Adam Lean | Getting Trapped “In” Your Business

Adam Lean is really all about working on our business, not in our business. Easier said than done when you’re already so busy. But to keep the lights on… and to have a company that lasts with a bright future, it’s essential.  

Adam, founder of Strategy Scout, shares his strategies for being able to figure out what moves the needle most and how to concentrate your efforts there for maximum impact. He also mentions a way that many business owners look at their money that misleads them horribly about their financial situation.

We take a deep dive into that, as well as…

  • The 3-step business turnaround plan – and the red flags to watch for on the way
  • The Amazon ad Google strategy for growth any company can follow
  • Creating a “stage appropriate” marketing strategy
  • The cashflow strategy most entrepreneurs miss
  • And more

Listen now…

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Transcript

Welcome to the Unstoppable CEO Podcast. I’m your host Steve Gordon and we’ve got a great interview for you today. Today we are talking with Adam Lean and Adam is a former accountant turned small business owner and after starting his first business things started off really great and then they were not so great and he felt stuck and he had no plan and he really had no one who could provide real help. And so ten years later, Adam founded statregyscout.com where he and his team of small business professionals really helped to give business owners a strategy to have a growing and more profitable business and to really focus on what we all really want to do which is to work on our business rather than in our business and he’s going to tell us how to accomplish that today. And in 30 minutes no less so Adam Lean, welcome to the Unstoppable CEO.

            

Hey, thank you so much. I’m super pumped to be here.  

            

Yeah, it’s going to be fun. Because this is such an important topic. I mean folks get so trapped inside their business and we all want to get to a place where we’re working on it so I know you’re going to share some great stuff with us today. Before we get to all of that, I want to just give everyone some context about you and what got you to this stage of your career. How’d you get here? Give us some background.

            

Yeah, so like you said, I was an accountant after college. Became an accountant and hated it. I really wanted to work in the business and get my hands dirty so to speak instead of just recording what happened, which is what an account is supposed to do. At night and on the weekends I started my own business. This was back in 2006. I started an eCommerce store. And then within probably the first 18 months it grew rapidly. I was doing within the first, yeah 18 months, I was doing a quarter million dollars in sales and then within the first three years it was about a half a million dollars in sales. At that point I was able to leave my day job and focus full time on this. 

            

What Happens When You Work on the Things That Don’t Matter

 

Because I feel I was an entrepreneurial small business person at heart. I wasn’t really cut out for the corporate world so to speak so I was really enjoying what I was doing. Sales were great. I enjoyed the autonomy, being on my own, but then things started not being so great. Sales were still growing but profit and cash flow was getting smaller and smaller every month. Of course the type of business I was in, eCommerce, it’s a very competitive world but the problem is I was working more and more in the business trying to just … I just thought, “If I could work a little bit harder. Spend instead of 60 hours this week, let me work 65 hours this week just to see if I could turn this around,” and the problem was I was spending all this time working in the business on things that really didn’t matter. 

            

And there’s only just a handful of things that really matters for any business in order to have a growing and more profitable business. And it all boils down to the fact that every single business has to work on just a few things, the most important things, to have more profit and have more cash flow. Because at the end of the day that’s the whole point of having a business. 

            

Absolutely. And I think a lot of us can relate to that. I think we’ve all been through those times when things seemed like they were going really really well and then circumstances change. And I think it’s really difficult particularly as you grow to maintain that profitability sometimes because businesses become very different at different scales and I’m sure you’ve seen that. I think we can all relate to how that works. 

            

You went through that difficult process and our theme here is really around how you stay unstoppable through that kind of stuff. When you were approaching that difficulty, what did you do to continue to press forward and stay persistent?

            

Yeah, that’s a great question and I think any business owner, entrepreneurial type person listening to this will agree that persistence is number one. If you want something you have to just be persistent. My problem was is that I really wanted to continue and own my business and have a profitable business. I just didn’t know what to do to turn things around. That’s the problem. I tried turning to friends and family and of course they wanted to help but they really just weren’t that big of a help because they’re not business people. 

