on Instagram as the profitability coach. And so you can also find my phone number and email contacts either on my LinkedIn profile or on my website as well. But my email for anyone that's listening is bill at the profitability coach.net.

Ed Mysogland  54:13  
Well, we will have all your contact information in the show notes. So if you didn't catch it, I can assure you we will have it readily available for you. So Bill, you know what I this. This absolutely was everything I'd hoped for. So I I'm so grateful for all the time I know. You know, you and me we start talking about time and you know the value of it and I so appreciate you going over with me a little bit and and I'm certain everyone will, will will have gained a lot from this from our time together. So thanks. You made it easy for me. You asked some great questions. It was it was a pleasure to be on the show.

Thank you for inviting me. All right, well, I'm gonna I'm gonna cut us off and I once again, I appreciate you being with us. Very good. Thanks again.

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