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is proudly sponsored by the rising tide Mastermind the rising tide Mastermind is
one of my favorite things that I look forward to each and every week because I
get to see people that have my best interest in mind I know this because I
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foreign up H2O podcast a podcast where we scale up on knowledge so we don’t scale up our
systems and of course I’m your host Trace Blackmore certified water
technologist now here’s the cool thing we have listeners all over the globe and
our listening numbers are increasing each and every day here in the United
States we are getting ready to celebrate the 4th of July we of course call this
Independence Day I asked a friend of mine who resides in the United Kingdom they call it the day of Disobedience so
whatever you call it the 4th of July is a celebration that I’m going to extend
no matter where you live and this is how I am going to do it you all know that I
am very passionate about sharing my passion to learn about the industrial
water treatment industry and I hope you caught whatever I have and it is an
infection for you to go out there and learn so much about this awesome
industry that we are in and there’s one thing that you can do that I think
really shows everybody that you’re doing that especially yourself and that is
getting your certified water technologist designation and I am here
to motivate you the best way that I know
how to motivate anybody and I am going to save you money as you know if you go
to scalingup h2o.com forward slash cwt prep you will see that we have a cwt
course that will take you through a practice exam so you can learn test
taking tips so you can affirm some of the topics that you know and I give you
references so you can learn more about the topics you want to learn more about
why haven’t you signed up yet why haven’t you scheduled your certified
water technologist designation well I don’t know the answer to that but I’m
hoping to take away yet another barrier and I truly believe that one of the
barriers that people do not sign up to take their examination is they feel that
they are under prepared so this course is designed to help you feel better
about that so again why haven’t you scheduled the exam or why haven’t you
signed up for the cwt practice course well maybe it was because of money so
happy Fourth of July everybody I am offering to everybody that signs up
right now to celebrate us celebrating the 4th of July no matter where you live
on the globe 10 percent off and in order to do that you go to scaling up h2o.com
forward slash cwt prep and you are going to select the cwt prep course and you’re
going to put in discount code cwt10 now I urge you as soon as you hear
this to go ahead and act on it because this coupon will not be available for
long so this is my gift to you and hopefully this is the last barrier that
is in your way to get you to achieve your certified water technologist
designation Nation something that I hope is on your
calendar is July 13th we are having our next hang and of course the Hang is
where we get together as industrial water Traders we meet new people and we
simply have fun if you’ve ever been on a hang before you know you want to be on
the Hang again if you’ve never been on the hang you don’t know what you’re missing but trust me you’re going to
meet people that you’re going to be able to rely on for questions you don’t even
know you have right now and you’re going to do this in a forum that is packed
with an hour of fun to find out more about the hang you can go to scalingup
h2o.com forward slash hang and you can sign up and find out all the information
right there and I’m hoping one of the topics is going to be have you signed up
to take your cwt and if you haven’t have
you signed up for the cwt prep course so you can feel confident in signing up for
your cwt so that promotion is still going to be going on hopefully with the
Hang once again that cwt10 by going to scalingup h2o.com forward slash cwt prep
again we’re talking about the hang here but it is my hope that when we go to the
awt annual convention that we just have
so many people line up to be recognized because they achieve their certified
water technologist designation this year I can’t wait to shake your hand and tell
you congratulations because really there is not anything else you can do in this
industry to show the world that you are taking this industry seriously and you
are taking credit for all the things that you’ve learned as you have been in
this industry So speaking of that we have the association of water Technologies annual conference October
4th through 7th and that’s going to be in Grand Rapids Michigan so it’s my hope
that you are one of the people that I get the pleasure of recognizing by
saying thank you for getting your cwt on October 4th Nation all this information
and all the other conferences that we have listed for you are very easy for
you to reference you can go to our events page and we’ve got everything listed what you need to know where you
need to go and it is simply done through clicks our great staff here at scaling
up H2O is making this so easy for you and that’s just one of many things that
are on our website you can pretty much search every episode we have ever done
by going to scaling up h2o.com Nation as you know education is
my passion and it’s my hope that you are doing something to learn something just
one thing each and every day I promise if you do that your job will never be
boring and somebody who is never boring and helping us make sure we are not
bored as we are doing our jobs here’s James McDonald hello and welcome to the periodic water
table with James where we think and learn about water chemistry drop by drop please use your week to search online
ask your colleagues or even pick up a book to learn more about each week’s periodic water table topic if you do at
the end of the year you’ll be 52 water chemistry smarter so let’s raise the water table of
knowledge together and get started today’s topic is
sulfuric acid what are all its uses in industrial water treatment for both
water treatment and testing what is its chemical formula in molecular weight
when used for pH control in cooling towers what is the feed ratio of sulfuric acid to alkalinity
what can happen when sulfuric acid is overfed how does the density of sulfuric acid
compare to water what concentrations of sulfuric acid are used in water treatment
when combining acid and water which should be added to which should acid be
added to water or vice versa what are the consequences if you get this wrong
can feeding sulfuric acid actually cause scale formation What alternative acids are available
can bacteria produce sulfuric acid we have made it halfway through the year
a periodic water table with James we just covered our 27th chemical
thanks for coming along for the ride we have many more to go remember knowledge is power and taking
the time to learn more about water chemistry each week will help make you a force to be reckoned with
be sure to post what you learn to social media and tag it with hashtag watertable23 and hashtag scalingup H2O I
look forward to learning more from you thank you James when nation I met our
next guest through a mutual friend and it was one of those interviews where I
