Could your business survive without you for two weeks?

Sam: Everybody is so afraid of taking that vacation when you're in your first year or two, right? You got your debt service payments, you got payroll, like it is, it's a scary time. But I think once you get past that, it's actually a really good test to see what breaks, right?

Kaustubh: Yeah. I, I have the goal for sure, and I've, I've mentioned this to the team, of like taking one month off a year, right? And basically that being a month where part of what we're doing is going into the month, we're prepping and building systems around what I'm still involved with, and then we see how it goes for a month. And then when I come back, the work is like, "Hey, like what broke? What do we need to work on?"

Sam: As a business owner, it's so easy to convince yourself to keep paying somebody and maybe like raise them, knowing they are the wrong long-term solution. But because you've got no alternative solution in the short run, you just sort of keep eating it and eating it and eating it, and you have no abil- no confidence in your own ability to rehire somebody to replace that function. Right. I think it is a superpower to have less fear around terminating people.

Kaustubh: Welcome back to The Intentional Owner. It's me, Kaustubh Deo, with Sam Rosati as always. How are you doing, Sam?

Sam: I'm good, Kaustubh. I'm gonna pretend like we just got on the line starting to talk. In reality, we've been talking for 40 minutes.

Kaustubh: Exactly. We have our, we had our long pre-call to discuss Blooma's, you know, capital requirements and the like. I got my free, free advisory session, and now we're ready to record a podcast.

Sam: I will say, and then we'll jump into topic at hand today, that once you get into the seat, especially, I think it also exists in, like, the pre-closing phase, the search phase. You don't need the biggest network on planet Earth to sort of help you out, but it is really valuable to have a group of 5 or 10 people that you can call on different topics that have not just an understanding of, like, maybe the financial or operational circumstance, but, like, the psychological circumstance. Because it's like, no matter who is in your life, a, a wife, kids, parents, college roommates, there's not a lot of great alignment there for advice.

Kaustubh: Absolutely. No, I, I, I mean, like, and interestingly, like, I always thought it was a function of, like, financial alignment, right? Like, okay, if you have investors, they are now aligned with you, so they're gonna be interested. What I have found is, I mean, that definitely helps, but that's sort of, uh, that's not actually required. Like, a couple of the folks that I go to regularly for advice are non-investors. They're just people who have, like, chosen to care and follow along for a long time, right? And so, like, you know, the s- the, the kind of the pre-call we had was you and Nick, who are both investors of mine, but, you know, later today I'm getting lunch with Chase, who I've sort of also had as a mentor, and he's not an investor. But what you need is you need some of these folks who are following the journey and know you well enough to give context-specific advice and thoughts, such that it's, it's... Like, that kind of help is just really valuable.

Sam: Remind me, do you have investors on your cap table who are professional investors?

Kaustubh: I do. They're all, um... But not in our asset class, per se. Well, actually, that's not true. But most, the professional investors are ex- like my coworkers from private equity life.

Sam: Okay. So would you say they tend to be... This is an unfair question. Maybe I'll reframe it. Do you find, like, your fellow ETA investors, like folks who are owners- Yeah of small companies like Nick and I are, tend to provide more helpful context? It must be like the relatability side of it. Yeah.

Kaustubh: No, the two areas that I have found the most... The, the two profiles I have gotten the most valuable help from are ETA investors who have been operators or kind of like longtime executives, like operators, right? Like, like there is something to be learned from folks who have run a large organization as a leader because they just have a good, like, top level view of how organizations should be designed and how people should be managed without being lost in the weeds of it. So the first few years, I don't, I don't work with him as much anymore, but the first couple years I worked a lot with this guy Andy, who was the CEO of one of our portfolio companies at my old PE firm. And, you know, like he ran what was a small business for my PE firm, but you know, it was a roughly [figure omitted] EBITDA business, so like not a small business by any means. And you know, he, and he'd run that very successfully after a long series of many other high-level corporate gigs. And so he just had a lot more of this just like how do you be a good manager kind of background to him, which is a huge, huge gap for most searchers, my... You know, definitely for me at least.

Sam: Yeah, totally. That's interesting. I think the more these investor funds pop up, I do think some of the guys and gals running them are skilled counselors- Mm-hmm ... or advisors or whatever the word is. But I don't think there's anything like sort of peers- Yeah ... that are also on your cap table.

