people, customer, business, thinking, owner, idea, revenue, sales, company, talk, problem, years, grow, big, growth, run, create, work, airports, marketing
Damon Pistulka, Jose Palomino
Damon Pistulka 00:00
All right, everyone, welcome once again to the face of the business. I’m your host, Damon Pistulka. And with me today, I’m excited to say I’ve got was a Palomino here, we’re going to be talking about keys to designing the revenue growth you want. Jose welcome.
Jose Palomino 00:20
Well, glad to be here, Damon, thank you for inviting me.
Damon Pistulka 00:23
Oh, man, I’m really excited. And we were talking a lot and getting just now before we went live here, and I was getting excited about ready I was writing down a ton more notes, and doing this. But to get us started, tell us a little bit about your background, and some of the things you’ve been up to, and then we’ll just go from there. But you’ve got an interesting background, I wanted you to share that. Oh, yeah,
Jose Palomino 00:46
no, absolutely. So started on a business a long time ago, as my kids say, when the dinosaurs roamed the earth, right? So start out in a technology, project management and technology side software development, things like that. And as a lot of people get into technology, who have a little bit of a creative bent, they end up moving into sales and marketing roles. And so that happened for a period of time.
And then, you know, I was it’s interesting, I mentioned this story to somebody recently, I was handling sales for a global research company that serve technology companies. And in the room was the senior vice president for one of the biggest technology companies in the world who ran their p&l for document management was like a $2 billion dollar unit.
And the analysts I bought brought into that room was about all of 27 years old. And I wanted to speak up my ideas about what they were talking about. But my role would be somewhat like the butler on Downton Abbey, like trying to offer an opinion on the family matters, you know, it would be inappropriate. So right then and there, I said, I gotta get my I have to create a context where I can share my experience at that point, 20 years experience doing this stuff. And that led me it took about another year or two. But it led me finally to start value prop interactive, which now about 17 years ago.
And that’s how the firm started. And then I started working with, like, a lot of people will start brand new, they start working with whoever wants to work with them. But it gravitated over the years to owner led businesses. In the b2b space, generally, industrial like professional services, industrial services, things like that, where they often don’t have a really an intent to not be in generous or ungenerous. They don’t have really sharp marketing and strategy and sales, generally, they may have Larry who was you know, good and engineering good with customers. So he’s that VP of sales now. And, and they literally will say, like, Mary, or Steve is the marketing kid. Right?
And that’s kind of what you walk into, like, Okay, well, that’s that. And, you know, it’s good little businesses, you know, anywhere from like five to $30 million dollars in revenue. And who wouldn’t want that? That’s a nice business. Yeah, the challenge is certain things that we started identifying and say, Hmm, do they want to grow? That’s the first question and that every owner in that category wants to grow. Some are very happy taking Wednesday, afternoons off, and kind of keeping things going until they lose their 40% book of business in one account that much to offshore, all of a sudden, you get what happened? You know, it’s kind of like a relationship breakup, what happened.
And so I really love helping businesses in that category. But my, the acid test is always an asked IANA Do you want to grow. Because if you don’t want to grow, then what you might need is something more like, like, you just want to run a nicer run business. And maybe EOS is right for you. And that’s perfectly fine. You might even grow and you do that, because it’s a good system, or something like that. But if you want to grow, you want to start thinking strategically. That’s why I plug in, and I work with the owner and the leadership team to help them do that.
Damon Pistulka 04:02
Yeah. Yeah. And and that’s, that’s a great question, because a lot of people will even say they want to grow. But they really don’t. They really, though,
Jose Palomino 04:13
because they, because they, there’s a cost to it. Yes. And the reality is, I mean, there’s so many books, I mean, everything from like, The Four Hour Workweek that all you really need to do is, you know, just set up, you know, just set up a website, and it’ll make it’ll print money for you. And I’m thinking really, like, are they really millions and millions of people that are just printing money on the web without really working if it were that easy, right? And the fact is, it’s not actually the people who do print money and people selling systems on how to print money on the web.
Damon Pistulka 04:44
Yes, I was just gonna say that. Can you talk about the four hour workweek and if you’ve ever read the book, I think it’s, it’s Darren Hardy reads the entrepreneurs roller coaster or something like that. He talks about the Delaware that wrote the four hour workweek and he said the same thing. He’s,
Jose Palomino 04:59
well it’s Why? Because you know, it’s a well, actually that particular book, The first half is very inspiring the second half, kind of like pragmatic. And Tim Ferriss is one of the hardest working men in the whole personal development world. I mean, he’s on the road constantly. He’s working.
He’s our you for hours. Yeah. But it’s a good book, and it makes you think about, okay, how do I eliminate waste? In my process, eliminate waste in my time? What do I focus on best and highest use? So I think from an inspiration point of view, that could be very good, even for an owner. You know, I guess I call a real business, you got payroll, you got infrastructure, but growth is expensive. And it’s, it’s, it injects an element of risk. And more importantly, it’s a real gut check time.
