The base level threshold is this $1 million

to $5 million in annual revenue.

Now, I'm not categorizing these companies by profit,

by EBITDA.

I'm categorizing them by revenue because revenue is

easy.

We all know what revenue is.

I don't want to get into seller's discretionary

earnings.

I don't want to get into how profitability

is measured in all these businesses.

Revenue is very easy to talk about.

So $1 million to $5 million in annual

revenue.

I've used the term Main Street Mavericks to

describe these people.

And the reason that I think they're Main

Street Mavericks is because they've created a business

to enable their freedom.

My experience, the people who are able to

push through, and by the way, that first

hurdle is a million bucks.

And in order to push through that hurdle,

they have to have come up with an

idea that really resonates with a group of

people who are their clients.

And they've created this business for themselves to

enable their freedom.

That's what the business is all about for

them.

They need to develop trust in other people

so that they can continue to grow.

And what usually happens is the trust comes

in the first key person they decide to

hire, or the trust comes in the form

of a partner that they decide to bring

into the business or go into business with.

And that's where it unlocks their strengths and

they're able to pursue the things that they're

really good at while their first key hire

or their partner is able to pursue their

strengths and they're able to grow the business

in that way.

The challenge for these people is that realization

that they cannot or should not do everything

themselves.

So that $1 to $5 million mark, they

go up that spectrum by the more authority,

the more capability they delegate out to other

people, the deeper the trust they have in

other people.

These people are worthy of your investment because

to get through that million-dollar threshold, they

trusted somebody at some point and they're willing

to continue to grow and expand their business.

And they will most likely be on an

upward trajectory.

And my experience is this is the fastest

part of the cycle.

Once they break through the million-dollar barrier,

going from one to five is the fastest

part because they're like, oh, look, I can

bring in a CFO and the CFO can

help me manage to the numbers and I

can realize where my profit is leaking and

I can reduce the leakage of the profit

and put that money back into the business

and then bring in a salesperson or two

salespeople or a sales team and reinvest that

money back in the business as it continues

to grow and expand.

Harry, your thoughts on the $1 to $5

million area?

Yeah, no, I agree with everything you say.

I think the one thing in the one

to five you have to be a little

cautious on is they're probably taking a lot

of the profits and plumbing it back in.

I think a lot of people make mistakes

about the people they hire, the systems that

they put in place.

So I think you always got to operate

with some level of caution and get to

know your client.

You know, people do stumble, but I think

that if you're growing with them at this

pace, if you become a partner with them,

then that's just going to do you, you're

going to grow with them and you're going

to do very well with them.

So you can be more instrumental by making

introductions for them that don't really relate to

your business that could be helpful.

So I think that's where you can get

a lot of loyalty, you know, down the

road.

But I think this is the part where

people really build on their relationships.

And I think that's just better, you know,

for the future.

But you have to be willing to invest

the time to do that.

The one to $5 million area is, it's

really liberating because it's like their first introduction

to the drug of bringing in a team

to help them.

And they think that because they've done everything

themselves and they feel the weight of that

and pushing through the weight of doing everything

themselves is what gets them over that million

dollar hurdle.

And then they bring in, usually it's that

one key employee, right?

In some cases, it's the salesperson.

In some cases, it's an operations person to

take the operations weight off of them so

they can sell.

And all of a sudden when that weight

is removed and they can leverage their strengths,

that sense of freedom is what propels them

forward.

And it is exactly like a drug.

And they're like, okay, this worked really well

with sales.

Now let me see what I can do

with finance.

Oh my gosh, I brought in a decent

controller and the controller showed me what we're

doing here and how to be more efficient.

That's more money.

I can take that money and then hire

more salespeople or I can do more marketing

or I can do more advertising and it's

just fuel that continues to grow the business.

So the mindset of that one to $5

million entrepreneur is the mindset of like you

basically unleash the kraken.

You just release the beast and they feel

finally like they can move forward aggressively and

quickly.

The five to $10 million area, this is

the valley of death and I didn't coin

that phrase, okay?

That phrase has been told to me by

no fewer than like six or seven people

who are in that area right now and

who have been told that they're in the

valley of death.

