May 13, 2026 • 51 mins
Scaling a business from $1 million to $10 million is where most founders hit a wall that feels impossible to climb. The "missing middle" is a profit-killing gap where passion no longer substitutes for systems and middle management often becomes a liability rather than an asset. Nick Avaria joins the show to break down why most agencies struggle to scale and how to prepare a business for a high-value exit by removing the founder from the center of the equation.
We sit down to discuss the tactical shift required to move from being a hands-on founder to a strategic CEO. Nick shares his experience transitioning from industrial services to acquiring and optimizing marketing agencies by implementing strict operational feedback loops. We get into the nuances of "mothership" positioning, the difference between behavior change systems and simple SOPs, and why high-level leaders won't follow a founder who hasn't leveled up their own management game. Nick’s secret sauce lies in his ability to view a business not as a passion project but as a product designed for a buyer.
The unglamorous truth is that most entrepreneurs are "leadership incarnate" but "management avoidant," which creates a culture of energized chaos that eventually collapses under its own weight. To build a company that is actually worth buying, you have to endure the boredom of management and be willing to give up enough equity to attract real partners, not just employees. You will walk away from this episode with a clear understanding of why your current leadership style might be the very thing capping your company's growth.
Subscribe and tune in for new episodes of Big Talk About Small Business with Mark Zweig and Eric Howerton. Each week we focus on practical insights and real-world strategies to grow your business!
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Episode Transcript
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SPEAKER_01 (00:00):
What I've basically come to understand through like
my time in agency acquisitionsand putting these systems
together and just seeing thisrepeated, like basically like
doing the management consultingarm of agency acquisitions, is
that there's this thing calledthe missing middle.
And to be honest, it's notunique to just marketing
agencies.
It's unique to all business.
SPEAKER_02 (00:24):
So hey everybody, um, I'm here today with Nick
Avaria.
Is it pronounced Avaria or very?
I nailed it first try.
Nick Avaria.
We've already been sitting heretalking, so I don't know where
this thing's gonna pick up, butthis is another episode of Big
Talk About Small Business.
(00:45):
And my partner Eric Howertonwill hopefully join us at some
point here.
He's running late today, butit's fun talking with Nick
already.
Um Nick, tell everybody a littlebit about yourself.
I mean, you've got such a variedbackground.
I mean, it's crazy all the stuffthat you've done and all the
stuff that you do.
SPEAKER_01 (01:05):
Yeah, yeah.
First of all, thanks for havingme on.
Uh, really appreciate it.
And yeah, like a bit about me.
Um, man, I I think I've startedlike six businesses like in
different areas over time.
And uh, you know, I I owned likea really like nice like DJ slash
um like entertainment businessprior to uh 2008-9.
(01:28):
So and that went really well.
That was before you were thatwas before you were married and
had a family, right?
You know it.
So basically it's I like look,it's sort of sort of like the
entrepreneurship bug, if youwill, where I was going to
school and I was like puttingmyself through school, like like
loan-free kind of thing by doinglike DJing and things like this.
So it was quite lucrative.
(01:50):
And then I realized at onepoint, because I had other
people working for me, and wesmart branched out into doing
like weddings and like all thisother stuff.
I was like, I'm about tograduate and make like less than
a third of what I make rightnow.
So after about like two years, Idropped out because I was like,
what's the point of this?
However, 2008 had differentplans, and then like that
(02:11):
industry went into like into thegarbage can like real quick.
People were paying like lessthan half than before, jobs
dried up, et cetera, et cetera.
Right.
Especially like that, which islike really a luxury.
It's not like a requirement tohave you know entertainment and
things like this at your weddingor like you know, venues were
paying half of what they werepaying, etc.
So I went back to school andfinished in my last two years,
(02:33):
and then I graduated and wentinto an industrial services
firm.
And so what's industrial, what'sindustrial services?
Just yeah, so like we we likeoperated like a lot of cranes,
like industrial moving, likemoving like really heavy objects
was basically like the business,right?
Whether that's like using acrane or using like other, like
(02:54):
I mean, we were moving likethings where it was like, hey, I
I gotta move this, I don't evenknow how many ton thing from
like this factory to thisfactory, and you're like, yep,
like that'll be like$1.5 millionto like move this thing, you
know, like 20 minutes awaybecause it's like that heavy and
it takes like that much likepeople power to do.
We also were putting up thingslike wind turbines and like so
(03:17):
like wind farms and things likethis.
Like we helped install, I mean,lifting heavy things, right?
And so um I was there for awhile doing special projects,
and then I kind of transitionedinto like the MA side of the
business where we were likeacquiring different product
lines and like businesses andthings like this.
And uh eventually the ownerenacted his uh succession plan,
(03:39):
which was basically to sell thebusiness.
And so myself and I was working,I mean, even though I was like
fresh out of university, I wasworking with like the VP of
sales and marketing, the COO uhslash president, like the the
CFO, etc.
Like on all these like biggerprojects, right?
And so I gained like a ton ofexperience in like in a very
(04:00):
short amount of time.
I actually transitioned out witha VP of sales and marketing.
We started like a consultingfirm for the industrial services
like sector, which includedthings like um you know
transportation, also um any kindof manufacturing, right?
Like heavier manufacturing.
And we were doing justconsulting, like just general
(04:23):
business consulting.
And the funny thing was is thata lot of the challenges were
operational, like, hey, we wewant to grow, but we can't
because we have this deficiency.
And if we have this deficiency,we know that if we grow into
this thing, like we're gonnalike collapse ourselves, kind of
thing.
And so we would go in and fixthese companies.
(04:43):
Now, at the end of theengagement, because like it was
like, look, the the weird partabout our job was if we do a
good job, uh we are basicallyfiring ourselves, right?
Because it's like we fixed yourproblem, it's done, like, see
you later, right?
And so all these businesses werelike, Great, now we need to
grow.
Do you know of anyone that canhelp us get leads or whatever
(05:04):
the function was in order to getsome sort of like you know,
throughput in the business fromthe sales and marketing side?
So we can do that.
That would yeah, it's like,well, it's like, how about we do
this?
And we have like a recurringrevenue model behind after we do
the front-end businessconsulting, which is frankly
like a lot more lucrative on aper hour basis.
So we decided to open up a firminside of what we were already
(05:28):
doing that was just marketing.
So it's like we would fix yourproblems, and then boom, like I
would help basically generateleads.
And because I would like mypartner was used to be a VP of
sales and marketing and like athousand-plus person firm, he
knew sales training inside outand backwards, so he could like
retrain the sales force, getthem to close at a higher rate,
(05:49):
figure out how to like generatedeals from like nothing kind of
thing, and so we that's what wedid.
Um, until he got you know alittle bit sick, and um, he was
quite a bit older than myself,and he was the rainmaker.
So once that happened, wedecided to sell the business,
and that's how but the businessconsulting side didn't really
(06:10):
have value because it was justhim and I consulting at the end
of the day, so we could onlyreally sell the agency component
of this, and that's how I gotinto agencies, and in the
meantime, like between all ofthis, like I owned a pub.
Um, it actually did really well.
We were producing like you knowtop five percent profit uh for
(06:30):
the industry in the like out oflike a single location.
Um, it still I sold it, it stillstands to this day.
It's actually quite profitablefrom what I hear.
Where is that, Nick?
That's actually like uh in asuburb of Vancouver, Canada.
Okay.
So is that where you are now?
Yeah, yeah.
I'm uh I'm like all that off.
Like I'm in a place called likeWhite Rock, which is like right
(06:52):
by the beach, sort of thing.
Great, love it up there,beautiful.
Yeah, like I mean, it's likeI've basically just had a lot of
businesses, but where I reallysettled in was, and I think I
did this, I mean, I did thiswith purpose, which was I I I'm
very operational and I'm verygood at numbers, and I'm really
good at efficiency, and I'm alsovery good at like leadership and
(07:16):
management.
So when I started working moreso in the agency world, what I
noticed is that all the thingsthat I was very good at was
actually like the standarddeficiency of all owners in that
space, right?
So like big idea people, right?
Right, they're creatives, yeah.
(07:37):
Yeah, but like very littleoperational, right?
So like they're like they're youknow, they're like, hey, I'm
making no money, and I'm like,oh, you just like move these
deck chairs around and like makethem face northwest, and it's
like bang, like here you go, 30%profit kind of thing.
And like to me, it was likereally easy.
So I like I I eventually likerestarted um uh agencies after
(07:59):
we sold that one.
Uh, and then I basically startedbuilding some for myself.
I now have like we currentlyhave three uh different
agencies, and basically like I'mlooking to acquire more, but
what happened during thisprocess was, and it's a funny
story, I was on my honeymoon uha number of years back, and my
(08:23):
wife had gone to get like drinksor something, and I opened up uh
like a Slack channel with awhole butt that has a whole
bunch of um other agency ownersin it.
And one guy was like, Hey, Ineed help.
Like my business isunprofitable.
My people say it were busy, blahblah.
Like, who can help?
And I basically answered the guywho was like, Hey, I'm away for
(08:45):
the next 10 days, but if we seta meeting like three weeks from
now, like we should have a chat.
And so this guy talked to meabout his problems.
I was like, Oh, like these areactually like pretty fixable,
like this is what you gotta do.
And I didn't mean for it to be abusiness, but it was.
And so I worked with him, andthen there was another person
(09:05):
that reached out to me, andthey're like, Hey Nick, like I I
hear you're on a tight ship.
Can you help me?
Long story short, these both ofthese guys were losing money
anywhere between like five andten percent negative EBITDA, and
I took them to around like 30 to40 percent plus EBITDA in about
six months.
SPEAKER_02 (09:24):
These are both agencies, Nick, you're talking
about other agencies?
SPEAKER_01 (09:28):
Okay, and I realized I'm like, you know what?
Like, beyond owning an agencyand being good at it, because
what I have been able to dowithin my own agencies is like I
don't run them day to dayanymore, right?
It it takes like maybe like twoto four hours a week to run all
of them.
I've been able to automate allthe systems and everything and
(09:51):
like scale up leadership andmanagement so that I I'm not
required.
Everybody else wants to do thesame thing.
And I realize that the reasonthat I have that skill is
because I've sold more than oneof my businesses before this
point, and I know how to fullyreplace myself because like that
is one of the major levers ofgetting a good exit multiple.
(10:13):
Is is it founder dependent?
Is it a business or is it a job?
SPEAKER_02 (10:17):
Yes, no question.
I mean, single person managementall going through the founder is
like the death of growth and andvalue.
You're right on with that.
SPEAKER_01 (10:28):
And so agency acquisitions, which is like the
current business I focus themajority of my attention on, is
born of this understanding thatlike this epiphany that I had,
which was that companies arebest run right before a sale
point, like the best it'll everrun in the hands of like the
(10:49):
founder is like six months to ayear before they sell because
out of necessity.
And I was like, wait a second,how about I call this thing
agency acquisitions because it'sgonna have a dual purpose?
Purpose one is this thesisaround hey, let's get your
business the best run it's everbeen, whether you want to sell
(11:12):
or not.
Like pretend you're going tosell and let's run the business
that way, where you can work onit rather than in it, so you
don't have to put out fires soyou can be strategic and do the
work that you love as a founder.
Number one.
And number two, if you happen towant to sell it, great.
Like I can help you with thattransition process as well.
(11:33):
Number one.
And then number two is basicallyit helps me like the more people
I help and the more they getacquired.
I develop a personal brand aboutbeing able to help agencies run
their best and be able to sellat a high multiple in order so
that like I can build that brandto actually buy businesses
(11:55):
myself, and people will havetrust in me that they're in good
hands when I do inevitably Ibasically start doing roll-ups
in this space.
Sure.
SPEAKER_02 (12:03):
Makes total sense to me.
I mean, for what it's worth, myprimary business that was
started uh 38 years ago, we weremanagement consultants, then we
got into the MA business.
And so your your story, I mean,it's so familiar to me.
