Ep 65 - "Dig A Moat And Build A Castle" With Gokul

0:00 Chris there. Yes, sir. How are you doing? I'm good. I got to come out of the gate swinging now so you don't steal my opener. So yeah, I peed in my corner on that one. Did you see how fast I came in swinging? You're always good for like, I love your little analogies. I know. These little wordisms that you throw out. I used to say stuff like that, like when we'd secure a big fire job, be like, did you guys piss in your corner? We probably should unpack that in the show sometime. Oh my goodness. Hey, who's our guest today, my friend? So today, we have the founder and CEO of Restoration Brokers of America, Mr. Gokul Padmanabhan. Second time. Yeah. Second time on the show. Yep. And I think what I really appreciate about him... I mean, he's obviously one of the preeminent brokers in our industry.

0:43 I think the last statistic we... we heard was like $600 million in restoration transactions. I mean, incredibly successful. No slouch. No slouch. Yeah, works with some of the top brands in the country. And just when you talk to them, has a real holistic view of businesses. I think you kind of anticipate when you start talking mergers and acquisitions, and you've got a little experience with private equity ourselves and... And it's like, you expect it to be so numbers-driven and sterile and black and white. And it is what it is. And then you talk to Gokul and it's like, he embraces all of the intangibles.

1:25 And I think he... We didn't get into it heavy today in terms of selling your business and all that kind of stuff. But... one of the common themes with him is all those intangibles matter a whole lot. Yeah. You know, in previous conversations, we'd focus more on bench depth, you know, and how mission critical that is for the value of your business. But today, you know, one of those themes and I just loved it was dig a moat. Yeah. And build a castle. Yeah. And we won't break that down too much, but, he talks about the importance of profits. And he gives some really practical advice. And we contrast a bit in this conversation between businesses that are just not sellable.

2:06 And some people listening are going to recognize themselves in that part of the conversation. Absolutely. And then contrasting with high performance businesses he's seen, just some of the behaviors and priorities that they have. Yeah. Another thing too I want people to listen for is he talks about There's some really good gold nuggets in this one. Oh, there's good. Yeah. Like, you know, whenever Brandon and I are writing notes, it's... You know, anyway, we know it's been a great show. But he talks about the four job descriptions that business owners really have to graduate through. Yeah. As the business group. Graduate through is the key part to that. Yeah. Yeah. Yeah. And I'm just going to give two, okay, as a little teaser. He talks about when every business owner starts their business, they have to put on the rainmaker role.

2:49 Yeah. Yeah, my ears perked up. They have to be focused on sales. Yeah. It's just the nature of things. They have to make the phone ring. They are the primary sales leader. And then, and it depends for people, usually around that 2, 3, 4, 5 million mark, they realize, I have to become a team builder. I can no longer be the face of the business that's making the phone ring, that's generating all the sales. I have to now shift my focus to building out a team that can make profits. That's right. And he goes on and it's really good. So listen for that in the show. But there's just some great advice for... I think this show is... If you're an owner of a restoration company, this show is really specifically for you.

3:34 Yeah. It doesn't mean that all the rest of us maybe who are aspiring owners of restoration companies or GMs or whatever. I mean, there's lots of good stuff in here. But boy, if you're an owner, man, he's talking directly to you in this episode. Oh, for sure. Yeah. Yeah. Let's get into it, man. Let's do it. All right. Welcome back to the Head, Heart & Boots podcast. I'm Chris. And I'm Brandon. Join us as we wrestle with what it takes to transform ourselves and the businesses we lead. Man, I love this industry. Gokul, welcome to the show, my friend. This is round two, hopefully round of two of many. Man, you've been in the heart of not just growing your business, but obviously everything that's impacting Florida and all the things.

4:20 But in the midst of that, you made time for us and you literally started out our conversation together and you said, guys... I've been thinking through what makes a high-performance company. And I don't know that there's too many people in our industry better suited to give us some perspective on this. But let's get right into it, man. High-performance company, I think first, what does that mean to you? When you evaluate something, you say, Hey, these fall into the high-performance category. What does that look like to you? And then take it away, man. You've been chewing on this. Yeah, yeah. I've been thinking about this a lot. So thanks for having me, guys. I really appreciate it. And, you know, it's the end of the year.

5:02 And I'm a small business owner, like probably everybody here listening to your show. And it's a great time to reflect on what's working and what's not. And when I hit you earlier today, man, I've been thinking a lot about it. It's really a personal journey. I've been thinking a lot about RBA and what does a high-performance RBA look like. And then I look at, we're in a very unique spot. We look at companies and talk to owners from all over the country. So we get a really unique viewpoint of what's working and what's not. We look at more P&Ls and more financials and talk to more owners. than probably anybody in the country as far as how their business is run and how they're valued and what they're doing just from the role that we play within the industry.

