Sieva Kozinsky joined me for a live workshop on the value of a business and growing your business’ value. We talked about what businesses we’ve picked, why we like certain industries, how we hire, fire, and delegate, and the key skills building a business into a valuable asset. Sieva runs Enduring Ventures and has spent over a decade building companies. He started with an education company for note taking and sharing, then launched and sold a pharmaceutical clinical trial company, and now operates Enduring Ventures as a holding company for everything from book publishing to software to swimming pool construction.
I like to ask people what they think is the worst industry in the world to get into in terms of scaling, operations, and profitability. In short, a business they would never want to start. The common answer is a restaurant, everybody knows about the nightmare that is food service. But there are still companies like Texas Roadhouse with over 600 locations, $4B in revenue, thousands of full-time employees, and making $500M in profit a year. Even in the worst business imaginable somebody has found success in it. No industry is impossible.
Ten years ago I was in my second year of entrepreneurship in Ithaca, New York and constantly playing victim. I was complaining about my employees, the labor environment, the customers, the market, simply everything that I could. My partner and I were constantly busy putting out fires, so in 2018 when we tried to sell the company we were shot down. Our business wasn’t an asset, it was a job. We needed to stop blaming everything around us and take ownership over our own problems. There were people in our market finding success, so we could be successful too. Over the next few years we got serious about systems and processes that allowed us to step away from daily operations and focus on adding value, all while simplifying our employees’ jobs so they can perform better, and in 2021 we were able to sell for $1.75M and walk away.
Sieva knew nothing about starting a company when he started his entrepreneurship journey. His main goal was to make some money to pay for rent and not work a typical job, and he didn’t stop to plan or think about what his vision for the company would be or how he could create value. He likens this lack of planning to leaving the house on a long road trip without bringing a map. You want to have a map for your business journey; what is your destination? What does success look like for you? Can your business act as the first step towards achieving your goals?
While in college Sieva took a class taught by Paul Orfalea, the founder of Kinko’s, who sold his business to FedEx and became a billionaire. Sieva’s main takeaway was that Orfalea had found a way to make money while he slept. When we think about great careers like being a doctor, engineer, or lawyer, those jobs will still stop paying you when you stop working. By building a valuable business you’re able to get paid while you sleep, or vacation, or work on another business entirely.
Some businesses are inherently low-value and some are high-value. Owning an apartment building is one of the simplest forms of business; customers are predictable, the real estate is valuable, and therefore the business is worth more than its cash flow, sometimes up to 20X. On the flip side, a great plumbing business may only sell for 3X its earnings. You can build a more valuable plumbing business that will still pay you while you sleep, but buyers will still pay less than they would for the apartment complex.
With tons of different industries under his management at Enduring Ventures, Sieva has had to research and learn about all kinds of businesses. He sees his job as looking at an industry, determining if the industry is valuable to him, and then determining if the company in question is valuable within the industry. This includes talking to investment bankers, other owners in the industry, attending industry events, researching public companies, and finally speaking with suppliers, distributors, and customers in the space. And he aims to speak with three people in each category to get a sense of things. This is all before he even considers the company itself.
At its core, a business is nothing more than a group of people operating together. And that’s why hiring, delegating, and building teams are some of the most critical tasks a business owner can be responsible for, along with sales. I used to vent to my mentor in Ithaca that I hated sales, and he put it very bluntly to me that if I don’t like sales that I need to get a regular job. Sales is at the core of entrepreneurship, and you need to embrace it and become good at sales if you want to succeed. I sucked it up, put myself into situations to get repetitions and get more comfortable selling, and got better.
Hiring is similar. I used to sit at my desk and hope that a great employee would come to us looking for a job. In truth, we recognized that 80% of the workforce neither hates nor loves their job, meaning they’re open to something else, and we had to go out and hunt for people to work. When I saw a young man hustling as a cart returning at a Walmart in Boston, I started talking to him and gave him my business card. I asked him if he knew anybody looking for a job, told him about what we do, and he turned into one of our best employees. I began to carry business cards everywhere because I was always on the lookout for great employees, whether they were baristas or bartenders or fast food workers. It’s hard, constant work, but that’s how you’ll find your most valuable talent.