just felt like I knew this person before I actually knew them we had a lot of
things in common a lot of energy on this interview and I know that you are going
to enjoy it here’s the interview my lab partner today is Ryan tansom of
our Kona Ryan welcome to the scaling up H2O podcast Trace good to see you again my friend
absolutely I had been looking forward to this you and I met a couple of months
ago and I felt like I reconnected with an old friend it’s so enjoyable when
that happens too it’s like wait a second I think we had like a 30 minute call schedule and we were trying to wrap up after about an hour it was one of those
exactly so I know this is going to be a fun interview but I want to start it off
right so do you mind telling the scaling up Nation a bit about yourself sure how how much of the Backdraft you want you
want kind of the cliff note and then we can unpack or yeah let’s do that let’s do that because I’ve got a lot of questions I want to ask because I want
to know myself so I’ll just kind of give uh I’ll do the cliff note version of my entrepreneurial
Journey started in the family business my dad mortgager house bought a semi truck full of copiers in the 90s uh
risked it all and scaled up our business doing copiers and then maintenance behind it from zero to 21 million 115
employees worked out of the business my whole life trace and then um swore My Grave Just Like a lot of family
businesses and probably a lot of people listening in I’m not going to do it not going to do it I ended up joining full
time in 09 and uh that year was hard for everybody uh with a great financial
crisis and we ended up losing close to a million bucks that year and so my dad and I spent uh he was very distant from
the business had been uh going through a bunch of stuff and so we got in and we just ended up taking the next almost six
years to turn the business around so new accounting packages sold two branches for cash we replaced about 60 of the
employees I built out the managed I.T services and the software Automation and then we rebranded so we could compete
just all these things tracers out of pure grit and can’t I mean there was no plan B there was like oh well what else
should we do so I say all that because but then we got to this point which I think a lot of the listeners is probably
going to be a lot we can unpack here my dad and I got to the point where I was managing the business there was a dotted
line from the CFO to him he was him and I would do the bank and the CPA meetings and all that stuff together and we
couldn’t figure out like how to align our goals long term so he wanted to essentially have more cash flow and not
to work in the business and I was piling all the money in for growth which is not what he wanted and he didn’t want the
headache so you know week after week it’s like hey I want to know what should we do and it was this whole conversation back and forth I couldn’t get the
clarity on how to get untrapped from that Trace so we ended up taking the company market and selling it to a competitor in 2014 made sure that deal
was is they had to fire 60 of our employees so I had to fire 60 people and
I went back and would pay off your debt paid a lot in taxes and I went what the heck was that man so that was in 2014
and I went from running a 20 million dollar business at the age of 27 and that was almost 10 years ago now and to
sitting in a cube next to an intern I’m like that’s not really what I wanted and so like that would have been nice to
know there’s no take backs by the way when you sell a business generally but so Trace over the next nine years I
spent every waking minute of my life trying to figure out what had happened and how to not become part of the
problem but how to help people and it’s really how to teach them how to fish and what I came to and this is what we can
unpack is there’s this concept so what we’ve created called intentional growth and it’s got five principles that help
people View and run the company like a financial asset so they can grow the value of the company Equity value and we
can unpack that too so they have choices trades so it doesn’t matter about it’s not about selling or exiting or like any
of those you know four letter words it’s about any asset whether it’s a stock or whether it’s a house or commercial
property or a company we want it to grow in value and have the choices and we have an understanding of what those
choices are so we picked the right one that aligns with our goals so kind of like I’ve told more of the background
story than more of the what’s today but like I think it’s just so helpful be like I get what it’s like to feel
trapped to have those Groundhog Day conversations and it’s like how do we get out of this this circus well and the
thing you said is your business is an asset and everybody gets that whether you own the company or you work for the
company you get that that’s the largest set but very few people treat it that way I mean we’ve got better systems to
manage our truck Fleet than we do our businesses yeah inventory systems and
you got the time and material or you got the any of that stuff 100 and Trace like this is actually one of the core
findings that I found over the last 10-year journey is and it took me a long
time Trace to like realize that I had a lot of I don’t want to call it shame because
that’s not the right word but like we should have known that you know like it was like everybody else must have this
figured out and like I’m all laughing because after 10 years I realized that we were just like a lot of everybody
else of we were in vistage and all these different you know I know you got peer groups and all you so we were working on
those resources but the reality was here’s why I love doing what I’m doing is that the reason I think my dad and I
didn’t View and treat it like a financial asset is because we didn’t understand how valuations of privately
held companies worked so if you think about it like if you and I bought a piece of commercial real estate for an investment and we didn’t know what grew
value we just buy random stuff like should we put a big aquarium in the middle of it for a million dollars Trace
I don’t know is it like how did it right exactly that’s you know AKA someone’s proprietary Erp system that no one else
knows how to use right like there’s so many of these analogies but like I think the reason and because my dad and I
managed the company Revenue gross profit what’s in the bank account Revenue growth what’s in the bank
account and then you just kind of do that hamster wheel but like so if you have a decision of like hey we should
take some money out for distributions or should we get a new truck Fleet Software
System or the new inventory system or hire that next field technician or sales
rep what’s the trade-off you’re just guessing if you don’t have it like because if you go back to the commercial
real estate example you and I would know if we put in a 50 000 HVAC system we’re using cash but it’s grow it’s
keeping the asset value where it is or growing it right so I think it’s that knowledge that is kind of one of the biggest gaps
so I know you have worked with several water treatment companies have you found
that they are any different than any other company no I uh the gentleman uh
the guys that we’re talking about like you know this is what I love what I do is they’re just like I just remember
