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The Realities of Scaling A Small Business with Callum Laing, MBH Corporation PLC

July 20, 2022

The entrepreneurial landscape is full of challenges for founders and CEOs, particularly those with the intention of scaling a small business. In this week’s episode, Callum Laing explains why entrepreneurs benefit from actively seeking discomfort, having an exit strategy, and accepting that painful moments are part of the journey! 

About Callum Laing:

Callum Laing is the co-founder and CEO of MBH Corporation PLC, a publicly listed holding company that allows small business owners to swap their private stock for public stock without losing control of their business. He has been an entrepreneur for more than 20 years, has started and built businesses in multiple countries and industries, and is the author of 3 best-selling books!

Episode highlights:

  • The scale paradox refers to the struggle that many small businesses face when trying to grow because big businesses prefer giving contracts to other big businesses. This is part of what motivated Callum to found MBH Corporation PLC, a publicly listed holding company wherein small business owners can swap private stock for public stock while retaining control of their business. (03:45)
  • Come up with an exit plan for your business as soon as possible. Having a long-term goal will keep you focused and will make your business more attractive to investors. (11:40)
  • Growing a business from a lifestyle business to a performance business is a challenging (potentially painful) transition because of culture clashes, business model adjustments, and systems upgrades. There’s no way to avoid it, just accept that it will happen so it doesn’t come as a shock! (21:06)
  • You will likely make many mistakes along your journey as an entrepreneur. Keep in mind that often when your biggest fears come true, they aren’t nearly as bad as you imagined they would be. (24:00)
  • Where you are right now on your entrepreneurial journey is not the end, it’s a stepping stone. So seek discomfort at every stage because this is where the biggest learning happens. (25:38)

Callum’s best advice for entrepreneurs:

“All businesses should be thinking about the end game.” (13:35) When you have a clear direction, everything along the journey becomes a lot more manageable.

Connect with Callum:

Follow Beyond 8 Figures:

Transcript

[00:01:19] A.J. Lawrence: I heard Callum speak as part of the Jeremy Harbour event. As you remember, I had Jeremy on the show about six months ago, give or take, and I was really impressed with what he said, so I went to his online community and I’m going to one of his live events in a little bit, the Harbour Club. And Callum is a business partner with Jeremy and he was a speaker on one of the days.

[00:01:43] Very, very interesting. I’m gonna massacre, if I try and say specifically, which Callum will talk more about, the type of deal structure that they work on with MBH corporation. But it is really interesting when we think about the types of exits that we look at for our businesses as entrepreneurs. There’s not always as many ways as we would like. Sometimes we get stuck with the types of deals that aren’t always the best for what we’re hoping for. What MBH corporation is doing, it’s an agglomeration, and as I said I’m gonna massacre some of the phrasing, of companies that are doing about a million EBITDA and higher.

[00:02:26] If you’re running a profitable business in that range, this gets really interesting because it allows you to access the public markets together with other businesses. So it’s a way to take some money off the table, look at the public market valuations for your business and kind of take it. What’s gonna be interesting is how he talks about the value of this and when to look at this for the type of business you may be running at. So once again, if you’re profitable business with a few, you know, a couple of million to a few million run rate with a decent, you know, EBITDA, this is something to think about. Because well, he’s coming from, you know, British Commonwealth or UK Commonwealth approach. I’m starting to see this a little bit more in the US too.

[00:03:12] Matter of fact, I’m on the board of a company that in the middle of all this time is trying to go public. And when they do, I won’t talk more about it, but, uh, smaller businesses are gaining better access to the public markets. What Callum has done with Jeremy and with his other partners with MBH corporation is really interesting. And listening to Callum talk about the value of this is something that you’ll want to take into consideration and look at.

[00:03:38] Also, we’re gonna talk a little bit about some of his books. He’s an author of three business books that have done very well. And just some of his other background, especially as he came up through the IT Space, which is something I’ve spent some time laying cables and installing T1s way back in the day. So it’s gonna be really interesting to learn from Callum. And, um, I hope you enjoy this. All right, everyone. Let’s go welcome Callum to the show.

[00:04:04] Hello Callum. Thank you so much for coming on the show today.

[00:04:07] Callum Laing: Hi A.J..

[00:04:08] A.J. Lawrence: I was just telling the audience a second ago, you know, I had heard you during the Jeremy Harbour course, and I was very, very impressed of what you were doing and more so in case of this show, just all the different things you’ve built up over time to kind of be where you are now. Would you mind sharing with the audience where you see yourself as an entrepreneur these days?

