are you ready to scale and outsource
your business okay let’s go welcome to the outsourcing and scaling show I’m
your host Nathan Hirsch a show where we talk about everything
Amazon shopify ecommerce and digital marketing let’s get started welcome back
to the outsourcing and scaling show my guest today my special guest today is
rolling Fraser rolling how’re you doing today how are you doing great where are
you joining us from I know you’re traveling I am in beautiful Austin Texas
in my fun room that’s got pianos and all kinds of cool stuff and a great river
view in the background so I’m I’m here for board meetings for a couple of our
companies that’s awesome who lose you that don’t know he’s a co-founder and
principal of three current inc magazine fastest growing companies and he’s
founded scaled or sold 24 different seven to nine figure businesses ranging
from consumer products to industrial machine manufacturing companies with
adjusted sales ranging from 3 million to over 300 million you might know him from
digital marketer running the trafficking conversion conference we’ve been talking
for a little while and we want to go all into that but first let’s take a
gigantic step back what were you like it as a kid were you a rebel were you a
straight-a student did you know that you wanted to be an entrepreneur it’s really
funny I was I was a straight-a student but I was also a straight F student
because I have always had a challenge with Authority so I have had ups and
downs in the academic world and so I would say rebel but but you know I
wasn’t like crazy rebel if that makes any sense at all so did you go to
college did you graduate college yeah I I did the whole thing so I graduated
high school I went to college I got a degree in accounting and then I went to
law school and got a degree in law and then I went to advanced law school for
an advanced law degree awesome and what was your first entrepreneurial endeavor
after that did you go out and get a real job or you go right into
entrepreneurship no I was in entrepreneurship from early age so from
about 16 doing different things then 18 I got my real estate license and started
selling real estate 19 I got my insurance license 20 I got my securities
license so I was doing what they call private placements or syndications
raising money putting together real estate deals stuff like that all through
doing the academic stuff and then I also played in a band during that time at
night so I played out in clubs from about age 15 to 242 I think I stopped
when I was 42 awesome and what was your what was your first like real outside of
college when you’re like alright I’m going all in with this entrepreneurship
er was that right away well I was an entrepreneur the whole time so that I
I’ve always just been passionate about business my you know my post college
stuff was I had a law degree so I figured why not practice law but it was
already doing I was buying and selling companies by that time I I started with
buying and selling real estate and then moved into buying and selling companies
when I was in my 20s and so as I was in law school I got out I had got offered
three different jobs with the Securities and Exchange Commission divisions and
then decided that I wanted to go and practice for myself so I opened a law
firm another entrepreneurial venture and grew it to be one of the top firms in
San Diego California which I had moved to from Virginia and and then basically
just had so many deals going on that it seemed like it made a whole lot more
sense and I made a lot more money doing those things than practicing law plus
it’s a whole lot more fun to do deals than it is to you know to do loss I
think a lot of people know you from trafficking conversion from a digital
marketer so what can you tell us that story how did you get into that and what
is your role now with them I know that’s kind of changed over time yeah
absolutely I started you know I’ve always been a big believer in if you
want to get to know somebody that you want to do business with find the paid
Channel for access that they have already created because you will go in
as a customer meaning that you will go in in a position where they want to
serve you and so I went to this event called traffic and conversion summit but
these two guys Ryan Deiss and Perry Belcher
were holding for the first time I think it was 2008 and and it was just amazing
I thought it was fantastic I they have this mastermind called war
room that that sounded interesting but I didn’t really know enough what it was
and and I I didn’t join it I went back the next year because I was regretting
the whole time that I hadn’t joined it for the following year and with the
intent of signing up right away and I went up to the thing as they were
signing to the desk as they were setting up everything and said you know hey I
want to join that war a mastermind and they said you can’t it’s like wait a
minute what do you mean I can’t this is like sold out what’s the heck’s going on
they’re like oh no we hadn’t printed the forms yet I was like okay cool so so I I
joined that and I was a member of that for about three years we got to be
friends Ryan and Perry and Richard Linder who was another partner in in the
business got to be friends and there was an opportunity to become a partner when
they had a CEO who had a big chunk of equity options that that that ended up
becoming available so they you know they said is this something you’d be
interested in being a part of and I said yes so I ended up buying in so I’ve had
the the journey with digital marketer and traffic and conversion summit and
war room which are three separate companies but all involving those people
and for gosh almost almost ten years now and I’ve been customer