 

Figuring Out What Moves the Needle

            

I tried turning to my bookkeeper even, an accountant and they were really of no help because their job was to record what happened in the past. They’re not strategic thinkers. But really what turned things around was when I started creating a plan, a strategy, and focused on the few things that matter to have a more profitable business. I literally started from the goal, which was having a profit, and then just sort of figured out how to get there. I built a strategy on what are the things that I needed to do to get from point A to point B, more profit, and then I made that a list.

            

Of course, I’m simplifying this but I made this list and then I figured out what are the three or four things, the most important things that if I do them right now will make everything else either easier or better? What are the most important things that have to happen right now to have a more profitable business? Of course this happened over several years. It didn’t get better overnight. But as soon as I started crafting a true strategy, a true plan of action, that actually focused on what matters is when things started turning around. 

            

You know, for so many of us we’ve probably had those moments where we’ve sat down and made those lists but it sounds like beyond just having the list you also had the perseverance to stay the course. I think it’s really easy for, early in a change like that, for people to get discouraged. And you just start grasping at straws. Did you go through a time when it was like that or once you laid out the strategy, you had enough confidence in it to know, “I’m going to keep going and it may take me awhile before I begin to see the fruits of all of this.”

            

Well, I mean there was a lot of trial and error. I wanted to give up a lot so many times. But I believed in what I was doing and more importantly, I knew that I was meant to be a business owner. That’s the thing. I knew I was meant to do this, go down this path, and what’s interesting is I actually sold that first, that eCommerce store about five years ago and I started consulting with other companies and one thing that I’ve noticed is I took for granted is the fact that I had this accounting background. I understood the financials. I understood how to read an income statement and balance sheet and understand the state of my business. And most owners are … They spend most of their time on the operations of the business instead of working on the business precisely because the reason why they got in the business in the first place is because they were an expert at a certain craft. 

            

For example, a dentist starts a dental practice because that person’s trained in dentistry. Naturally when they get into business they want to spend most of their time, and they’re going to spend most of their time working on the operations of the business. Being a dentist. Same with a fitness expert starts a gym. A marketing person starts an agency. Because these people are experts in their craft and so they’re not doing the things that really matter. They’re not creating a strategy to help them have a profitable business. Because they’re just not focused on it.

            

And according to the Small Business Administration over half, a little over half of all small businesses never see their fifth birthday. I mean 50% of businesses fail before the first five years and it’s because they just simply, there’s several reasons why but it all boils down to the fact that they didn’t have a true strategy to help them focus on what matters most. 

            

That’s, as scary as that stat is and I’ve seen that as well, I think there’s a bigger one and it’s got real implications for the people who are listening and it’s for everybody who makes it past that. And you’re listening right now because you made it past that. What we see is that the majority of those businesses just stall out. They get to a point and they just totally plateau and there’s no more growth. 

            

And the problem with that is expenses do keep growing magically. Without your intervention. But it’s much harder to get the revenue growth. And so you’ve got a lot of businesses out there too that are just sort of stuck in this plateau. And so I tell you what, I want to take a quick break and I want to come back. I want to talk about how you guide a business owner through getting out of being in the business and working on it so that they can create this profitability. We’ll be right back with more from Adam.

            

Hey everybody, welcome back. This is Steve and I’m talking with Adam Lean of strategyscout.com and Adam, where we left off was the idea that there are an awful lot of businesses out there that aren’t making it and then there are others that are just sort of stuck. And if I could maybe kind of paraphrase your approach to this, you think a lot of that is due to the fact that the owner is trapped in the business and not spending enough time working on the business. When you work with someone who’s in that position, how do you begin taking them from there and moving them towards being able to work on the business and taking them to be able to build that profitable business that they really want?

            

Do You Know Where Your Business Stands Now? Do You Really?

 

Yeah, so really the solution is to give that business owner who’s incredibly business a clear plan of action so that they know exactly what they need to work on. I mean I have sort of three major steps that I bring every client through to help give them that plan. The first step in understanding their, in coming up with a strategy, a plan of action, is to really assess, the first step is to assess where the business is now. 

