Business Tips from Cardie Saunders

Intro (00:00):
Being proactive, not reactive gives every business owner the opportunity to think through and make the best decisions for their business. With our world as busy and confusing as it currently is, even the strongest, most seasoned business owners might find themselves reacting to issues that they didn't see coming. With his 30 plus years of experience, helping business owners make the right decisions, your host, Stan Hladik.

Stan (00:26):
Good morning everyone and welcome to Secret Sauce 365 podcast, where we answer the questions that business owners ask themselves every day. I'm your host, Stan Hladik, and I am honored to welcome Carlton Saunders IV, better known as Cardie Saunders one of the best entrepreneurs I've ever met. So, you know, if we're going to get answers to business questions, then this is the mind we want to pick this morning. So welcome Cardie. Thank you for being here. Why don't you share a little bit about your background for our guests?

Cardie (01:06):
Sure, sure. Just to give a little background. First, thanks Stan for having me. It's great to be here and I haven't heard my formal name used in awhile. It's a challenge. It's in there somewhere. But yeah, so my background is a little bit different. When I started in corporate America, I worked for United Technologies and I was starting their strategic planning office and moved into product marketing and started in my first kind of M&A stint. My first promotion, when I got moved, I moved for them a couple of times physically. I was with the company for six and a half years, right out of college. Got to do some executive MBA work while I was there and get a little, cut my teeth in corporate America. It was great learning experience and was able to move into some exciting stuff, got to do some M&A projects as we were buying our distribution businesses back then in the mid to late nineties it was a strategy modeling after the Coca-Cola bottling angle, which ultimately we ended up buying them all. Shortly thereafter, within the same company, ran was VP of sales and marketing. So I was running a large group. We were doing about 170 million in sales. So I had four sales managers and dozens of sales guys. So I was used to running a sales team and we had to run the entire marketing budget. So I was sales and marketing guy, which is still my favorite thing to do of all the things I've had to do since. Then I got recruited out of there, did a turn around, so I got to work with private equity. For my first time I was running a turnaround situation president of a company that was a Northeast distribution company of 17 locations that was bleeding money and got that to break even and sold it off in pieces. And then I got after that, got to move onto my first, what I always wanted to do was be an entrepreneur. So that was my foray into learning what it's like to wear the president's hat and in a very tough situation. So it was well geared and healed to deal with the entrepreneurial market. So went out and did my own thing. I've been in a lot of businesses, small businesses anything from real estate to green cleaning technology companies, manufacturing, businesses, distribution some small turnarounds ultimately then founding my own company called eTemp, which I had for 11 years started from scratch. We started from scratch apologies for the dog in these times.

Stan (03:29):
Everybody's welcome on the Secret Sauce Podcast.

Cardie (03:32):
What are we going to do? What are we going to do, it's the new world. So anyhow, got going on an 11 year journey from startup scratch started with like say my partner started the $800 hundred plane ticket and went off and did that enterprise grew it and sold it eventually in December 2017, by the end we had global agreements with Hilton and Starwood, McDonald's and a bunch of great companies that were buying our products to save energy in their commercial equipment. So it was a great business. I learned about how to do an exit how to sell my business learned a lot through that process as well. You learn something new along the way. And then of course, they'll say along those same times, I've owned and still own a lot of different businesses. I'm an advisor in many, some of the board of some companies own some real estate, quite a bit of real estate have accumulated over the last 15 years. And shortly after some of the business, I got involved with a a great private equity firm called AEA where I've been helping them build one of their portfolio companies through acquisition. And what started as a single business manufacturing controls and pumps for leisure water business. We've now purchased, I've sole sourced seven deals which we've bought over the last two years ranging in size from a million EBITDA to 15 million EBITDA and brought those all together into one giant platform company and kind of a unique way doing a little bit different than most folks do it in leaving the companies truly stand alone, but benefiting from having ownership structure where the founders get 80% cash at closing 20% equity roll into the larger deal. So there's an incentive to work together without being told to work together and because they're all partners now. So it's kind of a neat approach to private equity and what we're doing. So I've been doing some of that buy-side advisory. In addition to that, I've been doing some consulting even though the buy-sell advisory works quite time consuming you know, like you Stan, I'm addicted to family and work my two favorite things. And so I spent a lot of my time doing it. I just love helping people. And so I've worked on a couple of engagements as an advisor for people selling their companies, also a lot of sales and marketing advisory work. So I'm actually taking on engagement now company to help them restructure their sales and market.

