Not Enough Experience to Hire!

Finding the right people continues to be a challenge. So what happens when you acquire a business? It's not a bed of roses. In most cases companies suffer from Founder's Experience Depravation. The owner leaves and several people are required to step in to replace the gap.

Hiring is critical for successful growth. The talent you have needs the experience to get accurate financials and update systems for a profitable operation. Lacking the right experience at each level can be costly to your new investment.

We talk about some of those challenges and what you need to do to fill the experience gaps in your company.

[00:00:00.00] - Alice

Books in the Biz, a podcast that looks at both the financial and operational sides of success. Please welcome our hosts, Dan Paulson and Richard Veltre. Dan is the CEO of Envision Development International, and he works with leaders to increase sales and profits through great cultures with solid operations. Rich is CEO of the Veltre Group and a financial strategist working with companies to manage their money more effectively.

[00:00:29.05] - Dan Paulson

Now on to the podcast. Good afternoon, everyone. Welcome back to Books of the Biz. I am here with my good friend Rich. Rich, how are you doing today?

[00:00:38.02] - Rich Veltre

I'm doing well, Dan. How are you?

[00:00:40.09] - Dan Paulson

I am doing wonderfully. If I was any better, I'd be you. Actually, I'm glad I'm not you right now because at the time we're recording this, you are wrapping up tax season. The latter part of tax season. So for those who don't know, we're just before October 15th, which is the last day personal taxes if you filed an extension, correct?

[00:01:03.08] - Rich Veltre

That's exactly right.

[00:01:04.29] - Dan Paulson

That's exactly right. So while Rich is busy trying to collect information, he said, hey, let's get together and do one of these podcasts. So here we are. And today we're going to talk about something that is going to appeal maybe to part of the audience here, which is those who are buying a business. Rich, we've talked in the past about this. And one of the issues that we both mentioned in the value of buying a business is sometimes when you buy, I'd say, a small or medium-sized business, that owner occupies a lot of space, we'll just say. They do a lot of different things in the organization. You have to replace that person with other skilled people, which we both know can be extremely expensive, especially since you're not replacing, typically, one person, you're replacing, most of the times, 2-3, sometimes And we support key individuals in the organization to keep everything up and running. I'm just curious to your thoughts on from a financial side, looking at from the CFO window, what's the recommendation you typically make to new business owners when it comes to hiring replacement talent, if you will?

[00:02:26.23] - Rich Veltre

I suggest to people that you get in and see what your needs actually are. So I'll give you an example. Multiple times, I've seen companies come in, they buy a company. This especially is relevant when you're a brand new buyer. If you've never actually owned your own company or run your own company, then suddenly you come in and you buy one that's existing and running. If you don't know what you're looking at, assess. Get an idea of what's going on. Because what will happen is someone's going to tell you at the water-cooler, you need a CFO. Well, if the company doesn't have any financial function, the CFO might not be your first hire. And the reason being that CFO is supposed to be, supposed to be, big air quotes, supposed to be a strategist, supposed to be a forward looker, supposed to be setting policies that get him the numbers that he needs to be able to look forward and not get bogged down in what's happened in the past, a little bit more of helping to steer the ship. And if you sit at the water-cooler and somebody says you need a CFO and you hire the CFO, CFO.

[00:03:45.22] - Rich Veltre

Is the CFO going to actually do data entry? Is the CFO going to handle bills that come in and make sure they get paid? Is the CFO going to get involved in collecting your money? If you don't know that these are the tasks you want, that list sounds long for one person. And to hire someone that's at a higher level and then tell them, here's all these low level tasks that nobody's doing. And now you have to do those. The problem is those bog that person down. They actually weigh them down to the point of not being able to do their original job. So you're now paying for this high level person that you bought because you were suggested to do so at the water-cooler. And then right below that, But he's now doing a lower level job that you could have gotten done half the money, quarter of the money. So it really becomes a bit of a take a minute and decide what it is that you want. There's a second part to that, which is if you are backed by private equity, and you are buying a business, and you buy that business from a founder, the founder does not understand the reporting requirements of being owned by a PE.

