#53 Start-up, scale-up, sell-up | A Master-class with Rob Goddard

TRANSCRIPT: THE bizval PODCAST
Guest: Rob Goddard, Founder — S Cubed Advisory
Host: Graham Stephen, CEO and Co-Founder, bizval

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[00:00:16] Graham Stephen: welcome to the bizval, podcast where we turn complex valuation and Mai, I’ll start again.

[00:00:22] Graham Stephen: Too much talking this morning. Welcome to the bizval, podcast where we turn complex valuation and M and a topics into practical insights that you can use today. I’m Graham Stephen, the CEO and founder@bizvalglobal.com.

[00:00:39] Graham Stephen: And joining me today is a man who really needs no introduction. He sat on every side of the deal table. Whether it’s advisor, buyer, seller, rescuer of distressed firms, Rob Goddard, he’s the founder of S. Cubed advisory. Rob it’s such a pleasure to have you out today.

[00:00:57] Rob Goddard: Yeah, likewise, Graham. Thank you for that wonderful intro. Hopefully, I won’t let you or the listeners down.

[00:01:05] Graham Stephen: Fantastic. Well, listen. As you say, we share real stories. So at the end of the day I think you got a you’ve got an incredible story to tell. So.

[00:01:13] Graham Stephen: Rock, you’ve clocked up apologies for that. Let me start again. Sorry I had an alarm to kick this off. I’m gonna and make sure my phone is on Silent, which I did. But I’m gonna kick it off again, Rob. Sorry for that.

[00:01:28] Rob Goddard: No worries.

[00:01:30] Graham Stephen: Okay. we come back

[00:01:38] Graham Stephen: welcome to the bizval podcast. Where we turn complex valuation and M and a topics into practical insights that you can use today

[00:01:46] Graham Stephen: I’m Graham Stephen, the co-founder, and ceo@biswellglobal.com. and joining me today is a man who really needs no introduction. He sat on every side of the deal table, from advisor to buyer to seller rescue of distressed firms. He’s even spent a stint in corporate, a fairly long stint at that Rob Goddard, the founder of S. Cubed advisory. Welcome and thanks for joining us here today, rob.

[00:02:11] Rob Goddard: Well, thank you for that very fulsome introduction hopefully, I won’t let viewers and listeners down. But thank you. Good to catch up with you.

[00:02:22] Graham Stephen: Fantastic, Rob. You know you’ve you’ve clocked up. I think it’s I don’t know where you stopped counting, but something like 350 transactions across the Uk. The Uae, the Us. Over the past 25 years.

[00:02:36] Graham Stephen: Can you just give us a sort of 2 min intro. How did you get here just a little bit about your backstory.

[00:02:43] Rob Goddard: Yeah. So 1st half of my career was working in banking. So corporate life. Natwest Bank in the Uk.

[00:02:50] Rob Goddard: And rose to the dizzy heights of senior manager. Then I got disillusioned.

[00:02:56] Rob Goddard: and I took my wife and my young family at the time to Los Angeles to work in a Food Ministry

[00:03:03] Rob Goddard: feeding 7 to 800 Hispanics a week, and it was a real boot camp for me, real sort of getting to grips with what I might want to do later on in my life.

[00:03:13] Rob Goddard: spent a year there, came back and then worked for a company for a few years, generating sales, leads for engineering firms. That was a tough gig

[00:03:26] Rob Goddard: selling to engineering firms, and then I got headhunted by an M. And A. Or a burgeoning young start early, start M, and a business which is still going today. I took it from 1.5 million turnover to 15 million turnover in 7 years. As a general manager.

[00:03:47] Rob Goddard: The Downside was. I wasn’t a shareholder so very well rewarded, but in in terms of performance. But I I parted company with them and set up my own one man band consultancy business, but it wasn’t through choice.

[00:04:04] Rob Goddard: My life. My life took a dive. Having reached dizzy heights.

[00:04:11] Rob Goddard: Commercially and financially. I lost my wife, my family, and my job.

[00:04:18] Rob Goddard: So I started from scratch, but decided to keep within business advisory and M. And A.

[00:04:24] Rob Goddard: And that was in 2,008, and many years later.

[00:04:30] Rob Goddard: I’ve had that that original business that I started I exited from

[00:04:37] Rob Goddard: 4 years ago. I’ve bought another business. The council firm, as you referred to did a turnaround sold that. So I’ve had 2 exits. I’ve done 3 Mbos myself, and I’ve done an acquisition. And I’m still back, because what I love doing with S. Cubed advisory, my main focus is helping businesses prepare for sale.

[00:04:58] Rob Goddard: because that’s what I’ve learned over all those years in M. And A. If you want to sell your business successfully.

[00:05:05] Rob Goddard: there’s some hard graft ahead for any business owner.

[00:05:10] Graham Stephen: Yeah. yeah, I think I think you know the the sort of dream that gets sold in modern. Let’s call it social media. And that is, you know, if you’re not running a business from a beach in the Bahamas, sipping cocktails, and and, you know, spending 3 min a day doing that. And you know it’s a 10 million dollar or pound business, and you’re doing something wrong. You know the reality is a little bit different to that right?

[00:05:35] Rob Goddard: Absolutely absolutely no, it’s it’s hard graft. The rewards are there, but nothing comes in life, does it without hard work and and actually resilience, not giving up.

[00:05:47] Graham Stephen: Yeah, Rob, I mean, you’ve been very vulnerable in that introduction, you know. And and I think you know, I think we often talk about as a sort of shark’s teeth of growing a business and entrepreneurship. You know, it’s never, you know, even growth is never a linear line. It’s these ups and downs and and and life happens in between. And you know it’s not just about the business.

