How To Grow Your Business and Build Wealth - Ross Paterson

TRANSCRIPT

Kevin Schneider: [00:00:00] Welcome to another episode of The Hidden Money Podcast. Today we're joined by Ross Patterson of XM Performance. Ross is a personal consultant to Mike and I, and has really transformed our business from where we were in the startup phase to where we are now, and where we're going to be in the future.

He helps people along that path, business owners, small business owners, and so Ross, we're just incredibly excited to have you on the episode, and welcome.

Ross Paterson: It's great to be here. You guys are great clients for XM Performance - we'll talk about that later. I'm excited to come share.

Kevin Schneider: Yeah, and if you would just kick it off by telling us a little bit about who Ross Patterson is

and how you got into this passion of yours, and tell us a little bit about your back history.

Ross Paterson: I think somewhere in my thirties, I started wrestling with my calling in life, and what I'm really most excited about is helping people to find their full potential. Humans, in general, live well below their potential, [00:01:00] and when you can unlock that next level for people, it's one of the most satisfying things in life, you know, almost more fun than making money. I started off my career as an officer. The army paid for me to go to college, so I got a lot of great opportunity as a very young man to lead people in some high stress, intense environments, and then, I didn't realize it, but I was getting bored with my career in the military after about six years,

and I decided to go to GE

and work in the big business because I figured there's so many things that are hard about working in a big government bureaucracy, surely in the for-profit world it would be easier.. and it really wasn't. It's the same problems that we deal with, even in small business.

Humans have to collaborate and work together to perform at the highest level, and that never happens by accident. After six years at GE, I was really wrestling with - there's got to be something more important to do with this, so I spent some time and I started a nonprofit called Global Fusion.

We'd done some international development work in some high risk [00:02:00] places like Afghanistan, Indonesia, Nigeria, Algeria, and even while I was working full-time in the nonprofit space, I still felt this pull back into the marketplace. At some point in my non-profit career, I felt, what if we could get some of my donors who were small and medium business owners, to get more active with us in the non-profit work?

And then, what if some of those donors became clients of my for-profit work? And then maybe at some point, all that would come together,

and that's where I'm sitting now, 12 years later, where I have clients and donors and collaborators in some of our international work, all sitting around the table together on a frequent basis.

Mike Pine: Beautiful.

Ross Paterson: So, XM Performance was really born out of that same desire to help people find their full potential, and over time, our real aspirational vision for XM Performance is, what if we could make small and medium [00:03:00] businesses the best places to work in America? That's the nature, the background, the aspirational vision behind what we do, and how I got there personally.

Mike Pine: Again, thank you for being here, Ross. I'm just going to start off with a smart aleck question, but it's an honest question. We've had this discussion before. I've never really been impressed with 'business consultants'. You've changed that for me, I admit that completely -

you've had me do a 180, but I used to think, if business consultants were so good at teaching what they claim to be teaching, then why wouldn't they just go out and do it on their own, and be that much more successful out on their own? I think I know the answer to this because I've worked with you long enough now, but why change from doing it on your own to teaching and helping other companies grow to do it on their own?

Ross Paterson: That's a great question. A couple of things for us in the marketing of our own business, XM Performance - it's a real dilemma for us, [00:04:00] because dependent upon what their experience is, whether they call me a business coach or a business consultant, most people have had a bad experience with a business coach somewhere,

so they put me in a box, and it's very difficult for me to get out of that box. If they've got me trapped in there - this is what I do and this is how I do it, then we're in trouble, but the reality for me was, I needed something that was flexible enough as a business model for me to be gone for two or three weeks at a time on these international projects, and allow me to come back and forth between some pieces.

We've owned a medical equipment business - I'm still kind of a partner in a web-based business called Palm Tech Global. That mesh is kind of what we're doing in Afghanistan with some of the small business work we do here, there's still a lot of that going on. So, here's the truth for me and why I do that -

I have a very short attention span, and I like working on messy, chaotic challenges, so being settled into a rhythm and routine of running one [00:05:00] business doesn't really stimulate my short attention span well enough. So, I like working with.. we work with 30 or 40 different companies a year in different phases of growth, expansion and transition,

and so all that stimulation keeps me engaged.

Mike Pine: I'm glad you do it because we're enjoying the dividends of what you do greatly. So thank you very much.