Kaustubh: Tactical tip for business owners: I learned about a bank statement loan, which I had not heard of before. It is technically considered a conventional mortgage, though it's not a Fannie/Freddie product. What it is is the lender, they look at your business' bank statements even though they're not taking a lien on your business, right? They're only taking a lien on the house. And this is the math they do basically is they look at your monthly deposits for the last 12 to 24 months, depending on the lender, and they take the average of that and they divide it by two. They like give it a 50% haircut. I don't know why. That, that's like the... I think they're thinking of that as margin of error. And then they multiply that by your ownership percentage, and they call that your monthly income Which is not close. You know what I mean? Like, so, you know, like I, you know, you take the business's revenue, cut it in half, multiply by your ownership, and the number the underwriters call your monthly income is [figure omitted], which is not close. So now, the... You do, you have to pay a bit of a spread against true conventional, you know, like an income-based loan, so like, that's- yeah ... the risk. But like, we ended up at [figure omitted], which is pretty much right in line with conventional loans right now.

Sam: I was gonna say, how's that a spread?

Kaustubh: Yeah, I don't think it is, actually. And we shopped it, you know? Like, our initial lender that we got pre-approved was at [figure omitted], and then we shopped and got a better rate. And then I kinda... Actually, you know what? This is... I, I monetized Twitter, actually, where one of my, this, uh, local Seattle entrepreneur who I know kinda through Twitter more than anything, he DM'd me, 'cause I was talking about it on Twitter, and was like, "Hey, I've got a guy for you." He connected me to his lender from his t- his bank statement loan, and that lender came in lower still, and so it got done.

Sam: All right. So today what we wanna talk about on the actual work front is- Probably, uh, uh, answers will have evolved, so I kinda want us to each answer it, and we'll start with you- Okay ... from maybe the perspective of a few years ago or at closing. And then today, 'cause I think that'll be... It'll be, like, a more stark comparison and, you know, kinda insightful as to what we work on, right? Which is- you know, the, the framing is, like, can your business survive a couple weeks without you? And all these small businesses that the ETA community are buying are largely, like, very owner-centric, very owner-dependent. It's really hard to imagine them running well without the sellers. And yet pulling them out, replacing them with our own energy and s- lack of skills and hustle is the job. And then for the first few years trying to sort of pull the necessity of us out of the business. Right. That is where you create maturity and set yourself up to grow. So, I don't know, I was just gonna ask a few questions to kinda see. Like, I wanna hear how Blooma was the day you bought it, and then maybe today, and then I can kinda do a similar comparison, but not one business. I can kinda talk about, like, you know, the dumpster business that we bought back in 20... Oh my God, I'm forgetting. 2019? 2018? And then maybe, like, PSG today. All right. So, a- and you know, this is like all, also leads into the stuff you can go as a searcher and ask a seller when you're trying to understand how fragile a business is based on that, that seller's involvement. But- Mm-hmm ... so, like, what breaks in the very immediate short run? Mm-hmm. Like, at the very beginning, if you were gone for a couple weeks- Mm-hmm ... in those first few days, what's gonna go- Mm-hmm ... super sideways?

Kaustubh: Okay. When I... W- so when I, right when I bought the business, if I had left for a couple weeks, right? Like, the... I mean, at that time, I was opening and closing the gates every day, right? Like, so yeah, like, I guess I would've, in theory, given somebody else the keys to the building and, like, literally I was the only one who had even that level of access. Every day I sent out a staffing text for the next day with, you know, who's going where. So, like, that would've broken, like, within 12 hours. Any customer escalations, any issues, like, we had, like, that would've es- you know, that would've... Those all went to me at the time. Obviously our team, like our... We had one other person in the office, so she can handle a lot of the basic ones, but then yeah, anything kind of unusual. I mean, literally when I bought the business, I... And this changed within a month or so, is like, we only had one physical iPhone that answered the phones, right? So like, every weekend I took that home with me, right? And so, like, all weekend calls would've been missed, right? And then obviously the one thing that's different today, or the... Sorry, the one thing that's the same today as back then is I still do final payroll every week. Um, so that would've broken.

Sam: When you bought the business, was pricing on a schedule? Did the business, did Blooma make customer-by-customer pricing decisions, or was it pretty standardized even then?

Kaustubh: It was pretty standardized, actually. Not in a... Like, it was all handwritten, but, like, there was We had a, we had a mental model for how to price things consistently.

