Today, our guest is Daniel Lee from Windura Windows. We're talking about whether it makes more sense to buy a business or start one from scratch.
Daniel recently bought Windura Windows and we're talking with him about his reasons for buying the business versus starting from scratch with a franchise or starting from scratch. You'll be most interested in listening to the part of our episode where talk about having instant cash flow versus building slowly.
In most instances, we don't suggest business acquisitions. This is an exception and you're going to want to listen to why this is true.
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 emergency strikes, fully fund a growth program, and fund your retirement program. When you do this, you will 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 Patrick: Hey, how are you today? This is Josh Patrick and you're at Cracking the Cash Flow Code.
And my guest today is Daniel Lee. And Daniel owns a company called windura.com. They do high‑end replacements for windows and doors. And, with full disclosure, I have to say, Daniel is a client of mine so I'm going to say really nice things about him. But I'm not lying. They're all true.
So, let's bring Daniel on and we'll start the conversation.
Hey, Daniel. How are you today?
Daniel: Hello, Josh. I'm great. Thanks for having me on today.
Josh: Oh, it's my pleasure.
So, the thing I find interesting, we really have never talked about this, but I would kind of like to hear the story. When you were working for Travelers, you apparently had a very successful career going with them. And you decided to throw all that way and join the world of private business owners. And I assume that you had some decisions you had to make about how you were actually going to do that. So why don't we start there? So, first of all, why did you leave Traveler's or what caused you to want to be on your own? And then, what was your decision process for what was next?
Daniel: Well, so, it starts back several years ago. And for some reason, I think like, as I've talked to folks, many others have a similar thought about, you know, “Is there more?” I was on a great track, with a great company, had great mentors and training but started to just kind of yearn for more. And maybe that was about 35 or so. I'm 41 now.
And just through some research and a lot of reading, what did it for me was thinking about time and money. And I felt like what I was taught in school and we were chasing - chasing to save this big nest egg, and then we can spend our time. And so, you know, I can't wait till I'm retired to play as much golf or travel.
Well, what I came to realization is that the capital is not really the goal. It's the time that's the goal. And the money is really the vehicle for time versus this finite resource or what we're trying to find. So that kind of flipped my mindset. And I went to school, majored in finance and economics, did my MBA in finance. And so, you know, I felt like I knew what I was talking about. But what I wanted was more time in my life. And so, I went through some real estate investing to try to find that and create some passive income.
But in late 2019, came to the realization that, as I was working in my role as a regional sales director at Travelers, I got to sit and talk with independent agents, talked about small business, and I just saw how much I felt I could offer and how much we had in common. And maybe the one difference was that small business owner was willing to bet on themselves, either deliberately or by default. Researched a lot of a lot of people's stories.
So, there's the day, I think it's like March 23 or 26th of ’19, I just decided. I wrote it down. I was working with a friend at the time that this was going to be the day we're going to stop talking and start working toward a goal.
So, I think a couple of things happened there. Writing it down. Espousing it to somebody else. And then, the next steps for me is I shared it with a close group of college friends on an annual golf trip they had. Simply, the statement is, “Yeah. Hey, I'm going to leave my job and I'm going to buy a business. What type yet? I'm not exactly sure.” But then sharing it with people who are close to me which, for me, doing what I say I will do is really, really important. So, it puts some accountability out there.
So then, I searched myself and out in the marketplace for about a year, an overall process. And I started with finding what could I offer to a business. So, I'd write down my strengths, looked at all my old leadership assessments, and came up with a lot of my success had been attributed to the people that I worked with. So, I really enjoyed working with a close group of people and delivering a service to satisfy a customer need.
And so, I wrote a target statement that I would go out to business brokers. And I'd look at the business brokers in Kansas City and go and sit down and say, “Hey, I'm Daniel Lee. Here's my professional financial profile. I'm looking for a service‑based business that has a good sales channel and in need of some operational efficiency, you know, in a certain price range.” And so, I just started talking, and talking, and talking to them. And then, you know, went through the due diligence of several businesses, and found Windura which was started by somebody very similar. He left his corporate job when he was about 40 and started the window company. And fast forward, 20 years later, here I am at Windura.
So, I'm assuming that when you went through the process, you looked at starting a business from scratch, buying a business, which you did--
Josh: --buying a franchise where you would start from scratch or buying a franchise that was already running from somebody else. Am I correct in that?
Daniel: Yeah. Yeah. So, a franchise, I felt like I immediately crossed off because I was looking for the independence to make my own decision and felt, if there was a franchise agreement, there's going to be certain things that you just have to do. So, I initially did not consider franchising much.
The startup business was less attractive to me. It felt riskier to me, because I had a family, a mortgage and I'm, you know, leaving, you know, a very, very nice job. So, I wanted something that was immediately sustainable. There wasn't any question of the revenue.