5:48 So it was kind of trying to learn from that and understand that and then looking at my own company and just saying, okay, what are the things I should be focused on What are the things I should not be doing? And it's simple to say, but incredibly difficult to achieve. So to me, there are some companies out there, every once in a while, I'll talk to an owner, and you just look at the company and you're like, wow. And then you look at some of them and you scratch your head and you go, well, what is the difference there? There's a lot of differences, but at a really high level, it's very simple. They're on purpose. The company knows exactly why it exists and what it does and what it is supposed to be doing. The employees understand their vision and mission clearly, without a doubt, and they're rolling.

6:32 you've got an owner that's engaged and on purpose. Correct? I mean, it's literally those three things. Right? Easy to say, but incredibly difficult to achieve. And I've been thinking about that for RBA as well. Let's get into these because I think the reality of it is that sometimes we talk about some version of these topics and we think, gosh, we're kind of repeating the same message. And what I'm shocked by, not just in our own operation or the businesses we see is... This is the message that has to be repeated because we get so caught up in chasing shiny things that we lose touch on these core aspects of our business that take years to master. And really, the more time you spend energy and resources mastering them, you only continue to get more and more return.

7:17 I don't think there's a point where you tap out. on the return from your investment of energy in these categories. So walk us through them. Where do you want to start? And let's just start hammering on that particular focus. So let's talk about that, right? I think the reason your comment resonates, because I think the reason... why some companies fail and some companies do succeed. People are always looking for the next shiny thing and it doesn't exist. You know what I mean? Delighting your customers today to grow your business was the same 100 years ago. So the fundamentals of the game never changes. And I think, me included, you just got to stop searching for all these magic formulas and say, what are the fundamentals?

8:01 And let me make sure that I block and tackle. really the name of the game. Right? Yeah, I think you're right. It's fundamentals, right? Every good sports coach, if you're going to hang in the sports coach analogy, it's the men and women that get refocused on the foundational elements, the foundational practices. I heard somebody say, I was listening to a podcast this morning and the individual said, I've never done anything extraordinary. I've done the hard things consistently. Correct. And I think that's exactly what you're talking about is we have to do the hard things consistently. So what are the hard things, man? You put it into three categories. Hit those again and let's tackle one. Yeah, man.

8:41 You know, I think about it and I think about all the companies we look at and I think about what are the really good ones doing well, right? And I wrote some notes down. Let me just read them to you, right? Yeah. I can tell you they're all extremely customer-centric. Okay, those companies are built around the customer. There's no doubt about it, right? You stop there for a second. Give some examples of... I mean, because you're getting in and you're having all kinds of interactions with people at different stages of, I'm getting ready to sell my business, I'm not sure if I want to, etc. But how does that show up? A customer-centric... business owner or business? What are some of the attributes of that? I'll give you some examples. So if you go on Google and you look at customer reviews, correct, it's the little things. And you'll see some reviews there where they're really connected.

9:25 In business, you got to connect before you convert. And that's what customer-centric is all about. When we go to a loss or when I talk to a customer that wants to sell a company, there's a tendency to rush to the technical side of it and say, hey, how do you want to do it? How can I help you? How can you help me? The real great customer-centric companies are connecting first. That means they care. Hey, how can I help you? What can I do for you? Once you connect and develop the high trust, then anything is possible out of that foundation. So great companies connect with their customers. Okay, whether it's helping out in the community, being involved in the community, the way they approach a loss, the way they talk to the customer that first 10 minutes they're there, the way they continue to talk to the customer every other day throughout the loss.

10:14 It's the little things that cost nothing. Yeah, we talk about how we make people feel. Correct. In the midst of doing our process is the paramount thing. In the world of tech and automatic emails and robots and cloud-based systems, I think the world is just starving for companies that just want to shake your hand and say, I got you. Yeah. So I don't think the bar is really high. I just think you've got to be reasonably customer-centric. Dude, I love that. I think this is probably one of those topics we could hang all day. But two things I just want to highlight. Connect before you convert. That's monster. And I think people need to really think about what you just said there.

10:56 Write it out somewhere, guys, and come back to that in your think time. But then this idea of people are desperate for somebody to shake their hand and tell them I care. I'm here for you. Absolutely. That's huge, man. It's huge. And it's what a lot of us got in this industry. Everybody wants to shoot you an email. They want to shoot you a text. They want to shoot you a video, bomb on video. They want to give you user ID passwords for their portal so you can look at updates. Nothing substitutes a quick five-second phone call that just says, here's my update on your job. Yeah. Right? And when you look at connecting, and it doesn't matter, you got to convert before you convert.

