[Podcast] Lessons on Customer-Driven Acquisition and Scaling a Business

Unconventional Entrepreneurship Wisdom

How Do I Grow and Scale My Business?

Sure, there is a lot of advice about starting a business…

Business schools try to prepare you, many people have advice for you, but listen to those that have done it. It’s nothing like the textbooks say.

Michael has “been there, done that” taking multiple businesses from idea to exit, generating millions of dollars in the sale and acquisition. If you want to learn from anyone who is an entrepreneur, you can;t do better than Mike. Having worked with him on many of these ventures, it was a treat to get his “behind the scenes” view of decisions, operations, and disciplines that he used to start, grow, manage, and exit.

In this second conversation about Michael’s book, Backward Entrepreneur: From Idea to $20 Million” , we dive into the crucial pillars of customer acquisition, scaling a business, the pitfalls of VC funding, and the necessity of understanding customer motivations for successful product development. Michael shares a unique process for customer-driven acquisition, emphasizing the importance of validation before investing significant resources. We conclude by addressing the art of exiting a business, with valuable insights into timing, goal-setting, and preparing for potential buyers

So grab a cup of coffee and join us as we uncover the secrets of the backward entrepreneur!

Content in this episode:

00:00 Don’t let exit become primary focus. Balancing.

10:13 Persuade customers by asking and listening carefully.

13:01 Pyramid model: customer needs, market validation, details.

19:52 Create universal messaging system using customer phrases.

38:17 Challenge scaling motives; prioritize personal well-being.

43:23 Assess market, scalability, and paying oneself.

55:41 Negotiate deal using term sheet in call.

Show Notes:

(Click image for larger size)

Unlocking Entrepreneurial Success: Strategies for Customer Acquisition and Business Growth

Introduction:

In this episode, host Matt Bailey sits down with seasoned entrepreneur Michael Stebbins to delve into the world of entrepreneurship, exploring effective strategies for customer acquisition and sustainable business growth. Gain insights into the challenges faced by entrepreneurs, discover customer-centric approaches, and learn the secrets behind successful business scaling.

The Entrepreneurial Journey

Navigating the Entrepreneurial Landscape

Michael Stebbins shares his wealth of experience, discussing the highs and lows of the entrepreneurial journey. Understand the importance of resilience, adaptability, and a growth mindset in overcoming challenges.

Setting the Foundation for Success

Explore the key principles that form the foundation of a successful entrepreneurial venture. From establishing a clear vision to building a resilient team, learn the essential elements for long-term success.

The Art of Customer Acquisition

Dive into the nuances of customer acquisition. Uncover effective strategies for identifying and reaching your target audience. From digital marketing to relationship-building, discover the tools that drive successful customer acquisition.

Building Customer Loyalty

Explore the symbiotic relationship between customer acquisition and customer loyalty. Learn how delivering exceptional value and personalized experiences can turn first-time buyers into lifelong customers.

Balancing Profitability and Fair Compensation

Michael and Matt discuss the delicate balance of compensating employees and sustaining business growth. Explore the dynamics of paying oneself, incentivizing the team, and fueling the company’s engine without compromising sustainability.

Strategies for Sustainable Growth

Delve into actionable strategies for sustainable business growth. From smart financial management to creative approaches in product development, gain insights into fostering long-term success.

Conclusion: Mastering the Entrepreneurial Landscape

As the conversation concludes, Matt and Michael reflect on the essential components of mastering the entrepreneurial landscape. Whether you’re a seasoned business owner or an aspiring entrepreneur, this episode provides valuable insights into achieving success in the dynamic world of business.

Show Transcript

Matt Bailey [00:00:00]:

Well, hello, and welcome to another edition of the endless coffee cup podcast. As always, I’m your host, Matt Bailey, and bringing you a deluge of interesting guests. And, of course, I got my good friend, Mike Stebbins, back. I promised that we would come back and talk more about being A backward entrepreneur, Mike. You know? And I’ve even got the notes in it. How are you doing today?

Michael Stebbins [00:00:25]:

I’m caffeinated and happy, and I love seeing the bookmarks in there. That’s that’s almost the equivalent of, Matt, when you’re doing one of your teaching sessions, teaching one of your classes, giving one of your talks, you see people pull out a notebook and start typing or writing things down, So couldn’t make me happier. Also, the fact that the bookmarks matched the r in the color scheme, I you know?

Matt Bailey [00:00:48]:

That may have been subconscious because I don’t remember even thinking about that because I do have a variety of your colors, but this was Yeah. And I love marking up books. I, you know, I I have a hard time. I’ve got a great library of books that I’ve just accumulated over the years. And I always like to mark, highlight, make notes. And, you know, just even today, someone’s like, oh, could I borrow that? I’m like, no. Yep. That’s that’s my copy.

Michael Stebbins [00:01:16]:

Matt, somebody once somebody once said that the material for a book Should be or could be, not should be, could be notes to yourself. In other words, if I was writing Notes to myself about how to assess my own abilities for a business or to be an entrepreneur, how to validate my markets, You know, how to structure the company, how to scale it, how to get customers, when to quit. These are my notes. Right. And what’s really funny is as, you know, in the pre roll, you and I were chatting, I may pick up the book and look at it some of these times and look up. What did I Hey. I’m super duper.

Matt Bailey [00:01:56]:

About that.

Michael Stebbins [00:01:57]:

Yeah. The human mind, at least my mind, doesn’t hold all 10 chapters of information, And it’s kinda like a bible for, you know, resource. Go back and look. And Absolutely. Get reminded of things that you’ve forgotten. So That’s how I treat the book. As I go through new ventures or even when I’m sitting with clients who are going through an exit or trying to get customers, It looks bad. You know, you could see him get a little nervous when I pick up the book and say, well, what did I say there? You know, I haven’t come through.

Matt Bailey [00:02:29]:

You know, but I do that in training all the time too. I I’ll be putting together the course, and then all of a sudden, I was like, wait a minute. I’ve talked about this before.

Michael Stebbins [00:02:38]:

Yeah.

Matt Bailey [00:02:39]:

When did I talk about that? And now I go back into years of PowerPoints. And I was just telling my staff here, like, they go back to, like, o six. They go back to o four even, some of them. And I’ll find them like, oh, that was good. What? How did I forget that? You know, you just these notes to yourself that you you you know, this is why I love digital is It’s so easy to store. You can go back and find it. You could do a search. It’s amazing how far you can go back and find things that you’ve said before.

Michael Stebbins [00:03:11]:

Yep. So absolutely. And so I may pick up the book and say, what did we say there as we go through this?