Sam: Okay. So when we first bought Alpha Dumpsters, the husband and the wife were deep, deep, deeply ingrained in the business. So the, the business could not function without them. Yeah. It meant they never really took breaks. It probably helped they had a couple kids in, in the business, so- you know, like, they probably had the perspective of being able to escape. We didn't share that perspective. We had a pricing book. Literally, it was a book. But there were e- I mean, absolutely there were exceptions every day- Mm-hmm ... that we would grant, and those were, like, 100% knock on their door and ask them what the exception is- Yeah and then it's granted. Alpha Dumpsters was largely a PPC Google Ads- lead-driven business, so the Google Ad campaigns were run by the sellers, and so, like, the spend was managed largely by them.

Kaustubh: And they were managing it, like, day-to-day or it was like a they set it and forget it kind of thing?

Sam: It was largely the latter. It was kind of a set it and forget it. And they had a budget, but we took that over and started managing it day-to-day.

Kaustubh: Makes sense, yep.

Sam: Scheduling was less a concern because remember, we were just a broker So we didn't actually have, like, our trucks that ran routes to pick up dumpsters. We- Right subbed out all the fulfillment. So, like, that wasn't a- an issue the way it is in like a route-based home or commercial services business.

Kaustubh: Yeah. Like, that, that for me was, would've been the biggest issue in the first... You know, but it, it was just a physical business. Right? Yeah. Like, you need to move things from point A to point B.

Sam: Mm-hmm. It's funny how you say payroll is something that, like, we both had control of and still do. Or I- I probably still would. I don't at PSG, obviously, but- why is that? Why is payroll something the owner tends to run personally? I

Kaustubh: think there's two things happening. One is it's just so clearly the most important thing, right? Like, it ha- it's extremely detail-oriented, right? Like, every payroll cycle has just, like, all these, like, quirks to it of, like, e- especially in a business that has a lot of hourly employees, right? And not just a bunch of salaried employees. But, like, you know, this week that person has sick leave and this reimbursement 'cause they accidentally paid for gas on their personal card. Like, you have to get that really right with, uh, with hourly staff. And so I just think it matters way more than almost anything else I do week to week, uh, on a just really short-run basis. And then secondarily, like, takes a long time to build a business where you can actually share payroll information with anyone else in the company, right? Like, having that level of pay transparency is difficult.

Sam: That's a good point. And I think about why, uh, maybe where that shift comes. I think part of that shift is business model dependent. Because in, like, the fencing business or in the dumpster rental business, so much of our cogs, well, so much in all of our costs sat in, like, material. So, like, reviewing vendor invoices- moved the P&L needle more than payroll.

Kaustubh: Oh, interesting.

Sam: For you, you don't have a greater expense than payroll.

Kaustubh: Correct. It's by far my largest expense. Yep. And it also gi- it helps me sort of have finger on the pulse of, like, okay, is our team getting 40 hours, right? Or is this person seeming to miss a lot? Like, I, this is... So now w- where payroll has evolved over the last couple years is Flavia, she's the one who actually sets up the spreadsheet for me, right? She's the one who kind of does all the time clock stuff and, you know, like, in, like, the team, if they like- Yeah forgot to clock out, they message her. They don't message me. And so I kinda get her output. But then I still go through it, and I in- and I input it all manually into Gusto. Like, I'm sure- Wow ... there's a way we could automate that, but, like, I don't know. This is maybe I'm being a boomer about it, but, like, I find, like, me inputting it, I just have, like, a little bit of finger on the pulse. I'm like, hey, who on the team is really, like, there every single day? Who... Like, you know, you just sort of have that feeling

Sam: And yet it's letting go of those kinds of feelings that is a- Yeah ... it's, it's both challenging to do it mentally. You feel like you're- Oh, yeah ... you know, thumb is off the pulse and you're taking financial risk. And yet, at a certain point you will have to.

Kaustubh: Yeah. I mean, now that I r- I'm thinking back to wh- when I started. So every day we would create a work order for each crew, right? To like, for what jo- for each of their jobs that they were doing. And so the way we would do it is they were all handwritten at the time. And so the, the seller's system was you took the, the work order, you would put a Post-it Note on the price, 'cause he didn't want the whole crew to know the pricing, and then you would scan that. So like, you know, the Post-it Note would show up as a blank if you run it through a scanner. And so every day we would physically do that for the next day, which, like, that I mean, I, I trained pretty quickly w- my other office employee to do that, so it wasn't like... That would've broken right away if I wasn't there, but that was one of my tasks initially.

