Today’s podcast features Rob Slee, an author, speaker, investor, mergers and acquisition expert. Today Rob is going to talk with us about what it takes to work for $5,000 per hour.
Too often owners of private companies work for $50 per hour which doesn’t even come close to providing enough money for a safety net, growth and retirement for the business owner. Rob is going to walk us through the steps you need to take to move from a $50 per hour owner to one that earns $5,000 per hour.
We’ll be talking about the following items and more:
- What is a $5,000 per hour activity.
- What is culture building and why should you care.
- How a niche conglomerate is something anyone can build.
- Why you need to think about transforming the model your company runs by.
- How failing can actually benefit your business
Narrator: Welcome to the Sustainable Business Radio Show on podcast where you’ll learn not only how to create a sustainable business but you’ll also learn the secrets of creating extraordinary value within your business and your life. The Sustainable Business is all about creating great outcomes.
Here’s your host, certified financial planner, student, entrepreneur and private business expert, Josh Patrick.
Josh: Hi, today’s podcast is going to be with Rob Slee. Rob’s an old friend of mine and we have talked for years and years and years about the topic of how you become a $5,000, $50,000 or even $5 million per hour entrepreneur. Let’s talk a little bit about who Rob is before we bring him in. He’s an author, an investment banker, a mentor and a business owner. He’s authored more than 300 articles on private finance and a variety of legal and business journals. Rob has written five books. Private Capital Markets is concerned the seminal work in financial private companies. If you haven’t read it and you’re trying to do valuation work on private companies, you’re probably not doing it right. I think it’s the best book about how capital works for private businesses.
He’s owned equity positions in more than three dozen mid-sized private businesses and has mentored more than 100 companies. He recently completed his first unicorn which is a business that is, so far, out of the norm of value of that it just happens once in a zillion years. He’s a Phi Beta Kappa graduate of Miami University. He received a Master’s Degree from the University of Chicago, an MBA from Case Western Reserve which makes him one of the smartest people I know. Rob is still best known as the father of Jen and Jesse, his identical twin daughters.
Let’s bring Rob in. Rob, how are you today?
Rob: Hey, I’m fine, Josh. Thanks for having me on today.
Josh: It’s a really pleasure. I’ve been looking forward to this conversation for a long time. I just finished your book over the weekend. It’s one of those books, I think is a must read.
Rob: I’m glad you said it because I’ve been telling the world, I might as well say it on tape that there’s only two people in the world that could’ve written that book, you and me. I just beat you to it.
Josh: Why? I don’t think—well, I might have been a little writer but you have more legitimacy than I would assume.
Rob: I don’t think anyone could’ve told the difference of the book. I think that it’d read pretty much the same.
Josh: Well, thank you. In there, you talk about three of my favorite things anyhow that comprise the $5000 an hour. It’s culture-building, niche conglomerate creation, and business model transformation. Can you give us a definition of what each are and why they’re so important?
Rob: Culture always seems to get the short shrift from business owners in that they just let the market set their culture. I think culture is probably the most important thing. I think culture eats strategy for breakfast. I think culture is just how the air in which you’re going to do business, the environment and the expectations and how you’re going to treat each other in business.
What we learned and a big breakthrough, because this book came out of a five‑year mentoring exercise, was when we started creating culture, sort of value creation in all these companies. What I meant by that is the owners can’t be the only people who are thinking about value creation. And when we started getting all the employees to start working on their own hourly rates, in their own hourly activities that created value, it all happened. That created the culture of value creation.
Josh: So, that covered culture building. How about niche conglomerate creation? I mean, first of all, what is a niche? And then, what is a niche conglomerate?
Rob: Yeah. I start out most of my talks with “My name is Rob and I’m a niche-a-holic.” And everyone says, “Hi, Rob.” It’s a little dorky but at the end of the day, I think all new middle market companies are an amalgamation of niches. So, these are those defensible little places in the market that – how you find these niches is you start asking around, “When have you tried to buy in last six months?” About the third time, somebody says or there are people who say the same answer, ah, I get this bright idea that I can go form a niche around that. They tend to be small-revenue size but high profitability. A niche conglomerate is when you string a bunch of these niches together, you might consider that the metaphor is “each niche is a branch of a tree and the tree trunk is the same intellectual capital”, so all the branches are leveraging the same know-how. That’s a niche conglomerate.