[00:04:30] Callum Laing: Yeah. I mean, as you know, it’s kind of a, it’s a constant evolution, isn’t it? You are always kind of learning and growing and where I’m at now, the culmination of 20+ years of doing lots of things and getting little bits of learning from each of those, and applying that to solve a problem that myself and Jeremy, who you just mentioned, identified and had been on the receiving end of trying to solve that problem or failing to solve that problem. And so, yeah, really the last six, seven years has been focused on that. And I think I’m happy to talk about sort of what that is and what it means, but I think that before I get into kind of the nuts and bolts of it, what makes it work is that combined experience that both myself and Jeremy have of being entrepreneurs ourselves and understanding pain you go through and the challenges, like the different challenges at different levels.

[00:05:35] So we very much designed the agglomeration model to solve those problems in a way that gave the greatest opportunity to other entrepreneurs, you know, basically solving a problem that we wished somebody else had solved for us. So to kind of explain what it is in, in a nutshell, basically what we’ve done is we’ve created a publicly listed holding company, exclusively for the use of good, well-run, profitable, typically owner-operated small businesses. In effect what happens is they swap their private stock for public stock in our holding company, but they retain full control over their business. So it’s their brand, it’s their hiring and firing, it’s their culture, but they get a whole bunch of advantages. You know, when they go pitch for business, they’re now a global multinational. They can win bigger contracts. They can offer their staff proper stock options in a real, tangible, public company. They can use our resources to go and do their own acquisitions.

[00:06:36] And I really like to sort of give the context of the why around it, that I think, yeah, anyone that’s been in entrepreneurship for any length of time will kind of understand. One of the things that we talk about is a challenge that faces most small businesses, it’s something we call the scale paradox, which is kind of a glass ceiling that small businesses bump up against. And it’s very frustrating. You know, oftentimes you’ll pitch for business and you’ll lose the business for no other reason than you’re a small company. So it’s a big companies don’t like giving big contracts to small companies. Uh, procurement best practice is never to give more than 30% of your annual revenue. So you can have the best product, the best service, the best pricing, and still lose that contract.

[00:07:23] And oftentimes the contract will go to another big company who’ll turn around and outsource the work to you because you’re better at delivering. But they’ll cream off a lot of the profits in the process. So that’s kind of one way that scale paradox manifests itself. Um, you know, you can’t get big in order to get those contracts. But the other thing is we sort of reach a point where you need to hire a really good senior people to take you to the next level.

[00:07:50] And lots of really good senior people in big corporates talk about the fact that they would love to leave the corporate world and go and work in a small business where they can make a difference. But the reality is you can’t compete with the resources of a big company. And ultimately, that executive has got to explain to their husband or their wife, why they’re leaving the safety of a big company to go and risk it all on your small business.

[00:08:14] So it’s really a very uneven playing field when it comes to small businesses competing against big businesses. So that’s one challenge that we were consciously very aware of, the second one I think every entrepreneur whose had any level of success will be very conscious of which is value creation.

[00:08:32] So if you have created a successful 8-figure business, for example, yeah you’re creating a huge amount of value in the world. Like you’re clearly creating value for your clients. You’re clearly creating value for your team, their families, but you’ve got a whole ecosystem of suppliers and partners and landlords that are all extracting value, because you get up and go to work every day.

[00:08:55] And the problem with that is that typically there’s only one person who doesn’t get to get consummate amount of value from the business, and that’s you, the founder. Now, hopefully you are drawing a good salary and in the good years you’re taking out nice dividends, but compared to the economic footprint of what you’ve created, it’s really negligible what ends up in your bank account. That’s kind of fine, sort of the, uh, the deal that we made as entrepreneurs is that we create value for everyone else and at some point in the future, we’ll get rewarded for that value.

[00:09:26] The problem is the closer you get to that end point, the more you realize that it isn’t that attractive. Most of us have long ago given up on that dream, that someone’s just gonna hand us a suitcase of cash for our business. Um, so we’re not gonna walk off into the sunset like that. And actually what most small businesses end up doing is a trade sale, so selling to a bigger player in their industry. But those deals are almost always structured in the same way. It’s normally like a three to five year earn out proposal for the founder, which sounds fine. But the problem with us entrepreneurs is, we don’t make very good employees. We’re just not very good at being told what to do, especially when it comes to our baby, especially when it comes to something that we’ve pulled blood, sweat, and tears into for the last 20 years.

[00:10:13] And now we’ve got an accountant in a different country or a different city telling us how we should run the business. It just doesn’t work well. And anyone that’s been in this world for any length of time will have seen people do those deals and then get spat out the other side, quit and discussed after six months or be fired from their own business. So that’s a very real problem. And, and I think, you know, certainly with the whole baby boomer thing going on at the moment and the 70% of all small businesses are owned by baby boomers, you’re gonna see a lot more of that happening, which is a really horrible way to end your entrepreneurial career after you’ve created value for everyone else.