So many things that you werejust saying.
The commonality of the problems.
We were very specialized inarchitecture and engineering
(12:26):
companies, and they still are.
I'm not with it, you know, I'mno longer an owner there, but
but you know, where it's likeshooting fish in a barrel, we
used to say here in Arkansas,where you see those same
problems over and over.
And just like you say, if youfix those things, whether you
want to sell internally,externally, not sell at all,
you're running a betterbusiness.
(12:48):
And and the whole MA thing isjust a natural outgrowth of
building value in the in theenterprise.
So that all makes sense.
Now, when you say agencybusiness, are we talking
marketing-related advertising?
I assume.
SPEAKER_01 (13:03):
Yeah, marketing, advertising, digital, um, like
kind of all of the above, anykind of marketing agency and any
extensions therein.
So, yeah, there's a lotbranding, you know, ads,
whatever else have you.
SPEAKER_02 (13:14):
Well, Eric just joined us.
He comes out of that world.
He had a business like thathimself that he morphed into a
software company.
Nice dramatically uh increasedthe the value and growth
trajectory of the business.
But I'm just glad youacknowledged me today on today's
show, Mark.
SPEAKER_04 (13:32):
I'm I'm a little late.
A little late, my God.
Nick, I apologize.
I've been actually I was in awebinar meeting about uh AI and
retail, so I couldn't could notget out of it.
There's questions and stuff.
I mean, that's that's a goodthing, but but it did postpone
me.
You're looking good, man.
Thanks, man.
I like the jacket.
(13:52):
Yeah, thanks.
Yeah, I'm dressing up to makepeople think I'm better than I
am.
SPEAKER_02 (13:55):
He he looks like Colin.
What is his name?
Colin Quinn.
SPEAKER_04 (13:59):
Is that the guy?
I don't know.
Uh no, you uh you always say hisname.
I'll forget Hayden uh AidenQuinn, isn't it?
Whatever.
I can't remember.
Aiden Quinn.
Aiden Quinn.
That's Aidenas will remember.
He looks like Aiden Quinn.
Mark's been saying that foryears, like from Legends of the
Fall, the older brother.
SPEAKER_01 (14:18):
Yeah, there you go.
SPEAKER_04 (14:21):
So so Nick here, he I think he's one of our kindred
spirits.
Well, I'm I'm just he's I've didsome research on yeah.
I mean, Nick, what you're doingis is really cool, and I think
it's extremely viable foraudience too, because there's so
many folks that are like, Imean, how do you build a company
to get to an acquisitionalstate?
And then I think that we can allagree being through
(14:41):
acquisitions, it's not like themost glorious thing in the
world.
There's a lot of work after youget acquired or you're getting
you're burnt you're acquiringanother company or you're
getting acquired.
Yeah, like you're a lot of yourwork just begins, right?
SPEAKER_01 (14:54):
I think that like, you know, when you look at the
statistics of it, and it's likethis is about as numbers heavy
as I'm gonna get, is you know,when you look at like the old
research of how many companieshit a million, how many
companies go from one million toten million, right?
Like, what is the attritionrate?
Big fall off.
Yeah, big fall off.
And so what I've basically cometo understand through like my
(15:16):
time in agency acquisitions andputting these systems together
and just seeing this repeated,like basically like doing the
management consulting arm ofagency acquisitions, is that
there's this thing called themissing middle.
And to be honest, it's notunique to just marketing
agencies, it's unique to allbusiness.
And the missing middle to me isyou know, when it's just you,
(15:38):
the founder, and a bunch of likefrontline people, everything's
fine, right?
Because you're the only manager,the only leader, everything's
good.
You're super passionate aboutwhat you do, so people naturally
follow you, but it might not bethe fact that you're a good
manager, you're just highlypassionate and that's
infectious.
Well, the problem is that thatdoesn't scale, right?
(15:59):
And this is why a lot of firmscan hit a million, but they
can't hit 10 and like theystruggle, and that's why the
drop-off is basically aginormous cliff between one and
10.
And so, generally because theowner is passionate about
day-to-day delivery, like thething that they're doing,
day-to-day delivery is prettysolid as long as they're
somewhat involved or directlyoverseeing the people doing it.
(16:22):
The second that they installmiddle management, this is where
things go poorly.
And, you know, I thinkunsurprisingly, in small
businesses, there's like a statout there that says 65% of
middle managers have negativevalue to a business.
They suck.
Yes, right?
It's like, and that's that's noteven to talk about the neutral
one.
So, like, I mean, if you'rereally looking for like people
that have good ROI on a manmiddle management layer, you're
(16:45):
you might be talking about like20% of people.
So and I don't think it'snecessarily the middle manager's
fault.
I think that too many people areraised up, especially during the
beginning of the business, wherethere's like a really good
person that is an incredibleproducer of work.
(17:07):
And they're like, You, you'rethe best producer of work.
We need to promote you.
And it's like they should bepromoted to a subject matter
expert role, not into a managerrole.
And and over time, you build upthese this management layer that
actually doesn't manage, and nowyour business is stuck, and
you're like, I don't understandwhy I can't get throughput.
(17:28):
I don't understand why mymanagers have to save the layer
below them, and because they'retoo busy doing their
subordinates' job, I'm busy as afounder doing the manager's job.
And now everything's likeclogged up and stuck because you
can't get forward movement.
So, what I basically how Iactually think about this is
(17:48):
like sort of like a pyramidwhere it's like at the bottom
you have day-to-day delivery,you have this like missing
middle.
And at the top you have strategyand planning, which most
founders and entrepreneurs arepretty good at.
The problem is that yourstrategy and planning, when
enacted onto the day-to-day,you're like, oh, based off of
this plan and the strategy, weshould be able to achieve like a
(18:09):
hundred percent of this upsidethat I foresee for us.
And then boom, like you deployit and you only get like 10 to
30% of the upside that youexpected.
And to me, I call this themissing middle.
And the missing middle is solvedby two things, which to me is
data feedback loops, so thatlike the day-to-day information
actually gets to the leaders,meaning, like, to me, in any
(18:32):
almost every any kind ofbusiness, what data shows us is
people behavior.
Because there's only two thingsthat can be really broken in as
far as the business goes, whichis are systems good or are
people's behaviors good withinthe systems that we've created?
Right?
So the data tells us whetherpeople are behaving in the right
way or not, and then the middlepart between the strategy
(18:54):
planning and the day-to-daydelivery then becomes behavior
change systems.
And this is all this boringmiddle management operational
stuff that no one does well.
And this is the gap between onemillion dollar businesses and
ten million dollar businesses.
SPEAKER_02 (19:10):
That I think that's profound.
I mean, that's the culture,though.
You've got to change the cultureto create the results that you
want.
Everybody today, it seems likethey think, oh, culture is I got
freaking, you know, uhpickleball courts or whatever.
That has nothing to do withculture.
Right.
The culture is what behaviorsare rewarded and what's
(19:31):
punished.
That's what it ultimately comesdown to.
But I I want to come back tothis for a second, um, Nick, and
I take two departures, if youdon't mind.
One is today my brother happensto be in town, um uh, and I'm
gonna have uh he's gonna visitwith him here in less than two
hours.
He was the chairman of WPPGroup.
(19:53):
Uh he had healthcare andspecialized communication
companies.
He had about a hundred companiesreporting to him.
All they did was buy marketingagencies.
I mean, you know how big theywere.
I think they hit 17 billion atone point.
Yeah.
He's retired now, but they keptbuying these companies and they
did not make any effort reallyto integrate them.
(20:14):
All they did is just buy them,put them on a common financial
reporting system, and then everyyear go, improve your margins by
1% and grow by X percent.
Yeah.
That was the whole thing.
And and you know, I alwaysthought that was crazy.
I I when you you know, when youthink about it, I don't want to
speak on his behalf.
I'm sure he has somereservations about it too, but
(20:36):
but it seems to me like it it soif you are an acquirer of these
companies, in my mind, youshould be trying to integrate
the things that you canintegrate, uh like sharing
overhead platforms beyond justfinance and accounting, right?
Sharing clients and resourcesand talents.
That's one thing if you're gonnabuy these companies.
(20:56):
The other thing, though, I thinkis is greatly uh uh taken for uh
greatly uh done wrong is forwhatever reason, when a company
sells, the next people who takeover want to vilify in many
cases the founder.
And they want to they want toget as far away from the founder
(21:19):
as they can because he craygrey.
They really um don't value theentrepreneur and understand what
the entrepreneur has done andwhat the entrepreneur could
continue to do if properlymanaged by the new ownership.
(21:44):
Okay.
I've just seen this over andover myself.
SPEAKER_01 (21:52):
So I have the the take that agrees with you and
the take that disagrees withyou.
So I I I would I would put itthis way.
I've been on both sides of thecoin and like doing like and
when I've sold a business I'vestayed on for like transition
purposes, et cetera, where likethis has happened to me where
they're like, oh, the old regimeisn't that good.
And I'm like, dude, I'm sittingright here.
Um, but you know, and um I likeI always think about things like
(22:17):
in the sense of like, can Icontrol them or not?
Like, am I a victim to mycircumstance, or did I create
the circumstance?
And like having sat in there andbeing like, yeah, like the old
regime wasn't that good.
There was doing these thingswrong, and like me literally
being there, I've the theself-reflection that I had was
like I didn't do a good enoughjob in order to create enough
(22:40):
champions of the culture and orenabled people to kind of be the
hero, like I was the hero,meaning like I would put out the
key fires and like I kind ofmade the key decisions, and that
casts a really big shadow.
So the acquirer has is like, howdo I dispel the shadow?
(23:00):
I think that for one, to yourpoint, and I think you're right,
it's like lack of creativity,lack of culture and management
and leadership, lazy, like lazykind of management and
leadership on behalf of theacquirer, but it's also the
fault of the acquired becausebasically they had this larger
than life persona that is notactually possible to mitigate.
(23:26):
So I think it's on both sides alittle bit, but I think that
this is the problem of likehaving a leadership that
represents the values at thesame stage, where it's like it's
dispersed, it's not like theculture lives with this one
human being, it lives within thecompany as a whole.
And I think that if the culturewasn't, you know, I don't know
(23:47):
how you would call it diffusedinto the business properly and
like in a in a consistent way,that's almost like the fault of
the previous owner that likethey were seen as the champion
of it.
You know what I mean?
You are right.
SPEAKER_04 (24:01):
I a lot of this I I keep is thinking like the um
something I've learned the hardway, and some of it I've learned
about just by fortune, you know,and we talked about a little bit
last week, but if you don't haveto be a founder to be an
entrepreneur, and not all well,not all founders are
entrepreneurs, that's right.
But Nick, to your point earlier,not all entrepreneurs are CEOs.
(24:23):
Amen to that.
Most are not, in fact.
SPEAKER_01 (24:26):
Exactly.
And I'm not sure.
And I think that's like themissing middle thing that I was
talking about, right?
It's like, and I talk about thiswith you know people all the
time.
I'm like, there is a transitionbetween being a founder and a
CEO, and very few people make itbecause they don't even
understand that that transitionis a requirement and even
(24:47):
exists.
They just think like I am, likeI think, therefore I am, and
it's like that's not how thisworks, guys.
The both of you.
SPEAKER_02 (24:55):
I mean, I hear you, but uh that excuse of now the
founder, we need to replace himwith professional management.
I've seen a lot of bullshitaround that too.
Okay, where yeah, we get thesepeople that came from bigger
companies, they've got uh theresume, better educated,
whatever, okay.
(25:16):
And they come in and theyfreaking ruin the damn company.
They can, yeah.
They're professional managersand not leaders and
non-entrepreneurs and notcreative and not energizing,
okay, but they're professionalmanagers, all right?
Or they're all a bunch offreaking highly educated.
And again, I I you know I've gotmy MBA, but I've got my
(25:39):
prejudices against MBA programsand what they do, how people
think I think it's about balancethough, right?