[00:06:08] Graham Stephen: You know. Was there a single moment. you know, through your career or through your life, where you kind of said, you know I’m going to. I’m going to shift what I’m doing, you know. Obviously you know your story there a couple when you moved out of corporate and became disillusioned, and then you obviously went through a sort of personal trauma, which also, you know, reshaped some things. But yeah, was there a single moment, or was a sort of gradual series of events that led to you, moving to where you are now.

[00:06:37] Rob Goddard: I think there’s 1 fundamental, and I don’t mind mentioning it, not least because I did a Tedx talk about it a few months ago and posted the video this morning.

[00:06:47] Rob Goddard: for on Linkedin. So I think fundamental thing was, I tried to take my own life on top of the Burj Khalifa many years ago, obviously unsuccessful attempt.

[00:07:00] Rob Goddard: But I bounced back from that because I’d been dealing for 2 years with depression as a 1 man band consultancy. It was hard bumping along the bottom, trying to earn a living. I had 4 kids at the time, 4 children to support.

[00:07:16] Rob Goddard: so that stress anxiety got too much one day, so I decided that I wanted to check out of life. And thankfully, the thing that stopped me was a locked fire exit in the Burj Khalifa.

[00:07:30] Rob Goddard: So the the caretaker, not doing their job thankfully, I’m still here today. So the way I found a way out was actually to contact a friend of mine in the Uk. And he flew over.

[00:07:45] Rob Goddard: and I think with anyone that may be struggling right now with business life, whatever it is. The key I found is just to open up to someone you trust.

[00:07:56] Rob Goddard: and that’s what I did. And I came back to the Uk. From Dubai and faced my debts, face my problems.

[00:08:05] Rob Goddard: and I managed to get seed investment a chartered accountancy firm with 14 partners. Would you believe?

[00:08:14] Rob Goddard: Because I had a 7 year track record in M. And A. They wanted to back me to set up a new business within the accounts he practice, and I’ll always be grateful to them. So yeah, we all put money in

[00:08:30] Rob Goddard: and that business grew. And, in fact, for our next office, we wanted to set up an office in 2,016, a second office, and the one I wanted was Dubai. I want to set up in Dubai. I want to go back

[00:08:44] Rob Goddard: as someone who failed, I’d I’d failed. I was a broken man out there 1st time round, so I set up an M. And a business in Dubai never been to the Middle East. Prior to that I was certainly not operated out, but out of there.

[00:08:57] Rob Goddard: and that that was a fantastic experience is doing the M. And a work in another country

[00:09:04] Rob Goddard: just gives you a different perspective, doesn’t it?

[00:09:08] Graham Stephen: Different different cultures and and ways of doing business, you know. I mean, I guess, as a process driven, I guess Brits, by background right. It must be quite a culture shock.

[00:09:19] Rob Goddard: Yeah, it was especially the heat for a liming like me, 50, 55 degrees centigrade outside. What I did learn, though, is most of the best practices were universal, whether it’s the Uk or the Uae. And I had worked in the Us. Before in an early days. So it’s amazing how much commonality there is.

[00:09:45] Rob Goddard: So I mean that that business I started from scratch, got the seed investment, grew. It set up a second off international office. I exited in 2,02021. So I had my 1st personal exit, having helped many business owners over the years, sell their companies.

[00:10:04] Rob Goddard: I was doing it for real for myself, and that is quite sobering, because you have all the emotion that’s involved with selling something that you started from scratch. And it’s like selling a child, I would say.

[00:10:18] Graham Stephen: Hmm, so.

[00:10:19] Rob Goddard: So, yeah. So that was my 1st exit. With some of the proceeds. From the 1st exit I bought an accountancy firm that was in insolvency. With a help of my business partner we turned it around, sold that, flipped it because we’re not accountants.

[00:10:34] Rob Goddard: We’re just good at setting up robust practices to help a business become profitable.

[00:10:42] Rob Goddard: We’re not accounting.

[00:10:43] Graham Stephen: And we to dive into that a little bit little bit just now. But you know it’s really kind of loop back on on the past few minutes of discussion. I think you know what people often don’t realize is how emotional.

[00:10:56] Graham Stephen: how emotionally draining and taxing, owning and running a business can be, you know, and and and you’ve had a story which I’m sure you know is is deeply traumatic, but also in some ways deeply inspiring. To see, you know how you’ve emerged on the other side. And you know, as you say, with a stroke of lack of a janitor not doing his job properly. We’re thankful that you that you yeah, today, Rob, but you know there’s many entrepreneurs who carry that sort of silent

[00:11:26] Graham Stephen: burden. If you want to call it that you know. So, having somebody who’s in your corner and who can support you, you know. I chuckle. I see a lot of like chatter around, you know. Are you an advisor? Are you a consultant, and are you a mentor? And all of these things? It’s actually nonsense at the end of the. Is it for me? The question is, if you’re working with a partner, whether it’s an advisor consultant, is it somebody who’s got your back and they’re in your corner, and I think

[00:11:49] Graham Stephen: that’s why, as business partners as well, we both have that ambition to be in the corner of the entrepreneur and make sure they can make the best decisions for themselves, not for the private equity business, not for anyone else, for themselves and their family, and whatever they’re aiming for. And I think that’s what you bring in. Scube is you’re in the entrepreneur’s corner. Ultimately.

[00:12:12] Graham Stephen: Yeah, I think that’s so powerful.

[00:12:13] Rob Goddard: I totally. You’re spot on Graham. I often refer to it as we will be in the trenches with you, whatever whatever that thing is

[00:12:23] Rob Goddard: we’re in the trenches. We’re but we’re by your side, and we’re here to move you forward.

[00:12:30] Graham Stephen: Absolutely. So let’s dive in a bit. There, Rob, you know. So you know our listeners keep asking us so how do I build a business that that sort of funds, the life I want. How how does the business, you know, serve me rather than own me?

[00:12:45] Graham Stephen: Where do you start.