So you have to say, Why do I want to grow? And, and part of it, I just believe, especially in smaller businesses, you know, companies that are not like multinationals, because most small businesses can’t afford a bad year, can’t afford even a bad quarter. Oftentimes, a lot of times, these small businesses have been squeezed by the biggest customers on margin so long, that they’re not even that profitable. I mean, some are, and I’ve seen some, I’m going, Wow, that’s good to be you, you know, you’re looking at an owner doing, you know, 2.5 million in EBIT, ah, and he’s working 35 hours a week, I’m saying, I don’t know that I would change that either, you know, yeah, good.
But most are really just trying to keep it afloat, keep the team together, keep customers happy. And they can’t clear headspace to think about boy pushing to something else. It’s hard to think about until they start coming to people like you, they come in and say, Well, you know, my, my wealth advisor, or my financial advisor says, I need $11.5 million to, you know, post tax, and then you’re looking at a business with like a million dollar EBIT. And you say, well, that’s great. Well, you know, if wishes were horses, beggars would ride. But you’re not gonna get there with that.
Damon Pistulka 07:02
Yeah, yeah, it is. And it’s, it’s, it’s interesting. Thank you, like you say that it’s, first of all, you talked about clearing headspace. And I think that’s, that’s what a lot of business owners get gets stuck in is adjusting their, their day, their routine, their lifestyle, around what the business needs today in it.
And that headspace just to think about what’s tomorrow, what’s that need to look like? And really, what do I have to do to get there is difficult. It’s difficult being in a business, especially if you’re, as most business owners in this category are, they get up and look in the mirror every day and go, You know what, to make the decisions to figure out, you know, what their day is going to look like they even though the rapid development of coaching and consulting anything else, you want to talk about the vast majority of these business owners still there on their own?
Jose Palomino 07:58
Oh, absolutely. And it is hard. And part of it is. And I understand that, look, they have to promote people from within. So they have good technical background knowledge of what they do. So their contract manufacturer, or even a small OEM, they need people who know what they’re doing. So that’s one.
But these people aren’t necessarily great managers, or great people, developers or anything like that, but they really know the technical thing. And then the people that can make a difference are actually hard to hire at that level, unless they’re on the kind of very much not only in the back nine, but they’re heading to the 19th hole when they become affordable, again, because somebody at the height of their powers, as a CMO, as a CEO, wants to test that out working for a division of GE or a part of Boeing and so on doesn’t say want to go into a $30 million contract manufacturer to try it out.
So finding the right talent that has the right combination of skills is a real challenge. And so the owner, who probably was that person who came from Boeing and started their own business, they also get frustrated. I hear this all the time. Why can’t and fill in the blank, whatever the key, the key person on the team is, why can’t they be more like and what they describe as more like me? And I said, well, first of all, if they were more like you, they would have left you and started their own business and be competing with you right now.
So they’re not more, they liked the paycheck, they don’t want to live with that risk, and they’re not going to work that way. However, that doesn’t make them bad employees or not. They might be very critical to your success. So you have to figure out ways to take advantage of the people you got. And that’s one of the hard challenges I think for a lot of leadership teams, owner leaders to really say okay, how do I move the pieces around to get the results I’m looking for? And not just and this is a little rarer today but going back even 20 years ago, I would see this that that owner that thought they could run by Iron Fist right? You In today’s market, especially, that
Damon Pistulka 10:03
ain’t working, it’s not working. Always going for the door.
Jose Palomino 10:07
Right? It was never a good plan, but no way with it, but now it’s really a bad plan.
Damon Pistulka 10:12
Yeah. Yeah, it is. It is. You know, and you talk about that clearing that headspace and I think, I think that is the real advantage of owners that just say, Listen, I, I want, I want someone else to help. Because it is that fresh perspective. And yeah, it’s gotta be the right the right person, group, firm, whatever you want to call it helping. First of all, you got to have the right person and, and you know, you and I’m sure can tell, gazillion stories that owners will share about hired the wrong person hired the wrong person, employee wise hired the wrong firm to help them do something.
But that headspace and Claire in that headspace and being that objective, other party, to guide them through this process is really valuable in terms of new developments that they might not thought. The other thing I’m sure that you see a lot in the way that you’re working with similar but in different industries, you can use something from one industry that may not have been used a whole lot in this industry, but it can be very valuable.
Jose Palomino 11:28
Okay, well, you know, the principles are principles, right. So principle, translate, largely not, not 100%. But a lot of them are sparking idea. So for example, something that you see increasingly, especially with small OEMs, is something and we’ve seen it take off in a lot of consumer goods is the idea of this as a subscription program. Yeah, yeah. So you know, so if I sell $100,000 machine, and it has wearparts. Yep.
Why not add a subscription, as opposed to always competing with Granger for that were part because at the end of the day, the operator of that machine, they just want the machine, they want uptime, they don’t want any time to run? They want it to run. So those that’s an idea that comes from somebody, you know, from, you know, Harry’s razors, right, yeah, or HP cartridges?