Matt Bailey [00:03:19]:

Well, the reason why we’re doing a part 2 is we we talked a lot about the first part of the book in in the 1st session that you and I had. But I think the 2nd part here, I wanna cover some of the final chapters because I think they are just as interesting that the 3 areas that I wanna cover with you today about your book. Number 1, getting customers because that is you know, everything else will fall apart if you don’t do that. But then scaling of the questions to ask about scaling a business and then also exiting. You know, I meet a lot of people who their only mission in creating a business is to And I think that’s an interesting way to think when starting, but it is something that you have to keep in mind. But I

Michael Stebbins [00:04:03]:

don’t think it should you when you’re doing that. Your quote is perfectly aligned with what we say in chapter 1, Which is why are you doing this? And then in the exiting chapter, we touch on that again saying, I have seen clients do this weird turnaround, Matt, in the midst of an exit, in the midst of a deal, When they had started the business with the vision of making a difference with, you know, paying themselves well or exiting as a secondary but important goal. That balance works really well for the long term. I warn people of making an exit your primary focus. I say your exit should be like a rearview mirror if you’re driving as you look up and you check on it. Right? But the primary focus is where you’re going. And in the exit, I’ve seen people do this about face where all of a sudden it seems like greed takes over because You’re looking at numbers that frankly can be life changing and make you financially independent, and and that’s That’s important. Right? But if you make it the primary primary focus in your exit, it can really change A lot of your decisions and killed the deal, and I’ve seen it happen.

Michael Stebbins [00:05:25]:

I’ve well, let me be accurate. I’ve seen it come very close to happening, And the people that I’ve worked with who’s able to have this conversation, steer it a little bit and say, hey. You know? You let it go. And the reason I’m able to do that is that I had a business partner who was willing to say, Mike, let it go. You know? Let it go. And it it made all the difference. And so that’s reflected in the in the chapter on exiting. But first, you’re right.

Michael Stebbins [00:05:54]:

Let’s talk about getting customers.

Matt Bailey [00:05:55]:

Absolutely. Absolutely. It’s interesting that you compare 2 different types of frameworks, the customer framework versus the entrepreneurial framework. I I thought that was an interesting contest contrast as a way to introduce your methods of, Basically, customer research. And you you’ve got a nice list of things to go through. But let’s start with that that comparison of frameworks. What’s the difference between a customer focused framework and an entrepreneur’s framework?

Michael Stebbins [00:06:27]:

Yeah. So entrepreneur driven acquisition Is where we define what we do and what we say by what we want to do. What we think customers wanna Right here are the features of our product that we think are amazing. And frankly, that’s the way a lot of people go. A lot of folks go by what I would call momentum. They look at things like slogans, and phrasing, they want to model their customer acquisition like BMW or Microsoft or something like that, right? Where they I doubt if they have the resources ready to go to make that kinda repetition and slogan work. And, Matt, you’ve seen this dozens of times. Somebody comes up with a great product, and they’re just convinced it’s gonna change the world, and then they say, I put out a sign, and I put up a website, and I wrote a blog post, and I did 3 LinkedIn posts.

Michael Stebbins [00:07:25]:

Where are the customers? And that’s usually where my engagement starts with clients. And I know in your case, you’ve seen the same thing. And it doesn’t mean the product’s bad, But what a lot of these folks don’t know is that the customer will tell you in advance what they will buy and how to sell it to them. And we know that customers will buy here, there’s a chart in my classes where it has this graph where two lines Intercept, and we’re very close all the way going up into the right. And, one of them says sales, and one of them says trust. I said, there’s a highly scientific chart that shows The higher the trust, the higher the sales. Right. You know? And, you know, our our mutual colleague and my friend, Rand Fish had posted something to the just of, if you want people to buy stuff, don’t sell it.

Michael Stebbins [00:08:20]:

You need to generously give information. I’m completely hacking this quote, but you need to generously give information so people so it builds trust, and people buy from Folks that they trust.

Matt Bailey [00:08:32]:

Absolutely. I well, I’m gonna jump in here because part of the trust and and that entrepreneurial mindset I’ll never forget. I was talking to a potential client, and her idea for the business, she says, I want everything to look like Oprah’s. You know, I love the Oprah vibe. I want her my website to look like Oprah’s. You know, I wanna put across that feeling. And it was kind of maybe Snarky on my response, but I was like, that’s awesome. I’m like, that’s great.

Matt Bailey [00:09:02]:

Do you have Oprah money? Because it was more this this is What I want to exude, this is what I want people to see, but it it was all focused on her and what She her view of what her business would look like, there was nothing about a customer. Yeah. And and so, okay, you wanna appear this way. I don’t think you’ve got the money to do it. Yeah. There’s there’s an a certain investment level there required.

Michael Stebbins [00:09:28]:

Yeah. Yeah. You’re right. For well, okay. So here’s how it works. And customer driven acquisition or I’ll say CDA sometimes, that means customer driven acquisition, it’s a process by which We define what we do, and what we do means our product or service, and what we say, which is how we try to persuade people To buy our product is informed not by what we think is cool or the features that we built, But it’s informed by what customers will buy, what customers are trying to do, and how customers describe what they want. And CDA is a methodology for extracting that. The simplest start to that is to answer this question.

Michael Stebbins [00:10:13]:

What do we need to say and do that will persuade the customer to do business with us and no one else? And then can you say that about your product? Too often the answer is no because we use the entrepreneur driven method To build what we want or what we thought will change the world. You know, you can have a product that has all the cool features, And it doesn’t fit what the customer needs in terms of a buying model, or maybe we’re using the wrong words to convey it to them. So by the way, there are other ways to derive, you know, what your customers need. This is just The way that’s worked for me, and it seems to work for clients, and I like sharing it with them. So we Could try to derive what we do and what we say by simply asking customers, hey. What will you buy? What do we need to say to you in order to get you to buy it? And sometimes that’s a hit. But too often, people will answer those questions With what they think you wanna hear, or what will just end the phone call quickly, or have the least amount of confrontation. Often when I teach CDA, the first thing I start with, Matt, is how I interview Mhmm.

Michael Stebbins [00:11:35]:

Employees. And what I’ll do is I’ll ask an employee as part of the interview, and my staff will do the same. What are 3 things that would make you get up and leave a job? And the first 1 or 2, they’re gonna read off the card. Right? Well, if there’s unfair treatment of my coworkers or if I’m suppressed somehow or oppressed, but Those are typical, and I try not to roll my eyes when they answer because it’s a genuine and valid answer. They’re out of the box answers. Yeah. Yep. When they get to the 3rd one, usually, you see the eyes drift up to the left, and now they’re processing.

Michael Stebbins [00:12:10]:

Now they’re thinking about a situation, And they’re not as concerned about the answer that they’re giving because they’re drawing from scenes, right, and emotions. At some of the companies, 1 candidate said, if there was the smell of food in the office, I don’t want No. I can’t stand the smell of food. I’m thinking to myself, you’re not gonna be happy here. Somebody burns popcorn an average of twice a day.

Matt Bailey [00:12:41]:

Oh, no. But what

Michael Stebbins [00:12:42]:

happened is the answer was honest. And so the customer driven acquisition process helps phrase questions to derive the pillars Underneath this pyramid. And, Matt, I don’t know. Can you put images in the podcast video?

Matt Bailey [00:12:57]:

I tell you what. I can put them in the show page. Okay. Great. So then

Michael Stebbins [00:13:01]:

we’ll have to I’m gonna provide a image of the pyramid. But basically, on top is what we do and what we say. And then underneath that is what customers will buy, what customers are trying to do, and how they describe what they want. And I got this Four things underneath those, right, that allows to do that. 1 is establishing validity of the market, but the other are deriving what we call Scenes, wants, and knowledge. And scenes, wants, and knowledge, and we gotta be careful about the detail on the podcast, Jared, because we go way down a rabbit hole. The scenes are Events or scenes where the customers first starts thinking about purchasing or acquiring what we do or what we sell. You know, what is that scenario? You remember from MarketMotive, one of the scenes that we derived by using the question methodology that, is part of CDA Was that Thanksgiving was a time when people bought and we found out why is that there was some family pressure, family get togethers.

