Business Valuation: Why Buyers Ignore Your EBITDA Multiple - Mark Mills, OBE

Speaker A: When selling a business happens years before the business ever goes to market. Of course, the value of a company is not simply what appears in the accounts, it is what the right buyer believes that business can become.

Speaker B: And if you meet those things, so don't actually, don't concentrate on the making of the money, concentrate on giving a great service and charging accordingly. And then, as it happens, the money tends to flow afterwards. You've just got to get that focus, you've got to get it in the right order, basically. So I've got a big be in my bonnet in terms of success about being able to sell to strangers. So if you've got a good business model, you've got the focus and you can sell to strangers, you're probably going to be successful. So I think you can, you can definitely help people on the journey to be more commercial and be able to spot things. But it's a process they need to pick up and learn. If there was no recurring income, so that taught me that rule number one in your business model is it has to have some form of recurring income. So that was a massive lesson. And I said, nonsense, because we've got a buyer who's got a big operation in the north, a big operation in the south, and this can be operated in the middle of the country. And we worked out it would literally cost them 10 million pounds to open an office, build up the workforce, steal our customers, and it would take them years. So when we presented to the potential buyer, who was extremely keen to meet us, I can assure you, because they had a big strategic problem, they basically said, what's it going to take to buy the business? And in the end, we got just over £10 million.

Speaker A: You're like. Ladies and gentlemen, you once again, welcome to Kingdoms Podcast and Diary of a cfo. And today I've got with me a very important guest fighting out of the United Kingdom, McWocum. Um, madame.

Speaker B: Thank you, Adam.

Speaker A: It's. It's a bit. It's amazing to have you today. Right. I, I just did the combat sports introduction for you. Right. And of course I have to do the corporate style introduction. So please sit back while I, you know, give you your flowers. Right. While you're live. I. I love to give people their flowers while they're live because you are apparently making your mark. I love that on your background. So what is the biggest mistake a founder makes when selling a business? Happens years before the business ever goes to market. Of course. The value of a company is not simply what appears in the accounts, it is what the right buyer believes that business could become. Today, on um, the podcast, I'm joined by Mac Mills, obe entrepreneur, Visa sales advisor, non executive chairman and author of Making youg Mac. Mac has spent decades building businesses, selling businesses, and helping other entrepreneurs uncover value that is often hiding in plain sight. His own journey includes building card points from a startup into a business, generating around £100 million in annual revenue, navigating multiple exits, and learning firsthand that maximizing the value of a company requires far more than simply growing the bottom line and finding someone willing to buy it. In this conversation, we are going deep into how founders, CEOs and CFOs can build a business that buyers 10 million. We'll explore the hidden drivers of valuation. The numbers buyers really examine why founder dependency can destroy value, how to Prepare a company 18 to 30 months before an exit, and how creating competition between the right buyers can fundamentally change the outcome of a sale. We'll also unpack the human side of exiting a company you may have spent decades building and ask what AI could mean for business valuations in the years ahead. If you own, lead or advise a business that could one day be sold, this is a conversation worth paying very close attention to. Max Mills, o ve. Welcome, uh, to the show. Whoa.

Speaker B: Thank you. Thank you for such a great introduction.

Speaker A: You're welcome. So you actually trace your entrepreneurial instinct back to selling broken biscuits as a child. What did that experience teach you about seeing value that everyone else overlooks?

Speaker B: Well, it's a great question, uh, and I don't really know what drove me to do it. Sometimes I think about it. But, uh, basically our auntie worked in a factory where they gave a, uh, bags of broken biscuits every week and she used to give them to us. And I, for the life of me, couldn't figure out why I would give them away when my friends at school were happy to pay for them. So I put them into small bags and sold them in the playground and everyone was delighted. So it just was one of those things that I remember a really early age thinking, you know, this is, you know, there is demand for this product and, um, people are prepared to pay. So that just felt so logical to me. And I think that really, it literally started my entrepreneurial journey. And I pretty much paid my own way all through school and never really had to bother my parents for money because I'd always be buying and selling things and finding an angle. And I think that was a. It was good grounding in, you know, figuring out desire and need and then fulfilling it for People, Wow.

Speaker A: From, from what you said, I see that from a, uh, very, very early age you understood the concept of value proposition, value exchange. And just shortly before we started recording, I was telling you about how I have a first degree in economics, right? And I remember back in university studying economics when we were taught about the concept of money, one of the major definitions of money was that money is a store of value. And that was that definition that stuck to me. If money is a sort of value, it means I can get more money by offering people more value. Right? Because people would always offer value, you know, for perceived value. So what did you actually understand about value at that very young age that many experienced, you know, professionals still miss today?

Speaker B: I suppose it was the fact that, um, the, I mean you're talking about 8 years old, so it's diving quite deep there. It's an interesting question. I suppose it was because value was having a really unhealthy, sugary snack which wasn't available in the school because your parents tended to try and get you to eat an apple or a banana with your sandwiches. So it was perhaps that recognition that something that the value that the other kids were attributing to it was really high. That is when I literally stood in the playground and said, I've got these bags of biscuits. There was literally a crowd around me scrambling for them and thinking, that's interesting because, you know, they're only biscuits at the end of the day, but when you can't get them and you're at school and you've got your pocket money in your pocket, then you know, the match between available spending power and a proposition that's scarce or non existent. In that case in school sort of came together. So I remember having a crowd around me every Friday lunchtime because we used to get them on a Thursday evening thinking, this is just, you know, this is what people want. I remember thinking, this is what everybody wants. They want biscuits every Friday. Uh, and again, for the life of me, I can't really figure out how I figured that out necessarily. But once you've done it, it's addictive. And I say to people, the problem with business to some degree is it's addictive. Making money is addictive. Everyone who makes money likes to do it and they like to do more of it. And sometimes people say to me, oh, you perhaps shouldn't say it's addictive. That's a strong word. But I say, well, addiction comes in all forms. I do think it comes in looking after customers is addictive. Being a Great. Giving great customer service is addictive. Making money as a result of great customer service is addictive. You know, looking after your team's addictive, etc. Does that make sense?

Speaker A: It does make absolute sense. And at first I remember Conor McGregor, the Irishman, the great Irish fighter, he once said, I have an addiction for spending money, but I also have an equally healthy addiction for making more money. Yeah.

Speaker B: So it's interesting on that point, when you wind it back, it's not that difficult to make money. And sometimes people say to me, oh, you know, you make it look easy. So it is easy because to your earlier point, it's about customer service and demand anyway. And if you meet those things, so don't, I say don't concentrate on the making of the money, concentrate on giving a great service and charging accordingly. And then as it happens, the money tends to flow afterwards. You've just got to get that focus. You've got to get it in the right order, basically.

Speaker A: Mhm, mhm. And I remember something my father used to tell us, you know, ah, growing up, he used to say, don't focus on money, focus on value. Focus on adding value to yourself. Um, focus on creating value and the money will follow. I, uh, had to grow up to understand what, what the old man was saying from a very young age. But uh, you know, some of us have that natural instinct of identifying, sporting, heeding commercial value, while others do not really have that talent. Right. I see it more like charisma. Right. Because for a person like myself, I've always had this feedback of when anytime I enter into a room, people say you have this effervescence around you. Uh, somebody once told me you have a Christmas light spirit. Right. When you get into a room, Right. It just shines bright. But also some people say you can teach charisma. And I, I struggle with that personally. Right. I'm not saying it cannot be taught, but I just struggle with the concept because I seem to be that kind of, uh, person who has it naturally. But I feel like I've also sort of improved, you know, over time with experience, exposure, learning, and of course, traveling, uh, around the world. Right. But when it comes to that ability to support hidden commercial value, do you think that people can train themselves to become better at it?

Speaker B: I do, I do. Because I think the thing you can put in train processes. So like you, I agree that a lot of things are sort of, you know, you're just born that way. It's, it's nature, not nurture. But with regards to commerciality I do think that you can get people to start to think about, for example, their business model or if they're looking for an idea, to have a list of criteria which basically would discount ideas and similarly bring better ideas to the fore. So to give a real example, a number of years ago I was in business with my brother and we basically had had lots of good ideas in our opinion, and we were sort of running three or four different businesses, none of which were particularly working that well, but they were all good ideas. So we sat down and said, actually what we should do is we should take two of them and say, which is the better of the two if they were A, B, C and D? We sort of put A and B together and said, well, B's better than A. Right, let's not do A. Then we put B against C and said, well, actually B's still better than C, so we'll carry on with B and disregard C. And then we put B next to D and said, well, actually D's better than B and therefore we'll just do, uh, B. So we went from sort of four entities which weren't particularly good to one that we concentrated on. We measured against it our sort of rules for a good business model and success. And as a result we ended up with a successful business in part because we concentrated on it, so we were focused. And secondly because that was the best business model of the four opportunities that we had. So if you marry those two things, a focus and a good business model, and then you start to sell more to more people. So I've got a big be in my bonnet, uh, in terms of success about being able to sell to strangers. So if you've got a good business model, you've got the focus and you can sell to strangers, you're probably going to be successful. So I think you can, you can definitely help people on the journey to be more commercial and be able to spot things. But it's a process that they need to pick up and learn. It's not something that everybody necessarily just sort of possesses, but the fortunate few Adamolo like us probably do. So we probably don't understand why the people don't.