[00:12:49] Rob Goddard: I started, and my advice often is to other business owners.

[00:12:55] Rob Goddard: design a business with the end in mind. so that involves coming up with a magic number

[00:13:03] Rob Goddard: when you want to achieve that magic number in terms of the value of your business. And what does the structure of your business look like without you

[00:13:13] Rob Goddard: did that piece with a mentoring client yesterday for them. They’ve got an organogram as to what the business looks like. Now, company structure or chart.

[00:13:23] Rob Goddard: I said, well, think about in 5 years or 10 years time, when you’re potentially looking to sell.

[00:13:30] Rob Goddard: What could the business look like.

[00:13:33] Graham Stephen: Hmm.

[00:13:34] Rob Goddard: And and please make sure that you’re not in it. or maybe perhaps, as chair chairman with a dotted line. But the the business is run by others.

[00:13:48] Rob Goddard: That’s that’s.

[00:13:49] Graham Stephen: To do, especially especially in the early days. Sorry to interrupt you is when the business gets started. Often as the founder. You need to be hands-on. You need to be involved. But there comes a point of

[00:14:00] Graham Stephen: transition, I guess, where that shift needs to happen. So you’re starting with that end in mind. But then there’s something called ego, which often gets in the way as well. Right is, you know, that you need to do this intellectually. You know all these things you’re like. But I take my identity from this. So maybe just yeah, carry on from there a little bit.

[00:14:19] Rob Goddard: Yeah. Ego often gets in the way it’s part of letting go as well. One of the barriers to selling a business is ego.

[00:14:28] Rob Goddard: because the current owner or owners get a sense of identity and purpose in their in. In their life.

[00:14:37] Rob Goddard: They’re used to being a legend in their own lunchtime. They they make the calls, they make the judgments. People come to the into their office, or whatever on a zoom call for their sage advice.

[00:14:48] Rob Goddard: You know it feels good.

[00:14:50] Graham Stephen: To have that.

[00:14:52] Rob Goddard: It’s quite difficult for many business owners to let go as a result. So I mean, ego shows up, of course, in the sale transaction as well, particularly when you’re talking numbers and valuation, and when you get a low ball offer from a buyer

[00:15:08] Rob Goddard: it’s quite hard not to be emotional.

[00:15:12] Graham Stephen: You think? How dare they don’t? They’ve only known me 5 min, and they’re already devaluing my business.

[00:15:18] Rob Goddard: So.

[00:15:18] Graham Stephen: I just came out of a lecture at the moment. This morning I lectured to the to the graduate school of business at Uct. And we do a bit of a case study where we have this fictitious restaurant and the buyers and the sellers of this restaurant. We put them up against each other. And yeah, we just had that that

[00:15:35] Graham Stephen: notional discussion. Now, you know, the buyers offered a million quid, and the sellers wanted 12 million quid, and it was quite entertaining just seeing these 2 groups going at each other and both justifying their position, you know. And that happens in the real world, right, but it’s people don’t necessarily understand that. You know you as a seller, see all the hard work and the graft and everything that’s gone into it, whereas the buyer can often be quite unemotional. It’s like

[00:16:04] Graham Stephen: the money I want to return.

[00:16:06] Rob Goddard: It’s the.

[00:16:07] Graham Stephen: Hi, docs! Every single day.

[00:16:10] Rob Goddard: Yeah, it’s baggage. The analogy I use is baggage on the part of the seller that they carry with them into a negotiation

[00:16:18] Rob Goddard: is often people think that selling a business is a financial transaction. I mean, of course it is.

[00:16:26] Rob Goddard: But primarily it’s an emotional transaction. And certainly for the salaries, because they’ve got the blood, sweat, and tears all that years of history that they carry with them into a negotiating room. And the way that we, one of the ways that we coach clients

[00:16:44] Rob Goddard: prepare them and mentor them is to say, Look, if you can come across the

[00:16:55] Rob Goddard: All of this success in the business has come about because of the results of your team.

[00:17:01] Rob Goddard: so use the we word, not the I

[00:17:07] Rob Goddard: and come across as almost humble. almost humble to say, Yeah, I know a lot. There’s things that we don’t do. We could do better in this business.

[00:17:18] Rob Goddard: but we are turning over 5 million pounds, and we’re making a million quid on the bottom line. But think what it would be like in your hands, Mr. Or Mrs. Buyer, you know, with your greater infrastructure knowledge, expertise, a larger company.

[00:17:32] Rob Goddard: Think what you could do with it. So it’s a very mindset, isn’t it? Psychology? So.

[00:17:38] Graham Stephen: Yeah, it is. I mean, a lot of it’s about psychology and that mindset shift. But I want to go back a little bit quickly. You know you spoke about the magic number. Can you just elaborate? What is the magic number? What do you mean by that?

[00:17:51] Rob Goddard: Yeah, there’s often confusion with business owners. When I talk about the magic number they think mistakenly. I’m talking about the value of their business, and I’m not.

[00:18:00] Rob Goddard: and nothing could be further from the truth. What it is is, what is the capital sum that they need

[00:18:08] Rob Goddard: in their life at some point in order to finish one chapter and start a new one. That’s the magic number, and you can’t find it in a P. And L. You can’t even find it through the bizval online valuation tool

[00:18:21] Rob Goddard: it. It’s not from a set of accounts. It’s what it’s their life needs and goals. That support. Which is why we always start with the end in mind.

[00:18:31] Rob Goddard: What? What is the life that they’re working towards? Once they’ve sold up years down the line. So that’s the magic number, and it will vary. I always ask the question. I’ve been doing it for many, many years. I’m only given one of 4 answers to that question. When they realize what I mean.

[00:18:49] Rob Goddard: It’s either 1 million 3 million 5 million, or 10 million, depending on the size of the company.