11:36 Whether you're connecting with an adjuster, whether you're connecting with a referral source, an insurance agency, a property management company, let's just go down the road. Okay. Your customers, it doesn't matter. Your adjuster. the basis of all incredibly meaningful advances in your business comes through connection. I love that. I have owners that will call me and say, Oh, I wish I could run a business without customers. And I don't need to go anything beyond that. I know that business is in the toilet. It's an unsellable business worth next to zero. Reality check. I can tell you that, right? Because I can tell you because they're not connecting. They're hating it. They're on the other side of it.

12:17 Okay. And there's no reason for them to exist. I don't even need to look at their financials. I don't even need to look at anything. Or charts. I can tell you pretty much where the company has landed. The data is only going to affirm the original story. Yeah. I mean, listen, it's a world of all this tech and all this stuff and mass emails and... There's nothing like picking up the phone and updating your customer once every so often. Yeah, I think storms like we've seen in Florida remind people of that. There's so many examples in these condensed formats of people just needing a hand up. There's just a friend, somebody to say, this sucks right now, but it's not forever.

13:00 Yeah. It's huge, man. Okay. Okay. Customer centric. You got two more. Totally. I'll give you some good ones for the day. No, this is great, man. I love it. Yeah. Yeah. Yeah. So that's number one. And tell you, and then unforced errors is number two. And when I say unforced errors, you know, the things that we make mistakes because nobody forces us to make them. We just take the eye off the ball. Correct. I mean, that's an unforced, like dropping a ball in football would be an unforced error. Correct. I mean, so companies that are really great. They don't drop the ball a lot. Okay. And that's the little, little, little things. Yeah. Okay. It's the mindset of the owner. It is making sure the warehouse is clean. It's making sure that if you have an angry customer, you're returning the call before the end of the day.

13:44 So it doesn't fester. It's if you know you've got a bad employee that's ruining the morale, it's taking it out. You know, it's making the micro decisions. Okay. that don't allow you to make any unforced errors. So great teams block and tackle really, really well day to day. Yeah. The basics. You know what I mean? Yep. Yep. You know, so if you look at an owner or a team that takes a customer recovery call, an angry customer on a Friday at three o'clock, and they don't connect with them, let's say till Tuesday, there's nothing I need to know about that company. I know it's not a high performance business. It'll never be. They know how to block and tackle. Yeah, the foundations are missing.

14:24 We call that gas. And that's called give a and then you can fill in the remainder there. The higher my team members gas is, you know, normally the better customer experience I tend to get right. You can't push a string. I can always tone somebody back a little bit or give them some different ways to deploy their energy. But I can't make people have enough energy to give a crap. And so I think that really is massive. You know, it's unforced errors and other things too, right? It's holding people accountable for the little things. It's making sure people are doing the job. It's being really good at Xactimate so you don't leave money on the table. So to me, this whole unforced error game is really what the owner tolerates.

15:07 So what you tolerate becomes your standard in your company. Okay. So if you tolerate things that things are falling through the cracks and things of that sort, then you just know that your company is going to make a lot of unfurls error. So all it is, is the standard you're setting for your company day to day, every day, block and tackle. Good companies do it really, really, really well. Really well consistently. So, you know, that's interesting. Let's hang there for just a minute is, I think most owners that we talk to fill this gap. sense of overwhelm. And a lot of times, it seems like they're attempting to control everything. And I think one of the things that we try to teach and work through with people is the return on investment of your energy.

15:51 And as soon as you've removed your ability to inspect your company, inspect our process, inspect execution in the field, as soon as you do then that's when that begins to just completely, I feel like, unravel out from underneath you. So in your sense of wanting to control or be cheap or try to have a skeleton crew, we ultimately are just creating this ongoing pain and chaos because we can't get above the fray enough to see... see the ship above the waves kind of thing, that's kind of the idea, right? Yeah. Is that what you're talking about here? Is just making sure we're in the right lane as a business owner to ensure we can expect what we're doing?

16:36 Yeah. I mean, it's understanding that you cannot make unforced mistakes as a business. There's all these other pressures that you cannot control. Correct? Correct. You can't control interest rates. You can't control not having enough employees. You know, I mean, these are macro kind of things. When I say unforced errors, you're saying, look at your business and saying, what you control, you do it really well and forget about everything else. And that to me comes more... from an owner mindset of having clarity on what is important in business. The minute you lose clarity, you lose focus. If you don't have clarity, you don't have standards. If you don't have standards, you tolerate everything. Yeah, it's all left for interpretation, right? It's all left for interpretation. And it changes week to week.

17:17 What's the flavor of the month, the flavor of the quarter? These things happen and then employees don't take you seriously and then you can't set a standard anymore. One of the things that we see so much of... In fact, Chris and I were just talking about this a lot in our personal life is just how hard it is to do the normal stuff enough times in a row that you actually yield the benefit from it. Just that consistency compounds and how hard it is to be consistent. And I think to myself within our businesses, if I can't journal five mornings in a row without some kind of accountability... how much harder then is it for an employee to show up every day and execute the way I want them to consistently without providing enough support or contingencies or processes or systems for them to execute that way because they're going to take the path of least resistance.

