As the sole owner of your business, you should be the one supervising and monitoring everything. If you are still busy with the day-to-day tasks other people should be doing for you, there is something wrong. Learn how to escape the mundane and focus on more pressing business matters with digital strategist and advisor, James Camp. Together with Eric Anderton, he sheds light on why most CEOs struggle to remove themselves from business grounds and start delegating work. James explains why most founders deal with identity crisis and how to build a lasting business legacy they can be proud of. He also presents various exit strategies that could lead to high returns and tremendous scale opportunities.
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Listen to the podcast here:
James Camp On Escaping Day-To-Day Business Tasks And Do What You Truly Love
If you want to extract yourself from the day-to-day operation of your business and spend more time focused on the things you do best, this interview is for you. My guest is James Camp. He helps people buy, build and sell digital businesses. Business is business. He knows how CEOs can extract themselves from the day-to-day and focus on what they do best. That’s why we have James on the show.
Enjoy the insights he shares. Feel free to share this with other CEOs you know would benefit from the insights that he has. I want you to take specific note of how to value your time and focus your time on the tasks that are of the most value, because that’s one of the key insights that James shares. Thank you for reading. I appreciate all the support you give the show.
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James, welcome to the show.
Thanks, Eric.
I’m interested in exploring with you a challenge that a lot of construction company owners have. That is removing themselves from their day-to-day operations. You have deep experience, working with different businesses, helping folks to do that. Why is it that you think most CEOs struggle to remove themselves from the day-to-day?
Most CEOs who have a difficult time removing themselves are often founders. It’s people that built a baby from scratch and had their hands and everything at first, and slowly have a difficult time removing their hands from these things. When PE shops buy business, and they place a GP in a role as CEO, that CEO does not have an overly difficult time removing themselves from their business.
It’s because if you grow something from scratch, you had your hand and everything at some point. It’s your baby. It’s a much more emotional mindset issue than it is a mechanical logistics issue. Sometimes people look at the mindset of these things as a farce and it doesn’t matter, but it is emotion that is connecting people to letting go of some of that day-to-day.
It’s interesting because a lot of times, when I’m working with CEOs, they’re looking at themselves and their abilities. They rate themselves highly. They’re right in that they’ve built these great businesses. They look at their people and their people may not be 100% of them. They may be 80% to 90% and that 80% to 90% is good enough, but that still isn’t good enough for them. That hinders them from getting out of their own way. Have you ever seen that?
Yes. That’s what happens often. This is myself included. I’ve been on this side of the coin several times. You think you’ve got great people, but that the way that you know it is better than they do. If someone’s at 80% or 90%, the only way they get to 100% is giving them a bit more autonomy and a little bit more control. The only way you got to that level of control was by getting your hands dirty.
At some point, there has to be some little bit of release and giving access to others. That can be incredibly difficult without question. I myself find that difficult all the time. There are little pieces of business where you have to do the unsalable. There are some things that you have to be able to have your hand on the pulse of.
For me, a lot of it has to do with writing. As I grow business and I start to build an audience and talk about buying and selling businesses, I find that I still need to be the creative spark behind the concepts behind there that we write about in newsletters and tweets. Eventually, even for that scenario, I will have to release myself of that. The editor of the New York Times has not written every single article in it. There are thousands of other writers.
That’s something interesting to think about. How do I distinguish between what is leverageable or scalable and what is not? What is it that I should first seek to release to other people?
There’s a big range here. If you’ve got 100 FTEs versus if you’ve got none, there are certain steps someone can take. I’m not phenomenal at this, but I’ve seen a lot of people do it and I preach about it. It’s hard for me to do myself even. It’s to start taking stock of what your days look like. You can do screen recording and taking notes. It sounds like mundane, boring stuff. There are time tracking apps. There’s Loom, which I used for screen recording.
People’s identity is predicated heavily on external stimuli and feedback. If you can let go of that, you can be in a strong position of power moving forward.
If I looked at everything I did in the day, I took notes about what I did and I recorded it, if at the end of the week, I look back, I’m quite sure there are things that I could say, “This is not something that needs to be on my plate. This is eating time for me.” There’s another weird amorphous thing I to do, which is to figure out what I generally believe my time is worth.
I’ve had years of my life, where I picked myself out of debt that I raised against a company. I’ve had moments where I was sitting in eviction court and I’ve had years that did well. In that experience, I had one business that we had a good exit on that for 3 or 4 years, I paid myself $2,000 a month out of raised debt and then lived off my savings. I had a tough time with that. When we sold that business, pro rata, I got paid a good amount of money.
