Josh Tapp and Jim Barnish deep dive into growing faster than your competition, while still outlasting them in the long run. Scaling a business can be one of the hardest parts of the entrepreneurial journey, make sure to do it with others by your side.
Deep Dive Into This Episode - theluckytitan.com/jimbarnish
I am a strategic change leader with over 15 years of leadership experience in global and integrated operations, M&A, and strategic go-to-market planning. Drawing on deep operational and investment experience at startup and scale-up businesses, I have created and curated a collection of proven, data-driven processes and methodologies to help companies build scalable, fundable and exit-ready solutions - accelerating both organic and inorganic growth.
Josh: What is up everybody Josh Tapp here again and welcome back to the lucky Titan and today we're here with Jim Barnish and this guy is the founder of orchid black, his website is orchid.black, which was one of the hardest URLs for me to remember cuz I want to say orchid.black.com, which obviously makes zero sense but I'm super excited to have Jim here because this guy has helped in the completion of over 100 exits. Okay, this is such an interesting thing for a lot of people in our space, because most people who are in the digital space, don't ever think about what their exit strategy is so I want to talk to you today, Jim about that so first off, Jim, say what's up to everybody in that we'll hop in and start talking about exits.
Jim: What's up, everybody happy to be here, excited to talk about exits?
Josh: Let's do it, man. Well, this is this is such an interesting thing for me because the the past year, Jim and I, we talked about this, as I've been in the process of acquiring another company, we've had about four falls through or working on one right now and it's not because they didn't want to sell these other ones fell through because they just didn't fit well, with our, with our company, there was just some little thing with each of them that ended up causing the deal to fall through and, and a lot of companies that I found, especially in our space, don't even think about what their exit is so let's I want to ask you first, what's your take on an exit and what should an exit look like for a digital entrepreneur?
Jim: Yeah, that's a great question. I mean, ultimately, terms of what an exit should look like, it's, it's very different than what an exit is talked about as right, we talked about multiples of revenue or multiples of EBITDA as, as core exit metrics, because that's what we know and that's how we're able to compare deals and that's what's shared, quite frankly, to make companies look really great. Problem is, that's just the beginning and it's really table stakes at the end of the day is looking at companies at the at the multiple of EBIT DA, multiple revenue, what exits are really about our transferable value to the acquire, what is gonna make that acquire, look up and want to buy you rather than having you force your hand to sell your business, which being bought and being sold or not at all the same things and what it really comes down to is, every layer of value that you see in a company are the same layers that we look at, as we build a company, right, we create a strategy at the top, that we then hire talent around, that then builds a product or service for us, that then drives revenue and at the bottom is our operations, we we run the business, right, the same way, as we look at value creation, I mentioned, multiple of EBIT DA or multiple revenue are kind of where companies stop looking at what value is, there's all of this product and talent and strategic value that's on top of that, which is the reason you see crazy valuations like Microsoft's purchase of LinkedIn, or, you know, all these other more strategic technology acquisitions that happen in the marketplace and what that comes down to is the ultimate realization of what that value might mean for the acquire when they take a look at your business. It's not just the revenue, it's not just your profitability, it's the way your product fits with theirs, right, is there a one plus one equals three equation that connects that they will sell your product to their customers, and vice versa, is their talents value where there's more than just a new skill or a new opportunity, but really, the ability for your talent to augment there isn't in a buy that looks very much like a new team that's part of that acquisition and then most importantly, is their strategic value and inspirational value and not just things like your mission, your vision and your values, but the way that that translates into moats that the acquiring company might be able to gain right competitive advantage, or things that are totally transformational, in a way that company might be might be acquired and so there's, as you can tell, there's passion here, right? There's a lot of different ways that you can slice it but ultimately, it really all boils down to what transferable value is.
Josh: Yeah, and I love that because that last term, you just said transferable value, you know, and you kind of talked about a moat. That's one explain that for our audience, if they haven't ever heard that term, right building a moat around your company, like, like Jim said, is that that competitive advantage that you have or that strategic advantage over their competition and you're talking about is, is should, should you be buying a company just because the numbers make sense or should be buying it because it's going to provide you that moat, maybe, or maybe you could provide them that moat that's going to make them strategic and more competitive in their environment. So I want to ask you this, Jim, having done over 100 acquisitions, you helped having done that as well. So with an acquisition, you know, most of the people listening to this probably have never even thought about selling their company right, it’s their Baby at something they've been trying to get past that million dollar mark, um, at what point would you tell people to start looking at potentially selling your company?
