My guest today, Joel Blake, has a fascinated story about how he became an owner of a manufacturing sales company called Marketing Technologies. Before acquiring, Joel first worked for the company as an employee before he and another partner took over the business from the two retiring owners. Joel calls this model entrepreneurship through apprenticeship and it’s a major topic of our discussion. Joel also, as you can imagine, has a deep appreciation for sales and we talk extensively about how to cultivate a sales mentality and develop the ability to connect with people you’re meeting with for the first time. We also talk about his transition to being an owner and working through that process with the previous owners, how owners can prepare their business for transition, what being an owner is like after being an employee, and what he’s learned from being a parent of two young children.
I loved this episode. It’s been one of my favorite of the podcast so far and I hope you come away feeling the same. Enjoy.
Live Oak Bank – Live Oak Bank is a seasoned SBA lender focused on search funds, independent sponsors, private equity firms, and individuals looking to acquire small companies. Live Oak has closed billions of dollars in SBA financing and is actively looking to help more small company investors across the country. If you are in the process of acquiring a company or thinking about starting a search, contact Live Oak directly to start a conversation at liveoakbank.com/contactus.
Hood & Strong, LLP – Hood & Strong is a CPA firm with a long history of working with search funds and private equity firms on diligence, assurance, tax services, and more. Hood & Strong is highly skilled in working with search funds, providing quality of earnings and due diligence services during the search, along with assurance and tax services post-acquisition. They offer a unique way to approach acquisition diligence and manage costs effectively. To learn more about how Hood & Strong can help your search, acquisition, and beyond, please email one of their partners Jerry Zhou at [email protected].
Traction Capital Partners – Traction acquires companies in the Pacific Northwest with between $1-5m in EBITDA and has acquired two companies to date. Visit their website or contact one of the partners, Justin Turner, directly to learn more.
Well, thanks for joining. I’ve been looking forward to having you on here because you have a really interesting background, which you termed entrepreneurship through apprenticeship because you took over this business that you’re originally an employee for. So it’d be fascinating to hear about that, but I’d love for you to first to go over your background, and then perhaps explain a little bit of what that concept means to you.
Thanks for having me. I’m a listener of the podcast and really enjoy what you’re doing, so appreciate the opportunity to be here. So I own a manufacture sales agency called Marketing Technologies. We’re based out of Colorado. Most people aren’t familiar with our profession because it’s extremely nichey. But essentially, there’s a bunch of lower middle market manufacturers scattered all over the US that need a way to go to market across the country. If a plastic molder in Arkansas wants to find customers in Colorado, how do they do that? They can hire a direct sales rep, pay him salary, benefits, and hope that they find some customers, or they have my industry as an option, which were basically a contract outsourced sales team.
We’ve been based in the Mountain Region for about 40 years repping US-based manufacturers, and we have a long history relationships in the manufacturing community here. So we’re able to sell multiple technologies into the same companies, and our customers are basically any company that’s designing and producing physical products from medical devices to industrial equipment to aerospace and defense. So again, quite nichey, but there’s a handful of us out there, and it’s been a long running, well-performing business.
So then, how’d you get to be the owner of the business? You came in as an employee. How big was the company when you came in, and then what was your process to eventually becoming an owner of it?
So I started as a technical sales rep with the company in 2012. We only had five employees. We run pretty lean, and we cover a lot of territory. If you look at our map, it’s everything from Colorado to Arizona, Utah, even the bustling areas of Idaho and Montana. So a small company, its four sales reps, and an operations manager who’s been with us a long time doing all the non-selling functions. I came on as just the sales rep intrigued by the products we were selling. It’s a technical sale, and I’m an engineer by background, industrial engineer from Georgia Tech, and had gotten into sales a couple years before that. So for me, it wasn’t necessarily preordained that I was going to be buying this business someday. Just was intrigued by the model and the income potential.
So that was in 2012. In 2015, I was made a minority partner in the company. The company had been owned and operated by the same two partners for over 30 years. They were both older guys, baby boomers, approaching late 50s, early 60s. So they were thinking about succession planning as well. So in 2017, we started the discussion in earnest about succession planning. The older partner who was going on 65 was ready to retire, and so we started working out a deal where I would buy out his 50% of the business. But it turned out the younger partner who was late 50s, almost 60 decided he wanted to retire at the same time. So we had to find another outside partner to come in with me 50-50 on the deal.
There was enough business that I couldn’t just buy it out right by myself. I wouldn’t be able to keep the business running, keep our customers happy, and so we were fortunate to have a really solid relationship with another guy in the area that was in the same business, just working with different types of manufacturing technologies. He and I had gotten to know each other over the years and decided to buy out the business. So that was in 2018, and it’s been a wild ride since then. We’ve been able to grow revenues by almost 70% since the buyout. We were able to maintain all of our manufacturer contracts and relationships that most of them go back multiple decades. So that’s the path I took.
How did you structure the buyout of the previous two owners?