I went and looked back. It was probably the biggest win in my life. I said, “What is pro rata my time worth over those years?” All that time, I dedicated to it. If I got paid $1 million a year on an exit, I need to say that at my peak performance, several years ago, my time was worth $500 an hour. A 40-hour work week, 52 weeks a year, is $500 an hour for $1 million a year.
These are back in the envelope numbers, but I go back and look at them. I should not be spending my time on things that don’t derive at least $500 an hour of revenue towards my business or to me. It’s probably more top line for the business. It’s about taking stock of what you think your time is worth and performing that out a little bit.
Whatever my time is worth now, I guarantee you it’s worth more in 3 or 4 years. I need to start thinking about when I look backwards, what did I dedicate my efforts and time to? It’s figuring out what my time is worth, the things in my day somebody else could surely do and are worth significantly less than what my time is worth and immediately getting those into the hands of someone that can take those off of my hands.
Right there is a key insight. That is something that changed my business. It is something I share with my clients consistently, that one idea of figuring out how much your time is worth, and getting rid of everything else that doesn’t hit that. That is tremendous. As I’m beginning to do this, what is the first thing I need to release if I’m going to spend more time working on my business, getting myself out of the business and allowing other people to begin to step into those roles?
I try to look at things that could be mechanical, things that probably still need a human intervention but we’re probably close to getting away from it fully. What are your weaknesses? A perfect example of that is going through financials, categorizing expenses, having an understanding of what your P&L and income statements look like. Somebody else should be doing that. First of all, you’re probably not the best at it, maybe you are. When I say you, one, an individual, when it comes down to it, unless you have an incredibly complicated business, it doesn’t take a rocket scientist of a bookkeeper to do your books.
Being a true CFO, financial planning, tax planning is a whole different bag of tricks, but bookkeeping should be something that is very quickly taken off your hands. You also want to have another set of eyes on it that looks at it and says, “This is what’s working. This is what’s not.” It’s relatively time-consuming. The other things that come in with it are the classic scheduling meetings, how you distill that information from post-meeting, emails and scheduling. That’s where I would look for.
Should every CEO be involved in sales, regardless if they’re at the beginning of their business or towards the end of their business?
Towards the end of your business, the sales depend on the size of the business that you’re looking at. Most at scale CEOs, whether they recognize it or not, are high-level salesmen and saleswomen. You’re doing very high level biz dev. You’re getting people to buy into your vision. You’re getting people to follow you along with, the belief that what you’re doing makes sense. You’re selling internally and externally in that regard. The mechanics of actual sales should be removed from that sooner and later.
You’ve run into a misalignment of incentives with SDRs and with sales. Part of it is that if people work on a commission-only basis or their upside is commission, they’re incentivized to sell as much as they can. Whereas as a CEO or an owner, you want the right clients to come in because you want to service them as well as possible. There’s no interest in bringing people that you can’t service correctly, whatever your business is, construction or selling water bottles, or whatever you want it to be.
If you set up some of the right processes, automations, and workflows combined with a sales development rep like someone hopping on the phone, you can get most real sales done. The super high level stuff is going to be a little bit relationship-based. Eventually, we’ll get onto this chat a little bit about the exiting of a business. A lot of that is going to be predicated around how removed you are from that business. The sooner you can get yourself out of there or set processes up to remove yourself from it, the better off you’ll end up being.
Let’s explore that in terms of the exit. In your experience, what are the different flavors of exit that a CEO can pursue?
We went through a cash-only exit. Someone made a joke to me the other day, they said, “Did you bring duffel bags to the bank?” When I say cash-only, what I mean by that is there was no financing. It was a straight cash deal. It was not all the cash upfront. There are a couple of different ways to look at this. Most exits that we all see and think of are all cash. That’s why everyone perceives selling their business like a chunk of change, they’re done. That’s it.
A lot of the bigger things I’ve been involved with are not that at all. There are earn-out agreements and clawbacks and all these different complex transactions that protect both parties and allow both parties to be happy with the transaction. There are a lot of levers and pulleys you can mess with to close valuation gaps in M&A. By doing that, you often lock yourself up in a longer transaction which is fine. You get what you want, but it’s a little bit more involved. We did it.
We sold a hearing aid company to a private equity shop. When we did that, we got 2/3 of it upfront, another 1/3 of it about, and there was a two-month transition and another 1/3 of it about a month later. The last little chunk, which was the inventory, will come at the very end. We’re still waiting for that specifically. In general, there are cash exits. The other biggest exit I’ve had come with a certain amount of cash and a certain amount of a stock swap.