So, frankly, you know, as I've done my research, I was looking for just a boring business. I mean, windows and doors. It's not a new tech startup company. But what I would read is the research about startups, only one in 10 really are successful. But a business that's been (1) has revenue over a million dollars and has been in business greater than five years, their success rate is extremely high. So, I was looking for a role specifically where there was an existing general manager role and some consistent dependable cash flow so I could have personal income and the business could continue to run. So that's why I ended up finding an existing business.
Josh: So, did you use a broker when you bought the business or did you do it on your own?
Daniel: I used a seller's broker. So, I did not have a broker representing me. So, what I did was talked to the small business banker, just Googled the business brokers in town, and just kind of work the network, and I would set up a meeting. And I would say, “Hey, I'd like to come in and talk about your listings.” And I had a one‑page profile about myself.
You know, the research I had done, the business broker wants to know, “Can this guy close the deal? And what are they looking for?” So, I tried to get that really narrow and shared that with my first step forward, and sat down, and explained what I was looking for with several groups - broker groups. And I would get on their list and I would get emails of their new listings or pocket listings, or you'd see the ones that they would post on the internet and, eventually, found the one.
So, we did work with a broker but the broker represented the seller. And, you know, just like a real estate transaction, did not represent me. So, worked with a broker but that person did not represent me. I did talk to a seller, a buyer's broker, and investigated that channel but just didn't end up going down that way.
Josh: So, where did you get advice from to make sure you weren't shooting yourself in the foot when you went through the buying process?
Daniel: Oh, yeah. Great question.
So, I did a lot of research on-- so there's a couple of books out. There's a Harvard Business Review published book called How to Buy a Small Business. Then, there's a book I really, really like called Buy Then Build. So that gave me some, you know, ways to think about it.
Once I got to a point of actually signing the NDA and getting the company's financials, I hired an external CPA to do an audit of the financials to understand “Is what is really happening or what we see in the books what's really happening in the business?” So, I used the independent CPA. I had a lawyer who would help out to look at any of the contracts. Pretty simple business. There's not a lot of contracts and complexities. And, you know, existing business owners in my own personal network are the people that I used.
So, you said something, when we first started the conversation today, which I found really fascinating, which is money and time. And one of the things that I preach a lot is that there's two sides of money and there's two sides of a business. There's the economic side and there's the personal side. And you're not, you know, unusual in the fact that, you know, you're not trying to make a gazillion dollars, but you're trying to get yourself to the point where you have time. Can you talk about that a little bit because, in my opinion, that’s, a really big deal?
Daniel: Yeah. So, time for me-- and different for everybody. But time for me was I defined as spending time on the things that I want to spend the time on. Not necessarily I want to go play golf every day at 2:00 p.m. That's certainly not happening as a small business owner. But I do get up every day at 5:20 and I'm oftentimes here until 5:00 pm. So, you're looking at 10 to 12 hours a day. And not at one time do I groan about not wanting to do it. So, it's doing something that you're building on your own that, I think, really gives me energy. And even though it's a lot of work, and when you talk about time, is I want to be able to spend time exactly how I want to spend it.
I chose not to take the opportunity to coach any of my kids’ sports in the past. And so, now, I'm coaching football, helping out with soccer, and being there and helping the time support my overall definition of a successful person. I think you can go really, really hard successful in your career but sometimes that leaves collateral damage at home or with other constituencies in your life. So, it was really about spending time on the things that I wanted to do in my life, and that are interesting, and engaging so.
Josh: Yeah. That sort of brings up this thing. And I've been on the soapbox for eight zillion years. We used to have a peer‑to‑peer group. And we used to talk about work‑life balance ad nauseum. And finally, one day, I said, “Screw work‑life balance. It’s work‑life integration.” And you just give a really, really good example of work‑life integration and that it's not like you stop working, go off, and do life. It’s all part and parcel. The same thing.
Daniel: I used to say that. Even my corporate career, we used to talk-- you know, people would come to me with problems, or they just-- when it got to me, you know, there was some challenging issue we're trying to work through and I use that line, “There's no work‑life balance. It's just life.” In life you have you have personal things, you have work things, you have social obligations. It’s just life and we're trying to fit it all together.
And it's not like when you walk through those doors downstairs, you know, you might be dressed a little bit differently, you might behave a little bit differently, but you're not a different person who walks through that door. It's still just one life that we're all challenged to manage every day. So, you know, I love that point of just trying to integrate those two major pieces of our whole life, the personal side and the work side, and integrate them together. And how can they work happily together. I think we're seeing that in COVID today.
