A 27-Year Business Failed Before Retirement - Here’s What Went Wrong

Speaker A: But the industry has vastly changed over two years ago now, even the last year. Tariffs, taxes, stressors, uh, venture capital, companies coming in. So there is less and less room for error. And what basically happened is this owner did not read the red flags and did not listen to, to people that were within his company advising him to cut back, get, uh, an advisor, get a business coach, whatever, and he went bankrupt. That was a death of a company. People feel if a company's been around for, oh, I made it past 10 years, they're safe and they're not. It's a very competitive atmosphere.

Speaker B: Imagine spending 27 years building a successful business only to watch it fail. As you are preparing for retirement, my guest today joins me to discuss a real world example of this unfortunate situation and what business owners can do to prevent it from happening to them. Welcome to Business Beyond. You'd the one stop hub for insights, conversations and perspectives. Business owners need to build businesses that last beyond it. Hi, I'm Sauravaziri M and a advisor in the state of California. And my guest today is coach Ellie Marshals, who has been helping owners of different businesses, especially H vac, plumbing and home service businesses, grow their net profit and unlock more owner time off. Coach. Welcome to Business Beyond.

Speaker A: You welcome, welcome. Thank you, Sarah for having me here. I appreciate it. Sure.

Speaker B: So we were talking about these unfortunate events that happened to a business owner. I know you cannot share confidential information and I know that they were not your client, but you know about the case. So I would appreciate it if you could tell us a little bit more about what exactly happened in this case.

Speaker A: Okay. What happened is we have an established H Vac company who also added on plumbing, uh, and electric services about 10 years ago. So the company was around for a while. And it is the classic business owner never really looked at his financials. And if you go back even two years ago, people were getting away with that. You know, people feel, I'm busy, I'm booked, I'm making money. And they somewhat make money to pay bills. But the industry has vastly changed over two years ago now, even the last year. Tariffs, taxes, stressors, um, venture capital, companies coming in. So there is less and less room for error. And what basically happened is this owner did not read the red flags and did not listen to people that were within his company advising him to cut back, get, uh, an advisor, get a business coach, whatever, and he went bankrupt. That was a death of a company. People feel if a company's been around for, oh, I made it past 10 years, they're safe and they're not. It's a very competitive atmosphere. Bottom line, this owner did not know his balance sheet, his profit and loss statement, and he had no net profit. And that's what I really drill into my clients.

Speaker B: Oh, my God. Uh, yeah. And I think that as more and more like we see in our industry, that a lot of private equities are buying these businesses and consolidate them. So I always say that if it makes the competition harder and harder for the existing individual businesses, even though if they have been there for a long, long time, uh, now they have to be on top of everything because they have to compete with bigger players and it gets harder and harder every day. So based on your experience, let's say that a business fails today. Is there any sign that they can detect it just a, uh, few years before that, Months before the. When can they find out? Oh, we are getting to that danger zone.

Speaker A: Well, let's start with this. Every owner has a fiduciary responsibility, and I call it that. They are the caretakers of their company. Their company is a live entity. It has to make profit. Profit or it dies. That's what I say. It has to make profit. So really, from day one, the owner has to be on top of and responsible to look at his financials. And I, uh, don't have to tell you, a lot of owners look at it maybe once a year with their accountant. They're, oh, I'm too busy, I'm too busy. No, this is their core KPIs key performance indicators. It's like, am I winning? Am I losing? So it should start at day one. It's a ritual that should. Honestly, I have people look weekly just to see what's happening. Why? Because if something starts slipping, if you look at it weekly, it's going to be a lot easier to fix than monthly or every quarter. You know, once you get to six months, one year, it's a lot harder to make up for a deficit. So that's the number one thing. The financials are the backbone, the blood of the company. So that is where they have to start. Now, the financials also show you the warning signs. And it is not just in the P and L, the profit and loss. It's also in the balance statement, which is something owners never look at and never understand. I'm not going to go into detail, but these are core pieces of your responsibility to understand and look because everything will be there. That is the last place they look. It's really true. When I talk to clients or really prospects They're I would say 90% of the time clueless. And I don't want to dump them all in a big bucket. But I'm talking about even clients that are over 25 million. So it's being very uh, regimented on looking at your financial statements and seeing because if you're not making a net profit, that's the end number in the profit and loss. That's after everything has been paid. If you're not looking at that, that is a problem. And that'll show you the warning sign. So you can, I mean I've worked with companies and turn them around depending on how gro, you know, broken they are. Um, but that's really it, that's the key to success. I'm sure you find that too.

Speaker B: It's very interesting because whenever we work with a business owner and we want to sell their business, they tell them to make sure you have good financials at least a few years before they sell. Because that is how the buyers see your business. Like for the business owners, business is a lot of thing. It's um, their legacy, it's how they communicate in the community that they are. It's, you know, how they know themselves, how people know them. But for the buyers, it's just a money making machine. It's, you know, that's how they want to see it. But based on what you see, that financials is not just important for the sell, it's important for the day to day and the survival of a business.

Speaker A: The life of it. Yes, exactly.

Speaker B: Nice. So let's go a little deeper. I um, know that when owners have the business a lot of times what happens is that in the um, business environment a lot of things change. Like for example, the wages change, the material they buy change. So isn't that the reason they need to constantly monitor their costs and you know, see the financial to decide if their current pricing work or not. Not only for the whole company, for individual services or products that they are offering to the customers, correct?