Sam: By the way, and for all those of you out there laughing at like these manual overrides that don't scale Welcome to small business

Kaustubh: Yeah, that's just the nature of the beast. Totally

Sam: That's just what it is. I mean, we

Kaustubh: had- Yeah. Where so now I don't, like... So, but, but because of that, in the early days, I, like, looked at every job we did, right? And so when you talk about finger on the pulse and, like, you just have this idea, like, I had this moment of like, oh, I would just mentally scan it, be like, "Wait a minute, this looks wrong or this looks funky. Like, let's flag something." Like, that step no longer exists in our business, right? Somebody else owns that. And so now we had to build a process for, we have a production meeting once a week where they go through all the jobs coming up for the next week and do that scan. Yeah Because there's never this moment of, like, somebody doing a literal, like, Xerox copy and reading it anymore.

Sam: Exactly. Yeah. I got a couple other ones that are kind of funny with the benefit of hindsight. Again, like Google lead-driven business, so negative reviews were a big deal. So those got escalated all the way up. Like, fighting them- Yeah ... was the owner's job.

Kaustubh: So- That's still the case for us, because it happens so rarely, that I, I'm the one who writes all of our negative review responses.

Sam: Yep. Chargebacks. So- Mm ... you know, we were getting all of our revenue from credit card- Yeah ... processing. And so- Yeah ... chargebacks, people who buy a small business often don't know that when you take on a credit card processing function, you the company, the burden of proof is against you. So you have essentially guaranteed the m- processor that you will stand behind any chargebacks. They will never lose money. And so, and that's one of the benefits of paying for things on credit card, is like, if you get screwed, you can charge it back. You the, the customer get it off your bill, but the m- but the processor or whatever isn't gonna take the risk, it's the merchant So obviously that's what causes merchants to take a lot of documentation seriously, because then they have to fight these chargebacks. Mm-hmm. And there's sort of like a, a duke it out battle that the owners, or in our case, we had to take on in the early days.

Kaustubh: That makes sense. Yeah, yeah. We don't actually have that issue, 'cause we don't keep payment on file, which we probably should. But we don't, so we, like, we've never had a chargeback issue. They just don't pay us.

Sam: Sounds worse. Yeah, exactly. All right. The- So y- you know, we'll fast-forward a little bit. Where today are you the bottleneck?

Kaustubh: Yeah, that's a good question.

Sam: That wasn't meant to be a derogatory question.

Kaustubh: No, no, no. That, that's literally, like, w- I think about that all the time. I'm- I'm always trying to remove myself from the business, right? To, like, not be that bottleneck. The primary bottlenecks I currently am still in is as the sales manager, like, I will review larger quotes before they go out, just in case. Yep. Yep. And this, it's, we don't actually have a fixed threshold. It's not like, hey, any quote over [figure omitted] I have to sign off on. We don't have that. So I'm not really a bottleneck, but the arborists have been sort of trained, like, hey, like, once you're going over [figure omitted] for a job, like, let's have a quick chat about it. So me responding to them when they send those to me, like, that's one area I- I bottleneck them. And then the second one is really just payroll. Like, in the day-to-day subsistence of our business today, I think that's it. I think those are the two... I'm trying to think what else would it be. Uh, like, outside of those two, I'm pretty sure the business can function without me. Mm-hmm. For, for two weeks. Not for, like, months, but for, like, two weeks.

Sam: Right. So maybe then where would you start becoming the bottleneck on longer term issues? Think about it- Yeah ... maybe, like, quarterly or monthly type issues, where would things Stop up

Kaustubh: Yeah. So things that would start to break would be, like, I do our sales tax filing, right? Like, we have to do that- Mm ... every month. Our, like, insurance renewal, you know, that would... That's obviously... And like our licensing, right, with the various departments, like I own that. So these things, like, they come up once a year or once a quarter, but if they're not done, then, like, your whole, like, contractor license gets suspended. You can't do any work, right? So it's like they're, they're important, but they don't come up that often. So th- like, that's an example. I think another example would be, like, I run all of our marketing, right? And so, like, it's all on various forms of, like, set it and forget it with agencies, but, like, you need to manage that and review the results. You know what I mean? And so, like- Yeah ... you're, you're burning funding- Set it and forget it for two or four weeks, but

Sam: not

Kaustubh: forever. Exactly. So that's another example where we would start to feel it on the, on the time span of a couple quarters, right? I think that's it, though. Within, within like a month or a quarter timeframe, those are probably it. Like, within a year timeframe would be things like the insurance renewal, our tax filings, you know, like our team offsi- y- you know, stuff like that. Which, again, matters, but yeah, it's, it's a, it's a much longer timescale.

