Key Points From the Interview
fter hearing Damon Chlarson's interview a few months ago where Damon explains that he decided business ownership wasn't for him and that he'd be returning to a W-2, Monte Marcum wrote me:
"This episode hit me hard because after closing two months ago all I want to do now is exit. Buying two franchise territories has been a complete disaster... After listening [to Acquiring Minds] for a long time your audience should hear the hard times more."
Today we are going to hear from Monte about these hard times.
Happily, when Monte and I did the interview, he'd come off a calm week — his first such week in months. It felt like maybe, just maybe, he was starting to turn a corner.
But I want to highlight a couple things that I took from Monte's experience.
First, buying small. Monte & I talk about it a lot.
When you buy a smaller business, one with less SDE, that means 2 things:
1. That the business is fragile, dependent on each & every employee, each piece of equipment. The tolerances are tight.
2. That the business generates less cash, by definition, and this is cash you will desperately want if a crisis hits.
Monte knew all of this, but he calculated that the opportunity in the business he bought compensated for the risk of being on the small side. And he may well be right.
But he did get hit, suddenly & painfully, with the fragility and cashlessness of his business.
Now I don't want the takeaway from this episode to be never buy small. Monte's reasons for doing so were strong.
Instead, the takeaway is:
If you do consider buying small, do so eyes wide open.
Really understand what it might entail, what the domino effects are. What happens if one of your crew is sick for a week, or quits? Can the business even survive? What if one of your trucks breaks down?
You should game out these scenarios before signing on the dotted line.
And, you probably need to be prepared to do the work itself. To jump in& perform the actual service the business provides. In Monte's case, that meant cleaning deep fryers.
One more thing, something I failed to bring up in the interview.
Consider how critical your service is to your customers.
Monte's business cleans deep fryers for restaurants and other professional kitchens. If he doesn't deliver service to a restaurant, the kitchen backs up, and the whole machinery of the restaurant can start breaking down. Panicked staff, unhappy diners. Like I said, domino effects.
Contrast that with the business of one of my earliest guests, Nick Haschka. Nick provides indoor plant services to companies in the Bay Area — so installing & maintaining the plants in offices. Now, if Nick's team can't get to a customer one day, it doesn't affect the customer's operations. The customer isn't calling Nick in a panic at 4 in the morning. This was something Nick saw & liked about his business. And it sure sounds nice after hearing Monte's stress.
(Now, you could argue another side of this. That Monte's business is a need-to-have, which means stickier, higher-quality revenue.)
But the point is, you must understand, especially if you're buying small, how mission critical you are and what the consequences are if the dominos start falling.
OK, here we go. Monte Marcum, owner of 2 Filta franchise territories in North Carolina.