In this episode Josh talks with Jason Hartman. They discuss how can you grow your business and sustain it forever.
Jason Hartman is the Founder of the Platinum Properties Investor Network and host of the Creating Wealth podcast, which is heard in more than 180 countries.
Jason is a genuine self-made multi-millionaire and serial entrepreneur who owns 21 businesses in investing, financing, real estate development, and SaaS software. He has owned properties in 11 states, had hundreds of tenants and been involved in several thousand real estate transactions. He has visited 83 countries, enjoys adventure, fitness and lifelong learning.
In today’s episode you will learn:
- How can you grow your business
- How to sustain your business growth
- How to get your business ready to sell
- How to systematize business
Narrator: Welcome to “Cracking the Cash Flow Code”, where you’ll learn what it takes to create enough cash to fill the four buckets of profit. You’ll learn what it takes to have enough cash for a great lifestyle, have enough cash for when an emergency strikes, fully fund a growth program and fund your retirement program.
When you do this, you’ll have a sale ready company that will allow you to keep or sell your business. This allows you to do what you want with your business, when you want in the way you want. In Cracking the Cash Flow code, we focus on the four areas of business that let you take your successful business and make it economically and personally sustainable.
Your host, Josh Patrick, is going to help us through finding great thought leaders as well as providing insights he’s learned through his 40 years of owning, running, planning, and thinking about what it takes to make a successful business sustainable and allow you to be free of cash flow worries.
Josh: Hey, how are you today? This is Josh Patrick. You’re at Cracking the Cash Flow Code. My guest today is Jason Hartman. Jason is a really interesting guy like 9,000 things going on at one time. All of them are kind of cool things around what makes a business sustainable and successful. He’s told me he’s bought and sold a bunch of businesses. We’re going to start our conversation out there. I think you just really enjoy listening to Jason talk about what’s going on. Of course, as usual, I’ll add my two senses, I think appropriately. Let’s bring Jason on.
Hey, Jason, how are you today?
Jason: Good. Good to be here, Josh. I wouldn’t say a bunch of businesses, a few. I’ve started a lot of them too that have not sold. I’ve been around the block a couple of times at least.
Josh: Well, that’s good. That’s good. Tell me, if you’re going to get a business ready to sell which I call the sale ready company. What would you say is the one or two or three most important things for them to do?
Jason: I think maybe the first thing is a year or two before you’re thinking of this exit event, stop running your personal expenses through the business. It’s one of the great things that you can get away with if you will. I don’t mean get away with illegally, but legally. You can run expenses through a business that are considered sort of personal business expenses, if you will.
Most business owners do that. You really want to develop a clean set of books, right? Many business owners and small businesses will end up doing what’s called recast financials for the buyer. That’s legitimate. Those aren’t illegitimate cooking the books type financials. They’re just examples where our financials where you take out those expenses that you can deduct, but they’re not really direct business expenses so clean up the books.
That’s one thing you can do. The other thing you can do is really start thinking about packaging, packaging, packaging. In other words, how do you make this business systematized is sort of think franchise prototype, if you will, as much as possible and sort of packaged if you will so that it’s easy to understand for a buyer because a lot of businesses including some of my own. They’re kind of hard to understand. We all understand it because we’re in it. We do it every day. You want to make it easy to understand.
Josh: By the way, I have a friend who owns a business. I’ve known him for 30 years. I still don’t understand what the heck to do with those. They can’t explain it to me either. He’s focused on getting to the age where they want to sell their business. They’re going to lose a huge amount of value because they can’t explain it. It’s a big deal.
Jason: There’s an old saying a confused mind always says no. You got to make sure that this is an understandable business. That it’s got understandable business model, understandable accounting, understandable brand, understandable audience or customer base those things. Think about packaging, even if you’re not a franchise business which I’m guessing most of your audience is not a franchise business.
Think like a franchise or especially at franchisor and think about, if this were a franchise, how would it be packaged? Who would the vendors be? What I have some standards for my vendors? Will I have clearly definable systems and processes for procurement, for sales etcetera.
Josh: Everything in the business.
Jason: Think like that, another tip that you can do in your business and this is like extraordinarily small, but it’s nice. Instead of giving everybody emails in your business based on Joe at ABC company or Jason at Jasonhartman.com, my email address, give the email addresses based on the role that they have like accounting at ABC Company, accounts receivable or accounts payable, things like this. Just little things like that can really help you. This may sound like a simple tip, but this technology drives a lot of people crazy including yours truly.
Use a corporate Password Manager. I’m not talking about a password manager that many people use. It’s a personal one, but a business and enterprise level Password Manager for all of these different accounts that we have, all of these different apps that we use in our business. Then when someone leaves the company or you have a new hire and you want to onboard them, you onboard them based on all the passwords and access needed for that role.