            

We have to know where, and the business owner has to get honest with themselves, where is the business now? What state is the business in? What financial state is the business in? What are that strengths, what are that weaknesses, what are the financial red flags? The first things we do is actually truly do an assessment on the business and the financials. Because we got to know what the problem areas are. A lot of businesses, we talked about earlier, a lot of businesses fail for various reasons but obviously one of the main reasons is because it simply ran out of cash and a lot of businesses run out of cash because of lack of profit and that’s either caused by not enough sales, not enough margin in their product or service or too much overhead. Various reasons.

            

But we assess and truly understand what are the problem areas? What are the red flags? And also what are the things the business is doing really well? That’s step one. We have to figure out where the business is now and we have to take off the rose colored glasses and help the business owner take off the rose colored glasses and truly look at their business. 

            

The second step is once we understand where the business is now, is then we plan where the business owner wants their business to go. We sort of do this in two different ways. We set three to five year, what we call big goals. Where does the business need to go based on the assessment that we just did? Where does it need to go? What are the things that have to happen for this business to survive? And then we also establish 12-month financial goals. 

            

Of course at the end of the day the whole point of business is to make a profit, which is a financial number so we’ve got to set financial goals to get there. And these are sales for gross profit. And by the way, we set goals and gross profit goals for every revenue stream in the business. Every product or department or division or service that they offer, we set those sales and gross profits because a lot of times sales is what most business owners think is the problem. And a lot of times it’s not. They may not have a sales problem. What they may have is a margin problem. 

            

I have a client that owns a marketing agency and they’re doing a little over 1.2 million in sales, or they did last year. Their sales were not the problem. Once I dug in, it’s a couple of their services that they’re offering, they had very very little margin. We took time and actually fixed those two things and their profit, they went from a negative profit actually to a little over two hundred and twenty thousand dollars in profit just from working on the margins. 

            

We establish these goals. The big year goals and the 12 month financial goals. And the third step, the third thing that we do to help clients create a strategy is we take their goals and where the business is now and then we actually train the client, the business owner to spot the most important things that have to happen right now, like this month or this quarter to make sure that they’re on track to meet their 12 month financial goals and their three to five year big goals. 

            

Because that’s the problem. Business owners are overwhelmed with so many things they have to do in their business that they’re not focused. And so if you’re going to spend time working on the business you need to work on just the most important things that truly matter and coming up with that is really difficult. It sounds easy to say but coming up with what really matters is difficult. And that honestly is the most important thing that we provide is helping the business owner understand what are the three to five things that has to happen right now.

 

How to Eat an Elephant

            

And then once the business gets good at that then we even go a step further and say, “What are the three to five things that your leadership team needs to do,” and then, “What are the three to five things that each department needs to do,” and then, “What are the three to five things that each person, every single person in your business needs to do this week, this month, this quarter, so that the entire business is on track to meet their goals?”

            

Really it sounds like you’re taking this high level view and diagnosing what it’s going to take to reach their goals but then you’re breaking that down into something that they can actually achieve within a period of time.

            

Yeah, absolutely. Because it’s like that saying, how do you eat an elephant? You take one bite at a time. And if you have a list a mile long of things that need to happen, nothing’s going to get done. You got to focus on what matters. There’s a concept called objectives and key results, OKR’s that I’m a huge fan of and this exact same sort of concept, businesses shouldn’t focus on three to five objectives and major businesses use this to this day. Like Google, they started in 1999 using this concept and every single quarter they set new objective of no more than five things and they do it for the entire business and then each division and each employee has to do their objectives.

            

And Amazon does this as well. So many other business do it. Precisely because you’ve got to focus on just the most important things. And you can’t have more than five things on your list. And in some case you really just need to have one thing on your list. Make sure it gets done. Well first of all make sure it’s the most important thing that needs to get done and then make sure it gets done. And then move onto the second thing, and then the third thing.