what it’s like you know you got thousands of customers you’re trying to figure out which customer is to serve
who to do what to trying to be a good company trying to work with your employees trying to make enough money to
pay for everybody’s salaries while also making it worth it for the owners and you’re just kind of working through and
it’s very similar to race and and I say that because what I have found over the last 10 years
especially with my podcast is that there’s this Venn diagram that I like is like if you have one Circle that is
operations and another circle is finance and the overlap is kind of what we’re
trying to encourage here because Finance is generally private Equity Venture Capital all the spreadsheet jockeys but
they’ve never sat down with a field technician or customer service and had to have a employee review meeting with
someone that’s not doing well that’s a family members friend from you know you mean they’ve been here for 20 years it’s
like that that Nuance is not in the spreadsheet and then you have the operators that don’t understand
normalizing but uh deal structures you know like Equity valuation hot trade-offs of all that stuff so like
there’s like hey we need to sync those up so the operator the people that have privately held companies that are
generally crafts people like we were sales people right we weren’t private Equity Engineers we knew how to sell
copiers and then I built up this manage ID Services because the customers needed it not because I had some grand plan of
you know building some huge asset and rolling up an entire industry well and the reason I mentioned that is
so many times water treatment company owners think that our business is so
different from everybody else’s and it’s really not we might have some unique
technical issues when we’re out in the field but a business is a business and if we’re not running that properly is
the business running us or do we really know what’s going on understood and for how I’d address that
because every industry is unique but what is not unique because I don’t want
to take it because I trust me man I remember like these Consultants who come in and be like all right I need to now tell them exactly how Imaging God that
was the name of our old business works or how our Kona works now and then people would listen like because in like
legal it’s like yeah there are things that are they’re 80 is the same 20 is different the typical 80 20. and so
Trace what does that mean for what is the same from the water treatment industry versus the HVAC industry versus
you know whatever it might be is that there’s goods and services that is revenue there’s a cost to those goods
and services and then there’s overhead and then there’s cash flow right so if it’s an asset regardless if you and I
are investors trace and we want to deploy and invest a million dollars we’d say what should we invest that in
right hopefully a diversified band you know portfolio but we’d say okay commercial real estate maybe stocks and
bonds do we want income-based assets or Equity growth assets right the reality
is every asset is based on cash flow dude right unless it’s a high growth
stock that is going to consume cash but you’re only going to invest in a high growth stock if you have Equity growth
right otherwise you’re not going to do it so my point is what’s the same about the water treatment industry or The
copier industry or the Consulting industry or you have a group of people and things that come together to do
things Reverend Revenue generating goods or services that generate cash flow and how sustainable predictable and
transferable of that cash flow is is directly correlated to the value of that company because if you and I have invested in a company or a piece of real
estate if it has lumpy cash flow we don’t know when we’re going to have to burn the cash flow to put it in that HVAC system or put in that inventory
system like we’re not going to pay very much for it because we don’t trust the future cash flows so there’s the guts of
the machine like HR operations I.T leadership sales marketing you know that
are whether your lemonade stand or water treatment company you have those functions the gooder service that you’re
providing is the unique thing I love how you describe that well let’s back up just a little bit how do you go
from the unfortunate event where you had to fire 60 of your team and now doing
what you’re doing now so after we had sold I’d read this book finish big by Bo
Burlingham editor of ink magazine and uh founder of small Giants and he interviewed 300 business owners Trace
about why they exited their business and then essentially their satisfaction
level and he figured out that out of 300 people 75 of them were unhappy and 25
percent of them were happy regardless of how much money they made and I was like well wouldn’t that have been nice to
know because I was totally in the campus 75 because I didn’t get what I wanted
that the gap of the expectations and realities hit me right between the or between the eyes and so my whole desire
was I want to go help I want to go help and not be part of the problem and generally when I think if you kind of
pull on the earlier topic of the main thing that I now know is people need to view and run the company like an asset
so I could have gone into private equity and taken advantage of people buying companies and not always taking
advantage but there was a high opportunity to do so Investment Banking where you make money off of selling a
company because once you get it it’s like playing chess like once you get it you get it compared to like love you
know go 11 up from Checkers to chess you’re like oh so then the people like so many entrepreneurs that I’ve
interviewed Trace they go from like kind of the resentful I wish I would have done things differently and I’ve got hundreds of podcasts of them
telling that story I’m like so what did you do now well now I buy companies and I get to create the wealth and I’m like
well so like who’s gonna help these people so I decided I wanted to teach people how to fish so I wanted to teach
people how this stuff works and I didn’t want to tie to their outcome and so Trace if if I was working with you you’d be like hey man what’s your goals truly
from valuation to income to Legacy and we use these five principles to help answer those questions and then we just
back into that but I don’t want to ever tell someone what to do because I’ve taken stupid risk myself my whole life
for the desire to keep my control I will own my failures but I want that failure
to be there for me and I think every owner wants their choices so it’s like hey here’s how it works what are the
trade-offs right and so my point is all of that led to the education that would
come or the education our coin was formed at the end of 2018 and we started with Education First and it was just a
program to teach people about this stuff you think about sitting up there at the deal table the Super Bowl of your
entrepreneurial career you’re going to pass it on to your kids or whatever and you kind of just go like this I think
it’s gonna work and I don’t want people to do that man well your tagline is intentional growth
and I love that because most companies don’t think about growth they just think let’s grow at all costs let’s grow and