I’ve been fan customer member and you know and partners so that’s kind of that
evolution and now where we’ve exited three companies that that group owns we
went through a partner buyout recently where we bought out Perry from the
digital marketer companies and very bought us out from the e-commerce
companies and and so now it’s digital marketer is Ryan Deiss and me and
Richard lender and we’re in the process of traffic conversion summit was one of
the companies that we exited part of its going into 10,000 people at in San Diego
in 2020 we’re doing in June of 2020 Amsterdam for our first European
expansion we’ll have about 3500 4000 people
then in October we’re doing Singapore for our Asia expansion so we’re really
focused on growing this company’s super super fast and big I love it you’ve
obviously hired a lot of people what is your hiring mentality when
you’re looking to add people the team to build a company to eventually sell it
what are you looking for well one of the things that’s really important to
valuation and the ability to sell is that if you don’t want to be in the
company when you sell it you need to have people who replace you and if you
are a personal brand you can’t really sell a personal brand it’s it’s it’s
almost impossible and if you can you’re not gonna really get that much for it
because it’s you so one of the biggest things for anybody who’s an entrepreneur
to do is to say I’m not going to make the company me I’m not gonna name the
company me I’m not going to do anything except be the spokesperson for the
company and then I need to get operators and personnel in the company that can do
all of the things that need to be done because if not then I don’t get to work
on the company because I’m working in the company and I don’t get to sell the
company because the company is still me so right you have to build you know what
I look at when I come in is who are the professionals that we can bring in to do
all the things that need to be done and and create something that someone else
can buy and be an owner of without being an operator of because that’s really
like that’s where the money is the money is in private equity firms investment
banks you know companies that want to buy a company to add something more to
it they they don’t want a company that’s just you so so you need workers and all
of those companies so we’ve had in the digital marketer group of companies I
think we’ve had as many as 300 and see 265 320 probably close to 3 325 350
people at one point now digital marketer has I think we’re at 62 people in
digital marketers so we’re probably a total of maybe 75 or 80 would you have a
bad hiring experience maybe a hiring horror story that you can share with the
audience um I don’t really have a hiring I mean we we’ve had people that we hired
that we’re crazy but but those crazy people ended up
lawsuits that settle but I can’t talk about so I won’t talk about those but
but I think that you know I’ve had experiences with people where usually
everything is communications so I think the big thing is is that you you want to
be very careful as a person who’s being hired or as a person who’s hiring others
to be really clear on what is the compensation what’s the expectation
that’s being created you know are there promises that are being made because
we’ve had people that relocated you know somebody’s moving from a place to
another then that’s that’s an expensive life up lifting kind of thing that you
know you you’ve got to have some responsibilities as an employer to to be
careful you know to not uproot people’s families and have them move out and then
say ah two months later it didn’t work out or we change directions sorry we
don’t need you anymore you know but at the same time you’re not signing
somebody on for lifetime employment so the key I think is communications to say
hey look here’s the position here’s the job description that’s a really key one
you need to write a job description before you hire somebody so that they
know and you know what they’re supposed to do you need ideally to have them come
into a position that already has SOPs standard operating procedures and
processes if you don’t then bring them in with the expectation that that will
be part of their job to create those so that if they move on or up in the
company that somebody else can come in and know you know know what they were
doing and then on the comp package – so we’ve had people who you know who came
in and there were conversations about all kinds of variable comp you know so
it’s people come in it’s like bulk you know can I get a piece of the company no
you can’t we don’t do that you know can I can I have a variable comp where I get
paid a certain performance you know fee based on this probably let’s talk about
that but then when you talk about it you got to write it down because as a
recovering attorney I can tell you that people hear different things without
either of them being liars cheaters or thieves you can have a conversation with
somebody you and I can have a conversation about a deal even and say
you know hey Nathan I’d like for you to do this and you know here’s here’s the
thing and then you here’s something and I hear and I think
I said something differently and and that’s what what makes people fight with
each other so I think that written understanding of that is very very
important and then the same thing with benefits and culture I think that you
know for us we’re we lean heavily on the side of providing a lot of benefits
because we want our people to feel really taken care of we don’t cut deals
for somebodies you know just gonna be scraping by in the calm package if we
can’t afford to pay them what they need to make things work for them then we