Josh: Just out of curiosity, would you consider Apple a niche conglomerate?
Rob: Yes. I consider Uber a niche conglomerate because there’s a central truth about Uber and Apple and then they just hang. Now, obviously, these niches can be multibillion-dollar niches – in the case of Uber and Apple. But yeah, I think almost all successful businesses in this new age, I read about Transformation Age, are niche conglomerates.
Josh: Yeah, so that’s something that is important for people to realize that a niche – although usually less than $5 million, doesn’t necessarily have to be one.
Rob: Right. For us, for our purposes, because we’re sort of the little guys in the market typically, it’s going to be less than $5 million for us. But for Uber and Apple, obviously it can be different.
Josh: And you can build something that has huge margins with these small niche conglomerates?
Josh: Let’s go into business model transformation, what do we mean by that?
Rob: Business model is how you organize to meet your goals. What we found is that’s quite a trial and error process. The old way of, I’m going to distribute 2×4’s and put them on a truck and take them to the job site, that’s the old traditional model. Now, there’s probably ten different ways to organize every activity. It takes a while to figure out which one’s the most effective to the customer – the most effective delivery plus lease cost delivery. I’m talking about product and services here. Business model has always been the toughest thing for me because I don’t ever come out of the chute or out of the gate knowing what’s going to be the most effective business model. So, once I discover a niche then I have to discover what’s the best way to organize/to deliver that product or service.
Josh: How many business models do you think exist, Rob?
Rob: It’s an infinite number, especially in this digital age. Another way of saying transformation age is the digital age. What’s happened is you can deliver a product or service in any of a million different ways and you might have the same product with a different business model in the U.S. vs. Canada vs. Mexico because of the process of delivering and how you organize around that model are totally different.
Josh: I have a friend and actually you interviewed him, Rob Rothman, who has a niche conglomerate all over the world and every one of his operations is a completely different thing.
Rob: Yeah, he was the star of another book I wrote, Midas Marketing. He had his own chapter.
Rob: That’s how impressive I was with him.
Josh: Yeah, he’s a pretty impressive guy.
Rob: Yeah. But he was on the forefront of building global niche conglomerates on the private side. We’re used to thinking of conglomerates on the public side. But Rob, I think, is a forerunner for that.
Josh: His conglomerate is markets, it’s not products.
Josh: He sells the same product in about 15 different places in the world with 15 different business processes.
Rob: That’s right.
Josh: It’s really an interesting thing. Let’s go talk about niche-a-holic. I know that’s how you introduce yourself. And I also introduce myself that way. What it is and why do you find that businesses are so resistant to becoming real niche businesses?
Rob: Yeah, because it’s a trial and error process built on failure. The thing about a niche-a-holic is that you don’t wake up in the morning saying, “Aha! I know the niche and I know the model.” It doesn’t work that way. What happens is you get out in the market, you slug it out and you fail. Like, you and I talk all time – you fail fast, you fail cheap. Finally, you get a little bit of traction. We call it “Somebody’s eating the dog chow.” Well, are there 10 people that will eat the dog chow? Most owners don’t want to be that aggressive towards managing their business because it’s an aggressive form of management, constantly failing and constantly attempting stuff that you know probably will fail. But true niche-a-holics don’t let that stand in the way because they know that’s the path to building a niche conglomerate – and it’s the only path, it’s trial and error as much as I hate to say it.
Josh: I would agree with that. Also, I find that most business owners hate saying ‘no’ to anybody who will pay them something to do something.
Rob: Yeah, that’s right.
Josh: I don’t know if this is your experience but my experience is it’s getting the business owner to say ‘no’ that keeps him from developing a niche.
Rob: Yeah and I agree with that. It’s tricky. I think it all goes back to why most business owners – most being 80% to 90%, are in business to begin with. In my opinion, it’s to build a lifestyle – a comfortable, enriched lifestyle where they can hopefully enrich their family. It never was, it never becomes. What I think, want to do is build a business – an entity that’s worth $50 million and I’ll do what needs to be done. It did just isn’t the thought process for most owners.
