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A 5-Step Framework for Intentional Growth with Ryan Tansom, Arkona

July 13, 2022

“If you don’t know where you’re going, you’ll end up someplace else.” Ryan Tansom learned the hard way what can happen if you don’t find your “why” or have a clear direction for your business. That’s why he has focused his career on helping you create success on your own terms through his 5-Step Intentional Growth Framework, which we discuss in today’s episode! 

About Ryan Tansom:

Ryan is an entrepreneur, speaker, podcast host, and Co-Founder and President of Arkona. Before founding Arkona, he revived his family business and then sold it for 8-figures in 2014. He is passionate about helping business owners create strategies that allow them the freedom to build the business the way they want.

Episode highlights:
  • There are so many different pieces involved in growing and exiting a business. It’s important to understand all the options that exist so that you can make an informed decision that will fulfill your long-term goals. (09:00)
  • Success means something different to everyone. Step one on the journey of achieving it is to understand what you really want, and why because if you don’t have a clear direction and motivation, you are likely to get lost along the way. (16:05)
  • The 5 principles of the Intentional Growth Framework: personal drivers, financial targets, exit options, increase value, and a team of advisors. Understanding each of these principles will help you get the most out of your business. (17:12)
  • Business partnerships are often fraught with challenges (as Ryan knows from experience) but creating frameworks can help to mitigate them by ensuring that everyone knows where they stand. (30:01)
  • Entrepreneurship (and life) is a continuous learning journey. Always be open to absorbing more knowledge because the more you know, the better your decision-making capabilities will be. (42:30)
  • Fun, wealth, impact; working at the intersection of these three factors is what Ryan sees as the recipe for a fulfilled life. (44:45)
Ryan’s best advice for entrepreneurs:
“If I’m more clear on what I want long term, and the multidimensional goals, then it’s more clear what I should be doing TODAY to get there .” (05:23) Without direction or intention, it’s easy to get lost in the multiple pieces that make up the entrepreneurial journey.
Connect with Ryan:
Follow Beyond 8 Figures:

Transcript

[00:01:36] A.J. Lawrence: And then also they work with entrepreneurs beyond the fraction of CFO, how to help align their long term goals to that of the business and prepare the business to sell. So they really help you create all this great, amazing value and help you figure out, you know, if it’s right to sell or just to continue running it. So well worth checking out Arkona.io.

[00:01:57] Now second, what I’ve been fascinated by and I’ve learned so much is his podcast, the Intentional Growth podcast. Go check it out, go subscribe, go listen to him. Really great, great, great listen. Not only does he have amazing guests, but Ryan is an amazing podcaster. His questions are brilliant. He really pulls out some really cool deep things. And he’s fascinated by the concept of what is, surprising, intentional growth. You know, and as you hear me talk about being deliberate about entrepreneurs, it’s really pretty cool to see someone taking a similar tact around the concepts of growth in a company and being intentional about it. So, you know, just a little bit off from each other, but very directionally the same.

[00:02:44] So a lot of cool stuff on this show during the interview, Ryan’s gonna talk a little bit about his background and how it kind of led him to do a few things that, you know, helped him grow. So pay attention and as he talks about setting his long-term goals, he realized that early on the efforts in his family and different pieces, they were all a little bit out there. As he focused on what he really wanted to achieve, he realized his abilities to drive growth and be intentional increased. And now that they’re working with a lot of amazing entrepreneurs, he’s seeing similar things. Those people who put the time and effort into setting really focused, intentional, long-term growth goals or long-term goals are seeing higher results.

[00:03:32] Now it’s not cheat code. But it’s that extra work. It sounds straightforward, but it’s not. You will get benefit from it, but it takes then consistent work on it. But then he brings up also sort of the idea that enjoying where he is, because the company he’s doing came out of a pain that he had with his earlier company in his earlier experiences.

[00:03:56] So by being able to kind of keep that in the back of his burner over the years. And then when he had the opportunity after the company sold, he wasn’t happy about the experience. But he took that pain and built this new company that does it. So as entrepreneurs, a lot of times we feel that the pain that we’re in for whatever reason about what’s not going right about our companies is the end. That it just, this is what’s gonna make things difficult or just ruin our life experience.

[00:04:25] Yet, sometimes that very pain we’re going through now, looked at appropriately, in the long term can actually be really something that brings us joy. So, you know, listen to Ryan as he talks about that. And last is another pretty straightforward thing, but is so difficult. Ryan talks about setting his own entrepreneurial growth, his own abilities as an entrepreneur and working on that in tandem with the growth of his company, along with the growth of the focus of his long term goals, as we talked about earlier.

[00:04:57] So listen as how he kind of talks about, we’ve had a few entrepreneurs talk about this effort of really trying to align this ability to work on ourselves along with where the company is. Now sound straightforward, but it’s not when we’re right in the middle of it, when things are growing way faster than we expected, when things are going way, way down quickly, or even just in the middle of normal, ongoing business. It is not easy to touch base and align where we are and where the business is.

[00:05:31] It takes the work, but believe me, listen to Ryan, as he talks about the benefits he gets from it and think about it in your own environment. So please go check out arkona.io. They have some great services, and I think you can look, you know, there’s, if you’re in the space for a fraction of CFO check ’em out, or also just thinking about where you’re going in the long term, well worth doing. And then more importantly, go to the Intentional Growth podcast on your favorite podcast player and subscribe to him. Give him a listen, you’ll enjoy it. Let’s go talk with Ryan.

[00:06:04] Hello, Ryan. Thank you so much for coming on the show. I’m really, really happy to have you here today.