[00:10:52] So that was kind of the challenges that we had faced, the challenges that we were increasingly seeing with our friends. You know, we would go out and drink champagne with them because they’d just done the biggest deal of their lives, selling their company to a bigger player, and then six months later we’re in the same pub drowning their sorrows because they’ve just been fired from the company.

[00:11:10] Um, so yeah, really, really wasn’t a good solution. And then, yeah, we’ve just spent the last six years, six, seven years working on this agglomeration model. The current company that we’ve got MBH corporation, it’s a UK based publicly listed holding company. We’re listed on the Frankfurt main market, we’re listed on New York OTCQX. We’ve got 28 small businesses in the group across eight different industries and six countries. And we’ve been growing year on year. We’ve been growing about 80% a year. So aiming to do probably five to 10 deals a year coming in into the group. And, uh, yeah, it’s, it’s going incredibly well because it solves a very real problem for small businesses and hopefully, they get a lot of value from being part of this.

[00:11:58] And, the way we structure is they make up the majority owners of the publicly listed company. So they not only contractually do they have control over their own business, but as a group, they have control over the PLC, which is kind of important for us entrepreneurs.

[00:12:13] I think one of the biggest challenges that entrepreneurs face is they really don’t know much about the exit of a business. And I was discussing this with one of the companies that’s in the group recently I was saying, you know, there is an infinite amount of information out there about startups. It’s been the flavor of the month for 20 years now so there is nothing you can’t find about starting a business. There is a ton of information about everything to do with operating a business, whether it’s marketing, whether it’s sales, whether it’s HR, you know, there’s tons of books, tons of courses. There’s lots out there. There’s really very little about what happens at the other end of the journey. And even before I met Jeremy, I discovered that I learned far more about entrepreneurship when I tried to buy a company than when I’d been running a company for 10, 15 years. And the reason being was that for the first time, I had to look at a company through different lenses.

[00:13:19] I had to look at it as a investor, rather than somebody in the business. And I remember this particular business that I’d been offered, at the time I didn’t have any money or time to take it on, but I thought it would be interesting to go and have a look and ended up buying it with no time and no money because I realized what, how I could do that.

[00:13:36] But I remember looking through the company and the owner was showing me around, and I was saying, well, look, I don’t understand why, why do you serve this client because you appear to be losing money every time he’s serve. He’s like, yeah, but he was the first client I ever had and you know, we go way back and I was like, yeah, but you know, if I take on the company, I’m gonna get rid of that client. He’s like, yeah, yeah. But you can do that, I can’t do that. Well okay. And I said, and you know, what about Muriel in accounts? You know, she doesn’t seem to be doing anything. I know, I know she’s useless. I was like, right? So you, you know, she wouldn’t be staying and he’s like, yeah, yeah. You can do that. I can’t do that.

[00:14:16] And I kind of walked away from that first sort of viewing thinking, Tch, what an idiot. And I went back to my own business with a fresh set of eyes and realized that I was a much bigger idiot in way more different ways. Like I had clients that I was servicing that weren’t making me money. I had staff that I should have got rid of a long time ago. So I think all businesses should be thinking about what is the end game, and I think it kind of gets easier if you are aiming for something. And certainly one of the bigger, longer term goals for agglomeration is that for any small business, they can kind of start the business and say, okay, what we need to do is get to a couple of million in revenue and then we can join an agglomeration and it will help. It’ll be like escalators to the next level of the business. We’ll have that support infrastructure, that network, that expertise to take us through what is arguably the hardest bit of entrepreneurship. It’s quite easy to build a small business but that next growth phrase is, is incredibly difficult to do.

[00:15:27] So putting yourself in an environment where you’re surrounded by other people that have done it and have invested interest in your success is very useful. And that’s sort of our longer term goal would be, to have that option available for small businesses.

[00:15:41] A.J. Lawrence: Very cool. I like that you had gone through these experiences and seen sort of that like, oh, this needs work and then you’ve brought it to bear here with MBH. What do you think kind of helped you the most?

[00:15:53] Callum Laing: So I think something we realized very early on was our empathy for entrepreneurs. And I say this because we knew that it was a key element and then we forgot.