            

Yeah, and I think the key thing you said there is make sure it’s the most important thing that needs to get done. You can put a lot of things at the top of the list but some are worth more than others to you. This is one of the areas where I think it’s really valuable to have outside help. I know over the years that that’s one of the things I’ve gotten a ton of benefit from is even though I built a business that was really successful and I’m building a second one and you know there are a lot of situations that I’ve seen but it’s just so valuable to have that outside set of eyes that’s a little bit detached from the day to day reality to help you decide what really is most important. 

            

To question … Like if you come up with an answer to the question of what’s most important, you want somebody to question your answer. And I think having that is really really valuable. Which I imagine is what you help folks do.

            

Yeah, absolutely. I mean that’s the key. You hit the nail on the head. We help business owners figure out the most important things to do. Because we’ll look at things through a financial standpoint. Because again, at the end of the day the whole point of a business is to manufacture cash. I mean what you do with the cash is totally up to you. You could give it away. You can reinvest it in your business. You could save it for retirement. Doesn’t matter. But that’s the point of business is to have a business that produces cash for you. And so we look at everything through the lens of, “How is this going to impact cash flow and how is this going to impact profit,” and we’ll help you figure out the most important things that matter the most. 

            

Yeah, and to me that ability to discern what really is the most important thing right now in the business. Because I think there’s a big time component to that too. A mistake I see a lot of business owners getting into is they’ll choose something that would be a really really good thing to do at the next stage of their business. Or three quarters from now after they’ve knocked down a couple of other things, which really are prerequisites for it. 

            

And so knowing what to do now, knowing what to do that’s stage appropriate. I mean we see that in marketing all the time. We’ll have people come to us and they want to do like they see these other businesses doing where they’re running all these kinds of ads and everything but they’ve got none of the marketing infrastructure behind it. Like, “Well, that’d be great if you really wanted to give Mark Zuckerberg more money but let’s do something that’s appropriate for you at this stage.” 

            

And having I think, having somebody like you come in from the strategy side and look at the whole business and be able to say, “You know, these are all really great ideas but this is the one you need to do now because if you do this one now, it’s going to make all the rest of these so much easier when you get to them.” I see a ton of value in that.

            

Yeah, absolutely. 

            

As you’re working with clients, what are some … I mean without revealing names, can you tell us about some of the transformations? Because I know for people listening, look it’s tough sometimes running a business and you feel like sometimes you’re trapped inside this thing you’ve built. I think it’d be useful for people to hear about the transformation that some of the folks you’ve worked with have gone through so they can see, “Hey, yeah, there is this path out there.”

            

Yeah, I mean for example, I have a client that owns a doctor … He’s a doctor and he owns a practice that has about 10 other doctors that work for him. And after a couple of months of us working together he said, “You know, this is,’ he said, “I’m a really good doctor but I’m not just a good business owner.” And because I was helping him understand the financial side of his business and how unhealthy his business was from a financial standpoint. His goal is to help his clients get healthy but his business was not at all.

            

And he, just from the first 90 days of us working together he realized some of the things that he needs to change and do differently in his business so that he can have a healthier, financially healthier business. And I had another client tell me that this is, just us talking is very therapeutic because a lot of times business owners have nobody to turn to that gets it. I mean a lot of business owners turn to their spouse but like I turn to my spouse all the time and want to talk business and she just rolls her eyes because she’s not in that world day to day and I just have nobody else to talk to. 

            

You know you can’t talk to your employees because they don’t get it. And you want some sort of strategic help and that’s I feel like half of what we provide is just somebody to talk to that gets it. And that’s what we do. We have workshops with 12, up to no more than 12 business owners and for four weeks we help every single person in the group create a strategy but you have 11 other people to bounce ideas off of and to inform you. And of course the instructor as well is there to help make sure your strategy is on the right track.

            

And having that dynamic in the room, having been through processes like that in the past, it can be really powerful. Even beyond the person that’s leading it. Just being able to put something out there in front of other business owners who have diverse experience and getting the feedback from them. Not so much … What I’ve always valued about that is not so much telling me, “Yeah, I’m on the right track,” or, “No, that’s crazy,” but it’s hearing, when I communicate, hearing what they hear. 