I wrote about this on Twitter recently, and people were really interested in it. Instead of a previous-earnings-focused buyout, which a lot of them in our industry are and in other industry. You often look at the company and say, “Okay. What’s the earnings been or the gross profit over the last say three years?” We’ll take an average of that, and then add a multiple to it, and that might be a purchase price that you target. Actually, since all four of us involved in the deal knew each other, and we knew how we worked, and we trusted each other, we all sat down and thought, “How do we do this that everybody benefits the best?”
If we just paid a purchase price that they based on history, and then hoped for the best going forward, and the two partners are long gone… One of them actually lives in Hawaii now. So they fly away to an island, and we’re left in the dust, and we lose our manufacturer contracts. What happens then? We’re on the hook for this full purchase price. So we started talking about how could we structure a deal that aligns our incentives better on both sides and potentially allows the previous partners to partake in the upside of the future performance of the business while de-risking us for the downside protection of the business?
So we ended up structuring it as a revenue share buyout, which had a lot of advantages. In my industry, it’s revenue share because we’re like a “revenue pretty much equals cashflow” type business. We don’t have a lot of overhead. We don’t see any products or keep any inventory. Most industries, you would look at some kind of profit share buyout rather than revenue share. But for ours, it was revenue share. We structured it over seven years. A percentage of the revenue each year goes to those partners, and that did a lot of things for us.
For us as the buyers, we didn’t have to bring a pile of cash to the table to purchase the business or take out an SBA loan. For the previous partners, they’re able to partake in the growth that we’ve been able to achieve since then. So my partner and I were lamenting the other day. We’re looking at the numbers and saying, “Oh, yeah. It’s been about 35% of the buyout period, and we’ve paid them almost 60% of what the valuation of the company was at the time.” But we’re happy to do it because the better the company does, the better position we are to write those checks. So it’s no big deal.
So are there any parameters then on the minimum or maximum total amount you paid to the previous owners from this revenue share, or is it strictly just seven years and whatever the amount is, that’s what you pay?
We did not do the floor-ceiling model. There have been companies that I’ve heard about that have done that, and I see both sides of it. In our case, for example, our largest manufacturer contract is worth around a third of our revenue. So say the two outgoing partners leave the company and that manufacturer comes to us and says, “Hey, we don’t trust you guys to take over the business. We’re parting ways,” that’s a massive blow to our revenue. So we’ve just decided as a group that the floor-ceiling model wouldn’t be needed and wouldn’t be optimal, but that’s certainly an option I’ve heard of companies doing. Yeah.
Got you. That’s a pretty impressive amount of trust you’re able to have with each other. Is that just something that you built over time with each other, or was there something with your personalities all working together that created this trust, or how did you build that over your time there?
For me, in my relationship to the previous partners, I had worked there before the buyout for over five years, so from 2012 to 2017. My partner who came in to the deal had actually known my previous partners for about 25 years. They were personal friends and industry colleagues. So there was a deep history there. So that’s one thing I try to caution people who ask me about this structure is that it’s not just going to work for everybody. You don’t walk right into the door of a business and say, “Hey, I want to take over your operation. You’re getting out there and age. Why don’t you sell to me?” It’s not that easy.
With this type of model, you really have to be entrenched in the business, learn the business, and it probably only works for certain types of industries. But I do think for a good percentage of smaller service type businesses, this model can work if you’re willing to invest the time. Now, if you’re in your 40s or 50s looking to buy a business, you might not be willing to invest that two to three-year, two to five-year apprenticeship time. But for someone in their 20s that wants to ultimately be a business owner, find a service business that they want to own for the next 25 years, it could really be a viable option.
Yeah. I was thinking about how you might replicate this strategy, and a few things would be, in my mind, difficult. So you first have the trust with the partners over a long period of time that somebody starting from zero isn’t going to have. So how would you think about replicating your model in perhaps a related type of business? But if you had to start from zero, what might you do?
Yeah. I’ve thought about it a lot. Of course, I’ve only done this one deal, and it was based around my parameters. It’s hard to say I’ve got some universal advice for anybody on this, but I have thought about… One option would be trying to replace that trust that wouldn’t be there with some type of unique skill that you bring to the table. So say you’re coming from a background of digital marketing, or finance, or sales, and you walk into the business and say, “What are your biggest pain points?” They answer, “Oh, well, we really struggle to get new customers.”
Well, if you’re an expert in sales, and you want to buy a business, and they need sales, maybe you bring that to the table as more of a value than that inherent trust that you’re missing having not worked for the company previously. But if you could bring something of value to the table, it doesn’t have to be necessarily capital all the time. In fact, capital might be the least personal contribution that you can bring to a business that’s been owned by the same person for 30 plus years. They might actually want you to invest your skills and prove that you care about the business and want to grow it. It could be marketing. It could be restructuring the financials of it, reducing costs.