Josh: No. Most owners get in business because they’re unhappy with something and not because they want to do something positive.
Rob: That’s exactly right. And so, that just keeps going throughout their whole life. And after about 20 years of ownership in that vein, it’s really difficult to change their spots and say, “Well, I think, what I’m going do is go into an aggressive form of failure.” It just isn’t going to happen. I’ve never met an owner who can do that.
Josh: I want to move on to the skills you can’t learn in college which is another area you and I have lots of conversations about. Why is it you know the skills you can’t learn in college and what do they do about moving to becoming a $5000-per-hour owner?
Rob: I’m real down on the way we teach MBA’s. I’ve read two textbooks that are used in hundreds of MBA schools around the world. I mean, in a lot of MBA programs, speaking. Unfortunately, the whole MBA thing is taught for the corporate ladder – success in the corporate ladder. My book’s all about success on this ladder you create yourself – the value ladder, if you own your own time or business. It’s a value ladder. A totally different proposition than the corporate ladder. I played both and I’m telling you, they’re two different ladders, two different sets of skills.
Now, on the value ladder, it’s a big street fight as you try to climb the ladder and it isn’t about what color of tie you wear and how you present yourself in a meeting. It’s a lot of negotiating. It’s a lot of nitty-gritty sort of get in there and fight your way up the ladder. And you only go as far as what you’re willing to take yourself. You’re not proving anything to anybody else along the way. You’ve got to make it happen. And so, that just doesn’t lend itself to formal education – those skills apparently, because I don’t know of any school that teaches them.
Josh: I would also submit that the business schools teach their students that there’s unlimited resources. And if there’s one thing privately held businesses don’t have is even close to enough resources ever.
Rob: Well, that also drives me crazy about corporate finance vs. the middle market finance which is the new field of study in my one textbook, Private Capital Markets. In corporate finance, the underlying assumptions are all invalid when applied to a private business and I show this chapter after chapter. But if you come out as an MBA and I have an MBA so I can say I’m not throwing stones at other people unlike myself. And what happens, you come out as an MBA and you think all that stuff applies in the private side. Frankly, it will bankrupt you. It almost bankrupted me 30 years ago. It almost killed me too. It’s just horrible trying to apply all that stuff I learned in MBA school.
Josh: That’s my experience when I work with a business owner who’s got MBAs in there, I say, “Well, we have one of two things we can do. We can either re-train your MBAs or fire them.”
Rob: Yeah and I won’t hire an MBA. I’ve owned all these companies and frankly I can’t remember a single instance where I had an MBA working for me, just because it’s a fish out of water sort of thing. They just don’t like to street fight. They’re not equipped to deal with the sort of street fight that it is trying to grow a private business.
Josh: Yeah, I actually don’t blame the people. I blame the education they receive.
Rob: The same here. They never stood a chance on Main Street. I tell them to stay on Wall Street – stay on the corporate ladder because that’s what their education is meant for.
Josh: That makes good sense to me. Let’s talk about mash ups because I find that concept, in an awful lot of people, is really pretty confusing. First, can you explain what a mash up is? Second, can you give us a couple of examples of how it’s being used in private businesses?
Rob: Mash up is sort of a new word, I guess. It’s where you take several attributes and mix them together to form a new value proposition, so to speak. It started in the music industry, maybe five or eight years ago, where musicians started mashing up several different styles of music to create a whole new sound of music basically – not the “Sound of Music”, but a different sound in music.
Then business started using it for various software programs. They started saying, “Oh, let’s take a little bit of this.” And most of us would know it through GPS software where you’re taking several different databases. In some cases, some of that’s like crowd source where people are seeing traffic stops and other things and they’re reporting that in. Another is they’re putting maps within the software. At the end of the day, the GPS software–
And there’s a bunch of them now. Waze, I guess, is probably the top one now. But at the end of the day, as the user, we just see the final product. What we don’t see is there were three or four very interesting, quite different programs that were mashed up and brought together. So, we just see the mashed potatoes. We don’t see all the ingredients behind it. That’s what mash ups are.
