Ep. #851 - How to Maximize A Business Exit

00:00.00
mattdecoursey
And we’re back back for another episode of startup huetle. I’m your host Matt DeCoursey along with Matt Watson hi Matt I’m gonna start a new business I know I know yeah, it’s been a few years and you know the one that we have full scale io that’s just.

00:06.45
Matt Watson
What’s going on man. It’s about time I think you’re due.

00:19.70
mattdecoursey
Breaking records and has several hundreds and ah several hundred employees just isn’t enough to keep me busy. So yeah I think I’m gonna start something new I’m not really sure what yet. So I thought I would put together a checklist. Right? So when I’m ready I’m going to know I’m going to know I got to do this I got to do that. Maybe don’t do this to a little bit more here a little less there and you know the checklist is probably going to help me out. What do you think.

00:41.44
Matt Watson
Um, ah sounds like ah yeah I mean it’s good to be prepared ready to go.

00:45.78
mattdecoursey
Ah, prior proper planning prevents poor performance Matt so we do know that and you know I’m ready to share the checklist with you. But first I have a question Matt are you thinking about starting a new business or expanding a current one because if you are then it’s important to get set up.

01:00.26
Matt Watson
Yes.

01:05.14
mattdecoursey
And maintain properly. That’s exactly what the folks at universal registered agents. Do they do Lsc’s scorp ccorps not nonprofits Matt no problem. You can learn more by clicking the universal registered agents link and the show notes and you know what? that’s on my checklist getting someone to help you.

01:21.15
Matt Watson
I was going to say it’s got to be high on the checklist.

01:24.65
mattdecoursey
Yeah, yeah, but getting people to set up a business properly for you all right? So Matt before we get into the checklist I’m gonna um I need you to sit down for a second because I need to tell you the truth about a couple things. Are you ready starting a business.

01:27.56
Matt Watson
Yes.

01:40.92
Matt Watson
I’m ready give me give me the real truth.

01:44.25
mattdecoursey
Starting a business is difficult. It’s not going to be easy. You’re going to have days where you’re going to regret that you even did it and you’re going to want to quit and regardless of how awesome my checklist is today. You still have a greater chance of failing. At your new business then you do it succeeding? Do you accept these risks. Please check this box and sign your name here if you do.

02:04.17
Matt Watson
But you just said universal registered agents made it easy I.

02:08.12
mattdecoursey
They do make it easy to set up the business but they do. They don’t come they they don’t come and make it successful for you I know I know I know I have one of those 2 I’ve been like so I hit it several times a day but it doesn’t do anything other than like make a sound.

02:15.10
Matt Watson
Oh shit I Thought that was the easy button.

02:26.18
Matt Watson
Business is hard man and um I just interviewed somebody for my you know weekly show startup puzzle show that ah is a publicly traded company now and ah, they’re still struggling and losing millions of dollars and it’s like I asked him I’m like.

02:27.96
mattdecoursey
Think the batteries are dead too.

02:36.62
mattdecoursey
Wow! yeah.

02:44.51
Matt Watson
You know he was talking about how much for grind it was it’ been like Eight or nine years and it was a total grind I’m like well you you know feel like you get to a place you know you always have challenges in business but you get to place where eventually it just becomes a lot of fun and you scale and grow it and he’s like no, not really oh, it’s like okay.

02:56.69
mattdecoursey
Oh well, you know? well but I disagree with that because like I’m at we’re at that phase with full scale like it was a dog. It was a dog fight and you know like four years later half of it’s through a pandemic and then we’re coming out of that and you know there’s days. At your business that you love it and there’s days that you hate it and you know but I mean really in the end if you’re going to start a new business. You just got to know what you’re getting yourself into which is kind of the reason we started the show right.

03:25.34
Matt Watson
Absolutely and it’s definitely the first couple years of the hardest part by by far.

03:29.13
mattdecoursey
Yeah yep, and that’s why that that basic you know, checklist now look before we get into the whole checklist. So this is kind of the first item but it’s not even the first item but well maybe it is this shows you how much I’ve planned for. Creating a basic plan now you and I are both. We have love hates with plans because you got to have a plan. But if all you do is write your plan then you’re never going to get out and actually work the plan because the real truth is is really in the end. The plan is actually wrong. No matter how well you do at it because you don’t have a crystal ball and you can’t tell what’s going to happen in the future.

04:10.56
Matt Watson
Are you saying people don’t read business plans.

04:16.20
mattdecoursey
Im saying people write them I say Investors don’t usually read them unless they’re finally sold on what you do? How you do it and who you are.

04:22.20
Matt Watson
Usually a ah the the simpler the plan the better and you’re absolutely right? It doesn’t matter what your plan is. It’s that’s wrong, but taking the time and having the force the forethought to make a plan is what’s important.

04:28.79
mattdecoursey
Yeah, and you know. Yeah, just so you don’t just just jump in with having no idea about what you’re going to want to do and how you’re going to do it because sometimes you know me and I’ve had done a lot of different things as an entrepreneur I’ve invested in a lot of different businesses consulted with them worked with them done a whole bunch of different stuff and. You know there’s been a lot of things that I mean have you had something in the past you’re like you know what? this is a great idea and then once you put the pencil to the paper you’re like and maybe it’s not.

04:59.90
Matt Watson
Well everything sounds like a great idea at first right and and that’s why you always see you know your your aunt your uncle your brother your cousin whoever that always have all these ideas but they never do any of them right? like all the ideas sound great. But then when you you sit down you start working on it. You’re like man who’s gonna buy this.

05:03.53
mattdecoursey
Yeah.