I mean, I think about this a lot with the manufacturers that we represent. They’re all over the US. They’re typically multi-generational family-owned manufacturers between $3 to $5 million upwards of $50 million in revenue, and I think about someone walking into one of those businesses and saying, “Hey, I’m an industrial engineer by background. I am an expert in process engineering. I’m looking at your shop floor, and I think I could save you a million bucks a year.” Well, that’s a huge value you could bring from day one that would earn that trust, and I’ve seen some of that happen with our manufacturers as well. You got to find some way to convince the previous owner. They’re not just going to be out looking for some millennial or Gen Z to take over their business. They need to really feel like they’re getting value out of it as well.
In finding these opportunities with owners, it doesn’t sound like something… if you wouldn’t look for an open position at a company perhaps because the role that you’re looking for is more of a value-add role that maybe the owner hasn’t posted anything about or may not want to share with other people. So how do you go about finding these owners who might be willing to take you on?
I think if you’re willing to invest the time and the apprenticeship model. So if you’re maybe earlier in your career or you feel comfortable with investing maybe three or four years in the business prior to buying it, then maybe you could start out looking for more run-of-the-mill job postings, things like that. You could work it into your conversation with the owner that, “Hey, I want to be in a position to do what you’re doing some day whether it’s with this business or whether it’s with another one, but I want to get the experience that I would need to run this type of business.” A lot of these businesses we’re talking about are smaller service type businesses. So there’s not great ways to learn them other than working in them or running them. Me personally, if I’m thinking in terms of risk, I’d rather work in a business and get paid to learn it than buy it out and hope I figure out how to run it.
So if you’re willing to invest that time, I think you could start with just getting a position with the company. If you’re coming to it from a different angle where you want to bring a skill to the table that leads to a buyout opportunity, you’re probably not going to find that on a job board. You’re probably looking at more of a… It’s the unsatisfying answer of maybe it’s just word of mouth in the community that you want to buy in because these are businesses that aren’t going to be on the big publication websites. They’re not going to be on the cover of Forbes or whatever. These are typically like these understated, but long-term, great, profitable businesses that you never hear about.
So to find those out, I mean, there’s not a cut and dried way to source these types of deals, but I tell people I would immediately start with my own network. Who do I know whose parents are business owners? Who do my parents know their friends and colleagues that run businesses or customers? They might be selling to people that run their own business. Me as an outside sales rep, I have a decent amount of exposure to all different types of businesses in our community mostly around the manufacturing space. But if I were looking to source a business to purchase, that would be a great place to start. Go through my customer list and think, “What are some of the smaller to medium size service businesses that I’m selling to today?”
Maybe I’m working with the owner already or maybe I’m not, but I have a direct line into what they’re doing, and I have an understanding of their model. So not a super full-proof way to find the businesses, but I would start with word of mouth and then maybe some trade associations as well like the local rotary clubs and stuff. It sounds really old fashioned, but that stuff is still around, and a lot of these businesses that have a presence locally would participate in those.
To your point you just made a minute or so ago, if I’m thinking as a searcher, I could just go out today and within a year to find a business and become the owner from day one. Of course, that has risks and trade-offs too, but what might be some advantages of, if you’re a searcher, taking a more patient look and trying to find an apprentice role in a company? I’d imagine you’ve alluded to it a few times, but the experience you get working in the company before buying and having that transaction could be really valuable. What are some other advantages to having a little more patient approach perhaps?
I think that you could really learn what you’re interested in in terms of what type of business you might like to run. The more targeted you can get… A lot of people just have this vision of, “I want to be a business owner, but I don’t know what type of business,” and that’s great. I mean, business ownership is great, but you really have to be willing to and somewhat enjoy the grind of whatever you’re going to be doing. So for example, if I was really interested in manufacturing and I wanted to be walking the floor each day and seeing parts being made at my shop, well, then I could start to narrow my market into, “Well, what types of manufacturing am I interested in, and what size businesses are around that might fit that bill?”
But with that level of patience, it also might allow time for you to get a couple of apprenticeship type positions because they might not work out 100% of the time. If you’re on your 20s and you get a job with the assumption that it might lead to an ownership opportunity and it doesn’t, well, you’re still in your 20s. You’ve got plenty of time to try something else, and that’s okay. But for me, I mean, I think back to when I was hired by my company. I was 25, didn’t have a wife or kids. I didn’t really mind being underpaid for a couple of years because the upside of the business was there, and this was even prior to the ownership discussion. So there’s a lot of advantages when you’re younger and when you have that patience and that flexibility to try some things out and see what you learn.
Is there a financial argument to be had for the apprenticeship model in comparison to a more traditional search model where you have a small LBO at this company and they have closed, that transitions the business to your ownership?
There’s a couple things. With an apprenticeship model where you’re working in the business, learning the business, and earning the trust of the current ownership, I think it affords you some flexibility when it comes time to do the buyout of exploring different structures. So some owners, if it’s a stranger coming in from the outside, they probably want a lump sum payment, or if they’re willing to do any sort of seller financing in the deal, they’ll want some sort of interest payout and things like that.