SPEAKER_01 (25:47):
Like, I think what you're talking about is these
people are professionalmanagers, but not leaders.
And I do bifurcate the twofunctions, right?
And I think that like look, Ithink on on your end, right,
Mark, like you came from like atime, and and I a lot of my
mentors came from a time wherelike man like leadership didn't
(26:07):
exist.
Like people don't forget, likepeople forget that the topic of
leadership is like a fairly newthing.
It might only be like 30 to 40years old.
Like we take it for grantedtoday, but before it was like
management, management,management all the time.
And then when this like new ideacame around, like and I don't
know if it was good to greatthat introduced it or whoever,
(26:28):
and they're like, sprinkle thisthing called like leadership
into the sauce, and it's likeboom, magic happens, right?
But here's the thing I thinkthat why that occurred and why
now leadership has been put on apedestal and management is like
and you even see this in likememes and like you know, like
images where it's like managerbad, leader good, and it's like
no no no no no no no, that's notwhat this is.
(26:50):
The fact was is that in the 80s,it was all management, and we
transitioned to management plusleadership, it was the secret
ingredient, bam, it made likethe sauce delicious, right?
The problem is is that webasically took management for
granted in the next comingdecades, now to a point where
people are like, yeah, likeleadership is all that matters.
It's like, no, no, no, likeleadership is about energizing
(27:11):
people, finding commonalities,culture, all these things.
But I look at it like underthis, like I use this metaphor
or like this example.
I'm like, look, you have like 30people standing in a field,
right?
They're pointing every whichway.
So they're looking in differentdirections, they're not looking
in a central direction.
You energize them vialeadership.
So leadership energizes andcharges people up with energy
(27:33):
and gets them to go.
But everybody's pointing in adifferent direction, so like
it's pure chaos.
It's going in like 10 differentdirections all at once.
People are crashing into eachother, all this other stuff.
That's leadership on its own.
Management is okay, you have 30people in a field, you come and
you organize them, they allpoint in the same direction,
they're in a tight formation,etc.
etc.
(27:54):
That's management.
Are they moving?
No, they're not moving.
So you first need to managepeople, get them in formation,
pointing in the singledirection.
Then you come with leadershipand you energize them, and then
now they move forward.
That's like the like you needboth.
And the problem to your point islike the MBA guys that are just
(28:14):
like they don't have that realworld experience, maybe they
don't have any leadership.
So they are management devoid ofleadership.
The problem, though, and I thinkthis is where Eric, like you're
saying, like there's thedifference between the founder
and the CEO.
Like, the problem is thatfounders are leadership
incarnate, right?
And so, like, all they do isenergize their team and create
(28:37):
more chaos.
And this is why people cannotget to$10 million in revenue as
a small business.
Is and they so the question is,how do you create the right
balance of management andleadership in order to actually
get the ship to go in the rightdirection in a meaningful way
that's consistent so that youcan actually break out of the
(28:58):
single-digit millions and gointo like the double and triple?
SPEAKER_04 (29:01):
Yeah, 100%.
I mean, I think that you know,there was an epiphany I had many
years ago to where, you know,I'm not the CEO because I
finally realized what the CEOtitle really meant.
And it meant management.
It did not, it did not meanleadership to me, right?
And like I had the leadership, Ihad the the point in the right
(29:22):
direction.
But man, I mean, I tell youwhat, if somebody needed some
time off, boy, I could not evenhandle it.
I could not even handle, don'task me about PTO, don't ask me
about your paycheck, don't askme about your freaking computer,
don't ask me about your chair.
I don't care.
Just work.
There is things to do.
That is but that's terriblemanagement.
SPEAKER_02 (29:43):
But you know what?
It works.
Yeah, if you're still there andyou have that person who does
that, 100%, then it works, okay?
But the my problem is when Iextract the entrepreneur and we
can get into good to great andall the bullshit about level
four versus level five.
We should all be level fiveleaders.
Great.
We don't all have ten billiondollar companies, okay, where we
(30:07):
can be level five and have noego and nobody even knows who we
are, but our job gets donebeautifully and we're easily
replaced, okay?
It's a crock.
It is all right.
We still need the entrepreneur.
SPEAKER_04 (30:20):
We need to 100%.
Like that and not because what Ido in my companies is I
recognize number one, I'm a nota good manager.
So therefore, I either partneror I hire you are good at that
to take to take the managementrole position so that to Nick's
point, there's someone that'sorganizing, there's somebody
(30:43):
that that is they're great atthat.
And then like on the acquisitionpart, let's talk about that.
The problem is is that a lot oftimes acquirers buy companies,
you know, for the product mixthat they can have for their
existing client base.
SPEAKER_02 (31:00):
Yeah, well, that's one thing.
They diverse they theyvertically integrate, yeah.
SPEAKER_04 (31:04):
Yeah, yeah, and and so that a lot of times is like
they could okay, and bring itin, put it under our operation
umbrella.
Yeah, let's bring in ourmanagers.
There's no need the leadershipdays are over.
We actually don't want thatbecause it's yeah disrupting our
management flow.
Yeah, and and that is not likeand that's a that's a too bad of
(31:25):
a thing because it is but whythough, right?
SPEAKER_01 (31:28):
Like, why does this happen?
It's like, well, like look, I'vedone multiple acquisitions in
the agency space, right?
And in other spaces as well.
Like, look, our entire strategywas to buy a like companies that
were sub-10% eBid because wewere doing 30.
So we knew if we could grabthem, tune them up to 30, plus
the synergies of the backoffice, like the the accounting
(31:50):
data.
You can even get the acquisitionif you look set looking as a
separate PL, like 40%, right?
But here's the problem it's likethey already have the
leadership, they don't have themanagement.
That's why their profit sucks,right?
100%.
So so to your point, Eric, it'slike, yeah, like you the
acquainters come in, they marchin with management because like
that's a prescription of theday.
(32:12):
But here, like, hear me out.
I just think they overdo it,like it's too heavy-handed.
Like, right now they're they'releaning like leadership heavy,
and they try to counterbalancewith like going management heavy
to try to meet in the middle,where it's like, no, like, yes,
it's the most effective thing todo, but you're gonna create all
kinds of uh upheaval.
(32:34):
So instead of creating a perfectcounterbalance to meet in the
middle, you actually have tokind of like purposely move it
to the middle where it's likeyou're still gonna lean too
leadership heavy, but then youyou're not gonna have like you
know, chaos on your hands aspeople leave because they're
like, this sucks.
Like you the transition has tobe slower, and the acquirer has
to be a bit more patient becausethey're trying to fix everything
(32:55):
in like three months or or evensix months, when it's like
really you need to integrateover like a much longer time
period.
And having done MAs where I'vebotched this, like personally,
right?
It's like every single time Ibotched an MA, and like there's
only two times I did likebotched it, and I learned my
lesson after that, is thetimeline that I have to get them
(33:18):
to the optimal profit is likeabout twice as long as what I
wanted initially.
Like before I said six months atmaximum to get all this upside.
I'm like, look, if I can gethalf of the upside in six
months, like I am like elated.
And if and really, if I can getlike a third of it, like I'm
still happy, or even a quarter.
(33:38):
But my real timeline is morelike a year, year and a half to
get like a hundred percent ofit.
And like that seems to be likethe right balance as long as you
strike the right chords and youget the right wins for the
people in the business after youbuy it.
SPEAKER_02 (33:53):
My my so now you're right into one of my theses
about this whole acquisitionthing.
I personally love distressedcompanies.
You just said it.
They're losing 10%, you're gonnatake them to 30% positive.
Why do I like distressedcompanies?
A, I don't overpay for them.
(34:13):
B, they clearly don't havegrandma's recipe.
Okay, so maybe they'll listenmore because you take it a
company that is highlysuccessful, highly profitable,
and growing, you buy that, oddsare it will not perform at that
level post-acquisition.
You overpaid for it, you're nowdriving your payback period way
(34:35):
up.
They're gonna be very resistantto any change because they have
grandma's recipe.
Okay.
So, I mean, I'm with you onthat.
But now, if we're out there asadvisors to other people trying
to sell their companies tomaximize their valuation to sell
them to these PE buyers, you'reactually making them a less
(34:55):
attractive buy, to be honest.
SPEAKER_01 (34:56):
Like I tell people that it's like, look, if we're
going on this ride to like, youknow, 10 million or you know,
high high singles at a highprofit, you need to understand
that whoever's gonna acquire youunderstands that there's very
little upside.
So either you need to build afull leadership team because you
(35:17):
are gonna be the firm that theyacquired, and then they plug
other firms into because youonly need one, right?
You need one good one, you needthe mothership, right?
Either you're the mothership oryou're one of these other ones.
Which one do you want to be?
And everybody's like, I want tobe the mothership.
It's like, I hope you understandhow much work we're about to
embark on because right now I'mlooking at your team and like
(35:38):
maybe you and your second incommand are good, but you have
no other leaders, and weprobably need like five or six
of them by the time we're donewith this like mothership play.
So, like, it is what it is.
So, like, either you they'relike, like, look, people forget
their business.
Like, if you're trying to sellyour business, your business is
a product, right?
Is your product attractive?
And nobody actually asksthemselves this question about
(36:00):
their own business.
Like, if I look at this from theoutside in, am I attractive as a
product to the buyer?
SPEAKER_04 (36:08):
Yeah, you know, one of the things you're talking
about on the mothership, likewhat entrepreneurs don't
recognize is how much work it isto become a great mothership.
And one of the biggest thornsand painful things in my
perspective, and it may not bethis difficult for other folks,
but in my realm, to bring onreally good leaders into
(36:31):
organization is seemingly aneasy thing to do, but it's not
like you bring on higher levelmanagement and leaders, that
means you as an entrepreneur hasto up your game.
Oh, yeah.
SPEAKER_01 (36:44):
Yeah, they're not gonna follow you otherwise.
Hell no.
No, and and you and that peopledon't understand this, by the
way.
They think that they can huckmoney at people and be like, oh,
just because I pay this personlike 350, 400 base, they can
make a million total, like withbonusing blah blah.
I'm gonna get good people.
It's like, no, no, no, no.
Like the strong, the strongdon't follow the weak.
(37:04):
It's not how it works.
SPEAKER_04 (37:06):
They don't, man.
I mean, it it's it's a uh likethe the more the higher level of
person, the higher level ofmanagement you have to do.
So if you're not a good managerand as an entrepreneur, like in
my case, you're not a goodmanager, then you need to be
very conscious about who is yourpartner, who is the person with
you that is gonna manage theseleaders when they come in the
(37:26):
door.
Because they're gonna ask thehard questions, they're gonna
dig into their compensation,they're gonna understand profit
sharing programs, they're goingto understand leadership roles
and build and they're gonna wantto build an org underneath them
to execute.
They don't do execution.
So if you hire somebody in aleadership position, right, that
(37:46):
or in a managed, you know, in ahigher level management
position, like it's gonna costyou even more than just them.
They're gonna be much moreexpensive and they're gonna want
the executors underneath themdoing the work.
SPEAKER_02 (37:56):
This is though why I think a lot of business owners
and and and you can comment onthis, Nick, are too damn
selfish.
They need other partners who arereally capable people.
Okay.
You're not just gonna hire thosepeople.
Some of those people need to beowners.
You need to say, you know what?
I'm gonna give Bob, I'm gonnamake it possible for Bob to own
(38:19):
20% of my business or 30% of mybusiness or whatever.
Okay.
And a lot of owners or foundersare just so damn selfish.
They'll be like, Well, I'll tellyou what, Bob, I'll give you
appreciation rights for 3% ofthe business or something.
And Bob sits there and goes,This is freaking bullshit.
It's not worth anything.
(38:39):
This guy's a selfish bastard,and there's no way I'm gonna
give my dedicate my soul tobuilding this company.
SPEAKER_01 (38:46):
I mean, don't you think that's true?
Uh, I think that owners, like,look, there's there's two
mentalities, right?
There's like rich mentality andking mentality, right?