Jim: Yeah, I do want to be very clear, it's my team that's done over 100 acquisitions, not just me, I wish I had that backup to my name but someday I will, I'm only a fraction of that but that being said, the the way that the way that value creation happens beyond that transferable value is certainly a first step, which is, are you looking to build a lifestyle business are you looking to build a high growth business right and that's a really tricky thing, especially in your early stages to figure out as a founder of what you want, do you want an easy road where you can, you know, bring in some profitability and have a business that sustains itself or do you want to have an exit that connects to what might be a high growth company and a really meaningful exit on the other side of that right legacy, well, financial freedom, things like that, are terms that are often thrown around so first figuring out do you want to build a lifestyle business or do you really, you know, want to build a high growth business that has an acquisition attached to it, beyond that, getting at peace, that founders are like athletes at the end of the day and, you know, this is a new term new comparison for me to think about that my executive coach turned me on to which is founders have a failure rate of 95% right, fact, right, most companies do not succeed, most athletes don't get to the professional level and probably even less than 95%, right but at the end of the day, there's this philosophy around going hard and hustling, and being super devoted to your cause, and playing to win the difference that took me a really long time to find out is beyond playing to win, there's, there's training, right, and there's recovering, and, and then most importantly, they're celebrating little wins around along the way and as founders, as CEOs, we're not taught to do that, right and so that is one-core thing I think that everyone needs to internalize as a family under is even athletes, even the athletes at the Olympic level, at the professional level, they take time to train, they take time to celebrate little wins, and they take time to recover and it's okay to do that but in order to really realize that fundamental aspect that connects to founder burnout, it also connects to what type of business do you want to build, that's why I went down that little rant, if you will, around founder burnout around the comparison to athletes, because you got to figure out what type of athlete that you want to be do you want to be the high school athlete that makes it really is really cool, and has a lot of really awesome opportunity in front of them, and then ultimately goes on to something else, where do you want to be that professional athlete that Olympic ballplayer that ultimately takes things to the next level that knows that there's a major failure rate attached to it and that really needs to focus in on, how do I recover? How do I train? How do I prevent burnout and ultimately, what does an exit look like for me on the other side of buildings?
Josh: And I love that explanation, I want to kind of tie it back into that concept we're talking about earlier about the moats because that's really what you guys have specialized in is like, let's let's build you a moat, that's not just a financial moat, right, that protects you from your competition or protects you from the market conditions but it's more of the people, like you said, avoiding burnout and finding the right people putting them in the right place with within the team and I wanted to ask you this, because you know, having orchid black is really a company built around helping get the right people in the right place, it seems like so for you, Jim, what's what's kind of been one of the big qualifying factors that you found for actually finding the right person?
Jim: Yeah, that's a really, really good question, I came from the venture world was my last gig prior to work to black venture capital, and saw how many companies had so much raw material. But we're solving it as solving any opportunities that they had any gaps that they have through more capital, more capital, more capital, right and this philosophy is always emerged from technology companies around the unicorn, becoming that next billion dollar company by throwing more capital and more capital and more capital and in some cases, that works when you have all the right things in the right places and in some cases, that works by throwing capital against the wall and hoping that it works out but there's a lot of opportunity that the VC model does not attack and that's, that's these companies that have a lot of raw material that know that they want to grow fast, but they understand that they also want to grow smart, and that they don't want to solve the problem with more capital, more capital, more capital, thus diluting founders and becoming not so founder, friendly after all, but really focused on growing the right way, putting the right elements in place to grow successfully, building according to what stage of company maturity, you're at, you know, getting the product market fit, building inefficiencies, and then focusing on scale and keeping in mind that it's okay to not have to have a ton of capital to throw at everything, it's okay to build smart and then fast and ultimately, it really relates to what problem are you trying to solve for your company, what kind of business are you trying to build, and most founders would rather have 50%, of $100 million company, then they would point 01 percent of a billion dollar company, it's just the way the cookie crumbles so I think as we're thinking about what people want to build, what people want to do and what an exit looks like, on the other side of that build, that's one really important factor to think about is don't just grow fast, but also grow smart.
Josh: Well, and let me ask you this, because with you and the way you've been growing your company, how do you feel like you've been growing smart and fast because you obviously have done both but how do you feel like you're actually doing it the smart way?
