On this episode Josh speaks with Kosi Stobbs, CEO of Specific Mechanical Systems. They discuss the challenges when growing your business from a few people to over 100 people.

Kosi Stobbs is the CEO of Specific Mechanical Systems and the Director of Property Owl Investment Solutions.

As a teenager, he worked at Burger King to support himself for college. He graduated at the age of 22 where he also bought his frst property. He dreamt of helping and inspiring other troubled youth to find another way and now is the owner of over 10 properties by the age of 30.

Now he owns a market cap of over 50 million in businesses and real estate and has over 100 employees.

In today’s episode you will learn about:

  • Working through adversity
  • Key ways to stay in business for the long term
  • Why it’s important to stay close to the customer
  • How we’ve been able to be around for over 35 years, some in the space have not

Transcript

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 and our guest today is Kosi Stobbs. I’m going to hope I got his name right. I tend to massacre names on a regular basis. Kosi has [inaudible 00:01:21] in company. He is in the real estate business. We’re going to talk to about manufacturing companies. I’m way more interested about that which is where he makes our brewing and distilling equipment.

Hey, Kosi, how are you today?

Kosi:                      I’m doing okay. It’s a very challenging time and talking about sustainability is at how businesses can stay the same for a long time is perfect timing because we’re testing that. A lot of businesses are testing that today.

Josh:                      Yeah, I would say there’s no question. There’s a lot of businesses are testing that today. Kosi, tell me how did you end up getting into manufacturing brewing and distilling equipment?

Kosi:                      You know, I’ve always had a big interest in business. My first business venture I think I was 10 years old when I didn’t have enough money for candy. I went around the neighborhood collecting pop bottles so I can get enough money for candy. I’ve always had an interest in business in general. Then in manufacturing, I have the personal belief that North American manufacturing— we’re based in Canada, but I love Canada, US it’s the same. North American manufacturing is some of the top in the world. We are on par with the Germans, but we don’t get the level of respect that I feel we needed we deserve.

Josh:                      Oh gosh, no.

Kosi:                      In terms of the quality that we output. It’s a very high quality product from your highly trained and highly educated people and just being a part of that movement and understanding that manufacturing in North America is not dead. We can manufacture great, highly specialized products and it’s going to continue to grow and get stronger in my opinion as people start to see the value of buying something and having it last for 10, 20 years. There she was value of that. It’s just great to be a part of that space.

Josh:                      Kosi, I have a question for you. You have 100 people working for you right now. Correct?

Kosi:                      Mm hmm. Yes.

Josh:                      What was the biggest challenge you had in moving from zero to 100 people?

Kosi:                      The biggest challenges the more employees that you have, the more you realize that you have to rely on other people to do things. It’s a mentality shift whether if you’re managing 10 people to 20 people. You can kind of be involved with it everybody’s doing and the organization. You can have your head wrapped around that. Before I own a manufacturing company, I worked in engineering as a manager. As a manager, you can get your head into, “Okay, here’s what all the employees are doing.” Get your head wrapped around 20 employees.

As you start to get above 30, 40 you start to realize if you’re going to take that step, you’re going to be relying on someone else to make critical decisions for your business. You have to accept that they’re going to make those decisions and you have to be willing to understand that sometimes they’re going to make a different decision to me.

You have to be okay with that. You have to understand, okay, here are the areas that I want to be involved in, here are the areas that I’m not going to be involved in. Then you stay out of the areas you’re not going to be involved in and it starts to work because ultimately, we only have 24 hours in a day, part of that asleep. There’s only so much you can do. You got to understand that, you set up systems instead of policies instead of procedures. You get involved in that into it. Then after that, hire the right people and let them do the right jobs.

Josh:                      You just hit what I think is the number one challenge of growing a business past 25 people which is how to delegate. In my experience, the hardest thing for a business owner to learn is how to be effective at delegating. I just want to get your input on this. There are actually two issues here. That was doing your podcast this morning. There might even be a third one which I just learned about, but the two I definitely know is [inaudible 00:04:55] are never good at trusting people because they don’t think the people they’re delegating to are as competent as they need to be.