Speaker A: Yeah, you know, nature versus nurture conversation. I've had this conversation multiple times and I think I, I started developing interest in that conversation when I, you know, started doing courses in psychology in university. Because in my university, if you study economics, you are in the faculty of social sciences. So you have to take electives, you know, across other social sciences like your political science, sociology, Anthropology, demographic and social statistics, you know, across the board. So basically I would describe myself as a proper social scientist. So that nature versus nurture conversation has been ongoing. And I don't know if I would ever drop that conversation, but that is another podcast entirely. So we can book another episode to talk about that. But today. Yeah.

Speaker B: Ah, well, that'd be a great case study because I'm a twin and, um, we're completely different, but we were brought up in the same household, so that's why these people. It's nature, not nerd.

Speaker A: Do you know the interesting thing? I've had, I've had, you know, double guests appear on the show. So it's. It's not impossible. We can have that. We can have you and your twin. Are you guys identical or fat enough?

Speaker B: No, fraternal. We literally are, um, nothing like each other to look at. But we sound. We sound really similar. So we can fool people on the phone, but not in person. Wow.

Speaker A: Interested. Interesting. So you are going to be able to fool people on the audio podcast platforms, right? Audio streaming platforms, but the video streaming platforms, not so. Wow. Okay, that is called Bam Fam in marketing. My, uh, fractional CMO taught me that. Right. It says bamfam is a marketing term. It means booking a meeting from a, uh, meeting. So that is exactly what we are doing right now. Bamfam. We are booking a meeting from a, uh, meeting. Interesting. So, uh, back to business, actually, right? You have actually built and sold multiple businesses across those exits, right? What belief about business valuation have you actually changed your mind about over time?

Speaker B: The main one is that businesses aren't valued on just a multiple of their profit. In fact, I literally spend my life arguing with most advisors about this because they just say that, you know, in this industry, the typical multiple of EBITDA is X. And, you know, that's what you can expect. And I spend literally every transaction explaining that the businesses that I'm selling have intrinsic strategic value. And whilst the valuation is underpinned by the numbers, there is no way that that's the end of the story. And of course we can talk about things like, you know, customer concentration and founder dependency and all that good stuff, but what still, uh, absolutely wins out every time, and I have appreciated a lot more in the sort of 15 or 18 years I've been selling other people's businesses, is that if you can position that business strategically. So it's important, and it's got its own identity, potentially its own brand, its own position in the market, and you've got, um, A number of other elements, such as accelerated growth and great client acquisition processes, because that's a big value add when it comes to companies valuations. If you put those aspects together, then what happens is when you get the bids in, the bids don't resemble a multiple of the ebitda. They basically have said, we need to buy this business and this business is worth X. So I sold one a few years ago where the valuation was sort of 3 million and the accountant said, actually the value's dropped a bit because the market you're probably going to get two and a half million. And I said, nonsense, because we've got a buyer who's got a big operation in the north, a big operation in the south, and this company operated in the middle of the country and we worked out it would literally cost them 10 million pounds to open an office, build up the workforce, steal our customers and it would take them years. So when we presented to the potential buyer who was extremely keen to meet us, I can assure you, because they had a big strategic problem, they basically said, what's it going to take to buy the business? And in the end we got just over £10 million and they got a great deal because they got an accelerated amalgamation of their other businesses and they picked up some new customers they could cross sell, you know, et cetera. And the owner had a great result because he'd been previously quoted 3 million drop into 2 and a half and he'd had an offer at that that he was going to accept. Um, it was purely strategic value and I've got lots of examples. I sold a software business where the buyer had three other divisions and didn't have a healthcare software business and we had a healthcare software business. I said, they're going to pay us big money because they're ultimately going to sell their business. And it was like the fourth part of the jigsaw that they needed. They had the first three and they needed a healthcare division. So again, the numbers were good, but the valuation was based purely on the value that that was worth to the buyer.

Speaker A: Interesting. So there's usually a confusion about the concept of valuation that, uh, I want us to try to quickly address. Right. And it's interesting that I do have that accounting background, having worked with the B2 accounting firms. And interestingly, I used to, I used to lecture financial reporting and uh, corporate reporting. Right. And the accountants are, uh, view or value is slightly different from it's, it is even different from the economist's view of value. Right. Which takes into, which takes into consideration Opportunity cost. Right. And of course you have the valuation experts. Right. And the interesting thing is what an accountant sees as the value of a business is the net assets. That is you're talking about your assets, right. Minus your liabilities, right. Which gives you your equity. Right. So the net assets basically is the value on the accountant, value basically on the books, which is usually different from what the business will be sold, which is usually attributable to, you know, factors, internal external factors, especially intangible factors, right. That drive the valuation of the business. And there are two possible outcomes or theoretically three possible outcomes. Right. It's either the business is sold higher than its net assets, right. So if you're selling at higher than the net assets, that's where you're making a profit. Right. On, you know, the valuation of the company. And that difference between the net assets and the value, the sold value is called your goodwill. Right. A lot of people don't realize that businesses have goodwill, right? You, you know, the brand equity, the brand value, the good, you know, customer relations that you have your clientele base. Right. These things are not usually valued, you know, in hard coded numbers in their accounts. Then theoretically. Right. The second option, or the second possibility is you're selling the business at the exact amount of the net assets, which technically does not happen in real life. Right. And the third option is you're selling it less than the net assets. We tend to see this a lot with businesses and distress. Right. And in such a case, the difference between the net asset and the purchase value value, which is called the purchase concentration in accounting, is called a gain on back and purchase. While you are into, you know, selling businesses that have goodwill. Right. So what would you say that most founders fundamentally misunderstand about the concept of valuation?

Speaker B: The, the goodwill can be easily generated, to use your terminology, and that big buyers of companies, so big corporates, typically. It's a slightly sweeping statement, Adamola, but you'll, you'll see where I'm coming from. Big companies typically are like ocean going liners and they're very slow to move. They're not dynamic. They try and break themselves into lots of component pieces to be more dynamic. And obviously it works for some. But as a rule of thumb, um, they're not able to react quickly in markets. So as a result, a good big company, if it grows 2 to 5% a year, looks pretty good. It gives a return to its shareholders, the chief exec's keeping the ship steady, the dividend might go up slightly, et cetera.

Speaker A: Right.

Speaker B: That's really Typical. So with small entrepreneurial businesses, if you can be a business winning machine, so you start to understand how to implement processes to sell to more people, so sell more stuff to your existing customers and sell stuff to new customers. And this comes back to my selling to strangers piece. And you have a process to do that which is demonstrable. And you can say, you know, with probabilities, these are our, uh, suspects and our prospects and our customers that we're moving across the graph in terms of signing them up and these are the values that we're attributing to them. And I did this for an aerospace company a few years ago that said this will never work because it's too long a sale, uh, process. And I showed them how it worked and we signed up absolutely tons of business. In fact, they turned over 14 million. 14 million. 14 million, 24 million. And I used to say to people, can you tell when I joined? Because basically we just went through a process of customer acquisition. And um, if you bring that into your business, then bigger companies who are on acquisition trails because they can only get that 2 to 5% growth, will pay you a premium and pay for that goodwill because you're a business winning machine, A, because they want you to carry on doing that, and B, because they want to know how you do that and try and do it in the rest of their business. So I say to owners all the time, don't worry about your balance sheet and the, you know, just the ebitda. Think about the buyer. What is the buyer looking for? So I know from having been on the side of buying businesses the weed. I look at businesses every day, every week and say, that doesn't add anything. To me, that does add something. If we had that, we could do more of this. The biggest acquisition I did cost me £90 million. And most people said that was a terrible acquisition at the time. Within 12 months, everyone was hailing it as the best acquisition in the world and certainly that we'd ever done. But I knew that because I knew that the strategic value and what it did for us, it took out, uh, a big competitor.