18:08 We're all going to have a bad day, a bad week, right? All the things. So yeah. Okay. The third one, man. Let's keep going. Here's what I find. I find great companies are focused on entrepreneurs and owners are focused on profits. Right. And not the top line is what you're saying. The reason a company exists is to create profit and to be able to do things with it, good things in your community. And it is amazing how many owners are focused on all these other things other than the reason a business exists is to serve your clients, serve your employees, and to create a profit while doing it. How often do you engage with a prospective client or a client and they don't know, they don't have a clear understanding of their EBITDA, how much money they're actually, profit they're actually making at the end of the day?

19:00 Like what if you had to throw a percentage? Great question. Over 50%. Wow. Okay. It's higher than I would assume. And I'm not surprised at the same time, right? Everybody's running... Listen, when you look at mindset, everybody's running their business out of a checkbook. Right. It's like going to an eye doctor for a headache. It doesn't tell you anything about your business. Right. Correct? Yeah. And you talked about fundamentals when we talked about, you've got to run it out of P&Ls. You cannot run it out of your checkbook. And I've seen companies with $20 million, $30 million in revenue where the owners have no idea what's going on. That's so unbelievable. And with all this new age stuff, I mean, it goes back to my earlier point of everybody trying to look for the next shiny thing and what's next and what's next.

19:43 And I've heard all these creative names. I'm a chief culture officer. What the hell is that? I mean, you're the CEO. If you don't want to be it, then don't be it. But you're not a culture officer. You're not a chief peacemaking officer. You're not a chief anything. If you own a company, you're the CEO, period. You either like it and grow into it or you don't. But that's my opinion. So I'll get off my own. I'm just venting. I like it. It's spicy, man. I wear all these different names, man. I'm the strategic advisor. What the heck is all that? And all that does is cloud everything. your judgments on why you exist as a company and why you should exist and why you will continue to exist, right?

20:29 So clarity is a lot when it comes to focus on profits. And I tell this to my team all the time. I said, guys, our job is only one thing. Dig a moat, build a castle. I tell it to them all the time. Every staff meeting, I'm like, how are we digging a moat? How are we building the castle? Okay, you got to unpack that. You got to unpack that. Digging a moat and building a castle. What does that mean? Dig a moat, build a castle. Okay. So am I here like defensible, right? Build the system, the platform. Yeah. Digging a moat is getting your branding and getting your differentiation and your value proposition and your customer service so good that no competitor ever come and raid your castle.

21:10 Yeah. That's what digging a moat is. You understand? Yeah. Absolutely. Building a castle is building profits. I always tell them, I say, I can sum up all the business in that one sentence. Dig a moat, build a castle. That's what every CEO should be doing. Correct? Yeah. Yeah. And that's what I'm saying. You've got to be focused on profits. Or another way to say it is, you know, you've got to be every day, dig a moat, build a castle. That's the only job. Everybody in your company has. There's nothing else. You're touching on something, I think, that crossover in a couple different lanes. But so first off, I have two thoughts on this. One is the ego. So for me, even in previous experiences, I will be the first to admit that learning how to keep profit was a skill set that developed later in my career versus earlier in my career.

21:59 And there are people in my sphere of influence that can attest to that. But one of the things I always had fun saying was, we have multiple locations. It's like top line is XYZ, and we have multiple locations. We're a regional provider. And I see now even talking to companies where they have six, seven plus locations. And when you really look at a lot of them, they're not profitable because we've got these repeated expenses to make it sound like we're bigger than we really are. But that product is not producing any profit. And it's probably because it doesn't have some of these other things in line to create that. But so anyways, that's one thing I'd just like to get your perspective on is like, how often are you having to tell people like, this isn't about an ego, this is about real life fruits of your labor kind of thing.

22:46 Oh, it's one of the toughest calls I make every week. Every Friday afternoon, I make calls. I call it my customer recovery hour. And what it is, is calling my clients and telling them the business is not sellable or it's not worth what it's... Giving them bad news. And I've been doing this for 15 years. I still can't get used to it. You know what I mean? I like, I got to drive myself to do it. And I'll be honest with you. Sometimes I'll write their names in the back of an envelope and I'll go sit somewhere and do it. I just can't, it's tough. You know, so I got to have, I got to find things to do. Give me some Novocaine, so to speak, you know, before I do it. You know, they're incredibly tough. You know, the things that we're talking about today affects people in big ways.

