Latest / Success Story with Scott Clary / Lessons - Bootstrapping Your Way to a Billion | Liz Elting - CEO at Elizabeth Elting Foundation

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Lessons - Bootstrapping Your Way to a Billion | Liz Elting - CEO at Elizabeth Elting Foundation · Success Story with Scott Clary

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  In this lessons episode, you'll uncover why focusing on revenue and profit over
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  early stage funding can be a game changer for entrepreneurs, discover how strategic growth
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  and powered team building and calculated risk-taking can create a sustainable,
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  high-impact business model for the long term.
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  You also, there's a couple things that I want to pull out of that.
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  Some things that I think are so brilliant. One of the things is that you don't like when people
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  take on funding. Why was this the case with you? Outside of the fact that maybe it was difficult
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  to get funding being your first venture, I don't know. I have no idea. But yes, of course,
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  also true. But why do you recommend stay away from funding?
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  Well, I think in our case, we just did not want to deal with spending time,
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  writing that business plan and then spending time trying to get funding.
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  Instead, the time seemed to much better spend focusing on bringing in revenue
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  and making that revenue profitable so we could pay the bills.
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  When people are working with it, first of all, it's a big job to get that funding,
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  particularly when you don't have a track record, as you say. But it's not the best use of your time
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  because then even if you do, getting the sales and the profit is the hard part.
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  And even if you're dealing with money, it's the hard part. I mean, one example is we encountered
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  a company that we acquired that had something like $82, $83 million of funding.
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  When we acquired that company, I believe it was $1.2 million in revenue.
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  Oh my god.
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  All the money in the world, but that doesn't bring in the revenue.
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  And so there are putting your all your hours, time, and efforts into getting funding
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  when the time is much better spent getting revenue and making a profitable revenue.
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  The other reason is, of course, it's great if it, in the end, if you are the sole owner,
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  wonderful situation, you all know the whole thing, or if you have a partner,
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  the sole two owners, you maintain much more control over the situation,
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  and you don't spend your time answering to other people and worrying about short-term goals
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  at the expense of long-term goals and long-term profit. So there are a lot of reasons over time
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  that it's very important. And the few more people you have involved in as owners
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  can also be beneficial because I hear people have lab issues with their, yeah, with their investors too.
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  And so for a lot of, but-
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  Hello, yeah, no, very, very smart. I also believe that people take on way too much money,
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  way too early on at shitty valuations, and then they get, I mean, then, you know, you look at
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  the entrepreneur 10, 20 years down the road and all of a sudden, they own barely nothing
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  of their company, and it looks good when they sell it at a high, you know, high multiple.
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  When there's a press release around it, but ultimately they walk out with like almost pennies
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  because they diluted themselves so much. Right, right. And I couldn't agree with you more.
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  Right. You don't like you watch it on 100% or 50 some percent or whatever. So I think that's super
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  important. And, you know, I used to say revenue is vanity prop and insanity because people,
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  some folks, were focused on revenue, but it wasn't profitable revenue. And I remember that
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  happened in the 90s and with- when people were still getting revenue, but now it's almost like
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  funding is vanity. And really what you need is that revenue and profit above all that sanity.
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  And that's what you need to focus on. So absolutely.
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  Speak to me about your growth strategy because I've never heard of a growth strategy like yours
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  outside of a franchise model, I guess. I don't know if that's the best way to describe it, but you
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  would air drop people into cities and they were successful. So I want to understand how you grew
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  this business because that is a wild strategy to me that you would put somebody on their own and
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  they would actually do okay. Basically selling those services into a whole new market.
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  Yes. And, you know, initially in the early years, I mean, the very early years, the first maybe
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  three years, we're doing it all from New York. And then we thought, okay, do we do become a global
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  company? We need to start having these satellite offices and also clients want that local present.