Where if you are able to achieve the apprenticeship model, you could do an earnings share buyout like I talked about that… It does a number of things. So not having to bring the lump sum to the table is huge for a couple of reasons. You don’t have to take on debt that you’re not comfortable with, or if you have a nest egg that you’re bringing to the table or whatever, you don’t have to bet the whole thing on it. Then, also, I think the diversification aspect of it is intriguing if you don’t have to pour all your capital or someone else’s capital into the deal. That gives you an opportunity to invest your ongoing earnings in other areas. So your whole retirement plan or whatever is not dependent on your business. So I think from a financial standpoint, it’s just more about a flexibility of different options of how to structure the buyout deal.
So with the apprenticeship model, what are some added risks perhaps? So you talked a little bit about having… Maybe you go into a business and it doesn’t work out. What are some other risks involved that you could see happening?
There’s two-sided risk through that when you just talk about in general it not working out. I mean, you might get into the business and after six months realize that it’s not something you want to do for the rest of your life. That’s a problem. It’s not going to make or break you if you’re early on in your career and you can go check out other opportunities. I mean, think about it though. If you’re 25 like I was, what’s the worst case? You get in, and after six months, you realize it’s not for you. Okay. You go find another job and try to get your market value back up where you want it to be.
But then, from the ownership standpoint, they may not see you as the right candidate, and some of that may not have anything to do with your capabilities. It might just be a personality type thing of who they want to leave their legacy to and that type of thing. But other risks, depending on where you are on your career, I think the primary risk is around your time investment. If you’re taking a pay cut to learn this business with the assumption and the aspiration that you’re going to take it over someday, and then it doesn’t work out, well, maybe if you go back to the corporate ladder, you’re making $10 grand a year less than you thought you would be or whatever. It’s nothing that at that point in your life is typically going to be tragic, but those are the primary risks of the time investment.
Turning it back around to you taking over your business, what was the role of the two previous partners after the close? Did they both just fly off to Hawaii and go relax?
One of them is still in Boulder, Colorado here with us. He stuck around a little more to help out, and that was by design. We had talked with both partners about what it would look like post-transaction. The older partner who ended up moving to Hawaii, it was funny. He started this business in 1980. It was a huge part of his life, and then somewhere around 2015, 2016, he’s like, “I’m hanging it up on January 1, 2018. I’m planning for it.” All of us were looking at each other like, “Yeah. What’s he going to do though? He’s been doing this forever and he’s really good at it. Why would he just be able to step back without thinking twice about it?”
Well, it turned out when the time came, he was ready, and he had prepared for it. He had reconfigured his life to where he had activities outside of work and things to just sail off into the sunset, and it worked out really well. With that, he did a more proactive job leading up to the buyout of positioning us to take over his customers and doing the warm introductions with those long-term customer relationships. He would set up full lunches with all his contacts at certain customer accounts and just positioned us to be successful after he was gone.
Where the other partner was still here locally. He was more accessible, and we were a little more focused on the older partner’s transition during that year leading up to the buyout, knowing that he would still be more accessible, the younger partner. So for about probably 6 to 12 months, he was still consulting in a way with the business on mainly, again, those long-term customer relationships, just myself and my new partner picking his brain on… He’s got 33 years of this tribal knowledge that we want to capture if at all possible. We still do call him once in a while just to get his input on things, but there’s no expectation on either side, and that’s a nice way to do it.
Can you dive more into the ways the older owner helped you transition the business smoothly and how he prepared both the business and himself to transition?
There’s a few different elements to that. I mean, so with our business, we’re balancing two big sides of the equation. We have our manufacturers on one side that we’re contracted by, and most of those are multi-decade relationships. They use us as their outside sales team in the Mountain Region. Then, the flip side is the customers that we’re selling to, which are based here in the Mountain Region. Those also go back a long way. A lot of those relationships.
So we had to instill the trust in our manufacturers that after this guy who ran the business for 40 years or 38 years when he retired was gone, that we would have it in good hands to continue the growth pattern that he had achieved. So most of this was just discussions with the manufacturers, but being proactive with all the stakeholders on the manufacturers side of what’s this going to look like and what’s going to make you guys feel comfortable with this transition.
I know on the customer side, it was more of… We don’t really have customers that would leave based on a sales rep leaving. That’s not usually how it works. They got different sales guys walking in the door every day and things changing over, but it was more about understanding the landscape of those accounts, and who makes decisions, and who’s designing new products and all those types of things. So our business is built around in-person selling. So it was a lot of visiting customer accounts around the state, making sure that they’re comfortable with my new partner and myself taking over.
Then, in terms of, on a personal level, how he positioned his life, he had lived in Boulder for most of his adult life. I think starting at about 21, he moved out here to Colorado, was originally from Iowa, but he was… Like you would imagine, most people in Boulder are very in to the outdoors. So he’s big on hiking, camping, all that type of stuff. I think it was mostly just a thoughtful approach to how he was going to spend his time after retiring.