Josh: If you were advising a private business, how would you suggest they go about thinking about mash ups and how they can apply it to their own business?
Rob: I think we all have to do mash ups. I think about mash ups probably every day. The reason is we’re used to doing business linear value propositions. What a value proposition is is answering the question ‘what’s in it for me?’ So, all your customers are constantly asking that. “What’s in it for me? Why should I buy your stuff?” If you just have a linear value proposition – so you sell them a 2×4—well, there’s no way to really differentiate your 2×4 and your service from everybody else. But if you put three, four or five different attributes with that 2×4, you end up selling in this metaphor of framing package. Or, let’s say you take it the whole way and you sell them the complete house. So, you’re working with a developer and you’re no longer just an independent 2×4 seller, “you give me the design and I’ll not supply the 2×4’s but I’ll nail them all together and you end up with a full house.” That’s a mash up. And if you don’t do that, you don’t have any competitive advantage anymore. So, you have to do mash ups to have a competitive advantage.
Josh: Here’s something that I find interesting is that in your book you talk about several different value chains and different roles from the owner. Some of them are worth $50 an hour, some are $500 an hour, and some are $5000 an hour. I’m not even going to ask you about the $50,000 or $5 million but what kind of roles would an owner be playing in $50-, $500- and $5000-per hour work?
Rob: This was the big breakthrough in the book. It dawned on me, three, four or five years ago, that the market prices—every activity in the market, and we’re all sort of used to the under $100 an hour pricing because people who take out the garbage get maybe minimum wage or people that do bureaucratic work collect payables or something maybe are $20 an hour. But it turns, it keeps going, that the market of values is probably the better way to say it – all activities, tactical and strategic. So the $50 an hour is the beginning of the value ladder. That’s where the owner of their time – not just business, but we’re talking about freelancers as well and giggers in this gig economy.
The owner of their time is the value proposition. So, if Rob Slee is a good copy editor, I would put myself out as a copy editor for $30 an hour or whatever it is and people hire me. They hire the owner of the business because they believe that Rob Slee is a good copy editor. It’s hard to create value at that level because the dollars don’t add up enough. It starts getting more interesting at $500 an hour where the owner – now, we’re pretty much talking businesses now, is the creator of all these value propositions, not just to customers but to all the other stakeholders of the firm – employees and vendors. You’ve got to create “what’s in it for me” solutions for everybody so everyone knows what their role is and can do it successfully.
But the owner is the monkey in the middle at $500 an hour. This is where most owners are, by the way. They are at less than $500 an hour but they’re in this vein of – they create the value propositions and they’re the ones that have to deliver all of them. And so, they never get away from the business. It’s like a tornado, circulating around them – the business and they’re right in the middle. And it isn’t as calm in the business tornado as it is in the middle of a nature tornado. And so, so that’s $500.
$5000 is where real value creation happens – $5000 an hour activities. And we talked about that earlier. That’s a triad of culture, market and model – bringing those together. So that’s really what it is. That’s the value ladder. Keep going up each of those steps.
Josh: One thing that I’ve noticed over the years is if an owner doesn’t bill to spending most of their time in $5000 per hour activities, they haven’t created a sellable business either.
Rob: That’s right and that’s what I say, it’s once you get to that level, you have all the exit options available to you. Plus, your life’s pretty good. One thing, I don’t talk about that much in the book. But the fact of the matter is, the higher you go on this value ladder, so by the time you get to $5000 an hour – and that may take a number of years. Nobody goes there at day 1. But you may only be working a day or two a week. And because there’s only so many $5000 an hour activities in any one time period. Most of the owner we mentored, by the time we got them to $5000 an hour activities, they weren’t working two days a week. That freed them up to think about stuff.
Josh: When we’ve done this work with people, they typically start off saying, “I needed to sell my business yesterday.” And by the time they get to be $5000 per hour, they get amnesia about ever wanting to say I’ve sold their business.
