All right, our first topic for discussion today is how you have to stop working with people who do less than a million dollars in annual revenue. I want you to stop working with people, stop targeting them. If they throw themselves at you with a wheelbarrow full of cash, take them, of course.

But I don't want you targeting or focusing on businesses that do less than a million dollars in annual revenue. And here are my five reasons why. And then I'll get Harry's take on this.

Reason number one is most businesses that don't do at least a million dollars in annual revenue fail. 90% of businesses that don't get to a million dollars or more fail. Now, I know what you're thinking.

Well, my brother-in-law has a mechanic shop and he's only doing $800,000 and he's been in business for 10 years. Well, your brother-in-law is the exception. He's in the top 10%.

Most of those businesses fail. And I don't want you doing work for somebody who's going to be gone tomorrow, a week from tomorrow, or a year from tomorrow. I want you to have the best opportunity to succeed.

Number two, most of those businesses that do less than a million dollars in annual revenue are dependent upon the owner. They're owner-centric. They are businesses that succeed or fail depending upon the will and the resilience and the desires of one or two people.

And that, for you as a professional service provider, is a recipe for failure. Because if that business is dependent upon the owner, and the owner wakes up in a bad mood, you're fired. Or that business is dependent upon the owner, and the owner gets sick, there's no more business.

So a business that is owner-centric is not a good risk for you. And you're putting time and money into your pursuit of clients. It's easier to pursue clients that make way more, that do way more in revenue than a million bucks a year, and not have that type of risk.

Number three, those businesses that do less than a million dollars a year in annual revenue cannot create the type of experience that will result in reduced churn, that will result in dedicated clients that provide repeat or recurring revenue for the long term. Now, if they're startups, and they're emerging, and they're scaling quickly, and they're taking the money that comes in, and they're reinvesting, they'll break through that million dollar threshold in 18 months. And then you can start to pursue them and work with them, because they will be able to provide a great experience, right? If they're sharp, and they have two partners or three partners, and they're well-funded, they can probably create a great experience, and they'll break through the million dollar barrier in 18 months to two years, and then you can pursue them.

But let them prove themselves first. Let them prove that they're creating that great client experience, because one of the reasons these businesses fail is because they can't create that great client experience, because they're just resource constrained. So, not being able to create the great client experience and retain them is a big, big problem.

The fourth reason to not pursue them is they can't invest in improvement. They're always cash constrained. They cannot put the money back in the business, because if there's one owner or multiple owners, they got to fund the owner's lifestyle.

It's really hard to put the money back into the business. And then the fifth is the owners just tend to lack resilience. If the business hasn't broken through the million dollar barrier in 18 months to two years, maybe on the outside three years, there's a pretty good chance the owners are going to have to go find a job, and they're just not going to have the resilience to stick it out.

Because the key to success in entrepreneurship is just surviving until you have the business model perfected and it catches on. And there is a moment where the owner recognizes that the business model is catching on, and they double and triple down, and that's what I'm talking about by ownership resilience. So, for you as a professional service provider, it takes the same amount of effort to go after a client that's doing less than a million in annual revenue, as it does to go after a client that's doing five million dollars in annual revenue.

And you may think to yourself, well Dave, it's hard to find those clients that are doing five million or more. It's not hard. They're everywhere.

Harry will tell you. They're everywhere. You're just not looking for them.

Because you're now in the land of the million and less, or less than a million, so you're not seeing them. It's like if I told you that, and this is the truth, blue cars, blue cars only make up seven percent or fewer of all cars sold in the United States. When you walk out of your office or out of your house today, you're only going to see blue cars.

Because I just mentioned blue cars to you, right? It's the same thing. If I said to you, you're not allowed to do business with anybody who's doing less than five million in annual revenue, all of a sudden everybody you see will be doing five million or more, because that's who you're focused on. Right now, you're focused on these small businesses, so you think they're everywhere.

The businesses that are a little bigger are everywhere as well. Okay, Harry, your thoughts on those five, and anything else you want to add? Yeah, I think the important distinction that you make, if it's a startup of several partners, that would be a distinction in who you want to work with. The other part is that usually those companies at a million and under, they're not going to be good resources for you about other referrals.