as you know there is a very good likelihood you can grow yourself out of business so when you talk about
intentional growth what do you mean so first of all let’s unpack yeah I’ll tell
you that I’ll lead up to our definition of attention or growth and how to actually apply it but like I think about
what we used to do and what I see regardless of the water treatment industry or any industry HVAC or even
sophisticated industries that are like you know high in Tech or whatever is when I sit in and I do all these vistage
or keynote presentations and I go hey what’s your goal you want to usually get 20 million five million 40 million I
want to go from 50 to 100 whatever the numbers are their revenue and then I go and I just listen to people because
that’s what US entrepreneurs talk about what is your revenue and how many employees you have and then I go I had a
21 million dollar business and 115 employees and we lost 950 000 and if we would have
sold the company we would owe the bank money so try me again I think that goal sucks because I can tell you for a fact it
didn’t solve our problems so then I like then I kind of get people’s attention because
it’s like well that’s what people are Marching towards and it’s the revenue good gross profit what’s in the bank
account and then let’s hope that someone comes with a bag of money for my that just so happens to equal my retirement
when I want to get out that’s what generally most people do so intentional growth is
Trace what is your goal man and so there are three things that the intentional growth really helps people
think about through these five principles and we can get into five principles but there’s these three outcomes one is get clear on what you
want from the business and why from your role to your legacy to your community like you have to know that
because like 80 of deals don’t close and it’s because people forget about this stuff because everybody’s focused on the
mechanics not the emotions like I didn’t want to fire 60 people trace I had built the Legacy and I had built a really cool
way of operating in our industry that was destroyed and that sucked even
though I got the money so what do you want from the business and why I’m truly thinking about that then the second one is come up with a
Target Equity huge important part Equity valuation you want at a point in time
and I say that because I don’t care if you say I never want to ask it well we
all die so like let’s not just State the obvious but the reason that we say Target Equity valuation at a point in
time is because like you or anybody can then reverse engineer that plan so if
you need a valuation say hey Trace you need a million dollars in normalized ebitda in 2026 to get to your five or
six million dollar Equity valuation okay well let’s reverse engineer that if you don’t give me that we’re just get
we’re just hoping you know and it’s the same thing with private Equity the thing that God bless them or hate them they
have a specific point in time that they’re working towards and it’s it’s intentional whether it’s right or wrong
you know like how they operate like that’s a whole different conversation but they’re working towards something so
you have a what do you want from the business and why then you have a Target Equity valuation at a point in time and when we
back into those uh those financial statements Trace we can say hey by the way chase you have to grow at 70
compounded annual growth rate to get there and you’re not going to have enough cash what do you want to do about
it so the second part of that Equity valuation is what is the income that you want on the way there from salary and
distributions because when we back into that we might say well Trace you’re taking too much out of the business you
can’t pay your taxes and fund that growth rate do you want to push down the valuation Target push out the goal take
lesson distributions but like I’m not Houdini man like I’m not just going to give you random money and help you fund
uh you know a cash burning company so like what that does is present this constraints to people then there’s the
third thing which is after you know what you want from the business and why you have a Target Equity valuation and an
income Target on the way there then you can say hey Trace what do you want your leadership role to evolve to on the way
there because we’ve been talking we haven’t covered this yet but ownership in the equity of the asset is concerned
about Equity growth and distributions leadership roles are concerned with operating the business and managing
people and employees and numbers and the operations so that third takeaway is if you
you said hey Ryan I want to move from the CEO role to maybe Chief Revenue
officer that’s what I’m doing I don’t want to be the CEO man I like doing what I’m doing I’m not good at that job so you can move your role and still have
ownership and most people don’t realize that so those three takeaways trace it really would help with intentional
growth and the definition is purposeful action towards a clearly identified
outcome what I love about that is you’re beginning with the end in mind and
there’s so many business owners that never think about the end it’s scary I
can’t imagine what I do after this business or I’ve invested all this time in my people and they become my extended
family and I don’t want to leave them so it’s scary to think about what the next
chapter is so most people don’t do it let’s unpack how the the words you chose
impact what we think about and this isn’t this is not a knock on you it’s just what I’m trying this is I view this
as part of my mission is trying to insert new verbiage for people to think about this stuff so you said hey I’d
love to back into what the end of mine so reverse engineer at the end in mind however when people let’s start with the
story that I like to really Hammer home this point people call me every week trace and they have for almost a decade Ryan I want out and now because it’s
taking me a long time to figure this out my response would be hey Trace what do you want out of your job or your asset
and then people go hmm and and it’s because they don’t usually
know and then I I give them and I’m like hey people don’t call me and be like hey Ryan I really want out of my million
dollar mailbox money while I sit on the beach in Florida and my president runs my company I’m actually good with that sign me up
for that yeah exactly no one wants out of that and usually what they want out of is employees and headaches and supply
chain issues and personal guarantees about like so they went out of their job and the reason I say this is important
because when you reverse engineer that third part so those three takeaways are so important because your leadership
role if we unpack that that question Trace I’m like hey do you need the money do you need to monetize and get a bag of
cash right now you might say no actually I don’t well okay now we have some
options so Trace hey dude maybe do we have six months to 12 months where if we continue growing this company you have
enough distributions for your income and then we could replace your salary with the president and then the president can
run the company I have a client that just did this so that he actually is moving to Hawaii while keeping his 18 million dollar Manufacturing Company