Michael Stebbins [00:14:02]:

It’s Like, why can’t you perform like your brother or your sister? Or why don’t you have a job like such and such? Mhmm. And we learned that the scene was You know, frankly, it was a negative thing, but it was, you know, pressure from the family. Then we derive Wants. So we do scenes, then we derive wants. And wants are when buying or using what we sell, what is the customer typically trying to achieve Or avoid. And sadly, avoid is a stronger one. Yeah. Yeah.

Michael Stebbins [00:14:33]:

They wanna avoid embarrassment or shame in front of the family or something like that. Right? On a positive, some people want to achieve financial independence or the admiration of their family for being a provider. Right. And these were some of the motivations that we learned. And then the last 1 is what we call knowledge. And the knowledge are what are the relevant and important issues That a buyer needs to be aware of when making a decision to buy something like what you sell. Yeah. So it’s not necessarily features, but what do they need to be aware of? And a great way to extract this, I’ll give one example of how we have Developed questions that extract this is to say, imagine you were teaching your cousin or your sister or your mom, you choose somebody that the customer might care about.

Matt Bailey [00:15:22]:

Mhmm.

Michael Stebbins [00:15:23]:

Imagine you were teaching them how to make a decision on how to buy plumbing services or Or how to buy a garage door opener or something like that. You might tell them, make sure it has one of those safety eyes so when little Billy, You know, walks in front of it, it doesn’t close on little Billy. Right? And now if you can get the customer to start Picturing in their mind, right, how they would teach their mom or their cousin or their sister how to buy, let’s just use a garage door opener. They’re using the phrases And describing the knowledge for what somebody needs to know to buy the product, and that is what we use to come back And communicate to them and share information with them that’s useful whether they buy our product or not.

Matt Bailey [00:16:09]:

Yeah. Yeah. I like well, it and it what it does is it it brings it to the level of feeling. And Yep. That’s where we make those decisions rather than just this this ascent of facts and figures, which I I think people don’t realize that is a part of the equation, but it’s not it’s not fully a couple of things I That study of of learning about those, you know, our our students at Market Motive was was absolutely great because I think our assumption was, You know, January 1st, everyone’s starting something new. I wanna I wanna be better. But it like you were saying, it was more of a negative motivator that I don’t wanna show up to the next Thanksgiving and be compared to my brother or sister. Or Yep.

Matt Bailey [00:16:55]:

You know? So there was a negative motivator.

Michael Stebbins [00:16:58]:

Yeah.

Matt Bailey [00:16:59]:

And so you approach that completely different when there’s a negative motivator rather than a you know? And I even look at, You know, this is where I bring in Maslow’s hierarchy of needs. This is such a deeper level of need. This gets to Acceptance. Social acceptance among the people closest to you Yeah. Which is much deeper than the what is it? It’s it’s achievement. Achievement and self actualization, which was top of the pyramid. Yes. You know, that there is miles of difference between that.

Matt Bailey [00:17:31]:

And so the motivation is different. They want to change more things. Absolutely understanding that underlying motivation because and especially that that the emotions will be deeper. They’re gonna be more motivated to finish because there’s more at stake with what’s happening. But I love you.

Michael Stebbins [00:17:50]:

When you when you get the answers to these questions, there’s a Process that we teach, that we learned is so valuable, and that’s you you get permission, of course. You record, you transcribe, And we color code the phrases that come in from the customer Mhmm. In terms of scenes, wants, and knowledge. Okay. And the 3rd step of CDA is to create what I call a persuasion bank. And a persuasion bank is this beautiful thing that some people call it a headline bank, right? It’s a bank of persuasive phrases that could be considered to be ad headlines or topics for blog posts or sharing or seminars or whatever. And they all contain what’s called a trigger And an assurance. Yeah.

Michael Stebbins [00:18:40]:

Trigger and assurance. Okay? The trigger combines a scene that’s familiar Or disturbing. Okay. That triggers the beta or aware mode. And then it also contains A scene and a want. So a trigger, a scene that’s important, like, let’s say, you know, you have wedding Planning services or something like that. Well, obviously, the scene is we’re planning our kid’s wedding or something like that, or you’re planning your own wedding. And a want is, I don’t want my wedding to be an embarrassment to the family.

Michael Stebbins [00:19:15]:

Right? I want I don’t wanna appear cheap. Right? I don’t wanna

Matt Bailey [00:19:20]:

spend 20,000. I don’t wanna spend 30,000 or 20,000 whatever the average cost of a wedding is.

Michael Stebbins [00:19:26]:

Well, the assurance is a combination of a want and knowledge. Mhmm. Okay? I want a good looking wedding, But I don’t wanna have to pay more than I need to. Yeah. Okay? So when you have a combination of a want and a knowledge, that becomes an assurance. And when you have a combination of a scene and a want, that becomes a trigger. You combine those to make headlines that matter. Mhmm.

Michael Stebbins [00:19:52]:

And then your topics follow on using phrases that your customers use to describe what they wanna achieve or what they want to avoid. And so here’s this magical thing happens, Matt. When we go through a workshop and we practice on these interviews, people what people have said, Your eyes start to color code the phrases, and you start to see, oh, okay. There’s a want to achieve, there’s a want to avoid, there’s a knowledge, There’s a scene, and then we go through the process of putting these into a persuasion bank. And what you end up with Is a universal messaging system that informs what you say and what you do for your product In your social media, in your podcasts, in your outbound, in your seminars, in your, what I call your generous output That helps you love your audience, helps you love your customers into trusting and buying your product, should their needs align with it. So now you have a persuasion bank entry that your ads are now coordinated with your social, is now coordinated with Your articles is now coordinated with your audio output, your videos. Everything is themed beautifully to speak to what the customer has Told you they need to know in order to do business with you and no one else. That’s great.

Michael Stebbins [00:21:17]:

I love that. I love that. I’ve I’ve seen you do it multiple times.

Matt Bailey [00:21:21]:

I try to repeat it because I I have learned from you on this, which is great. I mean, it it’s It’s so good because, you you know, I I would say my my my basis in persuasion is a lot of the classical literature,

Michael Stebbins [00:21:36]:

You know,

Matt Bailey [00:21:36]:

Aristotle and things like that. So being able to take a lot of those, you know I I’ve come out of the, I we’ve talked about this. The the logic, emotion, and credibility are the 3 elements of persuasion and and how you kind of reinterpret that to this this modern digital sense. But it’s it’s just people are the same that they’ve always been. And I go back to you know, I think it was Aristotle, gal. You know, it goes through philosophers all throughout history. People want to be happy. Yeah.

Matt Bailey [00:22:08]:

And that’s That’s what you’re doing with this assurance is you’re making a good decision. It’s okay. It’s you know, ultimately, people make decisions based on that single premise.