Your accounting person, your bookkeeping person is going to need a whole series of passwords for all the things that they need to access. Well, a password manager can number one, make those passwords more secure, less transparent so that they use an app to autofill the password and they never actually see it. Then when you’ve got a new person on board, you just give them a whole group of passwords and they’re in business, boom, right away. It doesn’t drive you crazy.
Josh: That’s a good tip. I want to circle back to something you talked about, which is cleaned up your books because there’s something that’s really important. This is especially true if you’re doing what’s called strategic sale, which means you’re selling to a competitor who’s going to make all your overhead go away. Not only do you want to clean up your books, but you want to recast the books as if it was being run by the new owner. In my experience, I sold my company, my food service company, we got close to an extra million dollars in our sale. This was in 1995. We’re really [inaudible 00:06:55] with real money.
Jason: Before inflation, right?
Josh: Well, inflation has been around. I remember hyperinflation. We had 18% interest rates. But at any rate, because we did this, we showed them how they were going to pay for our business at the price I wanted in 18 months. When you do that, and as legitimate, you get a whole lot more money for your business because your buyer, although they think they’re sophisticated really understand they don’t really understand your business and how it can add value to their business.
Jason: Sure. Yeah, that’s a good tip. Think from their perspective and really start thinking about who are your strategic buyers. I had a traditional real estate company that Coldwell Banker purchased from me years ago. I think that acquisition was more about the value for them in terms of what that company throws off then the value for me. The direct value for the owner is just the income it produces. Remember, every business throws off a lot of stuff.
The example in real life Estate Company is it throws off escrow business. It throws off mortgage business. It throws off title business. It throws off home warranty business, insurance business. There are all these other things. When you have a strategic buyer that’s in all those businesses and can profit from all those things that you throw off, maybe that doesn’t go to your books, but it’s going to go to their books when they buy your company.
Josh: Yeah, that’s a really good point. I have a question for you. One of the things that we talked about here that a lot about how to create a sustainable business is making the business owner operationally [inaudible 00:08:36] business, which means you’re no longer tactically involved. You talk about your experience with that and whether you think that’s important or not.
Jason: I think it’s very, very important. On my podcast, I had Michael Gerber on a couple times and his core idea, which really isn’t his but he sort of promulgated it a bit is, it’s the McDonald’s idea, right? It’s have a franchise prototype. Think like a franchise prototype so that you have systems that run your business and you run the system so to speak. The McDonald’s example is really a great example.
Because think about it, you’ve got a bunch of minimum wage workers that come and go. There’s tons of turnover. A lot of them are flaky teenagers and yet the business runs pretty well because the systems are so good. That’s what you want to try and move towards. A lot of this stuff isn’t necessarily about going in doing a lot of study and hiring, a super expensive consultant. A lot of it really in terms of those systems is just software. The software makes you have a system to some extent.
Josh: It does. Yeah, I’ve always told people that when you put an ERP system an enterprise management system in your company. Don’t make the software follow what you do. You follow the systems’ the software wants you to do.
Jason: Yeah. Because the software, the people that design that software now they’re not always right.
Josh: They’re mostly wrong, but that’s a whole conversation about user groups that needs to go along with that.
Jason: Sure. But if that software company’s been around for a while and if they have a lot of customers, take for example, something like Zoho. They’ve been around a while. They have a lot of customers. It’s a whole suite of apps. It’s pretty inexpensive.
Josh: It’s really inexpensive.
Jason: Yeah. Well, it’s cheap. I didn’t want to say that, but it’s really cheap, actually compared to something like NetSuite, which is outrageously expensive or–
Jason: Oracle, well Oracle is NetSuite. So, yeah, there are really expensive things out there. You don’t necessarily need a really expensive one, but the point is all of those users at that software have given feedback to that software developer. Over time, they have kind of refined that. Here’s one way to learn how to systematize your business. It won’t cost you a penny. It will cost you some time. I tell you, this is a valuable learning. It’s kind of a hack.
Maybe nobody thought of it but me. I think, as a business owner, should spend an hour two a week just doing software demos. I don’t mean doing demos like you’re a software company for other people. I mean, receiving the demo from a software company. So constantly be signing up for a free demo of software that might relate to your business. It might be an Enterprise Management Software. Might be some sort of tech software. It might be a software to get testimonials from your customers and clients. It might be a software for whatever and just have a demo, have a 20 minute demo and you will learn things and think of ideas, how to use that in your business whether or not you ever buy the software. Okay, but get demos?
Josh: Yeah, you know something? That’s a really good tip. That’s a really good tip. I mean, I do that a lot. I sign up for webinars or I go and I’ll spend an hour or two a week. I mean, I happen to like software. It’s a hobby for me, but it really does have a lot of work. Now, the other side of that is, make sure you don’t buy everything you demo.