Ross Paterson: Yeah

Kevin Schneider: Yeah, tremendous dividends on our end, because we have been burned by those consultants where we've thrown good amounts of money at them and we hope they fix a problem for us, but they didn't teach us really well along the way, so that now we can be independent.

It's kind of like raising a child. You want to teach them, but sometimes they need help and you to solve things for them, but at the same time, you're trying to teach them so they can eventually get out of your house. We really came to that realization with you. You've helped us on so many problems.

The first problem that we presented to you, you solved it, and that's what got us hooked. You dangled that carrot saying, 'All right, did you like that?' and we're like, 'Yes!' And so, now that we have this [00:06:00] relationship together, that we are able to solve these more complex problems with you, it's just a tremendous help in our business.

Our podcast is a lot about hidden money in the tax code, which always is going to be those hidden money components in the tax code when working with you. If you're a small business owner and you need to invest into some sort of coach or consultant, then that's 100% tax deductible.

That's really not that overly complex, but what the hidden money with Ross would be, is going to be fine tuning your business so well, and failing quicker and solving problems a lot quicker to where your revenue grows, and we've experienced that ourselves.

So Ross, with the hidden money in business, taking that deeper dive into the inside of the business, can you share some of that hidden money tactics that you could use in a small business?

Ross Paterson: I think we can, and I appreciate you guys sharing the experience you had with us, because one of the ways we battle out of that box that we get trapped [00:07:00] in as a business coaching consultant is, we call it the dinner date.

We try to figure out as we meet prospective clients, what's one problem that's right in front of them that we could solve easily,

that would prove that maybe we're different than the other people? So, in you guys' case, we started talking about team communication, and just figuring out how to communicate a little bit better as a team, and as we solved that problem, you started looking for opportunities to work on the bigger problems.

Now, one of the places where owners waste a lot of money, and we see this all the time - we have a small business owner who is working really long and really hard on mostly the wrong things, so they get trapped. I've never met a business owner with a 10 or 25 million dollar business, who says, 'The real key to my breakthrough was, I got the level 10 badge in QuickBooks,' but we always get trapped trying to manage our money, and try to manage all those things ourselves as our businesses are growing, our [00:08:00] foundation is growing. And so, one of the first things I'll challenge my clients and prospects to do is to hire an office administrator, or we like to call them, the small business accelerator or SBX because, here's the hidden money-

if you can potentially bill or achieve $250 or $300 an hour when you're doing your best work - client facing work, and you're spending 8 to 16 hours a week doing administrative work, logistical work, calendar work for your business, then that's roughly $280 an hour, a potential you're missing while you're working on the wrong things.

And for a lot of us, we work on those wrong things because we're not that confident with what those right things are, and these are a little more comfortable, a little easier to do. One of my favorite author calls it, 'I'm hiding from the hard work in the easy work'. Breaking out of that and really knowing what those are is one of the first hidden [00:09:00] money things, and once we can get that work away from the business owner, then the key things of long-term strategy and planning, people, and setting the rhythms and routines, we can start working on those, and just like you guys, I say to my prospects all the time, 'Who's working on those when you're not?' and the answer is always, 'Nobody is.'

If we don't have time to work on the most important things, if we don't have time to work on the future-based, next level breakthrough things, then they're just not going to happen, and a lot of times, as business owners, we get stuck and we think a couple more years on grinding out on this playbook is going to get us the next breakthrough, and it's rarely true.

Mike Pine: I want to unpack the small business accelerator (SBX, as you call it), a little bit more. One of the keys to unpacking hidden money in this world and building financial freedom, can be creating a profitable business - a lot of tax benefits in that - but [00:10:00] creating a profitable business is hard. A lot of businesses fail when they start up,

most businesses do, and cash flow is always a problem. I remember for years I knew I was (I wouldn't call it wasting), but I was not using my time as efficiently as possible because I was spending hours doing things like making sure our phone system was working, doing internal IT stuff, copying, scanning.. always stuff.

And then, and I had people saying, 'You just need to hire an assistant,' but I'm barely making any money as it is. Why am I going to invest in an assistant? But at some point, when we finally made that turn, it almost goes contrary to what your gut says - if I spend more money, I'm not going to have more money when it's over,

but that's absolutely not the truth, if you do it right and you hire SBX because they will help you make more money, and it doesn't take a year to realize those benefits, speaking.