We swapped equity. I became an equity holder in the company that bought us, and a little bit of earn out in cash, not to complicate it, and a clawback in equity. I was there for twelve months to get paid out on some of the work that I did on that transition in cash. This is not to complicate things. We were given all of the equity upfront with a clawback provision, meaning they were allowed to take back some of that equity, if we didn’t hit certain key performance indicators.
The reason that we structured like that versus an earn out of equity was because, with the SCC, you have different rules about selling equity blocks. I wanted all of our equity upfront even if we lost half of it. I wanted to be able all at a certain date hypothetically. If it had been different, if we got half upfront and the other half given a year later, what’s called a seasoning restriction, the timeframe in which the SCC says, “You have to wait to sell this,” would’ve been an extra twelve months from the second half.
Normally, there are cash options and some debt. That debt can be seller financing, debt from a bank, or an earn-out. Those are the two ways that are involved. The third is the magic mix which is a share swap, a stock for stock acquisition. Being paper wealthy and being cash wealthy is two very different things. I learned that the hard way.
How have you seen CEOs balance their desire to leave a legacy with their desire to get as much money as possible out of a business?
I find it very rare that people don’t have a number. Most of the time, people have a pretty big ego. I’m at this point in my life where I think about ripping apart my ego and legacy being a little bit a part of that ego. I do know someone. I don’t want to say exactly who they are. They run a very big lighting company. They were looking at a $400 million or $500 million private equity exit. They decided at the last second to not sell the business. It was mostly because they didn’t like the people buying the business.
If you’re looking at a $500 million exit in cash, you are doing well enough already that your need of money is not intense. They felt that their legacy would not have been held intact at that price point. When you’re making low to mid-eight figures a year into your pocket, you have a little bit more play with how much your ego involves your legacy.
If you’re taking home $600,000 a year in seller’s discretionary earning, and someone offers you $3.5 million for your business, that’s an astronomical amount of money versus what your actual take home is every year. There’s a number in the lower range where people are willing to give up their legacy in terms of a buyout.
What did that guy do who didn’t like the people? What did he end up doing?
He ended up paying a small break fee in terms of break fee being a fee. You sign a bonding letter of intent. If you back out of it, it has this option where you have to pay money. He still runs his business. He bought one of the most expensive homes in Southern California. The reason that you get to have that ego at that point partially is predicated on the concept of the fact that if you’re looking at a business being bought for that much money, your take home every year is eight figures. He’s the sole owner of the business. It’s just him. When you’re taking home $10 million, $20 million, $30 million a year into your pockets, the $500 million is not so important. You can borrow against that. You can do whatever you want with that. He paid the break fee and walked away from it.
Have you ever had an experience where someone wants to go down the path of selling their business, they do all the right things to remove themselves from it, get their processes and people dialed in, and then they reach the point where like, “I decide I don’t want to sell it?”
Whatever you want to do in this world, start telling people about it.
I’ve seen it in small examples, too. It’s much more predicated on people that are founders of businesses and are CEOs because this is their baby. This is something they’ve poured their heart and soul into. You can go through an identity crisis which supersedes a lot of the money if you’re doing fine. “I spent 15, 20, 10 or 3 years building this thing. I’ve dedicated my blood, sweat, tears, capital, friend’s capital, and everything. Who am I when this is done?”
It’s another thing if you’re getting enough money to be whoever you want when it’s done. If you’re not, you start thinking, “What am I going to do next?” I’ve gone through that a couple of times in my life. I’ve had some wins and seen people who have had wins. It’s very different getting $800,000, $4 million and $40 million. People often back out because they recognize there’s an internal, “Who am I once this is done? What’s going to happen? I lose all the control and all of my identity in my life. What do I build next?” Some people are excited by that. I’m excited by that. Some people are totally lost by it.
Let’s explore that a little bit then. This idea of identity is a huge issue. How have you handled that yourself? You alluded to it slightly about the excitement of creating a new identity. Talk about that little bit, James.
It goes back to ripping apart your ego a little bit. I’ve had this epiphany. I grew up in New York City where I didn’t follow the rules in the past of everyone else that I knew. Everyone else I knew went into professional services. They’re partners of consulting firms, partners of iBank, and stuff like that. I have spent some of my life trying to fit into these certain identity blocks and see how do I relate to that world. I don’t always necessarily.