Jim: Yeah, I mean, ultimately, the it starts with no matter what industry you're in, you know, we focused on SAS companies, but we're a services provider right at the end of the day but no matter what side of the ball you're in, no matter what market you're serving, it always focuses on establishing product market fit, before you really focus on scaling. Think that's kind of what all that looks into the the general philosophy, of nailing your nailing your niche, if you will, which is sometimes something that we as business owners just always look past, we know that other companies need to do it, we know that Apple isn't a swimwear company, or doesn't sell apples, we know that steak houses aren't known for having the best organic food but ultimately, we think that we especially in our early stages, need to be everything to everybody and that we need to do that in order to help as much as we can and term profitability as soon as we can and when we don't realize is that it really hurts us to not nail our niche and so, you know, what we do with ourselves and with our clients is focus on first nailing that niche seen so many companies waste millions of dollars in sales and marketing spend and not be positioned properly and, and I've made those mistakes on the spending side a number of times as well, not just others and a lot of that starts with taking an honest look at the pain you're solving for the solution or mote that that's connected to what you're bringing to the market and some real proof points and identify identifiable targets and then unique approach that you're bringing that really positions you and allows for you to not only narrow your niche, not only nail those targets, but build a programmatic approach towards your own go to market strategy, to then test and iterate on to be able to see the success that a lot of companies are seeing in high growth environments and that's growing smart and growing fast.
Josh: Yeah, I love that one, I feel like you guys have done such a good job with that, because you have worked with so many different industries and helping them determine what their exit strategy is and everything and and I want to kind of turn the conversation a little bit to what we were talking about pre interview about the how you're actually hiring people. You talked about getting to that 1% and how you're getting there so walk us through how you're getting the right candidates, like what's your strategy to actually get to that point?
Jim: Yeah, it starts with, I mean, I think the questions largely around the attraction and retention of talent at the end of the day, right and it really starts, especially as you're thinking in the early days with a list that anyone can Google and find around tougher challenges for business owners, which you'll look near at the top and you'll always find find hiring and recruiting and retaining and whatever where we want to talk about relation to talent at the top of that list, in today's environment is we focused on bringing in millennial talent, that just expands gives us a new new generation of people that we don't understand oftentimes as business owners, depending on what generation you're in, but can be really hot, highlighted when you look at three simple facts. 55% of millennials are not engaged in work in any environment, 42% of millennials change jobs every two years or less and there's $30 billion that's wasted in the US economy alone, around turnover costs from just millennials that's a lot so there's some big numbers and when we look at that, internally for ourselves and with our clients, because building a business of qualified talented people that are going to treat your clients like you would treat them as a founder is not easy at all we all know this but it's even harder in the earlier stages of a company where you've got a million things to do, you're wearing a million different hats, and this thing called hire and bringing talent becomes this time consuming process that you almost want to outsource in many cases, but it's the most important thing that you can do and you've got everything working against you, because not only do you have a million things to do, but you don't have the cash to compete with these larger companies, right? You don't have, you don't have the ability to pay what Google would pay for the same level of talent and, and you add the time consuming factor to that and it's, it's just how do I do, like, what do I, how do I bring in the next person but the crazy thing that people forget is that, especially when you think about what Millennials are motivated by, but really just people in general, what you do have on your side is the ability to let your most talented people grow from the inside, right to let them develop and, and drive that development and, and treat them the same way that you want them to treat your clients at the end of the day, and grow within the organization and make sure that they don't want to leave every two years and make sure that they are engaged, and maybe even give them a little bit of the upside all right, whether that's equity or something else, because that's huge for somebody that wants to actually do well in the company that they're contributing to and so, you know, when we look at this, for both ourselves, and what we've done, you know, we have much as originally as reasonably as possible, we tried to think about meritocracy from the top down, right and our business model, the way we interact with clients is very incentive based, very incentive focused and so we like to do the same thing with folks internally and even though we can't compete with the McKinsey's of the world, or the best private equity firms on the planet, in terms of compensation, we can do very unique things that allows them to participate in ways that they would never be able to participate in any other sort of company in McKinsey is a large private equity firms the world and quite frankly, that opera, opportunity to to grow is whether it's within orchid black, or within our clients, or just in general and one of your startups, that is so awesome to be able to think about growing in a in a startup and so awesome to think about being the driving force towards somebody else, being an entrepreneur, that is one of the most rewarding things that you will find as you're developing people in your organization and you almost want to encourage them to go start their own thing, because they've done such a great, a great job helping you get your thing off the ground and so you know, that's really the way that we serve it up with ourselves and with clients and the retention of the attraction and retention of talent is a big part of that, you mentioned the top 1% you know, US selecting the right talent, given our boutique nature is so important for us that that time consuming process of hiring, finding the right people is the majority of my job, it's, you know, I get to do fun things like this and be partners and, you know, help clients where I can but ultimately, at the end of the day, I'm spending as much time as I can finding the next talent that's going to take care of the next clients that we're going to get in the door because we are going fast and we've got to make sure to be relentlessly focused on on quality and so, you know, that is one thing as a takeaway that I would want everyone to have is, don't overlook the time you spend on talent, whether that's attracting or retaining the talent, because if you bring the right people in and you take care of them, everything else will work like clockwork, it's not that easy but it's pretty, it's pretty close right so that's, that's all I got to say.