Sieva has been tasked with finding higher-skilled talent, and focuses less on being a hunter and more on being a honeypot. He spends his time and energy cultivating partnerships, bringing other local CEOs together monthly to learn from each other. He surrounds himself with interesting people, builds relationships, and met his business partner that way. This process turned into a high-leverage, life-changing event. Sieva’s able to find success by surrounding himself with good people and providing value.
Providing value is a huge component of successful networking. My networking skills grew 100X when I realized that everybody in the world is selfish deep down, in that they’re looking for the best things for themselves. Finding mutual value is your greatest strength. I used to network with my hand out, wondering what people can do for me, and providing zero value. I decided to become a master at something, in this case self-storage, and began to add value to my interactions. Suddenly, important people wanted to know me and meet with me. I’ve met better employees, better partners, and found more opportunities by adding value in these relationships.
If you want to make money while you sleep, you need to learn to delegate effectively. That’s what creating a valuable business is all about, setting it up to run without your constant input so you can generate cash flow for more than the work you do. Sieva bought a plumbing business in Arizona that had $6M in annual revenue but the owner and his wife were working ten hour days for six days a week and hadn’t taken a vacation in ten years. The owner had such a tight grip on the business that he never developed his leaders and managers. In the first year Sieva’s team weened the owner off of control, implemented technology to drive efficient operations, gave key employees what they needed to grow and develop, and the result was 50% revenue growth in just that first year.
Most people suck at delegation. I got practice when I was 13 years old and hired a high schooler to drive me to my lawn mowing jobs. Sieva had to dive into it because, he admits, he’s naturally lazy. But we’re not taught delegation at any point in our lives. The school system teaches us to comply and do our jobs. Delegation is a muscle that needs to be practiced.
I see two different levels of delegation: delegating tasks and delegating decisions. Delegating tasks is easy, you tell somebody what to do and how to do it, and a lot of people can get rich that way. But delegating decisions takes more patience. People get better at decision making through practice, so you need to give them opportunities. When an employee walks into my office and has a problem it’s easy for me to say that I’ll take care of it, but that only adds to my plate and doesn’t help them at all. Instead, I make sure they leave my office prepared to solve the problem. I ask them questions until we have an answer, and I give them practice at decision making. Even better, I get to look into my employees’ minds and see how they solve problems.
We had a nuclear problem at one of my self-storage facilities with a major leak caused by melting snow and an ice break, but I didn’t know about it for two weeks! My team went through the procedures, solved the problems, made decisions, notified clients, and contacted our insurance company. For 99% of business owners that’s a weekend ruiner and an instant flight to New York to go on site, and I didn’t even have to hear about it. That’s the impact of successful delegation.
Sometimes an employee isn’t the right fit no matter how many opportunities you give them. If you have an employee who is struggling and not getting better despite coaching, you need to fire them right now. You won’t regret it. There is nothing you can do to upset and lose good employees more than surrounding them by people who are incompetent. The strength of your company falls to the level of competence that you’ll tolerate. I’ve never regret letting somebody go when it’s time, and it’s good for the employee to not waste their time on a job that isn’t a good fit for them.
We’re told often that employees want to set their own schedule. That they want autonomy, to make decisions, and to be their own boss. I don’t think that’s true at all. Employees want structure, they want to be told how to win, know what to do, to show up at the job and do it well. They don’t want uncertainty or ambiguity, because if they did they would be entrepreneurs. Your job is to structure an environment for them to succeed in a predictable, consistent manner.
There’s a lot that you’ll learn as you build and scale, and it’s easy to get ahead of yourself. Start with a process, go out and do work, delay gratification and grow your company over time. People want to be a visionary and think big early on but that will all come later.
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