Part of it is getting a kick out of it. I enjoy having my back against the wall and figuring out what’s next. We’re only here once. Why not reinvent ourselves again and again if that’s something that interests you? If not, hold onto your business, and build a legacy that you pass on to the next generation. The more you do it, the more comfortable you are with it. It sounds cheesy, but it comes down to being okay with not caring what other people think about you or how other people perceive you. That’s something I struggle with pretty often myself, but I’m trying to get much better about.
For any founder or CEO looking to sell their business, a lot of this needs to be about internally what’s important for you and not how others perceive you. That’s a never-ending quest for all of us, about not worrying about how others perceive us. Our identity is predicated so heavily on the external stimuli and feedback we get from others. If you can let go of that, you put yourself in a strong position of power moving forward.
What do you do to help yourself with that? It’s so important to talk about that. Some of it we do unconsciously, and some of it we do consciously. What do you do consciously to overcome that fear of what other people think?
I try and put myself out there a lot and get a lot of feedback from others. I’ve moved to Los Angeles from New York. Part of that was I was going through an identity shift. I had sold this business and I wanted to get much more involved in helping people buy and sell businesses. I started thinking about, “How do I reframe exactly who I am?”
I’m not going to say that everyone can move 3,000 miles away. It’s important to surround yourself with others who perceive you in the way that you want to be perceived. That sounds ethereal, but it’s an important function of mine. I’ve got a couple of best friends out in California who view me as the James that I want to be viewed as.
I hate to be this guy, but if there are people in your life that are not giving you the feedback loop that help you be who you want to be, I’m not saying to cut them out of your life. Be understanding of what you communicate and express with them if you want to be a different person and have this different identity. It’s the guy who’s helping people buy and sell businesses, not the guy who’s building businesses and selling them, and buying businesses and selling them.
When I was back in New York, I started telling people that I was doing, I’ve done a lot of this, but I do broker exempt M&A advisory. That’s me trying to relate to my investment banking friends and say, “I do what you do.” In their world, they work at Goldman or Cowen. They’re like, “You don’t have a seven. You don’t have a 63. You’re not doing M&A advisory.” I move out to California, where it’s the goal rush. Everyone makes their money in their own way. I come from a city where they want my W-2 and my tax returns are four years for an apartment.
I came to California. They’re like, “Can I see your checking account?” I show my checking account. They’re like, “Here’s your home,” which is so weird to me. It’s tough, especially the older we get and the more ingrained in our people that we get surrounded by. It’s important to surround yourself with people who give you the feedback to be who you want to be. I’ll tell you an anecdote. A good friend of mine got in trouble with the law when we were in college. He was messing around, being an idiot, and doing dumb things.
When he got out of college, he spoke to his father, who was a director. He goes, “Dad, I want to be a director.” His dad goes, “Be a director.” He goes, “How do I do that? No one’s going to give me a job. I’m a convicted felon. I did this dumb stuff.” His dad goes, “Tell people you’re a director.” He goes, “I’ve never directed anything.” He goes, “Start telling people you’re a director, and eventually, someone will hire you to be a director.”
Don’t get me wrong. I’m not talking about being a lawyer in which you have to pass the bar and have a license or investment banker where you need a Series 7. Anything we want to do in this world, we need to start telling people that’s who you all right, and that’s what you do. Some of the old people in our lives are going to have an issue with that unequivocally, but some of the new people in our lives are only going to know you under that context.
If you’re like, “I sold my construction firm and I’m starting an orange farming business,” when you tell that story to new people in your life, that’s the only version of you they’re going to know. At every moment, you get an opportunity to create this version of yourself that you want to be. All you have to do is tell that story yourself and surround yourself with people that give you that positive feedback about it.
The key insight I’m pulling out that I appreciate, on the one hand, is that our identity is formed so much by what other people think about us. On the other hand, if we pick the people that we surround ourselves with, and those people view us in the way that we want to be viewed, that can help to shape our identity.
What’s interesting, Eric, is you’re touching on all these very deep and complex things that we all struggle with, which is who we are. So much of it is about the external stimuli of people telling us who we are. That’s where the real happiness comes when we figure out who we want to be and, unapologetically, be those people.
When you get to that point, you get that feedback from people in your life. Eventually, the people from your past that have a hard time with this new identity of yours, they’re going to hop on board 100%. I have seen it. As long as you stick to it, that’s going to change people. The small outliers that don’t, you probably don’t need them around you significantly anyway. People are allowed to change, evolve and be better.
What if I’m a CEO? I’ve been trying hard to remove myself from the business, but it’s like The Godfather. When I thought I was out, they dragged me back in again. What can I do? What should I be focused on if I’m finding myself get sucked back into the drama and day-to-day?