The second thing is, when people make mistakes, we as business owners tend to have a low tolerance for mistakes. Instead of asking somebody what we learned, we beat them up about them and blame them and don’t look at the system. Does that make sense to you?

Kosi:                      It makes complete sense. It’s weird how different jobs you do impacts you differently. One of the first jobs, my backgrounds in engineering, one of the first jobs I had as an engineer was working for an oil and gas company. One of the things that I learned that oil and gas company it was talking about when they had injuries and when they had ultimately led to fatalities and how do you prevent those things?

Whenever they did these root cause analysis and always pin back to generally a system issue. If we go back to like when construction was done 100 years ago and they would expect for every million dollars spent, you’d have one fatality. That was a number that they were putting in for budgets. You think about that today. You go to a job site, the expectation is not that people are going to dive in job safe. What’s changed between 100 years ago and now? It’s not the worker and their desire to come in and do a safe job.

We’ve got hardhats. We’ve got safety systems. We’ve got procedures and understanding that systems usually not the individual issue as much as it is a system issue more times than not. If you as an owner can set up a system for success for your staff, and your people and people that work for you, you set yourself up to scale.

You set yourself up for checks and balances because ultimately everybody’s going to make this thing. I’m going to make a mistake. General Managers going to make a mistake or managers are going to make mistakes. Mistakes are part of it. We need to understand that we make mistakes. How do we have checks and balances so that those mistakes don’t get to the customer? 

That’s the question and then if they do get the customer, how do you make sure that we’re not repeating those mistakes that get to the customer? That kind of circular feedback loop of “Okay, if we have an issue, this is what we do about it then just running it in autopilot.” It helps a lot for any organization and to your trust issue. I agree with you very much so. A lot of people have that kind of deep inherent trust issue. You’ve got to have that at least your core team around you. You got to trust them. You got to trust them and if you don’t get there, you’re limiting yourself on what you can achieve.

Josh:                      I think part of this is that we take a look at the people that we’re working with. We don’t really realize that they actually want to do a good job. We often think as owners. I see too many owners say, my people don’t care about doing a good job and that’s garbage.

Kosi:                      Exactly.

Josh:                      The truth is they want to do a good job. They also have a track to run on to know what they need to do to do a good job. That’s were systems come in.

Kosi:                      Yeah, absolutely. Not allowing them to make mistakes. We’ll be surprised if you sit in a meeting room with two people you could have, the owner just wants to say everything.  His support and it will always look to him before making us do. The issue with that is we don’t get the full story and you know a company’s running well when everybody’s willing to voice their opinion. Because I’m telling you, if there are 10 people in the room, most likely the owner does not have the best idea that— law of averages.

Josh:                      I can almost guarantee that. The reason is, unless you send the owners area of expertise that they actually spend their time working on, they’re not the expert about it.

Kosi:                      Absolutely, [inaudible 00:08:21] the company gets, the less closer you get the direct interaction with the customer, the intricacies of what they have to do on a day to day basis. You got to really consult before you make grand decisions and more often than not let them make the decision. There’s very few decisions I find that are make or break for an organization.

The ones that is not operational. The ones that are things like okay, we need to maintain a certain amount of cash on the balance sheet and not pull money out so that if we go through downtimes, we can last six months a year. Don’t pull it out and buy a boat. Make sure it’s sitting there because it’s inevitable—downtime every decade or so they come in different form, but downtimes happen.

You need to make sure that you look at your business you say, “Okay, that’s the owners key job is to make sure the business can last five years, 10 years.” Those are the types of decisions I like to focus on, the outward looking decisions. What are we doing in five years? What are we doing in 10 years? How do we position ourselves to get to that next level versus the operational decisions that lead us to get to 50 people? There’s other people that if you allow them to do a job, they’re not doing what you do, but they’ll do a good job.