And here's why this is categorized as the

valley of death.

It's because they try to take the people

who got them to say $4 million or

$5 million, they try and take those people

and use those people to get them to

$10 million.

And the caliber of person to go from

five to 10 is very, very different.

To get to $5 million, you can be

very tactical.

You can be very action oriented.

You can be very hands-on and you

can get to $5 million.

As long as you buy into, hey, I

bring people in to leverage my strengths.

I can be a day-to-day manager,

a day-to-day salesperson, a day-to

-day person with my nose buried in the

finances and I can strong arm the business

to $5 million.

But to go from five to 10, to

scale that way, you need to be more

strategic and you got to take a step

back and you have to really start surrounding

yourself with situational expertise.

You got to surround yourself with people who

are smarter than you.

So to go from one to five, and

this is, I'll give you my experience and

I learned this with the ExecuState brand at

Marriott.

To get from like one to five, I

had great tactical people.

I had people who could make everything work

on time.

But to go from five to 10, I

needed people who had to think differently because

working more hours was never going to be

the answer.

Salespeople who had to go after bigger clients,

salespeople who were smarter about the way they

used leverage.

They realized they couldn't cold call their way

to $10 million.

They had to do presentations and they had

to put on events to put hundreds of

people in the room so that we could

pitch to them all at the same time

to go from five to 10 versus one

to five where we could sell to them

one at a time.

So the people who get you to five

are way different than the people who get

you to 10 and you as a professional

servicing a business that's going from five to

10 need to realize that the advice you

give to a business owner who wants to

go to 10 needs to be more strategic

and less tactical.

You need to get them to hire the

people to do the hands-on stuff and

surround themselves with really smart people who have

situational expertise.

Harry, your thoughts.

No, I agree with that.

One of the issues you always have with

clients when they do grow between the five

and 10 million, a lot of times they

will change advisors because of the brother-in

-law or somebody else.

I think that you need to be in

a position to help them and you gotta

be aware at the same time that they

will just make changes.

We had a situation where the client just

says, well, we're evolving.

I said, what the hell is evolving in

the relationship?

So you gotta be very careful about how

you're seen and if you just let them

grow without being part of that team, you

could be part of that evolving aspect of

it.

But I think that the five to 10,

I would agree.

A lot of companies do fail because of

a lot of bad implementation of systems, hanging

on to the wrong people for too long

of a time period, but not being able

to identify that.

And I think that's one of the big

issues of what you call the valley of

death where a lot of people fail.

The other thing too is in that area

there, you're losing part of that entrepreneurial part,

as you mentioned, Dave.

And once you lose that part, your company's

just different.

And I think, especially in today's world, a

lot of us dealing with AI and a

bunch of other things, how do you invest?

Because you don't necessarily have the knowledge to

do the investing in those areas.

You need to bring in other people who

have that experience, whether it's somebody on your

team or you hire a consultant to help

you.

And that's where, even in our field of

accounting, that's why you're seeing a lot of

the roll-ups because you can't compete with

it.

It's just imposters too much.

So that's where you have to really focus

in on.

So a couple of things to think about

to Harry's point with you not getting thrown

out with as they're changing the advisory team.

If you're the person who's helping push them

toward the change, you're less likely to be

part of the change.

This is the thing.

You're either on the bus, driving the bus,

or you're under the bus, right?

So you don't wanna be under the bus.

My preference is always to be the guy

driving the bus.

So if I'm sitting with my client and

I say to my client, how fast do

you want to get to 10 million?

And the client says five years, I say,

why not 18 months?

And they look at me.

And there's a very famous story that's told

about Peter Thiel, where he says, let me

see your five-year strategic plan.

And they give him the five-year strategic

plan.

And he looks at it.

He goes, this is a great plan.

He did a really good job on it.

And the guy's really happy.

He goes, now I want you to implement

it in 18 months or you're fired.

Five-year plan, implement it in 18 months.

Your job as an advisor is to always

be pointing your clients in the direction they

need to go.

You should always be taking your clients where

they need to get to.

Because if you are, you're driving the bus.

You're less likely to be under the bus

when it goes by.

I can't stress that enough.