One thing that I’ve struggled with that I want to impress upon people is that I’m constantly working on and they should work on is hiring and delegating. Getting pulled back into the drama is a function of either 1 or 2 things in my experience, either you don’t trust the people or they don’t trust themselves. Someone needs to let go at this point.
Everyone gets afraid they’re going to hire people that disappear. I hope that everyone I hire is so good that they, at one point, need to go somewhere else or do something on their own. That’s fine. The other thing is people get fearful. The reality is that not everyone’s an entrepreneur. Not everyone wants to be a CEO. That’s not the lane everyone plays in. The way that I live my life which is feast or famine, I don’t get paid 6, 7 months at a time.
We bought a business in March 2021. We sold that business. We started closing the sale of that business in November 2021. I still have not been paid $1 out of that business. I didn’t take a salary. Everyone got a salary, but me. This is a little bit different than the CEOs. You have to be able to let go and trust that the people that are involved can run it on their own and be willing to maybe make a little less money from the interim.
To circle back to the story about getting paid no money and having the exit and getting all that pro rata money later on, I’m making a decision as an equity owner in multiple ways to get paid last. Also, upon liquidation, say, we sell the business. Let’s say that all of a sudden, I’m in bankruptcy and everything’s screwed. There’s a whole list of lenders and employees. Everyone gets paid before the judge says that James gets paid anything. Risk and reward inexplicably tied hand in hand.
One of the things I often see as people try and scale businesses is recognizing they may need to make a little bit less money in this growth stage, so they can make more money later on. That’s super common, which is you make $250,000 a year. What happens if all of a sudden you hire 2 people for $60,000 a year? I get it. Over the next months, you’re going to be freaking out because all of a sudden, you are making 1/3. If this means it allows your business to grow, this is the correct decision in the long run.
That willingness to take a step back to take three steps forward in the future is so essential when it comes to removing yourself from the business. You mentioned delegating specifically. This is a topic that I’m fascinated in. I always like to pick people’s brains. What is your process for effective delegation?
My core skillset is marketing and sales. That’s what I’m good at. The first thing that I wish was my mentor, a friend of mine who’s a lot more successful than me, say to him, “I know your guts are in marketing and sales, but what you should be doing is immediately getting the things off your plate that you’re bad at.” Instead of me thinking, “How do I hire more salespeople and marketing people?” that first step for delegation is to hire an ops person. I hate ops. I’m bad at ops.
At every moment in life, you get an opportunity to create your own version of yourself. Surround yourself with people who can give you positive feedback about it.
If my zone of genius is marketing and sales, eventually, I want to remove myself from that and find somebody else whose zone of genius is that. If what’s tough for me is operations and I struggle with the organization, operations, and delegation of that, the first thing I should be doing is hiring someone who’s great at operations. Let’s say I got a five-person business. We’re doing $1 million a year, top line, and I want to scale to $10 million.
I don’t need to go hire the COO of a $1 billion company. That’s probably the last person I should hire. In fact, that person is probably so far removed from understanding the mechanics and actual operations of a $1 million business. What I want to do is hire someone who is being involved in a company my size and help grow it to be a $10 million company.
I want to find someone who understands the mechanics of how we get from 7 to 8 figures in business. That may be that you’re looking more for a director of operations. It might be that you’re looking to pull someone out of a bigger org that has a slightly lower title, and you’re going to let them grow into that. They can become a COO for you because they’re starting as an ops director. That’s an important thing to look at.
That’s interesting, not over-hiring. What I mean by over-hiring is positionally over-hiring someone, but hire someone for where you want to go.
One step forward from where you want to go, not three steps, this is not to slide at any of my friends, but I have a few friends that are C-Suite at multibillion-dollar companies. Those people have zero idea of how to run those businesses mechanically. I’m serious. They’re chief of staff, their EAs know more about running their businesses than they do themselves. With my last company, I put someone on my board who’s the COO and CFO of about a $2 billion consumer package, goods brand.
He happened to be a good friend of mine and was like, “James, whatever you need, I’m happy to hop on board.” I immediately thought when we start going and buying businesses doing $3 million to $5 million a year, he’s going to be useful. I love that man. He’s awesome. He’s the least useful person for that in the world. He generally does not understand the mechanics. The mechanics of a $3 million to $5 million a year business are astronomically different than the mechanics of a business that does $1 billion a year.
The org chart for him is astronomically different than the org chart for me. It’s important to recognize that you want to hire the best, but I don’t need the best. You want an operations person. The COO who needs $480,000 a year plus options who’s coming from a Pubco is not the one who’s going to help me scale my business from $3 million to 10 million.