Michael Stebbins [00:22:21]:

Yeah. It’s the promise of the ad. So, like, let’s go back to the wedding example. Here’s your trigger. Luxury weddings on a shoestring, and now your assurance. How 4 couples did it? Yep. Okay. So right there, you have a theme or a headline that can work for all kinds of output.

Matt Bailey [00:22:43]:

Mhmm.

Michael Stebbins [00:22:44]:

Now let me give you an example of where I did not do any of the customer driven acquisition and it completely failed. Is that okay for the podcast?

Matt Bailey [00:22:54]:

Yeah. Absolutely. Let’s

Michael Stebbins [00:22:55]:

Alright. Hey. Hey. Something silly.

Matt Bailey [00:22:56]:

People learn from failures. There’s some failures and others. That’s I’m convinced of that.

Michael Stebbins [00:23:01]:

And this yeah. And this isn’t the book. And it’s like, of of all people who wouldn’t do this, I did it. Right? I I teach this stuff. Right. So how is it how is it, Matt, that I created a product where I could not Speak to the customer in a way that persuaded them to buy it. Mhmm. And the answer is that I never created this product to Oh.

Michael Stebbins [00:23:25]:

Oh, no. I created a product to teach a lesson. I had somebody close in my family who I cared about who said patents are impossible to get. And I figuratively took them by the ear and led them out to my garage. You know my room.

Matt Bailey [00:23:43]:

This. I remember this. I know.

Michael Stebbins [00:23:46]:

And I said, we’re going to Said something, man. I was being very flippant, and this person was being very patient with me, and I duct taped a Cranberry juice bottle to a stick, and I filled it with sand. And I said, we have made a dead blow trash compactor. And this person was doing everything they could not to roll their eyes. And I chucked it down in the trash, Matt, and it compacted the trash to a pancake. And while we were kind of in this flippant fun, silly mode, we both saw the trash compactor, looked at each other and went, oh, we didn’t expect that. So I knew a trash compactor was unlikely to be in the market, so I went through the process of getting a patent for A granular damping methodology in a impact tool. So basically, those little tampers you use in your garden To tamp down soil or landscapers use them.

Michael Stebbins [00:24:39]:

And it turns out it was amazing. It was amazing. It blew everybody’s mind who played with it. You know, I achieved the goal. We got the patent, the interns at The company got to see, you know, conversations with the attorney. That was all fine. But now I got this product. I never did any market research.

Michael Stebbins [00:24:58]:

I never talked to customers. It was merely to teach, right? It was an object lesson, but everybody’s like, You’re rich. You got a patent. It’s amazing. And I let that influence me. Okay? And I thought, you know what? What’s a few $1,000 to go to the National Hardware Show? I take the product to the National Hardware Show. I know what’s gonna happen. I don’t know why I did this.

Michael Stebbins [00:25:20]:

I think I did it because it was fun, and Karen and I got to go to the hardware show and sit in the booth With a tangible product. This is fun. Right? You got a big backdrop behind me, you know, and talks about granular damping. I had the world’s for a granular damping doctor Philippe Vasquez, I believe, out of My goodness. So yeah. He validated this thing as superior. Somehow I got invited on stage with Home Depot. All the executives, they’re not supposed to come around and touch the product, but somehow I got them to come up and try the thing out.

Michael Stebbins [00:25:50]:

The guy’s Eyes went huge. His jaw dropped. He’s like, this thing is vastly superior. And in front of the whole audience, I gave the guy a break. I said, but you’ll never put it on your shelves. He goes, you’re right. Because that 1 foot by 1 foot section Of shelf space is too expensive for a high end product. It’s too expensive to manufacture.

Michael Stebbins [00:26:13]:

They would much rather have a low cost thing with a high margin that churns. Yep. And had I talked to my customers, and in this case, the customer would be Home Depot Right. Right. Had I talked to them in advance to find out what it is I need to do and say for them to buy my product instead of any others, they would have told me. It needs to have this margin and this cost of manufacturing, and it would have never ended up being a product. Yeah. And it isn’t.

Michael Stebbins [00:26:39]:

By the way, it’s a great product, and there’s a website, amtamp.com. You wanna buy 1? Let me know. I have seen them. I’ve seen

Matt Bailey [00:26:49]:

them come back from getting painted. They’re sitting out there on your porch.

Michael Stebbins [00:26:53]:

That’s it. I know. Yeah. And then as as landscapers come by, hand them to them, it’s a superior thing in every way. Yep. But we’ve done none of the market research to validate What we need to say and do in order for people to buy it instead of any other. Yeah. Well So, You know? It’s a perfect example of It is.

Michael Stebbins [00:27:13]:

Why superior products and even good marketing, As you and I defined in here with Greg and and and the rest of the awesome authors, Kim and and Cindy and, of course, Brad, That’s great marketing too. Great product, great marketing.

Matt Bailey [00:27:29]:

Mhmm.

Michael Stebbins [00:27:30]:

But if you are not informing what you do and what you say by what the customers have told you, it’s not gonna work.

Matt Bailey [00:27:36]:

Yeah. So I’ll let you know one of my failures as well. Very similar. So I was working for a software company, And one of they gave me the New York Times as a as a client. You know? I’m I’m the young guy and they gave me the New York Times. So I, you know, I’m trying to sell our software into Yep. And and this was pre press software and Great connection with the decision maker there. You know, we spent a lot of time together, a lot of time on the phone, and The demo went well, and we were a start up

Michael Stebbins [00:28:16]:

Yep.

Matt Bailey [00:28:17]:

And in the industry and and going against the big people, the big guys on there. And I remember I I, you know, I was in New York. We’d gone to lunch, and he’s like, Matt, you guys, you check all the boxes. You are the most logical choice. Love it. You’ll hear from me in a week. And I and, you know, and I and I tell this story. I’m like, I am on the plane ride home counting my commission.

Matt Bailey [00:28:37]:

Like, yes. Because this is gonna be it’s not just gonna go in the Times. It’s gonna go into all the remote printing areas. I mean, like, this is gonna be phenomenal. A week goes by, and I don’t hear anything. Yep. And after another week, I called and I said, hey. You know you know that you know that, hey.

Matt Bailey [00:28:55]:

How are you? What’s going on? And and he’s like, Matt, I’ve been trying to think of a way to tell you, he says, but no one ever got fired for staying with IBM. And, again, The emotional distance between he made this decision at a Security. Like, if I go wrong with this, I could lose my job.

Michael Stebbins [00:29:18]:

If I lose my

Matt Bailey [00:29:19]:

job, I lose my house. I you know, it affects my family. That’s the level at which he made his decision. Meanwhile, I’m selling up here, and I realized all the benefit statements that I gave were about the New York Times. There was no I sold no benefit to him personally Yeah. To make that decision. Yep. And that changed how I sold from then on.

Matt Bailey [00:29:44]:

That was just an amazing lesson in That assurance, as you were talking about, I I was assuring the company, not him, and he was the sole decision maker on that.

Michael Stebbins [00:29:57]:

Yeah.

Matt Bailey [00:29:57]:

So, yeah, it’s a it’s a the the things we do in our in our younger days really kinda come back and and provide good lessons.