Josh:                      The difference is I keep hearing that I hire people when they’re not as good as I am. You’re not hiring the right people if they’re not as good as you.

Kosi:                      Exactly. Yeah, exactly.

Josh:                      There are a few things I’m really world class at, but there’s an awful lot I’m not. I can hire people who are world class and they do it way better. I do a lot of videos. I like to play around as a video editor, but I’m not a good video editor. My video editor is great. She has way better ideas about what we do with video than I ever do.

Kosi:                      People love autonomy. They love the ability to own their own section, own what they can do. You start giving them autonomy and they start doing awesome things. You give them rope and they start doing awesome things. You got to focus on the stuff that’s key and critical to your organization and really look big picture. Otherwise, you just get stuck. You get stuck, you get stuck away, or you sit in the same position for 10, 20 years wondering why, why, why and when do we really need the answer lies of the person looking in the mirror. That’s their own worst enemy.

Josh:                      The biggest lesson I learned in business was to stop blaming other people and start taking responsibility for the bad things that what happened in the company because they offered were my fault.

Kosi:                      Exactly, at the end of the day, we either didn’t hire the right people for the right positions. They didn’t screen properly. We didn’t have the right atmosphere for that person to thrive it. Ultimately, that comes down to the owner.

Josh:                      Or we didn’t have the right system set up to be successful.

Kosi:                      Exactly. Ultimately, that’s where you come in. It’s making sure that we’re setting ourselves up for success and the beauty about the way we are with information. We’re not the first ones to have done this. We’re not the first ones that have looked at businesses and how they work and how they don’t work. There are a lot of places like this podcasts.

Places like really great books out there. There are a lot of places you can go to learn about what makes businesses successful, where they’ve analyzed thousands of businesses and said, “Hey, these are the commonalities to either allow you to get to 50 people to go from 50 to 100, to go from 100 to 1000 and scaling up.” What you need to do to to be able to take those steps? How you need to do to be sustainable and to last a long time? Part of is the operation. The other part is paying attention to customers.

Josh:                      You may not know the answer to this, but I will ask it anyhow. How did you make them change or make the changes in how you saw the world and how you acted in the world to be able to manage 100 people? What was your path that you went on?

Kosi:                      That’s a really good question. I started in engineering. My passion has always been business though. Even as an engineer, I wasn’t a good engineer. They recognize that early. Anything that I designed, it goes a lot. What they did recognize is that I was good with people, part of me dealing well with people. Educational, I struggled in school. I got an engineering degree, but it was by the thin, thin margins. It was just like grit determination. Then as I started to work, I understand what it meant to struggle, I understand what it meant to go through struggle.

I think I had a different level of empathy for people. It put me better suited to be a manager—a manager, not so much a technical manager, but more of a people manager, where you can sit down and have a conversation about what’s going on in your life that might be impacting your work. I think that really helped me excel so I excelled really quickly in the work environment because I was empathetic and I also understood business and how businesses operated event.

My steps to start managing my own business where I’m the owner, I said, “Okay, well, taking all those skill sets, you’re looking at having very few direct reports are linked to me.” I’ve got a system where I don’t want more than five people that I’m directly responsible for.

For me personally, and having those people be really skilled individuals. If I can get down to one, I’d love it, but maximum five at any given time, and then just empowering people to make decisions and then trusting them and then being able to not—because I’m not working in the business, I’m working on the business. I’m having conversations about, “Okay, what are we doing in five years?” Our growth plan is, we’re at this number now.

We want to acquire, what’s the best way to do that? What type of cash flows, we need to do that? Are we going to take out a loan to do that? What does cash flows look like after that and those types of things. The more enjoy looking at that a little more enjoy looking at big picture stuff. It gets me in the area that I feel I add the most value and that’s kind of looking out. Then the operational part, there’s people that are smarter than me that are doing that, way smarter than me on the operation.

Josh:                      How old were you when you started your own business?