don’t hire them because you’re just setting yourself up in them for failure
and then in terms of a breakup you know what what happens how do we determine
what happens if things don’t work out you know that that’s ideally agreed on
in advance as well you know we have a standard severance package or you know
something like that or we’ll pay you for two weeks or four weeks or whatever the
deal is just it’s just getting all that stuff that people gloss over and and the
biggest one of the biggest things for litigation is that you’ll get into a
business and you know we had a partner in one of our one of our portfolio
companies that had conversations with somebody and they thought they were
entitled to you know X amount of money per certain transaction that happened
and then when they and things didn’t work out and they left they file a
lawsuit for you know however much money saying you know well we generate all
these things and you know so I’m entitled all this money that never
happens if you got all that stuff in writing then it makes a lot of sense
what about the culture I know you’re someone that has a lot of meetings you
have a lot of different companies are you building the same type of culture
and every single company are you customizing the culture for that company
yeah it’s a really great question and the answer is that there are
similarities but every company has its own culture so it’s not a culture can’t
be cookie cutter copied and stamped out I think in different environments
because different people there are different people in a software company
than there are in a real estate sales company that are different from people
that are in an ecommerce company and even from one company to another
people will be different so what we do is we get together and and my partner
Ryan is excellent at this but we get together and we create a set of things
that we call we beliefs so we say what are the beliefs of the company what are
the things that we stand for what is our we have a thing called a character
diamond that’s basically if the company was a human being who would that company
be what’s the hill that it’s prepared to die on the North Star what’s the
counterpoint to that what’s the you know the one thing that we hold sacrosanct
that will not Bend on and you know and the other side is kind of what’s our
what’s our key thing that that you know that might some people might not like
but it it’s kind of a defining thing for us and then once we identify that we say
okay based on that what do we believe what do we believe should happen and and
we go through a whole exercise of that and every company we do and we actually
create a video that’s an indoctrination video for everyone who’s in the company
and everyone who’s in the company participating in the process is in the
video and then that video was shown to everybody that’s perspective higher so
that they can know what they’re getting themselves into I love it um what about
just running a meeting in general is there a certain like format you have for
running meetings with different teams I like to have an agenda outline that
that’s basically it as an agenda outline is what do what do we hope to accomplish
at this meeting and then what are the basic points that we’re gonna have to
cover that are critical to moving forward to accomplish the thing we want
to accomplish and then as you get into the meeting I take those things off and
then I like to say what are the action steps great we finished issue number one
what are the action steps who’s supposed to do what within what period of time
and when are we going to follow up to see what’s happening and that that that
and then we use a software program called Monday that is a it’s an okay are
so objectives and key results software so we follow the you know the John Doerr
measure what matters Monday okay our Andy Grove philosophy and guys if you go
do the free up Facebook group outsourcing masters the Freeeup YouTube
video we actually have a video using Monday
on how you can use it organize freelancers using that tool
what about figuring out how much to spend on hiring I think a lot of
entrepreneurs as a scale they struggle with this do have a certain percentage
of revenue a profit that you’re figuring out how much should I actually invest
into people for my business yeah it just depends though I mean any
any general rule is subject to exception but generally we like for payroll to be
no more than 20% of sales but so if we’re doing a million dollars then we
should have about a $200,000 payroll for doing ten million dollars about two
million dollar payroll but if the company’s in a growth phase you that’s a
different animal or you’re doing a dev thing with software or something like
that because you may have ramped up expenses so once you’re an operating
company I think it’s fair to say ideally you’re in that twenty twenty five
percent range try not to go over that as far as what individual people get paid
there there’s Glassdoor and places like that that you can look and see what does
this position pay in this particular location and it should what you pay
people should be what market rate is so there shouldn’t be a whole lot of
guesswork to that there is a range that you can look up that statistically been
determined because thankfully other people have hired people like you’re
gonna hire for similar positions in the past and and recorded what that is so
you’ve got a database of things you can look at so you have different business
partners in these business I know you talked about Ryan what do you look for
in a business partner oh gosh the it’s really okay it’s just somebody that I
like III think you know one thing you learned as an attorney is that people
