Build the business you want to own, not the one you hope to sell

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Chip Griffin: Hello and welcome to another episode of the Agency Leadership Podcast. I’m Chip Griffin.

Gini Dietrich: And I’m Gini Dietrich.

Chip Griffin: And I think we’re gonna talk about construction today, Gini.

Gini Dietrich: We are.

Chip Griffin: We’re gonna talk about building.

Gini Dietrich: Yes. Structure. I, Nope, I can’t do it. Sorry.

Chip Griffin: It’s my job to torture things. You’re, yes, you’re,

Gini Dietrich: yes. I,

Chip Griffin: you are too grounded in reality.

I’m the one who’s off in Never Never Land making up weird stuff. So, yes. No, we are not talking about about construction, I think.

Gini Dietrich: No, but we are talking about building.

Chip Griffin:  into all sorts of zoning violations and probably code compliance issues and all that.

Don’t listen to us on that stuff.

Gini Dietrich: We’re not touching construction.

Chip Griffin: We are talking instead about my Build to Own concept because it’s something I’ve talked about a little bit over the years, but haven’t really focused on well enough. So I wrote an article about it recently to try to underscore a little bit about my overall philosophy about how you ought to go about running your agency.

Gini Dietrich: Yeah, I think it’s a really good topic because you know, there’s the book called Built to Sell, which I think probably most of us have read, which the idea is that you’re building process and procedure to be able to sell your business someday. But what does that look like if you don’t sell or that’s not part of your goal, or you’ve built a lifestyle business, or you’re in the middle of it, and you’re like, Ugh, how much longer do I have to do this? Right? And so changing your mindset to be around built to own is, I think a really good one.

Chip Griffin: Yeah. And look, I mean, I, I think that there is, like everybody else I have read Built to Sell, I think it is a great book. There’s a lot of good advice in there.

Gini Dietrich: Yep.

Chip Griffin: I think, you know, my issue with it is that a lot of people don’t read all of the advice. And so instead they think about the title of the book. Right. And so it’s, it is very much, a build to sell is, or Build to Own rather, is a definite counterpoint to built to sell because it does two things.

First of all, instead of looking in the rear view mirror as built to sell does with the word built instead of build. And also it helps you to understand that you need to think about what’s going on with your business today.

Gini Dietrich: Right? Right.

Chip Griffin: Yes. Maybe someday you’ll sell, but if you focus just on the maybe someday.

You may have a miserable existence until then.

Gini Dietrich: Yeah. Yeah.

Chip Griffin: And too many people read Built to Sell and they dwell on the last couple of pages of the book. Yep. Where it makes it seem like the owner has driven off into the sunset and is sitting on some beach in Tahiti sinking drinking mai tais for the rest of their lives.

That is an unlikely scenario. Yes. For most agency owners. We’ve talked about that before. So fundamentally the same things that you want to do in order to be appealing to a buyer, typically, you’re gonna make it more appealing to own as well. But it’s changing your mindset to think about first and foremost, what you want from the business.

And, and starting from there, instead of saying, what might somebody else want? Why should I, you know, I wanna get into this particular sector because that’s a hot sector that someone wants to buy, or I wanna focus on growing revenue because if I grow it by, you know, 50% a year, someone’s gonna be excited about it.

But what does it mean for you today?

Gini Dietrich: Right. Yeah, I think it’s a really good question to ask yourself and, and I think we’ve also talked about this too, that it changes, right? It may not, it may not be the same that it is right now. I mean, in 2012, I remember looking ahead to 2020 and thinking like 2020, the year 2020, like perfect vision, here’s the things that I want to have accomplished.

And we all know what happened in 2020, right? Just the, right? So things change. Things… you know, the world happens, the economy happens. Sectors change. Your needs change, your desires change, all of those things. And I think it’s really important to say, what is it that I want to build right now? And be okay with the fact that it may evolve in three years.

It may evolve in five years, and that’s okay. Yes. But what is it that we’re trying to build right now and, and how can I be satisfied with that? And I think you raised some really good points in your article, which I will not steal your thunder on, but there’s some really good points in there about how to think through that and figure out what it is that you want right now.

Chip Griffin: Yeah, and I think as you say it, it can change regularly. So you ought to be reviewing this regularly. You shouldn’t assume that whatever you decided two years ago is still the right direction because your life changes, the world changes, you learn more. All of those kinds of things. And, so what I typically encourage people to do is, is to think about tomorrow.