And you say, Well, yeah, could that work? And, yeah, it absolutely can. Because at the end of the day, they don’t want to realize the need to replace a part. I mean, you can even have a hotswap part on site with the company and you check in every six months, and depending on the capital outlay, they pay you when they use it. Yeah, there’s a lot of creative ways you could do that. And you say, Well, why would I do that? Well, because you pick up probably some of your strongest margins on your wearparts. And you don’t want to open that up to competition.
Because over time, that might even be dependent on what the machine what you sell, but it could be more revenue than the actual original capex, I went into the machine. Yeah, and I have a customer at the same time. And, and that’s the kind of stuff you say, oh, so when we have lols, in our production, we could be making some of these WebParts. And now we know where they’re going to go. And so our timeliness when somebody needs a part is instant, because we have a certain amount on the shelf. And of course, we’ve all learned that running supply chains.
And you know, this goes way back to what 40 years ago, allaahu goal, right wrote the goal, right. And that helped revolutionize the whole thinking around supply chains, and of course, ERP systems and everything else that but what ended up happening is everybody decided to run, actually not what he writes in the book, he does not say don’t run with any inventory, run as lean as is practical, and have buffer. But people forgot those chapters, because on the p&l on your balance sheet, especially it’s very enticing to say, no inventory, because after all, all suppliers will be reliable and they’ll meet us.
But if everyone on the chain is thinking that you’re down to somebody who makes paper clips in China, holding up the entire line. And that’s exactly a big part of what’s happened in the last and is in talking to manufacturers, especially in the last year as I’ve interviewed folks and talk to them. I’m hearing more and more like, oh, yeah, we got to create, we have to sacrifice some cash off the balance sheet and turn it into stuff on the shelf. We’ve got to maybe not back to what it was in the 80s before people started thinking this way. Yeah, but there’s got to be a happy medium there.
Damon Pistulka 14:30
Yeah, no, you’re right. It has to be you have to take because you can’t the disruption is horrible, and it’s killed. A lot of business disruption itself has killed a lot of businesses. And then when you look at it to the other thing, and I’ve heard a lot of people talking about is really considering the cost a little bit differently with offshoring and going nearshoring staying in in in North America, or North or South America to try it out.
I try to lessen the potential impact of anything like that. But and you’re right is you have to do what’s acceptable. But again, back to back to value problem what you guys are doing there with the designing the revenue growth you want. So what are some of the things that you see common across the businesses that you help when you’re when you’re looking to design this revenue growth system that will just revolutionize their business?
Jose Palomino 15:35
Yeah, well, those who do this naturally well already, or are gaining some of the benefits of it. And I love working with a customer or client that’s already on the right track. Because that means they’re thinking the right way. And they really like to, they’re very open, you would think if they’re on the right track, why would they need me? Well, because they want to, you noticed like a top athlete that has hired the best personal trainer? Yeah, right, LeBron hasn’t stopped working out, right. And that’s why he says he’s 3738. And still an elite player, for example, whether you like him or not as a player, but I’m just saying he’s a great player, a historic player, Michael Jordan, same thing.
So the one thing they have in common is they have a clarity on two things. Extreme clarity on the customer, they serve best and extreme clarity on the problem they actually solve. And they don’t talk about and this, I often have to retrain them to think about it this way, especially in technical categories, we are trained historically, to talk about our stuff, in terms of describing the thing, right, the machine does this, the machine is this, this big, this weighs this much, or, you know, our paint trucks will show up at this time and do these things.
And that’s all important, you have to cover that ground at some level. But really understanding what it is you’re solving. So, you know, I worked with a company that they paint, airports, the runway lines, right? You know, all of that. That’s actually very skilled work. Because it’s not just road painting anywhere, anywhere else on the highway. And we’ve all encountered highways occasionally, where you realize, oh, boy, that machine went sideways on that, like, you know, the lines got away caddywhompus. And you go, what happened there?
Well, it turns out, like, in an airport, all the marks are laid out, not just the long runway lines, the short ones where the plane has to stop to let other planes land. So if you’re off by 18 inches on that, literally, you could be creating disaster, right? So it’s a really high end thing. So you think about you said, Well, so what the problem you really solve? Well, these airports cannot operate unless they’re in compliance. And that’s FAA monitored and reviewed and so on. And airports only make money and there all day even if they’re not for profits on the the city, they only make money if planes are taking off and landing, you know.
So when you think about it, you say, well, we the we you know, we paint roads that happen to be in airports, that’s one way to look at it. The other way is, we make sure your airport never will never miss out on revenue opportunities when takeoffs and landings. That’s a different value proposition, right? So not understanding that, and understanding who cares at your customer? Because you may be dealing with somebody who’s like, you know, the plant manager, and they you can’t have that conversation, maybe some plant manager, you can’t some you can, they don’t care, they don’t know.
So who do you have to talk to so they can understand that what your machine does actually helps them produce more stuff. You know, I have a client that does, specializes in something called design for manufacturability. Just simply, you know how to reengineer something so that it uses especially now with petroleum based products, like plastics costing so much, how do you reduce the plastic content, keep the same rigidity and strengthen the materials that you in the resulting products that you make.
