(0:00) You can scale with confidence. You can build a business that's not just busy, (0:04) but valuable. You just need the right foundation. This podcast, The Margin Method, is about the (0:10) lessons I've learned while building coltivar.com and helping companies create margin so they can (0:15) scale without chaos, grow without waste, and build businesses that actually increase in value. (0:20) My goal is to help you build financial, operational, and leadership margin, (0:24) the real leverage behind a business worth buying. Please share and enjoy.

(0:30) Welcome back to the podcast. Now, if you're brand new here, welcome. I'm so glad you found (0:34) the show. Be sure to hit subscribe so you don't miss any important updates. We're about to go (0:39) deep on the stuff that actually moves the needle in your business. But before we do that, here's (0:43) a quick backstory. I'm a man of faith, and I'm obsessed with trying to align my will with God's. (0:49) Now, I'll be real though, I'm not that great at it, but it's what I strive for. And over time, (0:55) I've come to believe that business is the best vehicle I have at my disposal to be an agent (1:02) for good in the world.

(1:02) That's why I started Coltivar. Our purpose is simple, to elevate (1:06) people through better business. And as I've sat with that more seriously, personally and (1:11) professionally, I've noticed a clear theme, especially as I look back on the clients we've (1:16) helped succeed the most. The ones who win aren't just trying to grow in a vague sense. They want (1:23) to scale intentionally, not just bigger, but to build a business that either A, runs without them, (1:29) or B, is valuable enough to sell on their terms. And that's when the light bulb went off.

(1:36) So yes, I'm still going to talk about strategy, finance and value creation because I love that stuff. (1:41) But now the show is going to be laser focused on one thing, helping founders and CEOs grow (1:47) profitably and build businesses worth buying. This podcast is where I'll share the systems, (1:53) stories and lessons that have helped us to do that over and over again with real companies, (1:59) just like yours.

(2:04) So let's go ahead and dive in to this new chapter. All right, let's start with (2:04) a tough question. Why is growth making everything harder, not easier? Have you ever felt that way? (2:11) Like you're doing all the things, more sales, bigger clients, more team members, but instead (2:17) of feeling more in control, you're feeling buried. You're stretched thin. Profit is not what you (2:22) thought it would be. Cash is tight. Your team keeps asking for direction. And you're thinking, (2:28) this isn't what I signed up for.

(2:33) And it's interesting because I was working with a (2:33) company a while back and we started to chart out their KPIs. And one of the KPIs that we're looking (2:38) at was EBITDA, earnings before interest, taxes, depreciation, and amortization. Just a nerdy way (2:44) of saying profit. And what was fascinating as we're looking at the data is that the company (2:49) was pretty profitable for a while. And then the founder wanted to pour on the gasoline. (2:56) They wanted to scale their business. They just wanted to grow the top line.

(3:00) So he hired a bunch (3:00) of employees and he thought that these employees would come in with their expertise, build out (3:04) the systems and voila, the company would scale. But guess what? That didn't happen. Instead EBITDA (3:11) tanked. Their overhead expanded and they were so inefficient. And then ultimately they had to (3:17) scale back and turn around the business to fix their trajectory. So I don't want that to happen (3:22) to you.

(3:22) So you may be feeling, okay, like I said, this isn't what I signed up for. And here's why (3:28) you probably feel that way. Number one, growth doesn't fix problems. It magnifies them. I talk (3:33) about this all the time with strategy. If you have a constraint in your business, something that's (3:38) holding you back from achieving your full potential and you grow, guess what? You just scale your (3:43) constraint. In other words, you just grow your problems.

(3:48) And that's what makes this the biggest (3:48) lie in business. Revenue solves everything. That is not true. Nope. It doesn't. In fact, revenue with (3:56) no systems is a recipe for chaos. Let me give you a real example. I worked with a company that went (4:01) from 6 million to 14 million in revenue in under 18 months.