Harry made the point.

I'm just emphasizing it.

You have to be the person to help

them go from five to 10.

You're the tour guide taking them through the

valley of death as fast as you possibly

can.

And you have to be comfortable, politely challenging

them.

You have to challenge them to say, you

have to challenge them and say to them,

you told me you had this goal.

You wanted to get to 10 million.

You said five years.

I told you you could do it in

18 months.

Let's talk about what it would take in

order for you to do it in 18

months.

And then you challenge them and ask them

in order to do it in 18 months,

what's missing right now?

Well, I'm missing this.

I'm missing this.

I'm missing this.

And I'm missing this.

Okay.

Who do you know that can help you

get those four things in place?

Let's get to work on it.

Let me help you get to work on

it.

I don't care what your role is.

If you're a lawyer, you're their insurance advisor,

you work on real estate for them.

If you tell them you wanna help them

get to 10 million, how are they gonna

say no to you?

They're gonna want you around because you're helping

enable them to go from that five to

$10 million mark.

Now, one more thing about this, and Harry,

I need your opinion on this as well.

If they're in love with certain people and

they don't want to abandon those people, maybe

it's their son who's part of the business

or another relative or someone that's been with

them for 100 years.

What you can do is you can share

with them the educational opportunities that could bring

that person along maybe to make them better

and make them into a potential $10 million

person.

The example I'll give you in this is

a company that I worked for called Concord

Hospitality.

They had a general manager in Allentown, Pennsylvania

who was like a technology wonk.

He always had the latest technology in his

hotels.

He was really into technology, would save up

money from his budget to invest in the

latest technology.

The CEO of the company recognized this guy

had an affinity for technology.

He knew he couldn't afford a chief technology

officer at that time in Concord's history.

He invested in this guy, paid for him

to go get a master's degree in something

in technology, paid for him to learn about

infrastructure and everything else, and he also invested

in him going to every technology, hospitality technology

conference there was.

30 years later, this guy is now the

chief technology officer for Concord Hospitality, which has

like 190 hotels all over the US and

Canada, and he's, by reputation, one of the

best CTOs, chief technology officers, in the hospitality

industry today.

He didn't start out that way.

He started out as just another general manager

who had an interest in technology.

They invested in him to make him the

$10 million plus, now he's the $100 million

plus chief technology officer.

So if your client has somebody who, to

them, is personally indispensable, help them find an

education path that could potentially make them a

$10 million person, but make sure they understand

that that education comes with the price, and

the price is time.

If that person is critical to the growth

of the company, you may be better bringing

in a steward for that role while this

other guy apprentices for four or five years.

Harry, your thoughts about that?

No, I think that's a great example.

I think the other way you can do

that in either, you know, let's say in

the accounting or financial area, if you have

somebody who doesn't have the experience, we have

seen people either bringing in other mentors that

the family knows or the business knows, but

you can also bring in, on an interim

basis, CFOs to help train them over time,

where you're dedicating a couple days a month

to do that process.

So I think you can attack what you're

talking about in a couple different ways.

You just have to be open to what's

going to work best for the company and

not drain all the cash and doing it

in the meantime.

So there's a lot of different ways to

slice it, but I think that whole process

of doing that, what you also get out

of that, Dave, too, though, the loyalty that

is then going to be seen by everyone

else by keeping those people and showing that

you're willing to invest in people is huge

from keeping your turnover down and long-term

people want to stay.

Some of those people are going to leave

as you're growing, but I'm not a proponent

of throwing them overboard just for the sake

of saying, well, you're only a $5 million

person and I got to go to $10

million, so I got to jettison you.

I think you try to elevate everybody.

You try to bring everybody along, but there

are three or four key positions.

And Harry, I'm curious as to your thoughts

on this.

For me, there are three or four key

positions that accelerate growth.

So strategically, the first one is in the

finance space.

I think you go from probably at $5

million, you go from a glorified bookkeeper to

a real finance person who knows what your

books should look like, knows how to use

the financial reporting in order to manage the

business.

And then at 10, you might even be

able to go to a real CFO, correct?

No, that's about right.