Sam: Yeah, I mean, people will ultimately be... Like, it, that will bubble up no matter what. Yeah. So- Totally ... whether it's, like, short-term management or long-term leadership, you know, without you for the long haul, that's... That's why I always go back to, like, this idea as a small business owner of getting to a point where one day you can hire a CEO, a president, a whatever the title is, and set that and forget it. I just don't ever... I don't align with that

Kaustubh: You, you're really just changing your... You're changing, like, the aperture on what timeline you're needed, I guess, right? That's really what's happening. Or the other way I've thought about it a lot, which interestingly, I was listening to Jon Matzner and Peter Lohmann's podcast, Lazy Leverage, the other day. Yeah. And they were talking about exception handling as an owner. And this is really, like, more and more becoming my philosophy also. So it was, it was kind of coincidental that I've been thinking about this a lot, and then they talked about it on their pod. But this idea that, like, a business is a series of processes, and then the business owner is responsible for exceptions to the process, right? And then your job over time is to build a process for that exempt- exception such that it's no longer an exception and it's part of the flow. And so, like, your exception handling should just keep getting bigger and bigger. Which means, like, you should have fewer problems over time, but each of them should be a bigger problem.

Sam: I think that's right.

Kaustubh: And so that's like if you're an owner who hires a CEO, like, your biggest problem will be CEO is underperforming or quits or something like that, and that hopefully only happens once every couple of years or f- five years. But when it does, you've got a huge problem.

Sam: Totally. Or I will often think, like, a- as soon as you can spend as much time thinking about the balance sheet as you do the P&L- Yep that's like a really first-class problem. But- that's fair ... again, I... Let's not forget here, 'cause of the folks listening, they're probably a little earlier on in their journey. We're talking about a often process that takes two, four, six years.

Kaustubh: Absolutely. No, yeah. I mean- I'm at year, I'm at four and a half years in. And part of why I think the business is so non-reliant on me today is 'cause I've invested a lot in the P&L for the team, right? So it's like the c- the cost of that shows up on, like, our lack of cash flow, right? So- Like, somebody else who has allowed themselves to stay more rela- like, crucial to the business, probably making more money.

Sam: We covered this a couple weeks ago, but can you quantify, like, how much maybe more team count you have in the business? Or, like, maybe dollars in SG&A?

Kaustubh: That's a good

Sam: question. Ads? Those are tough questions, so you can dodge- Yeah ... if you need to.

Kaustubh: No, no, it's okay. I mean, I... Like, we have a CSR team that, you know, is global talent of [figure omitted] people. And then we've got, you know, basically, like, one person running PHC department, got two other people in the office sort of running the office, including Flavia. So, like, yeah, I don't know. And when we started, it was just me and one other office employee, right? So, like, we've basically turned... If you... So exclude me, we've turned one office employee into, like- [figure omitted] in person and [figure omitted] overseas. Like, that's what... A, plus a, you know, part-time mechanic, and now we've actually, now that I think about it, we've pulled Zane up into production supervisors. That's another, like, full-time, you know, overhead role that, you know, and he was one of our crew leads. So yeah, so it's really, it's actually probably closer to [figure omitted] people from what was once one person.

Sam: That's a huge add. But to be clear, your revenue's also, like, jumped dramatically, so you know. Oh, yeah.

Kaustubh: It's jumped a ton, just not enough to, like, fully off- The, it's like, it's roughly offset by exactly that much.

Sam: Yeah. All right, so actually I'm gonna go and kind of like make... Everybody is so afraid of taking that vacation when you're in your first year or two, right? You got your debt service payments, you got payroll, like, it is, it's a scary time. But I think once you get past that, it's actually a really good test to see what breaks, right?

Kaustubh: Oh, absolutely. Because

Sam: you'll get to a point where you, the business owner, are really good at, at like tamping down the issues quickly, efficiently, so it appears to be a well-run machine. And so stepping back and taking you out, like, it will expose stuff. It's really valuable to know what breaks again.

Kaustubh: Yeah. I, I have the goal for sure, and I've, I've mentioned this to the team, of like taking one month off a year, right? And basically that being a month where part of what we're doing is going into the month, we're prepping and building systems around what I'm still involved with. And then we see how it goes for a month, and then when I come back, the work is like, "Hey, like what broke? What do we need to work on?"