[00:16:12] Um, so we clearly what was, yeah, especially when you are dealing with bigger companies, they’ve already spoken to private equity. They’ve already spoken to investors. They’ve already spoken to competitors who want to buy them. But all of those players come at it from the approach that they’re the buyer, therefore they’re the smartest person in the room. Whereas we came at it very much from, Hey, look, this is a problem that we were trying to solve for ourselves, these are the problems that we are seeing, this is how you can join us and be part of something. And look, we’re never gonna tell you how you should run your business, you clearly know what you’re doing.

[00:16:51] And I think by identifying the challenges that we knew that they were facing because yeah, fundamentally, we all tend to face the same problems. Getting ego out of the way and letting them be who they are and deal with the problems the way they see fit, really made it relatable and attracted a lot of business owners to us.

[00:17:15] And then when we got bigger and started to get growth, we decided to start hiring smart people into our company. And so we started hiring MBAs and immediately they got involved. They just couldn’t help themselves. They had to tell the company what they were doing wrong. It was just, you know, if you spent that much money on an MBA, you just can’t help yourself. You need to point out how stupid other people are. Some people do. It’s very difficult. And look, I think even without an MBA, you know, when you look at somebody else’s business, it’s always easy to see what they could be doing better. It’s like, you know, the customer service could be better. The website could be better. They could be doing this. They could be doing that. And it’s a very, uh, I’m afraid to say, is a very male trait is that, that we then want to go and tell them and show them how clever we are.

[00:18:09] So, um, we ended up, we went from having a fantastic deal flow to hiring these very smart people, to manage it and, uh, it all ground to a halt very quickly. And so we realized that, um, actually getting back to the basics, articulating the problems that we were trying to solve and getting out of our own way, letting those business owners do what they needed to do for their own reasons was a key step.

[00:18:37] I’ve made so many mistakes. People are different, but for me, I have to make those mistakes and sadly, I have to make them a couple of times, because I’m a bit of a slow learner. But it’s what makes you more aware and better able to kind of run the business now. And I think if you can have a few of these major setbacks, when you are younger, it’s painful to go through, it’s excruciating to go through, but it does make you stronger. And it also gives a lot of better context. And I think actually Jeremy says it very well in one of his books where he talks about, you know, we, we’re all terrified of failure, of the business closing down if we don’t make it. And we’re kind of on that tight rope of sort of walking across and trying to balance everything.

[00:19:30] And if it does fail, you fall off the tight rope. Actually you discover the tight rope was only a foot off the ground and it’s, it’s painful. It’s not the end of the world. And yeah, it just makes you that much stronger and better able to deal with the next crisis that comes along because there will always be another crisis coming along.

[00:19:50] A.J. Lawrence: So just build your ability to roll with the punches or to take the fall and get back up.

[00:19:55] Callum Laing: I actually did a lot of research into high performance athletes because I think there’s a very strong parallel between high performance athletes and entrepreneurs that that are forging new paths. And one of the greatest things is the All Blacks who have, uh, the All Blacks rugby team, which has an unbelievable winning record.

[00:20:18] And they’ve been working with mental skills coaches for about 15, 20 years. And one of the sort of philosophies that they have is actively go out and seek challenges to not just get comfortable with being uncomfortable. But to actually strive to be uncomfortable because you know that you’re gonna be performing better than somebody else because you’ve had that experience.

[00:20:44] And I think that’s a very powerful idea. And I think you combine that with problem that a lot of entrepreneurs face, which is we think what we are doing right now is the be all and end all and the most important thing. Whereas if you took the philosophy that what you’re doing right now is merely a stepping stone to what comes next, it’s a learning experience. It’s a chance to connect with people. It’s a chance to get knowledge. It takes a bit of the weight and the pressure of it. So sometimes tough to remember when you’re in the thick of it and dealing with fires on all sides, but, it’s been useful.

[00:21:23] A.J. Lawrence: No, that makes- it’s so funny you’re saying that because um, I just got back from a week in Zermatt skiing with my son and I go every year with my son. And it’s so funny because few years ago we went, you know he was 14 and I was like, daddy was this great skier. And then each year he is kind of coming up and I’m, you know, I like running, skiing reds and blacks, you know, but like light blacks, not the, like, not the drop off the mountain.

[00:21:52] And of course he’s now 17. And to his idea of fun, it’s like, how close can I get to death without, you know. Last week with our guide, I had to push myself a few times and I kept, oh, I don’t wanna do that. I don’t want to go them that yellow or whatever. And then I went, I was like, wow, that’s fun. I suck but that was fun. And I’ve been thinking about that, pushing yourself into that challenge really does help you experience the broader world. And I like the way, you know, that focus on it as an entrepreneur because yeah, we do. We get locked into, we are good at X and then all of a sudden, the world kind of says, well, X is nice, but you kind of need X plus Y to kind of move forward. And it’s like, but X, uh, what do you mean this what’s this Y? I like that. I think I need to kind of play a little bit more into that. That is very, very cool.