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Speaker B: It changed the dynamic of the market. We got our supply costs down. We did better negotiations with customers because there were less people in the playing field. You know, everything. We, we refined how things were done, we learned some of their best practices, they learned, you know, we imported some of ours onto business, et cetera, et cetera. We cut loads of costs just because we had so much duplication across two similar businesses. And I knew all that going into it, so I knew it was worth paying a premium for, but it just needed some time, effort and work on it to make that happen. So I would say to owners, don't discount the fact that you've got something that big buyers want, and it's typically that ability to, to get customers, which they find really difficult to do. And you also typically operate at a lower cost than big companies, you know, so they want to understand that piece. There are all sorts of areas where owners, I say to them, just don't get hung up on the numbers. Build something. If we're going to sell it, build something for the next 12 or 18 months that someone's going to say, we have to buy that business. And the chief exec needs to be saying things like, and I don't care what it costs us, we have to buy it. And then, you know, you're on, on a winner and you'll get a competitive process and you'll get a great price.

Speaker A: Wow, amazing. I love, you know, the story you shared. And it reminds me of something, uh, somebody told me to say you are labeled as cringe until you become the blueprint. Right. So that acquisition was, was actually being criticized until it now became the blueprint. Right. And you know, looking at, looking at this podcast, the, the audience is primarily comprised of two demographics of, um, individuals, I.e. entrepreneurs, I.e. the founders and career professionals. So those are the people that you know primarily from the audience of this podcast. And the next question I, uh, have for you is basically for the advantage on the benefit of the founders. So founders in the house, please listen, you know, attentively here. What would you actually do differently if you were building another company from the scratch today?

Speaker B: What would I do differently? Well, given where. Yeah, so, so. Well, okay, so that's a good, great question. So first of all, I would. Well, I have to take you back in time slightly and then you'll understand what I'm going to say. So time travel obsession.

Speaker A: Let's go.

Speaker B: There you go. Let's do it. So I, I'm obsessed with business models. So when I had my cash machine business, which I'm, um, most well known for, basically I, uh, we were doing really well and I got a new finance director, so new cfo. Some of your audience will definitely understand this point. And I said to him on these first day in my office, we were looking out the window and I was just having like the first day I just spent with him, chatting, getting to know him, lovely guy called Robin. And I said to him, robin, I think we can take this business to 100 million of revenue and 20 million of profit. And he was the first person who said to me, okay, so gone, take me through it. And we got some paper and pens out. And I said to him, if you think about it, if it's going to take us three years and in month M36, the business would need to look like this, and, uh, mathematically it was about nine and a half million in revenue. Because obviously if you're in a growing business, that means that the month 25, in that example is going to be somewhere below 8.3. So say 7.5 to get an average of 8.33, 12 times 8.33 being one. Said, so if we want to do 9.5 million in month 36, we need to figure out how many machines we need, how many transactions each machine needs to do, at what amount of charge, how much our costs are, et cetera. So we just literally on a piece of paper went through this and said, okay, so we've got it to X number of machines doing X number of transactions, et cetera. And then we worked all the way back over the course of a couple of weeks to the present month. And that made it just an iterative process. And we've got it down to seven, lots of seven KPIs for the seven guys that worked with us. So basically, if every Guy did his seven KPIs, key performance indicators every month, so what they were measured on, then basically I'd hit my KPI. So we've got it really broken down. So in answer to your question, if I was doing it again differently, what would I do? Well, I'd have said 200 million of revenue and 40 million of profit, because actually all I needed to do was twice the numbers effectively at the beginning, and I would have had even a bigger, uh, business. So what I say to people now is literally think of like a ridiculous amount of growth, a ridiculous turnover and profit number, A, uh, ridiculous amount of cash in the bank, a ridiculous valuation and then double it and then make that your target. But importantly and probably, this is the key tip. Wrap it around a very specific time frame. So do not ever say things like in three years, we will say in. By August 1, 2029, we will be at. So it's a real date worked backwards. So it's not three years or five years, because that just moves to the right all the time. You need to agree with your team and in your head, believe it, that you will do it by a specific date. So I literally said, by month 36, which in this case was like July 3, 2006, uh, we will have done 9.35 million or whatever the number was, and we'll have done a year of 100 million. And lo and behold, we ended up doing 98.2 million of revenue. We made 19.8 million of profit. People said to me, how did you get so close to like 100 million and 20? I said, well, because we worked it out, we were within 2%.

Speaker A: You may land on the moon.

Speaker B: That's it, people. I think about landing on the moon's a good example, right? Adam Muller, I don't know if you know this, but when Neil Armstrong got out of the ship and said, uh, the spaceship and said, uh, one small step for man, one giant leap for mankind, the following thing he said was just like we rehearsed. So you've got to plan it. He didn't get out of the rocket and just sort of make something up. And he didn't like, jump out and miss the steps. Uh, they'd practiced it to within an inch of their life. So I say to people, you've just got to work it out and then do it. And then, lo and behold, it comes true, doesn't it? So that's what I'd do differently. I'd make it bigger numbers and I'd. Earlier on than I did fix dates. Rather than say three or five years, I'd work to end of month in specific years and say by September 16th on that year, I'll have done that. I did do some of that because I did say to myself, I'll be a millionaire by 30. And I worked hell for leather to get to that point. And I was just about on paper by 30, but. But, you know, it was. So that was probably my first really good goal setting, but I wish I'd done more of that early on, basically.

Speaker A: Uh, amazing, amazing. And of course, you know what you're saying actually very much aligns with the line I always use at the end of the podcast, I always tell the audience, remember, conceive, believe, strive to thrive and achieve. And that's exactly what you're saying,

Speaker B: you

Speaker A: know, believe it first. And the, the philosophy of the podcast is mindset, skill set, toolset. And I am happy that you're aligning with that. Right. You, you need to make it start from the mind. Right? It all starts from the mind. Success of failure starts from the mind. And of course, you know, uh, the rest is history. You were going to say something.

Speaker B: Yeah, no, you're right. You've got to, you've got to believe it. So if you, if you say we're the best at this, there are lots more customers we can do this for. We could do that amount of business. You know, people say to me all the time when I, when I explain this to them, they say, it's different for you. You know, we sell this thing or that thing. I say to them, see, I, I'd say mine was one of the hardest businesses to do it in because we did 100 million of revenue and our highest selling price was £1 85. So there was a lot of £1 85 volume sold 10 volume. It wasn't 10 volume off the scale. Seven million different types of transactions a month. We had a lot of moving parts and also you could get our service for free. So we always had this Damocles sword that somebody could just say, you know, I'm not using that machine anymore. I'll use the one at the road at the bank. Which didn't cost them anything. So we had to be the best on service, the highest availability, the best, marketed the best notes, believe it or not, uh, nice new notes. People like nice new notes.

Speaker A: Yeah.

Speaker B: So what I say to people is actually, uh, when somebody comes to me and they sell things that ah, are a thousand pounds each, I'm like, well, this is easy compared to £1 85. Because if you want to do a million pounds of revenue, you've only got to sell a thousand of them. I had to do, you know, thousand transactions to make another million of revenue. That's a lot of, lot of extra people going up to machines and using them. So, yeah, so I'd say to any business owner, and particularly to entrepreneurs, don't be anything other than afraid of being ambitious in what you're going to do. If, you know you're the best at something and you know there's a market for it, the main component is being able to sell more of it to more people. And uh, that's the bit That I think everybody needs to work on and um, their business model. So you've got to have a very refined business model that you know every time you do it, it's profitable whatever you do. You're not leaving anything on the side or you're not propping your business up with what you know or making your business suffer with loss leaders and things like that.

Speaker A: Nice note. Lost leaders. Lost leaders can be pain. They can be a pain in the back. But probably that's a conversation for another day. Let's talk about your book. Let's talk about your book. I love the art work of, uh, your book. And of course I cannot wait to receive a copy of your book. Right? Making your mark. And of course, what. But what a play in words, right? Making your mark, literally your name. So it talks not only about success, but also about the disasters along the way. So what failure would you say taught you the most about eventually building a, uh, high value company?

Speaker B: Yeah, so. Great question. And I, and I bizarrely love talking about the failures because what I never want people to think is that when they're out there doing in their business and they're uh, listening to this in the car, on the train or whatever that, you know, it's all really easy because I absolutely know it isn't. And I'm really happy when I can in some small way help people to a b acknowledge that they're doing a great job, but it is tough and B, that it isn't a straight line of success. So in my case, my first business, which was in payphones, which was a great business, a great business in many respects and an absolutely terrible one in others since it's uh, it's demise. But I'll explain that in a sec. Uh, was, was a really good grounding because what it, what was wrong with it was a, the business model. I'll come to that. What we were good at was selling to strangers, which taught me a lot about, you know, just selling to people. What it made me realize was that if you interrogate your model more and instill certain elements, it could have been really successful. Now, as it happened, excuse me, at the point in time, there wasn't the mechanism to be as good a business model as it would be now. So I'll tell you for why. So basically we sold payphones and we got paid. We sold them and we made a profit on selling the phone. We didn't get anything out of each phone call and had. We got a penny out of every phone call. I retired at 23 and we wouldn't be sitting on this podcast now because I'd just been Barbados living then.