Sam: Isn't that something that those guys talk about, by the way, on that pod?

Kaustubh: Yeah, it's, it's... I'm, I'm 100% stealing this from Peter. He calls them a, a crane break.

Sam: Okay. That's cool.

Kaustubh: Yeah, which I like. You're welcome, Peter. His, his, his- Give you attribution ... his, like, property management, like, membership company is called Crane. So he- I think he was doing this anyways in his own business- Yeah ... but it's now been branded a crane break.

Sam: All right. So let's pivot a little bit. So the fragility, uh, that we just talked about is really, like, in the sellers that we tend to buy businesses from, which means then the job that we inherit is learning and replacing and then ultimately delegating, hopefully, most of what they were doing. Yeah. And that creates a lot of stability, ability to scale, yada, yada, yada. But I actually think one thing we're, maybe it's you and me, maybe it's our generation, is our ability to take the people out of the business who cause fragility- problems. And you and I have talked about this before, which is, like, we're probably pretty systematic in the hiring, training part of the business- but in terminating people who are not keeping up to your objective- Yeah ... it's harder than it looks.

Kaustubh: It's so hard, especially when you're smaller, right? I don't know if you felt this way with the dumpster business or early for PSG, but, like, you just need each person in the seat, right? Like, you can't afford to run without one of the people for a bit while you go find a replacement.

Sam: No. Like, there's no... You have no excess capacity. Everybody's fully utilized. Yeah. And it's just the way small business is run.

Kaustubh: Yeah. And

Sam: so the- And

Kaustubh: we still fall into that trap. Like, we have some excess capacity finally, but then, you know, somebody leaves you didn't expect, and now you don't have it. But now you don't feel urgently about hiring 'cause you're like, "Oh, well, we're still fine. It's not like we, like, needed another person." But then somebody's performance starts dipping, and now all of a sudden you can't let go of that person 'cause you don't have the excess capacity built into the system anymore. So it's like even if you do start to get ahead of the problem, like, the natural tendency of these businesses is to, like, pare itself back down, retrench to, like, the baseline. But like you actually need to be above the baseline.

Sam: Right. 'Cause you've gotta have the redundancy to be able to, you know, afford the loss without a bunch of chaos and... I mean, remember too, most of us are running these businesses while we're all busy doing other things. So- it's not just the owners. It's all, everybody that works for the business. So it's not like you can go from working 40 to 60 hours sustainably if somebody quits. So the thing I learned really early on for sure at Alpha Dumpsters was- I had a really hard time understanding, like, who was really effective at their job and who wasn't. And typically, I think we pr- I probably learned it by having to terminate folks for non-business related reasons, like unrelated to performance. And seeing some people leave and experiencing what it was like to lose a low performer gave me more confidence to terminate low performers. Because it's funny how long you'll put up, especially in the early days when you don't know anything about a business, every one of your employees knows more about the company than you do. Yeah. And you have all these financial obligations. People have value to you even if they're low performers simply because they know a lot and they do a lot. So- I

Kaustubh: think that's maybe one of the key issues, right, for b- business buyers is e- even... Like y- you can manage people over time even if you haven't done the role, but it's a lot harder right, if you'd, if you've never done the role, as you don't really know what good looks like yet

Sam: So that's easy though once you kinda can point out like who is performing well. The harder one is you have a really high performer that you also need to let go or is holding you hostage. You ever had that scenario,

Kaustubh: Blooma? We- we've had maybe one really early on where, yeah, it was just not... E- exactly. It was like a pretty crucial kind of crew leader type role where we're just like, oh, like it's just not a good culture fit, and like trying to pull the company in a direction that I didn't wanna go. But yeah, like extremely productive person

Sam: We had, I think, three of those people. And remember, we bought two businesses at the same time. And I'm trying to think back now. It's been a while. Geez, it's been like six years. I think that's the hardest part is, is as a business owner, it's so easy to convince yourself to keep paying somebody and maybe like raise them knowing they are the wrong long-term solution. But because you've got no alternative solution in the short run, you just sort of keep eating it and eating it and eating it, and you have no abil- no confidence in your own ability to rehire somebody to replace that function. Right. And I, I gotta say, like now with the benefit of a bunch of pattern recognition, seeing how, you know, entrepreneurs operate, I think it is a superpower to have less fear around terminating people because I think you and I probably have the opposite inclination, which is just to hold on for too long.