[00:06:10] Ryan Tansom: AJ, I’m super excited for this conversation, man. I was having a lot of fun catching up right before we hit record.

[00:06:15] A.J. Lawrence: So I’ve been telling you a little bit about Ryan. I think a lot of what he’s doing, you’ll find very interesting as you try and piece together what you’re looking at from your own businesses. So Ryan, where do you see yourself as an entrepreneur these days?

[00:06:29] Ryan Tansom: So it depends on what kind of journey we’re talking about. But when you think about, for me as an entrepreneur, I helped turn around a family business that was in Copiers and IT Services, sold that in 2014. And I’ve been at this for eight years, where I’m in this, so our companies called Arkona and I’m watching my idea flourish. And it is really cool, A.J., cuz I went working at a family business that was already, I watched the growth and then I helped, uh, you know, I was, uh, on the, uh, executive team leading the team, but that’s different than taking an idea and then actually building a company and an idea turns into a business, hiring people and watching that complete first part of the cycle that I didn’t get a part of. So I started, turned around, sold, but I didn’t get to do the first part myself. So now I’m in this first part myself and it’s very, very fun watching my idea work. Honestly, it’s been a lot of fun.

[00:07:22] A.J. Lawrence: Yeah, it was cool. It’s like, wait, this is happening?

[00:07:25] Ryan Tansom: Yeah, it’s working! It’s working! A.J., my wife and my wife looks everyone. I did that. I’m like, this is holy shit. It’s actually working. She’s like, isn’t it supposed to? I’m like, come on, give me a little bit of it. You know, like it’s not always supposed to, and if it was that easy, everybody do it.

[00:07:40] A.J. Lawrence: Yeah and of course I tell everyone it’s gonna work. That’s what we do. Me? Believe it though. Yes. So that is very, very cool that you are. So given the changes kind of, of like, as you said, you joined and helped turn around and sell, and now you’ve kind of moved from starting something based upon, you know, what you felt should exist. And now you guys are expanding out, how are you seeing what you are doing as an entrepreneur changing now?

[00:08:11] Ryan Tansom: It’s completely different with the things that I’m learning today. So like, you know, we talk about turning around a business name and the different types of businesses that you could turn around and then understanding how to sell it, how the different ways you can sell it, but it’s different than starting and scaling a professional services organization. So I’ve learned a lot about scaling professional service organization and a content business that was completely different than the business that I’ve had before. So the different type of business model. And so like when I think about how that impacts me is I have a, like, with my podcast, I get to learn and I get paid to learn.

[00:08:48] And paid to talk to really cool people. And then I take those things that I learn and then deploy them through the company that we created. So I find it very interesting of like how I continue to evolve. And the business evolves. It’s in tandem, A.J., which is on purpose and very much enjoying it.

[00:09:04] A.J. Lawrence: I agree. Getting to talk to cool people like yourself is always the fun part. It’s like, wait, what can I say? Nah. With the entrepreneurs that you do work with Arkona, what state are they in when they start coming to you?

[00:09:17] Ryan Tansom: So our business, we’ve got a training part of our business and fractional CFO services, which is really the business I wish I would’ve had helping me a decade ago. And the challenge is, is like when I see people go through our training or the people that we’re talking to, it’s a lot of, like, they wake up one day and they’re like, okay, like what’s to solve for how much is this thing worth? What is next? How do I get to where I go next? What are-

[00:09:44] Like, there’s just so many questions, A.J., of like, for example, someone I’ll get on a call and then they just like, ramble about questions. Like what about this? I, should I pass down to my kid or should I continue to grow? Should I buy this company? And it’s like 7,000 ideas, but they don’t even have a framework of to say like, which one should I do and why?

[00:10:02] So it’s a lot of not really understanding all of the decisions that they have to make or how that impacts their long term goal. So it’s more of like, okay, well just help me understand what do I really want long term. And then how do I, cuz if I, if I’m more clear on what I want long term, like the multidimensional goals, then it could be more clear today what I should be doing to get there. But they don’t really have clarity in either to be honest, it’s more of like, Hey, I succeeded. I got to the figures or, you know, I’m selling my stuff or, you know, whatever. But then what?

[00:10:35] A.J. Lawrence: And it’s so funny because I find that in so many styles of businesses and in so many different aspects of business, it’s like I did what I needed to do to get here. But now I have no clue because something happens and all of a sudden they realize there’s infinite choices of what to do next. And it’s like, yeah, in one sense, you kind of have to do everything, but not all at once. So there’s that overload. You see a lot where it’s like, ahhh.

[00:11:02] Ryan Tansom: It’s the overload of all the things, but then it’s also combined with what I like to call groundhogs day where like, it’s the repeat questions in what you were doing or what has been done, isn’t gonna get you further and you kind of know that. For example, like when I remember sitting that particular vice president of our business copiers manage IT Service sitting in a management meeting and it’s like, sell more copiers, sell more IT services. Okay, and then we just exponentially create more headaches, but then it’s like, okay, what are we shooting for? More revenue? More gross profit? But then at some point you’re just like, now what? You know what I mean? Like, is this it? Like, are we just gonna continue selling more, just, you know, optimizing for more revenue, more gross profit, more employees, more product launches?

[00:11:46] So it’s like this shift in mindset where people realize that there’s things that they’re missing, but they don’t really know what. And I remember A.J., when I sit in our business, my dad and I had all these kind of constant conversations, like what next, when we had this, he wanted out, I wanted to continue scaling and I didn’t even know what to go.