23:27 And they're not some theory sitting in some PowerPoint presentation. I mean, these are things that we've inferred and we've researched and we've talked about from real people. You know, hundreds of restoration owners that we talked to. We've talked to, I'll tell you, in the last quarter... I just got the numbers yesterday. We talked to 104 restoration owners last quarter. Wow. At different levels. And how many weren't ready to sell? 94. Wow. That's a lot of difficult conversations. Yeah. For those of you like me that are a little math challenged, that's very high. It's high. Yeah, there you go. Unbelievable.

24:09 Yeah, not focused on profits. And some of those calls are great because we'll advise our clients. We'll say, here's a roadmap. Here's how you got to go get there. And they'll take it and really make some changes and go do it. And some of them will hang up. So it's like it goes to the extreme. They're just really mad because they find themselves backed against the corner. So you got to focus on profits. But if they conscientiously work on digging a moat, building a cask, How did you do this? Yeah. Right? Yeah. So we've all had a lot of experience with restoration company owners not focusing on the profits or not having a clear understanding of it. What, when you look at high performance companies that you've worked with and helped sell and so forth, what are some of the critical disciplines or language or behaviors that you see them doing that focuses on the profits?

24:59 Oh, it's real simple. Okay. Real simple. All the owners understand financials. They understand accounting, not from taxes and CPAs. But they understand basic accounting and basic ratios on what's going on. They're looking at it. They know what they want. If you understand, then you look at it. You know what I mean? If you don't understand, you just depend on your accountant or whoever, your bookkeeper, whatever it is. So accounting is the language of business. And if you're playing the CEO role, in my opinion, you got to know it. You don't have to be a CPA, but you got to know your way around financials and you got to know your way around what a balance sheet tells you, what a P&L tells you, what cash accrual reports, gross margins, net margins, year over year comparison, year to date comparisons.

25:53 And some basic ratios, you know, CapEx, how much money you're investing back into the business. Opportunity cost is another one. You know, hey, if I go do this, what else am I losing on? And is that a better investment for me? You know, so there's some basic, basic things, you know, a rate of return. What are your net net margins? Your EBITDA, adjusted EBITDA. So there's about, you know, 10 things you can, you need to know. So that is the number one difference is people understand it. And along those same lines, the best and the most profitable companies either have a CFO, a chief financial officer that watches the numbers for the owner and... Oh, they outsource that part of it.

26:34 Yeah. Right? So they literally have a financial guy looking at their numbers all the time and saying, Hey, here's something you should look at. Or here's a red circle that you should look at. We need to make adjustments here. And I know you opened the second branch. But it's sucking up all your profits and you need to make a decision whether to shut it down and become profitable again or be breaking even for the next five years and say, that's a better opportunity. So I'm going to go with the pain, right? I'm going to enjoy the pain. These are the kind of decisions that you got to be making from a financial perspective. So it's a real simple, man. I tell you, the people that are focused on profits are the people that are looking for it. And the way you look at it is in your P&Ls. Yeah, 100%.

27:16 And probably the bulk of that starts at the old gross profit margin line. If we're not starting strong, don't even worry about reading below the line because that's going to be a tire fire too. Yep. Yep. It gets really tough. And I'll say a tip. When we work with our clients, a lot of times we give them a valuation, whatever. Let's just say it's $5 million. I really need it to be $7 million. That's my number. Okay. Okay. then I teach them a very simple trick. I'm like, you know, you got to make at least a 15% or 17% net-net margin. And I tell them, I said, take the net income line in your P&L. Go put it right below the revenue line.

27:56 I see where you're going here. That we want you to run at a 20% margin. I know it's high, but let's assume that. Let's assume a business has got $2 million in sales or $5 million in sales. That means it's going to make $1 million in profit, right? That's the goal, right? At 20%. So you would take 5 million, put 20% next to his net income, which is a million. Now what's left is 4. Now go build out the rest of your P&Ls. I like it. It's like, you see what I'm saying? You're taking the most important number, which is the last line, and making it line number two. That's that whole start with the end in mind, right? Start with the end in mind. And it's a great exercise.

28:37 I think every business owner should do it at least once a quarter. And it's amazing you'll find out all the leaky holes in your bucket when you do that. I dig it. It's interesting because it's such a... Again, it's like we always want to be presenting rocket science to make ourselves feel better. But that is a simple visual to remind us. It's like what the saying, pay yourself first. When we think about personal finance, that's what you're doing there. As a business owner, you're telling people, look, this is the number you need, really. This is the one that matters. Now use this gap that's remaining to decide how you're going to run the business. How are you going to run your business? This is the non-negotiable, right?

29:17 Right. See, here's the thing. Listen, the answers you get in your mind depends on the questions you ask. If you ask dumb questions, you're going to get dumb answers. If you ask different questions, you'll get different answers. So the idea here in this exercise is to ask the right answer. So I got $4 million left. How do I run this business? Then your mind, you start looking at things. You start finding opportunities everywhere. Listen, we've doubled valuations in companies by doing that one thing over time, over two years. two and a half years we work with someone, we have literally doubled valuations of companies. Hey friends, hey listeners. We're doing something a little bit different with our ads. So you've been accustomed to hearing some ads with our favorite partners and companies in the industry.