As those other companies are growing, then that becomes more of a referral source. They're well known, and then people will say, oh, if you're doing business with X, I'll invite you to the RP process or whatever the case may be. I think the big thing to think about here is your time that you spend on these smaller companies.

You're going to spend the same amount of time trying to get the five million or four million dollar account, and time is everything for yourself. What we did in order to eliminate a lot of that is, that's when we decided that every single client, we have to have a minimum retainer. I will tell you, that turns away a lot of different people, because they don't want to pay a retainer up front to get started.

That was our way of leading it through, and it was very diplomatic and everything else, but that allows you to do it. Now, you have to adjust your business however it is, and find some way to do that. We have found that we are more successful doing less things, more focused than doing many things, and trying to shoot like a shotgun.

So, that's the approach that we've taken, but you got to be a sniper on this. You can't just continue to go out there and look at that. The other thing too, is it takes a lot of time to build up your materials.

Dave, you're talking about the educational materials. You're better off spending that time than dealing with clients who are not going to end up paying your bills at the end of the day. So, it's all a balance, but I think the big thing there is that you're watching who you're spending your time with.

There's a likelihood of you not getting paid on those accounts. You know, Marnie, she went through this type of process in her business, and then she just said, I got to elevate everything, because I'm not making enough money on what I'm doing. When she elevated it, she's now doing much, much better.

Kate LeDon did the same thing. There was all this number of employees and all that, and they decided that less is more, and now she's more successful than she was in the past. So, I think you really need to think through that process.

I think those are great points, and people will say, okay Dave, that's great. How do I know? How do I know which business is doing a million in annual revenue and up? And you know how I find out? And Nicola, like the hair on the back of Nicola's neck stands up when I do this. How much are you making in annual revenue? That's how I do it.

That's it. You're sitting in front of me. Tell me what kind of business you got.

I do this, I do this, and I do this. How much do you do in annual revenue? That's it. I ask.

I ask, and if the business owner bristles at that, I say, are you doing more than a million? And if they say yes, then I'm good. If they don't answer, then I know. It's pretty straightforward, because here's the thing.

Harry hit the nail on the head. You don't have time. You don't have time for this, right? It's easy for Harry.

Harry's a CPA. Everybody expects Harry to ask about revenue. I think it's natural in what I do too.

Dave, what do you do? Oh, I help people grow their businesses. Oh, you do? Yeah, I do. Tell me about your business.

Oh, I do this, I do this, I do this. Oh, what size is your business? What do you mean what size? What's your revenue? How many employees? I never, I really don't, and I'll hedge a little. I don't ask about revenue in isolation.

I always say revenue and employees. I don't care about the employees, but I pair the revenue with the employees just so that it softens the question about the revenue, and I'll tell you that I'm not alone in this. If you decide you want to apply for EO, Entrepreneur's Organization, the very first thing they ask, how many employees you got? What do you do in annual revenue? Because they don't want anything to do with you if you don't have at least 10 employees and do at least a million dollars in annual revenue.

So, it's not a challenge or a problem for you to ask somebody that question. So, I wouldn't, I wouldn't hesitate. I wouldn't worry about people's feelings.

Business is business. What size is your business? You doing more than a million in annual revenue? Great. That's fantastic.

Now, if they say, why do you want to know? I just tell them, I'll tell them honestly. We have a program for people that are doing a million dollars or more in annual revenue, and if you're not, it's okay. We put on seminars all the time for people whose businesses are smaller than a million dollars in annual revenue, but I just, I want to know where we stand.

I want to know, I want to know what your business looks like. So, I just think you got to be unafraid to say this or help them be successful so that they get over a million. That's fine too, but moving forward, only target people who are able, ready, willing, and able to go with you on the journey, and that's the point about the revenue threshold.

You want people who are going to continue on this journey with you for the long term. You don't want people who might fall off the wagon at some point because their business is completely and totally dependent on them.