Jason: Absolutely. Good point, there’s a balance on this stuff. Stephen Covey, and one of my favorite books, the Seven Habits of Highly Effective People. It’s an oldie but a goodie. He talked about the P versus PC balance. That’s a balance that we all have to achieve in our businesses more constantly working toward it. So P is productivity or production, getting the widgets out the door, or mowing the lawns or doing whatever you do, whatever service or product you provide. The other one is the production capacity.
That’s the PC. The production capacity involves learning and implementing systems and having software demos and all this kind of thing. That’s the production capacity. So you want to balance these two, don’t sign up for everything, just learn from it. You can learn a lot from sales reps that are demonstrating software or other products but a lot of the world’s about software. I think it was Marc Andreessen that said software is eating the world and he’s not wrong. Software is eating the world that we see it everywhere in our lives now. You can learn a lot by a sales rep who is simply doing software demos all day long for your industry. Have them teach you something about your own business. It’s truly incredible.
Josh: It’s one of my complaints. I love HubSpot. I’ve been a HubSpot user almost since it started.
Jason: HubSpot is kind of expensive by the way.
Josh: Well, back I luckily, I’ve been grandfathered.
Jason: You got the old price.
Josh: I have like the original price, which is so cheap. It’s ridiculous. The problem with HubSpot is they don’t have industry specialists and their sales department. I keep talking. I know the owners of the company, the senior managers.
Jason: The founder has been on my show. I can’t think of his name right now, but he wrote the book inbound marketing.
Josh: Brian Halligan.
Jason: Yeah. Halligan
Josh: He wrote a book called Marketing Secrets of the Grateful Dead, which is how I found them in the first place.
Jason: That’s good book and inbound marketing also, yeah.
Josh: But any rate, they don’t do industry specialist, which I think you’re missing a huge opportunity on because if they’re salespeople were industry verticals, they will be able to speak the language of their customers and provide a lot more value in the sales process. I’m not able to get them to say, “Yeah, you’re right about that.”
Jason: There are certain things that are of course true of any business and those span industries, no question, but also you can learn things from generic businesses or other businesses that aren’t in your industry, which I’m sure you agree with it. I just want to say that. Let’s put that out on the table to make sure.
Most entrepreneurs are simply following the follower. They’re looking at their competitor. They’re thinking, “Oh, I should copy that idea.” The better thing to do really is to look at a completely different industry and think about how can I bring that to my industry? That’s what’s going to give you a more exponential type of growth versus an incremental type of growth.
Josh: It’s one of those things where I highly recommend you go to trade shows outside your industry.
Jason: Oh, yeah.
Josh: Because you walk around you say, “Well, first of all, what you’re going to learn is that 80% of your business is exactly the same.” Everybody thinks their industry is so unique. The truth is it’s not. It takes a little bit of time to learn. In about five to 10 hours, I can pretty much learn what drives
any industry. What I realized is I ignore the 80% that I know is the same. You just look at the 20% that might be a little bit different.
Jason: Yeah, you’re absolutely right. That’s a very good point.
Josh: So if you’re in the consulting world, it’s an easy way to go between companies to just your customers won’t believe you actually know what you’re talking about, but that’s a different conversation. I want to take a fast run back at systems because there’s something that I know, which is private business owners are systems adverse. Do you have any good hacks besides demoing software for how they can systematize your business?
Jason: I think the software is probably the easiest way to systematize the business now. There really were two conversations there we were having. One was have software demos to learn things. The other is use software to get into that groove and make software put you in a system.
Josh: So who would you recommend actually document the systems?
Jason: That’s the thing with modern software. You don’t really need to sort of learn it in the old way. Now, look, I’ve been around a while. In the old days, software was like, you have a big book and you go to a class. Nowadays, you sort of use it and that’s how you learn it. You click the mouse and you push the buttons and maybe watch a couple of YouTube videos.
Software is better designed than it used to be. It used to be pretty complicated. Now you’ll learn it by doing. That’s one thing. But in terms of documenting processes, I think the software sort of is the process a lot of times and since we’re not talking about a specific software. It’s sort of hard to relate to that and every business is different of course, to some extent in that, but you could, of course document it yourself. You could have a great admin person who documents it.
Josh: I would never expect a business owner to document themselves because they just don’t do it, at least in my experience.
Jason: No doubt there. But the other thing you could do, if you really want it to get into the weeds on this, I used to be a franchisor in one of my business. One of the things you do to become a franchisor amongst other things that are a big hassle is you hire a consultant that is your process documenter that basically creates your franchise manuals. You’re required to have franchise manuals.
Jason: This person will come in your business for a few days and document things. You’ll have to explain how this works and that works. Even if you’re not franchising, you want to act like a franchise. That can be a good thing.