Michael Stebbins [00:30:04]:

With others to their benefit. They can learn from our mistakes.

Matt Bailey [00:30:07]:

Yeah, absolutely. But I love that framework of very clearly setting those things out and analyzing those statements. Very effective, and I’m sure you and I can provide lots of examples.

Michael Stebbins [00:30:21]:

Yeah. Yeah. No. That’s well. Book is is getting customers, and I I think it’s chapter 7, and it’s, I hate hand wavy stuff. You know that. Right?

Matt Bailey [00:30:31]:

Yeah. Oh. So it

Michael Stebbins [00:30:33]:

Typically walks you through the precise questions to ask the script. It tells you how the calls can go And sometimes poorly. It assures you, you will never be able to ask all the questions at advance. It even walks through how to get people on your list to call to find out. You know, it’s the goal is is that chapter is really meant to equip somebody to get it done without a workshop, without a client relationship. Just Get it done. Yeah. Get it done.

Michael Stebbins [00:31:03]:

And Great. By the way, I mean, I should put it in perspective, Matt. The Getting customers, the the customer driven acquisition model was really the basis for the book. It was meant to just be the one that’s what I was gonna really write about. But it turns out that the steps leading up to it, your self assessment, your market validation, your product validation, even the idea of thresholds of when to quit, Are all decisions that are best made before you start doing customer driven acquisition.

Matt Bailey [00:31:34]:

Mhmm.

Michael Stebbins [00:31:35]:

The whole title, backward entrepreneur, is that you do that first. You talk to your customers before you make your product. Yeah. And you say, if I was to offer this, What budget would you take from to buy

Matt Bailey [00:31:48]:

it? Mhmm.

Michael Stebbins [00:31:50]:

Not would you buy it because they’ll always say yes, right? Right. In fact, you know, you know some of my current entrepreneur ideas that I have for the next start up. And so far, I have not been able to get customers to give A positive monetization statement. They all say it’s greatest idea since anything. You know, it’s great, congratulations, it’s innovative, all the compliments, that’s very nice. But when I say what budget would you take from, they stumble. Yes. And without that, I’m not doing the start up, Matt.

Matt Bailey [00:32:19]:

No. Absolutely. Absolutely. It’s it’s

Michael Stebbins [00:32:22]:

a great it’s a it’s a dead blow tamper with a patent. It’s the coolest thing in the world, but Boom. Nobody’s gonna pay for it. I’m not gonna put my family savings into it. No. And that’s really the methodology, and the reason that it’s in there is to Validate ahead of time whether or not this is gonna pay off.

Matt Bailey [00:32:42]:

Yeah. Yeah. Well and I wish more companies would, Actually, focus on this. It’s interesting. I think it’s maybe more critical from an entrepreneurial standpoint because time and time again, when we go into companies and do analysis for them, I see where you know, great example, threads came online. How much money and time did your company throw at threads?

Michael Stebbins [00:33:02]:

Yeah.

Matt Bailey [00:33:02]:

And where did but what gets them is when I ask them, where did that money come from? What budget did you steal from in order to explore that. And now, you know, 2 months later, there’s nothing there. Where did you steal that money from? And did and, usually, I can track down that you took it from somewhere that was a pretty good ROI. And so you stole from yourself twice moving that money from something that was already established and working to, we’re gonna try this out. And you you cut yourself twice, in in doing that. So it’s a it’s a dangerous thing, but it’s a great question you’re asking. I’d be surprised if many companies even knew where they were taking money from when they do some things.

Michael Stebbins [00:33:49]:

Yep. You speak truth.

Matt Bailey [00:33:53]:

Well, let’s get to that, the next section. I I mean, there’s so much. We could make this episode all about customer acquisition, But I do wanna get to a couple other things about the book because, especially, when we’re talking about entrepreneurship, one of the biggest questions, and, you know, I think it’s natural, is scale, is Yeah. Growth is I remember an employee asking me once, are we ever gonna get to the point where we have just enough customers and just enough work that, you know, we have some level of of normalcy. And and I my response is it will never be normal.

Michael Stebbins [00:34:26]:

I mean That’s right. Yeah.

Matt Bailey [00:34:27]:

And the agency world is one of rapid expansion, rapid decline. And, you know, I I Respect the agencies that don’t want to do that, and respect their workers about because it’s so easy to hire a dozen people And then turn around and let them go when the, you know, when the work’s not there. So Yeah. Scalability, that is a difficult difficult step in an entrepreneur’s life.

Michael Stebbins [00:34:54]:

Yeah. And the the chapter header is something like, if I can sell, You know, 100 at a profit. Why can’t I sell 1,000,000?

Matt Bailey [00:35:01]:

Right. Right.

Michael Stebbins [00:35:03]:

And

Matt Bailey [00:35:03]:

because if I just get 1% if I get 1% of that 1,000,000

Michael Stebbins [00:35:07]:

Oh, gosh. No. Don’t go there. Yeah. I wanna boil the ocean. Yeah. You know, so it’s the boil the ocean. Like, we we should Explain to your listeners what that means.

Michael Stebbins [00:35:17]:

Okay? One of the eye rolls, and Karen is really helping me with the eye rolls, that I have is when somebody says, You know, it’s such a big market. If I could get 1% of the market Yep. And

Matt Bailey [00:35:28]:

Just a half a percent.

Michael Stebbins [00:35:30]:

Yeah. Half a percent. Yeah. It’d be worth $1,000,000,000, and it’s like, Yeah. You know, and it’s like, as an exercise, I’d like you to go down. We’re on the coast here. Go go try to boil the ocean with a lighter. You know, because there is no get 1% of the market, okay, without incredible expense.

Michael Stebbins [00:35:49]:

But that’s that’s probably a topic for another podcast.

Matt Bailey [00:35:52]:

Yeah.

Michael Stebbins [00:35:52]:

You know, there’s a story, a short story I’m gonna share, that didn’t make it into the book. It fell off the editing table. And when I was I think I was a product marketing manager at a very popular firm in Silicon Valley, And I think I was in my twenties. And I had an entrepreneurial attitude, and I had already, you know, Been at least 2nd in command for some pretty big growth businesses. And so I brought that to this big company. It was one of the best companies work for in the Bay Area. And as a product marketing manager, I had p and l responsibility for my product line and I Use some of the company’s money. I think it was $70,000 or something like that on a campaign, and it gave a Very good return.

Michael Stebbins [00:36:40]:

It brought in 700,000 of revenue or profit. I can’t remember what, but anyway, it was it was good. And Word came to me that I was going to I was called to the office of the executive vice president at the company, And I was gloating and thinking this is gonna be great. And so I went in and sat down. Actually, I’ll show the name of the Man who did this, his name is Wei Ting, w e I, I think. Wei Ting. And he very stern across this big desk in this big Walnut office, and I’m thinking, here

Matt Bailey [00:37:13]:

it comes. You know?

Michael Stebbins [00:37:15]:

And Way looked at me and he said, so you Used $70,000 and you brought us 700,000. And I’m like, here comes, you know, the the award. Right? And he goes Because I don’t want you here. He goes, if you could do that, why did you not take 700,000 and bring us 7,000,000? Because you’re not doing your job. Wow. He said go take bigger risks and do your job.