Stan (06:00):
That's what this podcast is all about. C-man, it's about helping people and business owners. So, let's start from the beginning. I appreciate all the background and it lets our listeners understand the breadth of different businesses you've opened and been in and merged and closed, et cetera, et cetera. So let's just start from the very beginning, you know, if someone's a business owner that has an idea and wants to start up, you know, what are the couple things they need to think about right away as they're getting that EIN number and opening their business?

Cardie (06:36):
Yeah. I think, look, starting the businesses, the hardest thing you could possibly do. I recommend for most of the first step, and hopefully they've already taken that is to get experience from someone else on someone else's dime first. And I attribute my time at United Technologies to that. I got to cut my teeth on someone else's dime and you know, I lost my first business at 30, which I guess by today's standards might be old, but you know, I think you know, I think cutting your teeth in someone else's time is good because a lot to learn from a lot of smart people that have been around a lot longer than someone in their twenties.

Stan (07:08):
Surround yourself with advisors, you know, whether it be good accountant, good attorney, you know, get the right advice. So you build a solid foundation from the start.

Cardie (07:22):
Absolutely. So, yeah. Get your own experience first, but then when you do it, bring in the advisors and you know, one of the most important advisor you can get and it could be anybody, but it should be someone that's going to be on your advisory board or something that doesn't, you know, cares about. You wants to see you succeed. Has a little, maybe a little upsided, but nothing crazy, but wants to see your success because there's no agenda. Right. I think some key, like you mentioned, some key vendors are important too. Obviously attorney, accountant, insurance of course is important, but even someone like, obviously not to pad the host here a little bit, but someone like yourself, Stan, is a good example of someone that would be a good advisor to join because not only you have expertise in a specific field, but you run your own company. And so, you know, some of that, whereas, you know, it's one thing I'm sure there's lots of great insurance. People have a lot of great insurance expertise, but they also often hadn't had the burden of what it's like to be janitor to CEO when you're the owners. So I think it's a good thing.

Stan (08:24):
Such a great point. I remember when I created The Secret back in 2015, you know, two things I want to hit on that you mentioned is one, you know, I had a solid plan and I brought you in from the consulting side, you know, so you helped consult as to the structure, you know, how we would set up the team the contracts with the different carriers and all those things. And we laid out a five-year business plan, which you know, very grateful we've succeeded on. But the reason I think that helped me the most is I meet regularly with 10 other agency owners, right? Insurance, business people who've owned an agency for far more years than I have, and I pick their brains every month. So to our listeners out there, get involved with your peers in the industry. They may be your competitors. They may be your friends, but if you can and not reinvent the wheel, if you can follow other people's success path, that's I think what Cardie's saying. Right?

Cardie (09:25):
Absolutely. Yeah. And I think there's no reason why you can't do that and make your point about the competitors too, is, you know when you're younger, you think that everything needs to be yours. Right. And you need to, maybe I shouldn't talk to this person it's so, you know, most people aren't looking to steal every idea you have, you know you can talk to people it's safe, you share a little with them, then they share a little with you. Everyone takes something away.

Stan (09:47):
Yeah. Everybody has their guard up sometimes too much. And you block out some good information or things that could really help you succeed. So let's move on, like the business is successful and some people have a plan to grow it and grow their team. You know, what are some of the ways that they should focus on, you know, so that maybe the growth is not too rapid and that their structure keeps up with their business plan. And you have any advice in that area?