Speaker A: Or Bahamas.

Speaker B: Or Bahamas, yeah, all the Bahamas. I mean, easy, but there wasn't the mechanism. So basically, when the recession came, and I'm going back, you know, quite a long time here in 1991ish, basically the phone stopped ringing. And even though we had a great product, etcetera, Nobody was buying them. So we ended up wrapping up the business. So the lessons I learned from that was a. My model was actually flawed because it just relied on us selling more and more and more of the same thing. There was no recurring income. So that taught me that rule number one in your business model is it has to have some form of recurring income. So that was a massive lesson. And the second lesson was not to trust your advisors. Because when I went in to basically dissolve that company solvently because we had some assets, we had some cash in the bank, we just wanted to get rid of it. We got really, really bad advice. And it ended up being insolvent because of all the fees and costing me money to walk away from it. Unfortunately for many advisors who've been given a very hard time by me ever since scarring at the age of 21 of bad advice from a big, you know, top four big four accountants left me with a deep.

Speaker A: My people left me with a deep.

Speaker B: Yeah, exactly. Yeah. And believe me, you know, I've dealt with them all and they're a good idea, but, well, it's okay.

Speaker A: On behalf of my colleagues, I say a very big sorry.

Speaker B: Thank you. I accept your apology. It's slightly late, but. No, you know, I. I didn't have a way around. Yeah, true. I didn't know my way around these things. So it's just one of those things that we all encounter in business. And I always say to people, you're gonna have a bad experience in business. Every year. You might lose £20, you might lose a million. There's always a bad experience. And you have to get on with it. Cause that's being in business. But what it did was it made me realize that, you know, sir, uh, when we got home, my brother and I. Cause he was in business with me at the time with this business as well. We got home and as I was walking up the stairs with a pint of milk, I dropped it, which was a disaster, because if you drop a pint of milk, you'll know it takes years to get it out of the smell out. And, uh, I said to my brother, it Never rains, it pours. But what it did was that moment in time made me really sit down and think about what had been good about the business we'd had, what hadn't worked, and what we would do differently the next time. And I then wrote out what I thought a great business would look like and that's been refined. But number one is recurring income. And again, people say to me, Adam Ola, well, hang on a m minute. Our business isn't that easy to get recurring income into. And I will challenge anybody. I've been into lots of, lots of businesses and I've figured out how to get some recurring income in. There may not be the biggest element of their income, but rain or shine, they'll have income. And if you've got that underlying strength of income regardless, then you are in a much better place when the tough times come to survive them and you're in a much better place when it comes to valuation to sell your business for more, you know, a, uh, greater value, basically.

Speaker A: I think this is actually absolutely positively super amazing because it feels like you. We're a fly on the wall. In the meetings that I've had with my team members, they definitely need to watch this because I am always shouting mrr. Monthly recurring revenue. It is very important, but a lot of people think that it is like rocket science. Uh, they, and I think a lot of people think who would be happy paying you monthly? Come on, if you offer value, people will be happy paying you monthly. So I'm really happy that you spoke about that and you aligned uh, with my philosophy about the importance of, you know, recurring revenue in any form of business. So what do you say? So let me see for like the average visas, you know, you talked about having, would I say, hacked that growth system of monthly recurring revenue. So for the founders listening to us say, or let me even use myself as an example. Right. In media or in tech, we've seen uh, a lot of monthly requiring revenue model in tech with SaaS, businesses, software as a service. Right. So you could randomly pick any business model and you know, give a creative way, practical, creative way of creating monthly recovery revenue. I think that'll be helpful for the founders listening to us.

Speaker B: Sure. So I'll give you some examples. So, and you've got corporate professionals on. So I, uh, once worked with a, a firm of surveyors and they said, oh, you know, we'd have no recurring revenue. And I said, well, let's go through your customers. And they said, oh, we work for them all the time. So how, how Long have you worked for? Well, three or four years. How much do you bill them? Well, it goes up and down, but it would typically be. I can't remember the numbers, it's a long time ago, but it said it was thousand pounds a month or £2,000amonth. And I said, well, why don't you put them on a package? Uh, and they said, oh, our recovery isn't that good because sometimes we'll do a lot more for them, but then there's other months that we don't do as much. And I said, what do they want out of it? And they said, well, they really want us on the phone all the time. They do moan a bit if we sort of bill them for every hour. So we end up just doing them an average amount, et cetera. And I was like, right, so why don't you go to them and say, let's fix a number where you have got access to us all the time, but you're going to pay us every month. So in December, when you don't ring us, you're still going to pay us, but when you're doing lots with us during the rest of the year, you're only going to pay a certain amount. You now know that you've got us on tap for X amount per month and we'll always be there. And we know that we do get our recovery of our time because in those quieter months, um, you're still going to pay us. And the guy said to me, funnily enough, we used to do that with one client. And I was like, right, so you've just argued with me that you can't get recurring income. You've actually had it in the past. And so typically people say to me, oh, yeah, we used to do that, and we don't do it anymore for some reason or another. So I, uh, then worked with some accountants. They said, oh, accountants is terrible. No one does anything recurring. And I was like, right, let's go through all the services you do. And they did payroll. So, Right, well, how many payroll do you do? Oh, we make good money from payroll, but we charge per employee and all this. I said, why don't you bandit? So if it's one to 10 employees, it's X per month, whether they've got two or 10, because it's all pretty similar. And 10 to 50, 50. And then you just go to your customers and say, these are the bands. If you fall into the next band, it goes up, but this is your fixed cost every month. Rather than trying to work out every month that it was £40 per person and it was six this month, whatever. Just like find a number that fits. So we'll charge a minimum of say £250amonth. If you've got 1 to 10, 10 to 50, it's going to be a thousand pounds a month. 50 to 250, it's 4,000amonth, whatever. And, uh, literally everybody signed up. Yeah, the odd exception. And then their monthly recurring revenue, rain or shine. So literally anything I've ever been into, I've been able to figure out, you know, a heating and plumbing business. Let's sign people with a little package for their maintenance. So it's £15 per month and will come out. But what we'll do because everyone wants to sell, that is we'll come out in September before the weather gets bad and service your boiler and will come out in March and service your boiler after the winter. So that you're not going to call us when you turn it on the 1st of October when everybody calls us because everyone's heating doesn't work on the same day because everyone turns the heating on. And so legions of examples. And you've just got to really think about and ask your customers, you know, what would look, look good for you and not often. So this is a real pillar, I think, Adamola, of how to sell a monthly subscription or recurring revenue is people like certainty. So if they know that it's going to cost me X amount to my PR firm, um, or my heating maintenance or my payroll or for my surveyor, it's X pounds per month and that's pretty fixed for the next year or two. I know where I'm at now. I know in my accounts I'm putting down x thousand per month or x 100, whatever it is. And that's not going to change. So I can use as much of it as I want. And in other months and I'm not using it, I might think it's a bit painful. But actually I know it's 3,000amonth and it's £36,000 a year. And that is how to sell it to people. Certainty, availability, great customer service. And just think of how you can could do a better job for your customers if you offered that type of service because it's going to improve your business. And let's face it, win win wins every time.

Speaker A: Win win is the best philosophy in business. That's what I always say. And you know, speaking of business, I love the fact that you have actually gone through multiple exits right Because I stand to be corrected. But this is my personal opinion. I feel like in business, the smartest business people are the ones that know when to enter and when to exit the market. Right. It's not about time in the market, it's about timing the markets. That is my personal, uh, opinion. Right. And, you know, for founders, a lot of founders really struggle with the concept of, of whether to continue, whether to exit, whether to stay. And, you know, how can founders actually distinguish between a temporary setback and evidence that the business model itself, uh, is wrong?