And I spell that of course, in the, the weird texter way of TMRW because you know, I am, I am that hip and, and that’s, you know, typically how I, I text people too. Sure. At least whenever I can figure out how to even type something into my, my phone because I, I’m terrible at that. But it’s it. So it’s focusing on four things.

It’s focusing on time, meaning, rewards, and work. So in other words, you need to think about how much time do you want to spend in the business? What kind of flexibility do you want in that time? What kind of things do you want to carve out additional time for.

You need to think about meaning what, you know, how are you gonna get satisfaction from the business?

Is it the kind of clients you’re working with, the people that you’re working with? Is it building something that people are proud of and say, wow, this guy did a great thing. What is it that gives you meaning out of it?

Rewards pretty self-explanatory, but you know, it’s the financial aspect of it.

Are you getting what you want from it? Is it setting you up for your future that you’re trying to have? Whether that’s paying for your kids’ education or funding your retirement or what have you. And you should focus on the business today doing that, not some magical, mystical, possible sale somewhere down the road that may or may not happen.

Gini Dietrich: Yep.

Chip Griffin: And then finally, you need to think about the work that you’re doing because ultimately, if you wanted to do work that you were miserable about, you could go work for somebody else. At least for a while, you probably make some more money than what you would make off of your own business. So you need to make sure that you’re crafting a job, a role that you actually like.

So if you think about those things in terms of how you want to build something that you’re happy to own, that’s a good way to start by thinking about the TMRW mindset.

Gini Dietrich: Yeah, I think it’s really important to do that. You know, it’ll be two years in August that I decided I was retiring from speaking. And, not because of any reason other than it makes me super anxious. It, I get really, really, I get super, super nervous. I get really anxious leading up to it. It’s fine once I’m on stage and it’s fine after, but leading up to it is way too much for me. And I discovered through data that I actually make more money when I don’t leave my desk that often.

Right. So while it does help with awareness and all those kinds of things. I’m significantly more productive when I sit at my desk. So I said to myself, from a rewards perspective, what is it that I want to do with the business and with my life? And one of those things was giving up speaking.

And you know, to this day, people ask me to speak and I, it’s, it’s hard for me to say no, but I do, because I’ve said to myself, in myself inside my head. You’re retired from speaking.

Now I’ll do it virtually and you know, all those things. But getting me up on stage, I’m just not gonna do it anymore. Yeah. And that was a reward for me that I wanted to have, and that, you know, it’s been almost two years. It still remains today. So that may change. I may change my mind, you know, later and want to get back out there again and do it again.

Maybe. Maybe not, but, to your point, that’s one of the things that I think about is, you know, how is, how is my life structured right now and what do I want to change so that I’m happier doing it every day?

Chip Griffin: Well, and that’s a perfect example of the Build to Own approach because it really allows you to craft something that makes sense for you, even though it violates almost every quote unquote rule that experts would tell you, right?

Yes. I mean, most expert advisors, yes, will tell you, you know, as a business owner, as an agency owner, you need to be out there speaking and yes, raising the profile for the business and all of these things.

And look, that works for some people. But if you don’t like it, if you don’t want to do it. You shouldn’t. You should think of other ways that you can grow the business. Yep. Same thing with, you know that you will read, including in Built to Sell and elsewhere, that you should get yourself outta day to day client work. Okay. I mean. If that’s what you want, great. If it’s not what you want, figure out how to structure the business so that, that you can do that client service work ’cause that’s what fulfills you.

I mean, really, and I know I say this a lot, but what’s the point of taking on all the risk and stress of owning the business if you’re not getting what you want from it? Right. I mean that’s just, yes. It makes no sense.

Yes. ’cause at that point you are working for the business you own. Yep. Rather than putting the business to work for you.

Gini Dietrich: Yeah, absolutely. I think that’s such a good way to look at it, because if you think about it from the perspective of let’s just set aside that you will, let’s just say pretend you’ll never sell.

You’ll never sell the business. You know, we don’t know what’s gonna happen to it in the future, but that’s off the table. What do you want right now? Is it the ability to do client work? Is it the ability to work on innovative projects? Is it the ability to sort of think about the future and what that might look like for your business?

Is it to make a crap ton of money? What is it that you want? Write those things down and be really honest with yourself, and then build the business around that. And I promise you that if you do those things, you’re gonna be much more attractive to a buyer later than you are if you’re trying to build a business to sell it.