[00:12:02] I remember sitting in front of my computer and I’m like, I’m not content. I don’t know what’s going on. We have lots of questions that we need answers to. But things weren’t resonating with us. Whatever we talk about with our CPA, whatever we talk about with this consultant, whatever we’d go bring to our Vistage group or see our peer group. Like it was like, great. But we come back and go, all those seemed like puzzle pieces, which were relevant and you didn’t, I didn’t want to discharge them and put them anywhere, but I didn’t know where they fit.

[00:12:29] A.J. Lawrence: After selling my last company and going off as a fractional CMO, mentor, investor and all that, it is that there are so many things that happen developing that framework, finding that foundational, you know, I focus from a marketing point of view and growth, but I love how you guys look at it from financial and from the overall aspect to kind of say, it’s okay to have 20,000.

[00:12:55] So you’re in this position, you know, you were realizing that you had all these different Vistage group was great. There were other communities, masterminds, everything you read when you did transition. How did that happen?

[00:13:09] Ryan Tansom: Exactly what you’re talking about, A.J. is just all of the stuff. It’s like, it’s this tax strategy or this different way to launch a product or service, and it’s this, you know, way to hire people. And there’s all these tactical things to grow your operations, right, which is obvious. People need to do that. But then it’s like, when you get to that point where you’re asking what’s this for, what can I do with this you know, now that I’ve kind of got there, and all those pieces didn’t really fit together.

[00:13:35] So what happened was, my dad and I never got to an answer. So what happened was, and I’ll kind of walk you through where we got stuck and then how the five principles and how the framework came to be. But the things that were at odds and so many people have partners, different generations, maybe an investor, there’s one entity of a company, and there’s a certain amount of cash flow that comes out of that and it gets split based on the ownership. And people have different things that they want to do with their life and their businesses and their assets. So the thing is you have cash flow, so my dad wanted more cash flow. I wanted to reinvest and he’s going, I’ve been doing this for 20 years, I want more money.

[00:14:09] And it’s like, that’s his right by the way, there’s nothing right or wrong. It’s just, I wanted to continue reinvesting and manage IT Services and software development. So it’s like, okay, we have different ideas of what we wanna do with our cash flow and how much, how we should spend it. He didn’t wanna work in the day to day anymore. I did. And so there’s all these concepts that were just, they didn’t seem too complicated to me, but no one was giving us a framework on how to decide all these things. So the groundhogs day kept coming and finally we were sitting and not having beers and he’s like, I want out, and we can talk about what that means because I don’t like that phrase anymore. But I want out, it’s like out of what? Your job, the financial asset? Clarify what you mean. And no one really understands that by the way. They usually mean I want out of my job because if I said, A.J., I want out, what do you want out of Ryan? I want out of this million dollar cash flow annuity I have.

[00:14:59] Well, no one really wants out of that. If it’s got the perfect cash flow to it, it’s usually the job and the day to day activities that stress people out. So because of that, not having those answers, we sold the business 2014. Paid a lot of taxes, paid a lot of debt. And the nature of the sale was to maximize purchase price with a local competitor.

[00:15:19] We had to fire two thirds of the employees and we had about 90 at that time, horrible day for me, because I didn’t really want that. But it wasn’t the buyer’s fault, it was more of just like, Hey, this is the nature of the deal. So what happened was A.J., I got done and, and it was in 2014. I was like, why did that happen? And I like, I have regrets sort of.

[00:15:38] Now, I mean, they’re just lessons learned, but it’s more of why did I feel like I wasn’t in control of that process? You know, then I, after going a bunch of market research of like with Vistage or EOS, which is traction or scaling up Rockefeller habits, strategic coachs, you name these things. They assume the entrepreneur knows what the hell they want and why and how valuations, value growth and exits work. And then they like, you know what, well, no one really does. And so what I did is instead of going and like becoming a, you know, an investment banker, private equity firm, or one of these, you know, coaches, I know these other systems. I’m like, I wanna teach others how this all works so that way you, A.J., can go here’s what I want, long term. By thinking and understanding how these variables work together, here’s how to grow enterprise value. So I can have more choices. And then here are the financials that actually give clarity around the choices. So it was really just this way of thinking.

[00:16:30] Cause I like taking the complicated and making it simple. And I don’t know if it was because I was a bad student growing up and I really like to learn now. So now it’s like, Hey, if I can understand this, I think anybody else can.

[00:16:41] A.J. Lawrence: It is something that happens a lot because I looked at the EOSs and all then crossing the chasm was one we tried to dive into, you know, ink bought them. They’re almost all the same, different vocabulary, yet slightly different variables and all that stuff. But the end of the day, there are some weird assumptions that you know things, which I know from similar to you from doing the show and then talking of, you know, lots and lots of other entrepreneurs, it’s like, ahhh, I’ve been making that up, you know.

[00:17:13] Ryan Tansom: Well, I watch, a hundred percent agree. Like I mean, dude, we used to sell copiers and manage IT services. Like I’m not some like, you know, behemoth from the, you know, wall street that was in private equity and, you know, hedge funds and whatever for 20 years. It was like, no, I was just slinging copiers and, you know, having a good operation. And, the interesting part about this is like going back to EOS, like any operating system, I’ve watched people cuz you know, on your VTO or like whatever your one page plan, whatever the hell it is. I’ve watched people execute terrible strategies really fast because they’re like, well, like you could be, you know, spending all your time, money, energy, and resources into projects, activities, product launches, hiring people and have them be not value creating and a waste of time and money.

[00:18:01] But you put the goals on there just because their goals doesn’t mean they’re gonna create more value, create you more options.