One thing that was interesting too is he started learning some of the engineering stuff that we sell on a daily basis, but we don’t do it ourselves. We’re selling it to engineers, and then they’re designing products. He started learning cAD design, so computer-aided design, which is used in manufacturing at 65 years old after selling here for 40 years and never doing it. He started metalworking, which he had sold for so many years, but had never done it.
So just things like that, and one of the coolest things about the transition is we had a retirement party for him and… I mean, he was a guy that genuinely made friends with his customers, where if you work in sales, you know that different people have different styles. Some people are more professional, and some people genuinely opened up and get to be personal friends with their customers. He was that way. To see the people that showed up to his retirement party, I mean, I there were about 75 people there, and 90% of them were his customers. I can’t imagine at the end of my career that my customers are going to want to come see me off, but he had all these great multi-decade relationships that were… You could just tell they thought the world of him, and he had made peace with his departure and was really fulfilled by that sendoff. So it’s pretty cool to watch.
That’s really cool to hear. That ability to connect with people in that personal level is really impressive when you find it. Are you trying to emulate some of the characteristics and personality that he had, that ability to connect with people? Are you trying to emulate some of that today?
I try to think about it a lot. One thing that was really lucky for me when I started with the company was just getting to know the two partners both in the business and outside the business. We’re such a small company that we operate like a family office even though we’re not all family, but we all work remotely out of our houses. So I would during my training to their houses, and listen to their customer calls, and learn from them that way. So I really got to see their sales styles up close.
So the flip side of it is Keith, who is the older partner, had this more personable selling style where he was viewed as a friend to a lot of his customers. They would have lunch and not talk about business at all. Whereas the other partner, Mark, had more of a professional, down-to-business style. So I got to see both of those and really try to take the pieces here and there that matched with my personality and integrate them into my approach to business.
So I have done more of that certainly after observing Keith. It opened my eyes a little bit that my general approach is that I’m the sales guy. At the end of the day, I’m bringing them services that they pay for. But with Keith, it opened my eyes that yeah, but we can also be friends, especially as I’ve gotten deeper in this industry, and some of the younger engineers that I’ve worked with that are around my age start to take on management roles and decision-making roles in their company. We’ve really gotten to be personal friends talking about just general business strategies and things like that. It has been something I’ve taken to heart over the years.
That’s really awesome to hear. What parts of each personality do you find fit with your personality the best from that professional and then the more friendship-driven way?
It’s interesting in sales because you want to have enough personality in the relationship to where it feels beyond just someone writing a check for something that you’re selling them. So with Keith, it was pretty cool to see that he was genuinely curiosity about his customers’ personal lives and backgrounds. That would be one of the first things he would ask somebody when he would first meet them is, “How’d you get out to Colorado?” and, “Where’d you go to school?” and all those types of things. Whereas watching the other partner, Mark, it would be more… start with business, “Hey, what are you trying to do with this project?” kind of thing, and then maybe sprinkle in some personal stuff.
So for me, I’ve tried to do both of those. You want to be respectful of everybody’s time, and you got to get your work done. But at the same time, just trying to take a genuine interest in people’s personal lives. Of course, it’s easier to connect with people that are around my age. So whenever someone is in their 30s and has young kids like I do, we certainly make that connection, and I’ll reach out to them thinking this person could actually be a friend outside of work in addition to a customer for many years.
That’s really cool. Is there anything about becoming an owner that surprised you compared to when you are an employee?
I think I’ve been surprised to some degree by the amount of work that went along with ownership. It probably sounds silly saying that, but you look at our company, and it’s probably difficult to imagine from the outside, but very small company. We’re built around sales. If we don’t sell, we have no revenue. So you think, “Well, I’m already a sales rep at this company, so how different can it be being an owner and also maintaining my sales rep responsibilities?” It’s just like any business, there’s more happening behind the scenes than you imagine.
So some of the things that we’ve taken on, my partner and I, since taking over the business have been just upgrading some of our… Our CRM system, for example. That was a massive effort, and it was one of those things that we had been on the same CRM for almost 20 years. It was a very old-school tool called GoldMine that probably most people have never heard of. Actually, had a hosted server in my partner’s office. I’ve been here for five, six years leading up to the transaction. So it was like this very painful thing that I gotten used to, and my partner comes in in the business and he’s like, “This is the worst thing I’ve ever seen. We’re changing it right away.”
That sounds probably not a huge undertaking, but we have about a database of 15,000 contacts throughout the Mountain Region. So the amount of cleanup and migration that was required, and operations manager basically led that effort. But it’s projects like that that it seems like every few months, my partner and I put our heads together, and we have at least one to two of those. Just working on the business instead of in the business projects that come to the table, and we never have enough time to do as many as we want because we’re still… At the end of the day, we’re a sales agency. So we have to be working with our customers most of our day.
Have most of those projects been worth the time and effort to put into them?