Cardie (10:17):
I've always been biased to sales. You know, I've always been a philosophy and that's, again, my background of coming through and seeing too much burden on operations, but sales is, you know, sales cures, a lot of woes. So I think anything you could do to support the salespeople whether that's software, I mean, I used some great software products for cold calling. Anything you do to reduce their bandwidth salespeople without overgeneralizing tend to be bad at organization tend to, we got to keep in track of certain things. So if you can come up with some solutions to support those folks, I think you grow your business faster, obviously there's, you know, the other side of it would be of course, making sure you have the staff in place that your people can do the work. So whether that's software or backend staff, supporting the sales so that they have the ability to do that. And if you're an entrepreneur or starting your own business, odds are you're the sales guy, right? So you're usually the chief sales guy, it's the most likely path to success. So if you can do that, that's the way to go.

Stan (11:19):
So let's stick on that salesman or woman piece for a minute. You know, you've been through many businesses. Can you share with our listeners some ways that you've provided an incentive for the salespeople, whether it was giving them some skin in the game or bonus structure plan maybe touch on that?

Cardie (11:42):
Yeah. So, I mean, obviously we've done, you know, straight commission plans, but I always try to make it mirror. I run a very open kimono with what I'm doing with my team. So I draw the line that, Hey, the path we're on, here's how I, my company and me make money. So if you want to, I make sure to parallel them exactly to me. So if it's all about, you know, EBITDA margins for me, then I'm driving them to do the same thing. Right. I don't just take a sales guy in time to just grow sales. I try to time is something that's. So there is an incentive maybe for him to look for cost cutting and not just close deals at any price, right? So there's a value there to me. So why not set them to do the same? I do the same, even with my operations people, obviously it's a much lower amount because they're tied to a base salaries and that's more important to them, but I give them a tied to performance that, hey, if I close deals, even though they had nothing to do with maybe the work and the relationships or anything that happened, they're getting some sort of a taste of that so that they can feel that just to get constantly get this concept that it's all about the sale, getting someone to come on board, getting a customer to trust you is important. So I'll reward them with that. And again, it doesn't have to be big, you might have an assistant or a receptionist. It might be a a hundred dollar gift card but it's tied to something that the company gets to success for and they get to taste the part of that.

Stan (13:02):
Yeah, that's great. And it's good for morale transparency. I feel is always good for morale. And you know, from the standpoint of our listeners, not every sale is a good sale. Something I picked up on that you said is you're not just trying to close a deal just to bring in the top line, because if it's an unprofitable deal to the company, I mean, what have you done? Right.

Cardie (13:29):
Right. Yeah. So we timed it that got a time then.

Stan (13:33):
Let's bring the structure now towards the tail end because I don't want to miss out on your breadth of knowledge in mergers and acquisitions. So what does a business owner do? And when his exit strategy is maybe not a continuity plan and to sell, what do I do?

Cardie (13:54):
So look, I think there's a it's an interesting world what's going on with M&A, I think all the time. So I think if you're looking at what you're going to do in your future, you know, there's not a bad time and everyone has this vision of, I want to sell my business. You know, I want to suck it for all. I can grow it, take all the profits out, and then I'm going to sell it when I'm 65 and then I'm going to retire. The problem is you're leaving a lot of value on the table when you do it at 65. And you know, there's sort everyone, you have to talk to a trader or a wealth advisor. They're gonna tell you, you can't time the market. And the same can be said about M&A. But I can tell you this, that at 65 it's, the buyer is a little less likely to buy you unless you're strategic in nature. By strategic nature, I mean, they're someone that's going to buy you and merge you in. They don't need you anymore. You're going to be retired. They're going to close your business. They're going to pluck out what they want and that's okay. Sometimes that's the right way to sell. Right, but for a lot of people they've built their legacy. They built their staff, their staff's like family. When the times comes where they don't want to do the business anymore, they don't want to just see it die and fade away. So my recommendation is get involved with a partner earlier in that process. Don't wait until you're 65 because you're still valuable at a younger age. So, you know, if you look at something that, you know, in your fifties, you might say, okay, maybe I can partner with someone while I'm on a doing well. And I can still structure in a way that I can get not only some chips off the table now, but I can get some big upside going forward. As an example in the deal that I'm working on, currently that I'm doing with AEA, our partners that we're buying or getting, you know, it's flexible, but let's call it 80% in cash. The other 20% of upside could end up equaling as much as the 80% they got in cash. Now they have to wait three to five years to do that. But for some of them, what's the big deal. You're 55, you're 57. It's not a big deal. You're still working hard. You got a lot to bring to the table and you were eliminated the risk of having to put all the capital. And I know when I've owned my business, my own business, there were 10 things I wanted to do. Maybe I did three because there's only, I can't afford to take the risk. And, you know, as an entrepreneur and a person you're always balancing, you don't want to take the risks of my business. Do I want to go on that big vacation? Do I want to buy that second house? Do I want to take that extra risk, whatever the things that you're looking to do, there's only so much you can do. And you're constantly balancing doing that balancing act as an owner. And I think as a, if you look at when it comes time to sell, don't wait till it's too late. You want to wait, do it while you're strong, physically healthy, the business is strong. Don't wait for kind of the last squeeze, every last ounce out of it. Because you can do just as well on the exit post sale, if you're still the CEO.