(4:07) That kind of growth should have been a (4:07) celebration, right? But here's what happened. Cash got tighter. Operations broke down. Customer (4:13) experience slipped and went down the toilet. And the owner started questioning whether scaling was (4:19) even worth it. Why? Because they built volume on top of fragile infrastructure. They scaled up the (4:26) without scaling up the clarity. And this happens all the time. And when this does happen, you don't (4:32) get freedom. You get stuck.

(4:38) So let's talk about what actually builds a scalable business. Here's (4:38) the truth. You don't grow into success. You build into it. And the way you build it, it comes down (4:44) to three things.

(4:44) First, systems. If your business needs you to function every day, it's not a (4:51) business. It's a job with a really cool logo. And in fact, this could be a major problem when you go to sell (4:57) your company. It's called key man risk. It's when your business relies on you as a key person to run (5:03) the company.  So when I'm talking to business owners, I just had this conversation last week with some (5:08) CEOs. I said, okay, imagine you go on vacation for six months and your employees cannot contact you. (5:16) They can't call you. They can't email you. They can't FaceTime you. They can't do anything. No (5:20) contact — what happens to your business? And pretty much all of them said it would collapse.

(5:26) And that's a problem. That creates key man risk. And it's a giant haircut off the valuation of your business. (5:31) So if you're thinking about selling in the next one, two, three, five years, and you have key man (5:37) risk, let's say your business is worth $10 million — a key man discount could be 20 to 30%, depending (5:47) on how extreme it is. So imagine that you could be selling your business for two to $3 million (5:52) less, and they're going to be putting golden handcuffs on you, locking you into the business.

(5:57) So after you sell it, then you're stuck there. You still have to be an employee of the business (6:02) and help out, right? But now you're not in control and it's the worst situation ever. So you don't (6:08) want to find yourself in that position.

(6:08) So here's the deal. Systems take your genius and make it (6:14) repeatable. They let your team operate without constantly asking for approval or instructions (6:20) because that can absolutely drown you. I know that happens to me all the time and it could be (6:24) extremely disruptive and even frustrating at times.

(6:24) Systems help you to delegate outcomes, (6:30) not just tasks. So here's a dead giveaway. You need systems.

(6:36) Number one, you answer the same questions every week. Number two, your sales process is different every single time. And most (6:42) of the time, founders or CEOs, they're usually the best salespeople in their company. So imagine (6:48) trying to scale that if every time your sales process is different — it doesn't really go well.

(6:53) And third, you're the only one who knows how to fix a mistake. That is not scalable. That's (6:59) survival. So if you want to build a scalable system, that's the first thing you need to do.

(7:04) You need to fix your systems.

(7:04) Number two is financial discipline. If you've listened (7:09) to my other stuff, you know I'm a big finance guy because I believe strategy plus finance (7:14) drives tremendous value.

(7:14) Now I'm not talking about being a nerd, right? Being an accountant, (7:20) wearing a green shade, doing debits and credits in the back of your office. Instead, I'm talking (7:25) about something else.

(7:25) So here's the deal. Look, this doesn't mean spreadsheets 24-7, but you can't (7:30) build a valuable business if you're flying blind financially. You got to know three things.

(7:35) Number one, what's actually profitable? Number two, where are we bleeding cash? And number three, (7:42) what levers move the business forward?

(7:42) Too many founders focus only on the top line. They celebrate (7:48) sales, but they ignore margin. They confuse booked revenue with money in the bank.

(7:54) That disconnect will kill cashflow. I'm telling you, it'll kill morale and ultimately it will hurt your valuation.

(8:01) We'll go deeper into this in the next episode because if you ever felt like we're making money, (8:07) but I feel broke, you're going to want to hear that one.

(8:07) Okay, so that's number two — financial discipline.

(8:12) Number three is in order to build a scalable business, you have to have a clear (8:17) strategy.

(8:17) So here's the deal. Most businesses aren't overworked because they're scaling. (8:23) They're overworked because they're trying to do too much.

(8:23) Clear strategy is about focus. So if (8:29) you just cut out all the academic stuff, right? Because there's so many frameworks, (8:33) people get all confused. And I just tell leaders, I'm like, okay, if you want just a simple (8:38) definition of strategy, it's just about focus.

