Book Club #4: Small Giants, by Bo Burlingham

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We review books you should read in preparation to buy or sell a business, as well as how to build a company to sell one day. You can see other books we’ve reviewed in our archive.  

Small GiantsWhat’s the premise?

Bo Burlingham, who is one of the editors-at-large for Inc. Magazine, wrote a book in 2006 about 14 different companies that chose to be “great instead of big.”  He called such companies “Small Giants.”

What are characteristics of these companies?

Well, the book itself is not long at just over 200 pages, but the characteristics of these firms all revolve around intentionality.  For example, Small Giants tend to have leaders who have a burning passion for their industry and/or business in general.  They also have close, personal ties to suppliers and customers.

Small Giants tend to be deeply rooted in the community in which they do business and have cultures that look at the totality of employees’ lives.  One of the companies featured in the book was Danny Meyer’s Union Square Hospitality Group, based in New York City.

One of the ways Meyer has recently innovated in the employee space was by pioneering “Hospitality Included” pricing (i.e. no tipping at his restaurants).  Because the laws governing tipping mandated what he could pay the back-of-the-house staff, Meyer simply changed the rules.  By changing the way his restaurants operated, not only did the back-of-the-house staff see a significant increase in pay, but the front-of-the-house staff didn’t feel obliged to take the weekend shifts anymore, as their pay was now salaried rather than tip-based.  Some parents went to a softball game of their children for the first time ever.

Why should you care?

A lot of people have called this book the Good to Great of the small business world, and that makes a lot of sense.  Sometimes small business owners are busy putting one foot in front of the other and don’t really identify with the stories told in Fast Company and Forbes.  A book like this tells the stories of smaller firms that are carving out their own identity and can provide inspiration and a template to be great instead of big.

You can find a copy of Small Giants here and Bo Burlingham on Twitter here.

If you want to hear more about Danny Meyer and “H.I.” pricing, take a listen here.

Apex is actively looking for Advisors to join our team. If you or someone you know would like to learn more, contact Doug Hubler at or 913-433-2303.

Case Study #4: The Phantom Buyer

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Trent DyrsmidYears ago Trent Dyrsmid was one of the principals of Dyrand Systems, a Vancouver-based IT firm.

He managed to build the company to $1.2M in revenue before a series of events forced a sale…and to a party he never expected.

Where they started

Like many IT firms “back in the day,” Trent was running a basic break/fix IT service.  There was still the notion of computers and technology being somewhat of a utility – like water or electricity – and the idea that you didn’t really need to worry about those things until something was broken.

But early in 2002, due to competition for a client with a much larger competitor, Trent came across “managed service,” in which a monthly recurring charge covered ongoing monitoring and maintenance.  These days, such a service is the industry standard.

Growth peaked

Trent had a lot of success growing the business, doubling revenues until they approached $1M in topline…and then things slowed down a bit.  They were in an odd place, as when they approached larger clients that already had IT staff, they were fought tooth and nail (because the IT guy didn’t want to get fired) and smaller firms were already paying at “budget” or above, because they didn’t really count IT as an integral part of their businesses.

Where things started to go wrong

Trent decided that “sales cure all” and told the management team that he was heading to Seattle to help build and grow an office there to push revenues. He didn’t really get buy-in from the management team and, though he was growing revenues, two months later he got an email from his co-founder offering to buy the business for $1M ($200k in cash, $800k in a note). In addition, an ultimatum was included that if the offer wasn’t accepted in 24 hours, the co-founder was going to quit.

The other offer

Before all of this had ever happened, a competitor in the space had offered Trent the same amount (but all cash) for the business.  Trent wasn’t really in the mental space to sell and so he simply turned down the offer, but continued to keep in touch with the potential buyer.

As he moved to try to deal with the fire in his backyard, he reached back out to the potential buyer, expressing a willingness to sell, but asking for more, since the latest quarter showed significant growth.  But the buyer smelled a problem and asked a key question, “How long will the co-founder stay on?” to which Trent answered “a year”.  But, because the previous answer had been “three years”, the buyer halved his offer instead of raising it, and Trent was now looking at a $500k sales price.