[00:18:06] A.J. Lawrence: Yeah, that is true. It is that like, okay, step back. Is this good? Is this not? What you want is usually the right thing, but how you articulate it into a structure to then build your things

[00:18:20] Ryan Tansom: and how to make, what is the framework for making decisions too? So you might say to me, A.J., like, I want this and whatever this might be is like this kinda life, this kind of size company, or this kind of life design, but like, okay. Great. How are we gonna get there then? You know what I mean? And like, so it’s really clarifying what is it that success look like? And then what are the decisions in the trade offs that you’re gonna have to make to get there? Otherwise it’s just kind of, you wake up, what’s the Yogi Berra quote, it’s like, if you don’t know where you’re going, you’ll end up someplace else. That sums it up.

[00:18:53] A.J. Lawrence: Sorry. I thought you said Yogi bear, not Yogi Berra. Yeah, actually Yogi bear is based on Yogi Berra, but yeah, you know, it is that kind of, he has, you know, those quotes make a lot of sense when you’re, it’s all of a sudden his quotes make a lot of sense when you’re an entrepreneur. Let’s come in then, you went through this, you started building this. So now someone comes to you and it’s like, look, I have this business, you know, I have a broad sense of where I’m going, but I’m all over the place. So what’s the experience?

[00:19:25] Ryan Tansom: We created five principles to help people think through and clarify what they want. First, before I get into the five principles, I’ll just do a quick flyby of what they all mean and clarifying, I’m like, what the heck do you want, A.J.? Like, is it a legacy? Is it disrupting industry? Is it a certain style of life? Is it like, is it impacting your community? Everybody has a different definition of success. So like, I’m so, man, I’ve been around entrepreneurs now for, I mean, I’ve been in the circles for 15 years, like different masterminds, whatnot, and everything seems to be tied to revenue base.

[00:19:58] I wanna go from 5 million to 10 million to hit 8 figures, or I wanna go from, you know, 10 million to 30 million. Okay. Why? And most people don’t have an answer for that. I mean, I’m not even joking. I always present in front of a couple hundred people recently as one woman looks up after this three hour workshop, she goes. So you’re just saying, I just have to tell you, I just have to figure out what the heck I want and why I’m like, step one. Absolutely. And like, what is that? What is that definition? And so the question is then if what you want, what are the trade offs to get there? And how do we think through these trade offs, knowing that there’s a lot of choices and a lot of complex topics in this, what we created is five principles that we call the five intentional growth principles and they go in order.

[00:20:40] And the reason that we call it the intentional growth framework, A.J. is, I don’t like anybody telling me what to do and I know entrepreneurs don’t either. So it’s like, We need a framework to how to think about things. It’s not telling you what to do. It’s like, if A.J., you say, I want this, you can understand how all these data points correlate and how that might impact your long term goals and how fast you’re gonna get there.

[00:21:03] So the first principle is your drivers. What are your personal drivers that you’re trying to accomplish long term? So this is kind of the legacy, if it’s you know, a family, a lifestyle, stakeholders, your community, you know, you’ve got some sort of like disruption in the industry that you’re trying to make. Something that is hold true to you that you have defined as success that may not be monetary.

[00:21:24] The second principle is financial targets and there are three of them. And the financial targets, one is what is your target annual income whether you have the business or not. Let’s say it’s 200 grand. So I want that cash flow no matter what. The second target is your net worth outside the business, because it impacts your decisions in the business. So just understanding where that’s at, then it helps you calibrate the third financial target, which is the value of your business as you own it. And the value of the business based on the risk of its cash flow. Now, I’m not talking enterprise value, but I’m talking about how much would you walk away with in your pocket- the net proceeds?

[00:22:00] And so those three help you calibrate, what does this business mean to you, A.J., financially? So then if you think principle one, now I know what I want. Now I understand my financials. Principle three is your exit options, and there are five main buckets and these are for privately held companies that are cash flowing. And so it’s not necessarily targeting your people in the VC where they’re raising funds rounds, you know, A, B, C, D rounds. This is for cash flowing companies and these exit options impact your role, your day to day job and your asset and how it’s valued.

[00:22:32] And so there’s internal, which is family partners, et cetera. Second one is acquisition entrepreneur from our mutual friend Walker Deibel, and understanding that the search funds are out there. Third one is ESOPs selling to your employees. Fourth one is private equity and fifth one is a strategic buyer. It’s not about selling today and the word exit planning, it’s like, okay, no, we need to just identify what, what do we resonate with?

[00:22:56] And then the fourth principle is increased value. So I wanna tell you a little story of how this kind of, as we round principle four. There’s a gentleman that went through a training, $15M in revenue, 70 employees, manufacturing firm, owned it for 30 years, loves his legacy. I mean, he has sent like dozens of his employees to Tony Robbins’ Unleash the Power Within. Has two kids in the business, two kids out of the business, goes through the training. He’s like, oh my gosh, I’ve only got 1.1 million in EBITDA. He thought the business was worth 7 million bucks. That’s what his financial advisor told him. And it wasn’t, he’s like, well, I’m 1.1 in EBITDA, it’s actually only worth about 5.5 million? Pay some taxes, pay some debt, I’d only walk away with 2 million bucks.

[00:23:40] So he’s sitting there looking at principle two, going okay, it’s two and a half million, two and a half million, not seven. For first principle. I want legacy. What do I do about this? Well, right now, if he wanted to get out and sell his business, he’d have to gut it, sell it to a strategic buyer, similar to kind of what I did. But he said no. As he thought about the third principle exits. He said, I would love to go from 1.1 million in EBITDA to 2 million. So I can go from a five and a half million dollar valuation to 12. And then I can at net 8 million and sell to my employees V and ESOP. So over the last 36 months, he’s paid down million five in debt, he’s grown his EBITDA and he’s marching towards that ESOP.