Chip Griffin: Exactly. I mean if, if you’re able to build a business that throws off enough cash that you’re able to fund all of your current needs, to fund your retirement and all of those things, that’s the kind of business that a lot more people are going to want to buy. Yeah. If you’re counting on that maybe someday sale to be your payday that allows you to actually retire or those kinds of things.

And I see a lot of owners who are in this position. You probably have built something that you’re not gonna get that much of a premium on.

Gini Dietrich: Yep.

Chip Griffin: And so you actually are helping your future sale by collecting more money from the business today. You’re not actually holding back your opportunities, you’re creating more of them.

Gini Dietrich: Yeah, I think it’s really important to remember that. And you know, I have had several situations with friends who own agencies who have come to me and said, Hey, I’m thinking about putting the business up for sale. I need to be out in the next year. And you’re like, you can’t…. This… what? And have done no preparation for that other than that’s like, I want to retire and that’s the end goal is to sell the business.

And there’s no profitability in the business. They haven’t paid themself a fair wage. Like there’s no preparation for it. You know, one of the biggest lessons I learned is I sit on several boards and in 2019, I sat on a board that sold right before the pandemic. And leading up to that five years before he put the business up for sell, he knew he was gonna put the business on the market in five years.

He started to look for, first of all, he started to look for ways to take himself out of the business, so it was no longer founder led, and he put key personnel in place. Three years out of selling the business, he hired a president who was building the culture and that the team relied on so that that person would be sold with the business.

And he did all of these things to create process and procedure so that when he put the business up for sale, it was not about him as the founder, it was about the business. And he got… I think he ended up with like 18 times multiple because of it. But he spent five years doing that, right? And he built a team and he built key personnel and he ensured that those people had the right contracts in place and the right salaries in place that they would then go with the business when he sold it.

And he, of course, he had a little bit of an earnout, but it wasn’t as significant as if he were the, as if it were founder led. So there were all these things he did that he did to prepare for that for five years. So my team and I look at every 90 days, we do a 90 day sprint and we look at what process is broken right now and how can we fix that.

But at the same time, I’m not doing anything that I don’t enjoy. I’m focused on the things I want to do and I’m building the business around it. Will we put the business up for sale someday? Maybe. I dunno, we’ll see. But right now we’re building a business that I enjoy owning. We’re having a blast.

Chip Griffin: Right.

Well look, I mean, you know, as I say over and over again, because I, the biggest objection I hear when I talk about Build to Own is, geez, you know, I, but, but I wanna sell someday. I, I, you know, I don’t wanna do this forever. Okay. Build to Own in no way precludes it.

Gini Dietrich: Right? Right.

Chip Griffin: And it, all I’m saying to you is that instead of making selling your focus, you should focus on the ownership piece because you know that you own the business.

You know that you will own the business. You’re not sure if you’re going to sell. If you are, you certainly do want to take the steps to prepare that your friend did. And, and the more, time that you have to prepare and think about and structure the business, the more likely you are to have success. But it’s still not a sure thing, right?

You may not get right the kind of offer that you’re looking for, you may not get the terms that you’re looking for. Yep. And so you should always, even if you’re thinking about selling one day and you want to generally position for that, you should always ask yourself the question, would I still be happy with this decision if I didn’t sell?

Gini Dietrich: Right.

Chip Griffin: Because that is the, that is candidly the more likely scenario for most people listening to this show.

Gini Dietrich: Yeah, and I think it’s reality. Your, your advice to focus on things as a business owner, which are funding your retirement. Making a livable salary. Making a salary that, you know, if the business were bought, you would, they have to see that you’re making a salary that would compete with, like if you went to get a job, would you make $80,000 a year? Would you make $30,000 a year? No, you would probably make mid to high six figures. You have to be able to pay yourself at that level. You have to have profitability. Like those things are the things that you should be focused on.

And if you do that and you never sell your business, you’re still okay. Correct. Because you’ve funded your retirement and you’ve paid for the things that are going to support your lifestyle.

Chip Griffin: Correct. And you weren’t miserable in the process. I mean, you know, look, it’s often said that life is short.

You don’t know what the future holds. And so, you know, are you happy to spend five or 10 years being miserable because you think right, that maybe someday, maybe someday you’ll be able to sell for some big number.

Gini Dietrich: No. No.

Chip Griffin: Why would you do that? No, and and I’m not, I’m not some woo woo, Oh, you know, you, you have to be happy and everything, and

Gini Dietrich: You’re definitely not.