(8:38) It's about knowing what to say yes to and what to (8:45) ignore.

(8:45) A company I worked with recently had nine different revenue streams, okay? Nine. And guess (8:51) how many of them were actually profitable? Two.

(8:51) Once we cut the noise and we focused on what (8:56) actually worked, their profits tripled in less time with less stress. So I see that all the time.

(9:03) In fact, I was listening to this YouTube video the other day and this guy was going around (9:06) interviewing people on the street. He was saying, okay, are you successful? How much money have you (9:10) made? And one guy's like, oh yeah, you know, I've made millions. I run 35 businesses right now.

(9:16) I'm like 35 businesses. That's crazy. Now maybe he has a big team, but I can tell from experience, okay, (9:24) this is my best guess — that the majority of those businesses aren't actually making money, okay?

(9:31) A few core businesses are probably making a lot of the money and they're covering (9:34) the mistakes and sins of the businesses that aren't making a lot of money.

(9:39) So entrepreneurship (9:39) and success is not about having all these businesses to run. It's about focusing on the core, (9:45) optimizing that. And then once you have that running and it's scaled and it has systems in (9:50) place and you can step away, then great, go start your next venture.

(9:54) But too many entrepreneurs, (9:54) they have this entrepreneurial ADD and they just keep starting new, new, new, new, new, new. (10:00) And that can create a lot of problems.

(10:00) So strategy — the thing I love about it is it gives you freedom. (10:06) It's the filter that protects your time, team, and energy.

(10:06) The other day when I was running, (10:12) I was thinking of this: strategy — it's not about just predicting the future, okay? Because nobody (10:19) could predict the future.

(10:19) The value of strategy is it helps you to focus your priorities in the (10:25) present. That's the key.

(10:25) Because when you have a strategy, you could focus on what matters the most (10:31) right now, here, today, right?

(10:31) I hear that all the time from people like my spouse and my kids are (10:36) like, be in the present, dad, be in the present.

(10:36) And so oftentimes we look so far out into the future (10:43) and that's great. But then if you bring that back and you say, okay, strategy — yeah, it helps me to (10:48) think about the future and get excited about the future. But more importantly, it helps me to focus (10:52) on what to say yes to and no to right now in the present.

(10:52) So I can set priorities that will allow (10:57) the company to win.

(10:57) All right. So here's the big takeaway from today.

(11:03) Number one, don't chase growth — build value. You can scale with confidence. You can build a business that's not just busy, (11:08) but valuable. You just need the right foundation.

(11:08) And that's what this podcast is here for. In the (11:17) exact systems and shifts that create real scalability.

(11:17) Here's a sneak peek of what's (11:23) coming. You're making money. So why is there no cash? So we'll talk about why profit and cash (11:29) aren't the same and how to plug the hidden leaks in your business.

(11:29) I'm also going to do an episode (11:34) that talks about scale with systems, not just headcount — how to grow without burning out and (11:39) why hiring more people isn't always the answer.

(11:39) Remember that story I told you at the beginning, (11:44) where the company is losing a ton of money as they try to scale. I'll help you to avoid that (11:48) in your business.

(11:48) We'll also get into the five metrics every founder must know cold, like off (11:55) the top of their head. And we're not talking about vanity metrics, just the numbers that actually (12:00) drive value and growth.

(12:00) And then I'll also do an episode about, is your business actually sellable? (12:06) Because a business that's worth buying is also one worth keeping.

(12:06) And that's just the beginning. I (12:11) have so much more content that is going to deliver value to you. So I'm excited for you to keep (12:16) tuning in and checking this out.

(12:16) All right. That's what I have for today.

(12:22) If you want more resources, (12:22) or if you ever want to start a conversation, you can always connect at coltivar.com. We have a ton (12:27) of tools there, videos, and other things that will help you to build a scalable and sellable business.

(12:34) All right. I'll catch you in the next episode. Take care of yourself. Cheers.