like he’s like no I don’t need out of the asset I actually love the asset because the ass is kicking out cash and
I did a lot of hard work over the last five years to get the financials in order get the plan put the other get the president in place and there’s no risk
in the industry right now and I don’t know what I would do with the money and where I would invest it if I sold it so like I want to keep it but I hate my job
all right so so we got him out of his job so that’s why I say out of what because when someone says I want to exit
my business I don’t even know what people mean anymore so like that’s why it’s so important because the the flip
is also important where if you said hey Ryan I love my job like love it love my
industry love my community like that was me I love the industry love the topics of the community love the strategies of the conferences of my CEO peer group
I’m really sick of being cash broke like I’m really sick of rolling all the money
back in to hire the next person I need to monetize some of my company AKA take
some chips off the table well did you know that you could do an ESOP sell it to your employees a partial ASAP or all
of it take your Chips off the table still be the CEO control the entire strategic direction of the company still
get a paycheck and be a board member like if you’d like your job but you want to monetize your asset there’s a way to
do that but if you hate your job but you don’t like Chase what do you want that’s why what do you want is so important
it’s a great question so what are the options if somebody says you know it’s
time for me to Exit what are the options for them to do so so we have these and that so that’s
principle number three it’s called exit options and the reason that their principle number three is the first one is your vision what do you want from the
business and why second one is the financial targets there are three of them and it helps put the business as an
asset into perspective to understand the equity growth and that and the income but I say that because then we get to
the exit options each of these five exit options so I bucketed them into five buckets
and I did this after after about 10 years all the books and all the interviews and all this stuff say hey
you know what technically there’s like an infinite amount of ways you could structure a deal and sell all your company you know what that does for us
nothing that doesn’t help us at all we need to synthesize this and so what I did is we came up with 17 attributes
that bucketed the exit options into five buckets think about them kind of like mammals you have dogs horses cats
they’re different and but there’s a lot of versions of dogs and so I’m saying that to kind of give myself an olive
like this isn’t perfect but it’s giving us a a framework to think about this so there are five the first one is internal
so that could be uh family members Partners or managers second one is acquisition entrepreneurs
that’s from my uh dear friend Walker diewood wrote the book buy them build
search funds essentially you got the key executive or the the high-powered skilled executive that wants to go raise
some money go buy a company the third one is ESOP so Employee Stock ownership plans the fourth one is
private equity and the fifth one is strategic buyers like strategic buyers could be owned by a private Equity Firm
but like essentially these five buckets cover most of them you could for sure do
an IPO I just don’t play in that space and I don’t think your audience or my audience is dealing much with public
offerings I’m acknowledging this there so here’s the important part Trace every one of those five exit options I just mentioned
impact principle one and two wildly different they impact Your Role like I mean I
still do a third party they fired 60 of the employees and me and I had no control and like so depending on what I
wanted for my business and when and how I wanted my money principal wanted to those should be a lens to say hey what’s
the timeline for the equity valuation to get each one of these options do you
feel more like a strategic buyer would be the right choice or a private Equity Firm maybe an esap maybe an internal but
how those are valued you can reverse engineer the perfect exit to an esap or a private Equity Firm if you focus on
building that sustainable predictable transferable cash flow but when and how after the deal it’ll impact Your Role
it’ll impact when and how you get your money and your control post closing so I would say you use principle one and two
to then layer that on come up with your desired options and in principle four so I’m just kind
of rolling here is that grow value to create the options you’re not committing to anything right now but like for me I
as an entrepreneur I will wake up and eat glass if I know that there’s a purpose to it
like it’s getting me somewhere not just hopefully this works you know so like
it’s it you I think a lot of people think that they’re committing to death estate plan and like no you don’t have
to like if you can monetize your business and still be the CEO if you want there’s so many choices but you
have to think about it the right way right now in the water treatment industry what’s going on is probably
North of 60 of all the water treatment companies in our country are aging out
as far as their ownership and they’re trying to figure out what they’re going to do with their businesses many of them
don’t want to leave their businesses some of them have family members involved some of them are looking for
you know what do I do so it’s great that you describe the five buckets but there
are so many listeners here today that are thinking this is me I haven’t thought about it like I should have now
I need to start thinking about it so if they just started thinking about it today what advice do you have for
them and this is going to probably suck for an answer for everybody but like it’s like the whole thing of a planted in a
tree would have been great to do it 30 years ago but do it today or you’re going to keep complaining about it like it’s the
same thing with weight loss and all that other stuff right like I think that one of the biggest challenges that I see with with all of our clients the people
I work and present with is like the just the denial just denial of like because
there’s all of the scare like I remember being scared like dude we didn’t have a pot to piss in for cash trees so
everybody thinks the tandems are super rich and we’re going everything’s personally guaranteed we got stuff on our personal credit cards and like and
so you’re going like hey Ryan you want to exit you’re like with for what like you most people can’t even think about
this because they’re managing that day-to-day chaos of business and so I’d
say like first of all give yourself the grace to think about this and you’re not selling yourself to the
Devil by thinking about your future and you’re not committing to an accident you’re not committing to firing your
employees and I think Trey is one of the best well I mean I can I could go back to my company financials and show you
the moment that we rebranded his intentional growth three years ago it used to be called the growth and exit
program and it was like I couldn’t sell it to like to anybody like you know in
the word exit has got such a visceral reaction in people but then I