[00:24:22] And by using principle four as a lens of how to invest in the business, to de-risk your cash flow and increase that multiple towards what he wants long term A.J.. And then the fifth principle is your team of advisors, making sure all the people around you, know what you want, know where you’re trying to go so they can be the technical advisors that are optimizing your plan, which my dad and I, we struggled with. I see a lot of advisors where they don’t even know what the owners want, because the owners don’t know. So they’re kind of throwing stuff against a wall versus saying like, can you imagine A.J. if you said, with that much clarity, here’s what I want. Your advisors, your CPA, the wealth manager, the bankers, the financiers, your investors, whoever might be can help you get there. Because you’ve clarified what you want.

[00:25:04] A.J. Lawrence: That is such a difficult thing, that clarity. Because I said no to, you know, the big agencies with my last company purely because I had that eight figure. Not because it had anything else, you know, I wanted X, upper seven figures wasn’t enough. It was, it had to be eight. And then, you know, typical, you know, spent too much time talking and doing all that. Then all of a sudden got hit, you know, lost a whale client and had to restructure and, you know, was lucky to sell and yeah.

[00:25:37] Still sold in the seven figures, but it was like half of what I could have had. Yes, no golden handcuffs. So that’s always, you know, the trade off, but still I know exactly that space. It’s like, oh, what does it mean really for doing this? And I’ve seen lots of entrepreneurs kind of chase into that. Like, well, no, it’s a sale. It’s great. It’s this? And then all of a sudden, some of the stuff is handcuffs or not just having the type of busi- you get used to being an entrepreneur, you get used to the cash flow.

[00:26:06] Ryan Tansom: Well, yeah. And it’s like, what, like, what do you want with the business? So for example, just with Arkona, we have a very specific industry thing that I want to help as many entrepreneurs learn how the stuff works as possible. And then we have CFO services that can help them get there. And I have no tied to any outcome, we absolutely could have started a private equity firm or done investment banking. But then, you would’ve had to sell your business. So like, for us, I don’t want someone to have to have an outcome in order to engage with us.

[00:26:34] Like, if you wanna keep it as an investment, go buy other companies or whatever. I don’t care. I just want teach people how it works and then help them get there if they so to use or they can go do it on their own. My point is I have zero interest to ever sell this company to an insurance company, a CPA firm, or a bank of someone that could destroy the business model that I created, even if it’s a high dollar amount. And when I say I, me and my partners, it’s more of like we have this unified vision of like, here’s what this means to the marketplace. So it’s taking that first principle clarity, and then saying, how does that stack up against the financials and what this company is worth today and what it could be worth?

[00:27:08] Because what I want A.J. for everybody is to say, okay, let’s say I came in and knocked in your door and said, Hey, I’m gonna offer you 10 million bucks for your company, A.J.. And you’re gonna say, okay, well, Ryan, based on my five year plan, I know that my company will be worth, you know, 15 million in five years. Here’s our strategic plan. Here’s how much I’m gonna take at distributions along the way. Here’s how I’m gonna fund the growth. And you’re gonna have to offer me either A way more than that, or B show me why I should want to do this. And let’s say that, that let’s say that it’s a, a way bigger dollar amount, but then you could look at it and say, I could sell right now and do this with them. But it would make me an extra million dollars based on my plan, but I don’t like them. I don’t like terms. So I’m willing to forego that money and there’s a very clear articulated reason why. And it’s not like after that happens, you go, I wish I would’ve. Because I didn’t know that this is how the story was gonna unfold.

[00:28:02] A.J. Lawrence: No, I think that’s a very important thing because I think too often entrepreneurs are conditioned to just be like, take the exit. Now, sometimes it’s good. Sometimes it’s, you know, you have to understand more around the deepness and I don’t think there’s enough people like yourself talking about the why you look for it.

[00:28:22] Ryan Tansom: I was gonna say, let’s unpack that. Like why people end up, I think taking that exit, being gravitated towards it, A.J., and it’s this concept that we bring into our training called the intrinsic financial value of a business versus the transaction strategic value of a business. And I’ll actually use my exit as an example. So the intrinsic financial value is the value of the business based on the risk of the cash flow. If you got a million dollars in reoccurring normalized EBITDA, and there’s a multiple placed on that, let’s call it a six. So it’s, let’s say it’s a $6 million valued business. You can always do an SBA loan, sell to a partner, do an ESOP, you know, essentially defend your territory with a private equity investor as the risk of the cash flow. Then that compares to the strategic transactional nature, which is always starts at that financial value, like multiples come from an actual mathematical equation called the weighted average cost of capital.

[00:29:17] We’re not gonna get into that, but it’s not some willynilly thing that people just float around. So it starts at this valuation that’s based on the risk of the cash flow. A strategic buyer might overpay that value because of the strategic needs, what they can do. I also have people A.J., that though because their family is a second generation, they don’t need the liquidation event. So they actually discount the value of the company and then gift it to the kids in the estate plan. But it started at the financial value, the risk of the cash flow. And most people do not focus on de-risking that cash flow by growing the EBITDA, growing the multiple by de-risking it, and then paying down their debt.

[00:29:54] So what happens is you’re almost forced. So for example, the intrinsic financial value of our business did not meet my dad and I’s personal financial targets and principle too. So in order to do that, we had to sell to a strategic buyer, gut the company, reduced the synergies, or find the synergies because we couldn’t have done an ESOP, private equity recap, or a family transition because the risk of the cash flow was lumpy. And there was a lot of issues with that.