05:19.88
Matt Watson
Am I gonna sell this to like how am I gonna build it I don’t have any money ah shit never mind back to watching Netflix.

05:26.29
mattdecoursey
Um, I’m pretty sure ah I’m pretty sure I was watching a children’s soccer practice with you yesterday and one of the other kids’ parents pitched you on an idea and I literally said I literally said that’s not a very good pitch. It doesn’t sound.

05:35.61
Matt Watson
Yeah, they told.

05:44.21
mattdecoursey
Have a plan. Yeah, it’s it’s it’s like hey I got an idea to do a bunch of stuff. What do you think? are you and that’s not a plan. Yeah, totally yeah.

05:49.30
Matt Watson
Well and that’s I mean and now he is a business owner to his defense right? and and he has He has a successful business but he’s always like he said he’s like I always got all these ideas. He’s like it’s almost do with any of them.

06:01.84
mattdecoursey
Yeahp Yeah, so you get a refine a little bit. You know you can start like so whether whether you want to put a title on it or not like creating a basic executive summary about your business is what. You’re just going to list the opportunities your goals and the growth opportunities like what are we going to do and this is often as simple as what’s the problem and what solution do we have and I think that one of the things that we’ve always acknowledged on startup hustle is that. If your business isn’t solving a problem. You probably don’t have a very valuable business.

06:34.82
Matt Watson
I’m going to start a business selling tutos to little girls soccer teams.

06:38.00
mattdecoursey
Well, there was a a kid that wore that. But that’s not a real problem though. So you’re not gonna have much of a market now not going have much of a market. In fact, Yeah, yeah, yeah, so but but yeah with that you mean.

06:43.97
Matt Watson
It’s not damn it. They were cute though.

06:54.37
mattdecoursey
Why why does solving a problem make something valuable.

06:57.34
Matt Watson
Well, the the the more money people will pay to solve the problem right? There’s got to be an roi and whatever it is your business is and can it be simple like I need some made them on my grass I will base made to do it. There’s a business there come moment for me right? It can be a simple business doesn’t have to be complicated.

07:14.49
mattdecoursey
Yep now with that you talk about growth, opportunities and different stuff if you mow grass and you’re 1 person you can only mow so many yards. So if you so you’re gonna yeah.

07:23.91
Matt Watson
That’s it maybe your executive summary. Yeah maybe your executive summary should be like you know what? I’m gonna go find the largest business campus in town and get a big commercial account and I want to need like 20 people to mow this big damn thing.

07:39.23
mattdecoursey
But yep, yep, so you know with that. You’re also going to describe your company and you know you want to do a little bit of of market viability testing meaning you know, kind of.

07:40.81
Matt Watson
Right? That’s a different business plan.

07:52.86
mattdecoursey
If 1 more person tells me that they have an idea and they don’t have any competition and I go on Google and find that they not only have competition but a lot of it I’m going to honestly I’m going to beat myself with that business plan because there’s competition everywhere and you know while. It’s great. You’d be like I’m the only person that does it in 2022 if you’re the only person that does it. You also might want to examine whether or not there’s even a market for it because there’s very well. There’s a very There’s very few things that people haven’t tried or aren’t doing like.

08:19.20
Matt Watson
That means a lot of people have failed.

08:28.30
mattdecoursey
You could make a valid case for the fact that that having and a quote original idea is is pretty Tough. You know I mean we’ve got all of Humanity. The the history of all of humanity to come up with you know solutions and you know when tech was booming and really. Changing a lot of stuff you know, maybe things that would be unique now are things that are still Emerging. You look at like metaverse or blockchain or certain things that you know people haven’t thought of but if you think you have like a simple service or a product business. Someone might have already made it.

09:00.29
Matt Watson
Well a lot of times. There’s things that come in kind of big like ah market waves for example, like take electric cars As an example, right? It’s like because electric cars were created while all these other businesses around to get created like selling.

09:09.20
mattdecoursey
Me.

09:16.34
mattdecoursey
True.

09:16.51
Matt Watson
Home installation of electric charging equipment or battery technology or all these different things right? So you know my last business stackfi was kind of that way. It’s like there’s a wave of the cloud and devops and and different things. It’s like we’re writing that wave and we’re like 1 of a bunch of people. As part of this big wave right? So um, in in the us right now you know you talk about sports or something it could be like lacrosse lacrosse is the biggest up and coming thing so and be selling lacrosse equipment to big opportunity right now I don’t know but things come in waves like that and if you can catch some of those waves and probably marijuana would be 1 of those big waves right now. You can make a lot of money.

09:54.29
mattdecoursey
Yeah, but but the thing is is you want to know who you’re competing with what the market is how hard it is to enter it. How hard it is to stay in it get some idea of how future competitors are going to react to your entrance to it because.

09:59.61
Matt Watson
Yep.

10:08.66
mattdecoursey
You know sometimes you can enter a market space and if someone else is more established and they just under they undercut you by a dollar then you’re going to have a hard time making a sale. You know you have to where are you providing value and in certain cases like there’s been so much emphasis on supply chain stuff like you know. A lot of people make a great product and then have just no real ability to get it in front of buyers’ eyes and you know certain things like Amazon have made some of that a little bit easier and a little more scalable because you’ll have the ability to you know, deliver everywhere and a lot of that. But I mean the thing about how are you going to do it. And how are you going to handle it if things go well.

10:47.66
Matt Watson
People never plan for what to do if things go well.

10:52.76
mattdecoursey
Isn’t it amazing like the I mean the well but at the same time entrepreneurs are wildly optimistic and expect that they’re going to have things go well but then are often unprepared when when it does so you know? Okay, so Matt back to this checklist. I got a checklist inside the checklist are you ready better better faster or cheaper. You’re gonna have your business needs to in my opinion do 2 of those 3 things better than those that you’re gonna compete with if you want to have an advantage.