And while you’re at it, reduce the number of moving parts. So that assembly is more cost effective from a human capital point of not just the petroleum based product, but the actual human capital. So they are like a think tank that does nothing but help people figure that stuff out whether it’s a little robot, or a baby carriage or whatever, they can figure that stuff out.
So think of the value that has on a product that for a large consumer products company could be $100 million line of business. And they’re the back end their the end of their last mile on that. So understanding who do you serve best? And the problem you really solve is the beginning of becoming really smart on how to build out everything else around it. So all too typical. An owner says I want to grow and somebody says well, you know I have a friend who’s running a Who runs an SEO firm, right? Or runs a web marketing firm or something like that, or has a sales training operation, all of which could be valid things to do. I’m not saying of course, those are all important things to do.
But until you really get your head wrapped around this key thought first, and really test it, you could be spending a lot of money on the wrong message on the web, on the wrong keywords, training, the wrong kinds of sales approach. All of that is basically rooted in this simple understanding what we call targeting. And targeting is not just the customer, but the problem. And then even taking that a little further. Damon, like What results do you want to show? For example, if you want to grow a million dollars? Let’s say, Okay, you want to grow a million dollars? What’s your average sale? How many sales?
Do you have to make additional? I mean, it’s simple. I mean, this is back of the napkin type. So trust me, it’s not like common is that people don’t do this. And so in other words, you need to judge and then what your close rate, you know, so you have 10 additional conversations a month to get to that million, though. And they say, well, 10 that’s not, that’s not crazy, right? That’s like, I don’t know how to do it. Maybe they might think but yeah, 10 is not a ridiculous, insurmountable thing. You say, Okay, well, that’s what you need, you need 10 You’re gonna close for and blah, blah, blah, you do the math, and that’s your million dollars.
So now you could start thinking, Okay, who can help me get those 10 conversations? What’s the best method to get to the same conversation that’s all targeting. So we really do a heavy emphasis on the front end of knowing what you’re aiming for. Give it quantified as much as possible, not exhaustively, but enough so that everybody can get their head wrapped around. Hmm, that’s doable. And that’s the first challenge statement is an owner has to not only desire growth, they have to believe it’s attainable. They don’t believe no one else on the team is gonna believe more. No one’s gonna believe in your growth more than the owner?
Damon Pistulka 22:07
Yeah, that’s a great, that’s a great point, you have to believe you’re going to be able to do it to get there, that’s for sure. Like you said, the owner has to believe it. Otherwise, it’s not going to happen. Because you just that’s the way it does. I like to like the simplicity in this though.
You get really succinct on your customer, your problem and the results you’re going to create, because that is you know, it’s whatever you want to call it developing right persona, understanding your product, there’s all kinds of things about it. But it’s, it allows you to articulate in the right words, the right way, so people can understand very quickly, if you’re someone they should talk to, or if your solution is right for them, potentially right for them.
Jose Palomino 22:58
Absolutely. And you know, this is it’s the kind of stuff that if anyone even sat through like one Vistage meeting ever, they would this would come up and they say, oh, yeah, I got it. Yeah, I have to get my right customer. But having been in the meetings with the leadership team, that’s that as an objective is easy to say. But if you’ve been in business 1020 30 years, it’s actually hard to zero in on. Because what does that mean? Exactly? Does that mean a certain industry? Does that mean a certain type of buyer? Does that mean a certain size company?
Does that mean a certain geography? There’s a lot of things that go into it, is it you know, I always say what clients, would you or customers would you clone? If you had the cloning wand, right? Do you could clone them? Which one would it be? Is it your biggest single customer? And that intuitively? So yeah, like, you know, I’m working with deer I love I like another John Deere. I like caterpillar. I said, Okay, great. Let’s examine your business with Deere. Let’s break it down. Are you making money? Well, of course it’s 50% of our revenue.
Yeah, but are you making money with them? Yeah. Because chances are for the picking acre. I could pick on any large manufacturer. That is what procurement has to do. Every year. They’re squeezing you for another two points, three points, two points, three points. You’ve been doing it for 20 years. You it turns out and I have one client that turned they were working with a big manufacturer, and they were producing a sub assembly for them. And when they did this analysis, they realize we’re actually shipping dollars out with every part. Yeah. So what do you do?
I said, Well, you have to reprice, let him know, reprice it, we’re gonna lose the business. I said, Do you really want to continue shipping dollars out with every part, but this is mental inertia? Because there’s a sense of security I’m working with, you know, named the big on Boeing. You no matter Oshkosh, whatever he said caterpillar is and yeah, those are all things you want to be associated with. But just so you say okay, first of all, if you provide unique value, and that’s the second thing you have to provide a unique value. So now the problem you saw But know how you solve it uniquely.
And there’s a whole discussion we get into on how to Yeah. But if you provide unique value hang on to a good amount of it. So in this particular example, they reprice their whole line of things they did for this for this lock manufacturer. And sure enough, they lost about two thirds of the business. But it was two thirds of they were not making money on the 1/3, they kept, they actually were more complex parts that were more valuable to their customer. And therefore they kept the business there, their bottom line EBITA transformation in a year was amazing.