transferred it and I said I didn’t change the program at all and I just said hey why don’t you call
why don’t you intentionally grow and View and run your company like in a financial asset what do we want to do
with financial assets we want them to grow in equity value we want to monetize them when and how we want
without sacrificing things that are important to us and we want to do it the most tax efficient way right there’s no
like scary exit death word tied to that so I think like thinking about this
differently giving yourself some Grace thinking about it like an asset no like knowing like how much of your net worth
is tied up into this asset and if you don’t know how old valuations work or what yours is worth and by the way the
valuation is not how much money goes into your pocket I think just the fear Trace is and I it’s real man I dealt
with it but I want to take that away from people like hey this can be exciting and you can bring expectations and reality
together but like it sucks to look in the mirror sometimes right it absolutely does well
speaking of looking at the mirror there’s a lot of people that don’t own the company and they’re looking in the
mirror and they’re thinking I want to own this company I want to be the solution for whatever the next chapter
is what advice do you have for them the only thing that matters to everybody is the stuff that we’re talking about
here so like I was that person Trace trying to get my dad out what happened
was I couldn’t answer that question so the entire six years of Blood Sweat and Tears that I put into our business I
didn’t get to reap the rewards of because we couldn’t figure out the question you just asked me so if I would
have used I mean I built the business I wish I would have had to have the conversation to avoid exactly what I went through which is the question you
just asked which is if I would have figured out because here’s what my dad said I went out okay out of what we
didn’t know how to use we didn’t know what that meant and then I can guarantee one person listening and is going to
know what I’m talking about here he’s like wait a second I’m just gonna fund the bio with the cash flow the company that I already own so you can just buy
me out with my own cash flow why the hell would I ever do that and then I’m sitting there going wait you want me to just grow the value of this thing to
then double the purchase price that I have to pay from you
argument argument argument and then I’m sitting going like you gave me a Target of hitting 25 million but then you’re
sucking all the cash out so how am I supposed to fund the growth plan to the 25 million of the company that I’m supposed to double in value to pay you
and the conflict is crazy no like rightfully so if you if you frame it
that way but if you say Corey what my Dad Corey what do you want he just didn’t want to talk about copiers and didn’t want to go into that building
anymore Trace if I would have said if we split leadership and ownership and said okay Corey you need the company to be
worth a little bit more right and you need more cash flow for me to increase
my salary to the CEO so I don’t want the CEO salary we need to increase the cash flow to pay for my salary to replace
yours and we need to get his replacement of his salary with the distributions then there could be enough cash flow to
fund that bio so if here’s the unifying Factor Trace is what is the target Equity valuation that the main owner
needs then when during that between point a and point B will that second person that wants to buy that when can
they buy the ownership and increase their their role there’s such an easy
way to figure this out if them if everything’s mapped out like that then you can work through control and say okay at what point is then the person
that’s buying it the whole deal should go through so that person can also so that way resentment doesn’t build that
person should buy the company either like there should be a very clean way of doing that so that way the original
owner isn’t keeping one share saying nope Trace I don’t like that Software System yet you’re the grown-up who is
still running everything and you don’t have actual autonomy so I’d say like there’s a very mathematical way to build
this out but through the operating agreement and other things structure it the way that resentment doesn’t grow
it definitely is a charged emotional conversation what is your advice to get
past that charge that emotional oh my gosh I’ve got all this stuff in my head
you’re trying to take advantage of me all of this how do you get past that so you can do all those things you just
mentioned so I don’t like conflict a ton I’m in sales guy Visionary I love people and so
what you’re just describing I mean I truly I was having all those conversations with my dad charged like
you said and if I would have had the knowledge of these Concepts I could have
I could have realized Trace so if we were to just role play and we’re not going to but like if you were my dad and you’re like I want this and like so
instead of me rebuttling saying well I want this and you’re saying well I want this and you’re saying well I want this well no one knows how any of the hell of
this stuff works but it’s like if we said okay out of five principles hey Trace what is actually important to you
out of the business what’s important out of the stakeholders what’s that important out of your job what do you
want like truly I have to figure out what do you want from this if you’re the actual main owner the founder of second
gen and we’re passing the third whatever it is what the heck do you want this to
be like over time and the second principle is hey in order for me to actually buy this from you trace you
should probably know what is the value of this company can you afford to retire
from your net worth perspective and your cash flow perspective if Trace came
forward retire there’s zero chance in buying this company from you because you can’t and then so like we have to these
are building blocks of of Concepts so then once we understand and
introduce that concept of like leadership versus ownership is different Trace what do you want from your leadership role
oh oh well if we unpack this oh you just literally don’t want a job anymore but you still need the same income there’s a
way to figure that out it’s the five principles man it’s just knowledge if you don’t know how this stuff works you’re good the human default is
self-preservation and you’re gonna only be able to have a discussion with someone with whatever knowledge that you
have what is that Maslow’s hierarchy of needs is that what you run through totally man
in like so many business owners and it’s a kind of a weird it’s also correlated to me with a massive amount of wealth
inequality that we have these days I mean you you’re not going to ask someone like hey what’s your 30-year Vision when they can’t afford their tomorrow’s meal
so there’s a lot of too like if people are jugging cash flow that much they’re not gonna be able to sit and pontificate
about the future so I think there’s a little bit of you know get things stable then start thinking through because
you’re right you can’t your prefrontal cortex can’t think about the future if you’re not sure if you can meet tomorrow [Music]
this is all great uh I know you take businesses through this every single day