It's like if you want to beking, keep all your equity.
You're gonna gross so and you'renot gonna attract the top
people.
If you want to be rich, it'slike you're gonna attract good
leaders because you're you knowthat if you give away a piece of
(39:08):
your pie, but then makes the piebigger, you're better off.
There you go, right?
SPEAKER_02 (39:13):
Yeah, that that that element I think is missing for
so many entrepreneurs, and it'sone of the reasons they can't
grow to this 10 million, andit's one of the reasons they
also don't build value in theenterprise.
Because if I've got some ofthose people who will stick
around maybe post-sale, thenthey provide that glue, as you
(39:34):
say, to kind of get it from hereover to here.
That the resources and expertiseand client relationships of the
buyer, uh, you know, and financeand money combined with some
people over here that get theculture that have been making it
happen.
Beautiful marriage.
SPEAKER_01 (39:53):
And I've seen, like, like to your point, I've also
seen people make the mistake,even if they do follow through
on the like, hey, let's givethis person equity.
To your point, it's like fivepercent.
It's like, okay, so if you do asale, like what anchors this
person to this job?
Like, nothing.
It's like it's like you're notgiving away enough to make it
attractive for them to actuallywant to see.
(40:13):
It's like, oh, but I gave themfive percent.
They didn't earn it, they didn'tpay for it.
It's like they're running yourentire business for you.
What do you mean?
Like, it's crazy.
SPEAKER_02 (40:23):
I I have a friend, it's a such a great example.
He's here in in northwestArkansas, and he ran a group of
prosthetic clinics, and it gotup to like 13 million or so in
revenue.
He was the guy, the guy whostarted it, he didn't even show
up for six months at a time.
I'm telling you, it was so andthen when they sold the company,
I don't even think he got let'sjust say the amount of money
(40:47):
that the boss gave him was soinconsequential, it was beyond
insulting.
So the guy quit to the now he'sthe president of the company
after it got sold to this Germancompany.
Okay, he's running it and he'sgot no ownership in it.
There's nothing tying him there.
He quits, waits out hisnon-compete, starts a new
(41:11):
business, and is killing them.
They're almost out of businessnow, and he's back to where he's
got probably 60% of the revenuethat he had when he got out of
it already.
And I'm talking like within twoyears.
SPEAKER_01 (41:26):
But this is a typical story, isn't it?
Like, I mean, like, is is thisreally like rare?
I mean, I and I think it's toyour point, right?
Around, well, how are webuilding these things right?
And I I like look, like maybeit's simple to us, maybe it's
simple to me.
I don't know, but I just thinkI've just seen too many things
at this point to likeunderstand.
(41:47):
Like, look, the the majority ofthe deficiency of most
businesses is the balance ofleadership and management,
number one, right?
And like I I group culture underleadership, by the way.
Um, and then and then it's like,okay, who is your second in
command and or the person that'sgonna run this thing day to day?
Like, and and can you balancethem out?
And like what I've seen, thebest way to do about go about
(42:10):
this is get grab somebody that'sreally good at the management
elements and inject into themleadership rather than the other
way around.
I don't know why, but in myopinion, I could be wrong about
this.
Maybe it's just the personalitytypes that I look for.
I prefer taking somebody thatunderstands like management
inside out and backwards, andthen like, okay, I'm gonna fight
to like make you a leader on topof your skills.
(42:31):
I've tried to do it the otherway around, and it like seems
much harder.
And I don't know why.
SPEAKER_02 (42:35):
It seems counterintuitive, but you may be
right.
I mean, it seems like you couldlearn management, right?
Yeah, but I don't have thefreaking, I don't have the
goddamn patience.
SPEAKER_01 (42:43):
No, yeah.
Here's the here's the reasonthat I want the manager and then
teach them leadership, okay?
Yeah.
The ultimate motivation is to beable to endure boredom.
And very few people aremotivated enough to endure
boredom.
So you grab somebody that's aleader and you try to teach them
management, Eric.
Like, what what do I gotta payyou to learn management?
(43:07):
How motivated do you gotta be toendure boredom?
It's yeah, you're gonna, I mean,you're shit time profound that
way.
SPEAKER_03 (43:14):
It is profound, right?
SPEAKER_01 (43:15):
Yeah, like like leadership is exciting, right?
Like you can you can spin it tobe exciting.
SPEAKER_04 (43:20):
Uh that's why we're unemployable.
We can't you can't put us in acorporation because we'll be
miserable.
You're right.
Uh I mean, this is not only canI not manage, not only can I not
manage, I cannot be managed.
This is profound.
SPEAKER_02 (43:34):
It's a terrible thing.
No, but you know, but it butagain, to me, it really points
out uh a fund of all this talkis I I think it's really
profound and and beneficial toour audience.
But I think at least in my caseand Eric's case, um both um it
you know, we were fortunate thatwe got good business partners
(43:57):
who were completely differentfrom us.
Great managers.
We didn't try to go uh with ourbutt best friend from high
school or whatever, that we'reall the same, which a lot of
business partners are.
It's like, oh, the three of us,we all like to do the same
thing.
We're all the same.
No, that's the worst damn thingyou can do.
(44:17):
You're treading in each other'sterritory.
Yeah.
Get the opposite of you, thenmaybe you have a chance of
navigating some of this stuff asyou grow and having something
that is valuable at the end,because you're right, Nick.
I mean, if it's tied to you asthe founder, you're screwed.
Right.
And any good acquirer willfigure that out in due
(44:40):
diligence.
SPEAKER_04 (44:41):
So, Nick, there's one thing in your formula though
that uh that I feel that's stillmissing, right?
You got management, leadership,but what about that vision part?
Because I don't think thateither one of like you can have
to be a great leader, greatmanager, yeah, but that doesn't
mean you can see things.
Amen to that too.
SPEAKER_01 (45:01):
What what I I don't know if that's a teachable
skill, by the way.
Like I I yeah, you know, but youknow, I kind of group that under
like leadership culture.
Like, I mean, without a vision,you can't, I don't think you can
develop like a full culture forsure, like mission, vision,
values, etc.
Like, I mean, really, it's likethat's the thing that is gonna
drive behavior and anchor peopleinto like what the goal is, in
(45:23):
my opinion.
Uh, but do people do a good jobof like writing their visions?
Like, generally not, right?
SPEAKER_04 (45:31):
And even if you write it, like how do you see
it, right?
I mean, I think that it's Idon't know, man.
There's there's there's a littlebit of a mystery there.
And but I think that mysterythat we're talking about is the
entrepreneur, right?
It's not the founder.
A founder can be can found acompany and be a great manager
and leader.
Yes, like they can come out ofworking at Walmart for 50 years
and they're gonna go found acompany, and it could be the
(45:53):
best damn thing that's ever beenfounded.
Right.
But that doesn't necessarilymean they're an entrepreneur,
like they're gonna freakinggrind their teeth at night and
live like they've been oncocaine for seven days straight
and keep rolling.
SPEAKER_02 (46:04):
And not even have to be on cocaine, right?
SPEAKER_04 (46:06):
But you're not on cocaine, but live like you're on
it.
You know, like you are freaking,you are you're on the sauce.
SPEAKER_03 (46:13):
Man, I love it.
SPEAKER_04 (46:14):
Yeah, yeah.
Mark probably probably foundsomething that describes his
life.
You know, I I do live on it.
SPEAKER_02 (46:20):
You don't need any of that.
SPEAKER_04 (46:21):
You don't need that stuff.
SPEAKER_02 (46:22):
Yeah, no, you're right, but but this is what I'm
talking about.
Okay, we got okay, it is thatspark, that vision, that's
what's missing in so manycompanies.
And when they cast off the thethe founder, entrepreneur,
whatever the hell you want todo, and and and they either
don't need them because we'reprofessional managers or we've
(46:44):
got all these great leaders orwhatever, they lose something.
Well, yeah, you're gonna be ableto do that.
SPEAKER_01 (46:48):
Well, sometimes the vision doesn't match, though,
right?
Like after purchase, like, canyou even hunt the vision
anymore?
Like, if the vision was veryspecific, because again, very
well crafted for not selling thebusiness, like this is our goal.
Like, it's very specific, right?
People can see it.
Problem is like, is that stilltrue post-purchase?
SPEAKER_02 (47:08):
Yeah, they gotta have a new vision.
You're right.
SPEAKER_01 (47:10):
Well, and then anytime I've seen people pivot
vision, like it's not gone well.
It's a very hard thing to do.
You're right.
SPEAKER_04 (47:17):
You know, it's it's interesting.
Like, it would be like you goand acquire SpaceX.
Are you gonna kick Elon Muskout?
That could like that could beone of the dumbest things that
somebody could ever do.
But how do you cooperate withthat?
I know because that's a trueentrepreneur, right?
That is somebody that doesn'tcare about anything other than
solving a problem and will puteverything.
(47:38):
There's no leadership course ormanagement course that's gonna
teach that.
If he stays there though, he'sgonna be gonna be a problem.
SPEAKER_02 (47:45):
Oh, he's gonna be a huge problem for leaders and
managers.
But it's just like uh gettingrid of uh, you know, uh uh uh
Apple, you know, oh Steve Jobs.
Yeah, it's the exact story, it'sthe same thing.
SPEAKER_04 (47:58):
It's the destructive but how but how does an acquire
like because that's I think is aproblem, right, Nick?
How do you that entrepreneurialspirit?
Like, how do you incorporate ordo you agree with Steve Jobs
beforehand?
Hey, look, we just gonna we'regonna like here's the deal.
We just want to buy you for yourproduct, we don't need any more
(48:20):
of your entrepreneurial vision.
Do you shake agree with that?
Like, okay, sounds good, noharm, no foul.
SPEAKER_01 (48:27):
I think that there's like two sides of this.
There's like the side of on theentrepreneur side and the
acquire side.
So I would say this on theacquire, like fortunately for
most entrepreneurs, the personacquiring like seldomly do they
look at vision because they'relike, we're gonna impose our
own.
So I think that they undervaluewhat it currently is.
And I think that's to own likeentrepreneurs' benefits, by the
(48:50):
way.
Um, I think that as anentrepreneur, like I think what
I said before, which is likeyour business is a product, the
vision is a big part of thatproduct, and is it congruent
with being able to sell thisthing?
Like, does it dovetail into likeultimately what the vision is?
Like, once this thing getsacquired, or no, and then you
have to pick your purchasingparty carefully as the seller,
(49:13):
right?
That's that's my vision is tobuild up and sell.
SPEAKER_02 (49:16):
All right, on that note, we gotta wrap this up.
I I say we have to begin.
Let's get Nick back again.
Love talking with Nick.
He's great, he's a brother fromanother mother.
That's right.
Okay.
Love talking with Nick.
He's he's got a very good way ofbeing able to sort of put things
together in a sensible fashionthat people understand.
SPEAKER_01 (49:38):
Anytime you you guys let me know the time and place
from there.
SPEAKER_04 (49:41):
This is a great topic, Nick.
I mean, like if you're anentrepreneur, like I mean, going
through this when when you'reyou're building something and
you wanted to sell one day, thatyou're going, you're driving for
that dream.
Like, it's not nothing's as rosyand beautiful as you think it
is, right?
I mean, it is great to beacquired, it's great to sell
your company, build something.
I mean, it's an honor.
That is definitely an honor, butbut it is there's nothing clean
(50:04):
and roadmapped about that thing.
And so having your perspective,Nick, working with so many folks
that you've been through isexcellent for us.
Appreciate you being on the showtoday.
SPEAKER_01 (50:13):
My thing is like build it to sell, but then don't
sell if you really want.
SPEAKER_02 (50:17):
Yeah, we're cut, we're coming back to this again,
Nick.
Don't don't uh don't think wedon't want to have you back on
the show as soon as possible.
So we got to wrap this up today.
Last thing, if somebody wants toreach you, how do they get you?
What's your email?
Perfect.