[00:18:55] Rob Goddard: It’s never 974,000 and.

[00:19:00] Graham Stephen: Now.

[00:19:04] Rob Goddard: It’s always in round figures which indicates to me there’s no science at all that’s gone behind it. It’s in their head, which is fine.

[00:19:10] Graham Stephen: And it’s it’s it’s sterling, not rupees or or South African Rands, or something along those lines.

[00:19:17] Rob Goddard: Well, I say, update when they give me a number, I say, is that net, or is that gross or net of tax? Oh.

[00:19:24] Graham Stephen: As long as it’s bigger, as long as it’s bigger than the guy in their football at golf who just sold his business. Then that’s all that matters right?

[00:19:33] Rob Goddard: Graham I’ve never met. I don’t know about you, but I’ve never met a former business owner that admits to selling

[00:19:40] Rob Goddard: on a poor deal. They always had a great deal absolutely so. So, Rob, I mean.

[00:19:47] Graham Stephen: We spoke about the magic number, and I think also, you know, that magic number is you rightly say, that’s not the valuation of the business often. That’s the sort of expectation gap. And and that’s where you come in and help people say, Okay, well, this is. And that’s why you know. I think we both believe valuation is important, not because that’s what you can sell for tomorrow. It’s because that’s where your business is at, and it gives you a roadmap to say, Well, how do I get from there to where I need to be? And can I? Because sometimes some businesses simply can’t get you from A to B

[00:20:17] Graham Stephen: you know, and then you need to change course or change gears. But can you maybe just

[00:20:23] Graham Stephen: move on a little bit from that, and talk about what are some of the sort of biggest mindset shifts that you see founders struggling with?

[00:20:31] Graham Stephen: And you know also, how do they sort of balance, you know their lifestyle goals with the gross expectation or growth expectations of themselves, or even investors, when when it comes to maybe selling their business.

[00:20:44] Rob Goddard: I’ll stop with the last 1 first.st Then it’s a major one, isn’t it? Is that balance in your life? So it doesn’t become all dominating, and I’m probably not a good example.

[00:20:57] Rob Goddard: I tend to work more hours than I should even now, even after 10, exit 2 exits.

[00:21:05] Rob Goddard: and I’ve retired twice technically. But I’m back for a 3rd inning. I it. It’s very hard. I think some of the some of the tactics I’ve used with getting that balance is to have someone close in your life that can keep you accountable. Mine is my wife.

[00:21:24] Rob Goddard: She’s from Albania, so she’s got a Balkan mentality and personality. which means she doesn’t take any rubbish from an Englishman.

[00:21:34] Rob Goddard: She will. I am allowed to take my laptop on holiday. but but I can only access it for 2 HA day, which I think is quite generous, actually.

[00:21:44] Graham Stephen: As long as in the morning, when the family and everyone’s still sleeping.

[00:21:48] Rob Goddard: Yeah, that’s right. So it. It’s very difficult. I I’ve I’ve

[00:21:56] Rob Goddard: change from seeing it as 2 pots. Personal business for me. It’s 1 now. So I I’m able. I have the luxury of being able to choose who I work with, and both in terms of clients and team.

[00:22:14] Rob Goddard: and that’s a real liberation to choose to take work on or not, as the case may be.

[00:22:21] Rob Goddard: so that helps me keep things in balance. And also there was an old boss of mine when I 1st started in the M. And A. Side, he said to me, Steve said to me that

[00:22:33] Rob Goddard: I never get too excited with successes, and I’ll never get too down when things are getting really difficult. So so keep that midway path. Don’t don’t go to the extremes which I think.

[00:22:46] Graham Stephen: And brits can brits can tend to be like you know, my mom’s British, my dad’s South African, you know. The Brits can tend to be not downers, but I mean glass half full, rather glass, half empty rather than glass, half full, right? Whereas, you know, we do a lot of work in the Us. As well. I mean, it’s the opposite. It’s like, you know, how many glasses can you fill up? And and even then we can sell more.

[00:23:10] Rob Goddard: Yeah, exactly. And I think, yeah, I think also, when you go into business with investors, if you’re an investor or or you’ve sought external investment have an open conversation

[00:23:23] Rob Goddard: with them about, because they’ll always investors will invariably look at the exit.

[00:23:31] Rob Goddard: You know how, because most most investors don’t take large salaries or retainers, they make their money on exit.

[00:23:39] Rob Goddard: So it’s to have an honest conversation. If you’re running a business in conjunct, and you’ve got investors.

[00:23:45] Rob Goddard: what does the next it look like? When do you want it? And what is life after sale for you

[00:23:52] Rob Goddard: and with fellow investors? I found that there’s a really therapeutic conversation to have. At least there’s no surprises from within the board

[00:24:02] Rob Goddard: or within the investment of the company, so.

[00:24:06] Graham Stephen: That’s so important is investors don’t like surprises. We always talk about. It’s risk, risk, and reward. At the end of the day. I say, valuation is quite simple. It’s can you produce repeatable cash profits consistently without you involved in the business ultimately, and and surprise and volatility is not great for investors. It’s great for day traders who’s selling derivatives and options. And what have you but for your typical investor?

[00:24:32] Graham Stephen: And and that’s what the story needs to resonate with the numbers. Anyway, we’ll dive into that in a little bit more detail just now. But I think that’s such a such a good point, Rob, is that you know it’s not about being playing all your cards or being overly vulnerable. It’s about being honest and having those tough pragmatic conversations early on in a, in a, in a sale process, perhaps.

[00:24:54] Rob Goddard: Yeah, exactly. And and now, when I invest in businesses because I do that personally as well.

[00:25:00] Rob Goddard: I asked the people who are running the business. What is it that you want? What does success look like for you?

[00:25:06] Rob Goddard: Because if you can tick the boxes for the other person, then that that has potential to be a really good unison.