so if somebody were to engage with you what would that process look like
so there’s three revenue streams of our business one is education one is a financial dashboard and roadmap and the
third one is fractional CFO services so let’s put the services over for a second because we’ve been talking a lot about education and the service is really just
spawned out of the last three years of growth where the out of the education people are like we need help so we were
just responding to the marketplace but for the education Trace with an online
version and an in-person boot camp so some of the folks that we’ve talked about attended an in-person boot camp
it’s two days and it’s about the five principles we use two case studies of a 10 million Revenue million in ebitda and
like take the whole journey so it’s an online version or an in-person this the
curriculum’s the same as kind of just more like listening preferences or like learning preferences so that’s on the
website and then the uh the services there’s just a complimentary Financial assessment that we go through to figure
out if it’s a fit or not on either of the services what are the top things you want to make
sure that listeners get from today’s interview I truly believe that if people
understand the material that we teach and I didn’t make any of this stuff up Trace I just organized in a way that
hopefully makes sense is that it doesn’t have to be the biggest mountain that you avoid like there’s nothing worse than
avoiding something and then you just say just the anxiety starts to creep and then the stress and all that stuff so
like I just know it doesn’t have to be that way because I I ran a business like that and I had conflict with my dad so I
had no clear plan and I had a lot of conflict and that sucks and I just don’t think it has to be that way and so I
think that would be the one thing that that is possible to manage the business and actually fall back in love with your business and your job if you’ve got that
kind of expectation and reality once you have that knowledge there’s then the
second thing I would say is I have watched people now put intentional effort like and just get the valuation
and get exactly what they want man like it’s so cool and after doing this for now four years with arkona I’ve watched
people with very successful big businesses that we’ve worked with see I want all these things and at least don’t
do anything and guess what happens over three years nothing or it gets worse and I had this guy that I he we brought him
on he was losing 2 million a year now he’s making 400 Grand a month and he moved to Hawaii and he hired a president
and he kept his business and another guy he he like he he did evaluation he did a
software development company with 50 employees four years ago it was a five and a half million evaluation not enough
loved his business wanted to sell to a Nissan because it’s like the tech culture of bean bags and palm trees and
all this stuff and he then spent four years building the business the way it should through sustainable predictable
transferable cash flow and he did a Nissan for 15 million dollars last year pre-engineered wealth man so like it’s
possible to engineer the outcome that you want as long as your expectations and reality around time capital and
energy are aligned with your goal like I said if you plan on growing 150 every
year to hit your goal like I’d say reality and expectations are a little out of whack so it’s like the education then it’s possible to truly get what you
want as long as you do it if somebody wants to learn more about you and our Kona what should they do
website easiest place arcona.ioar k-o-n-a dot IO the podcast
is there there’s a financial checklist with a bunch of videos trace and like how to it’s all free videos so we have
more videos they could spend hours on the website and there’s a I think there’s even a link to book a call we’ll make sure to have all that link to our
show notes page as well there’s so many things I want to ask you but I know we only have so much time today so let’s
get into our lightning round questions and we’re probably going to have you back because there’s just a wealth of knowledge that you have so let me ask
you this if you had the ability to go back in time and I want to ask you this question in two different ways so you
can go back in time and talk to your former self when you were working with
your dad what would you tell yourself on your very first day it’s gonna be a rough ride but it’s
totally worth it same question but now our Kona it’s gonna be a rough ride but it’s
totally worth it there you go anybody that says business is a breeze
it’s like the first into the people in the first pew at church there’s something going on
first pew at church there you go uh what are the last few books that you’ve read
uh psychology of money was one of them uh I’m almost done with why we sleep and
then um because I listen to about two to three a month um I’m trying to think what was the last one that other than
that I’ve gone down this ancient civilizations deal so about global likely tappy I can never respond uh
pronounce it but Graham Hancock this guy’s Ancient Ancient apocalypse on Netflix and I went down a completely
random Rabbit Hole to stop thinking about business I’m curious you said you listen to books do you use something
like Audible yeah I was terrible in school trace and it was a lightning round but I was
terrible in school I barely like I mean just terrible and that’s like the world’s way of laughing I mean that now I’m an educator but I I learned by
listening man so I think I think I’ve listened to 350 books in the last seven years and it’s like just a downloading
into my head but like reading and writing and all that stuff was a little a little rough on me in the in the
earlier days well mine was time and I never had time to sit down and read a book but I’m driving everywhere and
audible is just such an amazing resource I’m curious because one of my podcast guests gave me this challenge at the
beginning of the year but he said don’t listen to it at one time speed and
listen to it faster do you do that it’s funny because my wife and I have this debate she listens to it at 1.5 and
there’s zero chance I can remember so here’s and and I learned this stuff an interesting way is I listen to it on one
times because I my brain doesn’t stop dude and so like it like I do all of my
morning routine just to calm the freaking monkey brain down and so for me if it’s at one times I can actually be
listening and having simultaneous thoughts connecting dots without missing
anything but if it’s all of a sudden it’s 1.5 it’s like it’s like you have to like hold on and you’re just gonna like
it’s like drinking through a virus I’m like you can’t think about the bird that chirped if it’s listening if you’re
going that fast the guy I was talking to he he listens to 300 books a year and I
was like there is no way you can do that because I’m always listening to something and I do maybe 50 to 60. and
he said well I listened to it at 3.5 speed I’m like get out of here there is
no way that you can get content out of that and he actually held up his his audible on the podcast and there was I
was like there’s no way that you could get anything out of that and he actually writes a net out at every book that he