SPEAKER_01 (50:33):
So you can go to agencyacquisitions.io or you can
add me on LinkedIn, Nick,N-A-C-K-Avaria, A-V-A-R-I-A, and
you'll find me on there.
Just DM me.
More than happy to chat.
Awesome.
Awesome.
Great.
SPEAKER_04 (50:48):
Well, hey, this has been another episode of Big Talk
about Small Big Us.
Thanks, Nick.
SPEAKER_01 (51:00):
Thank you.
SPEAKER_00 (51:07):
Thanks for tuning in to this episode of Big Talk
About Small Business.
If you have any questions orideas for upcoming shows, be
sure to head over to ourwebsite,
www.bigtalkaboutsmallbusiness.com,and click on the Ask the Host
button for the chance to haveyour questions answered on the
show.
Stay connected with us onLinkedIn at Big Talk About Small
(51:28):
Business.
And be sure to head over to ourwebsite to read articles, browse
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What I've basically come to understand through like
my time in agency acquisitionsand putting these systems
together and just seeing thisrepeated, like basically like
doing the management consultingarm of agency acquisitions, is
that there's this thing calledthe missing middle.
And to be honest, it's notunique to just marketing
agencies.
It's unique to all business.
SPEAKER_02 (00:24):
So hey everybody, um, I'm here today with Nick
Avaria.
Is it pronounced Avaria or very?
I nailed it first try.
Nick Avaria.
We've already been sitting heretalking, so I don't know where
this thing's gonna pick up, butthis is another episode of Big
Talk About Small Business.
(00:45):
And my partner Eric Howertonwill hopefully join us at some
point here.
He's running late today, butit's fun talking with Nick
already.
Um Nick, tell everybody a littlebit about yourself.
I mean, you've got such a variedbackground.
I mean, it's crazy all the stuffthat you've done and all the
stuff that you do.
SPEAKER_01 (01:05):
Yeah, yeah.
First of all, thanks for havingme on.
Uh, really appreciate it.
And yeah, like a bit about me.
Um, man, I I think I've startedlike six businesses like in
different areas over time.
And uh, you know, I I owned likea really like nice like DJ slash
um like entertainment businessprior to uh 2008-9.
(01:28):
So and that went really well.
That was before you were thatwas before you were married and
had a family, right?
You know it.
So basically it's I like look,it's sort of sort of like the
entrepreneurship bug, if youwill, where I was going to
school and I was like puttingmyself through school, like like
loan-free kind of thing by doinglike DJing and things like this.
So it was quite lucrative.
(01:50):
And then I realized at onepoint, because I had other
people working for me, and wesmart branched out into doing
like weddings and like all thisother stuff.
I was like, I'm about tograduate and make like less than
a third of what I make rightnow.
So after about like two years, Idropped out because I was like,
what's the point of this?
However, 2008 had differentplans, and then like that
(02:11):
industry went into like into thegarbage can like real quick.
People were paying like lessthan half than before, jobs
dried up, et cetera, et cetera.
Right.
Especially like that, which islike really a luxury.
It's not like a requirement tohave you know entertainment and
things like this at your weddingor like you know, venues were
paying half of what they werepaying, etc.
So I went back to school andfinished in my last two years,
(02:33):
and then I graduated and wentinto an industrial services
firm.
And so what's industrial, what'sindustrial services?
Just yeah, so like we we likeoperated like a lot of cranes,
like industrial moving, likemoving like really heavy objects
was basically like the business,right?
Whether that's like using acrane or using like other, like
(02:54):
I mean, we were moving likethings where it was like, hey, I
I gotta move this, I don't evenknow how many ton thing from
like this factory to thisfactory, and you're like, yep,
like that'll be like$1.5 millionto like move this thing, you
know, like 20 minutes awaybecause it's like that heavy and
it takes like that much likepeople power to do.
We also were putting up thingslike wind turbines and like so
(03:17):
like wind farms and things likethis.
Like we helped install, I mean,lifting heavy things, right?
And so um I was there for awhile doing special projects,
and then I kind of transitionedinto like the MA side of the
business where we were likeacquiring different product
lines and like businesses andthings like this.
And uh eventually the ownerenacted his uh succession plan,
(03:39):
which was basically to sell thebusiness.
And so myself and I was working,I mean, even though I was like
fresh out of university, I wasworking with like the VP of
sales and marketing, the COO uhslash president, like the the
CFO, etc.
Like on all these like biggerprojects, right?
And so I gained like a ton ofexperience in like in a very
(04:00):
short amount of time.
I actually transitioned out witha VP of sales and marketing.
We started like a consultingfirm for the industrial services
like sector, which includedthings like um you know
transportation, also um any kindof manufacturing, right?
Like heavier manufacturing.
And we were doing justconsulting, like just general
(04:23):
business consulting.
And the funny thing was is thata lot of the challenges were
operational, like, hey, we wewant to grow, but we can't
because we have this deficiency.
And if we have this deficiency,we know that if we grow into
this thing, like we're gonnalike collapse ourselves, kind of
thing.
And so we would go in and fixthese companies.
(04:43):
Now, at the end of theengagement, because like it was
like, look, the the weird partabout our job was if we do a
good job, uh we are basicallyfiring ourselves, right?
Because it's like we fixed yourproblem, it's done, like, see
you later, right?
And so all these businesses werelike, Great, now we need to
grow.
Do you know of anyone that canhelp us get leads or whatever
(05:04):
the function was in order to getsome sort of like you know,
throughput in the business fromthe sales and marketing side?
So we can do that.
That would yeah, it's like,well, it's like, how about we do
this?
And we have like a recurringrevenue model behind after we do
the front-end businessconsulting, which is frankly
like a lot more lucrative on aper hour basis.
So we decided to open up a firminside of what we were already
(05:28):
doing that was just marketing.
So it's like we would fix yourproblems, and then boom, like I
would help basically generateleads.
And because I would like mypartner was used to be a VP of
sales and marketing and like athousand-plus person firm, he
knew sales training inside outand backwards, so he could like
retrain the sales force, getthem to close at a higher rate,
(05:49):
figure out how to like generatedeals from like nothing kind of
thing, and so we that's what wedid.
Um, until he got you know alittle bit sick, and um, he was
quite a bit older than myself,and he was the rainmaker.
So once that happened, wedecided to sell the business,
and that's how but the businessconsulting side didn't really
(06:10):
have value because it was justhim and I consulting at the end
of the day, so we could onlyreally sell the agency component
of this, and that's how I gotinto agencies, and in the
meantime, like between all ofthis, like I owned a pub.
Um, it actually did really well.
We were producing like you knowtop five percent profit uh for
(06:30):
the industry in the like out oflike a single location.
Um, it still I sold it, it stillstands to this day.
It's actually quite profitablefrom what I hear.
Where is that, Nick?
That's actually like uh in asuburb of Vancouver, Canada.
Okay.
So is that where you are now?
Yeah, yeah.
I'm uh I'm like all that off.
Like I'm in a place called likeWhite Rock, which is like right
(06:52):
by the beach, sort of thing.
Great, love it up there,beautiful.
Yeah, like I mean, it's likeI've basically just had a lot of
businesses, but where I reallysettled in was, and I think I
did this, I mean, I did thiswith purpose, which was I I I'm
very operational and I'm verygood at numbers, and I'm really
good at efficiency, and I'm alsovery good at like leadership and
(07:16):
management.
So when I started working moreso in the agency world, what I
noticed is that all the thingsthat I was very good at was
actually like the standarddeficiency of all owners in that
space, right?
So like big idea people, right?
Right, they're creatives, yeah.
(07:37):
Yeah, but like very littleoperational, right?
So like they're like they're youknow, they're like, hey, I'm
making no money, and I'm like,oh, you just like move these
deck chairs around and like makethem face northwest, and it's
like bang, like here you go, 30%profit kind of thing.
And like to me, it was likereally easy.
So I like I I eventually likerestarted um uh agencies after
(07:59):
we sold that one.
Uh, and then I basically startedbuilding some for myself.
I now have like we currentlyhave three uh different
agencies, and basically like I'mlooking to acquire more, but
what happened during thisprocess was, and it's a funny
story, I was on my honeymoon uha number of years back, and my
(08:23):
wife had gone to get like drinksor something, and I opened up uh
like a Slack channel with awhole butt that has a whole
bunch of um other agency ownersin it.
And one guy was like, Hey, Ineed help.
Like my business isunprofitable.
My people say it were busy, blahblah.
Like, who can help?
And I basically answered the guywho was like, Hey, I'm away for
(08:45):
the next 10 days, but if we seta meeting like three weeks from
now, like we should have a chat.
And so this guy talked to meabout his problems.
I was like, Oh, like these areactually like pretty fixable,
like this is what you gotta do.
And I didn't mean for it to be abusiness, but it was.
And so I worked with him, andthen there was another person
(09:05):
that reached out to me, andthey're like, Hey Nick, like I I
hear you're on a tight ship.
Can you help me?
Long story short, these both ofthese guys were losing money
anywhere between like five andten percent negative EBITDA, and
I took them to around like 30 to40 percent plus EBITDA in about
six months.
SPEAKER_02 (09:24):
These are both agencies, Nick, you're talking
about other agencies?
SPEAKER_01 (09:28):
Okay, and I realized I'm like, you know what?
Like, beyond owning an agencyand being good at it, because
what I have been able to dowithin my own agencies is like I
don't run them day to dayanymore, right?
It it takes like maybe like twoto four hours a week to run all
of them.
I've been able to automate allthe systems and everything and
(09:51):
like scale up leadership andmanagement so that I I'm not
required.
Everybody else wants to do thesame thing.
And I realize that the reasonthat I have that skill is
because I've sold more than oneof my businesses before this
point, and I know how to fullyreplace myself because like that
is one of the major levers ofgetting a good exit multiple.
(10:13):
Is is it founder dependent?
Is it a business or is it a job?
SPEAKER_02 (10:17):
Yes, no question.
I mean, single person managementall going through the founder is
like the death of growth and andvalue.
You're right on with that.
SPEAKER_01 (10:28):
And so agency acquisitions, which is like the
current business I focus themajority of my attention on, is
born of this understanding thatlike this epiphany that I had,
which was that companies arebest run right before a sale
point, like the best it'll everrun in the hands of like the
(10:49):
founder is like six months to ayear before they sell because
out of necessity.
And I was like, wait a second,how about I call this thing
agency acquisitions because it'sgonna have a dual purpose?
Purpose one is this thesisaround hey, let's get your
business the best run it's everbeen, whether you want to sell
(11:12):
or not.
Like pretend you're going tosell and let's run the business
that way, where you can work onit rather than in it, so you
don't have to put out fires soyou can be strategic and do the
work that you love as a founder.
Number one.
And number two, if you happen towant to sell it, great.
Like I can help you with thattransition process as well.
(11:33):
Number one.
And then number two is basicallyit helps me like the more people
I help and the more they getacquired.
I develop a personal brand aboutbeing able to help agencies run
their best and be able to sellat a high multiple in order so
that like I can build that brandto actually buy businesses
(11:55):
myself, and people will havetrust in me that they're in good
hands when I do inevitably Ibasically start doing roll-ups
in this space.
Sure.
SPEAKER_02 (12:03):
Makes total sense to me.
I mean, for what it's worth, myprimary business that was
started uh 38 years ago, we weremanagement consultants, then we
got into the MA business.
And so your your story, I mean,it's so familiar to me.
So many things that you werejust saying.
The commonality of the problems.
We were very specialized inarchitecture and engineering
(12:26):
companies, and they still are.
I'm not with it, you know, I'mno longer an owner there, but
but you know, where it's likeshooting fish in a barrel, we
used to say here in Arkansas,where you see those same
problems over and over.
And just like you say, if youfix those things, whether you
want to sell internally,externally, not sell at all,
you're running a betterbusiness.
(12:48):
And and the whole MA thing isjust a natural outgrowth of
building value in the in theenterprise.
So that all makes sense.
Now, when you say agencybusiness, are we talking
marketing-related advertising?