Stan (16:46):
Yeah. You want to sell at the peak, I think is something that I took out of what you were saying is when you know you're really rolling and that's a tough call because sometimes you don't know when your peak is right. But that's good.

Cardie (17:01):
You can't totally go for the peak and that's that's yeah. It's yeah. You want to sell when it's up the business strong, but just like the wealth managers say you can't time the market, no one can tell you exactly when the peak is going to come and the same thing with your company. And I saw that happen you know, this year, right? So people, the businesses were peaking in February. We have a pandemic, they come down the evaluations have come down. Now, if you find the right buyer, like in case we're doing our valuations really haven't come down. We're looking as an opportunity to not cheat people, which selfishly gives us the opportunity to get good businesses and get them to go with us. Right. So it's, you still can find it. It just becomes harder. So that's the thing is don't try to time, obviously don't sell it if you're having three bad years in a row, but if you're having you're feeling good, you're feeling strong, solid, you know, take some chips off the table. They want and try to structure your deal where you're still the guy going forward, you know, where you have a piece of the action.

Stan (17:54):
So if you're still the guy, it's not like a cold turkey, you get your money and you're out. So mentally it's like a wind down. Right. You know, after a good, long run on the treadmill, you're still walking. You're still talking to those same clients. You're just not, maybe controlling the equity anymore.

Cardie (18:11):
Yeah. And if you get the right partner, and again, I'm only referring to family offices and private equity, but if it's a family officer or private equity buyer they don't want to run your shop. That's the last thing they want to do, they're buying you. So I know in our structure, that's why we make our guys roll 20%. It's not because we need the money. It's because we don't want them to run away. Right. So if we give them 20% equity in the deal, you know, there's enough there that we show them, hey, look, you were investing reinvesting a million dollars in your business. Every year. We're going to plow in 7 or 8 million cash every year. We're also never going to take a distribution. So think of all that capital, that's going back into your business that you never had before. We're going to explode the business. We're going to give you the capital to explode the business. So that 20%, couldn't that be worth, our goal is to get four X on that. So in theory, there's a good chance they'll get just as much money on the second bite. So they're incentivized without removing 80% of the risks. So there are partners out there that do that. I think that's a good way for people to look at exiting.

Stan (19:10):
So let's do, like I said, a minute ago I'm going to ask you a question now about the same topic, mergers and acquisitions during the pandemic. Okay, so we're in some, some interesting unchartered times, right, with this whole pandemic. Not sure if it's going away, not sure if there's going to be a second spike. So, how does that affect the business plan in mergers and acquisitions? Can you share some thoughts to our listeners?

Cardie (19:41):
Yeah, sure. I think you know, I, so obviously there was a lull in obviously there's a freeze in March and April and May of M&A activity, but I think people have gotten back into it. I thought you know, without getting into the economy or politics, I think there's been a strong, positive response to helping businesses, pause you know, things like the PPP, you know, you can argue whether they're great or bad, but I can tell you that. I think it allowed everyone to take a two month breath, relax, gather themselves, get back to work. And I think that's certainly true in M&A, I saw that pause, relax, everybody calm down and get back to work. And not worry for two months, and that two months got them back to doing what they do best. And so M&A got back on track. So right now it's a very busy M&A market again. There's still a lot of capital on the sidelines. The market's at a high obviously, but even separately that there's a lot of capitals. What drives the market up to? There's just a lot of cash on sites of M&A activity. People want to put the money to work. I think this is going to be as far as second spikes, I don't think I've ever seen a year where politics is going to be that big, a swing on how people react in the M&A but we'll have to see what happens post election, but I think there's going to be an M&A activity either way. It's just depending on which direction it goes, is it going to be opportunistic M&A or is it going to be bullish M&A, we'll let you know in November.