They were they were about 60% as big as an overall top line company. But they went from being in the red continuously Alright, on that border. You know, we’re like, like, the brakes are Yeah, yeah, metal on metal, there’s no patches, not good. And you just, you know, you’re still kind of moving along, but it’s painfully here. Today actually turn they went into the black as they will that’s, that’s growth on purpose. It sounds counterintuitive. When you say, Well, God, you took the top line, guys, uh, yeah, but bottom line up, now they’re prepared to invest and continue growing that top line.
Damon Pistulka 26:13
Yeah. And again, when you go back to the basics of what you said, understand your customer, the problem, the results that you create for that customer. And then as you just said, solving that uniquely, go out and find more of the customers like that, that will make you that kind of money, rather than using all your capacity up to ship dollars out the door.
Jose Palomino 26:35
And that’s it. It’s just it’s so it’s like anything else in life? This things that sometimes you need a good friend to come alongside and tell you. Yeah, you know, like the truth about something. And you know, and he may be, you know, I’ve had friends where there’s things I’ve wanted to say, and I generally I’m pretty circumspect, with the times you got to speak up. And, and I’ve had friends to say, You know what, Jose, thanks so much for telling me that I really needed to hear that. And I’ve had others that I haven’t heard from since. Yeah. You know, that, okay, you know, I can’t care. I can’t want it more than you do. So that’s what that well,
Damon Pistulka 27:10
not. Now, that’s, that’s a great point. That’s a great point. Because to help someone in this situation, they’ve got to want the hell they even because sometimes you’ll I’m sure you’ve gotten into it in with good intentions. And you’ve had clients that have good intentions, and they hire you, but they really don’t want to change.
Jose Palomino 27:32
Yeah, and actually, they fall into two categories, which is always interesting to me. There’s the one that at the end of the day isn’t ready to pay the price, right. So years ago, I worked with a manufacturer, they’d been around a long time, and it was like family owned business. And they had a lot of old equipment, but they could do probably eight, nine different operations on metal. And the production manager had been there like 20 years, right? VP of production wasn’t family, but it was like family. And we were going through their capabilities.
And then he said something, and it caught my eye say why. And I asked him to repeat it. And then I said, so let me understand this. When you are asked to quote, something with more than three operations, you cannot tell the customer when you’ll have it done for them. Is that what you’re telling me says that’s correct. Which I was astounded that he could say that in front of everybody, but they just took this for granted.
Like this is just you do best efforts. And nobody buys that way. Right. And they were shrinking, obviously. So I said, Well, wait, Have you have you talked to like your local MEP centers? Have you looked at lean? You know, if you brought in somebody says, Oh, that won’t work for us. And in my you know, right then and there. And I didn’t see any of the ownership team respond to that. And I said, Well, clearly it won’t work for you, because you believe it won’t work for you. And it works for everyone else, but it doesn’t work for you. So I guess, and sure enough, they couldn’t make the turn.
So that’s the first thing is not willing to try something new. The other one that’s interesting is the person and this was usually when I have very short engagements, not many, but it happens. What I call the I know I know person, right? You point something out to them? And I know I know. He points then I know. And then they start trying to give directions they can you can you do? You know, I don’t know what it is. Get a tradeshow booth done for us or something and say, Well, I say that then, you know, one of us is in the wrong room here because this is not what we do.
And, and obviously you have this thing dialed in, you got it all figured out. I don’t know why I got invited to the conversation because you got it all figured out. And usually these are smart people who have a lot of it figured out. But there’s such an efficiency if they would hand off some of that but they just really want to be that person that everybody views as they know they got it all figured out and I can’t help that person that’s, you know, I always say it’s You have to have a humble confidence. I want to work with confident people. But I also want to work with people to know they don’t know everything.
Damon Pistulka 30:08
I like that humble confidence or write it down. Because that’s, that’s key. I think that’s key. And you see, you see that in the best performing companies over time. Because it’s, it’s, it’s like that, that, that humble being in the humility that that brings, is having the confidence to say, this was a great direction we did yesterday, but we’re going that direction today because it’s even better.
And they show and I figured that out from, you know, a gym down the street that was, you know, told me that I think it’s an awesome idea, we got to do it, you know, it’s just, it’s, it’s because of the being humble, they don’t have to be the one. And they need to be confident because they have to stand up and make the right decision.
Jose Palomino 30:57
Sure. No, that’s exactly. And I’ve just seen, I’ve been inspired. I’ve had mentors in my life. Yeah, who really live that out. And, and I try, you know, again, it doesn’t really matters what my wife would say about this, but I like to think I’d like to be that kind of person that, you know, willing to listen and that, you know, it’s always like, how do I make it better? How do I do? How do I do it better?
If you’re always asking that question, then you’re gonna learn, it doesn’t mean you’re going to do everything that somebody suggests, because, you know, you only have so many cycles and so on. But you’re open to ideas. And, and you know, the worst thing in the world is that you tell your team, okay, we’re gonna do this, this and this. Okay, any ideas, any other ideas?