Matt Bailey [00:37:47]:

Wow. I love it. It changed

Michael Stebbins [00:37:49]:

it changed the trajectory. Right? You know? Right. Yeah. You know, he’s like, if you can do that, you’re wasting time, You know, unless you use it with bigger numbers. Now, obviously, there’s a lot of complications to that, and sometimes what works for 70,000 won’t work for 700,000. But it Set it set it in the mind. Right? Is there a process by which I can show that Some small traction can be amplified into larger traction.

Matt Bailey [00:38:16]:

Mhmm.

Michael Stebbins [00:38:17]:

And so if you take something away from this podcast in terms of scaling, That question, constantly asking, if I can sell this many for this much, what’s in the way of me putting extra zeros after both of those numbers? Yeah. And it’s a good test. But, Matt, as we were talking earlier, one of the first questions I encourage people to ask when they’re considering scaling us, why do you wanna scale? Yes? Is it because that’s what you were taught to do? Is it because that’s what gets rewarded when you’re at Thanksgiving dinners? Because Sometimes it it doesn’t make sense. If your personal life suffers because you’re scaling something, It’s not worth it. Life’s too short to be chained to this image of scaling something. So, You know, in the book you know, and I encourage people to write in the book. Write write on the pages, please. We’ll print more.

Michael Stebbins [00:39:12]:

Okay? But I want to scale because and finish the sentence. Mhmm. And I know I’m scaling when this occurs. And, You know, if you can answer why you want to scale, and it’s a positive, you know, I want to scale because I’m motivated to do this, it fits my vision, Then great. Then go through the rest of the chapter. In fact, we say it in there. It’s like, if you don’t pass this, you can read the rest of the chapter as an exercise, but you may wanna go to the next one. Right.

Michael Stebbins [00:39:43]:

So the scaling process changes a lot of times, Matt, as you were talking about with agencies. Earlier in, the most important pillars Of scaling seem to be 3 things, ideas, resourcefulness, and first customers. That’s the focus. Right? And that’s okay. That’s good. But as we really shift to, you know, 2nd gear, I say that there are 4 pillars. Okay? And that is vision, Fuel, process, and talent. Okay? So vision vision we know.

Michael Stebbins [00:40:17]:

It’s shorthand for our guiding principles, Our mission and other statements to keep us on track as we scale. That’s important. We’re humans, and that means that we’re emotional creatures as we were talking about before. And no matter how How calculated we try to be, we can get distracted or affected by emotion, and our decisions can be inconsistent, they can be mercurial or even counterproductive. So It’s good to have that mission that can guide you through scaling. Fuel, we know that fuel is the capital required to bring in the talent, equipment, or partnerships that you need. And the most typical fewer sources are from your own sales, from loans, or funds raised through investments from outside sources. And Yeah.

Michael Stebbins [00:40:58]:

A lot of that’s covered in the chapters. Reviewers have noted that I’m sort of anti VC Yeah. Which is not quite true. I’m cautious VC. Yes. And quite honestly, not seasoned In terms of accepting VC funding, so I leave that to others, and I say so in the book. I don’t thoroughly discourage people from it, but I do They realize that it comes with a significant burden.

Matt Bailey [00:41:26]:

Yes.

Michael Stebbins [00:41:27]:

Yep. Yep. Absolutely. So

Matt Bailey [00:41:29]:

Well, there’s there’s there you’re giving up autonomy. Yeah. And now you have a whole new set of goals Yeah. That are not yours. There’s an

Michael Stebbins [00:41:40]:

exchange. Could be.

Matt Bailey [00:41:41]:

Well and and but there’s always an exchange

Michael Stebbins [00:41:44]:

Yes.

Matt Bailey [00:41:44]:

In scale.

Michael Stebbins [00:41:46]:

Yeah.

Matt Bailey [00:41:46]:

If you wanna scale, There are limited resources. And so you have just like I was talking before about budgets, you’re pulling from somewhere in order to get what you want. And and I like your list of of hours, market resources, and products that I’m gonna pull from 1 or all of these in some way in order to leverage growth. And what’s the cost of that? Yes. Where will I pay? Because you will pay somewhere.

Michael Stebbins [00:42:18]:

Yeah. And, I mean, a good example is available hours. So my cousin is a physical therapist And has, offices down in Monterey, California. And no bias, she’s really good at what she does. She could scale her business by hiring a bunch of physical therapists and taking I don’t know. Is it Medicare, Medica whatever the, you know, funding is For paying bills and and insurance types and and churn people in and churn people out, do 20 minute appointments with half the appointment on stimulation, which is like Electrocution that heals like that. Right. Right.

Michael Stebbins [00:42:54]:

Okay. Great. She doesn’t wanna do that. She wants to heal people. And so her business is highly limited by her available hours. So scalability in her vision, It wouldn’t make it through the preflight checklist for your typical scaling of an office like that.

Matt Bailey [00:43:10]:

Right.

Michael Stebbins [00:43:10]:

Right. And it’s intentional.

Matt Bailey [00:43:12]:

Mhmm.

Michael Stebbins [00:43:13]:

So rather than struggle with the, you know, oh, I should be scaling at Thanksgiving dinner, how many patients are coming through your clinic, That’s not the measurement that you accept.

Matt Bailey [00:43:23]:

Mhmm.

Michael Stebbins [00:43:23]:

You know, do you have the available market? You know? Are enough people buying copper that it makes sense to smelt copper, you know. Mhmm. And there are attributes Of certain products that lend themselves to scalability. Those are things like follow on products, low variable cost, and high ticket, and those are described in the chapter. That is a good preflight checklist to go through before you decide to put your effort in scaling. So I’ll touch on I think, we’ll we’ll talk a little bit about exits after this. But there’s 2 questions that have come up recently that I wanna share how those go. And one of the most Common questions I get when people are thinking about scaling, Matt, is, when do I pay myself and how much? Yes.

Michael Stebbins [00:44:10]:

It’s a good question, and it’s genuine. People are really

Matt Bailey [00:44:13]:

It is. It it’s it’s genuine because it’s painful.

Michael Stebbins [00:44:16]:

Yeah. Yeah. But my answer is a bit controversial. When somebody says, when do I pay myself and how much? My answer is pay yourself as much as you possibly can and as soon as you can, as long as it doesn’t inhibit the growth of the company. Oh, well, that’s a catchy phrase. It is. It is. Because that means paying your employees fairly And sustaining the company with fuel, including yourself.

Michael Stebbins [00:44:43]:

Right? I mean, on one side, if you as a founder Can’t afford to build the business, then it’s a death of the business, which hardly makes sense. Right? Right. But if you’re Starving your employees? Well, then it’s not sustainable either. So, I mean, I have seen entrepreneurs Suffer or even not pay themselves for many, many years, and then when they finally start making a profit, they felt guilty taking a big paycheck. And my advice to those in particular cases was you need to pay yourself obscenely well while you can. Yeah. As long as it doesn’t inhibit the growth of the company Right. Or create an unfair situation for others, You need you got a lot of back pay to make up for.

Michael Stebbins [00:45:29]:

And if somebody can afford it, then do it.