I assume.
SPEAKER_01 (13:03):
Yeah, marketing, advertising, digital, um, like
kind of all of the above, anykind of marketing agency and any
extensions therein.
So, yeah, there's a lotbranding, you know, ads,
whatever else have you.
SPEAKER_02 (13:14):
Well, Eric just joined us.
He comes out of that world.
He had a business like thathimself that he morphed into a
software company.
Nice dramatically uh increasedthe the value and growth
trajectory of the business.
But I'm just glad youacknowledged me today on today's
show, Mark.
SPEAKER_04 (13:32):
I'm I'm a little late.
A little late, my God.
Nick, I apologize.
I've been actually I was in awebinar meeting about uh AI and
retail, so I couldn't could notget out of it.
There's questions and stuff.
I mean, that's that's a goodthing, but but it did postpone
me.
You're looking good, man.
Thanks, man.
I like the jacket.
(13:52):
Yeah, thanks.
Yeah, I'm dressing up to makepeople think I'm better than I
am.
SPEAKER_02 (13:55):
He he looks like Colin.
What is his name?
Colin Quinn.
SPEAKER_04 (13:59):
Is that the guy?
I don't know.
Uh no, you uh you always say hisname.
I'll forget Hayden uh AidenQuinn, isn't it?
Whatever.
I can't remember.
Aiden Quinn.
Aiden Quinn.
That's Aidenas will remember.
He looks like Aiden Quinn.
Mark's been saying that foryears, like from Legends of the
Fall, the older brother.
SPEAKER_01 (14:18):
Yeah, there you go.
SPEAKER_04 (14:21):
So so Nick here, he I think he's one of our kindred
spirits.
Well, I'm I'm just he's I've didsome research on yeah.
I mean, Nick, what you're doingis is really cool, and I think
it's extremely viable foraudience too, because there's so
many folks that are like, Imean, how do you build a company
to get to an acquisitionalstate?
And then I think that we can allagree being through
(14:41):
acquisitions, it's not like themost glorious thing in the
world.
There's a lot of work after youget acquired or you're getting
you're burnt you're acquiringanother company or you're
getting acquired.
Yeah, like you're a lot of yourwork just begins, right?
SPEAKER_01 (14:54):
I think that like, you know, when you look at the
statistics of it, and it's likethis is about as numbers heavy
as I'm gonna get, is you know,when you look at like the old
research of how many companieshit a million, how many
companies go from one million toten million, right?
Like, what is the attritionrate?
Big fall off.
Yeah, big fall off.
And so what I've basically cometo understand through like my
(15:16):
time in agency acquisitions andputting these systems together
and just seeing this repeated,like basically like doing the
management consulting arm ofagency acquisitions, is that
there's this thing called themissing middle.
And to be honest, it's notunique to just marketing
agencies, it's unique to allbusiness.
And the missing middle to me isyou know, when it's just you,
(15:38):
the founder, and a bunch of likefrontline people, everything's
fine, right?
Because you're the only manager,the only leader, everything's
good.
You're super passionate aboutwhat you do, so people naturally
follow you, but it might not bethe fact that you're a good
manager, you're just highlypassionate and that's
infectious.
Well, the problem is that thatdoesn't scale, right?
(15:59):
And this is why a lot of firmscan hit a million, but they
can't hit 10 and like theystruggle, and that's why the
drop-off is basically aginormous cliff between one and
10.
And so, generally because theowner is passionate about
day-to-day delivery, like thething that they're doing,
day-to-day delivery is prettysolid as long as they're
somewhat involved or directlyoverseeing the people doing it.
(16:22):
The second that they installmiddle management, this is where
things go poorly.
And, you know, I thinkunsurprisingly, in small
businesses, there's like a statout there that says 65% of
middle managers have negativevalue to a business.
They suck.
Yes, right?
It's like, and that's that's noteven to talk about the neutral
one.
So, like, I mean, if you'rereally looking for like people
that have good ROI on a manmiddle management layer, you're
(16:45):
you might be talking about like20% of people.
So and I don't think it'snecessarily the middle manager's
fault.
I think that too many people areraised up, especially during the
beginning of the business, wherethere's like a really good
person that is an incredibleproducer of work.
(17:07):
And they're like, You, you'rethe best producer of work.
We need to promote you.
And it's like they should bepromoted to a subject matter
expert role, not into a managerrole.
And and over time, you build upthese this management layer that
actually doesn't manage, and nowyour business is stuck, and
you're like, I don't understandwhy I can't get throughput.
(17:28):
I don't understand why mymanagers have to save the layer
below them, and because they'retoo busy doing their
subordinates' job, I'm busy as afounder doing the manager's job.
And now everything's likeclogged up and stuck because you
can't get forward movement.
So, what I basically how Iactually think about this is
(17:48):
like sort of like a pyramidwhere it's like at the bottom
you have day-to-day delivery,you have this like missing
middle.
And at the top you have strategyand planning, which most
founders and entrepreneurs arepretty good at.
The problem is that yourstrategy and planning, when
enacted onto the day-to-day,you're like, oh, based off of
this plan and the strategy, weshould be able to achieve like a
(18:09):
hundred percent of this upsidethat I foresee for us.
And then boom, like you deployit and you only get like 10 to
30% of the upside that youexpected.
And to me, I call this themissing middle.
And the missing middle is solvedby two things, which to me is
data feedback loops, so thatlike the day-to-day information
actually gets to the leaders,meaning, like, to me, in any
(18:32):
almost every any kind ofbusiness, what data shows us is
people behavior.
Because there's only two thingsthat can be really broken in as
far as the business goes, whichis are systems good or are
people's behaviors good withinthe systems that we've created?
Right?
So the data tells us whetherpeople are behaving in the right
way or not, and then the middlepart between the strategy
(18:54):
planning and the day-to-daydelivery then becomes behavior
change systems.
And this is all this boringmiddle management operational
stuff that no one does well.
And this is the gap between onemillion dollar businesses and
ten million dollar businesses.
SPEAKER_02 (19:10):
That I think that's profound.
I mean, that's the culture,though.
You've got to change the cultureto create the results that you
want.
Everybody today, it seems likethey think, oh, culture is I got
freaking, you know, uhpickleball courts or whatever.
That has nothing to do withculture.
Right.
The culture is what behaviorsare rewarded and what's
(19:31):
punished.
That's what it ultimately comesdown to.
But I I want to come back tothis for a second, um, Nick, and
I take two departures, if youdon't mind.
One is today my brother happensto be in town, um uh, and I'm
gonna have uh he's gonna visitwith him here in less than two
hours.
He was the chairman of WPPGroup.
(19:53):
Uh he had healthcare andspecialized communication
companies.
He had about a hundred companiesreporting to him.
All they did was buy marketingagencies.
I mean, you know how big theywere.
I think they hit 17 billion atone point.
Yeah.
He's retired now, but they keptbuying these companies and they
did not make any effort reallyto integrate them.
(20:14):
All they did is just buy them,put them on a common financial
reporting system, and then everyyear go, improve your margins by
1% and grow by X percent.
Yeah.
That was the whole thing.
And and you know, I alwaysthought that was crazy.
I I when you you know, when youthink about it, I don't want to
speak on his behalf.
I'm sure he has somereservations about it too, but
(20:36):
but it seems to me like it it soif you are an acquirer of these
companies, in my mind, youshould be trying to integrate
the things that you canintegrate, uh like sharing
overhead platforms beyond justfinance and accounting, right?
Sharing clients and resourcesand talents.
That's one thing if you're gonnabuy these companies.
(20:56):
The other thing, though, I thinkis is greatly uh uh taken for uh
greatly uh done wrong is forwhatever reason, when a company
sells, the next people who takeover want to vilify in many
cases the founder.
And they want to they want toget as far away from the founder
(21:19):
as they can because he craygrey.
They really um don't value theentrepreneur and understand what
the entrepreneur has done andwhat the entrepreneur could
continue to do if properlymanaged by the new ownership.
(21:44):
Okay.
I've just seen this over andover myself.
SPEAKER_01 (21:52):
So I have the the take that agrees with you and
the take that disagrees withyou.
So I I I would I would put itthis way.
I've been on both sides of thecoin and like doing like and
when I've sold a business I'vestayed on for like transition
purposes, et cetera, where likethis has happened to me where
they're like, oh, the old regimeisn't that good.
And I'm like, dude, I'm sittingright here.
Um, but you know, and um I likeI always think about things like
(22:17):
in the sense of like, can Icontrol them or not?
Like, am I a victim to mycircumstance, or did I create
the circumstance?
And like having sat in there andbeing like, yeah, like the old
regime wasn't that good.
There was doing these thingswrong, and like me literally
being there, I've the theself-reflection that I had was
like I didn't do a good enoughjob in order to create enough
(22:40):
champions of the culture and orenabled people to kind of be the
hero, like I was the hero,meaning like I would put out the
key fires and like I kind ofmade the key decisions, and that
casts a really big shadow.
So the acquirer has is like, howdo I dispel the shadow?
(23:00):
I think that for one, to yourpoint, and I think you're right,
it's like lack of creativity,lack of culture and management
and leadership, lazy, like lazykind of management and
leadership on behalf of theacquirer, but it's also the
fault of the acquired becausebasically they had this larger
than life persona that is notactually possible to mitigate.
(23:26):
So I think it's on both sides alittle bit, but I think that
this is the problem of likehaving a leadership that
represents the values at thesame stage, where it's like it's
dispersed, it's not like theculture lives with this one
human being, it lives within thecompany as a whole.
And I think that if the culturewasn't, you know, I don't know
(23:47):
how you would call it diffusedinto the business properly and
like in a in a consistent way,that's almost like the fault of
the previous owner that likethey were seen as the champion
of it.
You know what I mean?
You are right.
SPEAKER_04 (24:01):
I a lot of this I I keep is thinking like the um
something I've learned the hardway, and some of it I've learned
about just by fortune, you know,and we talked about a little bit
last week, but if you don't haveto be a founder to be an
entrepreneur, and not all well,not all founders are
entrepreneurs, that's right.
But Nick, to your point earlier,not all entrepreneurs are CEOs.
(24:23):
Amen to that.
Most are not, in fact.
SPEAKER_01 (24:26):
Exactly.
And I'm not sure.
And I think that's like themissing middle thing that I was
talking about, right?
It's like, and I talk about thiswith you know people all the
time.
I'm like, there is a transitionbetween being a founder and a
CEO, and very few people make itbecause they don't even
understand that that transitionis a requirement and even
(24:47):
exists.
They just think like I am, likeI think, therefore I am, and
it's like that's not how thisworks, guys.
The both of you.
SPEAKER_02 (24:55):
I mean, I hear you, but uh that excuse of now the
founder, we need to replace himwith professional management.
I've seen a lot of bullshitaround that too.
Okay, where yeah, we get thesepeople that came from bigger
companies, they've got uh theresume, better educated,
whatever, okay.
(25:16):
And they come in and theyfreaking ruin the damn company.
They can, yeah.
They're professional managersand not leaders and
non-entrepreneurs and notcreative and not energizing,
okay, but they're professionalmanagers, all right?
Or they're all a bunch offreaking highly educated.
And again, I I you know I've gotmy MBA, but I've got my
(25:39):
prejudices against MBA programsand what they do, how people
think I think it's about balancethough, right?
SPEAKER_01 (25:47):
Like, I think what you're talking about is these
people are professionalmanagers, but not leaders.
And I do bifurcate the twofunctions, right?
And I think that like look, Ithink on on your end, right,
Mark, like you came from like atime, and and I a lot of my
mentors came from a time wherelike man like leadership didn't
(26:07):
exist.
Like people don't forget, likepeople forget that the topic of
leadership is like a fairly newthing.
It might only be like 30 to 40years old.
Like we take it for grantedtoday, but before it was like
management, management,management all the time.