Speaker B: Well, if your model is robust, a setback is just a setback. So if your model's wrong, and I say this to people all the time, so if your model is actually flawed, I. E. You know, I dealt with some solicitors and they said, we don't recover our time, we do all these things for free for people basically worked out that the more they did in terms of business, the more likely they were over time to go bankrupt. So your model is wrong. Like, the more you do of this, the worse it's going to get. It's just that you can keep the balls in the air for so long. If your model's robust and what you do is profitable, there's a good market for it, you're able to sell to strangers, then a patch of poor trading is just like. It just happens. You know, when the government in the UK whacked up national insurance, everybody had a couple of quiet months because everyone was dusting themselves down, wondering what the new norm was going to look like. And it didn't matter really which industry you're in. Everyone sort of just quiet off. Then two months later, we're all back to normal. It's just that business costs us more. Well, here's a surprise. Not business is always going to cost you more and business is always going to be harder. So. So when it comes to figuring out if it's a setback or a flawed part of the model, the model's flawed. You've got to really ruthlessly interrogate your model to the point that you are very honest with yourself about how good your model is and that you don't do the thing of saying, but we do this, this for this customer, or, but we sell that at, uh, lower than the normal margin, or, but we've always done it that way. All those forgiving yourself statements are really what drain your profitability. Whereas if you've got a robust model, a quiet period is just a setback for a period of time. And to your point, which is a Good one. About when to get out again. It's an exercise I do with people. I say to people, well, how much money do you need so you can work it out? You know, if you work out that you are going to need. If you're 40 and you're going to exit, you probably need at least 10 million pounds. Because if you're going to live another 40 years, 10 million divided by 40 is 250,000 pounds a year. Can you live on 250,000 pounds? If you use up your capital, can you live on £250,000? Plus the fact you'll get some interest? So you're probably going to be able to live on £400,000 a year and not touch your capital. If you can live on £4,000 a year for the rest of your life, then 10 million after tax and fees is enough. If you're only going to get 5 million for your business at 40, well, I might have to be the one that breaks it to you. The bad news is you're going to end up working again unless you have a less interesting lifestyle than you currently have. So people sometimes say to me, you've just put me off selling. And I say, well, I don't want to persuade you to sell if it's the wrong decision. I only want to sell your business with you if it meets all of your criteria. And, um, your criteria is normally that you don't have to work again. You may want to work again, and you probably do because you're probably very good at business. Hence, hence why we're selling your business for 10 million pounds or 50 million pounds or whatever the number is, or 500 million. But you don't want to. You don't have to work again is the point. You can choose to work again on your terms. And I'm in that fortunate position now. I don't have to work, but I love what I do. And therefore it's not stressful anymore. Whereas in the years of building up, as a lot of your listeners will be, it's a bit stressful, you know, and we should acknowledge that. Uh, but actually, if you get your model right and you now have to sell to strangers and you put the effort in, it becomes less stressful because it tends to become more successful. And actually success isn't that stressful. Growth is a bit stressful. But we could come to that on another. On another topic.

Speaker A: Okay. Uh, interesting, right. You are actually very well known for talking about building a business that buyers actually want. And it's something that I very Much resonate with. I've spoken about this, yeah, very much on the podcast. I always tell people, do not sell what you want to buy only if you want to build a business wherein you are the sole customer. But if you want to build a business that caters to the public, right, you need to build a business selling something that the market wants to buy. So, so coming Bringing it home, Cat Point actually grew from a startup business into a business that generates £100 million in annual revenue. So what would you say were the few decisions that made the business generally scalable rather than simply growing bigger?

Speaker B: That's a good question. So what made it scalable was the. Here's a funny thing. It was the very poor provision of cash machines by the banks. And when I say poor, the banks would say, actually yeah, we were pretty good. Our uh, machines were available most of the time. But actually what I mean by poor in that example is they were never in the right place. So what made it scalable from our perspective was figuring out where people wanted to withdraw cash, where they needed to withdraw cash. So instead of figuring out so what banks had historically done, and again a, uh, lot of the listeners will sort of say, well that was okay, you know, because that was your business and my business is different. But what I want people to try and draw from this are the parallels to their own business. So if you think of the parallels, banks installed cash machines where bank branches were. They didn't put them where people actually wanted cash. So we put them in petrol stations. Because when you filled up your car, you might need cash for the weekend or whatever. Bear in mind, it's a few years ago, so we were a much more cash based economy. But similarly we put them in, you know, amusement parks, we put them in museums, we put them at fairs and you know, visitor attractions and motorway service stations and convenience stores. So we put them in lots of shops where, you know, you wouldn't do your weekly shop in a spa or a C store, but when you need

Speaker A: a Pasco's, Sainsbury's, but you, you know,

Speaker B: when you need, when you need some cash because you know the gardener's been, uh, or you've got to pay the milkman, you know, you go to your corner shop and there's a cash machine and you, you get out the money, it costs you a pound or £1 50, it's not the end of the world. Now if you need to get £300 out and you're really organized and you, your office in town and there's A bank nearby, you're going to use the free cash machine. So what I say to people is, I know it's a very specific example, but try and draw the parallels with your own business. And the reason, therefore we were able to scale was because we identified where people needed cash and put machines there. So it was no more scientific than that. And then behind the scenes, we were very good at operating a business model that meant that we could scale it. So we were good on process, we were good on selling to strangers, we were good on marketing the machines, we were good at publicity. And then when I say we, not me, what I did was recruited people who were really, really good at these things, far better than me, and got them into a team environment. So I can't take much or any of the credit at all. But that was what we did. We had lots of people really, really good at certain aspects. We're really good at fitting machines, we're really good at making sure they were highly available with cash, etc.

Speaker A: Etc.

Speaker B: And we're really good at spotting where people needed them. And if you put all those elements together, we knew on day one, literally on day one, that we could scale that business up. And in the end we had six and a half thousand machines, we were in three countries and we were dispensing half a billion a month. So from a thing that needn't have existed because there were already 35,000 cash machines in the UK, so why did we need any more? We proved that, uh, well, we needed them where people needed them, not where banks wanted to operate them, which was quite lazily in their own bank branches. Again, say the same thing. Not to want to keep repeating myself. You've just got to think in your own business. Whoever's listening to this, think of your own business and think of those parallels. Where can you provide your service that your competition aren't getting anywhere near you? Because you're the best at what you do and knowing that, and knowing what that customer profile looks like. So I always say to people, look at your best customers, look at your icp, look at them, look at how you acquired them, because that's really important. What did you do? Where did you meet them? What were the steps you took? Did you take them to lunch? Did you meet them at an exhibition? Did you send them a newspaper article? Did you present six times? Did you introduce them to your tech guys? Did you, whatever it was, whatever you did, do it again with the same ICPs? Because if you do that repeatedly, you will do lots of business. And if you know you're better than your competition, in our case the banks, because you are more dynamic, and I'm sure you are, whoever's listening to this, then you have got an opportunity to grow and scale your business. Uh, and the other point is, don't be afraid to scale your business, because when I said earlier about growth, that's the whole definition. When you think about business, if it's going downhill, if you know you're going bust, it's horrible, horrible, you've got to stop your business. But actually most people know what to do, which is cut costs and like be aggressive with your suppliers and, you know, span out paying people and all that stuff. It's not nice. But wouldn't you know what to do? Steady state is relatively easy because you're just doing the same year after year after year, growing a business. Of the three elements, growing steady state or going bust, growing is actually the hardest one. It literally is. So I always say to people, I don't underestimate scaling your business, but if you want to be successful, you have to scale. And if you have want to scale and be successful, there is risk involved and you have to recruit people and you have to learn how to delegate. And if you do those things, you can scale your business up. So I very quickly, in my business couldn't do everything and had to rely on other people. But that's where process and key performance indicators, et cetera, come in and, you know, creating an environment, which is a very important point to make, particularly on this podcast. Adam Elroy. I also came up with the acronym, which is People work for Fun, Achievement, Recognition, then money, in that order. So the acronym's farm. If it's no fun, they won't work with you. If they're not achieving anything, they won't work with you.

Speaker A: You.

Speaker B: If you don't say thank you and recognize them and recognize their contribution, they won't work with you. And lastly, you've got to pay them. But funny enough, pay isn't the top thing. People used to say to me all the time I could earn more money somewhere else, but I love working. It's great fun. I get loads done and you say thank you to me and give me a bonus every now and again. And therefore they'll work for you for less than they could earn elsewhere because no one wants to work somewhere where they get really well paid. But it's no fun. They don't achieve anything. And no one ever says thank you.

Speaker A: You.

Speaker B: So scaling your business, it's. There's risk involved, but calculated risk, process measurement, team building, et cetera. That's how to do it. And if you're a business owner listening to this, you owe it to the people, if you're great at what you do, to do more of it to more people. That's why I always look at it.

Speaker A: M interesting. And, you know, looking at the way you've spoken about cut points and reaching a point where the constraint was not demand any longer, but the amount of cash required to keep the thousands of cash machines stocked. So how did you rethink that working capital problem? Uh, how did you resolve it?