[00:30:22] My point is if you focus on growing the value of the business, by focusing on that intrinsic cash flow and de-risking that, you can almost guarantee the value and the exit that you want whenever you want. But you don’t have to. It’s just choices versus waking up one day, going, A.J., I want out. How to, what your job, your company, you’re burnt out. It’s like, oh, I’m just hoping that the strategic buyer’s gonna come in with a bag of money and take all my headaches off my plate. And it’s like, if that lucky thing doesn’t happen, then what? Well, then I’m kind of screwed because I haven’t built a healthy business, which is just unfortunate.

[00:30:54] A.J. Lawrence: Yeah. I hope the chairs are worth something.

[00:30:57] Ryan Tansom: Exactly chairs and monitors and some servers and cars and whatever the heck it is.

[00:31:02] A.J. Lawrence: Yeah. I mean, the rooms of loose chords, you end up with, you know, it’s like, how did we, yeah. And businesses accumulate a lot of useless stuff, but that is really good. We think about partnerships and whether we have them, how to make them better. And then if we don’t, should we, or should we not? You talked earlier about you and your dad having different opinions about where to take the business. And yeah, he want out, you wanted in. As you were talking about your current business, you did say, oh, my partners and I are aligned. And then you kind of went on, how did that experience with your father affect how you chose your partner or how you built your partnership and how are you continuing to do it to make sure you are aligned.

[00:31:47] Ryan Tansom: Ooh, man. Very good question. And we’ll to give the highlights, because this could be like four episodes in itself. I’m just gonna introduce like how to actually think about partnerships and how to get aligned. So the concepts we’ve already kind of alluded to A.J.. You have this asset, so let’s say you and I were partners. So let’s say, I’m just making some salt, let’s say it’s a million dollars in cash flow and it’s worth 5 million bucks. You and I are 50-50. We are 50% owners of an asset that we get cash flow from. And we have to have ownership alignment of reinvesting that business to create something of value down the road. Or are we optimizing this for distributions? Right? So A.J., you and I from the ownership roles have to better understand what do we expect from this asset? Do we expect cash flow and taking as much money out of this company as possible? Or are we gonna reinvest that to grow it down the road. If you expect yourself to pull a half million bucks out of it, and I expect to reinvest to create something that’s worth twice as much, we got ourselves a problem. So there’s alignment on what to do with that asset. That’s number one and that’s part of the ownership equity role. The second is management roles. You have a job. So let’s say you and I again, we’re partners. I was the VP of Sales and you were the chief marketing officer. Let’s say you were literally only working in the business halftime and I was full time. I should get market comp and wages for the job that I’m providing to the business that we own. You should be getting market comp, which would be half time for the role that you’re providing. Just because we’re 50-50 on the asset on in the entity does not mean that we get the exact same paycheck and I see that happen wrong so many times.

[00:33:31] And so once again, it kind of goes back to, I want out. Out of what? Are you sick of your day to day job? Well, hopefully you have enough income from somewhere else to actually get rid of your job, but that doesn’t mean we have to sell this asset. So like, again, I joke around where, like I have some apple stock because of it’s in my retirement accounts. I don’t work at the genius par A.J.. So I don’t have to work at the assets that I own. So by separating those two, then that provides the framework an additional, you know, set of discussions around partnerships. We need funding or we gain growth, or we have people at the cap table for a certain reason, either they provide funding or they provided some sort of help.

[00:34:09] There’s a reason people are on the equity cap table and we need alignment of what we’re gonna do. Is this a growth asset? Is this a, you know, an annuity asset? And then we have to have an alignment on the jobs that we’re all providing. And so like with our partners, it’s like, who’s gonna be doing what? So we have a whole discussion around jobs, paychecks, how paychecks get determined and wages get determined based on the roles that people are providing for the entity. And then we have a discussion around the ownership of how people are going to have expectations for investments or taking cash out now and in the future.

[00:34:41] So we have two different discussions that we’re having. And then in the partnership agreement lays out how all of those conversations happen. So that way you don’t have to think about this stuff when you know, it’s five years from now, and there’s an event we’ve a complete framework of how we’re gonna make these decisions.

[00:34:56] A.J. Lawrence: Do you find those frameworks work, because you built this around your own experience and for you and your partnerships now, are you using those frameworks within Arkona? How does that play out?

[00:35:06] Ryan Tansom: So, yeah, we’re living and breathing what we teach. So like we’ve got our partnership agreements. I’ve got two partners, Pat and Matt. We’ve got conversations of other people. I mean, I hire very, very, very smart people so the first question every single person asks is can I have equity? It’s like, I’m constantly dealing with extremely smart people that want in. So we always have questions or we have a framework to make those, you know, to understand what does that mean for Arkona, but same thing with every owner that comes through.

[00:35:34] I’ve got five engagements right now, couple are multi-generational families. Couple are multiple, uh, multiple partners that are different ages and they just don’t know how to think about this stuff. So what happens is everybody kind of turtles up and is like protecting what they know instead of sitting down and having an equal understanding, evaluations, how this stuff works. And then what that allows everybody to do is to meet the human to human, because they’re not scared about the technical ramifications of getting screwed. So I watched that it provides a framework to then get to the top 5% of the decision criteria instead of living in the, kind of the minutiae.

[00:36:10] A.J. Lawrence: Many people kind of commented and I know I have as it’s this super complex and super difficult process. The way you’re breaking it down is yes, there’s a lot of things, but by kind of focusing on the core aspects first, you can more easily move forward a lot of things that’s take up noise in that discussion and, you know, push some of the complexity and some of the difficulty further down and focus more on the value.