When someone who's starting their own business, and they are overwhelmed with their administrative needs, or overwhelmed [00:11:00] with stuff that they're not making $280 an hour versus $20 an hour, what are some of the discussions you've had?

How have you helped people to get over the concept of - I can't spend more money until I'm making a lot more money?

Ross Paterson: Well, There's a few strategies we use in this particular role, and some people might confuse this role with a more traditional executive administrator or EA, but as entrepreneurs and business owners, what we need in our businesses as far as support goes, sometimes varies radically based on who the owner / entrepreneur is,

because a lot of times what we need to hire in this SBX role is a counterpart, somebody whose strengths are where our blind spots are. I think we can match up that way to make a big impact. one of the solutions to that is we start saying, ' Hey, you need to hire somebody', and automatically they think, 'Oh, this is a $45,000 or $50,000 a year investment, plus benefits, plus whatever.'

And the reality is, what you might need right away at the [00:12:00] beginning is just somebody very part-time, and this is not meant to be discriminatory, but a lot of times there are very talented businesswomen who have made the decision, for a season, to have more time with their kids, and be at home for that.

They might only want to work three or four hours, three or four days a week, and it's exactly what you need to get the breakthrough to the next level. So, it's not always a full-time employee that we're looking for - it's just a bridge to get into that capacity to work on the next level thing.

Here's what we see all the time- somebody will say, 'Hey Ross, we can't afford to hire somebody,' and I'll do that math with them about what their time's worth and what they're spending their time on, and I'll quickly show them you can't afford not to hire somebody to do this work.

Then it really comes down to- are they committed enough to that vision of getting to the next level, or not?

Will they bet on themselves to go do that? And we don't leave them, we can help them get the right person, we can help coach that owner and that SBX through their first three [00:13:00] months of engagement to really leverage and and exploit that potential.

Kevin Schneider: Yeah, and taking that potential not only from the business standpoint, but also you take a stance of bringing potential out of employees in that small business. We've sent some of our key leaders through your kind of leadership training and course. I've seen huge changes in our management team just because the assertiveness, the decision making, the confidence level.. it's those intangibles that you really

can't teach in the CPAs. I could teach tax, I know how to teach tax, I could teach you, but as far as those intangibles, it's so hard to bring those out naturally from me. Bringing you in and your team in on that, I've seen a huge growth in our management team, which has trickled down because if our managers are strong, my staff is strong.

Now, we're in the stage of just trying to find the right staff, because my management team is so strong that I just need my staff, and [00:14:00] then we're off to the races, and so, that's where we're at now. I love how when we first started working with you, you have this trajectory of a business - you've got your Startup, Growth and Exit or Transition.

Ross, having my leadership team go through your leadership course, what were some of those things that you use - those tools that you use and things that you've seen with all your years of experience to unlock potential in people?

Ross Paterson: We found, as we started working with the small business owner, there's really three things that we're good at. First, we have to create some strategic focus. Second, the owners have to evolve. Your role, Mike and Kevin, has been changing over the last three years, right?

And we're helping you accelerate that a little bit. Then we have to get the right team in place,

and what we find frequently in the small business community is- we take that employee who has been with us the longest, and we make them the team leader or manager, or director of these people, and we do that frequently

on a Friday, we say we're going to promote this guy to manager, and on Monday, [00:15:00] they're the manager and leader of the people that were their bros last week. It's probably the most difficult leadership position we put people on, and it happens all the time in small businesses. Now, over that weekend, we also gave them zero training on how to lead and manage people. So like you, they're a tax expert, and their people skills haven't been developed. As we worked with business owners growing, we just kept seeing this pattern over and over they didn't know how to train their managers. They didn't know how to coach their managers. There were people sitting on their teams who were waiting for them to give them bigger assignments, and they didn't know how to do that kind of work.

So, while we were working with the owners on one level, we started training their frontline managers on another level, and we were just trying to do that for our clients at first, and we got really good at that. So now, a lot of times, we start with larger and medium businesses by training their leaders first, and it just gets us started.

I think as leaders, we struggle with a lot of things. Here's one of the symptoms you might hear[00:16:00] - it's just easier if I do this myself. how many of us say that on a regular basis? Or, I'm the only one who knows how to do this thing - if that's your delegation problem, then number one, I want to say you're not the only one in the United States of America who can do anything. And if you think that's true, you have a mindset issue that probably I really can't help you with, but the reality is we're just not that good, and the second thing is, it might be easier to do it yourself because we haven't put any systems and processes in place.