Kosi:                      I’ll kind of go through the different steps. There’s the pop cast for caddy which I used to do when I was 10. To me, that’s where you find out where your heart is. If you look at teenagers, that’s where you find out who the true future business owners and entrepreneurs are, if you’re 10, 10 11, 12, what they’re interested in that stage or they’re trying to start a business or trying to be entrepreneurial. There was at stage and then in my early 20s, getting into the real estate side were first started buying them and started developing and big construction teams.

Then into the mid 30s, we started buying operational companies and more recently, a year ago is when I purchased Pacific Capital Systems. That is kind of like the clear steps and the progression is manufacturing a lot different than some of the other stuff. It’s no different in terms of how you deal with people. People are people and every single person is important and every single person has a story. Every single person needs to be made to feel a level of importance for what they do.

I think it helped with my mom was a janitor because some of the people that I get close on a personal level on times are the janitor at the companies. Getting to understand their story because I knew my mom’s story and how hard working she was. The fact that she was in that position wasn’t necessarily because she wasn’t hard working or wasn’t smarter. It was just that was what immigrating to a country at the time where she did, there wasn’t the same opportunities that I had growing up in the system being educated in the system.

Just understanding that people are in positions, not necessarily because they’re not smart or don’t care. A lot of people are working doing the best they can and everyone should feel comfortable about what they’re doing and when they come into work and just those environments.

Josh:                      That makes perfectly good sense to me.  What I’m hearing is, you have a belief that the most important people in your ecosystem of your businesses are your employees.

Kosi:                      By far, employees are the most important because they are the ones that allow your customers to feel important. How they communicate to your customers. There are front liners, they’re going to be communicating customers, customers are important. If your employees feel really good about what they do, they care about the company that comes across in the way they communicate with the customer.

That is what allows you to if a customers kind of on the line and saying, “Do I go with you guys? Do I go with other guys?” That customer will talk about the people at the company, and how good it is to work with those people and how they deliver and how they build quality product. It’s always the people first and making sure that that culture of the way they do things is consistent with how you behave as an owner as a manager, what you want that to come across. It’s amazing how much doing good things impacts the bottom line because it comes across.

Josh:                      Kosi, unfortunately we are out of time. If somebody wanted to find you and learn more about what it is that you do and what you’ve done, how would they go about doing that?

Kosi:                      You know, oddly enough, the best place to capture me is on Instagram. My Instagram handle is @thepropertyowl. That is when I spend, if I’m communicating about what I’m up to and what I’m doing, I do it there. I find it very interactive and people can ask me questions and I can reply back in real time and I can create little videos and share my thoughts and my insights on different things that are happening and how we progress but yeah, that’s probably the best place to get in touch with me.

Josh:                      That’s @thepropertowl at Instagram.

Kosi:                      Yeah, it’s @thepropertyowl. Look me up on Instagram. That’s the best way to find me. Thank you so much for having me.

Josh:                      Okay, sounds good. Hey, I’ve got an offer for you too. The thing that Kosi and I were talking to actually we’re dancing around what I call creating an economically and personally sustainable business. One of the steps that keeps you from ever getting around to doing that is they don’t know where they stand when it comes to becoming financially free from the company.

I’ve been using this little tool I developed. I don’t know about 30 years ago called the four boxes of financial independence. I finally got around to making into an online quiz. It’s really easy to get. You just go to thecashflowcode.com that’s thecashflowcode.com. You click on a big orange button, and from there, you’ll be taken to the quiz. You spent seven minutes placing numbers in.

At the end of seven minutes, you’ll find out whether you’re on the road to financial freedom for your business or not. So this is Josh Patrick. We’re with Kosi Stobbs. You’re at Cracking the Cash Flow Code. Thanks a lot for stopping by. 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 jpatrick@stage2solution.com. Thanks for listening and we hope to see you at Cracking the Cash Flow Code in the near future.

Topics: kosi stobbs, sustainable business podcast, Sustainable Business, business growth, growing your business, staying in business long term, from zero to 100 employees

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