You know, that’s, you got it, you know, and you don’t really get the benefit of your team. So even knowing how to brainstorm with your team is something that a lot of owners, candidly, don’t have, often don’t have the skill to know how to do that. And that’s something that I often get brought in to help people figure out how to pull good ideas from good people. And I’ll tell on as I said, Do you have a good team? We all absolutely great team, I love my team. I said, Do you trust him?
Absolutely. So do you think they’re smart? Oh, yeah, they’re very smart, then let me pull that out of them. But you can’t be in the room. Yeah. Because they’re all looking to you for what you think about their idea in real time, and in their self editing. And it doesn’t matter if half the ideas are never implementable, but the few that are, what an opportunity to get somebody to, first of all, for you to even see what their thought processes might be how they solve problems, you want a problem solving organization, if you’re going to have a growth organization in the 21st century.
Damon Pistulka 32:45
Yeah, yeah. I’m giggling because we last fall, we did this with a client and it drove him crazy. Because I said, Listen, we’re gonna have a your weekly operational meetings, we’d listen to them for three, four weeks. And we said, we’re going to start doing them without you from now on, because it was the owner talking, right? And everyone shaking their head, and we, and then we brought them back.
I think three months later, it was a completely different meeting. Because all these people have gotten used to this is my department, this is what we’re doing. This is how it relates to our goals. And you’re, that’s a huge thing, because as you said, you need a problem solving organization to be growing in this day and age. And that’s, yeah, that’s really cool. So when you talk about the value prop, you created, what you said, the revenue throughput model, tell us, you’re the CO inventor of that, tell talk a little bit about that, because I cannot then see that. I can’t not ask about it. Let’s talk about
Jose Palomino 33:52
No, no, absolutely. So one of my mentors started a consulting practice. And it was my transition into consulting. So I work with him, he says, Can you help me out, as in this whole area of methodology, he knew that was a strength I had, like figuring out processes and stuff. And so we started working together. And he worked with slightly smaller firms. And I would see how they would it’s almost like the boys finger in the dike, you know, they plug one hold and another hole open and so on.
And so you know, I just don’t see revenue flowing through this business very effectively, because some things are working well, but then other things break down. So that was the genesis that thought and so his name is Doug Chrisman. He has since retired but again mentor my new and for many years and we had a great time together working on this. And so when he started developing was a model. Initially we built just using a spreadsheet to capture the idea we came up with 48 elements dimensions in eight major categories that We said, okay, these are things we’re seeing in sport.
By the way, you know, you could argue in any businesses hundreds of dimensions, right. But we picked these 48 as being the most indicative 8020 rule that would most affected. And then we came up with this mental picture, this metaphor of a pipe. So you picture a pipe opportunities going one side, profitable, revenue comes out the other, right? Very simple thought of a pipe. But imagine that pipe had eight valves, right. And those valves are either open or close. And so you could have a lot of wide open valves. But if one is closed, let’s say something like customer success.
So what happens with customer success is close. We have a great marketing, we get leads, we have great sales process, we make a great product. And the customer success is when somebody has a problem and they call your 800. Number. They get routed to voicemail, hell, yeah. When somebody eventually answers the phone, they don’t have the answers, and nobody returns phone calls. So what happens is, that’s the last order you get from that customer, unless you have something so unique that like, can’t be bought anywhere else. But in almost every category, there’s alternatives, you
can find it
Jose Palomino 36:13
somewhere else. So also you think you’re kind of thinking well, but we have all this stuff going gangbusters. But there’s one thing or even you have a great sales team. But your marketing, doesn’t pick up doesn’t create leads doesn’t create opportunity. So you have salespeople, and you say, how good are they? And he said, Well, they really good, how about writing complex proposal, they they’re very good at that?
Well, the, the challenge is they only have to do one a month. So they’re very good, right? Now, if we fix marketing, and they have to do 10 a month, you realize they’re not that good. And now you’re bottleneck on that pipe, floats from marketing to sales. So the idea is it’s not a once and done thing, it’s a way of looking at your business as a system. And when you think about it, you want opportunities going in one side and you want profitable revenue coming out the other. So we say the first thing is targeting, or even putting in the right opportunities for your business.
Second is differentiation. How are you standing out in the market? Like why should they pick you? Why should they want to talk to you third is marketing, meaning all the traditional kind of you have to do you have to reach out to the market, let the market know you. And then fourth is sales. Those are kind of the vowels across the top of the pipe. The vowels on the bottom part of the pipe are risk. Things like customer concentration, employee concentration, banking and investor relations. I mean, you may want to expand and your bank says no, no, no, yeah. And I’m gonna do that. And then resources like what’s your infrastructure like what kind of, you know, administration.
So all of a sudden, you realize that for when we send our invoices, people hate our invoices, they don’t understand how to read them, they pay us late as a result of not being able to interpret what they should be paying. So that impacts cash flow, which impacts our investment capability, which means we cut back on marketing, which means we don’t have leads. And it all came from an invoice. And it happens every day. And then the seventh thing is what we call production, the ability to do the work, you promise people you can do, right? Like you got to execute there. And that’s the case for the guy who had couldn’t do more than three operations without like falling apart, right?