11:13.18
Matt Watson
I’m ready.

11:26.31
Matt Watson
And it can’t be just a little bit better right? like it. It can’t be like 10% cheaper like I’m not gonna go through the hassle of changing like who mows my yard cause you’re 10% cheaper like it’s just not worth the hassle right? like.

11:40.90
mattdecoursey
Right.

11:41.92
Matt Watson
It’s got to be a lot better. A lot faster a lot cheaper. It’s got to be significant if you’re going to get in.

11:46.97
mattdecoursey
And when when we did our when we did our series about how to start a tech company I can’t even remember what episode it was but we talked specifically about this because we had some actual research that said like you had to almost be like twice as cheap to get someone to unstick themselves from an existing thing. Because it’s just like people I mean people don’t really care and also once people get used to using a specific product like whether they like it or not they often just don’t want to learn how to do something new or use something new. Yeah.

12:15.93
Matt Watson
Well, it’s the risk and it’s risk right? like you know the guy that most my yard he’s okay I like it I’m used to it. He does a good job if I switch who the hell knows.

12:25.31
mattdecoursey
But how much better is the next guy going to do it? Yeah yeah, right.

12:29.78
Matt Watson
Well maybe it does it way worse like I’m happy with what I got you know like why would I take the risk of trying to save ten bucks and then then I have all these problems like it’s just not worth the risk. No I don’t care I don’t care.

12:38.58
mattdecoursey
And and do you care if he mows it faster because I wouldn’t I don’t care as long as you mow it take it. You don’t care if you do it in 2 minutes or 2 hours so then then it’s got to be cheaper and then you even said if it’s just few bucks cheaper. It’s like yeah I got other things to do then hook that up.

12:47.64
Matt Watson
Yeah I mean.

12:56.95
Matt Watson
It’s not worth the risk.

12:58.58
mattdecoursey
You know one thing that that I want to advise you if you’re starting a new business and your your so your home model is based on being the cheapest you’re gonna have shitty customers and clients too because the people that are there for the cheapest aren’t the greatest clients. So I’m not a big fan I’m not a big fan of cheaper.

13:11.44
Matt Watson
Well and and there’s a huge perception and value right? Like if if I go to buy a product like let’s say it’s for business right for business if I’m buying something that’s a hundred bucks a month two hundred bucks a month. That’s not a lot of money. And and then if I find one that’s twenty bucks a month. They’d be like why is this thing so cheap like it must be like a piece of shit. Why would I buy that thing everybody else is $200 like oh gladly the pay $200 is no big deal. That’s like when it cost me to take a couple guys out for lunch for a business meeting. Why would I care. It’s two hundred bucks

13:34.19
mattdecoursey
Yep.

13:40.89
mattdecoursey
Where do you where do you take people out to lunch dude two hundred bucks you’ve never taken me out to a $200 lunch I’m gonna take you up on that.

13:45.44
Matt Watson
Yeah, well you know it it adds up well sometimes now but but point being like there’s a perception of value of things right? like. If things seem cheap like they’re like ah thing I don’t know about this. It seems too cheap.

14:03.87
mattdecoursey
Yeah, so all right? So So with the market and analysis like hey look you don’t want to mess this up because if you’re way off, you’re you’re going to find yourself and yeah, yeah, have a big problem and when it comes to products too like I think a lot of people don’t realize this like. A lot of shelf space and a lot of stores and a lot of retailers is basically controlled by the people who already have products on it like you know like food vendors and and distributors actually pay grocery stores to know that they’re going to have the end cap and some other stuff and. You know that’s the it’s the same way with with a lot of retail products. So If you just think you’re going to make a similar product and slide it into some mega retailer or whatever like you might find some heavy heavy resistance. So another thing too and this is often hard to do in the earliest stages is who’s your target buyer. So like you know whether it’s ah whether you’re whatever it is that you sell or people. Yeah who who is the target because if you if you’re like oh anybody could use this well then the problem is is you’re gonna have to figure out how to market and advertise to anybody which means like that’s like you’ve got a lot of impressions.

15:10.27
Matt Watson
Yeah, you got to get a more focused audience.

15:11.44
mattdecoursey
Make and you’re not very, you’re not very specific. Yeah, so so I you know that’s so all right? So with all this you got less your competition that now the longer that less gets I mean then it’s kind of the bigger Hell you got to climb.

15:27.88
Matt Watson
So I somebody told me the other day that’s like most markets are are controlled. You want to know who like who controls like 70% of the market share right? So for example, if you were talking about cell phones. You’d have like Apple and Android combined or like 90% or something. But. If you’re looking in and a different industry where’re like wow to get to that 70%. You’d have to have a list of like 20 names is like there’s not anybody who really controls the market then so you want to think about like who can you know how many names does it take to get to like 70% and if it’s a whole lot of names then you don’t have any 1 dominant player in that industry. But if you got 2 or 3 and most industries there are you got Pepsi Coke whatever right like it. It only takes 2 or 3 to get to that kind of 70% number that was an interesting rule of thumb to know.

16:14.39
mattdecoursey
Yeah, so well Jack Welsh the former Ceo of Ge was really famous for having sold all of the divisions of Ge that were third place or lower in their industry. So like the kind of the rule effemin with they’ll teach at business school is if you’re not first or second.

16:25.29
Matt Watson
Yeah, yeah.

16:33.28
mattdecoursey
Then you’re struggling and you know what you were talking about all right Matt named 3 brands of razor blades.