[00:25:15] Graham Stephen: Absolutely move on a little bit. So we’ve spoken about some of the sort of the fundamentals and and some of the sort of perspective on.

[00:25:23] Graham Stephen: you know, a business value. But let’s talk a little bit about scaling. Okay? Because this is a topical where everyone thinks you need to scale a business and and scale. Often, I think people think it means you need to grow at

[00:25:34] Graham Stephen: 300% a year, you know. So you can become the next unicorn. But you you’ve scaled firms both in professional services, tech manufacturing

[00:25:44] Graham Stephen: and then you spoke a little bit earlier about saying, even across geographies there’s this common principles and that that apply whether you’re in the Uae, the Us. Or the Uk. Can you maybe talk a little bit on the scaling journey. What is is what is scaling actually mean for you? And what are some of those sort of universal levers that business owners need to think about when scaling a business.

[00:26:08] Rob Goddard: Yeah. So I mean, the 1st thing to say is, scaling is not for everyone. and I think it can be overused as a term. Anyway, if you’ve got a profitable

[00:26:19] Rob Goddard: business with sustainable revenues, and you’re deriving a good livelihood. there’s nothing to say that you need to change that

[00:26:28] Rob Goddard: you can continue to enhance your offering and and customer service, but you don’t need to become bigger and better.

[00:26:36] Rob Goddard: So that’s the first.st It isn’t an automatic thing that said. Probably the majority of business owners I’ve ever met do want to grow significantly.

[00:26:49] Rob Goddard: And I guess there’s there’s 2 main ways of doing it. One is to grow organically.

[00:26:55] Rob Goddard: So that’s concerted sales and marketing effort. The other way is by acquisition.

[00:27:03] Rob Goddard: and if you buy the right companies and integrate them in the right way.

[00:27:09] Rob Goddard: You can accelerate that growth potential or that growth journey pretty significantly. But of course it does come with a health warning, doesn’t it? Because you can hear all sorts of problems when you absorb another business.

[00:27:23] Rob Goddard: and and the attrition rate is quite high in the Uk. Quite a significant number of businesses don’t get acquired. Don’t get beyond 3 years post acquisition.

[00:27:36] Rob Goddard: and the common reason given is lack of cultural fit isn’t to do with the numbers isn’t to do with products.

[00:27:45] Rob Goddard: It’s it’s 2 2 workforces not being able to integrate successfully

[00:27:52] Rob Goddard: in what a shape or form.

[00:27:53] Graham Stephen: People at the end of the day. Right, you know.

[00:27:55] Rob Goddard: Yeah, yeah, the little widget. Yeah, they’re not stock. They’re not on a set of accounts that yeah, the human beings. So that’s what I would say on the scaling side I mean clearly to to grow. Have ambitious growth.

[00:28:13] Rob Goddard: Then sometimes businesses have to have external funding, because there isn’t sufficient work, sufficient working capital within the current business to do that.

[00:28:21] Graham Stephen: Yeah.

[00:28:22] Rob Goddard: And of course, Ca, that can mean that. So you can get external funding to go on a buy and build acquisition program. If that’s what you.

[00:28:30] Rob Goddard: But I I think it. Growth is healthy significant growth is healthy rather than just. Let circumstances dictate

[00:28:42] Rob Goddard: be in control of your destiny. But it need I? I would advocate that, do it with someone who’s in the trenches with you.

[00:28:50] Rob Goddard: It’s always.

[00:28:51] Graham Stephen: And I think that absolutely do it with somebody. But I say that that word scale. It’s like the word success in many ways. I think you need to be intentional about defining what that actually means. Scale for one might be growing at 100 a year for the next 3 years scale for somebody else might be.

[00:29:08] Graham Stephen: Yeah, as simple as can the business operate without me. So I can take a 3 week vacation. Okay? And not having to stress, you know, and and I think sometimes the levers and the drivers are quite similar.

[00:29:18] Graham Stephen: Maybe you can just drill down into like, what are the sort of 2 or 3 most common sort of things that you would say business owners need to think about like things in the background that need to be in place for a business to scale, you know, doesn’t matter how you define scale, whether that’s rapid growth or just the business not being dependent on you. What are the what are this? 3 things that you would focus on if if you engaged a client.

[00:29:42] Rob Goddard: Number one have a plan. 90% of business owners I’ve met in the last last 25 years do not have a formal 3 year, 5 Year Growth Plan. They don’t. At best they have a 1 year budget

[00:29:55] Rob Goddard: because their accountant has told them.

[00:29:58] Graham Stephen: So have a plan.

[00:30:00] Rob Goddard: With milestones, annual and quarterly. As to what you’re going to do. And what does success look like

[00:30:07] Rob Goddard: at those various milestones? So definitely have a plan number 2.

[00:30:13] Rob Goddard: Accounts, financial reporting. the majority, not 90%. But the majority of business owners I come across do not have sufficiently robust

[00:30:23] Rob Goddard: financial reporting. They just don’t. A a big clue is when I ask them some basics about the numbers of their business, they say, well, I’m not sure I’ll have to get back to you on that, Rob. I’ll speak to my accountant.

[00:30:38] Rob Goddard: I said. Well, you’re running your business. You should know your key numbers shouldn’t be going to your accountant if you go to your accountant. That’s going to be historic information.

[00:30:49] Rob Goddard: And and when you’re running a business, you need the the most up to date, don’t you. to make strategic.

[00:30:55] Graham Stephen: It’s it’s an interesting one. That. And I’ll get to. Your 3rd point now is when when we value businesses. we say you don’t need your accountant in the room? We ask a set of questions like, What’s your annual revenue? What’s your annual wage cost? What are you paying yourself? What are your cash expenses, and and some people will say, but I don’t know that, but that’s almost a red flag or a bit of a filter itself, because most successful business owners know those kind of numbers in the back of their hand. They may not know whether their turnover is 20.2 3 6 million, but they’ll know that it’s

[00:31:26] Graham Stephen: more or less 19 million. They’ll know what wageable and they need to make at the end of every month. So I think that’s that’s critical. And and having good accounting and processes in place makes that easier as your business gets bigger right.