Even though he had all the equipment to do nine operations, you couldn’t really do it. And lastly, what we call a customer success or fulfillment, how do you make sure customers stay happy working with you, so you get repeat business? So you think about those eight valves, and we help customers, our clients think through that. We get into detail with our leadership team. And we kind of score things on a red, yellow green basis. That’s it. We don’t everybody wants to cheat and say, well, can it be kind of green? Can it be? Can it be just a little bit red? And listen?
It’s red, if it’s if it’s a turn of the valve to close through? Yeah, it’s green. If it’s open, it’s yellow. It’s not if it’s not affecting you and something that’s neutral, a yellow today, when you fix some other part of the of the pipe now becomes a constraint, right? So we look at that idea. Is that a contributor? Is that a constraint? So that’s the model we developed and what had helped us do. And, you know, we’ve done group sessions where we’ve brought in, you know, eight companies with their leadership teams each at their own table.
And I remember one very close a small contract manufacturer, maybe three $4 million a year and describe the process and then we were before we began the process during the break a coffee break, he says the owner says, Man, I’ll do this because that’s why it was recommended that we do this. It was through an MEP center, they recommend that but I know my team and I were like a one mind. So I’ll really okay, well, that’s great. So we start the process where they have to like agree in grade on what’s red, what’s yellow, what’s green? And also like I’m turning so where’s this like heat coming from?
And is this really heated conversation? that table, they were not at all of one mind that. And I had to come over to kinda like, Hey, it’s okay, we’ll be alright. I said, it’s better this surface now. And you guys can wrestle with these things, because how else can we figure out what to work on? What should be addressed. And so this is a really powerful part of our process where we Daymond get a leadership team to really take a holistic look at their business. And it’s different than something you can do. You know, like, like I, you know, I’ve talked at Vistage, I was a Vistage member for years. I love peer advisory. But let’s face it peer advisory, you get maybe 15 minutes of airtime.
Yeah, crosses one issue, you get some great insights from the folks like if you’re making a decision, should I fire Gladys or not, and they’ll help you figure that out. But then I can help you figure out your system for your business. You know, that’s not what they’re for. And it’s not just about operations, because it’s about thinking about your system, as it relates to creating growth, which is where just being well run might lead to some growth. But we’re looking at the things that really hinder growth and profitable growth at that, that’s what that’s what I focus on, is on and that that will be our differentiator in terms of how we work with clients.
Damon Pistulka 41:19
Yeah, and that’s awesome. I mean, I’m sitting here to scramble and write notes, because they’re so great, you know, when you talk about your eight different valves, targeting differentiation, marketing, sales, risk, resources, production, and customer success, and then the simple, red, yellow, green, it gives you should we have to work on the red ones, the green ones we’re not worrying about the yellow ones is gonna be a problem sooner or later, but just keep an eye on that. It simplifies it because otherwise you’re sitting, you’re trying to work on everything, and you don’t need to work on some of it.
Jose Palomino 41:54
In fact, we have, you know, so we have a cloud based platform that helps us score this for a particular customer. And then we have a button of basis as a critical path. And it will based not everything weighs the same. So we have, we have an algorithm that we’ve developed over the years, it will only surface, the top three or four items for you to look at, that are the most problematic, that could have the biggest contribution. So you could have 18, red items, you’re only going to work on four, because reality is you can’t work on more than that the best. And we pick the four that are the ones that are most impactful for growth.
And we put them in the order of that, which is most important. So if you only have time to work on one thing, you’re going to work on the number one thing, and you as a team determined that was read, and we give you criteria, how to read mean, and so on. But the point is, that’s the power of thinking about your business systemically. So you could redo that. Every quarter or so. It trains your team to think about your business as interconnected. So it isn’t. And I’ve seen this and you’ve seen this in companies where, well, it’s marketing’s fault or its productions fault, or its customer services fault.
No, we in a small business, we all own the result, we’re all going to be affected by it. We’re always made parking lot going into the same building. So that’s where we think one of the one of the outcomes of this process is getting people on the same page and thinking more team going through this process, because they actually can sense Oh, that’s why that happens there. And maybe they have an idea for somebody in a different discipline, because they’re looking at it differently.
Damon Pistulka 43:34
Yes. This is awesome. That’s all I’m saying right now. It’s awesome. It’s just this is this is incredible. And I’m so glad we brought it up because this, the thing that you’re doing with the your revenue throughput model here is you’re incorporating the ad 20 to make sure we’re working on the stuff that’s going to make the biggest difference in your revenue today. And then like you said, you can just re read it, reassess it every quarter, every half a year, whatever you think is appropriate, and just keep working on what’s limiting your growth.