16:41.50
Matt Watson
Chick Gillette Harries

16:42.73
mattdecoursey
Well Harry’s is in there now but Schick and Gillette are a good example because that’s the 2 and they own 97% or more of the market which by the way is known as an oligopoly. So but it’s very hard to break into those things now Harry’s or like dollar shave club or some of those other things came along and tried to disrupt that because but but they are purely based on hey we’re cheaper right? So you know you’re going to find 1 or the other. So all right? So these are some of the things you got to do like just.

17:00.85
Matt Watson
And.

17:15.30
mattdecoursey
Before you even get into the the you know talk about a new business checklist now I’m going to save us a bunch of conversation I’m going to say if you’re looking for commentary about like setting up a business entity or things or like ah the other kind of basic structural things to avoid I want you to go back to the episode. That I published on may second with Melody Ashby and we talked about setting up a business entity and then we had another one called shit you shouldn’t do and starting a business that’s me and Tricia Meyer she’s an attorney and we talked about some of the more structural things. So but Matt and I are and are not. We are not attorneys accountants or well I don’t really have any professional licenses to you I’m just kind of a guy talking to a microphone right now now that I think about it. Yeah yeah, yeah, well.

17:56.79
Matt Watson
Um, I’ve I’ve played all of them on Tv but I don’t have a license any of them.

18:08.34
mattdecoursey
You know it’s okay, Matt because you know while setting up a new business and maintaining compliance isn’t easy. That’s why it’s important to get expert help and along the way that’s exactly what you’ll find when you visit the universal registeredagents dot com site. That’s a long domain just go down to the show notes and click it. They will help you get all of your business set up and even offer maintenance needs. They can help you set up an lllc a corporation or nonprofits wherever you’re located once again I had some other episodes about those those are like a whole nother topic that we’re not even going to get into today so they can also help you set up. You know, pretty much anything you need but getting the right kind of entity is important and that’s what they do at http://universalregisteredagents.com they can help you with registered agent services and a wide variety corporate services as well as meeting the needs of independent directors. Do you know that you get 20% off when you use the code startup. Ah, you just click the link in our show notes and you’ll learn more 20%. It’s ah it’s 20% of the $200 lunches. You’ve been taking people to is forty bucks so I’ll just take the forty just send the 40 over.

19:14.97
Matt Watson
I I need to expense those by the way.

19:18.73
mattdecoursey
At which at the company we own together or the podcast or like somewhere else just anywhere anywhere you get Okay, okay, sure totally kind of feel like they should be paying us at lunch.

19:21.60
Matt Watson
Yeah, yeah, yeah I mean I was meeting podcast guests. Potentially they were like Highfalutin you know and I yeah had to take them out someplace nice. And yeah, yeah.

19:36.43
Matt Watson
Maybe maybe.

19:38.11
mattdecoursey
That true I mean we we do let we do. Ah we do broadcast your message to people last year and 2021 181 countries who are you people? yeah. Talked to several of them this week I have they went to fullscale io and filled out the get started page. We talked about technology and all kinds of stuff. Man. Yeah, so okay, so now we we know we want to sell some stuff. We went back and listen to the other episodes about a business entity. You know like I said that’s a whole nother topic but hey a great idea and a great product. Really don’t mean shit if you don’t have a plan for sales and marketing.

20:18.40
Matt Watson
Got to have a go to Market Strategy or or otherwise you’ve just got an idea and a product that nobody knows about.

20:23.58
mattdecoursey
Yeah, and you know another thing too and like we we like to share real life stories. So like 1 of the things at full scale that’s been a challenge for us is okay so I’m a pretty good salesperson I mean I’ve sold millions and millions and millions of dollars worth of tech services. But at some points we’ve had a hard time finding other people that were good at that which limit it can limit your growth and can limit a lot of stuff so when you talk about sales and marketing plans I’m of the believer that if you’re the Ceo and the founder you you do need to be the best person at selling it. But you also have to have a plan for getting past that. Because if you’re going to. You know all you can do is all you can do so you know sales and marketing in that plan is something that too many businesses wait too long to figure out they’re like we’re building a product. Okay, that’s awesome, but how are you going to sell it and if you wait until the product’s fully built and then you’re trying to figure out sales and marketing. Honestly, you’re gonna and you’re gonna be fucked because there’s it’s just it is so it’s so difficult to dial this in in the beginning like unless okay so you mentioned earlier you want to start a business that does tutus for for little girls playing soccer. That’s a pretty exact market. But then when you start to look at it. You’re like holy shit. There’s. They’re in every state they’re in every city. They’re all over how you’re going to reach them how you going to distribute it are you’re going to sell through you’re going to do it through a distributor you’re going to do online. You can do in stores you’re going to go to soccer practices as as hell there like because here’s the thing last time I check Matt you can only be in one of those places. Time yourself.

21:57.66
Matt Watson
Well and and you’re absolutely right? and I think a lot of times to your point people build a product and then they figure out how they’re gonna sell it and who they’re gonna sell it to which a lot of times it needs to be the opposite right? like especially with Software. You’re like well am I gonna build this for like big Enterprise clients. Am I going to build it for small and medium sized businesses am I building this for consumers am I focusing on an industry where mobile is super important because all their employees are running around in the field all day like ah the the answers to those questions change Dramatically the product features. Maybe even how you bill for the.

22:35.43
mattdecoursey
And your path to revenue and your path to revenue. Yeah, the path to revenue is the hardest part like if you’re going to sell to Enterprise buyers or huge companies your path to getting putting a dollar in the bank is way rockier. It’s way more treacherous. It’s a hell of a lot longer too.