[00:36:39] Ryan Tansom: Or completely ignore it because you’ve determined it’s not important. Like, I think one of the, let’s kind of pull this thread because I love education, which is so funny to me because I hated school. Yet, I like learning more than, I mean, I’m totally addicted to it. But I figured out how my brain works and how to learn. And so my favorite analogy is like, if you had a puzzle right now, A.J., this is what most entrepreneurs are doing. They’re trying to build a puzzle. All the pieces are upside down and there’s no box with a picture on it. It’s like, all right, go good luck. And, well, it’s gonna take a lot of times and be super frustrating and you’re probably gonna get crappy. You might not get there.

[00:37:13] Or you could go, well, where’s the box? Is this an elephant, a church or a building? Or like, okay, here’s the picture now we’re gonna flip all the pieces up. Yeah. Here. And then here’s the framework. And now you can optimize, Hey, all the blue pieces go over here for the clouds in the sky. I mean, what you’re doing is you’re figuring out what you’re focused on based on the goal.

[00:37:31] And so that, I just think about like, for example, like that whole story I told about that the guy wanting to grow to an ESOP. He figured out what he wanted. He understood his financial targets. Then he said, well, what are my options that could align with the value that I need and what I want? Oh, it’s not gonna be private equity. It’s most likely not gonna be selling with third party. It’s not optimal for the family transition. So it’s probably gonna be these couple options.

[00:37:53] Saying no and ignoring all that shit is probably as liberating as finding a, ringing the bell at some point, because you’re just like, I don’t have to pay attention to any of that stuff, because I know it doesn’t matter to me, which I think with all the noise out there today, you know, finding out what’s gonna really move the needle is probably one of the hardest parts.

[00:38:13] A.J. Lawrence: It’s the craziness of like there’s so many opportunities to do things that have huge impact. But there’s so many things that you can do to move. And, you know, so like, I know I suffered from it, but like I talk to entrepreneurs now and it’s so much easier when you’re not trying to do it. It’s like, why are you doing 50 things, please take, you know, these things are going to, you know, let’s look at the data.

[00:38:37] But yes, being in that moment. This is why I find it so interesting about what you guys are doing. You kind of, you put a framework, not just around, these are the things you should think about, but you put a framework around how to approach it. And I think you had said earlier, so often some of these other things tell you, you need to do this. And then you get into that decision or you need this. When most people have never gotten that X, Y, Z, they’ve just done it.

[00:39:08] Ryan Tansom: And think about how you even started that A.J. is, you need to. I don’t want anybody to start their conversation with me of you need to, unless it’s my wife and I still wouldn’t appreciate that much. And she has absolutely the right to do that. My point is, is like, I want to know how to think and what I need to understand. And like the reason I think so many people have so much anxiety that are entrepreneurs. I’m one, man. I’m like visionary. There’s a thousand things I want to do every day. And I honestly, I think part of this framework is self coping mechanisms, because if you don’t know what you want long term, you’re gonna wake up and go, well, I might need to do that opportunity, because that might make me my 10 million bucks or I might need to do that opportunity because it’s AI or it’s, you know, it’s NFTs and it’s crypto because that might be my wealth creation or I might be over here. When people don’t know, they put all these irons in the fire and the great equalizer is we all have 168 hours each week. Period.

[00:39:58] So it’s like, okay, because you don’t know what you’re doing, you’re doing too much stuff and you don’t know how that those are all gonna unfold and how that impacts what you want, because you don’t know where you’re going and you don’t know how you’re gonna get there. So it’s like, when you think about, what do I need? What do I want? I joke around because Google Maps is one of the most powerful tools on the planet. What happens if you don’t plug in point B? Nothing.

[00:40:18] I mean, so I’m in Minnesota, if I’m going to Florida, am I driving? Am I flying? Am I walking? Am I biking? How long, how much time do I have to get there? How much is it gonna cost? Are we gonna make some stops? I mean, all these things that all synthesize once I understand where I’m going.

[00:40:34] A.J. Lawrence: I love that kind of breakdown of strategy, because I do think as someone who came up as a developer, into, you know, production into project management into account, you know, kind of came from the bottom up, too often you hear people say strategy and you’re like, that’s not strategy.

[00:40:52] Ryan Tansom: What is strategic planning? Oh my God. We could pull the entire audience. We’d have 5,000 different definitions.

[00:40:57] A.J. Lawrence: No, I know there are some geeks in the audience, because I’ve spoken to a few of you who have actually brought this up, but no, it’s, let’s not because the rest, everyone else in the audience will fall asleep.

[00:41:09] But yeah, that is that true. It’s like using the app for the value and generating that strategic thrust out of it is really important and kind of difficult. And of course I have my kids and the dog running around out.

[00:41:24] Ryan Tansom: The beauty of podcasting, man. It’s real, we’re all real humans.

[00:41:28] A.J. Lawrence: You’ve shared a little bit about like regrets and stuff that have led to kind of where you are now. What’s something you think a mistake or regret you have that you feel people in the audience can learn from you and take into their own businesses?

[00:41:44] Ryan Tansom: One of the biggest lessons that I’ve learned A.J., is that my lack of education or knowledge generally creates enormous blind spots. And so most of the conflict I’ve had in my life is because I don’t understand things. And so like, I think about the two failed partnerships that I had. It’s because we didn’t agree on a certain set of facts so that way we could get to the meat of what we both want and how that works based on what we’re both trying to accomplish. And whether there is an alignment or not. It’s tough, man. Because I do get the regrets question quite a bit, especially because that’s kind of what a lot of the businesses that we have now is based off of. But like the reason I don’t regret it, anything right now is because I think that failure is a part of learning about who you are and who you wanna be.