Speaker B: Yes, it was a really early on problem. Basically, when we had the first three machines, the typical amount in our machines was that they held £25,000. So three times 25,000, we needed £75,000 in actual cash. But the thing was, you also needed the next amount of money that was going in when you'd started to dispense that first 75,000. So we sat around and figured that we would very, very quickly run out of our own cash because there was no way we could fund 10 machines or 20 machines because we'd need a million pounds in cash. So what we did was we just sat and thought laterally about it. And what we figured out, and it was literally a sort of brainstorming session, was that somebody must have all of the cash. So we brainstormed and said, right, who takes cash? Who dispenses cash? Went through all this process and eventually figured out at the time that supermarkets took lots of cash because people basically got their pensions and family allowance and benefit payments in cash. So supermarkets, as it turned out, had too much physical cash. At the same time, post offices, where people went and got their benefits from, dispensed cash. So the post office had bought Gyro bank, as it was called then, which was the post office's sort of bank. And Gyro bank basically agreed to collect all the cash from supermarkets and then use that, uh, cash to push out through post offices. But the thing that they were was what they called note surplus, which is a problem we'd all like to have, which is they had too much physical cash because actually the supermarkets were too popular and not as many people were getting their benefits from post offices. So I went to see Jarabank in September, said, you've got too many physical notes. And they said, yes. I said, can we borrow them and pay you interest on them? So we worked at, uh, Schemeware and it's easier to use a round figure. So Basically on a Monday we would order a million pounds worth of cash from Gyrobank and they would give it To Securicor or G4SR Cash in transit people. And then on the Tuesday, that million pounds would go into our, uh, cash machines and then we would pay interest. So the interest rate 1:365, we would pay a day's interest on that million pounds. If on that day we then dispensed 100,000, the following day that 100,000 went back to Jarabank. We would only pay interest on the 900,000. So basically bank, um, said to me, how much do you think you're going to need? And I said, well, I don't know, we could end up with 50, 100 machines. It could be in the millions. And the guy said, well, I'll tell you what we'll do is we'll just leave the contract open ended, so whatever cash you need, just ask us for it. And by the end of it, as I've mentioned, we were dispensing just over 500 million a month, or about 500 million a month. That guy got promoted many times off the back of our contract because if you work out the interest on, um, 500 million a month, so 6 billion a year, that was a very lucrative piece of business for Jarabank because they were being charged to keep that money by the bank of England, the way it works. And we turned it into a profit center for them and took all of their excess cash. So we ended up being bigger than all of the building societies apart from Nationwide. In fact, we ended up running machines for some of the building societies because we were so good at it and we could do it for a lower cost. Again, when I say, when I talk to people about business, they'll say, you know, when I started that business, I never thought that building societies would actually phone up a little company in Blackpool and say, actually could you run our machines because you're better at it than us and we'll pay you to do it. So that's one of the things that so literally it was just, it was addressing the problem, brainstorming it, thinking of all the angles, then making loads of phone calls, asking loads of questions and eventually, eventually, eventually saying, actually this, could this work? And eventually, eventually, eventually somebody saying, yeah, we could do that. And then that helped. That meant we could put as many machines in as we wanted and we knew we'd always have enough cash.

Speaker A: This is quite interesting. I love how you talk about, you know, asking probing questions and also Having that think tank, it's very, very important to, to, to, to brainstorm. But also another thing I know that I appreciate, and you appreciate as well as stress testing, because you have actually mentioned it in person in this podcast already. You talked about ruthlessly interrogating your business model, right? So if a, uh, CFO and a CEO listening to us today, right, wants to, to embark on stress testing, ruthlessly interrogating their business model, what, what are the things they should look out for? Whoa.

Speaker B: Well, great question. So they should basically just sit down and say, right, who do we, our, uh, customers? How do we charge them? What do we provide for them? And when I say this, I don't mean like a glib, you know, well, we've got these customers over here. This is like a granular, uh, analysis. So take customer one. How much have we charged them in the last year? How much have we, what have we done for them? How much did we charge them? What did it cost us? Real cost, you know, what were the good bits, the bad bits? What are the bits where we forgive things, as I mentioned earlier, you know, well, we do that because we've always done it that way. Or, well, we do that because if we do that, they'll do this. And it never seems to happen. So you literally go through one by one by one and back to the icp, who is your ideal client. So when you're in there interrogating, invariably this has happened in every business I've ever been into. Adam, right, Somebody said if all of our customers were like xyz, we'd be bloody billionaires by now, right? Everyone always says that, uh, everyone's got a customer that just, yeah, you could kiss them when you see them. You don't do anything extra for them. They pay on time, they order it really straightforwardly. Everything's just runs like a well oiled machine. Everybody's always got that, uh, one right. So the thing is, you now know what your absolute best business model is. Oh, and it's profitable. They never moan about the price. You know, you couldn't nip them if you wanted to. But the point is, it can't just be luck that there's one person or one customer like that you're doing something that makes that happen. So all you've got to do then is wash that through the rest of your customers. Now people get a bit nervous when I start to talk to them about this and try to instill it because they'll say, but there's this, ah, uh, but there's that and all of it. And I go that, that's fine and there's always going to be exceptions to rule. But I'm telling you, if you want to be really successful, you know, Apple, uh, make iPhones. I know they make other stuff, but if you just use the iPhone as the example, nobody gets any more or less when they make their iPhone. It's the iPhone and it cost X and they sell it this way. You either buy it in a shop, you buy online, doesn't matter who you buy online from. It's the same price. It's the same price wherever you are and it's the same model that comes out. No one can have it, you know, with a bit an inch bigger or an inch smaller or, you know, back to front or, you know, with three cameras, not two. Doesn't work like that. Uh, they, that's what they do. And if you want it and they figured out that they're going to sell most of them to most of the people because it's right. So in your case, in your interrogation, you find that perfect customer and then what you do is you start to look through your other customers and see how close they are to the alignment of what you do best. And invariably, by the way, when you find that ideal customer from whom you're making your ideal profit, that is actually what you do best. So that's the thread that runs through it. It's not normally something that is sort of on the side. It's like, uh, that is where we are at our best is by providing that type of customer with that type of thing at that price in that manner. All the other stuff is where you've been distracted and it's grown arms and legs and you rue the day, because you probably started off doing exactly what you're still doing for that customer, or that's what you've started to do because you started somewhere else, but that's where you've wanted to end up. So to CEOs and CFOs, you just need to do that exercise. You need to literally go through every customer, line by line and your cost base and how you operate and say, who is that number one customer? And they may not be the biggest, they aren't normally, but they're definitely the best. And how can we get our salespeople, our account managers, whoever, to go and see our customers and say, you know, we do all this other stuff for you, it doesn't really work for us. You know, we need to change this, we need to do this. We do this really well, we think we can do this better for you than anybody else. Our other customers that we do it for love us doing this. Our, uh, customers, where we do all these other things from, like, you probably don't really enjoy the best service we could give you. And that's the exercise you've got to go through. And as I say, success involves a level of bravery and going and talking to customers and explaining that, uh, you know, we're not doing the best job that we could for you because we'd rather do. This is a bravery thing, but it's worth doing because that's how you become more successful.

Speaker A: Successful. I very much appreciate what you have, you know, analyzed. Right. And it's sort of, when I say, inspiring some intrusive thoughts for me. Right? Because speaking of drawing parallels, by the way, I love to draw, draw, uh, parallels. And I very much appreciate you talking on train parallels, of course. It's very, very important, right. In what I say, achieving your objectives across different domains. I started out as an economist, for example. Right. I studied economics. Right. Or became a chartered accountant. Worked with a lot of people. Don't realize that. I actually worked with an international ngo. I started in, you know, the charity development space first before getting into the big core, then now doing my own thing. But one thing I've seen with Parallels is, is there are always transferable skills from whatever it is that you're doing, right. So I left finance to do tech and now media. Right. But the analytical skills from Finance actually does help in tech. It does help in media. And of course, speaking, speaking of media, by the way, right before we started the podcast, I broke the announcement to you. Diary of a CFO got promoted today to top 2.5% in the world. And speaking of Parallels, thank you very much. Thank you. That's a big milestone.

Speaker B: That's amazing.

Speaker A: Thank you very much. Thank you. Speaking of Parallels, right. I basically brought the, the data junkie mindset from finance, right. Being an auditor, being a beautiful auditor, into media. Right. A lot of people ask me, how are you climbing the global rankings? It's simple distribution, right. We are not just on YouTube or Spotify, Apple podcasts, Amazon Music. We are, I think the last time I checked, we are on more than 30 different platforms. Distribution, right? So basically we understand how numbers work and you bring it into another domain. Right? Right. So, like that is that about Parallels? Right. But, you know, there's something that I picked up, uh, that you spoke about in person, but I'm not going to let you go. Right. You need to please, you need to please educate the audience because the, the, the aim, the objective of this podcast is just three things, right? To educate, to inspire and to empower. Right. If we do those three things, our job is, you know, those are our KPIs, right. So speaking of educating, you talked about the importance of, uh, learning to sell to strangers, right. Rather than just relying excessively on existing relationships. Why does it really matter, especially now than ever, right, to have that skill.