We haven't trained any people on what our expectations are. We don't know how to delegate and give feedback and coach people up to the performance levels we want, so a lot of those things are what we start taking the frontline managers through in a six session training regimen. One of the things we really know about leadership training is leadership training's not a class.

People ask us frequently, 'Can't we just do all that in two days, and then my leaders will [00:17:00] be better the next day?' and the reality is - No, you can't. So, we use a very intentional design process where here's a little bit of insight, here's some inspiration, and here's some implementation.

Go do these things for the next 30 months, and then we give them the next bite. I think, if there's anything that business owners ask me for all the time, is, 'Hey, Ross, where's the easy button? Where's the three step process for delegation?' It just doesn't work that way. Delegation's a complex process.

Here's the vision, here's your role and what we expect you to do for that vision, here's our meeting structure and routines, here's how I give you feedback and hold you accountable for the work, and all those things work together for delegation to work, and it's harder than you think, but at the same time it's simple and if you change how you approach it a little bit.

We've coached a lot of teams to have breakthroughs in that, and that just gives them potential. Now, all of a sudden, Kevin and Mike don't have to carry this heavy leadership burden and you can get a lot more work done through your team, and inevitably you're going to [00:18:00] find a Brooke and a Steven whose potential is much higher than we thought.

We crack open this leadership toolbox for them, and all of a sudden - Wow! I didn't even know that was there! That's really fun for us too - not only do we see these humans operating at the next level, but then we see our clients, like Pine and Company, creating that next breakthrough as well.

They work together.. It takes time.

Mike Pine: So, let me back up a minute. I'd say one of the biggest breakthroughs we, Kevin and I, have experienced working with XM Performance, goes back to my undergrad, some business management class. I remember this lecture on 'business owners have to work on their business, not in their business',

and that became a phrase I heard over and over again. After I left Big Four accounting and I went to a smaller CPA firm, we were consulting with clients a lot. The partner had a coffee cup that had 'Work On your Business' in a circle, and then in a circle with a line through it, Working In your Business', something [00:19:00] to that effect.

Kevin and I must have said it dozens of times over the years - we've got to work on our business, not in our business, but we're constantly just doing the day-to-day work to survive. Then about three months into our first consulting gig with you, Kevin and I were talking (I think we ended up following up with you later that day) and said, 'Wait a second!

Did you realize we're actually working on our business- we're strategizing our business?' Talk to us a little bit about why so many business owners and startups get stuck working in the business versus on the business, and how to change that paradigm, and how powerful that is.

Ross Paterson: Yeah, it's the key really, to some breakthroughs, and I think the reality is when we start our business from scratch, we're working in it. Hey, The reality for me is, there are some days when I do work in my business. There are some days when I am the delivery guy in front of some clients. There are some days where I am closer out there getting the next big deal done.

That's just the reality. Now for all of us, we've got to [00:20:00] find out a way to balance that. There's going to be some chunk of time during this week where I'm working on the business and there's some chunk of time where I'm going to be working in the business, and I think the big dilemma for most business owners is, they don't know the difference between that work, or they're working on the business -

Let's do some strategic planning, let's talk about putting some values culture together, do we need to hire a COO so that we have the time to go do these next level pieces?

I don't think most small business owners, entrepreneurs really know what that looks like. They get the startup going, they get the foundation set,

and now it's time to grow. Now the real leverage is there. The real potential is in the business. Most people want that to happen in the first 8 to 12 months, and it just doesn't. Getting that foundation set is a 3 to 5 year process,

figuring some of those pieces out. Then, some of it depend upon where you're coming from. If you're a CPA or a lawyer, or even a dentist, a professional services owner, you probably didn't have any training anywhere in the process on marketing and [00:21:00] sales, and so strategically, we've got to start understanding marketing and sales as business processes to create that next growth and breakthrough,

because the revenue's got to come first, and then the leadership challenges come behind the revenue growth. It's very complex. The analogy I use all the time is, there's nothing really so complicated in a small business that you can't figure it out. It's just the complexity of we've got to be six inches deep in about 117 places.

