John Jantsch: This episode of the Duct Tape Marketing broadcast is brought to you by Gusto, modern easy payroll benefits for small businesses across the country. And because you’re a listener you get three months free when you run your first payroll. Find out at gusto.com/tape.
John Jantsch: Hello. Welcome to another episode of the Duct Tape Marketing podcast. This is John Jantsch and my guest today is Brad Sugars. He is the founder and chairman of ActionCOACH, and the co-author of a book we’re going to talk about today, Pulling Profits Out of a Hat: Adding Zeroes to Your Company Isn’t Magic. Welcome back, Brad.
Brad Sugars: Hey, buddy. Good to be back, good to chat again.
John Jantsch: I’m a little disappointed in the title of this book because you claim that it’s not magic, and aren’t we all just looking for magic?
Brad Sugars: It was funny. I sat down with a buddy of mine at lunch about two years ago, and he says to me, “It just seems like magic the way these companies like Ikea, and Amazon, it just seems like magic the way they all keep growing and stuff.” I sat there and I said, “You don’t really believe that do you because, you know, magic is just a system as well. Magic is just a methodology of getting a result that looks like accidents. It’s just a system that people follow right behind it.” I think that he looked at me weird, and I looked at him weird. I said, “Do you know what, I’m going to write a book on this,” and so here we are two years later.
John Jantsch: I think you hit on a really good point. I think a lot of companies that do things, not household named company, I mean any company that you look at from the outside, and it just you use magic, or whatever term you use. I think sometimes magic, or genius, or growth it involves so many things that we don’t see, or don’t understand. I think the really great companies just make it look easy, don’t they?
Brad Sugars: Oh look, I think that the greatest of anything, any greats in anything, sport, acting, music, business, you name it, the greats make it look easy. My wife makes it look easy running our house with five kids and all of these things going on and stuff. That’s not that easy. It’s tough.
Brad Sugars: But, I think what we found in writing Pulling Profits is that when you look at businesses that are having real growth, and I mean exponential year-on-year growth, you notice something about them that is just different to other companies. It starts with that mindset of it is possible to have that level of growth.
John Jantsch: Let’s unpack that term because I was going to ask you about it because you use it throughout the book, this idea of exponential growth. I mean how is that different from year-over-year growth?
Brad Sugars: Well let’s think about this, so we go into most business scenarios, and you chat with the average business person, and they’re sitting there saying, “Well you know, what we’re looking for here is we’re looking for 20% or 30% growth.” My first challenge to all of them is, “Well, what about 10 times, 20 times, 30 times growth?” They look at you like you’re very weird. Multiplication growth is different to percentage growth. It’s like, “Well, how would we do that? What would have to happen in order for us to do that?” That’s where just that mental change just has to be there for a person to actually understand it. Probably the best example is that… Do you remember the movie, what was it called, The Founder, The Ray Kroc movie? Did you ever see that one?
John Jantsch: I did not.
Brad Sugars: I use the example of that because it shouldn’t have been The Founder. It should have been The Finder. Ray Kroc came along and he found this business, the McDonald Brothers. The McDonald Brothers were looking for annual growth, percentage growth. Ray Kroc comes in, and looks at it differently and say, “Okay, how do we put this on every street corner in America, and eventually every street corner in the world?” It’s looking at it from a different perspective.
Brad Sugars: For me as an entrepreneur, right, I mean I just bought a company down in Melbourne, Australia. It’s a commercial cleaning business, and one down in Houston, Texas, a property management company. I look at them and they’re amazing businesses with a singular office. They do phenomenal things, great marketing, great sales systems, good culture, all of that sort of stuff. However, at no point are they considering opening up across the US, or across England, or across the world for that matter, and so it’s really just starting with that mindset, I guess, of exponential growth.
John Jantsch: Well, and you used the word mindset. For a lot of people they can’t ever get past this because they won’t allow themselves think that way.
Brad Sugars: I got to tell you buddy, it’s scary to think, okay, what if we went for 10 times, or 20 times growth and missed it? At least at 30% I’m safe. There is no real risk. All I got to do is work a little bit harder, a little bit more, push my people a bit better, train them a bit better, get a few more customers. Do you know what I mean? It’s that safety march. But, when we go and see companies that are growing exponentially, and we start seeing that level of just domination of a market very quickly, people sit up and go, “Oh, I don’t think we could do that.” Well yeah, you can, but there is a systematic methodology to it.