Speaker B: Yeah, well, yeah. So one thing about businesses, I'm always happy to be challenged because I always say to my wife, you know, the world according to Mark Mills isn't always correct, but on this I know I'm right. So if you want to scale. So we all start in business and invariably it's contacts where we've worked before or people we know, et cetera. The thing is those people will forgive you to some degree because you're starting out in business. And we all do it. You know, somebody phones me if I know and say I'm starting in business, do my best to help them, I'll buy from them if I can. I'll, uh, you know, lend a sympathetic ear, help them in any way. But, but I'm being slightly forgiving because I'm probably not going to say to them, although if you get to know me, you'll probably say, I probably would do this and I probably have. I'm um, not really going to say. I think actually your model's a bit rubbish. In fact, I have done that in the past. Probably was a bit, but, but hi there.

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Speaker B: But the thing is, you know, probably saves me from a disaster, so. But if you want to, if you want to know if your business is really good, then you need to now to sell somebody that has no relationship with you, you, has never heard of you, hasn't got any reference points to you, that is literally out of the blue and then buys from you. And if you can do that. So A, if you can find those people, important number one. B, if you can sell to them, number Two, if you can sell to them and do that, then the outcome of that is that you have got a viable, feasible model that's replicable and scalable. So if you can't sell to strangers, then my advice is learn how to quickly. And secondly, learn how to teach other people in your organization to quickly. Because you cannot survive off the sort of daisy chain of recommendations and referrals forever. Whilst they're the best way of getting business, of course, and you should absolutely get them. Uh, any person in business, business or in sales, who at the end of every meeting doesn't say, is there anybody else you can think of that might also like what we do, that you could give my name to or give me their name for me to contact, should literally be taken out and shot. Uh, and we don't do that. Literally anyone listening to this will, will know that in the last week they've seen new customers and customers not asked that question. Change that today. Because referrals, leads, stacks of contacts, uh, are 100% the best way of getting business, but it cannot be relied upon. If you want to scale your business, you have to be able to sell to strangers. And the way to learn to do that is to read upon how to sell to people emotionally, because people buy emotionally, not logically, and then figure out a process which is really easy to do of how to identify suspects and prospects. Because you just look back to what we're saying a minute ago at, uh, your ideal customers, and particularly with AI, I mean, golden age in a sense with things like AI, you know, profile your customers and don't just go and then see their competitors because that'll get everyone's backup. But profile, you know, I had this conversation yesterday with a company and said, you know, just because you sell to them, you need somebody that sells that, uh, operates in the same way but sells a different product because they'll have the same parallels. That's a haulage company. So it's like you're selling to those people. There's going to be other people very similar, but in different, different areas of business. So if you learn how to sell to strangers and you know how to prospect and work a tracker of sales activity, you know, and, you know, all those logical steps of, you know, uh, the best customers we ever sold to, to, you know, we met them at exhibitions, they saw us, they saw us online, they took references, we did a trial with them, we took them for lunch, we sent them a newspaper article, whatever those small touch points are. They came and saw us at our premises. That's a big one. Manufacturing or, you know, even if you're a lawyer, get people, you know, if you get an interested party and you're in professional services, get them to come into offices and meet lots of people. All these things that, you know, worked really well to get your best customers, just replicate them, but with strangers, because that's where the biggest mark is. The biggest market isn't people who know you or know of you or know somebody that knows you. The biggest market is all these millions of potential customers across the world that have literally never heard of you. And you need to get busy understanding how to sell to them.

Speaker A: Them. Okay, uh, that's quite interesting. Uh, I know we are a, uh, little time left on the clock, right. And I have two more questions for you. Right. But I think I might want to wrap it into one. Right. So the elephant in the room is AI. I call AI The Elephant in the Room. And interestingly, I don't know why my initials are AI Right. I feel like my parents need to be investigated. Probably they were contacted by the aliens, you know, some 34 years ago. And I don't know the contract they had with the aliens, but, uh, come on, you guys should go invest, go investigate those people. Right, But I, I want to take pick your brain, you know, on, briefly on how AI is going to affect, you know, the landscape of business, especially for founders. And I know that you do have a framework, right, you know, for the, the whole exit thing. I know you have like a 40 step process and like a three module approach. I'd like for you to just touch on, you know, the model briefly. And yes, that is the last, uh, question that I have for you today.

Speaker B: Okay, so AI is one of those things. It's inescapable. And therefore, and every business owner knows this and every business owner is already doing it, I think, or if they're not, they're getting close to it, which is figuring out how to use it best for their business. And genuinely, I just think it really starts and ends with two things. One is improvement of your sales process and client acquisition and secondly, monitoring of the key performance indicators or metrics in your business. Because I've got clients now who've literally sat down and over the course of a month or two built a dashboard as a sales engine, linked into Companies House and other databases around the world and have got automated email campaigns going out and it's cost them literally tens of pounds rather than tens of thousands of pounds. And similarly, they've built dashboards to monitor all of the key metrics in their business that are now across their business and have got greater control over costs, customers, everything, you know, productivity, efficiency, effectiveness, much greater in real time than can be previously delivered without spending a lot of money. You know, you do wonder where people like SAT will end up after all this. So I think that in the short term the positives and the ability to leverage that power at such a low cost at the moment is something that everybody should be trying to embrace. And if, if all you do after listening to this and, and I'm sorry for some of my particularly my last comment came across as a bit of a stern, stern sort of telling of what to do. I didn't mean it to, but what I would ask everyone to do but probably did come across pretty, you know, I was getting a bit uh, animated to give me Adam Olive. But if, if my, my ask of people would be to at least look at using AI in any business to acquire customers because it can literally just chomp through so much data. Uh, whether it's just giving you a list of people who are ICPs, or it's actually contacting them or it's even ringing them or it's linking in with them, whatever it is. That to me is just, you know, such a gift that we've been given because of the low cost at the moment. Uh, but actually once you get into it, that more technical piece in the back end of your business, I think there's a lot to be said for that and within that that's going to drive your profitability, drive your valuation, make you more successful. So yeah, my 40 step process now is being reconfigured around AI but you know, that's the world we live in and rightly so and it will make business quicker. Uh, it'll make things more interesting, there'll be some casualties but actually this is a moment in time to embrace it and definitely use it for it for its good because we've never had this amount of computing power before, uh, at our uh, ah, disposal at such little cost. So you know, let's make the most of it.

Speaker A: Amazing, amazing. So I do have a tradition at the end of a podcast, right. So you have to tell me one name one person whose body of work you respect, you admire and you would love to invite to be a guest on the podcast I think would be a great feat for the podcast. So who would that person be?

Speaker B: Gosh, now I'm gonna. This may sound slightly corny, but I would, I would pick Prince William because he is a very Clever man. And whilst he's been thrust into a position, actually his moral compass is definitely from his father in the sense of things like the environment, but in the sense of humanity. He is on the money and I have a great deal of admiration for him and I think he has a body of work, but it's not that well known yet, but a bit similar to his father, King Charles. His body of work is now coming to the fore. And things like the Prince's trust, which is now the King's trust, you know, that started a long time ago and I've met lots of people who've been incredibly successful with that leg up, uh, that they were given by King Charles. But at the time, you know, these things took a lot of time to come to fruition. So at the time it was difficult for people to be able to see the advantages and the benefits to society as a whole. And I think, um, Prince William is a fast follower of that. And history will prove that. Some of the stuff he's been doing now as the heir, ah, when he's, uh, our, uh, monarch will have borne a lot of fruit, particularly over the environment, I'd say, and children and homelessness and things like that. But the environment I'd say, is front ground, centre. So Adamo, if you could get him on, I think he'd make a great guess.

Speaker A: We should, we should invite him together. We should invite him. Let's combine our powers and make it happen. So, yeah. So Prince William, if you're listening to this, respectfully, we respect your body of work with my body of work and we are inviting you to the podcast. So see you soon.

Speaker B: Wow.

Speaker A: Uh, so there we go. Down to the quick fire round. Quick questions. Five quick questions and definitely five quick answers. Are you ready to rumble?

Speaker B: I am. Hit me with it.

Speaker A: Let's go. Uh, okay, so number one is what is the single biggest valuation pillar you see?

Speaker B: Repeatedly a flawed business model and lack of preparation within that model of how to refine it. So therefore it's a drag on value and valuation.

Speaker A: Interesting. When preparation meets opportunity, we call it success. So, uh, number two, which one financial or commercial metric would you never ignore when assessing a company for sale?

Speaker B: Cash collection. So debtor days. Because turnover is. Sanity is vanity. Profit sanity. Cash is king.

Speaker A: And cash is reality.

Speaker B: Cash is reality. Collecting cash is often overlooked, but actually there's a correlation between the most successful businesses I've sold and their ability to be paid really quickly. And it's because they give a great service. Yeah. So I definitely always look at that and it drives value in the right direction.