And then when this like new ideacame around, like and I don't
know if it was good to greatthat introduced it or whoever,
(26:28):
and they're like, sprinkle thisthing called like leadership
into the sauce, and it's likeboom, magic happens, right?
But here's the thing I thinkthat why that occurred and why
now leadership has been put on apedestal and management is like
and you even see this in likememes and like you know, like
images where it's like managerbad, leader good, and it's like
no no no no no no no, that's notwhat this is.
(26:50):
The fact was is that in the 80s,it was all management, and we
transitioned to management plusleadership, it was the secret
ingredient, bam, it made likethe sauce delicious, right?
The problem is is that webasically took management for
granted in the next comingdecades, now to a point where
people are like, yeah, likeleadership is all that matters.
It's like, no, no, no, likeleadership is about energizing
(27:11):
people, finding commonalities,culture, all these things.
But I look at it like underthis, like I use this metaphor
or like this example.
I'm like, look, you have like 30people standing in a field,
right?
They're pointing every whichway.
So they're looking in differentdirections, they're not looking
in a central direction.
You energize them vialeadership.
So leadership energizes andcharges people up with energy
(27:33):
and gets them to go.
But everybody's pointing in adifferent direction, so like
it's pure chaos.
It's going in like 10 differentdirections all at once.
People are crashing into eachother, all this other stuff.
That's leadership on its own.
Management is okay, you have 30people in a field, you come and
you organize them, they allpoint in the same direction,
they're in a tight formation,etc.
etc.
(27:54):
That's management.
Are they moving?
No, they're not moving.
So you first need to managepeople, get them in formation,
pointing in the singledirection.
Then you come with leadershipand you energize them, and then
now they move forward.
That's like the like you needboth.
And the problem to your point islike the MBA guys that are just
(28:14):
like they don't have that realworld experience, maybe they
don't have any leadership.
So they are management devoid ofleadership.
The problem, though, and I thinkthis is where Eric, like you're
saying, like there's thedifference between the founder
and the CEO.
Like, the problem is thatfounders are leadership
incarnate, right?
And so, like, all they do isenergize their team and create
(28:37):
more chaos.
And this is why people cannotget to$10 million in revenue as
a small business.
Is and they so the question is,how do you create the right
balance of management andleadership in order to actually
get the ship to go in the rightdirection in a meaningful way
that's consistent so that youcan actually break out of the
(28:58):
single-digit millions and gointo like the double and triple?
SPEAKER_04 (29:01):
Yeah, 100%.
I mean, I think that you know,there was an epiphany I had many
years ago to where, you know,I'm not the CEO because I
finally realized what the CEOtitle really meant.
And it meant management.
It did not, it did not meanleadership to me, right?
And like I had the leadership, Ihad the the point in the right
(29:22):
direction.
But man, I mean, I tell youwhat, if somebody needed some
time off, boy, I could not evenhandle it.
I could not even handle, don'task me about PTO, don't ask me
about your paycheck, don't askme about your freaking computer,
don't ask me about your chair.
I don't care.
Just work.
There is things to do.
That is but that's terriblemanagement.
SPEAKER_02 (29:43):
But you know what?
It works.
Yeah, if you're still there andyou have that person who does
that, 100%, then it works, okay?
But the my problem is when Iextract the entrepreneur and we
can get into good to great andall the bullshit about level
four versus level five.
We should all be level fiveleaders.
Great.
We don't all have ten billiondollar companies, okay, where we
(30:07):
can be level five and have noego and nobody even knows who we
are, but our job gets donebeautifully and we're easily
replaced, okay?
It's a crock.
It is all right.
We still need the entrepreneur.
SPEAKER_04 (30:20):
We need to 100%.
Like that and not because what Ido in my companies is I
recognize number one, I'm a nota good manager.
So therefore, I either partneror I hire you are good at that
to take to take the managementrole position so that to Nick's
point, there's someone that'sorganizing, there's somebody
(30:43):
that that is they're great atthat.
And then like on the acquisitionpart, let's talk about that.
The problem is is that a lot oftimes acquirers buy companies,
you know, for the product mixthat they can have for their
existing client base.
SPEAKER_02 (31:00):
Yeah, well, that's one thing.
They diverse they theyvertically integrate, yeah.
SPEAKER_04 (31:04):
Yeah, yeah, and and so that a lot of times is like
they could okay, and bring itin, put it under our operation
umbrella.
Yeah, let's bring in ourmanagers.
There's no need the leadershipdays are over.
We actually don't want thatbecause it's yeah disrupting our
management flow.
Yeah, and and that is not likeand that's a that's a too bad of
(31:25):
a thing because it is but whythough, right?
SPEAKER_01 (31:28):
Like, why does this happen?
It's like, well, like look, I'vedone multiple acquisitions in
the agency space, right?
And in other spaces as well.
Like, look, our entire strategywas to buy a like companies that
were sub-10% eBid because wewere doing 30.
So we knew if we could grabthem, tune them up to 30, plus
the synergies of the backoffice, like the the accounting
(31:50):
data.
You can even get the acquisitionif you look set looking as a
separate PL, like 40%, right?
But here's the problem it's likethey already have the
leadership, they don't have themanagement.
That's why their profit sucks,right?
100%.
So so to your point, Eric, it'slike, yeah, like you the
acquainters come in, they marchin with management because like
that's a prescription of theday.
(32:12):
But here, like, hear me out.
I just think they overdo it,like it's too heavy-handed.
Like, right now they're they'releaning like leadership heavy,
and they try to counterbalancewith like going management heavy
to try to meet in the middle,where it's like, no, like, yes,
it's the most effective thing todo, but you're gonna create all
kinds of uh upheaval.
(32:34):
So instead of creating a perfectcounterbalance to meet in the
middle, you actually have tokind of like purposely move it
to the middle where it's likeyou're still gonna lean too
leadership heavy, but then youyou're not gonna have like you
know, chaos on your hands aspeople leave because they're
like, this sucks.
Like you the transition has tobe slower, and the acquirer has
to be a bit more patient becausethey're trying to fix everything
(32:55):
in like three months or or evensix months, when it's like
really you need to integrateover like a much longer time
period.
And having done MAs where I'vebotched this, like personally,
right?
It's like every single time Ibotched an MA, and like there's
only two times I did likebotched it, and I learned my
lesson after that, is thetimeline that I have to get them
(33:18):
to the optimal profit is likeabout twice as long as what I
wanted initially.
Like before I said six months atmaximum to get all this upside.
I'm like, look, if I can gethalf of the upside in six
months, like I am like elated.
And if and really, if I can getlike a third of it, like I'm
still happy, or even a quarter.
(33:38):
But my real timeline is morelike a year, year and a half to
get like a hundred percent ofit.
And like that seems to be likethe right balance as long as you
strike the right chords and youget the right wins for the
people in the business after youbuy it.
SPEAKER_02 (33:53):
My my so now you're right into one of my theses
about this whole acquisitionthing.
I personally love distressedcompanies.
You just said it.
They're losing 10%, you're gonnatake them to 30% positive.
Why do I like distressedcompanies?
A, I don't overpay for them.
(34:13):
B, they clearly don't havegrandma's recipe.
Okay, so maybe they'll listenmore because you take it a
company that is highlysuccessful, highly profitable,
and growing, you buy that, oddsare it will not perform at that
level post-acquisition.
You overpaid for it, you're nowdriving your payback period way
(34:35):
up.
They're gonna be very resistantto any change because they have
grandma's recipe.
Okay.
So, I mean, I'm with you onthat.
But now, if we're out there asadvisors to other people trying
to sell their companies tomaximize their valuation to sell
them to these PE buyers, you'reactually making them a less
(34:55):
attractive buy, to be honest.
SPEAKER_01 (34:56):
Like I tell people that it's like, look, if we're
going on this ride to like, youknow, 10 million or you know,
high high singles at a highprofit, you need to understand
that whoever's gonna acquire youunderstands that there's very
little upside.
So either you need to build afull leadership team because you
(35:17):
are gonna be the firm that theyacquired, and then they plug
other firms into because youonly need one, right?
You need one good one, you needthe mothership, right?
Either you're the mothership oryou're one of these other ones.
Which one do you want to be?
And everybody's like, I want tobe the mothership.
It's like, I hope you understandhow much work we're about to
embark on because right now I'mlooking at your team and like
(35:38):
maybe you and your second incommand are good, but you have
no other leaders, and weprobably need like five or six
of them by the time we're donewith this like mothership play.
So, like, it is what it is.
So, like, either you they'relike, like, look, people forget
their business.
Like, if you're trying to sellyour business, your business is
a product, right?
Is your product attractive?
And nobody actually asksthemselves this question about
(36:00):
their own business.
Like, if I look at this from theoutside in, am I attractive as a
product to the buyer?
SPEAKER_04 (36:08):
Yeah, you know, one of the things you're talking
about on the mothership, likewhat entrepreneurs don't
recognize is how much work it isto become a great mothership.
And one of the biggest thornsand painful things in my
perspective, and it may not bethis difficult for other folks,
but in my realm, to bring onreally good leaders into
(36:31):
organization is seemingly aneasy thing to do, but it's not
like you bring on higher levelmanagement and leaders, that
means you as an entrepreneur hasto up your game.
Oh, yeah.
SPEAKER_01 (36:44):
Yeah, they're not gonna follow you otherwise.
Hell no.
No, and and you and that peopledon't understand this, by the
way.
They think that they can huckmoney at people and be like, oh,
just because I pay this personlike 350, 400 base, they can
make a million total, like withbonusing blah blah.
I'm gonna get good people.
It's like, no, no, no, no.
Like the strong, the strongdon't follow the weak.
(37:04):
It's not how it works.
SPEAKER_04 (37:06):
They don't, man.
I mean, it it's it's a uh likethe the more the higher level of
person, the higher level ofmanagement you have to do.
So if you're not a good managerand as an entrepreneur, like in
my case, you're not a goodmanager, then you need to be
very conscious about who is yourpartner, who is the person with
you that is gonna manage theseleaders when they come in the
(37:26):
door.
Because they're gonna ask thehard questions, they're gonna
dig into their compensation,they're gonna understand profit
sharing programs, they're goingto understand leadership roles
and build and they're gonna wantto build an org underneath them
to execute.
They don't do execution.
So if you hire somebody in aleadership position, right, that
(37:46):
or in a managed, you know, in ahigher level management
position, like it's gonna costyou even more than just them.
They're gonna be much moreexpensive and they're gonna want
the executors underneath themdoing the work.
SPEAKER_02 (37:56):
This is though why I think a lot of business owners
and and and you can comment onthis, Nick, are too damn
selfish.
They need other partners who arereally capable people.
Okay.
You're not just gonna hire thosepeople.
Some of those people need to beowners.
You need to say, you know what?
I'm gonna give Bob, I'm gonnamake it possible for Bob to own
(38:19):
20% of my business or 30% of mybusiness or whatever.
Okay.
And a lot of owners or foundersare just so damn selfish.
They'll be like, Well, I'll tellyou what, Bob, I'll give you
appreciation rights for 3% ofthe business or something.
And Bob sits there and goes,This is freaking bullshit.
It's not worth anything.
(38:39):
This guy's a selfish bastard,and there's no way I'm gonna
give my dedicate my soul tobuilding this company.
SPEAKER_01 (38:46):
I mean, don't you think that's true?
Uh, I think that owners, like,look, there's there's two
mentalities, right?
There's like rich mentality andking mentality, right?
It's like if you want to beking, keep all your equity.
You're gonna gross so and you'renot gonna attract the top
people.
If you want to be rich, it'slike you're gonna attract good
leaders because you're you knowthat if you give away a piece of
(39:08):
your pie, but then makes the piebigger, you're better off.
There you go, right?
SPEAKER_02 (39:13):
Yeah, that that that element I think is missing for
so many entrepreneurs, and it'sone of the reasons they can't
grow to this 10 million, andit's one of the reasons they
also don't build value in theenterprise.