22:36.17
Matt Watson
Product and and the feature set all all that stuff changes Dramatically yeah it changes dramatically.

22:54.11
mattdecoursey
The more expensive. Whatever you’re selling us the harder. It’s going to be to make the first sale just know that so you know and then another thing too is if you’re coming right out of the gate and you’re like we’re $5000 a month. You have no clients and no users you better, you better have something that it doesn’t have a whole lot of holes in it.

22:59.00
Matt Watson
Yep.

23:13.37
mattdecoursey
Because it’s going to be hard to get people to pay for something that’s unproven that’s really expensive.

23:18.56
Matt Watson
Well and and that brings up what I mentioned earlier right? It’s all about risk like why is somebody going to choose you over choosing Ibm like nobody gets fired for hiring I Ibm right? like everybody’s heard that expression before and it’s true. You know versus taking the risk for this little.

23:27.40
mattdecoursey
Yeah, yeah.

23:35.28
Matt Watson
From this little startup I’ve never heard of and like okay you got to go back to the Ceo of your company explain to them why you fired this vendor that’s been doing a great job for all these years and now you want to hire this like random people that have no other clients and we’re going to take a big risk like there’s got to be a big. Ah, roi difference there.

23:53.53
mattdecoursey
No one gets fired for hiring full scale is what I think that I think that’s the same. No well you know, but but there’s some truth to that. So look back at our business in 4 years now we have over 250 employees

23:58.75
Matt Watson
Ah, that’s probably true.

24:08.68
mattdecoursey
Tens of millions of dollars of revenue and I’ll just sell you right now. It is so much easier to sell now than it was three point five years ago because three and a half years ago people were like how many people do you have how long have you been doing this, you know like who do you who do you have that I can call that says your service is great and you know.

24:13.73
Matt Watson
Um, yeah, right? yeah.

24:26.30
mattdecoursey
Six three and a half years ago there was 3 clients that were kind of and we were yeah, we’re figuring a lot of stuff out now but now 4 years later very refined, very targeted to the point where we actually say no to a lot of clients because they’re not a good fit for us.

24:36.27
Matt Watson
Yeah.

24:43.64
Matt Watson
Right.

24:45.43
mattdecoursey
Either we know exactly like it’s about what makes you happy and what makes you sad Matt point to the smiley face. Not the frowny face when you’re bringing in new clients or buyers.

24:53.20
Matt Watson
Well and to that point your go-tomarket strategy changes a little bit too because when you’re first starting out, you’ll take almost whatever you can get because it’s like okay we need to get the first 5 10 clients their friends and family or whatever and then once you get once you get the ball rolling then then it changes right? and then and that’s um.

24:59.60
mattdecoursey
Yep yep.

25:12.37
Matt Watson
That’s where you talk about like product market fit and and kind of getting stuck where it’s okay, it was is easy to get the like early adopters and like we got the first 10 clients or hundred clients or whatever and then we kind of get stuck like the mass market still doesn’t like understand what we do, they’re still not interested in what we do and all that kind of stuff you run into different problems. But when you first start out. You just gotta take whatever you can get.

25:33.15
mattdecoursey
Well and some of that’s also just seeing what’s a good fit like it’s okay to do that in the beginning but you know you need to you need to be aware because you’re probably going to find that a specific type of buyer User client.

25:35.86
Matt Watson
Here.

25:48.46
mattdecoursey
Is not a good fit and they and they in some cases it will cost you money to keep them as a client meaning like they put a specific strain on you or maybe you made a deal with them early before you figured out that you weren’t charging enough I mean there’s a whole lot of different stuff that can come up. So.

25:56.20
Matt Watson
Yeah.

26:06.19
mattdecoursey
Yeah I mean just but figure it out and then stick with it because ah you know we’re talking about this yesterday Matt yeah when it came to the employees we hire at full scale like so we ah we’ve had a waiting list and we have a lot of purchase orders to fill. But we’re super specific with who we hire. And and sometimes I talk to people like well why don’t you just relax your hiring standards because every time we’ve tried that in the past it was a fucking disaster right? And so know know what works for you know where you provide the best value know what? what is a good fit for you and then. Identify who those people are and get real aggressive with finding them and bringing them in because if you load up the wagon with what I just described. You’re going to have a much happier. Um, but youre you’re going to have a much happier trip down the oregon trail mat you’re not going to die of dysentery or what what are they. What were those? What else were the other things that would get you on Oregon trail. Maybe I think you usually starve remember how you’d like try to hunt for deer and you’d like hit the button. You’d see the shotgun pellets and you miss and the next thing you know that’s it game over.

27:00.63
Matt Watson
I Don’t you drown in the River is that one of them stars.

27:13.66
Matt Watson
I was at my kids school the other day and they and they made it sound like Oregon trells made a comeback like they played at school.

27:15.74
mattdecoursey
Alright, so god I hope so I was just sitting here thinking I was like why isn’t that on my Nintendo entertainment like the classic it dude I’m the guy that has like the modern gaming station and then I just play old school shit that I could just still play with the original console.

27:29.10
Matt Watson
Yep.

27:34.70
Matt Watson
Does that mean you’re officially getting old.

27:37.20
mattdecoursey
And why is it just punch it. Why is it just punch out now. It used to be Mike Tyson’s punch out I want I want him back on there. Okay, so ah, how many good ideas and good founders and great businesses are out there just doing nothing because they didn’t have a funding plan because I think it’s a lot.

27:54.68
Matt Watson
That’s ah, a lot. It’s hard. You know and the the guy I had a guy on um, just the other day and they built security robots which is like you know looking at today may may sound like very futuristic but.

27:56.20
mattdecoursey
Now.