Stan (21:17):
Yep. Time will tell. So what was that?

Cardie (21:21):
It will be busy though. Yeah.

Stan (21:23):
Busy is good. You know, sticking with the pandemic. You know, maybe it's just some, thoughts to business owners out there who, you know, maybe are a little confused, a little struggling PPP got them by, you know, what do they do? Do they pull back? Do they reinvest the salespeople? Do they beef up advertising? You know, any thoughts there for what business owners who are struggling are going through?

Cardie (21:51):
Yeah. Look, it's easy to say, because I don't remember what's balance sheet, but if you have the ability, I think now's a great time for a land grab. Right, so you got capital and you've got the ability to do it. It's a great time to kind of grab those opportunities. I mean, as an entrepreneur and investor, just personally speaking, you know, it's, I'm always looking for opportunities. I mean, you know, now's probably not the best time to buy a shore house. Right. but you know, there may be opportunities in other, other fields or markets, you know, I just use real estate as an example, maybe going into Manhattan is the right time you know, taking the risk and doing those things. And again, just on the real estate side, I think the same thing goes for operating companies is it's an opportunity to do something right. And maybe bring in some partners. There may be some weaker competitors or things like that. And that's where M&A comes in, too. It could be, you know, you might be looking at maybe you're not ready to sell, maybe looking to acquire, you know, maybe it's a good time for you to be a buyer. Maybe some businesses are struggling a little bit that are over leveraged and convergent.

Stan (22:53):
Yeah. It's a great point. You know for every man's floor, there's another man's ceiling. So maybe there's someone out there who can benefit both parties through that merger or acquisition. You know, you touched base on real estate, you know, so I would be remiss not to allow you to speak a little bit about the real estate market and you know, your thoughts there as to, just in general, but you know, I'm going to put the pandemic side here for a minute. Just, how real estate can help a business owner on their balance sheet.

Cardie (23:33):
You know, I look at real estate it's and this may be a little jaded from my private equity work last few years, but it's a hard thing to do, but real estate really needs to be separated from the business. And I always tell people that people said, well, shouldn't my business own real estate. And I'd say, no, you should own real estate, your business shouldn't. Real estate is a long-term game. It's very expensive, even though you can maybe borrow at the right number. It's still, it can be a burden on the business. And you got to separate, I've always believed in separating the real estate from the business. And I think you know, it's one of those things, that's, it's a 20 year plan. I don't look at real estate in windows of a year or two, like a business. You could turn it quickly and you can start coming profitable very quickly, real estate, especially, you know, people are on to the fact that you can buy at low cap rates of real estate. So you kind of put in the time just like anything else, but this is a long run. You also have to be able to buy for the long run. And I think that's a big thing, real estate. I mean, I'm looking at, I own real estate in New York right now. It's a terrible time to have real estate in New York, just terrible tenants moving out vandalism, riots. If you're in a major city, it's just not a great time. So I wake up some days, I say, I want to buy more in New York. Some days I wake up and say, I must be insane to buy more in New York. So interesting time.