Rob: Yeah. They won’t sell. And they don’t need to because frankly that’s when they’ve met – lifestyle meets business value creation. You can have both. And yet most of the popular literature and the people talk that about this stuff seem to preach that you have one or the other – one choice or the other. I know, you and I preach the same thing on this. You can have both, you just have to institutionalize your know-how in the business so you’re not having to do everything.
Josh: Yeah. I think that that’s absolutely true. When you’re climbing the value ladder, you talk about not being an all-at-once thing, that you sort of have to go through stages.
Rob: Nobody can jump rungs. This is the big mistake younger people make. I’m not going to point at certain ages but a lot of younger people want to sort be at that $500 or $5000 an hour activity without having really built the skill sets because what does the $50 an hour stuff do? It builds skill sets. So, then you can make the climb up. And at $500 an hour, you’re building systems around you. And at $5000, you’re sort of institutionalizing all you know in these systems.
You can’t jump rungs. Nobody can. I know it looks like – on some of these unicorns like Uber and stuff I’ve built that we’re jumping rungs – we are not. Because if you jump a rung and don’t solidify whatever the system is or the skill sets, you will fall right back down. You may get the $5000 an hour but you’re coming right back down to Earth.
Josh: That fits in perfectly with all the research that I’ve read on structural dynamics within companies which is you have to do stage 1 before you can get to stage 2. Otherwise, stage 2 never happens.
Rob: That’s right. And that’s what we learned too. So, as we were mentoring people up their own value ladders, what we found is “Hey, if it takes a year or two to move from one rung to the next, that’s fine. It takes whatever it takes. You’ll get there.” Typically, we were getting people up to spending most of their time on $5000 hour activities in three years. Everyone can do that by the way. That’s not an economic DNA issue. Everyone has enough economic DNA to get to $5000 an hour which good.
Josh: I think that’s very cool. We have time for one more question. My question is, why is it so hard for owners to translate strategy into tactics? I have a—it’s kind of a postulate around this, is it possible that owners don’t understand what they’re talking about when they start talking strategies?
Rob: Yeah and this is what we found. What we found is we were—early on in our mentoring program before we had figured any of this stuff up that’s in the book, we were trying to paint strategic pictures with a broad brush and then hope—hope’s not effective strategy, I wrote in the book, hope that the owners could then sort of head in that direction. It turns out that transmission between the strategic picture or the strategic endpoint and what goes on in a daily basis is unknown to owners. They’re not educated. They’ve never been trained in it. That’s what forced us to break all this down by the hour.
So, when you start reading the chapters in the book that are $500 or $5000 dollar an hour, what we would literally do is, every week we would put the four activities – no more than five. But the four or five activities the owner was allowed to work on that week, with the number of hours they were allowed work and that’s how we translated strategy down to tactics for the owner, and then they would do the same thing and sort of waterfall it down to all their employees. That was the only way we could do it. We couldn’t do it by some intuitive process. It had to really be blueprinted out to that degree.
Josh: Hey, Rob, thanks so much. I think we’re out of time. So, for all those listening, you do, you want to get Rob’s book and the name of it Time Really Is Money, How to Work for $5000 per Hour. Rob, how would someone contact you and how will they find a place to buy your book?
Rob: It’s available everywhere, e-book and paperback on Amazon is where most people buy it so I suspect that’s where they should go. I hang out – I write a weekly blog on LinkedIn, free for everyone, called the Midas Nation Group. That was the name of the mentoring organization we founded five, six or seven years ago – Midas Nation Group. You can join that for free and what will happen is there’ll be some pretty high-octane conversations out there about all that we just talked about. So, that’s how people get a hold of me.
Josh: Rob, thanks so much for your time today. I really appreciate it.
Rob: No. Thank you, Josh. It’s good talking to you.
Josh: You’ve been listening to the Sustainable Business Podcast where we talk about what you need to do with your business if it was to be here 100 years from now. If you like what you heard and want more information, please contact me at 802‑846‑1264 ext 2 or visit us on our website at www.stage2solution.com or you can send me an e-mail at email@example.com.
This is Josh Patrick and thanks for listening. I hope to see you soon for another edition of The Sustainable Business.