So, before I left-- I left Travelers in the end of 2020. So, spent about six months, you know, going from working really intensely out in the field to my entire team was, you know, behind a computer monitor. And, now, when they're starting to talk about going back, I think that they're finding - people that are going back, are finding, “Gosh, it was-- I could get my job done. I could also manage the stuff at home. I could also feel better about myself. I'm a better mom. I'm a better dad. I'm a better husband. And I'm still producing great work.”
So, I'll be interested to see like, you know, when the pandemic is fully over, you know, what does that change to our overall view? You know, does work and life integrate a little bit more?
Josh: You know, that really comes down to trust. You know, if you're letting people work from home, it means that you're going to trust that they're actually going to do the work from home. There are programs you can put in to monitor what they're doing but, you know, at the end of the day, I'm not sure that's something that makes a whole lot of sense. Many business owners or many managers are not very trustful with the people they work with. So, I think it's going to really depend on the companies that allow you to do that.
You know, the truth is, if you're not commuting to work and you're working from home, you just picked up an hour or two a day, you know?
Daniel: Yeah. Yeah.
Josh: The average commute in the United States is somewhere around 24 to 25 minutes. So, if I just get rid of that, that's five hours a week which is 12% of my workweek. So, that can be a big deal.
Daniel: Yeah, it can be attract--yeah. Right. Right.
Josh: Yeah, it can be a big deal. It's going to be interesting to see how many companies integrate working from home with their regular thing as time goes on.
So, I want to talk a little bit about a term that I use a lot and you found very attractive when we first started talking about it and that's operational irrelevance. What does operational irrelevance mean to you?
Daniel: Well, so I do love that term. And I feel like I have tried to achieve that. And that really has been key to, you know, whatever level of success I have had in my career. I don't know that I have ever used it in that terminology.
One of my roles was, as a director of a department and I had eight leaders working in my organization who then had direct reports. And so, I would hire leaders. And when you go from individual contributor to a leader, the skills are different. An individual contributor does well because of the work that they can produce. A leader is does well because they get other people to achieve their best.
So, I always felt like, you know, I would coach them and teach them to try to work themselves out of a job. You should not be answering questions. You should be teaching how to find the answer. And oftentimes I'd ask questions of the leadership team about-- and they probably, you know, to this day, you know, roll their eyes about this. I would always ask them what they would do or “How would you solve this? Or, if you were in my position?” And got maybe infamous for answering a question with a question to try to help people think.
And then, when I believe you help people think on their own, give them the trust that we talked about earlier to make a decision, or at least some sub parameters, or you can make decisions between point A and point B that makes them self‑sufficient. So, the best definition of a successful leader would be I could leave for a week or one of my leaders could leave for a week and nothing would blow up. And you've got the appropriate systems in place. You've got the appropriate expectations in place. And when things come off the rails, the appropriate mechanisms, where somebody else can step in and help out.
So, I feel like making yourself irrelevant, as a leader, has always been something that I've strived for, although not using those terms. And then, taking it to a whole different level in the context that you talk about in your book becoming operationally irrelevant. How do you do that in your business? That's the part that I'm, you know, really challenged with now. And I did it when I had this huge support system at these major corporations. But now, at a small business, the resources are less, the flexibility is greatly increased. So that's my challenge right now. And things that we work on and talk about is “How do we create that system that works not dependent on either myself or one other person so, if something happens, the business is still sustainable and still serves our customers and all the employees that depend on this business?”
Josh: Yeah. We'll talk about that in one second. But what term would you use? When I say operational irrelevant, what other terms do you use that would work for that?
Daniel: I don't think I ever termed it.
Daniel: I think I would use--
I would always use analogies. And, you know, if anybody who's on my team ever sees this, they would roll their eyes. And when I say analogy, I would use, you should be able to leave and your cellphone not blow up. I would say I'm going on vacation, I will not be checking my email.
So, I was one of those corporate leaders, instead of putting, “Hey, I'm going to be on vacation for a week but here's my cell phone and my email.” Instead, I would put a lot of work daily in to helping people become better decision makers and they can make 99% of the decisions that happen on a daily basis where I could say, “I'm gone.” And I wanted that for my leadership team too that, when you stepped away, refreshed and integrated, work and life, that your team continue to run self sufficiently.
I think day‑to‑day that starts by not always having to be the person that makes decisions. And it feels good to make decisions. And it's easier to say, “Go do this. Go do that” and bark orders. It's harder to say, “Well, how would you think about that? Okay. Have you thought about it this way? What are the factors that you would think about in order to come to that decision?” And that person starts to put all those dots together and then makes them more valuable.
So, I would talk about being able to leave. I would talk about how many people have been promoted off of your team? Your best person is always going to leave. They're always going to. At some point in time, they're going to have another opportunity. And that's great because you have helped them develop into this person who can create their own path. And so, I would talk about it more like that.