Stan (25:02):
Yeah. Like anything else it's calculated risk. You know, and real estate markets in all kinds of cycles have upsides and downsides and, you know, buy low, sell high. Right. you know, but I want to bring out an interesting point. You said, which I agree with you from my insurance background perspective, you never want to have the operating company, or one of the operating companies own the real estate. You want to shelter the liabilities and the equity and the value of the property to an LLC, pretty much that's the structure. Most people go it gives you the corporate shield, but it also segues it from the operating company. And then it's weird depending on the value of the property and the value of the operating company whatever's worth less should indemnify the other in my point, because that's the way from an insurance perspective, you know, if the operating companies, the tenant and it's big piece of property, you want them to indemnify the landlord for everything and this way we'll keep it separate. Yeah. so, you know, let's just circle back to you know, the business environment in general. Any thoughts to you know, just little tricks of the trade that a business owner could do to kind of, you know, on, on this weekly basis, motivate his team, grow his top line, cut his bottom line. Let's let's just go on a macro approach as we come down to close here.

Cardie (26:36):
Sure. So I have an interesting philosophy about the P&L and this might help people do that. I look at my P&L and I look at every line item and I don't call them expense items. I call them investment items on my P&L. When I look at my expense, it's something I've done for the last 15 years. So when I look at an investment, I say, okay, this is an expensive investment. What's my return? My wife drives, I drive her crazy, says, don't use the word ROI around me again, because I have to remember, I can't use that at my house, but when I use it in business, I say, what is this expense about what is my return on investment on this? Because it's really an investment, not, shouldn't look at the things as expenses. So if you take the time, it might seem like a micro task. It's actually a fairly macro task. You go through you know, your ledger and look at every single one of your expense item says, what is my return on investment? You know, the obvious are advertising and marketing, those are easy, but if you just keep going right office supplies, anything you're buying, what's my return? Insurance, what's my return on that investment. I'm making investment insurance. I don't look as insurance as an expense. It's an ROI from it, right? Well, that's my protection I'm getting from that. So same thing. I think you got to look at all these things, what am I getting for this? And there's not one item on your expense list that you shouldn't consider an investment. And whether it's a good one, whether it should go away completely or change or be increased and you can play with those things. Okay. If I increase it, what do I get out of that?

Stan (28:00):
Just I'm going to recap for our listeners here, you know, taking from start to finish in this podcast, you know, everything that Cardie said, because there was so much meat in this podcast that when you're starting a business, right, you really need to surround yourself with some good advisors, right? Your vendors, accounting, legal, marketing, consulting. You want to be open to understanding, you know, the market you're in what those competitors or peers are doing for success and follow that strategy. And then as Cardie mentioned, once the business takes off really invest in your salespeople, right? So the business owner always is the major investor and salesperson. And he's got all the skin in the game, but then he has to build his team out of other salespeople and provide the right incentives and the right infrastructure, whether that be support staff, technology, software, et cetera you know, and then Cardie took us a little more along as the business succeeds over the years or decades, you know, what is the end game strategy, is it to acquire and continue to grow, or is it to look to become a seller? And I think I want to point out here, Cardie mentioned, think about that well ahead of time, you don't want to react just in a bad cycle or a bad couple of years and bail. You want to try and hit your peak and then, you know, think about doing it, you know, maybe well before 65 and retirement age, maybe you stay on for two to five years in the runoff and you probably make the most money that way on the buyout and the additional sales that, that may be incorporated into that contract. Along the way, if you can pick up some real estate, put it in your personal portfolio build that personal balance sheet as well as the corporate balance sheet. And that's always going to be a successful move. And I mean, there, you have it folks Cardie took you from you know, being a 17 year old and and just getting you know, talk about ROI Cardie here for a second. Caitlin just got her license yesterday. So I was thinking, I'm asking them, what is my ROI on that investment? And boy, it, I think it does become an expense, but you know that very well.

Cardie (30:21):
That goes off the chart that doesn't count.

Stan (30:25):
Yeah. The editor might have to say, well, wait a minute, everybody's got to invest in their kids, win, lose, or draw. But you know, you've presented so many strategies for us to focus on not only on a macro, but a micro level. And I'm definitely going to have you back, buddy, because we didn't scratch the surface on digging deep into some of these other topics and I'm going to keep picking that brain, but I really want to thank you and all of our listeners out there. Thank you Cardie for joining Secret Sauce 365, the podcast where we give you answers business owners question every day.

Cardie (31:01):
Thank you, Stan. Have a grip.

Stan (31:03):
You too, buddy. We'll talk to you soon.

Conclusion (31:07):
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