In terms of the actual mechanics of delegation, let’s say you are having a delegating conversation with someone, what technique or system do you use to make sure that someone knows what they’re supposed to be doing?
I’m a big fan of project management tools, check-ins, and communication. I come from a digital world where that is the norm. In the brick and mortar space, there are often massive gaps for how people are managing teams. We use Slack and Asana. We have basic automation set up. I sold this business, so we don’t have so much going on. We used to run these scrums, these morning meetings. A process can be amorphous. I’m okay with that. Trying to stick to a regimented routine does not always work. You need to be able to bend.
What I often do is I try and think about if I am removed from this business. If this was somebody else’s business, they ask me, “James, what do you think?” What are the things I would say? What are the checks and balances I would ask for? For us, we’ll put everything into Asana. Everyone gets tagged in Asana, which is the project management tracking we use. We use Slack for communication. It does get a little gray. We do end up leaning into Google Workspace, some of these digital functions of it. You need check-ins and accountability for tracking that. There are infinite ways to do that.
Let’s say I got a client doing $250 million a year and they want to go to $1 billion in 5 years. In your experience with that scale, those kinds of dollars, what you’ve observed or been involved in, what do they need to focus on?
There have been around two transactions that were anywhere near that size. One was about $400 million. The answer to that was M&A. It was acquisitions. It was acquiring other businesses. That’s what it was. It was not about, “How do we get more output out of our sales team? How do we do more of what we have?” It was, “How do we find creative businesses we can bolt on, the moment we put them in, become more profitable and can scale?”
Even with the last bigger business, I sold in 2020, the sale of that business was partially a stock swap. It was them giving us equity in their business. Don’t get me wrong. If you have a super high growth business that is doing $250 million a year, and you’re already performing because you’re going 20% or 30% year over year, you’re already seeing where you’re going to be. That’s a very different thing. From my experience, the answer is M&A, rolling up other businesses in your space that makes sense, are creative to you, and the seller wants out of. That’s where I’ve been in that regard.
When it comes to bolting on businesses, as you look at the desire for growth and you balance it with the need to maintain culture, is that tremendously important or is it more like, “I want to go over there and do this, or we’re going to bolt this on and figure it out later?”
In my experience, it depends on what the business is, how much culture is there, how much is FTE-based, and how much is in-person-based. A lot of our stuff is all digital. The culture is a little bit different of a culture. We’re trying to keep culture alive through Zoom chats and Slack. That’s a very different world. I’ve only ever had my own full office for four years of my life, which is interesting to think about. I often tell people I’ve only been on a W-2 for two and a half months in my life.
I’m very lucky I didn’t get fired from that job because I told the person who hired me, “I can’t do this.” They were like, “I can tell. Would you like to leave before you get fired?” I was like, “Yes. Thank you so much.” In all honesty, the culture fit is super important if you have a tight, cohesive culture. What I often find though, is that people manage to pull things together without getting a good culture going.
There’s often an opportunity for buyers or sellers to create culture. CEOs who are founders and inexplicably tied into their business, people may love them personally, but the structure in which culture functions inside their business is not necessarily one that’s healthiest for everyone. It’s often healthiest for certain individuals. Culture and community are super important, but it’s okay to recognize that sometimes a shift in culture is not always what’s wrong.
I often talk about this with websites. People will talk about algorithm updates from Google. “If I buy this website and Google changes the algorithm, I am going to lose my rankings in Google.” You could, or you could get better rankings. Things don’t always go bad here. You may have built a business that does $20 million a year with horrible culture. It may be that the people buying you have a much better understanding of how to integrate teams and build culture. Under the $10 million mark, you’re looking at $10 million, $20 million, maybe search funds, high net worths, very small family offices.
When you start looking larger than that, you’re looking at PE shops and big Pubcos that are doing stock swaps. You’re probably looking at teams much larger than yours making that acquisition or people that do this for a living. Culture is important to tie in, but it’s important to recognize that small shifts in culture may be required and may be okay. It may make things better for everyone involved.
I want to remove myself from the day to day. As we’re wrapping up here, James, give me your top three things that I need to do right away to get that going.
I would figure out step one is I would start tracking what I do, whether it’s a to-do list, project management tracking, or screen recording certain things, I would go through my day and maybe every 20, 30 minutes, takes stock of what you’re doing. Look at what you’re doing. For example, I woke up this morning and I straight up did four hours of work before I got up and did anything. I promise you. This is because I’m making a transition in my life as I’m starting to build a business that’s predicated on my audience and helping other people. There are things I’m doing that I could remove myself from very quickly.