28:08.62
Matt Watson
Think about it like security cameras like who doesn’t have security cameras now like 10 years now we’ll look back like who doesn’t have a security robot that runs around the parking lot and make sure this that whatever he had a great idea. He had a great idea and had no competition and he’s in Silicon Valley nobody had any interest at all in giving him any money for it.

28:09.19
mattdecoursey
Yeah.

28:16.40
mattdecoursey
They like the terminator.

28:26.51
Matt Watson
Cause it wasn’t sexy. It wasn’t cool. It wasn’t like this you know great big. You know, exciting technology idea so it was like nearly impossible for him to raise money and it took over a year to raise $1000000 and it took them probably about two and a half years to build an mvp to even get the first kind of version with king. The kinks out and and the point is it takes funding like depending on what you’re trying to do it takes money and you got to raise capital.

28:52.58
mattdecoursey
Did they model that robot after me.

28:55.30
Matt Watson
Um, now it’s a little shorter new not quite as scary as you though, it’s got more lasers than you do.

28:58.78
mattdecoursey
Probably I’d be a pretty tall robot. Yeah, that’s why I was asking because you know I Scream Security. Ah, that’s a problem we’re solving so look when it comes to when it comes to Funding. You got to raise it borrow it or have earned it and already possess it now you know what’s the right choice I don’t know I mean that’s it just really depends on you and your business. What what kind of risk you want to take like I literally started my my.

29:25.19
Matt Watson
Depends on your business.

29:33.50
mattdecoursey
The business that I wrote million dollar bedroom about I literally funded that with a stack of my friends credit cards. Yeah.

29:39.40
Matt Watson
It all depends on the business like if I’m selling tutus I can go buy some fabric today probably for fifty bucks and sew some together and I’m selling them I’m selling them this afternoon right? like but if I’m building security robots like I might need like a couple million bucks to prototype those things.

29:45.30
mattdecoursey
Might be able to sell him out. Yeah yep, yeah.

29:54.27
mattdecoursey
What about a security robot with the tutu on it. Yeah yeah, cross verticals man. Yeah I’m always thinking Matt I’m always thinking about ways to sell more stuff but you know with that.

29:58.16
Matt Watson
O I’m gonna give him that idea I’m gonna sell him the two twos. Yeah.

30:09.63
mattdecoursey
You should always be thinking about ways to sell more stuff and you should always be thinking about ways to fund your business and you know there’s a lot of stuff out there. The thing that that is rough is when you get yourself behind a lever or something happens and then you have to go out and get money and it’s way too. Expensive. And that happens to a lot of people you know like you’re talking short-term kind of things that you know carry huge interest rates and they will drag on your growth. So you know figure out how to how to do it. Um, you know we have a lot of episodes about funding companies. So look through the feed because they are. There are a lot of them. Including episode number 2 which was titled getting funded sucks I feel like we really set the pace for the subsequent 850 episodes after that one so people are like what’s your podcast about dude and I’m like it’s a.

30:51.97
Matt Watson
It sucks.

30:59.40
mattdecoursey
The reality of entrepreneurship. Oh so like all the good stuff. No, we talk about all this shitty stuff and the failures and how getting funded sucks and the truth is is. It’s easier to get money when you don’t need it than it is when you do so figure it out. Okay.

31:09.43
Matt Watson
Absolutely I’ve been through that.

31:16.89
mattdecoursey
I’m gonna I’m gonna say 2 words that when I hear them I think is the following words. Go also go through my head are usually wrong financial projections. Okay, in some cases you can be pretty well on some parts of them. You can be pretty accurate like.

31:27.30
Matt Watson
Wrong.

31:36.29
mattdecoursey
Possible expenses and things like rent and you know, utilities and whatever but at a newer business. It’s almost impossible to truly predict your future sales.

31:45.32
Matt Watson
I sat down with a guy the other day he’s got a really successful business. It’s taken him four years I’m not going to use the exact numbers. It took him 4 years to grow his business to do. Let’s say $10000000 a year in revenue and now he thinks he’s going to start a new business and do more than $10000000 with a revenue in the first year and I’m like how didn’t you learn like over the last four years how hard it was to get here I’m like you’re not going from 10 to 20 like I could see if you’re going from 10 to 20 you’re starting a whole new business doing something kind of different. You’re not gonna go from 0 to 10 in a year

32:05.96
mattdecoursey
How does that work? Yeah, yeah, yeah, yeah, yeah.

32:21.19
Matt Watson
It doesn’t matter how many times you do this shit. It’s hard and the projections were always wrong.

32:22.98
mattdecoursey
Well this is this Well this is what this is why they are always wrong, especially in the beginning now look the important thing is like without the sales. The downstream effect of the expenses after that I mean it’s pretty impactful I mean so look. Plan for look make 3 make 3 iterations of it. Do one where you sell everything in the store another one where things are just kind of like and do another one where you don’t sell shit and and just be ready like know what can could or might happen in all 3 scenarios and in that case.

32:50.33
Matt Watson
Yeah.

32:59.67
mattdecoursey
Financial projections are are pretty good now. Another thing too though is this is where is is really important for new businesses If You have a lump sum of money that you’re usually to start the business This is going to help you determine your burn rate which is how fast you’re burning through that cash before you’re broke and don’t wait till you’re broke. To fix the problem of being broke.

33:18.96
Matt Watson
And you can pretty much assume you’re going to burn a lot more money and you think a lot faster.

33:23.57
mattdecoursey
Yeah, did you know that Benjamin Franklin once said a penny saved as a penny earned well Matt decourseey later several hundred years later said saving money is making money.

33:35.52
Matt Watson
Yes, well somebody that was.