Chip Griffin: It’s all sunshine and unicorns and all of that.

I mean, no, no. I mean, even if you follow my, my Build to Own approach, you’re still gonna have some. Really miserable days as a business owner.

Gini Dietrich: Yep, yep.

Chip Griffin: It’s not all going to be fun. Mm-hmm. You have to do a lot of things you do not want to do. You do not enjoy.

Gini Dietrich: Yep.

Chip Griffin: However, those should be in the minority and they certainly shouldn’t be because you’re doing something with the sole objective of maybe someday selling.

Gini Dietrich: Right. Yeah, that’s absolutely true. It’s funny you say that because I had a miserable Friday last week and today is Monday when we’re recording this and I feel much better. But yeah, I mean, you’re not, I, I love my job. I love what we do. I love what we’re building, but it’s not all rainbows and unicorns.

That’s life.

Chip Griffin: That’s life. It’s entrepreneurship. It’s, it’s the risk and the stress that I talk about. It’s, it’s all of those things. But you can still structure it in a way. Yes. That gets you more of what you want.

Gini Dietrich: Yes.

Chip Griffin: And is not following someone else’s formula for success. Right. Or what someone else might be interested in potentially buying.

Yes. Is figuring out what works for you? What gives you what you need and want from the business? And I think if you’re, if you spend your time looking at those and evaluating all of the decisions you make in your business, whether that’s, you know, what kinds of clients you’re pursuing, what sectors you’re working in, the service mix that you provide, the people that you hire to be around you, how you compensate yourself, all of these decisions should be looked at through that frankly rather selfish lens.

Gini Dietrich: Yep.

Chip Griffin: Of what you want as an owner.

Gini Dietrich: Absolutely.

Chip Griffin: Because it, it will not only make you happier, it will likely make you have a better business. Because if you’re just implementing someone else’s plan, you’re not gonna be as committed to it as something where you can understand, I’m doing this for me, I’m doing this for my family.

I’m doing this to get what I want from my business.

Gini Dietrich: And if you’re implementing somebody else’s plan, just go work for somebody else,

Chip Griffin: right?

Gini Dietrich: There’s no reason to have all the risk and flood and sweat and tears, like just go work for someone else.

Chip Griffin: Yeah. I mean, it’s, it is really, if you’re going to be an owner, you have to have an owner’s mindset.

Yeah. You can’t have an employee’s mindset as an owner because that you, you’ll just, you’ll fail and you will feel miserable at the same time.

Gini Dietrich: Yeah.

Chip Griffin: That’s not a good combination.

Gini Dietrich: I, I think, I mean, I’m sure Jen will include the link to your article in the show notes. It was, it’s really well done. I read it and I was like, we need to talk about this because it’s, it really helps you change that mindset from building a business to sell it and versus building a business to own it. And I think you still can absolutely, to your point, still sell it someday, but you’ll be much happier if you’re building a business to own it right now.

Chip Griffin: Imagine if the, if the sale is the gravy, right? Imagine if you’ve already stockpiled your nest egg and you know, I don’t have to sell.

I mean, first of all, that takes the pressure off you. You can negotiate a much better deal if you’re not forced into doing it.

Gini Dietrich: Yep.

Chip Griffin: And we all know this, right? I mean Yep. Anytime you can walk away from a deal, you’re likely to get better terms.

Gini Dietrich: Absolutely.

Chip Griffin: So, so if you can say, look, I’m confident. Now take it or leave it, buddy.

This is, this is what you’re gonna have to pay me for this business. This is what you’re gonna have to give me in terms of an earnout and an employment agreement and all of those kinds of things. And if you don’t, that’s fine. Yeah, I’m still good. I can walk away. Good. Right. Imagine how much more powerful that is.

And imagine now you’re thinking about your sale as something that allows you to do something maybe extra special with your retirement as opposed to just having a comfortable one.

Gini Dietrich: Right.

Chip Griffin: I mean, I’ll take that any day of the week.

Gini Dietrich: Absolutely. Yes. Yes.

Chip Griffin: With that, I hope, hope you had a good day of the week by listening to us.

That was kind of a tortured wrap up, but you know, it is what it is. We constructed some good ideas for you today. I dunno, we just, we,

Gini Dietrich: no terrible. No, no.

Chip Griffin: We’re just gonna let this go here. So with that, we’ll wrap up this episode. I’m Chip Griffin.

Gini Dietrich: I’m Gini Dietrich

Chip Griffin: and it depends.