listens to and he told me exactly what they said during all that fast gibberish
and he said this is how I did it he said I I went from one time speed to 1.1
speed and then the next week or whenever I wasn’t even thinking about it I went to 1.2 speed it’s like the frog in the
water you don’t know you’re boiling heat up just slightly so I really
thought that that was the biggest load that I have ever heard but I am now on
2.2 speed and I am getting great retention holy buckets man I love it I
learned about that I’m for sure because I started listening to this podcast recently called the founders have you
ever stumbled across out I have not oh my God so awesome so I’ve been a lot of buyer biographies I’ve gone through
recently and this this guy he’s a I actually don’t know much about the of
the host because of one of my friends sent it to me recently and I’ve been binging on it he reads like a bio of
like Albert Einstein or Thomas Edison or Benjamin Franklin and then he gives you an hour and 10 minutes summary of it and
all through the lens of an entrepreneur so he’s like oh my gosh so he did this one recently I listened to about Henry Ford and Thomas Edison and Firestone
were all friends that I didn’t know and he’s like explaining how cool the story is through the lens of an entrepreneur
business person trying to grow a company and how it relates to everything so like I’d rather listen to that because like
those biographies man they’re like 15 hours sometimes and they’re dense but it’s like you kind of want the cliff no
I’d rather do that sometimes I think well let me let me now add a bonus question to the bonus questions what are
your top podcasts that you listen to oh boy I actually just got back into podcasts so I have not I have not
listened to one of my own for seven years and I now so that I actually spend
a lot of time on science and mental health and uh so like Andrew huberman is
one of my more recent favorite ones that I like so any Peter or tea has got one as well so like I get my fixation where
like pretty much what I do Trace is like and I don’t know if you’ve done this with even books or podcasts is if people
are regurgitating other people’s stuff I have no interest really and then it’s like so then I’ll kind of claw my way up
to like oh they’ve been mentioning this book all the time so thinking fast and slow read that one and then you kind of
got the gist and so with podcasts I kind of do the same thing where now it’s where like if I’ve read a book no I mean
now everybody’s got a podcast so if I read a book that I like the author generally has a podcast so um Peter Tia
Andrew huberman I’m trying to think there’s any other ones those are the two for sure that are on the top love it who plays Ryan in the movie they make about
Ryan’s handsome oh my God some random person that no one
knows I don’t know enough actors names man I was like I was like Hey that person from
that that movie or whatever only because we saw a movie with him in it this week that I even know his name but uh Jake
Gyllenhaal is who I would I would I’ve gotten that before and back when Adam Levine was uh on the screen all the time
for what was that uh music show that he was doing um yeah the voice I kept going oh you look
like Adam Levine it just got it happened so many times Chris I had like an actual can response
I can’t sing but he’s got more tattoos but there you go there you go get you
into restaurants a little bit quicker yeah there you go all right last question you now have the ability to speak with anybody throughout history
who would it be with and why Benjamin Franklin because my God the amount of stuff that that guy has done
that is impacting everybody that’s listening in today still is insane like
every time I learned more about him I can’t believe he did that in his spare time while he was doing something else
yeah the original Mastermind founder I think huntis yeah and like I mean
honestly man like the amount of stuff that he invented that was everything from social things to the mail like he
didn’t invent the male press but like just yeah so I’d be I’d just sit there and ask why as many times as I could
Ryan this has been a lot of fun very informative and I know a lot of people are thinking maybe it’s not as scary as
I’m thinking it is and now I know how to start that conversation so thanks for coming on scaling up H2O oh thank you
Tracy I hope everybody knows that it is possible and people aren’t judging them and people have done really good work
and hopefully the the journey can be worth it [Music]
automation back on episode 313 I introduced you to a concept that I’ve
used in leadership for many years and it’s from Pat lincione and his book the
advantage and in the advantage he talks about healthy companies and Smart
Companies and what Ryan was talking about is so much around smart making
sure that we have the right metrics we know what’s going on with our companies
so we can make better decisions now maybe you’re thinking I don’t own a company how does that apply to me well
you are running a company within your company and if you are not taking smart
metrics to make sure you’re doing things as smartly as you can you are probably
wasting time money and energy and let’s face it those are things that we do not
want to waste and those are things that if we do waste they lead to burnout so
how smart are we really making our decisions and do we have the tools to
allow us to make those smart decisions so by bringing Ryan on the show I hope
you’re thinking about what you do with your day-to-day and how you can apply
some of the things that we were talking about to make yourself a little more
smart when it comes to work to make your organization a little more smart when it
comes to how you make decisions Nation it’s all about knowledge and what you do
with that knowledge is really the point so I hope this helps point you in the
right direction Nation earlier in the show I mentioned the hang I would love to meet you on the hang this is a zoom
call that will last for exactly one hour starting at 6 PM eastern time this will
be on July 13th we will start off by having fun you will meet new people you
will learn that you are not alone in some of the challenges that you might be facing and then we are going to have a
lot of fun together so all this is completely free to you all you have to
do is go to scalingup h2o.com forward slash hang and you can register for this
event and make sure you get it in your calendar I’ve met so many people on the
hang and I have heard so many success stories about people who met somebody
who were able to answer a water treatment issue that they had maybe a couple of months later and they would
not have had that opportunity had they not joined the hang and and met that
individual Nation once again I really want to encourage you to take your
certified water technologist designation if you have not done so and to encourage
you to do that we have a course just for you and you can go to scalingop h2o.com
forward slash cwt prep and in order to help you celebrate the 4th of July put
in promo code cwt10 to take 10 percent off the price
and remove even one more barrier to getting your certified water
technologist designation folks I hope you’ve had a great day I hope you
enjoyed this episode and I can’t wait to bring you a brand new one next Friday take care folks
all right [Music]