[00:42:32] And so this whole, you talk about a lot in your show, journeymen and women, and about how you’re on this journey. I think life is a journey we’re constantly trying. The more you can be appreciative of that process, then the whole is enjoyment. But I think, I’ll go back to my, my first comment, it’s the lack of understanding of concepts and topics, same thing with the other person’s concept and topics and the lack of their understanding, start to mesh those together so we can get an agreed upon set of understanding and facts, and then be able to use because like facts-

[00:43:06] You know, if you and I have an agreement of how valuations work, like those concepts I just talked about. Then, we can just get into what does that mean to you, A.J.? Versus what does that mean to me? So we can get to that actual meaty conversation versus trying to agree on the facts. So I think my regrets are that I didn’t know a lot of this stuff because I think I would’ve made different decisions. But when I look back, I made the best decisions I could given my understanding and the circumstances.

[00:43:34] A.J. Lawrence: Nope, that makes a lot of sense. And that is something really good to kind of take into it, like, you know, as you go forward into your business. Now that you are putting so much effort in helping people define what it is that they really want, and then putting that structure in place to help them achieve it, how are you going about defining your own entrepreneurial success?

[00:43:57] Ryan Tansom: So I will pull on the conversation that we had right before we hit record and my partner and I, we went through the story brand framework about 18 months ago. And it’s really like, it was really what do we, and what do entrepreneurs really want? And after, I mean, a bunch of sessions and arguing and, you know, good iron and iron, productive sharpening, you know, it boiled down to three things, A.J., and you can think about it for the listeners in think about a venn diagram with three circles and there’s some intersection in between is, Have fun, make wealth, and make an impact. And they all need to be happening at one point. And I’ve learned this from, you know, the 300 episodes I’ve had in my podcast, A.J., where there’s billionaires I’ve interviewed that are miserable. So how, why is that?

[00:44:43] Well, if you think about it at some point you could be making a bunch of money. You could be having a lot of fun and at some point you’re gonna go, what’s this all for? Because at some point, your morality and your like legacy and all that stuff is going to creep into your mind because we’re humans and that’s the case. You know, the opposite of that is you could be having a lot of fun, making a huge impact and broke as hell. Well, at some point you’re gonna go, well, I need to meet my financial needs. So if we can live in the intersection there, that’s my goal, because I really enjoy my day to day, and I’m creating an impact, and I’m creating wealth along the way. How that lines up now and in the future, I want to live in that intersection the whole way. Our cone is the main vehicle that’s facilitating the intersection of those three.

[00:45:27] There’s gonna be other businesses down the road. My activities might be changing as we grow, but I want to wake up and have fun, know that I’m making wealth long term and know that I’m making an impact. For me, how I know that that’s happening is there’s four main things that I really focus on to know if I’m living in my flow zone is: I like to learn, I like to create, and then I like to teach and I like to lead. In that order. So if I’m learning every day, I have the ability to create products out of things that I learned. And then I can teach people because once you teach you actually cement what you’ve learned and you hear the feedback of people. And then it’s leadership. I do really miss the big infrastructure of people that we had back in the old days. But every one of those things is tied to creating wealth, having fun and making an impact.

[00:46:13] A.J. Lawrence: Those are three good things to keep balance, because they are hard to balance appropriately. No. Very cool. Thank you. And I’m like, I’m already like, Hmm, let me play. So what’s the best way for the audience to go check you out?

[00:46:29] Ryan Tansom: Website is the best place, Arkona.io, and we’ve got all the 300 podcast episodes on there. We’ve got videos on the training, should people want to know more about the five principles, tons of free videos out there.

[00:46:42] We also have an Intentional Growth Financial Assessment, A.J., that you could, well, we can get you the link put in the show notes. And it’s this assessment, that’s 22 questions, you don’t need your financials. But what it is is it helps people understand how to view their company as a financial asset, like a private equity firm, because my partner and I, we’ve had a lot of exposure to that and where you can project out the value of your business.

[00:47:03] So once people go through that questionnaire then there’s a results page where they get to score the different pillars of the financials. But then my partner and I show videos of what good looks like. So you could literally go and show it to your CFO. You could show it to your controller, whoever that’s helping you and say, Hey, you know, here’s what good looks like, how close are we to that? So hopefully you can give people enough content that you want.

[00:47:23] A.J. Lawrence: No. Very cool. And we’ll, we will put everything in the show notes, we’ll put it in our socials. It will be there and it’ll be in the emails, everything. So you will be able to find Ryan.

[00:47:31] Ryan, this has been great. Thank you so much for coming to the show. And I really, I hope I can get you back on down the road too, because there’s so much more, we can kind of dive into, you know, how you guys help entrepreneurs on their journeys. Thank you.

[00:47:44] Ryan Tansom: Yeah, I appreciate the opportunity, A.J., and, uh, you’re gonna be coming on my show too, so we’ll have to get that out.

[00:47:49] A.J. Lawrence: We’ll make sure we have everything. We’ll line everything up.

[00:47:52] Ryan Tansom: Awesome. Thanks, A.J..

[00:47:53] A.J. Lawrence: Bye bye.

[00:47:58] This episode of Beyond 8 Figures is over, but your journey as an entrepreneur continue s. So if we can help you with anything, please just let us know. And if you like this episode, please share it with someone who might learn from it. Until next time, keep growing and find the joy in your journey. This is A.J., and I’ll be talking to you soon. Bye bye.

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