Speaker A: Oh yes. I mean even in the last month, uh, there have been so many tariffs and price increases. So um, these little increases and nuances really compound. It's not like it's just 10%, it just will start eating away. And yes, when you say wages or salary, everything is very, very competitive in that industry. So to get another tech who's really good, you might have to put in a signing bonus, you might have to pay more. But all of that pipelines and feeds into the larger picture of the health of the company. You can't invest and grow and scale. If you have a corroded base, it, it won't hold up.

Speaker B: Yeah.

Speaker A: And they either find out too late or they stretch themselves out or they take bad advice from their uncle somewhere. It's amazing. But it comes down to being very, very specific. And honestly I do, I do teach and uh, coach a lot because it all leads into it. Mindset, leadership, all of that is important but I find that really bringing them back to what is your net profit when they price? People in this industry do not know how to price. People in this economy don't know how

Speaker B: to price and they're afraid of uh, raising their prices.

Speaker A: That's yeah. And that's ridiculous. So with pricing you have to start with what net profit do you want to make in your company. This is across any industry. You don't start back that they usually do that last and hope and pray for it. And that's not the way to set prices. You have to start with this is what I want to have. And then you work backwards so you know you have that net profit built in ahead of time.

Speaker B: Mhm. Is there any specific um, like metrics like KPIs that you usually suggest business owners monitor daily or weekly and give them those red flag signs?

Speaker A: Well as I said before Sarah, I think the biggest KPI is looking really at ah, number one their bottom line financials because that'll show you the net profit, look at their revenue, um, and where all the expenses are. So it's got to go back to that for an owner, we're talking about a business owner if they're monitoring the health of the business because cost is going to be eating away at that profit, you bring it in in revenue. Then you have your materials, you have your labor and this can be in any industry. And then you have the rent, the insurance and at the end of the day you have to have cash and profit to exist as a company. That is their core KPIs. That really is the core. Um, I can't think of anything stronger. There's a zillion KPIs. M. I can go you know and get specific by industry but that I don't know if you, that would do you any good at this point.

Speaker B: So um, what are other than that? Um, one of the things that you help business owners is when a business is very dependent on the owner's instincts versus the facts. How do you see that? When, when you go to a business, what do you try to dig into to see, see if there is a Situation like that or is it really based on facts rather than the owner's instinct?

Speaker A: Okay, well, um, I say to an owner, that's how you feel, but let's look, how is it performed? So the only way that anybody in any industry can create future goals is from the past. That's how you set goals. You look at your track record, right? Like you're a horse race or anything, any kind of sports. You look at the track record and then you say, oh, okay, this is where we're at. And if I need to increase it, um, let's see where the blockage or the leaks are. Let's see what's preventing us from growing and we can work it that way. So I don't know if I answered your question properly. Was that what you wanted or am I missing something?

Speaker B: No, it's good enough. But, um, let me go over this question that, um, a lot of business owners are very busy with day to day problems. At what stage do you think that bringing somebody like you, a coach from outside could help? You know, because now you can come in and you are not involved in that day to day and you can take a look at the business from outside and guide them. Um, what are the signs that somebody can see and say, oh, I need somebody like that?

Speaker A: Well, it's usually, it's definitely at that point. It's a mindset of the owner. He realizes that he has hit a wall or she has hit a wall. They can't keep going the way they're going and they are not growing and whatever. You know, there could be a million issues. There can be a lot of their team turns over or the competition has really became very, very fierce. But uh, it really is a point where they say I'm afraid or I can't go on. Now I will say I've had clients who are doing really, really well and call me and say I'm growing. I don't know what to do because it is not in their landscape. Mhm. Uh, so there's a great, very famous book, the E. Myth Revisited by Michael Gerber. Gerber Baby Food. Think of that. So basically he says people go into business because they know their trade. In his book, it was Sarah and her pies. She knew how to bake pies. But does, uh, she know how to run a business? No, no. Most people really, I mean, it sounds easy. It's a lot more difficult, difficult and technical than you think. So that's the passion that's behind a lot of businesses. I'm sure you find that. Mhm. But then when reality hits and the door closes and it says owner and it's not operating the way they want, it could be very dysfunctional. They can have barely any systems, which is important for efficiency. That's the point where owners usually say, enough, I need help. Honestly, I wish owners would look in the mirror sooner because they can just scale so much faster and easier if they got the help they're not supposed to do. All the answers correct.

Speaker B: Great. Um, Coach Ellie, thank you so much for joining us in this episode of Business beyond you. As a last question, in Business beyond you, we are trying to focus on building businesses that last beyond the owner. What is the one, uh, suggestion you can have for the owners to do in order to achieve that?

Speaker A: Um, I would say you are not the business. Owners get very wrapped up that it's me, it's the business. No, you have a responsibility to make this company run as best as possible to make it profitable. I press profit because it means they'll live and grow. And, uh, they need to take that responsibility very seriously and do what it takes. Read books, whatever it takes to build the knowledge to compete in this very, very aggressive market.

Speaker B: Thank you so much. Tell our audience, um, how exactly you work, when they can reach out to you and how they can reach out to you.

Speaker A: Okay. I work all the time. No, I work a lot. And I'm very dedicated to my clients. I take on what they call one to one, um, private coaching clients. So I build plans for them. It's very, very tailored, very unique. To reach me, you can go to my website, www.coachellymarshall. and there are all kinds of ways. You could click a button and you can have a free business health check. That's important. It's complimentary. And I coach them for one hour and bring up what's working with their business and what they may want to improve.

Speaker B: Nice. Thank you so much. And we will add that information under the video. And, uh, I wish you the best.

Speaker A: Thank you, Sarah, for having me.