The CRM, for example. I don’t know how you would possibly calculate the ROI on it, but it’s been a huge upgrade. Our previous one didn’t have a mobile interface. So doing anything from the road, which as a salesperson, you need to be able to do stuff from the road. So that type of impact has been huge. Right now, our latest one that were just in the early stages of is overhauling our website, which… You can go as deep as you want into that type of effort. For us, we’re trying to restructure our website completely to where it’s more of a marketing tool, or historically, it’s been more of an informational resource. So a lot of these, it’s hard to quantify the impact of the project. As salespeople, our output is immediately quantifiable. That’s hard sometimes. It’s the difference between being an employee of the business and owning the business.
You’ve also been doing some interviewing recently. Can you talk a little bit about how you think about adding great people to your team?
So with our business, we’re interviewing an outside rep for our Utah, Arizona territory. Essentially, we tell everybody this, and we truly mean it that it’s… You’re running your own small business within the business. You’re using our tools and you have our support, but your customer base and your territory are yours to own. I mean, we’ll be here to help you as much as you need or as little as you need. So it’s an unusual position to hire for. It really has to be someone entrepreneurial.
Our business in general is challenging to hire for because you need a mix of two skillsets that don’t typically go together. You need a technical attitude to learn the manufacturing processes and be able to sit down with engineers and talk about their projects. Then, you need the sales side of it, which is just communication, self-driven motivation, the ability to get rejected every day of your life, the constant following up, and just moving conversations forward. It’s a challenging hire to make, and we look at it as we want to hire someone for the long-term. Depending on their age, we’d like them to work the rest of their career with us.
The beauty of our business and also, the challenge it for someone coming on board is you’re probably going to be a little bit underpaid the first couple of years, and then you’re probably going to be overpaid the next 20 if you do well, if you’re still there. Whereas a lot of corporate jobs, it’s the opposite. They pay you really well when you’re starting out, and then they pay you just enough to stay around the rest of the time. So it has to become one who’s willing to come on and think long-term about building something.
That’s fascinating. So how do you identify those characteristics within people as you’re talking with them, interviewing them, having phone calls? How do you find those characteristics in these folks?
We’ve actually put a lot of research into our hiring process, but because we don’t hire all that frequently, it’s challenging to optimize the process when you don’t have high numbers of data coming through it. But for example, if someone has a technical degree. So when I was coming on board, I wasn’t working in a technical field, but I was an industrial engineer by education. So you look at that, and you say, “Okay. They made it through a decent school as a mechanical engineer. Whatever it is. They’re going to be able to pick up the technical stuff.” You don’t truly know how they’re going to embrace it until they get on the job, but that at least is a great feather in their cap for the technical side of it.
The sales side of it to me is actually the more important part. We always talk about, “What is our ideal candidate? Is it a salesperson that also has a technical interest, and they fix things in their garage once in a while, and things like that? Or is it an engineer that’s been working either as an engineer, or as a project manager, or something that wants to get more into a sales role?” To me, if you’ve never been in sales, that’s the really, really hard part. That’s almost the gating item to doing well in this job because without the ability to generate new relationships, and make a lot of phone calls, and just generate the activity in your territory, without all that, the technical doesn’t matter because you don’t have anyone to talk to about it.
So on Twitter, you’ve talked a lot about having a sales gene or skill. What does developing a sales skill mean to you, and how does someone develop that over time?
I think that, generally, sales still today gets a bad rap. A lot of people, especially younger people, less experienced in their careers still think of sales as like the used car salesperson that’s trying to influence you into a decision that you don’t really want to make. Even some of my smartest friends in the world, engineers, lawyers, really successful people, they shy away from sales because they think that they’re not cut out for it. They think it’s something you’re born with. Whereas I was fortunate enough in my 20s to have some volatility in my career that actually threw me into a sales program.
I started in sales at 25 with Major League Soccer. They had this bootcamp style sales training program to start out where you would go to Minnesota for six weeks. For me, it happened to be in February and… Basically, the end of January and February, which was brutal, but you go there for six weeks. You’re learning in a classroom style setting about the principles of sales and communication. Then, every single week at that program, you’re on the phone making cold calls, and what you’re doing is selling ticket packages for a different team around the league each week.
So you’re selling remotely. You can’t meet anybody in person. We were encouraged to make over a hundred phone calls a day. So most of our group made well beyond that. It’s boiler room style sales training, which seems terrible, but my gosh, it was the best learning experience I think I’ve ever had. It will probably go down as the best asset that I have in terms of my career growth, and then ultimately becoming a business owner.
So there’s a lot that goes with sales that I think if you’ve never had training on it, you tend to shy away from. But the big things for me are it’s a work ethic, discipline to… You’re in a setting like that. You’re making such a volume of phone calls that you really have to structure your day and keep pushing through even when things get hard, even when you’re getting rejected left and right. Those types of things. You have to learn to build rapport with a stranger within about 15 seconds. I mean, no one in the world can tell me that’s not a valuable skill, the first impression. You only get one shot at it.