[00:31:40] Rob Goddard: Yeah, I think that once you’ve got through the early stage of a business, and it’s and it’s generating profit. And it’s sustainable. You can get complacent.

[00:31:51] Rob Goddard: and maybe you didn’t look at the numbers accurately. And you feel now you don’t need to, because you’ve got a successful business.

[00:31:59] Graham Stephen: But that’s the.

[00:32:00] Rob Goddard: Relevant when you come to sell it one day, because you can bet your dollar the people on the other side may have a Magic Circle accountancy firm.

[00:32:09] Rob Goddard: Why have Deloitte or Ey? They’re going to have a forensic deep dive into your

[00:32:16] Rob Goddard: so yeah, so definitely, that’s number 2 is the the whole sort of financial reporting, apart from making your business more saleable one day.

[00:32:25] Rob Goddard: can actually help you run the business and make the right decisions if you’re well informed. So that’s number 2 number 3 is systems and processes. When to go from the S. Of Sme to the M. Of Sme.

[00:32:40] Graham Stephen: You can’t do it.

[00:32:42] Rob Goddard: In the way that you did it before to get it off the ground. You just can’t. You need people around you that are better than you. You need systems, things, documented systems, processes, things that are repeatable, things that make the company more efficient rather than making errors. So I mean, that could be all sorts of it could be in the way that you, the human resources side. It could be the operational side. If you’re into manufacturing

[00:33:11] Rob Goddard: so, and and buyers really like an engine that that runs smoothly when when they come to look at potentially buying a business, they want to make sure that that engine runs day to day smoothly.

[00:33:25] Rob Goddard: Not all.

[00:33:25] Graham Stephen: A Diesel engine, a profit generating Diesel engine, basically.

[00:33:31] Rob Goddard: Yeah. So I mean those. Those are my top 3. There’s plenty of other business, I mean, and the top 3, because they come up time and time and time again when we’re doing preparation making.

[00:33:43] Rob Goddard: I mean, sometimes our clients won’t necessarily want to sell. They just want to make it sale ready that if they get a contact out of the blue

[00:33:54] Rob Goddard: the interested party doesn’t have to wait a year or 2.

[00:33:59] Graham Stephen: It’s it’s an optionality being having the option to sell on your terms rather than being forced to sell because you ill health, or you’re tired, or whatever you know, that’s that’s absolutely fundamental.

[00:34:11] Rob Goddard: Yeah, agreed, or you’ve just given up because you’re tired of it. You’ve had 30 years doing the same thing, I mean, who wouldn’t get bored.

[00:34:19] Graham Stephen: Absolutely. I mean just just a question. I know how long is a piece of string, but in terms of that sort of scaling and growing journey. Are there any sort of like

[00:34:26] Graham Stephen: like rule of thumb kind of transition points, you know, going from a million pound business to a 5 million to a 10 million. I know it’s different for every business, in every industry, but just like broad brush strokes. Where do you think? And and what are some of those indicators that you’re kind of taking a step up rather than just kind of a little incremental improvement.

[00:34:46] Rob Goddard: Yeah, thank thank you for that question. You’re right. It is a long speech string. I

[00:34:53] Rob Goddard: I see it more like step change, you know, like Russian steps.

[00:34:58] Graham Stephen: Hmm.

[00:34:59] Rob Goddard: Well, not quite there. I’m trying to do it in reverse, but you know what I mean.

[00:35:02] Graham Stephen: So.

[00:35:03] Rob Goddard: Probably have something like 3 years of growth. and then maybe a year or 2 of consolidation, and then off you go again. 3 years. Growth.

[00:35:13] Graham Stephen: And

[00:35:15] Rob Goddard: So what you’re doing is cementing the successes of the business to date, and then building on a steady platform to make that next launch. So it what it isn’t is that

[00:35:28] Rob Goddard: I I’ve never seen a business like that. I see plenty with the hockey stick growth curve after when they say they, when they’re trying to sell, when they want to sell their business, and everything will come good once the new owner is.

[00:35:40] Graham Stephen: Absolutely selling potential.

[00:35:44] Rob Goddard: It’s all yeah, it’s all about potential. So yeah, so I would say, Russian steps. And I think it’s important for the team as well, the people working in the business that they don’t have year after year after year after year, high growth.

[00:36:00] Rob Goddard: Because we we talk about scale up as business owners as a positive thing. I could tell you, Staff don’t necessarily think that

[00:36:07] Rob Goddard: what they see is extra work.

[00:36:10] Graham Stephen: Exactly. Yeah.

[00:36:12] Rob Goddard: And pressure and anxiety and time off, and you know, because they’re not well.

[00:36:18] Rob Goddard: So I think that’s the other part of scaling up. We’ve got to think about the people around us that are going to deliver that growth.

[00:36:26] Rob Goddard: How do we position that message to them? Because a lot of human beings. Probably the majority don’t take change. Well, they look at the negative. The the English way to pick up on your

[00:36:40] Rob Goddard: as business owners. We look at glass half full. We’re looking at, you know, bigger business, better business, more profitable, bigger dividends for the owners.

[00:36:50] Rob Goddard: But that’s not how the team would necessarily see it. So I think that that needs careful thinking through.