[00:22:45] I am really impressed with what you’ve been able to achieve. And I’ve been go, you know, I went through your steps, you’ve taken along your career, kind of getting to here and you know what you’re working with with Jeremy and the company, you know, the agglomeration, sorry, it’s one of those English words that is not shared between our common language is it’s like, you know, slightly off different how we say it.

[00:23:07] But in doing that, how do you go about defining your own success as an entrepreneur? Not as the business, not as this, but for your personal success as an entrepreneur. And then what are you looking to do to continue that success?

[00:23:21] Callum Laing: Yeah, look, it’s something I kind of occasionally think about. I think the challenge, when you look at somebody else is career and, and you think, okay, that’s kind of an impressive path. When you are the entrepreneur yourself, you know, that there’s tons of stuff still undone. It’s, you know, when, when somebody sells their business or their business gets valued at a billion and they go, that’s beyond my wildest dreams.

[00:23:49] And I go, oh, that was the dream that got me started. It’s I don’t have a beyond my wildest dreams. So in my world, yeah, there’s still tends to be done. I think both myself and Jeremy have a very strong "why" driving what we do. So we, we come from small businesses backgrounds. We’re huge believers that it’s a hugely important part of capitalism of the economy.

[00:24:18] And, you know, 50% of the world’s GDP, 90% of private sector employment, but completely underrepresented in politics and, and anything else. And I think there’s a huge opportunity to reconnect the capital markets with the small businesses. And I think that would have far more impact on inequality in the world than pretty much anything else.

[00:24:47] If you took those trillions of dollars of derivatives and applied some of it to, not sticking it into a 22-year old startup who’s just gonna give that money to Facebook and Google on ads. But you stick it to somebody that’s spent 10, 20 years building a education business or a construction business, or an F and B business or whatever it is.

[00:25:09] They know how to use that capital at that point. They know how to use it. They can hire the right people. And they can, you know, a million or $2 million given to the right small business, they can add another 20 or 30 employees based on that. And that’s, that has a far bigger impact on the economy than a lot of other things, but there isn’t a financial product that allows investors to do that.

[00:25:36] And really that’s kind of what we are trying to do is to give investors the liquidity that they’re looking for. But reconnect that capital with the small businesses that can actually make a difference. And I think, you know, we’ve got 28 companies in MBH and you know, people look at that and go, wow, you’ve gone from zero to 28 in three years, and that’s impressive. But it’s not even a scratching a fraction of 1% of the good businesses in the world that could benefit from a structure like this.

[00:26:06] So for me, success is being able to impact many more small businesses and see how they’re able to use what we’ve built to build their own success. Really.

[00:26:19] A.J. Lawrence: Yeah, I think it is interesting. A lot of entrepreneurs, as you know, we move through the sort of like, okay, I have something to okay, I’m doing well to like oh, okay, this is something. It is this idea of like what we can impact. And I do like having been quite familiar with the process of selling off companies and building them, it is one, you never do it in a way, or I have yet to have a clean experience in a way that I wanted. It was always sort of more on the downside, you know, small fiddle I get to play on complaining about that first world problem.

[00:26:59] But at the same time, it wasn’t that great experience. I do think this focus you have really can allow, you know, the right company to kind of, you know, capture a lot more of that upside and at least the better experience. So where should they go reach out, find out more, what should they do?

[00:27:20] Callum Laing: If you’re a business owner and you’re interested in this space, definitely gonna have a look at mbhcorporation.com, so that’s our website. And if you’re an investor as well, because it’s more than 60% of the stock is held by the business owners themselves, we are probably the most transparent, publicly-listed company you’ll ever own. Because our business owners determined yeah that, that’s what they’re used to. They’re used to transparency. Everything is on there and more.

[00:27:46] We’ve got a great YouTube channel where business owners that are in the group are often doing webinars and or interviews. So yeah. Do that reach out to me on LinkedIn, always happy to connect with business owners. Yeah. Love to hear their story.

[00:27:59] A.J. Lawrence: Great. We’ll have everything in the show notes, put it on our social, in the emails when we send out this episode. Callum, thank you so much for spending your afternoon in what seems to be very lovely Singapore for you right now. Thank you very much for coming on the show. I really appreciate it.

[00:28:16] Callum Laing: Thank you for the opportunity, A.J..

[00:28:17] A.J. Lawrence: Talk with you soon.

[00:28:23] This episode of Beyond 8 Figures is over, but your journey as an entrepreneur continues. 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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