There’s no way that I need to be immediately doing every single little detail like that to crack it. I would take stock of everything that you do, write it down, understand what it is, write down what is required to do it and the permissions that are required to do it. I’ll give you a random example here. Money’s a big one. I’m not going to go hire some virtual assistant to go run my finances for me. For the right person, I would love to grow the business I have now to a point where I’m paying someone in person to be next to me that I fully trust that can have these important things in my life with them like my passwords to my banking.
It’s tax season. I’m going through something where I’m like, “I’m spending so much time digging through everything for tax season.” I wish so badly that I had somebody to do that because this is one of those mechanical things that if as long as I had someone that I trusted, there’s someone that for way less than, by the way, I value my time at the $500 to $1,000 an hour timeframe. At that range, I should not be digging through bank statements.
That’s crazy. I should not be reconciling bank statements. That is out of control. Partly it’s because the business that I have now, when we sold the hearing aid brand, that there are people that work there fully, but with this business, which is me building an audience and teaching people how to do this and trying to help people that I didn’t think about how to build this. It fell together.
I need to go and do this myself. I would track everything I do, first of all. I would then find the things that were easily outsourceable. Step three is going to be another one. Things that I could find almost robotically that I don’t need some fulltime employee W-2 FTE to be doing. That might be scheduling, reconciling bank statements. What is part-time outsourceable? I’ve had tons of bookkeepers and I’ve had a CFO and a controller and all these different things. I can tell you that needing a CFO and a controller and a bookkeeper, most people don’t need all that.
It’s over what they need. I would hire those things out. The third thing I would do is think about what are my biggest weaknesses that are not robotically outsourceable. For me, that’s operations. That means that the next step in my business is going to be to hire an ops person to make sure that the people that are the contractors are still in play and it works with what I’m doing and I can still stay in my zone of genius, so to speak. When I start capping myself on marketing and sales, which is what I’m good at, that’s when I start replacing myself.
If you hate doing something, you will do it more slowly and poorly. It will become more of a chore even if you are good at it.
That’s when I start to throw myself. Those are the three steps. I would record everything I do, replace the mundane, and on the third level, I would look at what are the complex things that I need real brainpower for that I’m willing to pay for, but that I’m bad at. Not even that I’m bad at it, but I hate doing it. Marcus is obstacles away, “Do what is tough.” I’m all for it, but I will also tell you that success I find comes from not thinking about life in a vacuum and thinking about life in reality. The vacuum says, “Glean in. Do what you hate.” We all have to do that to an extent, but the moment you can take that off your plate is the moment that your brain opens up into being able to fully go into the things that you love doing and are great at.
It’s important for people to remove themselves, not just from things they’re bad at, but from things they dislike doing, because in the reality of life, if you hate doing something, you will do it more slowly. It will be more of a chore. You will do it more poorly, even if you’re good at it. I want to be happy and do things I love. What allows me to work 20-hour and 17-hour days is when I’m doing something that I don’t realize is work. For that to happen, I have to enjoy what I’m doing. That means removing myself from the things I hate doing.
It’s interesting you say that. I’ve been reading the book of Ecclesiastes. One of the things that refrains in Ecclesiastes is to enjoy your work. That’s the flip side of the obstacle. The way, if you’re not enjoying it, find someone else to do it.
I’m all for we all have the obstacles away. We have to do some of these things. To touch on this, people have a hard time. I know what my life’s burn is. I know what my monthly burn is. I know the money I have to make. Often, when I make more money, my burn goes up. That means that scaling becomes more difficult because it’s harder for me to take less money to hit scale. I have a friend who does coaching for executives that want to do career changes. Often, what she finds is that some guy will come in or some lady will come in and she’ll say, “I’m sixty years old. I’m making $700,000 a year. I hate my job.”
She says, “Tell me about your life.” She goes, “I have two kids in college. I’ve got one kid in private school, still. I have my lake house, my normal house.” Patricia, the woman says, “I’m sorry, you can’t quit your job. There’s nothing you can do.” The moment they quit their job, they’re in debt. It’s important to recognize that when you’re in a growth phase or in a potentially thinking about an exit phase is, being cognizant that it’s okay to get paid more later, and you’re probably going to get a much bigger multiple on the paid more later.