don’t sue people they like even if those people make big mistakes so number one
you and you’re gonna spend a lot of time with a business partner so if you if you
have somebody that you have any doubts about whether you like them or you know
whether you can hang out with them outside of business then it’s probably
not going to work I think that’s any anything anytime I can look at
throughout all of the things I saw as an attorney or all the business
relationships I’ve had that didn’t work out in some way
it’s just personality differences and it doesn’t mean those
people are bad or wrong or anything it’s just you know you like who you like and
so I think that’s the first thing you got to like them the second thing is is
that you need to have complementary skills you if if you’re really good at
operating a company and you hire some air you partner with somebody else who’s
really good at operating a company you’re probably gonna butt heads because
you have different operating styles and so you need to really think about you
know the the the traction model of visionary integrator right that that’s
either rocket fuel or traction where they say there’s people who are
visionaries who have the idea of where the company is going to go and then
there’s integrator people who make that stuff happen that’s a really good
pairing but I think that you know and Ryan my partner has a thing that he
where he says there are inventors builders generals and guides and so a
guide is somebody that’s not really in the company managing that’s more of a
CEO outward-facing kind of person the general is the
integrator operator that’s kind of like the CEO who’s running the show but there
are also builders who you know operators aren’t necessarily the people who can
invent the things or come up with the ideas and they’re not necessarily the
people who can actually build those but they can operate them once they’ve been
built and I just did I just had a talk with Clayton mask who founded
Infusionsoft which is now keep and you know as they’ve gone through a hundred
million plus and sales he really I think had a good point in that there’s along
the way there’s just different people that you’re going to come into contact
with and so a partner can’t be somebody who’s not willing to change and grow and
very dedicated to personal development along the way because when you found a
company or get into a company and you’re in the he said it’s the rules of ones
and threes at a hundred thousand three hundred thousand a million three million
ten million 30 million a hundred million three hundred million you’re usually
each time you hit one of those new thresholds the people that you’ve got
aren’t going to be qualified to get you to the next threshold the people in
management and senior management in particular as a founder you’re the
exception if you are on a like an aggressive personal growth path because
you do have the vision of the company and ideally you step out of the things
that you can partner with or hire or contract out that are not your skills
and you’re developing new skills all the time and you’re really committed to
honing the skills you’ve got so your partners have to be in that mindset as
well because if they’re not you know and we I’ve just seen three companies in the
last year that went through partner buyouts because you know one partner was
not committed to that or one partner had a different vision or whatever so you
really want to be sure that you’re aligned you really want to be sure that
you like each other you want to be sure that you can have fun together if your
meetings are knockdown drag-outs that’s probably know if you’re arguing about
the flowers what flowers should we have on the desk that’s probably not a good
partner I love it let’s talk about sales and
marketing that’s not obviously been a big part of you scaling and growing
what’s your mentality when it comes to those two and how do you see things
changing I am for both sales and marketing so so if specifically I mean I
think that I think that it’s really important to have a sales function it’s
something that is probably the weakest thing in our business because we are
really really good marketers and so if you say there’s 20% that will never buy
and 20% that will buy anything that you do and then the other 80% excuse me
other 60% is where the money’s made we’re not good at getting the 60%
without bringing in and outside kind of group because we’re word marketers were
not sales people so knowing that marketing to generate inbound for sales
and sales to convert the leads that you’ve got is a really important
combination and very frequently those two don’t get along so the people that
are marketing are sending all kinds of lead to sales and saying why the heck
aren’t you converting more of the leads and the sales people are saying well the
leads aren’t converting why aren’t you sending better leads and the sales
people go back and say well maybe if you followed up with them a few times or got
back to them immediately it would be better and you know it’s back and forth
and back and forth so I think the perspective of marketing
and sales and what’s happening in that is that they are coming more and more
and more together more sales people are having to embrace marketing technology
and become at least familiar with marketing and more and more marketers
are moving into sales as they realize that the best way for them to maximize
their efforts or to optimize their efforts is to actually be able to
convert that 60% that that they’re just kind of leaving on the table right now
and that they need to be familiar with and understand how sales works to better
integrate the two and ultimately you know you’re gonna have smart gating