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  So it's in their best interest too. So I remember we started with San Francisco just to kind of give
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  a tangible example. And basically what we said to the person leading that office and we do this
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  with every offices, okay, you need to sell $50,000 a month for three consecutive months. And then
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  you can bring in a second person. And then the two of you need to sell $120,000 for three consecutive
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  months and then you can bring in a third person. You need to sell $190,000 for three consecutive
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  months and so on. And that's how we paid for it. And we did a very low cost model because as I said,
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  these were one person offices and they were in executive suite situations were which were the most
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  cost effective way to go. And as a result, the route was very low, one or two person offices
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  starting with one person, but they had the revenue goals and they were very incentivized because
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  they didn't want to work alone. They wanted to have their own company under that. It was an
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  entrepreneurial situation and we paid them like entrepreneurs whereby when their revenue went up,
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  they made a lot more. So they had a low draw, but a high upside. So the goal was to pay as low
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  draw is they were comfortable with, but then make it so they had a high upside and they would make
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  more than they would anywhere else in the industry and they would really feel like an entrepreneur.
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  And we made it so they had a commission that didn't sunset. I mean, if you I can elaborate on
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  that if you want. No, I think it's smart too. The reason why I think it's really interesting to
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  go into this model is because you speak a lot about the employees have to feel like owners,
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  but I feel that very few people accomplish that effectively. I think there's a couple of issues
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  that present themselves. Number one, you're not paying them a lot so they don't care about the
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  business. Number two, if you're trying to do a low draw and high commission, then you have
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  to find the right people that are very self-sufficient, self-motivated are confident in their
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  own abilities. And I feel like that's a very hard profile to find and obviously you've perfected
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  how to find that person. But the strategy that you deployed, I think a lot of business owners
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  founders would love to deploy, but it's the people problem that they have an issue with and they
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  can never solve for it. No, you're right. And it is the hardest part. That is the key to having a
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  successful business, right? Finding and tiring and developing and retaining the right people.
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  And often it's some of it's not developing. It's just they aren't right people when they come in.
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  They have what they they need. They have the the threshold level of qualities they need.
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  But related to what you're asking is I think it helps if you hire people who are young,
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  who don't who aren't married, who don't have families that they need to support or used to living
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  higher risk. They're okay. They'll take the risk. They'll make less if they're not successful,
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  but they're looking to make more than they could ever make. So they don't need the security. They're
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  willing to take the risk because they know they want to feel like entrepreneurs or be entrepreneurs
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  within our company or within a company. And that's the situation you can provide.
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  The other thing you can do over time is fathom stock, or I guess they're, you know,
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  employee, I mean, eSops, but I mean, fathom stock is another way to do it without actually giving
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  away equity and basing that stock on the revenue and the profit of the company. But I think for us,
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  the key was finding like-minded people who really wanted to build something big and create a
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  100-person office or a 200-person office and then be managing people outside of their office
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  in other cities or countries in our company. And that's precisely what we did.
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  A quote from you, very entrepreneurial quote, work today like no one else will so you can live and
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  give tomorrow like no one else can. What does that quote mean?
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  Yes. And I mean, that's really, and I'm putting in the hours and sacrifice saying, and you know,
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  it's not what people want to hear, right? I see people want to hear there's a way to be a
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  mega success without doing that. But every company I can think of and I read about and I learn about
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  created huge companies, billion dollar companies or even successful companies that are not that
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  like put in a lot of hours and and given up some things in the early years to create
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  the infrastructure that they want and the right sales team. I mean, I've talked a lot about
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  sales. I think the right sales solution is critical because you can't do it alone at the
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  entrepreneur cannot be that the salesperson for the company or even the most important salesperson
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  or the head person. As a salesperson, I mean, ultimately you have to have a well well machining.
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  But in order to create that, you have to put in the hours over a sustained period of time. But
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  today is not, you know, forever. Yeah, in that quote, I mean, I hear of entrepreneurs who sell
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  incredibly successful companies after five years, seven years, 10 years. I mean,
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  in my case, I did it for 26 years, but it got a lot better after those early years. But it relates
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  to the first million or the first five million is by far the toughest. In the early years,
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  you have to give it more than anyone else. You have to work out work anyone else. You have to be
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  available when no one else is. And that really leads to a well oiled machine and success at the
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  highest level. And it's exciting and interesting because if you choose the right path with the right
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  passion, a passion that can make money and you work with amazing people, it can be fun and exciting
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  for all of you. So it's really a great way to go. Thanks for tuning in. If you found this valuable,
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  don't forget to hit that subscribe button so you never miss an episode. And if you want to dive
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  deeper into this conversation, check out the links in the description to watch the full episode. See
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  you in the next one.