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31:31 There's no better investment than investing in... the ability for those individuals to represent themselves, our clients, and our brands well. So Super Tech University, Surety, they essentially are cutting down this life cycle between delivering service and then getting paid, stepping in, removing the middleman in terms of mortgage companies, refining that pipeline, making sure that there's as least friction as possible. So we can go out and do a great job and then our businesses don't suffer while we're waiting to get paid. The money's coming and it's coming quickly. And then the last one, guys, is Liftify. It's kind of a newer entry to the industry. They're driving Google reviews. So they're a turnkey partner that we can literally go out, provide a great customer experience, hand that name off to our trusted partner in Liftify, and have them go chase.

32:18 That Google review. 25% conversion rate, which is industry-wide. People tend to average 5% of the people you ask for review actually convert. Lift to five bumps at the 25. We were such a big believer. We were a customer and they've been generating all of our floodlight reviews. And in a matter of a week and a half, we're up to, I don't know, close to 15 reviews in just a short period of time. And I think people just underestimate what happens organically with your SEO search activity when you're getting these new and active five-star reviews from our clients. And we just can't let the pedal up on that because of the effect on our business as long as long. It's a big deal. So check it out. Check out our partners page. Do business with them. You won't regret it. We're confident in that. Floodlightgrp.com forward slash partners.

33:00 Thanks, guys. I'm ashamed to say it. But it's like, I'm re-engineering in my own mind. Right now, it's like, okay, tomorrow I have a conversation with a brand new client. I'm literally thinking to myself, I'm gonna hear your voice in my head and I'm gonna go, the first thing I'm gonna do is I'm gonna show this person why this is going to be so important. And I'm gonna take their bottom line number and put it right up against their revenue and do this exercise. It's freaking brilliant. But there's, okay, there's a little bit different theme than where we started. I'll give you my address after the show. After the show, yeah. You can send me the royalty checks. That's right. Okay. The Gokul system. We've now adopted the Gokul system.

33:42 Okay, man, hear me out on something, okay? This is a slightly different theme than where we started, but I'm hearing two things that really stood out to me so far. And I want to get your perspective kind of synthesizing these two things together. Okay. So I'm going to go back to that statement you made, dig a moat and build a castle. And what I'm interpreting with that is, focus first on creating the differentiators between you and your competitors. What are the values? What is the thing that's going to protect whatever it is you now spend your energy building? I love that. It's like, start with the end in mind. And then I'm hearing you say that again with this visual representation of, we literally start this perspective by saying, you need 20%.

34:25 You need to keep that 20%. Oh, what are you? That's the non-negotiable, right? Yeah. And we are believers in the 20%, by the way. Okay. But you need this. This is the part that's non-negotiable. We can start working around with the how based on this remaining money. Again, starting with the end in mind. There's this, help me... Do you see where I'm going with that? Those are the two things that stood out to me. What does that mean to you when you're talking about a business owner's mental shift to... Build the moat first. Start with the 20% first. What is this? What's happening, I guess, with this? So when an owner starts a business, we all as entrepreneurs go through different job descriptions and different mindsets that go with it.

35:08 Correct? Yeah. So when you start a business, you're going to start as a rainmaker because sales is really important to you. And then you start building a team. You've got a 1,500-square-foot warehouse or a 2,000-square-foot warehouse. You may have a couple of trucks and 10 employees. Now you've got to learn to be your job description completely changes to a dream, a team builder. You have to switch mentally and acquire the skills to do it, right? Now you're growing, growing, growing. I don't know. You're reaching $7 million, $8 million in revenue. Now you got to systemize everything because you need the same performance over and over and over and over again. Your job description changes to a systemizer. Yeah. You see where I'm coming at? It's a very different job description.

35:50 Yeah. Very different job description. Then it grows, it grows, it grows. And then from there, you have to look at your company as an investor. Correct? And that's what digging a modem, building a castle comes from. If your mindset is as an investor, your only job is to dig a moat and build a castle. Because now you're looking at the business and you're protecting it. You're making sure no one can come in and take all your customers. You're making sure that, for example, if two of your key people leave... no one can raid your castle, that you got a replacement for them. You're looking at, you made such great connections, not conversions, but connections in your area, in your city, that it doesn't matter if a national player buys somebody, one of your competitors, or it doesn't matter if some private equity drops an office next to you.