which is sales and marketing together I think what about conversions what are
you or some of the biggest mistakes you see when entrepreneurs are trying to
convert and just can’t get it done like converting people to sell on a website
or something like that yeah ecommerce trying to convert clients
it could be an agency trying to land that client or get a client back what
are some common mistakes you say it’s it’s that they it’s a couple of things
one it would be that they’re focused on the wrong thing because conversion
across the customer journey is is much deeper than are they going to click the
Buy button on my website right now so I think it’s it’s a failure to address
customer experience if you look I think it’s about 89 percent of all
fortune 500 CEOs right now say the biggest thing that they’re focused on
going forward is customer experience customer experience is the number one
thing that you can differentiate yourself from other people in a world of
homogeneous products right or fungible products where people are going to China
and buying you know the same 67 versions of something and then putting them on a
website and putting them for sale that’s just ultimately not going to be
successful going forward and the little tiny conversion hacks I think that’s
that’s probably what I would say is people are focused on conversion hacks
which are temporary and disappear the moment that everybody else knows the
hack windows go away and and they’re immersed in the hacks so they ignore
product market fit product development customer experience and
and because they’re after those new customers they’re also ignoring their
existing customers who have been proved through study after study to be worth
five times the value of a new customer so I think the conversion the conversion
thing is it’s a focus on hacks and not on the bigger things that matter I love
it as we wrap up here you’ve sold a lot of businesses you’ve been a part of
mergers what advice do you have for entrepreneurs who are looking to sell
their business well there there are a whole lot of factors I’d say that’s a
big question I would say that the things to think about are you have three
different ways that businesses typically typically get sold if it’s a small
business that’s just dependent on you it usually sells for what you’ve taken out
of the business in the last 12 months it’s called seller distributable
earnings or seller distributable cash ste RS DC which means if you have a
business that’s doing a million dollars a year and you’re making $100,000 a year
out of it that you take out of the company you’re gonna get paid a hundred
grand for it the next way that companies get sold is if they’re a little bit
bigger if they have that bench depth so that they’re not a personal brand and
they’re not totally dependent on you you’ve got no one customer that’s more
than 20% of your customers you got 20% year-over-year compound annual growth
rate you’ve got standard operating procedures and processes those kinds of
things you’ve got some sort of ideally defensible IP intellectual property some
sort of competitive advantage you’ve got a good share of your market that’s
trending up if all of those things are in play then typically you’re gonna sell
for a multiple of your earnings and so let’s say that and then generally then
it’s called a beta which is earnings before interest taxes depreciation
amortization so in that same business that was doing a million dollars that
had a profit of a hundred before that you only sold for a hundred this one
might sell for a multiple of seven times that 100 profit so now you’ve got 700
and then the other kind of business is a recurring revenue business and a
recurring revenue business typically sells for a multiple of sales so in that
same business and this would be a
software-as-a-service is the perfect model but any other subscription kind of
thing with monthly recurring revenue or annual recurring revenue where the
revenue comes in every month you’ve got a reasonably low turn ideally under five
percent you’ve got a twenty percent compound annual growth rate etc etc then
you’re probably looking at a multiple of sales and so that same multiple of say
you know seven that we talked about on the 100k now goes towards the million
and you’re gonna sell that company for seven million so you need to say do I
want to be a small company where I’ll only be able to sell it for whatever
I’ve taken out in the last 12 months do I want to build it a little bit have
some employees some infrastructure and spend some time developing the skeleton
of the company and then sell things kind of one at a time in which case I’ll
probably get a multiple of that or do I want to create a recurring revenue
company where I’m likely to get a significantly bigger bump I’d say that’s
the first place that you need to think about who do you want to be and how do
you want to position yourself for sale and then all the things that I kind of
mentioned casually really quickly in passing those are all things you have to
focus on when you’re you know when you’re thinking about preparing a
company for sale role and this has been great where can people find out more
about you and what are you most excited about for the rest of the year sure I
have a podcast also called business lunch so that’s a good place to listen
to a lot of stuff for me where I talk just just me and also talk interviewing
people like you and I’m on all the socials at forward-slash Roland Frasier
I have a website Roland Frasier calm digital marketer calm our big event
trafficking inversion summit calm those are all places to you know to connect
awesome man thanks again hey everyone thank you so much for
watching can you enjoy this content if so click like leave us a comment and