John Jantsch: Let’s talk about this word profit. I think one of the things that drives a lot of company is that bottom line mentality. That to reach for 10 times sometimes means maybe you won’t make a profit, or worse maybe you’ll have to kill the profit you’re already making because it’s going to require you to do things differently. You actually take profit on, and say maybe it’s not the sacred cow that it used to be.
Brad Sugars: The interesting thing is that what we look at in most business today, and this is where big business I guess has had this understanding for a long time, it’s the value of the company that we’re looking to build not necessarily the immediate profit of the business. Small business unfortunately lives with a day-to-day profit mentality rather than what’s the value of the business we’re building?
Brad Sugars: Now, in the beginning I know with all of my small businesses when I first started out we needed that profit. We needed that tomorrow because if we didn’t have the profit we weren’t bootstrapping our way through, so I get that whole philosophy. But, I think that where we’re looking for profit, profit can be defined differently as we go forward in business today. Profit can be defined in retention of employees. It can be defined in retention of customers. It can be defined in how we add value to the community that we’re a part of, so there is many different ways to look at it, and within the book we go through the five main constituents and how you build, so that each of them actually gets a win.
Brad Sugars: Absolutely, I’m an accountant by training. The bottom line has still got to be there. You got to have that profitability for valuation. You’ve got to have that profitability to fund growth to do all those things. That’s an interesting debate, my friend, and I’m sure that we can continue it for years and years.
John Jantsch: Well, it’s interesting. You mentioned, and you talked about it in the book, the companies that do what you describe, pulling profits out of a hat, adding zeroes, do meet a win for all these constituencies. Do you find that companies that do that, do that intentionally, or maybe that’s just built into their mission, or who they are, or what they believe, and then it happens, or does it have to really be something that you sit down in a room and say, we’re going to do XYZ?
Brad Sugars: I personally think it’s about planning it because a lot of the companies we look at when it comes to matching the five constituencies, the five core disciplines, and when I look at the five core disciplines in the average organizations what I start to see is they’re pretty good at two, three of them. But then in the other two areas… And it normally depends on where the CEO or where the C level execs are strong. If they’re real strong in that people side of the business then obviously they’re going to have a fairly strong mission, and people development, and that sort of thing. It’s really a balancing act, my friend. I think that some people naturally stumble across it, but in most cases it’s a planned growth strategy.
John Jantsch: Let’s name them, strategy, business development, people, execution, and mission. I think you hit on a really good point. A lot of founders, solopreneurs, they start a company, they’re good at strategy, or they were great marketers, or they’re good at execution, and there is probably not too many human beings that are just wired to be good at all five of those disciplines, so how do you bring them all together?
Brad Sugars: It’s interesting because now through this book we’ve now developed a program for businesses to do that. What we find though buddy is this, and if I can spend a minute defining each one in a moment, but what we find is this, that in a business where the C level execs all just keep hiring other C level execs like themselves, or with an owner who hires people like themselves, very quickly the business leans in one direction. The differentiation of people is a core to a great team, and that’s a big part of it.
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John Jantsch: We will come back maybe in the course of doing this, or you can outline them all, but one of the things I found interesting, most people start with mission. I’m not saying you necessarily put these in order, but I found it interesting that mission was the fifth of the disciplines.
Brad Sugars: If I’m going to start with a business, the first thing I look at is strategy because without strategy the business and how it delivers… And I’m not talking about are we using Facebook advertising? That’s a tactic. A strategy is the core of the business. Let’s say I went into the music business. I can go into the music business and I can be a drummer in a band. I’m still in the music business, or I can be Spotify, or iTunes, or something like that, or I can be right in the middle and be in a music production house, or something. Do you know what I mean? The strategy within which you attack it.
Brad Sugars: Even if you take iTunes, you go back to Apple’s strategy, their original strategy of make a computer sell a computer, they had to change strategy otherwise they were going to go bankrupt. Steve Jobs becomes a brilliant strategist and goes away and runs Pixar, learns leverage, which is one of the four components to strategy as well as learning great management, and leadership skills, comes back to Apple and says, “Hey, we got to get out of this make at once sell at once business,” and so he went into the music business where… And even more genius than me, Steve Jobs never make a song and sell them forever. I mean my definition of leverage is do the work once, get paid forever. If a business has to fight against leverage, if it’s getting a customer once and then they have to go and get another customer the next time, these are some of the things that fall under strategy.