Because if I've got some ofthose people who will stick
around maybe post-sale, thenthey provide that glue, as you
(39:34):
say, to kind of get it from hereover to here.
That the resources and expertiseand client relationships of the
buyer, uh, you know, and financeand money combined with some
people over here that get theculture that have been making it
happen.
Beautiful marriage.
SPEAKER_01 (39:53):
And I've seen, like, like to your point, I've also
seen people make the mistake,even if they do follow through
on the like, hey, let's givethis person equity.
To your point, it's like fivepercent.
It's like, okay, so if you do asale, like what anchors this
person to this job?
Like, nothing.
It's like it's like you're notgiving away enough to make it
attractive for them to actuallywant to see.
(40:13):
It's like, oh, but I gave themfive percent.
They didn't earn it, they didn'tpay for it.
It's like they're running yourentire business for you.
What do you mean?
Like, it's crazy.
SPEAKER_02 (40:23):
I I have a friend, it's a such a great example.
He's here in in northwestArkansas, and he ran a group of
prosthetic clinics, and it gotup to like 13 million or so in
revenue.
He was the guy, the guy whostarted it, he didn't even show
up for six months at a time.
I'm telling you, it was so andthen when they sold the company,
I don't even think he got let'sjust say the amount of money
(40:47):
that the boss gave him was soinconsequential, it was beyond
insulting.
So the guy quit to the now he'sthe president of the company
after it got sold to this Germancompany.
Okay, he's running it and he'sgot no ownership in it.
There's nothing tying him there.
He quits, waits out hisnon-compete, starts a new
(41:11):
business, and is killing them.
They're almost out of businessnow, and he's back to where he's
got probably 60% of the revenuethat he had when he got out of
it already.
And I'm talking like within twoyears.
SPEAKER_01 (41:26):
But this is a typical story, isn't it?
Like, I mean, like, is is thisreally like rare?
I mean, I and I think it's toyour point, right?
Around, well, how are webuilding these things right?
And I I like look, like maybeit's simple to us, maybe it's
simple to me.
I don't know, but I just thinkI've just seen too many things
at this point to likeunderstand.
(41:47):
Like, look, the the majority ofthe deficiency of most
businesses is the balance ofleadership and management,
number one, right?
And like I I group culture underleadership, by the way.
Um, and then and then it's like,okay, who is your second in
command and or the person that'sgonna run this thing day to day?
Like, and and can you balancethem out?
And like what I've seen, thebest way to do about go about
(42:10):
this is get grab somebody that'sreally good at the management
elements and inject into themleadership rather than the other
way around.
I don't know why, but in myopinion, I could be wrong about
this.
Maybe it's just the personalitytypes that I look for.
I prefer taking somebody thatunderstands like management
inside out and backwards, andthen like, okay, I'm gonna fight
to like make you a leader on topof your skills.
(42:31):
I've tried to do it the otherway around, and it like seems
much harder.
And I don't know why.
SPEAKER_02 (42:35):
It seems counterintuitive, but you may be
right.
I mean, it seems like you couldlearn management, right?
Yeah, but I don't have thefreaking, I don't have the
goddamn patience.
SPEAKER_01 (42:43):
No, yeah.
Here's the here's the reasonthat I want the manager and then
teach them leadership, okay?
Yeah.
The ultimate motivation is to beable to endure boredom.
And very few people aremotivated enough to endure
boredom.
So you grab somebody that's aleader and you try to teach them
management, Eric.
Like, what what do I gotta payyou to learn management?
(43:07):
How motivated do you gotta be toendure boredom?
It's yeah, you're gonna, I mean,you're shit time profound that
way.
SPEAKER_03 (43:14):
It is profound, right?
SPEAKER_01 (43:15):
Yeah, like like leadership is exciting, right?
Like you can you can spin it tobe exciting.
SPEAKER_04 (43:20):
Uh that's why we're unemployable.
We can't you can't put us in acorporation because we'll be
miserable.
You're right.
Uh I mean, this is not only canI not manage, not only can I not
manage, I cannot be managed.
This is profound.
SPEAKER_02 (43:34):
It's a terrible thing.
No, but you know, but it butagain, to me, it really points
out uh a fund of all this talkis I I think it's really
profound and and beneficial toour audience.
But I think at least in my caseand Eric's case, um both um it
you know, we were fortunate thatwe got good business partners
(43:57):
who were completely differentfrom us.
Great managers.
We didn't try to go uh with ourbutt best friend from high
school or whatever, that we'reall the same, which a lot of
business partners are.
It's like, oh, the three of us,we all like to do the same
thing.
We're all the same.
No, that's the worst damn thingyou can do.
(44:17):
You're treading in each other'sterritory.
Yeah.
Get the opposite of you, thenmaybe you have a chance of
navigating some of this stuff asyou grow and having something
that is valuable at the end,because you're right, Nick.
I mean, if it's tied to you asthe founder, you're screwed.
Right.
And any good acquirer willfigure that out in due
(44:40):
diligence.
SPEAKER_04 (44:41):
So, Nick, there's one thing in your formula though
that uh that I feel that's stillmissing, right?
You got management, leadership,but what about that vision part?
Because I don't think thateither one of like you can have
to be a great leader, greatmanager, yeah, but that doesn't
mean you can see things.
Amen to that too.
SPEAKER_01 (45:01):
What what I I don't know if that's a teachable
skill, by the way.
Like I I yeah, you know, but youknow, I kind of group that under
like leadership culture.
Like, I mean, without a vision,you can't, I don't think you can
develop like a full culture forsure, like mission, vision,
values, etc.
Like, I mean, really, it's likethat's the thing that is gonna
drive behavior and anchor peopleinto like what the goal is, in
(45:23):
my opinion.
Uh, but do people do a good jobof like writing their visions?
Like, generally not, right?
SPEAKER_04 (45:31):
And even if you write it, like how do you see
it, right?
I mean, I think that it's Idon't know, man.
There's there's there's a littlebit of a mystery there.
And but I think that mysterythat we're talking about is the
entrepreneur, right?
It's not the founder.
A founder can be can found acompany and be a great manager
and leader.
Yes, like they can come out ofworking at Walmart for 50 years
and they're gonna go found acompany, and it could be the
(45:53):
best damn thing that's ever beenfounded.
Right.
But that doesn't necessarilymean they're an entrepreneur,
like they're gonna freakinggrind their teeth at night and
live like they've been oncocaine for seven days straight
and keep rolling.
SPEAKER_02 (46:04):
And not even have to be on cocaine, right?
SPEAKER_04 (46:06):
But you're not on cocaine, but live like you're on
it.
You know, like you are freaking,you are you're on the sauce.
SPEAKER_03 (46:13):
Man, I love it.
SPEAKER_04 (46:14):
Yeah, yeah.
Mark probably probably foundsomething that describes his
life.
You know, I I do live on it.
SPEAKER_02 (46:20):
You don't need any of that.
SPEAKER_04 (46:21):
You don't need that stuff.
SPEAKER_02 (46:22):
Yeah, no, you're right, but but this is what I'm
talking about.
Okay, we got okay, it is thatspark, that vision, that's
what's missing in so manycompanies.
And when they cast off the thethe founder, entrepreneur,
whatever the hell you want todo, and and and they either
don't need them because we'reprofessional managers or we've
(46:44):
got all these great leaders orwhatever, they lose something.
Well, yeah, you're gonna be ableto do that.
SPEAKER_01 (46:48):
Well, sometimes the vision doesn't match, though,
right?
Like after purchase, like, canyou even hunt the vision
anymore?
Like, if the vision was veryspecific, because again, very
well crafted for not selling thebusiness, like this is our goal.
Like, it's very specific, right?
People can see it.
Problem is like, is that stilltrue post-purchase?
SPEAKER_02 (47:08):
Yeah, they gotta have a new vision.
You're right.
SPEAKER_01 (47:10):
Well, and then anytime I've seen people pivot
vision, like it's not gone well.
It's a very hard thing to do.
You're right.
SPEAKER_04 (47:17):
You know, it's it's interesting.
Like, it would be like you goand acquire SpaceX.
Are you gonna kick Elon Muskout?
That could like that could beone of the dumbest things that
somebody could ever do.
But how do you cooperate withthat?
I know because that's a trueentrepreneur, right?
That is somebody that doesn'tcare about anything other than
solving a problem and will puteverything.
(47:38):
There's no leadership course ormanagement course that's gonna
teach that.
If he stays there though, he'sgonna be gonna be a problem.
SPEAKER_02 (47:45):
Oh, he's gonna be a huge problem for leaders and
managers.
But it's just like uh gettingrid of uh, you know, uh uh uh
Apple, you know, oh Steve Jobs.
Yeah, it's the exact story, it'sthe same thing.
SPEAKER_04 (47:58):
It's the destructive but how but how does an acquire
like because that's I think is aproblem, right, Nick?
How do you that entrepreneurialspirit?
Like, how do you incorporate ordo you agree with Steve Jobs
beforehand?
Hey, look, we just gonna we'regonna like here's the deal.
We just want to buy you for yourproduct, we don't need any more
(48:20):
of your entrepreneurial vision.
Do you shake agree with that?
Like, okay, sounds good, noharm, no foul.
SPEAKER_01 (48:27):
I think that there's like two sides of this.
There's like the side of on theentrepreneur side and the
acquire side.
So I would say this on theacquire, like fortunately for
most entrepreneurs, the personacquiring like seldomly do they
look at vision because they'relike, we're gonna impose our
own.
So I think that they undervaluewhat it currently is.
And I think that's to own likeentrepreneurs' benefits, by the
(48:50):
way.
Um, I think that as anentrepreneur, like I think what
I said before, which is likeyour business is a product, the
vision is a big part of thatproduct, and is it congruent
with being able to sell thisthing?
Like, does it dovetail into likeultimately what the vision is?
Like, once this thing getsacquired, or no, and then you
have to pick your purchasingparty carefully as the seller,
(49:13):
right?
That's that's my vision is tobuild up and sell.
SPEAKER_02 (49:16):
All right, on that note, we gotta wrap this up.
I I say we have to begin.
Let's get Nick back again.
Love talking with Nick.
He's great, he's a brother fromanother mother.
That's right.
Okay.
Love talking with Nick.
He's he's got a very good way ofbeing able to sort of put things
together in a sensible fashionthat people understand.
SPEAKER_01 (49:38):
Anytime you you guys let me know the time and place
from there.
SPEAKER_04 (49:41):
This is a great topic, Nick.
I mean, like if you're anentrepreneur, like I mean, going
through this when when you'reyou're building something and
you wanted to sell one day, thatyou're going, you're driving for
that dream.
Like, it's not nothing's as rosyand beautiful as you think it
is, right?
I mean, it is great to beacquired, it's great to sell
your company, build something.
I mean, it's an honor.
That is definitely an honor, butbut it is there's nothing clean
(50:04):
and roadmapped about that thing.
And so having your perspective,Nick, working with so many folks
that you've been through isexcellent for us.
Appreciate you being on the showtoday.
SPEAKER_01 (50:13):
My thing is like build it to sell, but then don't
sell if you really want.
SPEAKER_02 (50:17):
Yeah, we're cut, we're coming back to this again,
Nick.
Don't don't uh don't think wedon't want to have you back on
the show as soon as possible.
So we got to wrap this up today.
Last thing, if somebody wants toreach you, how do they get you?
What's your email?
Perfect.
SPEAKER_01 (50:33):
So you can go to agencyacquisitions.io or you can
add me on LinkedIn, Nick,N-A-C-K-Avaria, A-V-A-R-I-A, and
you'll find me on there.
Just DM me.
More than happy to chat.
Awesome.
Awesome.
Great.
SPEAKER_04 (50:48):
Well, hey, this has been another episode of Big Talk
about Small Big Us.
Thanks, Nick.
SPEAKER_01 (51:00):
Thank you.
SPEAKER_00 (51:07):
Thanks for tuning in to this episode of Big Talk
About Small Business.
If you have any questions orideas for upcoming shows, be
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