That's hard, because you can miss some things. Sometimes, it's a little more powerful as an owner if you have partners in your business- then we can divide and conquer. I take this piece and they take that piece, but if you're an independent owner like me, then the burden of the leadership rests right here, and if the business isn't breaking through, it's mostly my fault.

So, if you don't know how to do some strategic planning, and a lot of people think that's a 35 page private equity document, that's just really not it. What your team needs, if you have a team [00:22:00] now, it's just a simple business plan in writing, maybe that they even helped create, and then we can start working on the next things when they can see that.

Our clients, our business-owner clients are always impressed with - I didn't know she had that in her. I didn't know he had that in him. Who knew that they had this potential? And all of a sudden, we're not the only ones who can do things -

And lo and behold, my teammate Fanni Gambero, she's way better at this thing than I am, so let her have all that, and that frees you up even a little more. The control freaks in us sometimes can't let go of that stuff. That's a whole another battle.

Mike Pine: You say that's a pretty common Eureka-moment with all your clients over the years, where the business owners finally realized, 'Oh my gosh, I'm working on this, and it's better this way.'

Ross Paterson: Yeah, I think there's a few Eureka-moments they see. I remember really successful business trial attorneys that I worked with, and I was trying to convince them that the most important thing they could do as partners of this growing business is, they've got to learn how to bring more business in.

It took me about three years with these guys,

we were at lunch [00:23:00] one time, and one of the partners goes, 'Hey, bringing business into this practice is the most important thing I can do.' And I was, like..

Mike Pine: Yes! It took 3 years!

Ross Paterson: Finally! Right? A little breakthrough. That's a mindset breakthrough. right? It's a mindset breakthrough. They don't understand marketing and sales. They don't really see them as business processes. right? They think, 'There's this Thing.. Can't I just outsource that?' and and it's dangerous. right? you want to lose a bunch of money, outsource your marketing to a digital marketing agency who doesn't understand your business at all, because they'll spend all that money and you'll get zero ROI.

And so, at some point, if you want to be a business owner of a higher level business, you've got to master marketing and sales to some extent. right? So that's one Eureka-moment. The other Eureka-moment is when they hire that SBX and we help them put them in place, they go, 'You know what? I wish I had done that sooner.' Almost every time - 'I should have done that sooner.' And the last one is like you guys have experienced, when you put Leadership Team in place and you hire a strong COO like Hillary on your team, all of a sudden, you have all this time to work [00:24:00] on your business and get things to the next level, and it's amazing.

Kevin Schneider: I like d your Eurekan-moment number one. It really relates to me just because I got stuck in that. You get to understand as a CPA.. I always felt the biggest value I could bring is my knowledge to the tax code, because typically, the push and pull in our industry is the more experience you have, the more you're going to know about taxes, you're going to be the best in the room because that's what you're good at in your firm.

You're going to have the 20 years, and everyone below you has 10 to 12, or maybe more, so you always feel- I need to be in every engagement. I need to be involved because I can help my clients more efficiently. I can maybe come up with a different strategy, but what we've really learned is, like you mentioned in Eureka one, the best I can do is bring clients into the business.

I have now trained, and we're currently training, always training, the people, the management team, and the staff to eventually replace me. They don't need me [00:25:00] hanging around reviewing every tax return that goes out the door, nor is that scalable. So that was my biggest Eureka-moment - all this experience I've had and developed is great and I can use that as part of my business development, but at the end of the day, I don't need to be putting pen to paper inside this tax return.

Ross Paterson: Yeah, and I think that's a big paradigm shift too. We talk about, a lot of times, there's this old toolbox of skills that got us to this point, and that old toolbox, it's very comfortable, we know those tools better than anybody on our team, but the real breakthrough for the business owner that wants that $10- 20- 30 million business, is this whole new toolbox set of leading through leaders, of mastering marketing sales, of building a better business plan. We set the expectation almost immediately - one of my teammates will go on a sales call with me,

and if you just set that expectation, 'Hey, Tosha's really the expert here. She's going to be the one that engages with you from this point.' And so, I might have started the relationship, but we make this clean handoff [00:26:00] right from the beginning to an expert, and we set that expectation up front, like- if you really want a quick answer (you can call me; I'm always available), but the fastest way to get something on the calendar with XM Performance is to call Lisa Valle.

Listen to part 2 next week as Mike and Kevin continue the conversation with Ross Paterson.

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