Brad Sugars: Scalability falls under strategy. If a business today has to have human interaction to make a sale then its scalability factor is limited. We look at how Uber took out the human factor from the taxi business. Instead of having to make a phone call to a person who then dialed out and got another person to answer the phone call and then Uber goes straight through technology, no human interaction, boom, got the sale made. That’s how they can scale so fast.
John Jantsch: Do you know what’s interesting about that example is that technology was available to Yellow Taxi, but they choose not to employ it because it was going to shake up the status quo, and consequently they’re struggling now.
Brad Sugars: Well, the MP3 player was invented by Sony who is one of the biggest music companies in the world. Now, they’re paying 30 cents on the dollar to Apple to sell every song they make on a machine they invented, so just because you… That’s where execution comes in, I guess. That’s one of the five disciplines as well.
Brad Sugars: But also mission, I go back to mission because you mentioned that, and I think that one is really important, and whether it’s fifth, or… Because here’s the thing about the five of them, if I go into a company that’s really good at mission, and really good at say people, and execution, but its business development is struggling then it doesn’t matter what order we put them in because every business is different.
Brad Sugars: Apple, again, another success story on mission because mission is all about the word love in my opinion. Do your customers love buying from you? Do your staff love coming to work? In the days of the lowest levels of employee engagement we’ve seen in a long time, or maybe it’s just measured today, and it wasn’t always, we sit here thinking how do we get our people to love coming to work, and how do we get our customers to love buying from us, not just enjoy it, and not just buy from us because we’re cheaper, or we got better marketing, but because they love doing a transaction with us?
John Jantsch: Yeah. I think one of the things that’s tough for a lot of companies is some of these things, some of your disciplines require investment that maybe doesn’t drop to the bottom line, at least not immediately. I mean we all know it does.
Brad Sugars: Yeah.
John Jantsch: You’re happy engaged employees drop to the bottom line whether, or not they’re making a sale. I think that isn’t that one of the challenges for a lot of people? I don’t want to say it’s a leap of faith, but it’s a hey, we’re going to invest in mission and in people, and those may not immediately make a sale.
Brad Sugars: Yeah buddy look, for many years investing in my team, and investing in the humans in my business because that’s if you look at the discipline of people and try, and describe it real quick it’s how you build your people determines how they build your business. And if you don’t build your people then don’t expect them to… You can’t expect people to outperform their training. Let’s just make it that blunt.
Brad Sugars: I remember as a young man going to my dad, I think I was about 20, or 21, and I said to him, “Dad, I just can’t get good people. I can’t hire motivated good people.” He looked me dead in the eye and said, “Son, you get the people you deserve. You’re an average manager running an average business. The highest caliber of employee you should expect is average.” I’m like, “Hey, thanks dad. That was really, really great advice,” and it was. At the time, it stung like anything. I mean it was like thanks, wow.
Brad Sugars: But, what I’ve had to learn and what a lot of people have to learn is that if you don’t build your people… I mean how you recruit, hire, train, induct, mentor, manage, lead your people today determines where your business is at tomorrow. The longevity of business is all about building great people who build great businesses. I think that whole section of the book is quite eye-opening for a lot of people about how they want to build long term.
John Jantsch: I think it really comes down to how the leader of said business views those disciplines because there are a heck of a lot of business owners that I talk to that still think marketing, or business development in this case is a cost and that people are a cost as opposed to an investment.
Brad Sugars: I love that you bring that up because you and I every day agree on this wholeheartedly. The reality of marketing is if you’re doing it wrong it is an expense. If you’re doing it wrong it’s the dumbest thing you can ever do in your business, but if you’re doing it right it’s the world’s best investment, business development, your sales, your marketing, your customer service. I love that you use the word discipline now with me because we put it in this book as a discipline of business development and [inaudible] five disciplines because it’s not something you got right once and then you can just let it run. Your sales team needs to be trained daily, and brought up to speed daily because the markets shift.