The thing that is magic to me about flipping businesses, I call it flipping to attract more people into the concept of it, to value added private equity. How do we change this business? In real estate, I would think about changing a cap rate. The magic is that if a business sells for a 3X price to sales, 3X gross revenue, to make the numbers easy. For every $1 of revenue that I can bring in, on the equity piece, I’ve made $3.
You pay yourself $300,000 a year maybe. I bet my bottom dollar you can hire someone for less than $300,000 a year to run your business if you structure this correctly. You’re changing the top and bottom line. This gets into add-backs and how P&Ls look. That’s a much more complex thing.
In general, if you’re looking at exiting businesses, you want to be cognizant of what the buyer is interested in. Let’s do a price-to-earnings or net income to make it easier. If businesses are selling for 3X in net income, that’s much more likely, a 3X in net income or SDE. For every dollar that I can add in net income, it doesn’t matter if the SDE is a little bit less, but the net income to the business, as long as the salary I’m taking is as normal salary, I’m adding $3 to my net worth down the line. That’s important for people to remember and recognize.
There’s so much in there. I appreciate it. It’s so important for people to be able to understand that to remove themselves from their business, there are multiple things they can do across a variety of things, including modifying their burn rate so that they feel more comfortable with the process of removing themselves from the business. That is a tremendous insight that people can lay hold of. James, how can people get ahold of you? Tell us a little bit more about yourself here.
I’m a marketer who is a transaction junkie. At my core, I’m good at marketing. I’ve managed to find myself playing in the M&A space again and again. You can find me on Twitter. My Twitter is @JamesOnCamp. NanoFlips.com is my newsletter where I talk about buying and selling digital businesses and what are the mechanics and case studies in which you could pull levers, change the evaluation of a business quickly and sell it.
When I look at businesses, I normally try and help small family offices, small PE shops, high net worth individuals. There’s a crazy opportunity for most people in this world, which is the low seven-figure and range of taking these tenants that big PE shops use in terms of value add, and how you reposition an asset and applying that on a much smaller scale.
Unless you go, get your MBA, or you’ve worked in IB or PE, these are foreign concepts that no one teaches you ever. What I like to do is help people find businesses that are accretive to their life or to their current business, help them acquire and reposition it to make their current business more profitable and then help them catch an exit later on hypothetically. I often talk about exits and flips because for every $1 you add, you’re getting $3 or $4 net worth. That becomes exciting in terms of getting people interested in these concepts.
People that find ways to take their business and make it more profitable or to buy a business that they make more profitable end up making it a buy and hold scenario. They recognize that when you can remove yourself from the business, you can basically be collecting dividend checks for semi-passive income. Passive income is a farce unless you’re getting dividends from some giant company. You can remove yourself from a business and semi-passively get a 30% cash-on-cash return from a business unlevered in a way that is impossible to so many ways. That’s basically all I talk about.
James, I have one last question. What’s the one thing you miss about New York?
I’m going to catch some flak from this, but I miss the hustle and the grind. It’s pervasive in LA, but it’s different. It’s much more of a slow burn. We’re going to move and groove, whereas in New York, everyone is out there trying to make it happen immediately. I was born there. That’s deep in my soul. What I will say about New York though, is that there are poets and authors who write beautiful poetry about New York, a love poem, about how enamored they are with how sexy and beautiful it is.
That is not New York to me. New York is my mom. New York is my safety net, my comfort zone. I like to go back to New York for a little bit of a reminder like, “Let’s go get it. Let’s go make this happen.” Some people hate that about New York. One man’s garbage is another man’s treasure. New York, to me, is a gem. If you want to be around people who are willing to live in a tiny home, pay obscene amounts of money to do it, and be surrounded by 10 million other people in a tight-knit space and they all want to be obscenely successful, New York is one of those cities that’s there. I love that.
What’s the one thing you like about LA?
I love the sun. I’m sitting here and it is 75 degrees. I will probably go meditate on my roof and eat lunch. That’s unequivocally the quality of life in Southern California that beats Manhattan.
That’s what keeps us in Cali, the weather. James, I appreciate your time. You’ve been very generous. I wish you all the best.
Thank you so much, Eric. It’s been a pleasure.
Thank you.
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Thank you again for reading. I hope you enjoyed my interview with James.
Important Links:
- James Camp – LinkedIn
- Loom
- Slack
- Asana
- @JamesOnCamp – Twitter
- NanoFlips.com
- www.ConstructionGenius.com/contact
About James Camp
A passion for growth and the online world has lead me to constantly look for opportunities to help companies with their digital strategies. This has given me the opportunity to work on digital strategy for a myriad of SMB’s as well as multi-national brands like Mckinsey & Company and Lionsgate.
