Lessons - Bootstrapping Your Way to a Billion | Liz Elting - CEO at Elizabeth Elting Foundation

In this lessons episode, you'll uncover why focusing on revenue and profit over early stage funding can be a game changer for entrepreneurs, discover how strategic growth and powered team building and calculated risk-taking can create a sustainable, high-impact business model for the long term. You also, there's a couple things that I want to pull out of that. Some things that I think are so brilliant. One of the things is that you don't like when people take on funding. Why was this the case with you? Outside of the fact that maybe it was difficult to get funding being your first venture, I don't know. I have no idea. But yes, of course, also true. But why do you recommend stay away from funding? Well, I think in our case, we just did not want to deal with spending time, writing that business plan and then spending time trying to get funding. Instead, the time seemed to much better spend focusing on bringing in revenue and making that revenue profitable so we could pay the bills. When people are working with it, first of all, it's a big job to get that funding, particularly when you don't have a track record, as you say. But it's not the best use of your time because then even if you do, getting the sales and the profit is the hard part. And even if you're dealing with money, it's the hard part. I mean, one example is we encountered a company that we acquired that had something like $82, $83 million of funding. When we acquired that company, I believe it was $1.2 million in revenue. Oh my god. All the money in the world, but that doesn't bring in the revenue. And so there are putting your all your hours, time, and efforts into getting funding when the time is much better spent getting revenue and making a profitable revenue. The other reason is, of course, it's great if it, in the end, if you are the sole owner, wonderful situation, you all know the whole thing, or if you have a partner, the sole two owners, you maintain much more control over the situation, and you don't spend your time answering to other people and worrying about short-term goals at the expense of long-term goals and long-term profit. So there are a lot of reasons over time that it's very important. And the few more people you have involved in as owners can also be beneficial because I hear people have lab issues with their, yeah, with their investors too. And so for a lot of, but- Hello, yeah, no, very, very smart. I also believe that people take on way too much money, way too early on at shitty valuations, and then they get, I mean, then, you know, you look at the entrepreneur 10, 20 years down the road and all of a sudden, they own barely nothing of their company, and it looks good when they sell it at a high, you know, high multiple. When there's a press release around it, but ultimately they walk out with like almost pennies because they diluted themselves so much. Right, right. And I couldn't agree with you more. Right. You don't like you watch it on 100% or 50 some percent or whatever. So I think that's super important. And, you know, I used to say revenue is vanity prop and insanity because people, some folks, were focused on revenue, but it wasn't profitable revenue. And I remember that happened in the 90s and with- when people were still getting revenue, but now it's almost like funding is vanity. And really what you need is that revenue and profit above all that sanity. And that's what you need to focus on. So absolutely. Speak to me about your growth strategy because I've never heard of a growth strategy like yours outside of a franchise model, I guess. I don't know if that's the best way to describe it, but you would air drop people into cities and they were successful. So I want to understand how you grew this business because that is a wild strategy to me that you would put somebody on their own and they would actually do okay. Basically selling those services into a whole new market. Yes. And, you know, initially in the early years, I mean, the very early years, the first maybe three years, we're doing it all from New York. And then we thought, okay, do we do become a global company? We need to start having these satellite offices and also clients want that local present. So it's in their best interest too. So I remember we started with San Francisco just to kind of give a tangible example. And basically what we said to the person leading that office and we do this with every offices, okay, you need to sell $50,000 a month for three consecutive months. And then you can bring in a second person. And then the two of you need to sell $120,000 for three consecutive months and then you can bring in a third person. You need to sell $190,000 for three consecutive months and so on. And that's how we paid for it. And we did a very low cost model because as I said, these were one person offices and they were in executive suite situations were which were the most cost effective way to go. And as a result, the route was very low, one or two person offices starting with one person, but they had the revenue goals and they were very incentivized because they didn't want to work alone. They wanted to have their own company under that. It was an entrepreneurial situation and we paid them like entrepreneurs whereby when their revenue went up, they made a lot more. So they had a low draw, but a high upside. So the goal was to pay as low draw is they were comfortable with, but then make it so they had a high upside and they would make more than they would anywhere else in the industry and they would really feel like an entrepreneur. And we made it so they had a commission that didn't sunset. I mean, if you I can elaborate on that if you want. No, I think it's smart too. The reason why I think it's really interesting to go into this model is because you speak a lot about the employees have to feel like owners, but I feel that very few people accomplish that effectively. I think there's a couple of issues that present themselves. Number one, you're not paying them a lot so they don't care about the business. Number two, if you're trying to do a low draw and high commission, then you have to find the right people that are very self-sufficient, self-motivated are confident in their own abilities. And I feel like that's a very hard profile to find and obviously you've perfected how to find that person. But the strategy that you deployed, I think a lot of business owners founders would love to deploy, but it's the people problem that they have an issue with and they can never solve for it. No, you're right. And it is the hardest part. That is the key to having a successful business, right? Finding and tiring and developing and retaining the right people. And often it's some of it's not developing. It's just they aren't right people when they come in. They have what they they need. They have the the threshold level of qualities they need. But related to what you're asking is I think it helps if you hire people who are young, who don't who aren't married, who don't have families that they need to support or used to living higher risk. They're okay. They'll take the risk. They'll make less if they're not successful, but they're looking to make more than they could ever make. So they don't need the security. They're willing to take the risk because they know they want to feel like entrepreneurs or be entrepreneurs within our company or within a company. And that's the situation you can provide. The other thing you can do over time is fathom stock, or I guess they're, you know, employee, I mean, eSops, but I mean, fathom stock is another way to do it without actually giving away equity and basing that stock on the revenue and the profit of the company. But I think for us, the key was finding like-minded people who really wanted to build something big and create a 100-person office or a 200-person office and then be managing people outside of their office in other cities or countries in our company. And that's precisely what we did. A quote from you, very entrepreneurial quote, work today like no one else will so you can live and give tomorrow like no one else can. What does that quote mean? Yes. And I mean, that's really, and I'm putting in the hours and sacrifice saying, and you know, it's not what people want to hear, right? I see people want to hear there's a way to be a mega success without doing that. But every company I can think of and I read about and I learn about created huge companies, billion dollar companies or even successful companies that are not that like put in a lot of hours and and given up some things in the early years to create the infrastructure that they want and the right sales team. I mean, I've talked a lot about sales. I think the right sales solution is critical because you can't do it alone at the entrepreneur cannot be that the salesperson for the company or even the most important salesperson or the head person. As a salesperson, I mean, ultimately you have to have a well well machining. But in order to create that, you have to put in the hours over a sustained period of time. But today is not, you know, forever. Yeah, in that quote, I mean, I hear of entrepreneurs who sell incredibly successful companies after five years, seven years, 10 years. I mean, in my case, I did it for 26 years, but it got a lot better after those early years. But it relates to the first million or the first five million is by far the toughest. In the early years, you have to give it more than anyone else. You have to work out work anyone else. You have to be available when no one else is. And that really leads to a well oiled machine and success at the highest level. And it's exciting and interesting because if you choose the right path with the right passion, a passion that can make money and you work with amazing people, it can be fun and exciting for all of you. So it's really a great way to go. Thanks for tuning in. If you found this valuable, don't forget to hit that subscribe button so you never miss an episode. And if you want to dive deeper into this conversation, check out the links in the description to watch the full episode. See you in the next one.