Brad Sugars: I was with someone the other day and I said, “Tell me, do your customers know more about your competitors than your salespeople?” He said, “Oh, probably.” I said, “Well, then you’re out of business.” He looked at me and said, “What do you mean?” I said, “Well, if I’m a customer and I know the benefits of your competitor better than your sales people do, you can’t sell me. I can sell you, and what I’m selling you is that you can’t help me,” so yeah. I mean I wrote that whole book, Buying Customers, to teach entrepreneurs and executives about the whole principles of how much money you need to invest to buy customers.
John Jantsch: Does what you’re outlining in, Pulling Profits, change the role of the typical leader?
Brad Sugars: Dang buddy, that’s a tough question. I don’t think it changes it. Actually, I’ll give you an answer that I got. I was in Dublin last year giving a speech. She was a fun one because before me was Lady Michelle Mone who is a baroness and after me was Sir Richard Branson, so it was like the lady, the convict, and the lord. Sending an Australia up between a lady and a lord is funny. But, I got offstage, shook Sir Richard’s hand. He went up and did his gig. There was a question for him that said, “Have you had to change your management now with millennials?” He said, “No, we’ve always done good management.” I thought about that for a minute. To answer your question, does it change, no, it just requires you to actually do it. A great CEO, or a great entrepreneur will cover all five disciplines. I think that’s probably the simplest way to answer it.
John Jantsch: My follow-up to that really is, and I’m sure you hear this sometimes, it’s going to continue to evolve, it’s not… none of these disciplines are static as the company changes. I mean how do you keep this alive and fresh and engaging because it… I mean let’s face it, it’s exhausting to constantly be juggling all five of these balls?
Brad Sugars: Yeah, so is parenting. I got five kids. Juggling that is the same, I guess. I think it comes back to a very simple understanding and that is that do you remember Bill Gates did an interview many years ago where they said to him, “Are you every worried about somebody?” He said, “Listen, there is a kid in a garage somewhere and trying to put Microsoft out of business.” He was right, but it was two kids in a dorm room, Lowrie and Sergei, and they almost got him.
Brad Sugars: The point behind that is that, that’s what I love about business. I love the fact that it’s always changing. I love the fact that it’s always growing and stuff. I can wait and follow, but the problem with imitation, or following someone else is that you’re second. The view don’t change too much, second, or third, but imitation doesn’t get there, so you’ve got to fall in love with the fact that you’ve got to keep growing and changing. I think the greatest execs and entrepreneurs do love that about business.
John Jantsch: Brad, where can people find out more? Obviously, at actioncoach.com, but also about the book itself?
Brad Sugars: The book, they can jump on pullingprofits.com, or any great bookstore, buddy, Amazon, Barnes and Noble, you name it. It’s sitting on their shelves I’m sure, and they’re selling them for me, or they can jump on any of the social media platforms. You’ll find me on Insta, and Facebook, and LinkedIn, and You Tube, and all those, probably not Pinterest, no you won’t, actually definitely not Pinterest. I’m not that crafty.
John Jantsch: One of those things I meant to point that I forgot, one of the things I love in chapter six you show each of these disciplines we’ve been talking about. You actually had an assessment for us, so we can not only fully, or more fully understand the discipline, but also measure where we are in that. I love books and resources that do that because I think in some cases maybe we learn better by doing that kind of assessment.
Brad Sugars: Yeah, it’s interesting. When we sit with businesses, and they fulfill that assessment they start to really understand a bit of a benchmark as to where they’re at versus other businesses not just within their own realm because sometimes the challenge is we can’t see the forest through the trees. We might think, okay, we’re doing great at the people as a discipline, but then we go and do the tests and we realize, hang on, we’re not keeping up where the market is today.
John Jantsch: Yeah. It’s hard sometimes to… You get really lulled to sleep sometimes in your own business, and it really does take a look outside to, or somebody else, a third party come looking in to help out.
Brad Sugars: Hence, ActionCOACH, buddy. That’s probably the reason why ActionCOACH is still around for that exact reason. It’s hard to see what’s in your own business.
John Jantsch: Pulling Profits Out of a Hat, co-authored by Brad Sugars. Thanks, Brad. Hopefully, we’ll catch up with you sometime out there on the road.
Brad Sugars: Hey John, great to be here. By the way, anyone listening to this for the first time please subscribe. I love what you’re doing, John. I’m really a fan of all of the podcasts. Thanks, buddy.