Matt Bailey [00:45:32]:

And that

Michael Stebbins [00:45:32]:

You know?

Matt Bailey [00:45:32]:

And that is part of the fuel. I mean, you’re the engine that’s making this business happen, but you may have a good product. You may have these things, but, ultimately, you’re the one driving this, and there is reward to it. That is the that is a tough question, but it’s I I think it’s one of those things that you are going to lose your motivation. You’re gonna lose your you’re gonna lose your passion and your vision for it if you can’t reward. That’s the whole reason you did this. And so yeah. It’s And it’s very easy to you know, I think, for some to get caught up with, I wanna take care of my employees.

Matt Bailey [00:46:04]:

I wanna grow. You know, they do some of the work and, You know, maybe be a little more altruistic that I wanna help more people, so I’m gonna take less. That’s not always the best route as well. But, yeah, just that concept of this is kind of a zero sum, and you’ve gotta pull from somewhere to make these things happen.

Michael Stebbins [00:46:25]:

Yeah. The second1, and then we can talk more about exits. The second1 was that and I mentioned this in the book. So I helped the client tracked a new president. They they kinda wanted to step back and let somebody else run things. And the new president Came in on the promise of equity ownership, and one thing I do teach is do not give away equity. It needs to be earned over time.

Matt Bailey [00:46:49]:

Yes.

Michael Stebbins [00:46:50]:

You could give away a percentage of the company. That person leaves the next day. Now you’ve given up they’re holding 10% of your company and they’re not even involved, so you gotta be There’s a whole bunch of creative ways to take care of that. So the new recruit was super excited and said, so what can I pay myself? Fair question. And the answer I hope the owner craft was something to the effect of, you can pay yourself whatever you wanna pay yourself as long as The company is profitable? Oh, and it’s not more than the owners pay. Oh, Okay. You know, you could just see the furrowed brow as they’re calculating. Right? Right.

Michael Stebbins [00:47:28]:

Right. And there are other limitations, like, If there’s zero margin, then it’s minimal pay for the new president. Right? Or fair pay for the employees couldn’t be compromised. Yeah. So now this new president has to be careful About increasing his or her own pay because it would mean a 2 times hit on profit. And in this particular case, it took a little while for this To sink in. And the the candidate for president. So if I come to the owners Telling her she gets her raise, we all win.

Michael Stebbins [00:48:01]:

It’s like, yep. Mhmm. More profit, more pay, no profit, minimal pay, incentives aligned, All partners succeed. Right? Love it. Love it. So there’s creative ways there’s creative ways to do that.

Matt Bailey [00:48:13]:

Absolutely. Absolutely. And I and I like that. I mean, it It puts the incentives in the right place and, you know, and the growth of the business. That is why you’re here. That’s you know? So it’s gotta be commensurate with that. Alright. We’ve got a few minutes to go here, Mike.

Matt Bailey [00:48:29]:

And so, you know and and exiting, we we talked about a little bit at the top of the podcast about what your what your goal for the business. But I think sometimes, you know, and I even found myself in this This realm as well is that, you know, I had spent 9 years building an agency, and it really just happened almost overnight where it was, you know what? I’m not gonna do this anymore. I I wanna I wanna go into teaching and training. And, you know, just I was done with the agency business. And fortunately, we worked very closely with another company, and it was just a natural thing. It was a leveraged asset buyout, And it worked so well. Essentially, I kinda became a, you know, a salesperson on commission only. You know? And, You know, the employees were well taken care of.

Matt Bailey [00:49:20]:

The clients, you know, they still, 10 years later, have all you know, the clients. I couldn’t have asked for a better situation, and it just worked out beautifully. But not everyone runs into that. And part of that is finding a buyer who’s willing to pay what you want.

Michael Stebbins [00:49:38]:

Yeah. Yeah. And in a wealth of buyers, You know, your value increases, supply and demand. Right? Mhmm. And, you know, one of the first things that I’ll do with somebody who’s thinking about We’ll talk about why, you know. Yeah. You know, whether it’s personal timing, market timing, or investor timing, and any one of those is valid. You know, market timing is I think the business has its peak value right now.

Michael Stebbins [00:50:02]:

Personal timing is, hey, this is a grind. I wanna do other things. Yeah. Right? Investor timing, as your investor say, it’s Time. Yeah. Which is one of the issues with, venture capital. But, you know, obviously, you wanna make sure there’s harmony among those. And then, you know, like a vision, setting why you want to exit and what conditions you’ll exit under as something that’s written down really helps Avoid those emotional swings.

Michael Stebbins [00:50:29]:

Right? Yes. You know, I will sell because of this only when I can get this exit or only when I can assure that my employees will be taken care of, only when my investors get this return. And that that helps keep us. So when we’re Getting a list of buyers, which is the next step that I encourage people to do and start with a napkin sketch. We wanna obviously, we’re gonna list competitors. But here’s where the list gets really interesting, is to create people who sell adjacent products for adjacent markets. Okay? So adjacent products might be a follow on product to what I sell. So if I sell a garage door opener, you know, maybe, You know, I don’t know what follows a garage door opener.

Michael Stebbins [00:51:15]:

It’s like, what’s an adjacent product? It might be, you know, floor coverings for the garage or Or cabinets or storage systems or something like that. Right? Yeah. And then adjacent markets might be let’s talk garage door openers. It might be home improvement products, Right. Or in a channel of home improvement products. And then competitors. It’s like, who else sells garage doors, right, or garage door openers? You know, and those you can make a list like that, and then in the chapter, I don’t think we have time here, but in the chapter, we talk about methods for communicating And making that balance between exposing the fact that you might be willing to sell to the possible detriment of the reputation of your company.

Matt Bailey [00:51:54]:

Mhmm.

Michael Stebbins [00:51:55]:

And we walked through that, but I can give you one of the hints, one of the takeaways is prepare a statement in advance that’s positive. If a nasty competitor decides to leak out that you’re looking, you can put out a statement that says, yeah. We’re looking to Build this even more in partnership with a good partner, but if we don’t, we will go on with your support. Yeah. Positive message. So, you know, we kinda plug that hole, and the fear of something leaking out is now reduced because you have an answer for it. Yep. So now it loosens you up a little bit.

Michael Stebbins [00:52:31]:

You can make those phone calls that I’ve made in the past where somebody didn’t know who I was. I just called and I said, hey, would you be interested in taking over this business.

Matt Bailey [00:52:40]:

Mhmm.

Michael Stebbins [00:52:41]:

And they’re like, are you really Michael Stebbins? Yeah. You know, you gotta give them a second to sit there and go, this isn’t a Scam call. This is actually legitimate. Right.

Matt Bailey [00:52:51]:

Yeah.

Michael Stebbins [00:52:51]:

Yeah. And I think the other point that my heart really wants to share with people is is the aspect of qualifying the buyers so you don’t waste a bunch of time.

Matt Bailey [00:53:03]:

Mhmm.

Michael Stebbins [00:53:04]:

And So, obviously, if you’re pursuing buyers, you could do a little less of this. You still wanna make sure you’re talking to the person who’s gonna sign the term sheet. Okay. And don’t settle for not talking to that person at some point because if they’re not talking to you, then it is not a qualified buyer. Yeah. But there are 3 questions that I wanna share with your audience that I like to ask to qualified buyers because too often we get spray and pray or somebody who just took a get rich Quick course, and they wanna try and buy your business with equity in their imagined future merge business. And no. No.