Kaustubh: Absolutely. That's been my... If, if there's any error or mistake I've done m- the most consistently and repeatedly, it's holding onto people too long. Why? With... Yeah. Why? I think like one of the clear reasons is the cost of terminating someone is very obvious in that you now have to replace them, you have to go higher, you have issues on the team in terms of backfilling their production, all of that, and the benefits of terminating them are pretty murky, right? Like, the like impact on team culture is hard to measure or really to gauge the impact on just like the vibes are s- hard to gauge. So like unless they've like forced your hand, right, and done something really crazy, that's I think the one of the biggest reasons combined with some level of just like wishfulness, like naivete, naivete, right? Like or just like I... Like, like there's, there's been people I've had to terminate who I really liked, right? Who like I just w- was... I wish they could... Like I kept hoping that they would get better.

Sam: Do you have any sense of how many people you've terminated over the last four and a half years?

Sam: Are we talking 10 or 40?

Kaustubh: It's, it's, uh, it's, uh, in the order of 10. Yeah. No, yeah, it's somewhere around 10.

Sam: Okay, so you can probably remember each one probably very vividly.

Kaustubh: Yeah, for sure. Uh-

Sam: There's a bootcamp alum who's pretty vocal on, on Twitter these days, and I don't... Well, anybody could probably figure it out. He bought a small residential HVAC contractor, and- Mm he churned over everybody on his team, I believe. Not literally everybody, but like the count, uh, his original employee count in his first year. Oh, And like I just remember thinking, "That is one thing I never would have had the bravery to do, no matter what."

Kaustubh: No, no, no, certainly not. Like, especially not being able to do the role by... Like, for me at least, like, it's not like I can go climb a tree, right? And so it just w- it was never gonna happen, yeah.

Sam: Right. And yet, like, I believe he three, 3X'd revenue, so.

Kaustubh: Oh, that's awesome.

Sam: I know. So it's one of those things, like, the rule of thumb is try not to change anything. Try to, like, have as much stability and smoothness as you can in that first year. And yet, you know, it just creates a different set of problems.

Kaustubh: No, I know. Have you... Do you feel like you got better at it over time? Like, uh, between Dumpster Rental and, and PSG?

Sam: Well, I had to do it a lot more when we were running those first two. So I'd say, like, my skill set has softened up, which is kind of, you know, a bummer. Yeah, I think that's definitely a bummer, right? As you kind of get further from the action, you just don't have the reasons to sharpen the tool. But yeah, no, I feel like at the very, uh, like couple years into all of this, it was much easier. You, you just sort of become more clinical and- personal inclinations just don't matter as much when they're getting in the way of, like, the objective you're creating.

Kaustubh: Yeah. I do think I'm also, like... I hope this isn't just, like, cognitive dissonance, but, like, I think I am believing more and more that it is eventually good for that employee as well. Like, I'm not a, I'm not really a big, like, a h- I don't, I don't really buy into it when folks, you know, are on these podcasts and they'll say, like, "Oh yeah," like, "you just, y- y- it's good for the employee to, like, lose their job so they can move on to the right adventure." And it's like, eh, I don't know about that. Like, that's, like... But I do think, like, eventually it could be good for them, right?

Sam: Yeah. Yeah, yeah. Um- 'Cause it's not a long-term answer where they're at. Correct. Exactly.

Kaustubh: And so there's something to be said for, like, as soon as you know something is not a long-term answer, moving towards what might be is, uh, the right choice. But the reality is with the termination, like, it's not on their terms, it's not on their timing. Like, so I, like, I don't believe it's good for them in the inter- in the short run. So I've, uh, yeah, I've always found that language around termination a little unappetizing.

Sam: Same. All right, one more personal one, which is I'm gonna totally pivot, but as I am getting ready for an upcoming conference- Mm-hmm it occurred to me that I think a lot of business owners do conferences wrong. Mm. Or maybe they just do them very reactively and not as proactively as they could. So-

Kaustubh: Okay. Say more ...

Sam: fi- five minutes, like, let's just go into how you use conferences and how I use them, 'cause I bet they differ a lot. But I bet you are more proactive than most. So- I have a conference next week, and it's, you know, typical three-day event, big hall, big... Lots of conference, uh, booths. And we're gonna send a lot of people from the operating team to do a lot of different things. But walking the floor sort of nonchalantly is not one of them. And so I'm, like, pretty happy with how we are pretty proactive with, we will set up a lot of private meetings. Mm-hmm. So the, the thing I think about with conferences now is it's not that, like, the physical conference hall is a special place at all. What's special is so many people that are involved in your day job are in one place at one time. And so you can do the in-person valuable meeting- with 10 or 15 people over the course of a couple days. And to me, like, just build and sustain fantastic relationships in a very short period of time.