The wait

Due to advice from a savvy friend, Trent had informed the co-founder that there was a possible sale in the background and there was no need to resort to the drama of a 24-hour ultimatum.  The co-founder agreed but got anxious waiting for the buyer he thought was bidding at $1M.  When he called Trent asking for an update, Trent responded, “Well, you guys could always up your bid for the company and buy it yourself.”  That’s exactly what they did, but they never realized they were bidding against themselves.  Trent accepted the deal at $1.2M, or $700,000 more than was on offer.

Lessons learned

  • Before you make a major decision, confer with your team rather than simply inform them of something already decided. You’ll get better buy-in and/or find out if you’re really headed in the right direction.
  • Pay attention. The COO, who Trent had hired a year before all this happened, was the “snake in the grass” that initiated the entire process by convincing the co-founder to threaten to quit and offering to put up the $200k in cash.  But his performance had been nonexistent.
  • Sometimes waiting helps. If he’d gone back to the co-founder in a panic with the much-decreased offer, he would’ve gotten even less than the original ask/offer.  Instead, he let the weaker party make the move first…and he won.

Trent now hosts a podcast and helps to coach other small business owners on exits.  To learn more details about his story, click here.

Apex is actively looking for Advisors to join our team. If you or someone you know would like to learn more, contact Doug Hubler at or 913-433-2303.

 

Slack: Simplifying Business Communication One User at a Time

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slack“I love email.”

Said nobody, ever.

There’s been so much that has evolved in the last 25 years in communication.  Mobile phones have proliferated to the point of being ubiquitous. We used to use those phones for voice calls, but now they’re really used mostly to send messages and access the internet.

Every now and then we use them to make calls, but many of us use it to access email.  Email, the one piece of technology that hasn’t changed much since its inception at the dawn of the internet.  Think about how shocking that is – that you work with something so often that has fundamentally not evolved to match our digital devices.

You still have a sender, a recipient, a subject line, etc.  For most people, it’s the beating heart of their businesses, but they dread having to deal with it.  What’s worse, sometimes people use email as a crutch – as a way to avoid dealing with talking to someone, be it over the phone or in person.

When dealing with buying and selling businesses especially, it’s important to make sure that you’re choosing your words carefully.  We’ve seen deals fall apart simply because a series of emails were birthed from a misinterpreted tone, intent, or piece of content in an email that should really have been handled by a phone call or in-person meeting.

So it might be even more of a relief to hear that there’s been an evolution in messaging that has the ability to destroy the scourge of internal company emails – and beyond that – actually make communicating with your team something fun and that you can look forward to.

That’s where Slack comes in. 

Slack is an archivable, searchable, hive mind that allows you to move all of those long, terrible, threaded email conversations into various separate threads.  These conversations are accessible via mobile apps or a browser.  You can watch everyone chime in on various topics and issues without having to resort to searching through an email pile (which nobody loves).  You can even adapt Slack to use it to communicate with vendors or important clients.

What companies use Slack?
LinkedIn, Salesforce, Google, PayPal, eBay, Dropbox, and Stripe, just to name a few.

What’s the catch?  Well, Slack is part of the popular SAaS (Software As a Service) industry.  Mailchimp, a well-known SAaS product, works off the same principles: provide a basic level of service for free.  This will satisfy many people who have small teams or who don’t need a lot of technical integrations into their Slack channels.  But, should you need more features, etc., you can purchase them via a monthly per-user charge.  Many small businesses simply use the Basic Slack plan at no charge and transform the way they communicate with each other.

Yes, it will be a bit hard to change – but once you’ve adapted, you’ll wonder why you didn’t switch sooner.  And you won’t miss the massive pile of internal email you’ll have eliminated with this one simple switch.

Want to learn more? Check out Slack’s website.

Apex is actively looking for Advisors to join our team. If you or someone you know would like to learn more, contact Doug Hubler at or 913-433-2303.

What You Need to Know About the SBA

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SBAHere at Apex, the majority of our deals are related to the Small Business Administration (SBA) in one way or another.

Many people know that it’s a government agency, and they know it’s supposed to help small businesses, but from there it usually gets hazy.

What we want to share are some of the things you’ll need to have in order to qualify for an SBA loan so that when you start the process you won’t be too surprised.

Three things at the outset:

  • The SBA does not lend. It simply provides a guarantee to the banks for 75-85% of the amount originated, thereby severely de-risking the loans for the banks.  That does mean, though, that there is a cap on the interest rate that can be charged.
  • You still need to have good credit.
  • The SBA process takes a long time if you don’t use Preferred SBA Lenders – we can steer you to the right lenders.