Michael Stebbins [00:53:38]:

No.

Matt Bailey [00:53:38]:

Run away from it. Yeah. Yes.

Michael Stebbins [00:53:40]:

Yes. The the 3 questions, I’m gonna read these because I wrote them down here just for this audience. The first question is, This is for potential buyers. What businesses have you invested in that are similar to mine? And, Matt, if they can’t answer that, if they can’t answer who they’re looking at, and they don’t know about your business, Then they’re probably not serious. Yeah. The second question I ask you, what are 2 acquisitions that you’ve made that didn’t work out so well or that failed before completion? They can’t answer that. They’re probably not qualified. Mhmm.

Michael Stebbins [00:54:15]:

Right? And then the last 1 is, what are the source of funds and approval chain For an acquisition like this. That last 1, it’s a deal killer if they’re not ready. Yeah. And so I highly recommend that when you get a call or a voice mail or a, you know, email messages saying we’re interested And buying companies like yours, those call them back. I mean, you know, vet them online. And if they’re legit, call them back and run through those 3 questions, and you’ll get a really Clear sense as to whether they’re qualified or not.

Matt Bailey [00:54:47]:

Oh, absolutely. Absolutely. There’s I I think there’s a lot of people that like you said, they’ve got dreams. They’ve got ideas of how to do that. And and whenever someone says create a financing, I I cringe a little bit about that.

Michael Stebbins [00:55:01]:

Yeah. Yeah. Can I share 1 more? Yeah. Sure. There’s one more. It’s called a term sheet trick. And there’s definition of a term sheet in the book, you can look it up, but it’s basically it outlines what Terms of the deal are before you execute a binding agreement. Mhmm.

Michael Stebbins [00:55:17]:

And the this term sheet trick has saved me so much. First off, I love and value attorneys. You’re gonna see that in the book over and over. Get a good attorney to set up your business, get them to advise you. But Realize that attorneys are not dealmakers. Mhmm. It is their job to scare you away from a deal with all the possible horrible things that can happen. Right.

Michael Stebbins [00:55:41]:

So To take control of your deal, here’s a process that has worked phenomenally well for my clients and for myself. Grab another term sheet, either one of yours from the past or one from somebody else or grab 1 online, Okay. And use that as a script in a live 1 on 1 call with the deal maker on the other side, not their attorney. Go through each of the items in this model term sheet, and come to agreement on what you’d like to do for each one of those. Consideration, payment time, equity, all of these things, deal timing, breakup fees, all those kinds of things. Come to verbal agreement and write your own script together as the rules for your attorneys. Yes. So when you take that, you’ve already come to mostly material agreement with your buyer, and now you are both giving the same sheet of music To your attorneys to execute.

Michael Stebbins [00:56:42]:

Now Nice. Will your attorneys maybe reveal something that isn’t gonna work out in your benefit? Yeah. Okay? But you it becomes the exception. Right? Yeah. I’m telling you, you do that trick, it will streamline your deal and help by close much faster. So hopefully, that’s valuable.

Matt Bailey [00:56:58]:

Yeah. I mean, that’s exactly what happened with you know, in my case was, absolutely, we agreed on all the terms first, and then it was just framework. Everything was in line. It made the process so much smoother. But, yeah, just to remind people, if you’re having an accountant or an attorney review this, their job is to find the problem. There you know, it’s not to pat you on the back, tell your dude and doing great.

Michael Stebbins [00:57:21]:

It’s Yeah.

Matt Bailey [00:57:21]:

If they’re working in your best interest, they will scare you. They will tell you. And Even myself looking at an acquisition at one time, you know, when my accountant came back and said, no. Run away. You know? I’m like, but I you know? But and and it’s our nature is, oh, but I could double my business. I could you know? And but when you have an accountant saying, like, no. It’s a shadow. It’s not there.

Matt Bailey [00:57:46]:

Yep. That’s what you need at that point is people telling you bringing you back down to earth that this is here’s the reality, and you’re still looking at things. Yes. You know, with the rose colored glasses, you need to get those off.

Michael Stebbins [00:58:01]:

And on a positive note, the same principles that we talked about for customer driven acquisition can work In closing up a deal, when you’re working with private equity and there are 7 decision makers all involved, almost always, you’re gonna have 1 person On the buyer side who’s pretty obstinate and is negative, negative, negative, and I don’t wanna do this. And, You know, taking that person aside and spending some time and just saying, what do you really wanna have happen in this deal? Yeah. Can be really revealing. 1st off, it validates them. Yeah. You know?

Matt Bailey [00:58:37]:

Oh, yeah. Absolutely.

Michael Stebbins [00:58:39]:

You know? And and second off, they they might tell you something that’s Actually material. You know? It’s like, I haven’t thought of that. Will you address this? Right. Right? But also, I mean, Matt, there’s one situation where A product ended up getting named after the person’s family, and that closed the deal. Yeah. So it’s the same thing as the sales process that you pointed out. What’s in it for them? Obviously, you don’t wanna breach, you know, anti kickback or do something, you know, fraudulent or wrong or misrepresentation. But, You know, sometimes it’s a way to work through a naysayer by learning exactly what it is that you need to do or say for them to make the business deal happen, And that ends it on a real positive note.

Matt Bailey [00:59:22]:

Absolutely. Love it, Mike. Love it. I listener, I have got to tell you, dear listener, if you are a business owner, If you are thinking about being an entrepreneur, pick up this book. The amount of information in here, you know, I even read it as, you know, I I I I call my I’m a 3 time entrepreneur, and I was still you know, and I’ve known Mike for years, but, you know, some of those stories I’ve heard, but still to To see it, the frameworks, invaluable stuff. You can’t get enough coaching when you are, you know, working on your own business. So Mike, thank you.

Michael Stebbins [00:59:56]:

What you’re already doing. I mean, there’s a lot of folks who a lot of the LinkedIn messages that I’m getting, Matt, are like, They start with dude, which I always love that. Yeah.

Matt Bailey [01:00:05]:

Right. Right. Right.

Michael Stebbins [01:00:07]:

You named my favorite band. But asides From that, you validated what I’m doing, and now I have more confidence. Absolutely. Absolutely. To surge ahead. And I’m like, That oh, it makes me feel so good to get those. So Absolutely. Meter, by the way.

Michael Stebbins [01:00:21]:

Send that in. I love feel for the next one.

Matt Bailey [01:00:25]:

Well, we’ll put all your contact information on the show page. So listener, if you’d like to contact Mike, I highly recommend connecting on LinkedIn. You know, learn more about Mike’s giving away free wisdom, so take advantage of it. Mike, thank you so much for making time to be on the show. I really appreciate it. Pleasure.

Michael Stebbins [01:00:44]:

Yep.

Matt Bailey [01:00:45]:

Alright. And dear listener, as always, We’ve got the show page. There’s gonna be a lot of resources there from this show, so I highly recommend you go there and check them out. And as always, I look forward to our next coffee and conversation on the Endless Coffee