Josh: That’s Michael Gerber whole thing. Here’s what I’ve learned over the years, I just can’t do things in a systematic manner. It doesn’t work for me. So what I’ve done is I have the person doing the job, document the job. They use the software. We use Process Street in our company.
Jason: Oh yeah. By the way, thank you. I like trainer roll, I think it’s called or something like that. There are some good things like Process Street, exactly. There’s some good software for that.
Josh: Yes. I mean, it makes it easier to document. Back in the olden days, ee just did checklists. The truth is the people doing the job or the expert job, and the person who should document the job. I get to be lazy, which is even better.
Jason: There you go. Good stuff.
Josh: Which I’m really good at.
Jason: Absolutely. Yeah. That’s the default lazy.
Josh: Well, I tell people when I’m working or they’re running the business and I want you to think about how lazy you can be in your business. They look at me like I’m from Mars when I first say that. I said, “No, I’m really serious about it.” I want you to think about if you were to do nothing, except come in and see if you have enough money in the bank, to talk to a customer to what would you have to do differently than you’re doing now?
Jason: Turn a couple of dials, but don’t be engaged all day long. There’s another thing on software. Before I go, I want to mention to you, I think the concept of a desk program. A desk piece of software is extremely valuable. I know HubSpot has one. Zoho as one of course, most people if they’ve ever emailed a tech support, they got a response from Zendesk, which is probably the biggest. Here’s the thing about that, the idea of a desk software which is really designed as a customer support software that creates a ticket.
Here’s one of the things that’s very valuable. It doesn’t have to be a desk software or customer service or support software. But anything that is a collaborative email will start to make your business much more collaborative and your people will work together better. The problem we have now with technology is that email, for example, is very siloed. It’s very personal. It’s my email account or your email account versus a collaborative email where multiple people can work on the email. That is really, really a big deal.
Josh: Slack sort of fits into that world.
Jason: Slack kind of does that.
Josh: Slack is great for internal stuff, but not external stuff.
Jason: Yeah, yeah. I don’t think Slack is really the answer for that, but a desk software or any type of evolution of email that becomes collaborative, that is so valuable. Here’s why, when you hire a new person, or someone quits, it’s really a problem to make sure that the customers get taken care of when there’s a transition. You don’t want to be hostage to that.
You want a collaborative environment so someone– like with a desk software, a new person can just like jump in and see the history and exactly what’s going on and help people. It’s really just a better, better system.
Josh: You’re absolutely right. Hey, Jason, unfortunately, we are out of time.
Jason: No problem I got to run too. It was great talking to you.
Josh: It’s just that we want to make sure people can listen to this podcast in a way to or from work in one shot and that’s why we do it this length. I’m going to bet people are would like to find you or talk to you or see what you guys are up to. How would they go about doing that?
Jason: Yeah, you can find me at Jasonhartman.com. That’s my real estate investment company. JasonHartman.com, we help people buy properties nationwide. By the way, for business owners, you should diversify. Most of your money is all in your business. We got so many entrepreneur clients that have all their eggs in one basket. You should build a little real estate portfolio outside of your business.
Josh: With a really should do is buy the real estate to operate their business.
Jason: Sometimes if that’s not a real expensive market I agree with you.
Josh: Well, with the blue collar business owner, they’re not the most expensive places in the world. They should literally all of them should own the real estate they operated.
Jason: If you can get a really good SBA loan, yeah there’s an argument for that.
Josh: I would do SBA because SBA
Jason: Well SBA is a pain, but they do have high loan to value ratios.
Josh: Yeah, well I can do it without– anyway, Jason thanks so much. I also have an offer for you. One of the things I think and Jason, you sort of hit on this a second ago is that you need to know where you stand as far as reaching financial independence for your business. I put together this little quiz which we call Cracking the Cash Flow Code quiz.
These are really easy to do just go to thecashflowcode.com. That’s thecashflowcode.com. They’ll take you about seven minutes you’re going to find out whether you’re on the road to financial independence or you’re not. If you’re on the road great, but most people are not. You’ll figure out by taking this quiz, some things you might want to be doing.
I just want to thanks a lot for having Jason on today. This is Josh Patrick. We’re with Jason Hartman. You’re at Cracking the Cash Flow Code. Thanks a lot for sticking around today. I hope to see you back here really soon.
Narrator: You’ve been listening to the “Cracking the Cash Flow Code” where we ask the question, “What would it take for your business to still be around a hundred years from now?” If you’ve liked what you’ve heard and want more information, please contact Josh Patrick at 802-846-1264 extension 102. Or visit us on our website at www.sustainablebusiness.co. Or you can send Josh an email at email@example.com. Thanks for listening and we hope to see you at Cracking the Cash Flow Code in the near future.