With that said, here are, broadly, seven criteria the SBA considers when reviewing your application:

  1. The business has to operate for profit.
    It can’t be solely making losses, particularly in the most recent years.
  2. The business must be considered “small” relative to the industry.
    There is a 45-page government index (did you expect anything less?) which reveals the majority of businesses fit in this category.
  3. The business has to be based in the United States.
    You should not be drawing significant income from foreign sources.
  4. There must be reasonable investable equity.
    You should expect to contribute 20% or more to the transaction.
  5. Personal resources and financing must already have been exhausted.
    Would the transaction qualify for a conventional loan?
  6. Criminal Background Check.
    Felonies in your past? Could be trouble.
  7. No delinquency on government debt.
    The US government gets a lot wrong, but at least it’s sensible enough not to loan you money if there’s still a question about other funds you may owe it.  Make sure you’re up to date on all tax debts and student loans.

We understand it looks intimidating, but you don’t have to go through this alone.  Our brokers and bankers have guided thousands of our clients through this process.  We’re here to make this part of the process intelligible and easy.  We can’t promise we’ll have all the answers to every question you might have, but we’ll know where to find them!

Apex is actively looking for Advisors to join our team. If you or someone you know would like to learn more, contact Doug Hubler at or 913-433-2303.

Book Club #3: The Automatic Customer, by John Warrillow

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We review books you should read in preparation to buy or sell a business, as well as how to build a company to sell one day.  

About the Author

John Warrillow is perhaps best known for his book Built to Sell and his creation of the Value Builder System, which is a proprietary scoring system that rates a business’s fitness for sale. But today we’re looking at his book The Automatic Customer, that is identifying a megatrend in businesses these days: recurring revenue and subscriptions.

Automatic CustomerBut my business doesn’t work with the subscription model…

This is probably the main argument John battles in this book. He makes the case for recurring revenue not just as something important for your business if you want to keep it, but of added attractiveness should you wish to sell it.

He also points out that all it takes is a little time and thought to identify how you can add recurring revenue to your existing business, even if you don’t see, at first glance, how to do that.

How will my business be more valuable with subscriptions added, exactly?

Great question. John has several answers, but here are two:

Recurring Revenue

Instead of simply looking at one class of revenue which may focus on sale cycles that are longer than a month or a year, you can count on revenue that just automatically hits the bank, whether it’s on a weekly, monthly, or yearly basis.

Hedge against Recession

One of the things that all business owners know is that during a recession large purchases can be scary and sometimes orders that were “for sure” become “holds” or “cancels.” But if your customers are on a lower-priced subscription model they might be less likely to cancel, especially since the automation of their payment takes away the impetus to have to “decide” on an upcoming purchase.

How will my business be more effective with subscriptions added?

Again, John has several answers here as well, but to focus on two:

It smoothes out demand

Instead of bigger cycles of launch and ship, if you’re in a service business, or manufacture, stock, and ship, if you’re in a product business, you have a steady drip-drip-drip of work, which can add efficiencies to your back office and give you the time and ability to integrate the work for your peak times into your off-peak times, avoiding the “slammed vs. dead” paradigm.

Customers are likely to buy more

Because you already have your customers’ trust and subscription, they’re likely to come back to you for more purchases. The biggest example of this was Amazon’s introduction of Prime. Not only did they manage to introduce a new annual recurring fee for many users of Amazon, but they found that these users ended up buying more as a result of the benefits which came with Prime, not least of which was free 2-day shipping.

Why should I buy and read this book?

Because it’s not a long book – John knows that business owners are busy – but also because it has the documentation, case studies, and examples to prove that you can add subscription revenue even to very old, traditional, established business concepts.  This isn’t just for the millennial, pure-play, tech companies.  You’ll also be given a fresh injection of inspiration about how to make your business even more valuable!

You can find a copy of The Automatic Customer here. John Warrillow is also on Twitter.

Building a business is a lot of sweat and hard work. But a fair bit of it is learning as well.  If you need book recommendations on building, buying, or selling, we have plenty to give you.  Just ask!

Apex is actively looking for Advisors to join our team. If you or someone you know would like to learn more, contact Doug Hubler at  or 913-433-2303.