But again, in the meantime, you can also

bring in people to assist in that process.

Look, I mean, the three areas of any

company is going to be financial, operations, and

sales.

That's the three that you got to get

right.

Yeah.

And, you know, depending on what's going on.

So it's a limited number of areas.

Now, depending if you're in a regulatory environment,

you might need legal more.

But those are the three main areas you

got to focus in on.

Yeah.

So to Harry's point, one of the places

that I worked had a laundry, had a

commercial laundry.

And during a recession in, actually when the

dot-com bubble burst, like right around 2000,

most of you weren't even born yet.

Sheldon was born.

But everybody else probably wasn't even, you weren't

working at that time.

But around 2000, we decided we were going

to take laundry from other hotels and charge

the other hotels because we were one of

the only hotels in our geographic area that

had a functioning laundry.

So the laundry became a profit center, but

we were overwhelmed.

We were already, we were working seven days

a week, two shifts because we were doing

our own hotel's laundry, but we had some

capacity on the evening shift.

So we were doing such a good job

that we filled that second shift and we

thought we needed to buy more equipment to

handle the capacity.

And my boss at the time was smart

enough to say, well, the equipment is going

to cost basically like two whole years profit,

and we probably won't be in a recession

in two years.

We don't even know if we'll continue to

be doing outside laundry in two years.

Maybe there's another way to do this.

And we called a guy who all he

did was consult with commercial laundries.

His name was at the time was Charles

Eiffel, and he was literally the guru of

commercial laundries.

And he in 48 hours transformed that business,

made it an incredible profit center.

And all he did was show us how

adding a third shift, the expense of hiring

and adding a third shift could be easily

offset in just four months by making that

third shift at least 50% capacity five

days a week.

So we were absolutely able to, we got

it to 100% capacity five days a

week and then eventually expanded it to six

days a week.

And it was an incredibly lucrative opportunity for

us.

But we didn't think of going to a

third, it's a hotel open 24 hours a

day.

We didn't think of running a laundry on

a third shift in the hotel because for

the entire life of the hotel, they only

had one and a half shifts.

They only had a half of the people

on the second shift.

That guy bringing in that consultant different thinking,

$10 million plus thinking completely transformed that entire

business and made the hotel a ton of

money from a department that was supposed to

be an expense.

After we experienced that, just FYI, the division

that I worked in was responsible for housekeeping,

laundry and recreation.

We had an indoor pool in New York,

okay?

We were one of the only hotels in

our area to have an indoor pool.

So we said to ourselves, shit, we brought

in this outside guy who was really smart,

had fresh eyes.

If we did that, if we do that

with recreation, let's see what a consultant in

the recreation space comes up with.

And sure enough, we started selling memberships to

our health club for the hotel and to

the pool, okay?

Indoor pool, retractable roof, great facility.

And because the hotel wasn't busy, it was

a freaking recession, we went nuts.

And I had people going door to door

selling memberships to this fancy hotels health club.

The recreation department went from being an expense

to being a profit center.

We had a consultant, a health club consultant

come in, brought us the entire operating procedure

for a fraction of what we made in

the long term.

Again, we were $5 million thinking these people

are $10 million plus thinkers, that situational expertise,

that's what breaks you out of the valley

of death.

Harry, your thoughts?

No, those are great examples, Dave.

I mean, that's why you need to bring

in those people.

The issue you always have is finding those

right people because there's a lot of consultants

out there.

So that's gonna be the real issue.

You need to talk to someone else who

really has worked with them to see how

instrumental they have been.

But those are things where you gotta start

thinking, how do you get to that next

level and how did you break out?

You know, the other thing too is even

people in business, we've had this with clients

who have told me this, is going to

talk to other people who have broken through

it on their own, even if they're competitors.

A lot of times they'll open up because

they want to help you.

Whatever the case may be, we had one

where a competitor told one of our clients,

you need new trucks.

You gotta have new trucks because you'll make

a lot more money because people are going

to think it's another level of professionalism.

And he did it and things went very

well after that.

So, you know, you gotta get the Steven

Jobs theory.

People will give you good information if you're

willing to ask, even if it's a competitor.

Yeah, that's great advice.