[00:36:57] Graham Stephen: That’s a great point, Rob, I can. I can see we’re gonna have to have a follow up podcast. Because, I think yeah, we’ve got so much we can dive into. But I think for today’s episode, I want to kind of yeah, maybe deal 2 or 3 more questions and and then wrap up. But

[00:37:11] Graham Stephen: 1st thing I want you to myth bust for us is this notion that business owners say, I’ll think about selling when I’m ready. Okay, you know, or you know. So they have this mindset that they’re, gonna you know, put their business on a broker site, and it’s going to sell within 6 weeks.

[00:37:31] Rob Goddard: Great.

[00:37:32] Graham Stephen: That myth for us? What does reality look like.

[00:37:36] Rob Goddard: Oh, dear, yeah, look, build it, and they will come. Yeah, they don’t.

[00:37:42] Graham Stephen: Yeah.

[00:37:42] Rob Goddard: If you want to sell a business, you got to work at it, or, more particularly, get get someone on board that’s experienced and knowledgeable can do it for you.

[00:37:53] Rob Goddard: I would never advise Diy selling of businesses, but on the part of the current owners, because they’ve got business to run and selling a business is a second job.

[00:38:03] Rob Goddard: It. It ain’t easy to sell a business. There’s more businesses for sale than there are. Buyers always has been, and I would venture to suggest always will be.

[00:38:15] Rob Goddard: there are tactics and perhaps in another. Podcast there are tactics. You can use as a seller to increase price and improve terms.

[00:38:25] Rob Goddard: So yeah, it will never take 6 weeks to sell a business, not unless it’s distressed and in insolvency.

[00:38:34] Rob Goddard: That will take a few weeks. Typically, I don’t know about South Africa or other countries, but for us.

[00:38:41] Rob Goddard: 9 to 12 months is a pretty pretty typical timeframe. We always say 12 months. You need to have in your head 12 months to allocate.

[00:38:54] Rob Goddard: So.

[00:38:54] Graham Stephen: That’s after the businesses sale ready. So in that process can sometimes take even longer. Right? You know. I mean, that can take what anywhere from 18 to 24 months, sometimes to actually get the business in that state.

[00:39:05] Rob Goddard: Oh, easy! That that’s why. At Sq. We concentrate on the the coaching, training, equipping really of businesses years before they even get in front of a potential buyer

[00:39:18] Rob Goddard: because we.

[00:39:19] Graham Stephen: Absolutely.

[00:39:20] Rob Goddard: And when they say No, I’m not thinking I’m not thinking about. When I’m ready they’re never ready.

[00:39:27] Rob Goddard: Business are never ready to sell their business. It hit. It hits them hard, I would say, and I’ve had several 100 go through under my belt.

[00:39:37] Rob Goddard: and it they do. The vast majority do have second thoughts later, in the process.

[00:39:43] Rob Goddard: which is quite a worry when you’re an M and a advisor because you’ve got a success Fee that’s waiting for completion.

[00:39:51] Rob Goddard: Usually it’s that they’re scared about the unknown. They’ve built this company and this lifestyle that’s predictable pretty predictable.

[00:40:02] Rob Goddard: Now they’re caching it in. And what are they going to do? It’s like they’re looking over the edge of a big black hole.

[00:40:11] Rob Goddard: So one of the things we do when we’re coaching, mentoring, and equipping business owners is to think about life after sale.

[00:40:20] Rob Goddard: So it’s all about envisioning. We get them to do a vision board. What does life look for? You look like for you.

[00:40:28] Rob Goddard: including the magic number. But it’s more than the magic number. It’s the things in life that you want to do

[00:40:34] Rob Goddard: that. Selling the business will enable you to do. Not necessarily. It may be the money to fund it. It might be just that you have a release of time, your diary becomes open.

[00:40:47] Graham Stephen: The money is the enable. Often it’s it’s more than that. And without that I’ve seen so many entrepreneurs, you know, 6 months in. They’re like, Well, I’m bored. What do they do? They start another business, you know. So a few more zeros in their bank account often. But I would ask one last question before. Sort of a fun ending of question is, you know.

[00:41:10] Graham Stephen: we speak often about choosing the right advisor. You know. Sq, you guys have put together a really great team, you know, it’s an experienced team of people who’ve been there. They’ve been in the trenches and all of that.

[00:41:23] Graham Stephen: What questions should an owner be asking before appointing an advisor, or sell side team if you want to cause it that and call it that? You know. I mean, what are the key questions that owner should be asking.

[00:41:35] Rob Goddard: So great question. And and some of this comes out of experience of being on the buy side.

[00:41:43] Rob Goddard: Because we meet, sell side brokers and advisors. The 1st thing to establish is, what personal experience have they got? What’s their track record in doing deals.

[00:41:56] Rob Goddard: How many, what transactions, you know? Where are the case? Studies? There are too many people that are just doing it as a job in our industry.

[00:42:06] Graham Stephen: And.

[00:42:07] Rob Goddard: They’ve never been a business owner that doesn’t preclude you from doing advisory piece, but it does help. If you’ve been a business owner and you’ve sold at least one business. You’ve gone through that emotional journey.

[00:42:20] Rob Goddard: That’s real added value for a client, because you understand. And you can empathize so definitely find out their career history.

[00:42:29] Rob Goddard: How long they’ve been doing it. Talk about some of the transactions they’ve been involved in.

[00:42:35] Rob Goddard: You want to make sure that you speak with more than one company.

[00:42:41] Rob Goddard: I think that’s true of anything, isn’t it? You get a few views. One of the things to look out for is an overvaluation which will be music to your ears. Graham, I know.

[00:42:51] Graham Stephen: Hmm.

[00:42:52] Rob Goddard: There are too many 3rd party advisory firms, business brokers that are overvaluing businesses on purpose.

[00:43:01] Graham Stephen: Because and the reason they’re doing that is, they’re going for the retained work.

[00:43:05] Rob Goddard: They want to get paid every month. Whether or not they sell is secondary. They want the retainer, because that’s the that’s the short term cash.