            

Yes.

            

That usually tells me a lot about how clear I am, about what I’m trying to communicate or even my own thinking. Because if I can sit in a room with other experienced business owners and they don’t know what the heck I’m talking about, I know that the idea isn’t great, you know?

            

Totally. 100% agree with you. 

            

That’s awesome. It sounds like you guys have really created a great environment for that. Before we kind of wrap up, I know we’re getting a little bit tight on time, is there anything else you want to share with the folks listening that in terms of a thing they should be looking at in their business or maybe a first step that they need to take to head down this path?

            

I would say that anybody listening that owns a business that just as uncomfortable as it may be, just get familiar with your financials. And a lot of people make the financials more complicated than it really is but just go get your income statement, in QuickBooks or whatever. Or ask your bookkeeper or accountant. And get your income statement from the past 12 months in an Excel spreadsheet. Just one column per month for the past 12 or even 24 months. And then just understand and just look at the trends. See what’s been going up, what’s going down. 

            

Another trick also is to take all your expenses and convert them into a percentage of sales. That way you can measure apples to apples. For example, if payroll one month went from 14% of sales and the next month it went to 30% of sales than that’s a major red flag. Your payroll went up about double based on your sales. And it’s really easy to spot something like that when it’s a percentage. It’s hard to spot when it’s a dollar amount. But just get really, just start looking at your financials to see where your business is now.

            

If there are maybe a handful, a shortlist of things that folks should look for in their financials beyond the ones you’ve just mentioned, is there any in particular that you tend to point business owners too?

            

It really, it all boils down to what is impacting your cash flow? There’s … A lot of people say, “Let’s look at your sales.” Which is fine and all but again, you have to look at your sales in context of how that’s affecting your cash flow. If you bring in a million dollars in sales but you give out in expenses nine hundred and ninety-nine thousand dollars, then you’ve only added a thousand dollars to your cash flow for the year. It’s not really great. And so you have to know what is impacting your cash flow. 

 

Why Cashflow, Not Profits, Matters Most

            

I would say in addition to the exercise I mentioned earlier, make a list of where you’re cash is coming from and where it’s going. One of the big contributors to cashflow obviously is profit but then also accounts receivable. If you’re not collecting on the sale that you’ve made then you’ve made sales and you’ve made profit but you have zero cashflow because you haven’t gotten it from the customer. And businesses close every day that are profitable but they just did not … They just ran out of cash. You’ve got to look at everything through a lens of cashflow. Know where your cash is going. 

            

Yeah, that’s critical. Quote from a guy that ran Vistage, which is a CEO peer group and he owned the Florida region for that and he used to say, “Cash ain’t cash unless it’s cash.” 

            

Yeah. Love it.

            

Because people will think, “Well, I’ve got cash in my line of credit and I’ve got cash over here,” and he’s like, “No.” And that was actually some of the best advice. I heard that for the first time before going into the 2007 through 2010 little adventure we all had in the economy and that was some of the best advice that I ever had through that time. 

            

Yeah. Absolutely.

            

Adam, this has been great. And I know you guys are doing great work with your clients. If somebody is listening to this and they’re thinking, “Gosh, I really, I want to be working on my business more. I need to find out more about this,” where can they go and learn more about what you’re doing?

            

Yeah, so our website is strategyscout.com and I actually created a special page for you guys called, strategyscout.com/unstoppableceo and there’s on that page is my nine steps to creating a strategy. You can see the roadmap that we take to create a strategy for each of our clients. The nine steps. And there’s also a link if anybody wants to just get on a 15 minute phone call. I love to talk to business owners so feel free to jump on my counter and we’ll get on a call. 

            

Awesome. That’s strategyscout.com/unstoppableceo.

            

Got it.

            

We’ll link that up in the show notes so if you’re driving don’t try to write it down. Come find this episode and we’ll have it linked up there for you. And Adam, thanks again for coming in and investing a little bit of time with me as well. I had fun.

            

Oh, it’s been a pleasure. Thank you.