So I think there’s an entrepreneurial mindset to sales where you feel like you control your own destiny, where your output is directly tied to your input in most cases. Different companies structure it different ways, but my company, we’re actually paid on a 100% commission. I mean, we don’t earn money unless we sell something, which is the beauty of it from our manufacturing partner side. But for us, we’re always thinking we have to be relentlessly optimistic about the future, but also, some level of paranoid about losing the business that we have, and we’ve got to be out finding the next thing. So there’s a lot to it. It’s a little bit deep. I don’t know if I can distill it into a succinct answer, but those are a few of the things that I’ve gotten out of sales that really, they apply to every aspect of my life.
I love that term “relentless optimism.” What times in your career on owning this business has that optimism been challenged the most do you think?
I would say definitely in the early days when I started as a rep with the company. I had it in my head that within a couple of years, my earning potential would be reached or my ideal earnings level would be reached. In reality, it took closer to three and a half years, which is a long time to be underpaid in your 20s thinking about the grass is greener at other places. It was frustrating in some ways because I didn’t know the situation coming in. I didn’t know how many customers I would be starting with or exactly what that landscape would look like. So ultimately, it ended up being me growing a new business from scratch basically in a territory with two guys who had worked it for 30 years. So there’s only so much to go around, but I would say that early part of my career is when I asked the most questions about, “Should I be doing this? Am I on a path to success in this role?”
One of my closing questions here is, what’s the class you would teach in college if you could teach about anything? It sounds like you could teach a sales class, but is that the class you would teach if you could do anything?
That was my answer. So now, I’m… Have we talked about sales too much?
No, no. This is fantastic. What would your sales class be structured as? What would you have people do?
My college class if I had a chance to teach one would definitely be Sales Training 101. Like I said, that sort of bootcamp style training program that I entered with Major League Soccer was easily the biggest payoff I’ve ever had for my career trajectory. I think that some of it is just about being educated to what’s possible and what’s out there. When you’re, say, you’re in college, you’re 18 to 22. You don’t really know how the business world works. You’re learning about things in textbooks, and you don’t learn a lot of that stuff until you get out into the world.
But I think a lot of young people need to be taught as early as possible that sales is not a dirty word. It’s not the guy with his trench coat selling jewelry on the corner. The entire business world revolves around sales, and nothing happens until someone sells something. Really, you don’t have to work in sales to get the benefits of that type of training. Being able to speak with strangers without being nervous, being able to persuade people to your point of view when you’re trying to sell an idea, or a project, or really, anything that comes up in your career.
It’s also a little bit of being able to navigate red tape in sales. You’re always looking for a backdoor when you get denied at the front door. That type of thing. Whether it’s job hunting or trying to get approval for funding in your role, you always need to be thinking about how you navigate those landscapes. You don’t have to take no for answer. I think a lot of young people, it takes them a long time to learn that.
One thing about sales is it provides ongoing quantifiable feedback on your efforts, and a lot of jobs don’t do that. So you often don’t know where you stand in other jobs, whether it’s engineering, or finance, or… Well, maybe finance. If you’re investing, you get that feedback. But with sales, you’re always tracking how your effort impacts your outcome. So these are just a few things that I think I would focus on in a college course based around sales.
For you personally in that MLS program, what did you start doing after the first thousand phone calls that you didn’t do initially?
One of the first things you learn or we learned in that setting was the value of open-ended questions. You probably appreciate the value of open-ended questions as a podcast host. You don’t just want to ask yes/no stuff because it gives your guest the opportunity to stop talking. So it’s who, what, when, where, why questions. So we spent a lot of time in the early part of the program practicing those types of questions and channeling every question that we had into open-ended to keep the customer talking and giving us more information about their goals and their objectives. So with that, I, in the early days, went into a mode of asking too many questions in some regard. It wasn’t conversational. It came off almost as like an interrogation where you never stop to say, “Oh, yeah, me too. I played soccer growing up, and I’m a huge fan,” or something like that. You really have to blend in making a connection with the people you’re talking to along with trying to investigate their needs and their priorities.
That’s awesome. That’s fascinating. What’s a belief you used to hold fairly strongly that you’ve since changed your mind on?
I posted about this on Twitter recently. One thing that I thought pretty much throughout my 20s is that I needed to make an impact on a global scale in order to look back on my life and think it was successful. I think a lot of people in their 20s get caught up in the world of tech startups and things like that, these rocket ship growth type companies, and you’re like, “Man, maybe I can start something like that.” As I’ve gotten older, I really just appreciate the value of building my work around my lifestyle rather than the other way around.
So one of the best things about small business ownership is that once you put in the work to get it running and get it profitable, in my case, I was fortunate enough to take over a long-standing profitable business. It affords you the flexibility that you want to have a family, and you don’t have to work 70-hour weeks if you don’t want to. I’ve got a three-year-old and a one-year-old. So to me, if my business went away today, I’d survive because I still have them. Right?