36:44 Your connections are so strong that you're good. You don't have to worry about it. that's what digging a mode is, that no one can attack the castle. Yeah. Yeah. Right. Right? Maybe your internet marketing has been great for years now and you're just hyper-local and you're just dominating. Not just dominating with ads because you can't build a mode with ads because someone bids more and they take you out. Let's say you have content. Maybe you have videos. Maybe you've helped the firefighters. Maybe you've helped the police in there. Maybe you've done all these things. It doesn't matter if someone came in with a $10 million budget. They're never going to replace those connections.

37:26 Okay. That's digging a moat. You look at talent, you look at your team and you go, man, I got the best talent in the city and they're happy. That's building a moat. Say that again. That's what I mean by building a moat. Say that part again, Gokul. The talent part. You got to say it again for us because we hammer on this all the time. The differentiators are people, right? Listen, you're only as good as the players on the field. It's really that simple, right? And so talent becomes really important. And great talent is part of that moat that you're building around your firm. If you've got great people, they're going to fend off anything that's coming at them. Yeah. You know what I mean? Oh, along with the right knowledge, the right skills, the right purpose. That's a moat that...

38:08 It's going to dig such a deep moat that it really doesn't even matter who comes and who's your competitor because then it becomes me versus me. Us versus us. It never becomes us versus somebody else. You got the best talent. It's all about just upping your game all the time. So that's that investor CEO mindset that is, as your job description changes, that to me is the pinnacle of the entrepreneur and a small business owner. From a mindset level. If you become a true CEO investor mindset and you play that job description, you are going to be thinking only about how to dig them out and build a castle. It's simple.

38:48 And I think that's what we all need help with. It's not easy. That's not what we're saying. But it is simple. Where we need to focus our attention is more simple than I think we allow it to spin out from under us, I think. So one aspect of this that underlies everything that we've been talking about is sales. And what kinds of attitudes, behaviors, perspectives do you see or observe in high performance companies when it comes to sales? I think really great companies, when it comes to sales, do fewer things, but do it better. Correct? So I've seen companies where I talk to owners, we're doing this 50 things to generate revenue and we're not generating revenue.

39:32 Why? Because you can't be good at 50 things. When I see great companies, they're like, we do this three things and we dominate. Yeah. You see where I'm coming at? It could be content creation and SEO. They dominate. It could be relationships with just property managers and they dominate. You see where I'm coming at? It could be a relationship with plumbing or other professionals in the area. They dominate. Okay. So I think when it comes to sales, it's a mindset of do less but better. Yeah, focus. And so as we talk about that... I think when you spread yourself too thin, it's really hard to build a name and a brand recognition.

40:12 And coming back to my original point, it gets really difficult to build connections when you want to be everywhere. Even if you just do internet and emails and SEO and content, you never shake hands with the community. You still have to build connections. Yeah. Yeah. Does that make sense? You know, you still got to build connections through your videos, through your content, through all these other things, right? So the companies that have great sales are the ones that are connected the most within their community. Yeah. You know what I'm saying? I do, yeah. You know, that family-run company in Connecticut, man, we know them. They've been, they sponsored this. They're in the parade. They're in the Christmas parade.

40:52 They, you know, I see their ads, but they've done something great for the community. They, whatever, they did a pro bono something for the school. You know, it's the connection. Oh, the owner's teaching baseball, you know, the local Y, whatever it is. So I think it's like sales is all to me about connections. You cannot have sales without connecting to whoever is going to give you those sales. Whether it's your end customer, whether it's a property management group, whatever, insurance agency, it doesn't matter. It's connecting. Meaningful connections. And meaningful connections happen by having time and not being rushed and taking the time to know each one of your referral sources meaningfully well.

41:35 Yeah, personal relationship. To me, it's very counterintuitive. I tell you, we're doing 2023 marketing plans for my own firm, right? And the idea there is we've cut off 25% of everything we're doing in 22. You see where I'm coming at? And we're just saying, hey, we're going to just pare it down, but we're going to take our time and get to know and connect better. We're doing the same thing at RBA. Right. Yeah. Yeah. How important is diversification? In this topic of sales, we've got a lot of engines for revenue in our business. One of them is TPAs. Right. And of course, we see scenarios where companies are... really dependent on TPAs.

42:16 We occasionally come across people that 80% or 90% of their income is from TPAs versus direct commercial sales versus referral partner portfolios. Do you have some perspective on that? When you look at high performance companies that sell for high multiples, their valuations are super high. What does that diversification look like? Is that an important priority as a CEO? One of the most important things, yes. Okay. Talk about that. Again, let's talk about creating a moat and building a castle. If 80% of your revenue is coming from one source, and we have a company right now that we have that issue, what if that goes away? Yep. You don't have a castle anymore.