33:39.33
mattdecoursey
Do you think they’ll put me on the hundred. Um I’m going to be on the hundred dollar bill someday with like a supreme hat and like gold shoes.

33:44.18
Matt Watson
Yeah, somebody that I I had on the podcast today. He said something like for every dollar of like profit that you get you have to sell like $6 or whatever right? So it’s like if you can save a dollar in expenses. It’s like not needing to sell 6 right? like.

33:57.83
mattdecoursey
Even people don’t get this and they don’t get it. They legitimately don’t seem to understand this like.

34:02.58
Matt Watson
It’s such a profound difference. It’s such a profound difference. Yeah.

34:11.27
mattdecoursey
You know there are there are a whole lot of things that can create efficiency in your business and save money at your business and just like Matt said like you know, like hey a dollar like a dollar not spent on 1 thing. Is still worth a dollar created from selling something else now the upside of the revenue part of that is maybe whoever helped you create that dollar and revenue buys again later and again and again and again. But at the same time saving money is making money.

34:43.83
Matt Watson
The other other hard thing about financial projections is a lot of times. It’s I feel like you’re like controlling an orchestra right? It’s like well I got to hire salespeople and they’re going to sell stuff and then I’m going to make money and then I got to hire these other people to do the fulfillment and.

34:45.86
mattdecoursey
Right.

35:01.20
Matt Watson
You’re you’re always trying to balance and juggle like all your expenses The people I need to hire and and all these things kind of have to work together right? just like at full skills like I gotta hire people and then I can sell out their services but I don’t want to hire a bunch of people and I don’t sell out their services like there’s always this balancing act that goes on and it’s really different to. Difficult to forecast that stuff and it’s like you’re constantly rejuggling it on a monthly basis and that’s why we always say it’s like doesn’t matter what you forecast like it’s totally wrong.

35:22.45
mattdecoursey
Yep.

35:31.27
mattdecoursey
Yep, now there are you know one of the things that for this is we’re talking about new business stuff for those that lack experience. You’re gonna come up. We’re gonna find that there’s a whole lot of expenses that you’re gonna have that you didn’t even think about. That you don’t know about because you don’t know what you’re doing because you haven’t done it yet. Can I give you an example Matt yeah, you could have you could have dickhead employees like Watson that go to 7 martini lunches.

35:50.62
Matt Watson
That lunch that I need to ah expense.

36:00.62
Matt Watson
Ah, yes.

36:02.24
mattdecoursey
Where where he should be getting his lunch paid for but instead because he had 7 martinis. He picked up the tab and then comes and turns a receipt in. Yeah by the way I’ve got a bunch of receipts that I’m rejecting your expenses by the way. It’s actually it’s not it wouldn’t even fit in a folder. It’s like a bag.

36:17.89
Matt Watson
That’s Fine. No problem.

36:21.30
mattdecoursey
So I’m going to bring those by later. Um now but there’s a couple things so you know all right? So I remember one of the first things. The first time I had an employee I learned that you also have to pay taxes on their income. So.

36:34.38
Matt Watson
Well, they.

36:37.14
mattdecoursey
So we did those financial projections and we knew our payroll was going to be $10000 a month but because we don’t know what we’re doing yet. We didn’t realize that we would have another $800 a month in taxes this is 8%’s about what a lot of states might end up charging you. So. That can throw your number off by a whole lot that what’s 800 times 12 oh it’s almost like you just put an infinity symbol in the and that column because yeah, so right.

36:54.40
Matt Watson
Well hold on hold on what about their health insurance like that itself could be like another thousand bucks a month man. Yeah, the the fully loaded number is more like 30% or something it depends on your type of employees.

37:10.23
mattdecoursey
I go with 20 actually 20 s bent. So so there’s a thing if you do projections an easy way to kind of. There’s 2 things I do so one burden rate so that’s your taxes and some of your basic benefits and whatever. So I always put 20% on and then Matt might the ever so famous Matt de cory.

37:13.22
Matt Watson
Yeah.

37:21.41
Matt Watson
Yeah.

37:30.12
mattdecoursey
Oh shit line I literally put you’ve seen it. It’s a thing I put it on there and it’s a line item in the projections that just says oh shit and people look at that they’re like what is this I’m like it’s the oh shit line and they’re like what’s the oh shit line and it’s the oh shit I didn’t think about that. Um, so that can but that’s a buffer so look you’re way better in your planning process to over project your expenses than you are to under project them because if you overprojet them so you put the oh shit line in and look if you’re a new business like say it’s 5 % of your revenue or something. Because that’s the buffer and you know another thing too with new businesses is there’s just a stupid list stupidly long list of things you need to buy 1 time or sign up for 1 time Matt do you own a like do you own. Do you own a laser printer for our other location. Do you have that in stock. No.

38:17.97
Matt Watson
That oh shit list.

38:26.61
mattdecoursey
Okay, that’s $350 what about all the ink the paper the pens. Do you have another desk how about a chair you know it just kind of goes on and on and on and next thing you know it’s like death by a thousand tiny cuts.

38:37.44
Matt Watson
The the one that is most likely to wreck you as a counts receivable I mean how many times the history of full scale. Do we have somebody that owes us like 50 grand right? or like slow pay. Yeah I mean that’s the.