Josh: It was a good, good spiels. I like it. So I want to ask you this, because this is kind of where the argument enters do you do you hire based off of talent, or excuse me off of skills or off of personality, right and I think that's kind of where the argument comes into play here a little bit but I personally sit on the side of care that you actually fit culturally, and that you're actually a good person, and you have good morals and good standing with everybody else in the company and we'll just train you on the skills, that's my personal belief but it seems to be kind of your your standard as well, for your company, as you mentioned, making them become entrepreneurial and everything, but how are you kind of balancing that where you're actually bringing people in who have the capability so you don't have to train them from the ground down?
Jim: Yeah, that's a really great, great question and it starts to me, it's, it's almost like gates, right? If and I think of it as aptitude and attitude, right? Just to have two words that sound pretty similar, if you don't have the attitude, right, I don't care if you're the best person on the planet, I don't care if you have the aptitude, it is literally a checkbox in our hiring process that you meet the culture, that you are focused on learning that you are not so focused on the exits that you've had, or the great work that you've done in your career, leaning on what you've done, it's actually about what you can do now and how excited you are to bring that knowledge to people that don't have that has attitude so whether it's everyone here is learning everyone here is an intellectual has an incredible amount of intellectual honesty, which is one of our values if you don't embody being able to know what you know, and also being able to know what you don't know, then this isn't the place for you and there's everyone doesn't know some things, I don't care how many exits Yeah, I don't care how many companies you built, how much revenue you've driven value creation, whatever it is, there are things that you don't know and there's probably more things that you don't know than what you know and so ultimately, aptitude is first, or sorry, attitude is first, then aptitude comes and we have a really interesting mix in our talent, philosophy, a very senior level, folks who have, you know, had incredible exits don't necessarily need to be working all the time and bringing what they've done to the table, because they've gotten a lot of exits. they've, they've done a lot in their, their history, but they're excited to bring that knowledge, and that hands on occasion to other companies and that is so hard to find people who've been there done that, who don't need to do much, but ultimately just can't get it out of their system. they're so passionate about building businesses that they can't stop and so that's one group and then the rest are, you know, really hungry, high aptitude or high attitude, you know, have some levels of aptitude in their core skill set but ultimately, folks that are looking to learn the rest, and whether their journey is being a founder themselves, or entrepreneur, or their journey is becoming our next, our next level operating partner, our next senior talent, if you will, doesn't really matter to me, as long as they're here for the journey and they're excited to create a lot of value for companies along the way and so again, you know, bringing it back to the basics, number one is always attitude, number two is aptitude but aptitude can also be really important, you got to have the right people in the right roles.
Josh: Well, and I appreciate you sharing that, Jim, because you know, most of you who are listening, this interview might be saying I want to work with a company like that, right, where you know that every employee is hired that that way or every partners employed that way, it's such a cool methodology, I think that you're spot on with that, because of the attitude makes, it's everything that the skills can be learned and a lot of times the high skill people can be put in, in even lower skill positions, and they'll, they'll still thrive because maybe that's what they're interested in is the contribution side so everybody, make sure you go check out orchid.black, it’s not .com, it's .black, make sure you go check that out and also, Jim, is the guy that you want to connect with so he has a LinkedIn profile. I'm not gonna read off to you he's a little bit long. I'm going to add it in the description to the to the show notes. Make sure you go check out his LinkedIn profile, this guy does some amazing content so Jim, could you give us one final shout out and give us one final parting piece of guidance before we close up the show?
Jim: Yeah, I would say building your business is 50% focused on growth in the business 50% growth on personal mindset and so whatever your system of doing that personal mindset is minus having an executive coach and focusing like hell on my fiancé, and in my family when I've got the time to do that, taking care of yourself is a big part of the equation and so don't forget that.