DevReady Podcast E30 - ’Sweat Equity’ and Real Value with Paul Lange

On this episode of DevReady Podcast, Andrew and Anthony speak with Paul Lange, “Business Growth Accelerant”, about working in private equity, the life of buying companies to scale, and the importance of understanding how to grow your business. When looking to draw investors, what you really need to be able to do is demonstrate that you can sell what you want to sell. “Sweat-equity” is great but investors care about real valuation. Paul lays out a 9-point strategy for growing your business and prepare for success from the perspective of an investor: 1.Figure out ways to minimize your risks. a.Find out what’s in it for you. b.“Where’s the exit?” c.“Show me the money”: demonstrate the capital-building potential. 2.Taking money (because you cannot really “make” money). a.Structures: get the structures of your company right. b.Systems: the balance of formalized and personable. c.Scalability: so you can grow beyond your local market. 3.Making it happen: all about people. a.Who’s on the team? b.Where’s your niche? (The target market.) c.Traction: Why, what, and how you do what you do Some tips from Paul: 1.Spend one day writing out your plan, and get it on paper. 2.Iterate, iterate, iterate. 3.It has to be good enough to start — and then start! The strategy for implementing all nine of his points: ask yourself the question, answer the question, and question the answer. Rinse and repeat until you really like what you have. Topics Covered: ●Private equity firms. ●Managing buyouts. ●The dizziness associated with taking on a multi-million dollar portfolio. ●Money should be the last thing that’s “in it for you” in your business. ●Your vision needs to extend beyond your business. ●The effectiveness of collaborative campaigns. ●How to minimize the risks in your business. ●The importance of understanding the marketplace. ●Folding a business into yours to mutually grow. ●Understanding how much it costs to scale even a small business. ●Sweat-equity is not nearly as valuable as real valuation. ●There’s no right or wrong about structures: just put some thought into it. ●The result of systems is that they put the focus on your values. ●Small business owners need to divide and conquer. ●Hire based on values not skills. ●Think about who you really want on your board. ●Define very clearly who you add value to. ●Measuring traction. ●The experience is what keeps people coming back. Key Quotes (Time Stamps): ❏“I don’t want to fly C-130s: I want to be Top Gun!” - (6:30) ❏“Before you get into anything, you need to have your exit strategy nailed down.” (8:00) ❏“I tell most people: ‘how about you try selling your way out of your funding issues.’” (9:45) ❏“Business is not built to last -- think about where your exit is gonna be.” (15:15) ❏“At the end of the day, an investor and an business owner are looking to put money into their wealth account.” (19:00) ❏“Whenever possible, we will put the smallest amount of money on the table.” (22:45) ❏“I know people who have bootstrapped a business on a grand.” (30:15) ❏“To really be random and fluid, you need a solid structure underneath you.” (36:40) ❏“You cannot effectively scale without the systems in place.” (43:45) ❏“There are different levels of exit.” (47:10) ❏“Passion is teachable.” (49:50) ❏“Even the Catholic Church doesn’t have 100% of the religious market.” (55:10) ❏“If you can’t measure it, you can’t demonstrate it.” (1:02:35) ❏“A restaurant is only as good as its last meal.” (1:07:45) ❏“Perfection is procrastination.” (1:10:50)