That’s awesome. So what have been some real revelations that people have seen that because you probably have clients have been on this for a while not because you did this? This is a few years ago, you develop this. So what are some of the things that you’ve seen people do with this? I mean, over the years, how has it transformed their business? How has it really helped them and have you seen some people just emerge as industry leaders because of it or,
Jose Palomino 44:40
or Well, yeah, no, absolutely. So the for example, the company that did paints airports, yeah, they we work with them for a year through this process with their leadership team. We also added some additional tools for giving them visit ability on revenue and awaited, they weren’t really, they didn’t have as much clarity as what’s coming up. They were always frustrated, like, how do we project what’s coming and said, Well, let’s take a look at that we built a model for them, that came out of that was a real issue for them.
That was one of the things we call pipeline management is one of the things that could be red. And so we developed an initiative around that. And basically, within that we worked a year and then they received an unsolicited offer from a PE firm for a fantabulous amount of money. And they sold the business. Very successful. So that’s a real success story, such that the owner had a party for his employees, and I was invited to it as a black tie affair and that Cirque du Solei coming in?
Oh, yeah, it was pretty hands off the chain. It’s awesome. Awesome, is very good. But that’s like that, you know, the ultimate owner happy story, right? Yeah, that’s one, I think, very real example of things that you know what it is that if you create transparency, and you create a way that people can actually see what’s going on in the business, that people want to work on a business, I mean, those who do really do. Yeah. And as you say, I think you said it really well. There’s so much to work on. It’s like it’s an infinite string, right?
Like, how what do you work on? So our ability, we believe, strategically, there’s a few key things you have to anchor your thinking around targeting is one differentiation. And other, you got to have a marketing plan of some kind, right? If you’re doing b2b, and you’re set, you have to have sales process, that’s a real sales process. And I’ve asked people, what’s your sales process? They say, Well, you know, we get a call, we make a proposal, and we close them don’t close. So that’s our sales process. That’s, that’s just that those are happy milestones along probably, was there a demo involved?
The demo was their presentations were there that you have to connect them with references, you know, all those things are things that you can anticipate and improve on. And so we help them do that. And we’ve done this, you know, across a wide range of businesses in in b2b, again, like industrial service, like the painting company, the contract manufacturing that skinny down to grow. All right. And again, it’s really giving them and here’s the thing, some of the things, they do have nothing to do with what we do with them. But it creates a mindset of tracking of dashboarding, which is one of the things we measure as a strength or weakness in a company, do you have metrics?
And where are they being tracked? And you don’t need and some will come out with this report that has like 1000 metrics. So does anyone read that? As it was three metrics, you really need to know, there was a manufacturer that they were late all the time, late days late, right, so they added up all their days late from all their projects? And they literally had hit 1000 1000 days late cumulatively, right? So some product 10 days, 50 days, whatever. And so that’s, well, how are you going to get reorders? If you’re late all the time, if people know you as the company that’s late, you can’t trust them?
Yeah. So he said, we changed that. And the reason they were late, is when somebody called to place an order, they were so hungry for the business, they just said yes. And then figured we’ll figure it out at the end, right? Well, at the end, it couldn’t figure it out. Because yeah, it’s finite. So he changed their philosophy, because they were measuring that and they put it up on a big board inside the biz in the manufacturing floor. And that went from 1000 to 700. To 300 200 to 50. To zero. Yeah. And they are not late anymore. Now they get better business at better margins, their customers trust them more. Those are the transformations that that I love to see happen.
Damon Pistulka 48:50
Yeah, that’s awesome. That’s awesome. Well, I tell you, it was a it’s been awesome. It’s been incredible having you I just really as an it’s such a pleasure for me.
Jose Palomino 49:01
I appreciate it. Daymond this has been a lot of fun. I love I love talking about this stuff. So it’s easy. Oh, man, I
Damon Pistulka 49:08
so appreciate you sharing this with us. Because your revenue throughput model you develop with your third cohort there is incredible and listen to the applications of it is really valuable. We got a couple of great comments here on it. You know about this. This is great information. And it’s just man, thank you so much for being here today. Again, I wanted to thank Jose Palomino from value prop for being here today talking about the keys to designing the revenue growth you want. If you’re just catching this now get back and listen to it. Listen to him talk about the revenue throughput and how it is and then reach out to him. So Jose, where can people find you get a hold of you? What
Jose Palomino 49:49
is the best way to do that? Yeah, two easy ways to do it. One is just go to our website value prop.com That’s value PR o p.com. Lots of resources there are podcasts or blog, a couple of guides made available a book, all of that and contact easy ways to get a hold of me. And then also on LinkedIn, there aren’t that many Jose palominos but just follow Jose Palomino Valley prop and you’ll find me on LinkedIn.
Feel free to reach out to me that you heard me on Daymond show. And if you want to talk to me 1530 minutes easy to have that conversation. See if there’s, there’s a there, they’re happy to help. You know, that’s, that’s how my life has been advanced by other people. So I like to pay it forward as well.
Damon Pistulka 50:35
Awesome. Awesome. Well, thanks for being here today, Jose, and thanks everyone else for listening. We’ll be back again later this week.
Jose Palomino 50:41
Thank you, Damon.