42:56 Mm-hmm. You don't have a moat. Diversification is part of that moat. Does that make sense? Oh, absolutely. You know, when it comes to TPAs, there's always numbers. But I can tell you when buyers look at companies, they don't want more than 12% of their revenue coming from a single source. Wow. Wow. 12%? That's a pretty small number. I mean, if we're honest with ourselves. Not in any other business, it's not. Hmm. Yeah. You know, in our industry, we've just kind of gotten used to it. Yeah. No, I agree. I agree. I think that's a solid reminder. Yeah. A hundred percent. Four percent. Okay. It's what we measure, we manage.

43:38 Right. So that's a number we should be cognizant of for sure. Yeah. I think when you're doing marketing plans and sales plans, you know, you got to know where you know, where your fishing holes are, right? And then you got to understand what kind of worm am I going to put out there? How much fish am I expected to catch? When am I expected to catch them? And then you track it and then you make your adjustments. But from a revenue perspective, you really don't want the tail wagging the dog. Right. I tell you, we have a company right now And I had to tell him his business was unsellable last Friday. He had 70% of his revenue coming from a single source. Wow. We can't sell.

44:18 Great company, great profits. Great. No diversification of revenue. So susceptible. Yeah. Hey, so we have to be really sensitive with your time. Yeah, thank you for that. Yeah, so... I'll go through my last three really quickly. Yeah. Owners are engaged. So they're playing that CEO role. Okay. This is a huge problem. Owners know for years, they're not engaged in their business and they continue to run it. You cannot run a high performance company if the owner is not 100% in. All in. 100%. All in. Okay. You got to be all in or let somebody else take over your company and be all in. But you cannot have a high performance organization as an absentee owner, as kind of, this is one of my 10 projects I'm doing.

45:03 I've never seen it. Okay. Right. They make huge investments in HR and culture. COVID has really brought that to the forefront, has it? I mean, you know, companies that had great culture and a sense of family and belonging did not have as much HR issues as companies that had not so good cultures, where the owners maybe have not paid a lot of attention to. Yeah, agreed. You know, COVID really... I mean, we saw companies that had almost no HR issues during COVID. And we had companies that was staffed 30%, 40% levels because they couldn't find the people. They had the job. The claim volumes were there. Yeah. They didn't have the job.

45:43 So now when I talk to people, everybody's talking about talent acquisition and all culture. Those are the conversations. And I think that's probably one of the better things that's come out of COVID for us. Yeah. Because I think our industry is going to start paying attention to, it's not just a position and an employee and an employee number and a badge. It's real people. And maybe they need flex time. Maybe they need some kind of recognition. Maybe they need a path. Yeah. So I think that's coming off. And then the last one is employee satisfaction. If you went out and surveyed employees in high-performance companies, I'm not going to say they're ecstatic and jumping off the moon, but here's what I'm willing to say. They're reasonably happy in their jobs.

46:25 Yeah, right. Yeah. We're not asking for miracles. You don't have to shoot for the moon. They're reasonably happy. You know what I mean? If you put on a scale of one to 10, maybe they're a seven. Yeah, 100%. You can't get them to 10, but you don't want a number two either. You don't want it to be ranked number two at a time. So companies that have great employee satisfactions have unbelievable performance. So those are my top six. That's it. Yeah. And I love it. That's awesome, man. Two things. And we got to let you go. One is I want to highlight something that we've seen from our very first exchange with you. And that is, even though your business is driven by analytics and data, okay, it's a very black and white business.

47:06 There's no negotiation about that. However, the importance that you place on talent, HR focus, right? This human capital component is unquestionable. And so I think it's important for all of us as restorers to be reminded of that. This is a data-driven business and how important it's showing that the people elements are. So we want people to go hang with you for the reason that you, at minimum, will do a great job of telling them what they really have. So where are people going to learn to get the vitals on their business so that they can start making some different decisions, regardless if they're ready to sell today or not, right? Yeah. I mean, listen, we got all kinds of information.

47:47 And one of the best things about our job is talking to entrepreneurs around the country. Yeah. Every job has got that 10% that's like a root canal. And then it's got 10% that's like a chocolate cake. That's the best part of your job, right? To me, helping entrepreneurs, whether they're ready to sell now or later, but giving them a path of how to get better and better and better at what they do, man, that's like my chocolate cake. I mean, I love doing it. So it's great. Yeah, you go to our website, all the information, all our videos are there. www.rbasels.com. People can find us there. So thank you for that. Of course, my friend. And thank you again for hanging out with us, Gokula. And we'll be seeing you hopefully soon in some other endeavors.

48:28 So yeah, we'll do more on this topic soon. Yeah. All right, buddy. Appreciate you guys doing great. Thanks, guys. All right, buddy. We'll see you. Bye. All right, everybody. Thanks for joining us for another episode of Head, Heart & Boots. And if you're enjoying the show, but you love this episode, please hit follow. Formally known as subscribe, write us a review, or share this episode with a friend. Share it on LinkedIn, share it via text, whatever. It all helps. Thanks for listening.