And so, your way. I feel like I'm being really wordy here but your way is just simply operationally irrelevant. But some might struggle with the term irrelevant because none of us want to really be irrelevant.
Josh: Well, that's the thing I'm struggling with is that, you know, when I say the term “operationally irrelevant” often people will say to me, “So what will I do if I if I achieve that?”
And then, of course, I have-- you know, the thing is, is that-- well, one thing you've achieved is a sustainable business because the next owner of your business will not want you, but they will want your cash flow and systems. So, that helps make your company sale ready. And sale ready does not mean you're going to sell your company. It just means that someone else would want to buy it. And, frankly, if you’re sale ready, you're going to have too much fun and you're going to be making too much money to want to sell your business.
You know, the truth is the value building in a private business is on the strategic side but too many private business owners don't carve out enough time for themselves to be strategic. They just live in a tactical world. And they seem to always be chasing their tail. And after 20 or 30 years, I'm going to assume the person that you bought the business from was going through a certain amount of burnout and they were just sick of it.
Daniel: Yeah, I think that's fair. Mm-hmm, I think that's fair.
And I feel that I was in a good position to take because, in my corporate roles, as a leader, you have to learn to give some of that autonomy away and know that nobody else is going to do it like you did it. But you can't achieve something greater until you teach and push some of the decision making throughout the organization.
And perhaps, you know, the term-- you know, perhaps people push back on the term irrelevant. But if you focus, it's operationally irrelevant.
And a good example, I felt this a couple of weeks ago, my wife and I took a quick weekend trip. I found this pit in my stomach thinking, All right-- first of all, I don't fly well, anyway. But, I mean, there’s this pit in my stomach and on the plane thinking, “Gosh, if this plane would’ve went down, what would happen to all the customers and their orders? What would happen to all the employees?” So, to me, it would be peace of mind that I can get up in that plane, whatever happens, that the people left behind, if something were to happen, continues to basically run. Somebody would have to step in for strategic decisions. But day‑to‑day, the windows would get installed, the customers would get taken care of.
Josh: Yeah. And that will happen when your business gets a bit bigger.
Josh: I mean, one I think that’s really true is that you can't be operationally irrelevant when you have nine employees.
Josh: It really starts coming in at the 20‑ to 30‑employee level where you can become operationally irrelevant. That's one of the reasons to get there. You know, people used to tell me, “I hate employees.” Well, I love employees because, when I had 90 employees, I didn't do a darn thing that I wasn't really good at. I had lots of other people who did stuff they were great at and I was terrible at. But you need some scale to get there.
Daniel: Well and it goes back to the time question we were talking about. So then, now, as a business owner, you get a team around you. Now, you spend the time on things that you're really good at and you enjoy doing that drive value for the business. And you kind of flatten the organization where there aren't five roles wrapped up with one person. It's large enough and can support a person or some sort of resource helping out in all sorts of different areas in the business. So yeah, that is our path.
Josh: Oh, cool.
Well, Daniel, unfortunately, we are out of time. And I'm hoping that some people want to go to your website and check out that great new website you’ve built and, if you're in the Kansas City area, even buy some windows from you.
Daniel: There you go.
Josh: So how will they find you, Daniel?
Daniel: Well, you can check us out at www.windura.com. You can see what we're about. You can schedule an appointment right there so it fits you convenient. Or feel free, if you want to connect with me, you can find me on LinkedIn, Daniel G. Lee on LinkedIn. So, thanks a lot.
Josh: And I'm assuming that if another business owner wants to have a conversation with you, you would be happy to do so?
Daniel: Oh, I would. I would absolutely love-- I would love to do that. That's one of my rabbit holes is talking to other business owners in town, and what they're struggling with, and what their path is. And what I find is that, gosh, we all have some of the same challenges. And it's fun to see people who are a little ahead of you on the timeline, a little behind you, and you can kind of learn from all of them. So, I think I would definitely encourage anybody who wants to reach out, I would love that
Well, I have two things are likely to do. First, I would like you to go to wherever you're listening to this podcast and please, please, please give us an honest rating and review. If you love us, tell you love us. And I hope that's what you think. But if you hate us, you can say that and I'll just be sad for a little while. But, at any rate, please go and rate and review the show. I would really appreciate that.
And the second thing is, my second book is coming out. And it’s coming out really soon, on July 20. So, you can get my new book at www.salereadycompany.com. We continue the journey with our friends, the Aardvark family. And now, John is actually getting ready to transfer the business and he's got a whole raft of issues he needs to deal with to do that successfully. It's a fun read. People really like it. I really loved writing it. And I hope you’ll like reading it. So, go to www.salereadycompany.com. You can get the book for shipping and handling and you have a whole bunch of bonuses that come with it.
So, this is Josh Patrick. We're with Daniel Lee. 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 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.