38:43.28
mattdecoursey
Ah, yeah, yeah, or no pay. We actually so well let’s talk. Let’s talk about that first I’ll use that as an example so as we started. As a service provider company. We were providing a month’s worth of services and we’d send an invoice and then we’d collect the money 15 to 30 days later and that worked for a little bit and then all of a sudden when we started stacking up clients. We realized oh wow this is not going to work. It’s not going to be sustainable because right now like we. Do almost $1000000 a month in receipts which meant if I was two months late and collecting all those well a couple things occur one I’d have to finance $2000000 worth of receipts or payables and then another thing too is you put yourself in a position of liability because. If you’re waiting that long to get paid on services already rendered people with struggling businesses or maybe lack of moral caliber in some cases, you’re not going to even know that they’re not in a healthy financial position until they already owe you a crap ton of money. Kind of like all those expense checks she turned in.

39:58.36
Matt Watson
Yeah, managing a accounts receable is always a tricky thing and it depends on the type of customers and industry. You’re dealing with and all that kind of stuff.

40:05.66
mattdecoursey
So I’m nearing the end of my checklist so you know once again, a big thank you to today’s sponsor universal registered agents. You can set up your new business and maintain all aspects of your business compliance. Their goal is to make your job easier so you can focus on what you do best running your business connect with them by visiting the link in our show notes. Don’t forget to use the code startups you get 20% off 20 met you save money and then you.

40:37.46
Matt Watson
Um, make money. It’s the same. It’s the same.

40:40.74
mattdecoursey
Correct he’s learning. He’s learning link in the show notes. Okay, so you know what? let’s let’s try something different Matt what’s something dumb you did or didn’t know about and setting up a business along the way that you look back at and you’re like wow I probably could have known that anything stand out.

40:55.51
Matt Watson
I mean I as a software you know my background is a software engineer right? I’m the product guy and I’m the guy that always struggles with like I’m going to build the product and then they will come like people will magically come by this thing where. Really you’ve you’ve got to know what your niche is and who you’re going after and how you’re going to price it and package it and build them and you know as Enterprise Account Non Enterprise account like what features matter to them like there’s so many things like that that you got to get out and talk to customers and figure out who you’re selling to so you know exactly. You know, maybe 80% of the product’s the same but you got to figure out that last 20% that it’s got to be molded to whoever your niche is and I feel like that’s a huge yeah.

41:40.44
mattdecoursey
I’ve been guilty of over ah guilty of overbuilding stuff and then you the stuff you overbuilt and you you you put it out in market and then you realize no one even cared about it anyway and you’re like Wow Okay, that’s shitty. Yeah.

41:48.50
Matt Watson
Yeah I built all this shit that nobody cares about and I totally miss these three really critical things.

41:54.98
mattdecoursey
Yeah, you know for me I think one of the things is is in the past is not getting the right kind of help early enough at the business which you know because the. A couple things can occur if you’re Bootstrapped. You’re going to want to try to do things yourself and then you start telling yourself. Well I can just do it faster if I do it myself and then you end up doing all those things and not where you end up working out the business not on the business and that’s not great. And then a lot of times. There’s just things that like little accounting practices and stuff like that now if the business grows quickly. It’s easy to kind of procrastinate getting up to speed on some of that stuff. You’re like oh we’ll catch up on it. We catch up on it next thing you know it’s like eighteen months later and you’re like shit we have to catch up on this and it doesn’t always happen quickly and. Problem is is when you want to borrow money or get an investor or so do anything and they want to look at that kind of stuff and you’re like yeah I’m look over a year behind. Yeah no, 1 ne’s giving you money. So yeah, yeah, do you think Matt.

42:56.94
Matt Watson
I have one more.

42:59.78
mattdecoursey
Is this a good check was this a good checklist you got another, you got another box.

43:01.81
Matt Watson
I think this is a great checklist. There’s 1 more thing we didn’t talk about earlier about you know when you’re estimating your potential market share that every single person does they’re like if I could get 1% of the market I will be a billionaire please don’t do that.

43:14.27
mattdecoursey
Oh God you had to go there I’m out you had to go there. You’re at the end of the show and you got to bring that one up because you know that you just opened the can of worms. Okay so I get that a lot too.

43:20.86
Matt Watson
Yeah, please please don’t do that? yeah.

43:32.22
mattdecoursey
But it’s ever 1% there was effectively just get 15% of market share I’m like dude that’s hard in like any industry like it really is and you know if like that’s your I think you should be focused on trying to put $1 in the. And the cash register that should be your first goal have have and at this and at this point we have 48% of the market share I mean is that possible.

43:51.70
Matt Watson
I just think it’s funny. That’s always the go to in every financial plan every business plan. We’re gonna get 1% of the market.

44:05.37
Matt Watson
It is possible.

44:08.37
mattdecoursey
Anyway, so hopefully this is a good list. Hopefully this give you some good advice now by the way if you want more structural details and more of a checklist related to setting up entities. Go back to the may second episode titled setting up a business entity. And then there’s the one that came out on five nine shit you shouldn’t do when you start a business which we covered a couple of those things here, but that was a little more along the lines of you know things that like protecting your intellectual property not giving away too much equity for no reason like anyway we put it put together a nice little 3 pack. Of stuff that will help you start a business so matt at at the beginning of the show I was ready to start a new one and now I’m not going to because this seems like a lot of work.

44:50.74
Matt Watson
Ah, you know I thought um universal of registered agents was going to be the easy button for all of it sounds like they’re the easy button for getting started.

44:59.48
mattdecoursey
They’re the easy button for setting it up Legally yeah but they don’t I talked to him about that a little bit I was like so do you guys do anything like where you come and do all the hard work and I get all the profit and I think they’re working on that. So just click the link in the show notes and.

45:02.42
Matt Watson
And then the hard part starts.

45:11.20
Matt Watson
Just print money.

45:14.91
mattdecoursey
Yeah, contact them and see what’s up been I think you get 20% off of that too when you use the code word startups see him at.

45:21.50
Matt Watson
See you.