[00:43:13] Rob Goddard: That’s wrong. It should be giving an honest market relevant business valuation, which is why we work with your firm because it gives us a starting point isn’t an endpoint, but it gives us a starting point. It’s a reality check.

[00:43:29] Rob Goddard: So I would look out to go back to your question when you’re looking for a an advisor to help you on that journey

[00:43:37] Rob Goddard: is ask them to value the business. Watch out for the word. Could it could be worth a gazillion dollars. Well, yeah, the word could

[00:43:49] Rob Goddard: better to have should than could.

[00:43:53] Graham Stephen: Yeah. And then we, we have a saying, I know it’s very much aligned to your values, is it’s a core part of the way we do businesses. We’ll tell the client

[00:44:01] Graham Stephen: what they need to hear and not what they want to hear, and that’s often often hard, you know. So sometimes it’s also a bit of a red flag. If if somebody’s appointing you as an advisor or whatever, and they’re not asking the right questions, right? You’re sitting on the other side of the equation. So sometimes you get these red flags going off. And you think, actually, do we really want them as a client. So it works both ways. Right? The quality of the questions a prospective client asks you

[00:44:27] Graham Stephen: is a good indicator, I guess, for you is, should we take them on as a client, and can we help them? It’s it’s got to be a a 2 sided equation right.

[00:44:36] Rob Goddard: Well, we, we like using your service because it gives an independent objective view as to value, and it measures it in 3 ways, gives a valuation range, which is a starting point for a conversation. That’s that’s what it is. So beware of brokers and advisors saying it’s worth 9 million. When other people have said, it’s probably worth 3.5.

[00:45:00] Graham Stephen: Don’t. Don’t challenge the 9 million valuation broker. But just say so. That’s interesting. How did you get to that? Because we’re only making half a million pounds. So that’s 8 years 18 years. Profit.

[00:45:16] Rob Goddard: Who would, who would pay a multiple of 18 for my company? I don’t. I don’t understand that.

[00:45:24] Graham Stephen: Absolutely, Rob, we’ll ask you one last question. There’s so much there’s so much gold in this podcast. And and you know, I definitely think we’re going to have to get you back on. Maybe when I’m in London in the next month or so, we should do it in person. But if you if you could give everyone just sort of one piece of advice or one habit that they should start tomorrow, what would that be?

[00:45:51] Rob Goddard: Oh, definitely! Empower your team, give them more, give them more responsibility

[00:45:59] Rob Goddard: and encourage them. You might have to pay them more, some of them for that. But that’s fine. But upskill your team.

[00:46:06] Rob Goddard: because do you know what come the day when you want to cash in and retire to Honolulu, or wherever it is you want to go to and sip pina coladas from the beach.

[00:46:16] Rob Goddard: you. Your. The value of your business is in the team, and it’s not in you. That means you’re gonna get a premium price or should mean you get a premium price.

[00:46:26] Graham Stephen: Yeah, such powerful advice. You know that owner dependency. Sounds like such a negative. I like the way you frame it, because empower your team is so much more.

[00:46:36] Graham Stephen: What’s the word empowering? Then then reduce owner dependence. It’s an important reframing, as well, you know. So, Rob, you know, I just want to. Firstly thank you for joining us, I think, just to recap on some of the key takeaways. You know, you spoke about a bit about your personal journey, and and you know the the sort of ups and downs and emotional traumas and and resilience you spoke about that magic number. Some of the scaling levers.

[00:47:03] Graham Stephen: the preparation and the exit and optionality around that, and also the importance of having someone who you can trust in your corner, who’s going to give you independent, objective

[00:47:15] Graham Stephen: advice, but delivered with the right degree of compassion and understanding. I think it’s a fine balance, so I think a powerful message for any entrepreneur to take out of this in closing. Can you just share 2 things, one, any last piece of advice that you want to leave with the listeners, and then finally, your contact details. How can somebody get hold of you? How can they reach out to you.

[00:47:40] Rob Goddard: Yeah, I guess to see things in perspective. Just thinking about my old boss from years ago. Don’t don’t get too excited in the in the highs and too low with the lows. Just keep things in perspective. There are more important things than running a business.

[00:47:56] Graham Stephen: Hmm.

[00:47:56] Rob Goddard: There are. I have to say that as a recovering workaholic, there are more important things.

[00:48:02] Rob Goddard: Keep your family close to you and and your friends, because at the end of the day businesses come and go, but hopefully your friends and your family, close friends and family will stay there

[00:48:14] Rob Goddard: for the rest of your lifetime. So invest in those people and spend time with them. Don’t don’t let the business crowd it out.

[00:48:22] Rob Goddard: Yeah. The best way to get hold of me. I’ve got a Linkedin profile. I tend to put out regular content. I always link with people. Unless and then I sometimes I have to unlink with them. If they sell, send me a sales pitch within a second of linking.

[00:48:40] Graham Stephen: You know, there’s an automation running there somewhere.

[00:48:44] Rob Goddard: At the end of it. I don’t. Even if they may never be a client of mine in the future they may know someone that is relevant to what we do. So I’m always happy to link with people on Linkedin. That’s the best way, and then they can get free content. As I post it.

[00:49:00] Graham Stephen: Fantastic. So connect with you on Linkedin or or Look S. Cubed advisory website. I think it does pop up 1st on Google when I do the search so.

[00:49:09] Rob Goddard: All right. Yeah.

[00:49:10] Graham Stephen: Advisory, you can exactly.

[00:49:12] Rob Goddard: Yeah. It’s s cubedadvisory.com.

[00:49:14] Graham Stephen: Dot com correct? Yeah, Rob, wonderful to have. You have a great rest of the week, and to our listeners there I hope you took value out of this and join us next time, as we as we go deeper into building businesses of value. Thanks. Everyone.

[00:49:39] Graham Stephen: So stop recording.

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