Kaustubh: No, I think that's right. I, I don't, we don't have as many, like, supplier partners or vendor partners as you guys do, and so for me it's a little bit more oriented around, like, almost treating it like a reunion for, like, other business owners, right? And get- basically getting to, like, see my tree company friends from other regions in person, 'cause everyone's there, right? And, and so, like, to me, like, a really good way to walk the floor, the c- the trade floor, is to, like, buddy up with one of your friends and be like, "Hey, like, do you wanna go walk the floor together tomorrow at 9:00? And, like, we'll go do that for a couple hours." You're really catching up, like, as you're walking around, and maybe- Yeah ... you see something interesting, you talk about it, and you, like, learn. And it also, like... I find that it helps, like, jog the conversation of, like, oh, like, you see the new crane from some company and you're like, "How are you guys using cranes right now? Are you guys still subbing? Are you thinking about buying?" And, like, that's the conversation that's interesting. I'm not, I don't need to talk to the crane vendor, right? Like, I, I know, like, what they're, what the pitch is, right? Sure. So I, I think, I think I, that's what I try to use the trade shows for, is mostly, like, d- deepening the relationships and connections with my peers.

Sam: So why did you join the... Didn't you join the board of your tree care association?

Kaustubh: I did. Yeah, that... So I joined... A- and that is a little, it's less of a trade association. It's more of a, like, arborist education association, and so that was a lot more, like... Like, there's not really, like, vendors in the same way. It's a lot of, like, seminars, webinars, con- like, in, like, like, training conferences. So a really good way to get to know the people locally who are, like, working in our industry, right? Mm-hmm. Okay. Like, that's what I have found it most helpful for. And, you know, like, i- it's funny, we recently, we had a sales arborist just leave, which was a bummer, but she got a sweet gig with the city, which is hard to compete with. And so, but, you know, so we ran a whole new hiring process, and for our two finalists, like, I was looking at their references, right, on their resume. And, like, for each of them, I knew at least one of the references personally already.

Sam: Nice. Okay. And so that's- By the way, is she in a posit- is she in a position to send you work now?

Kaustubh: Maybe. TBD. But we... Yeah. We, we've already, we've already told her that in as many words.

Sam: All right, one other thing I use it for is in the deal-making, like, part of my job. The fact that I can go, like, I'll go to Atlanta. By the time this posts it'll be in the past, but I'll go to Atlanta maybe for, for an overnight and, you know, full day plus part of another day, and I'll have at least a dozen deep in-person one-on-one conversations, all of which I pre-arrange. Wow. And so I can crush conversations around deals at conferences. Yeah.

Kaustubh: I guess that's the benefit, right? Like, you have such a clear goal- Yes ... at, in your role at PSG- Yep ... that, like, you can really execute against that. Whereas I think for me, like, like I have clear goals for Blooma, like, in Seattle. I don't have a nearly as clear of a goal with the conferences the way you might, right? Yeah. So, like, I feel like you're doing it much more effect- Like, you're, you're making conference time really valuable.

Sam: Or maybe, like, if you're the owner, going there and I just think about some things that have caused pain. Like, I would love to know an insurance vendor who s- specializes in an industry that can meaningfully bring down insurance spend or, like, a certain- Yeah. Yeah ... kind of material supplier that can break a spec and, like, bring down cogs in a nice... Like, maybe I'm also trying to solve for, like, short-run tangible outcomes in a- in a role where, like, M&A has a long sales cycle. So- Yeah. ... you can do a lot of good work and get not a lot from it.

Kaustubh: Yeah. No, no, that's right. Yeah, but you get a, you get to log activity on your, uh, CRM, so there's that.

Sam: That's great. Thank you. Mailbag. If you guys have topics or questions, let us know as we get into, like, the heat of fall or I guess the, the busyness of fall. It'd be fun to get into some topics that y'all wanna hear about.

Kaustubh: Totally. And, and, uh, the one other ask is to share this with your business owner friends. Uh, you know, we're really trying to orient this. Obviously, we talk about business buying in Searchers, but more and more of this is focused on small business owners and, you know, like, how to run your business successfully, effectively, efficiently, and deal with the lifestyle of being a business owner. So if you have friends who you think should listen to this, please do share it with them.