One thing that one of my previous business partners said to me early in my career that I didn’t really understand because I didn’t have kids at the time and I wasn’t even married yet, he said, “I’ve been doing this for 33 years or whatever, and I just… My best memories are my kids growing up. I never missed a single one of their sporting events, their drama events at school.” I still think back to that a lot, especially now with kids that it wasn’t nearly as impactful at the time as it should have been. But now, it’s always in the back of my mind how lucky I am to run this business that allows me to live the life I want. That’s the belief I’ve changed that I don’t have to start a multi-billion-dollar company. I don’t have to be the next Elon Musk or whoever it is to really live a great life and feel good about it at the end.
What do you feel like you’ve learned from having two young kids that you’ve been able to apply to other places in your life?
Well, talk about sales training. You’ve not negotiated until you’ve negotiated with a three-year-old. So I say that in just a little bit, but I mean, being cognizant of my communication style with my kids. I have two daughters. I don’t know if this is a boy/girl thing, or a genetic thing, or what, but they’re very sensitive to my tone and how I deliver messages. That brought me in tune more with how I deliver my communication. I mean, having kids, it sounds sappy, and it probably sounds a little cliché, but it just completely takes the focus off yourself sometimes to a detriment.
Sometimes you have to stop and be like, “Wow, I haven’t eaten breakfast yet because I’ve been taking care of my kids the whole morning. I need to keep myself in shape so I can continue to parent.” It gives you a perspective on the world that I didn’t have before. So when times get hard at work or just in general where… In 2020, times are hard. It’s the weirdest year of my life by far with the pandemic, and everything, and quarantine. Just the perspective that kids bring to bring your priorities into focus has really helped me.
Then, the other thing I think I’ve gotten out of having kids that applies to all aspects of my life is just the level of patience that I didn’t have before. Generally, when I make a decision that I want to do something, I just start working on it. With kids, you’re always focused on their needs and the family’s needs. The older my toddler gets, she certainly has a knack for testing my patience in the best way, but it ultimately makes me a better person. It makes me better at my work as well when I’m dealing with all different types of personalities that I have to navigate. I think that experience at home has translated to making me a better salesperson.
I love that answer. That’s fantastic. What’s the best business you’ve ever seen?
Fresh in my mind is a business… This is more of like back to the global impact tech startup world. So I’m going to give you one of those, and then I’ll take it down to a local service business because that’s what most people want to talk to me about on Twitter. On a global scale, my fraternity brother from Georgia Tech started a company called OneTrust. I think they’ve been around three and a half years. In their last funding round, they were valued at $7 billion. Even as a $7 billion company, they just placed number one on the Inc. 5000 list of fastest growing privately owned companies in the US.
So usually, that number one spot or the top spots on that list are companies less than a year old. They went from $10,000 of revenue to a million. So their growth rate is just off the charts. Well, his company was already valued at $7 billion and they grew like 48,000% in the last year. So that business was built around privacy software and consulting services. So if you are familiar with… the last couple of years, you’ve started getting prompted about cookies on every website, that started with a regulation in Europe called the GDPR, and OneTrust was the first to market and the best to market for helping companies become compliant to that regulation.
Wow, that’s impressive. That’s incredible.
So he’s my fraternity brother. He’s two years younger than me, and he’s a multi-billionaire. So think about the self-esteem issues I’m having with that, but a super smart guy. Kabir Barday. I’ll give him a shout-out. Very, very smart guy. Then, on a smaller scale small business type level, one of my favorite businesses that I get to deal with personally is a company called FairMeadow in Denver. They’re a local laundry service that’s a wash-and-fold laundry service. They bring you a giant Home Depot size bin that you put out on your porch one day a week, and they come pick it up. It’s full of clothes. They wash them, fold them, bring them back the next day, and it’s 15 bucks a week. With two young kids, that is the best money I will ever spend.
It’s a really great company. Great service. We’ve had weeks where we’ve forgotten to put the bins out. We had to contact them and let them know. On their website, it says you get charged if you do stuff like that. They immediately text us, and they’re like, “Oh, no charge. We’ll take care of it.” So the one thing I can’t quite figure out is how they’re making money at those prices. But in terms of the level of service, and the customer experience, and just in the vein of cool local nichey service businesses, I love that company, FairMeadow.
I love that answer too because some people will ask like, “Well, what’s the best business by what measure?” That’s part of the fun out of asking guests the question because everyone has a different view on what is the best business because they have their own measure for what is the best. Customer service, or financials, or economics, or scale, or something. So I love that answer. That’s fantastic. Thank you very much for sharing your time with us. This has been one of my favorite episodes, and I loved hearing your thoughts on owning a business, and being an apprentice, and all these other… just our whole sales conversation as well. So thank you very much for sharing your time with us. I really loved it.
It’s my pleasure, Alex. Really great talking to you. I love the work you’re doing with the podcast, and your newsletter, and your blog. So keep it up and keep spreading the word about small/medium businesses.
My guest today, Joel Blake, has a fascinated story about how he became an owner of a manufacturing sales company called Marketing Technologies. Before acquiring, Joel first worked for the company as an employee before he and another partner took over the business from the two retiring owners. Joel calls this model entrepreneurship through apprenticeship and it’s a major topic of our discussion.