Speaker A: Amazing. Amazing. So, number three, what is the biggest myth founders believe about selling a business?

Speaker B: That it's easy and that it can be done in six months. So it's not overly difficult, but there's a lot to it. And also people think that they'll just be able to carry on running the business and it'll all sort of happen. And that's why they employ advisors like me and accountants and lawyers. And the reality is it's pretty much as big as running your business, actually doing the transaction. Uh, and unless you've got somebody sort of coaching you through that on your side, it can take people by surprise. So the m. Myth that, uh, everyone's met somebody says, oh, yeah, we got a call on a Tuesday, and within a month we had the money and I was in the Bahamas. Yeah, that's not going to happen very often, sadly. It's more likely to be 12 to 30 months of loads of hard work and bumps and scrapes along the way.

Speaker A: Amazing. So what book is it that you have read and has impacted your life, you know, significantly, positively, that you would recommend for the founders and business owners that are listening to us today? What book would that be?

Speaker B: Okay, so I picked two, but if you only let me pick one.

Speaker A: Oliver tweet. Oliver tweets. Yeah, two. Two is allowed.

Speaker B: Yeah, let's do on a business basis. So I'm really glad that I'm only that you mentioned parallels, because this book is a great book, but you to think of it in sort of parallel terms. And it's Rich Dad, Poor dad, which you may have heard of.

Speaker A: Wow, sorry to interrupt you. Sorry to interrupt you on this one. I. I have something interesting to tell you, Rich. That Poor dad is written by Robert Kiyosaki. Right. But do you know that myself and, uh, Robert Kiyosaki have something in common?

Speaker B: No, I didn't know.

Speaker A: You know, okay. We share the same birthday. April8w. You can, you can fact check me

Speaker B: and I, I share mine with Princess Anne. So. Yeah. So, yeah. So, Richard, Rich Dad, Poor dad, you know, it's about property. But the point is that what you take away from that book in terms of business lessons, invaluable. So you, you have to sort of disregard that. It's about buying property and leverage and, you know, know, occupancy and stuff. You've just got to soak it up and then over time, people will understand why it's just a great book to read for business.

Speaker A: Okay, so how about the second book?

Speaker B: Uh, well, the second. The second book's really a life thing, which is all quite on the Western Front, which is about the First World War. And I always say to people, if everybody in the world read that book, we never have another war. So if there was a. And it's. It's sad. Sad, but it's uplifting. Uh, and it's sad, but it is such a profound piece of work and it's been made into a great film. But if you wanted a book to sort of just put down at the end and say, I'm just going to try and be a better person, that's the book. So I do think in business, again, we owe an obligation to giving a great service of being a nice person, creating employment, looking after customers, looking after our team, looking after our suppliers. So actually, it's quite congruent with business to read books like that, I think. So I like to read lots of biographies and autobiographies and books about business and business models, but I like to read stuff about human beings as well. And I think that makes you a better person.

Speaker A: Absolutely. You know, I've spoken about these very often on the podcast. I think m. Growing up, I definitely, I. I absolutely got lost in my father's library, you know, reading all that I could find, from, um, philosophy to psychology to health sciences. You know, I had. I read the work of the Nobel laureates, right? I got to discover Winston Churchill is actually a Nobel laureate. But a lot of people do not realize that Winston Churchill is actually a Nobel laureate. I don't know if he got to win the Nobel Peace Prize, but I know he won the prize for literature. Literature, because I literally read his literature. So. But looking at me today, looking at the journey, I know that all of that reading actually did help me, you know, going forward. And, you know, today, you know, interviewing the billion minds of the world like yourself, you know, it definitely is useful. So I appreciate that. I appreciate that. And the very last, last question on the pre fire round is complete this sentence. A, uh, successful exit is not just about price. It is about dash. So what would dash be?

Speaker B: Dash would be the best fit for you as the owner, uh, your team, your customers and suppliers, which gives you enough money that you don't have to work again. So it's not necessarily the best price. It's the best deal for you. And every single time it's around the. Because if it doesn't work for all the people, it's not the best deal. So I've never met a business owner yet that would Take more money and sell the team down the river as opposed to take less money and have a great experience for everybody. And that's what defines the best team deal for my money. Can I ask one thing, Adamola, though? Can I tell you a quick story before we finish? Because what I want to get across to people, if I may, is that, you know, my career has definitely been up and down. You know, there's been a lot of mistakes along the way, and I don't mind admitting them and failures, but I do think, you know, just keep trying and eventually you'll get there. And that's what I encourage people to do. But also, there have been some moments that I've really remembered, and I think. I think there were lessons to be learned from them. Uh, and one in particular I always tell the story is when we had the cash machine business, the first three cash machines dispensed £30,000 in the first 14 days. And I went home to my wife and I said, dispense £30,000 in 14 days from three machines. I've had an effect on the economy I'm not sure I had, but that's what it felt like when I got an offer for the business, which valued it at 250 million. This is six years later, uh, $250 million. I went home and I said, and I couldn't tell anybody, but I could tell my wife. And I went home and I said to her, listen, I said, I've had enough for. It's $250 million. I didn't own all of it by then, but it's still a worthwhile number, my part. And I said, you know, I've got 300 people, we've got six and a half thousand machines. We're dispensing half a billion a month. You know, we're in three countries. Like, you know, I was expecting to say something like, oh, fantastic, you're really clever. Well done. And she looked at me and she. We were standing in the kitchen and she looked at me and then she sort of turned and walked towards the kitchen window. And I thought, gosh, she's going to say something really profound. And I could literally feel my heart beating in my chest. And she looked out the kitchen window and she said, it looks like it's going to rain. Will you bring the washing in? Now? I, at this point realized that my wife was not phased by my success. And the reason I tell the story is because I say to people, uh, one absolute thing about being successful in business is to really be proud of what you do, really strive forward, but don't get ahead of yourself because we're all human. And actually that humility of knowing that actually we're all the same and we're just still trying to make a living and we're just trying to do a good job comes across to people. So I always thank my wife for sort of bringing me back to earth with a bump because I don't want to get ahead of myself. And I do think that if you don't, then when you sell to customers and when you're talking to your team and when you're dealing with suppliers and when you're dealing with your bank and your landlord and all those people, it comes across and you get further quicker if you remain a nice person, however successful you are. And you know, I'm not as successful as I'd like to be, I hope to be more successful. So, uh, and we all do. So I do think that's a good lesson for people to take away. And just know that, that it's never easy, but keep plugging away. You'll be successful. When you are successful, still be a nice person, because that's actually what it's all about. At the end of the day, I

Speaker A: feel like words are insufficient to express gratitude for that because that is amazing life advice, my friend. And from me to you, it's a very, very big thank you. I always say this, that an attitude of gratitude is good attitude. And when a person shares their time with you, they're sharing their life with you. Of course, the SI unit for measuring life is time. So thank you very much, Mac, for sharing your time and your life with me and the audience day on the podcast. So from me to you, it's, you know, immense, profound, you know, appreciation and gratitude and. Okay, I think I'm gonna add the link to your book, you know, in the description section. What is. It's available on Amazon, right? Is that correct?

Speaker B: It is by the M Mola. Listen, you've been so great with me. Let me offer this. If anybody emails me their address, I'll send them a copy, no charge. So just my email's really simple. Mark.co.uk email me, just entitle it book. I'll sign a copy, I'll send them out. I've got lots of them. So absolute, uh, pleasure to send them to you.

Speaker A: Oh, wow, amazing. So I'll, uh, just add the email. So guys, you can check the email in the description section. So over to the audience, right, you guys, you know what to do if you enjoyed today's session, right? There is a lot more yet that came from. So please do well to like to comment. Yeah. Engage and of course, share, because sharing is scary. And do not forget what I always tell you at the end, end of the podcast. Conceive, believe, strive to thrive and go achieve. Always go for something in your life. Right? So from me, it is goodbye. Okay, not goodbye yet, right? Because. Yeah. Announcements. The podcast, uh, diary of a CFO is now global top 2.5%. And of course, in the very first week of September, my first published book titled Human Led AI Powered Finance, is going to be published and is going to be on Amazon. So watch out for that as well. So for me, it is goodbye. And from the man, the myth and the legend, I'll let you do your goodbyes and a final word.

Speaker B: Thank you. Well, look, it's been an absolute honor and privilege, and your questions have been absolutely fantastic. I, uh, really hope, uh, people have taken something away from this that would make my day, if they have. So listen, I can send out as many books as people one people want to drop me a line with any questions. Always happy to help people out if they're on that journey of building a business and genuinely wish everyone great luck. Who's listening to this? You've built a great audience. It's been an absolute honor and privilege. Thank you very much, Adam Miller.

Speaker A: Uh, thank you very much, Mac Mills. Thank you. And of course, goodbye to that.