[00:05:07.10] - Rich Veltre

So the fact that you walk in, and now the PE wants forward-looking Forecast. They want a budget. They want a 13-week forecast. They want to handle on the cash. They want to know where every dollar is going. They want to know that you're taking care of making sure that all the bills got paid. You make sure that everybody knows this is the This is what you need to collect next week because you have a payroll. So all of these things now, the PE is now asking your CFO for that. He's not paying the bills. He's not doing the data entry. He's not making sure that the books are up to date because he's busy. It's not that he's not working. It's not that he's not doing the job. Now, the question is, can he do the job? Because when he gets involved in doing something that's a reporting project that takes a week to set up because it's never been done before, who paid the bills for the week? So now you're behind somewhere. Now, he'll go and he'll go and catch all that stuff up, and now the reporting gets behind. So he goes back and forth, and now he's just moving everything forward at a really slow pace.

[00:06:17.20] - Rich Veltre

I said, take three solo cups, turn them upside down on your desk and move one about six inches, move another one about three inches, move one about a foot. Those are the three tasks he gave him. He can only move them a a little bit each time. How does he get everything to the end at the same time without hiring other people? Soapbox.

[00:06:40.20] - Dan Paulson

Soapbox? Well, I think we're all on the same soapbox here. So from the operations side, I see similar things. I've been brought in, admittedly, to sometimes do the task management. So oftentimes, what you're trying to do, though, is you're trying to get members of team up to speed on doing specific tasks or duties. So in some cases, it might not necessarily be hiring new people. It might be getting the skill sets of the people you have to match the needs that the business has. And often, again, when you have, as you pointed out, a founder, we know there are many founders out there that have their hands in everything. They control everything that's going on. They might have people to do certain tasks, but they only do tasks to the the limits that founder allowed them to do. And unfortunately, that usually means that founder is doing, I'll call it 60 to 80 % of the heavy lifting. The person that is supposed to be doing the task is just doing some of the tactical work. They don't understand necessarily everything that they're doing or why they're doing it because the founder just says, this is what you need to do.

[00:07:56.04] - Dan Paulson

So some of it is, yes, you need to hire new people, right Sometimes you need to hire to replace people who just don't have the capabilities to do the task that needs to be done. Other times, you need to train up. And as we talked in the last couple of episodes here, it's getting harder and harder to train up because you have talented individuals with years of experience who are no longer active in the workforce. They're not looking for their next full-time job. If they're looking for a job at all, they want something that's stepping them out of that role. So to me, it's getting harder and harder to find the skillsets you need. Maybe, as you point out, it's not a CFO, it's not a COO, it's not executive level position. It could be a controller. It could be, in your case, a bookkeeper. In my case, it could be a manager or a supervisor that needs to either be trained or put him to position. Because Because as you get to those C-levels, I think most people lose sight of that is not doing the work. It's being that forward-looking individual saying, This is what we need to develop to make this company grow.

[00:09:17.25] - Dan Paulson

And to me, that becomes more and more important, especially as companies are acquired. That talent, that internal talent at the top level, the founder is now gone. They had a lot of knowledge about the business. Now we got to replace them with somebody else.

[00:09:35.13] - Rich Veltre

Right. I agree with you there. I think that I lean towards the hiring someone, and it's skewed, right? It's skewed because one of the jobs that I'm on now, I see all these things that are happening. And I think in this particular case, there's no one in the finance function. Like zero. So you have to hire someone. And the owners are focused on the C-suite. They're focused on the finance department. And I'm saying, there's nobody for the finance department to have do anything. There's no one underneath them. So I've asked a couple of times, you got to have somebody there, and their thought pattern is go for an outsource. But they're going to go for an outsource that's overseas. And I'm saying, Why does that work? Are we going for the cheapest solution or are we going for the best solution? Which one is it? And I don't have an answer because they never answered the question.

[00:10:40.09] - Dan Paulson

Well, I think a lot of people just see stuff as either busy work or tasks. And there's enough marketing out there that says, well, for example, AI. There's things out there that AI can replace that are repetitive work, that are consistent work, that are mundane things that most people don't want to do anyway. There still needs to be a knowledge base there, even to activate the AI. And I think the same mentality, though, is, well, if we can get somebody a live body and we can get them overseas in Asia, India, wherever, and they can do it for a couple of bucks a day, in some cases, depending upon what they're doing, isn't that a lot better than trying to find somebody here that you might be paying 30 to $40 an hour to do the task or even more?

[00:11:37.09] - Rich Veltre

Yeah, I think I like the idea of AI stepping in and helping out. I'm curious, though, in the case that I'm working on, the system is old. So AI is not necessarily going to connect to it because it's not built with AI in mind. It's not open architecture with AI in mind. So how do you get it to do what it wants to do? I'll give you a further example. It's very common, right? You buy a company from a founder. They will tell you what their sales are. They'll tell you who owes them money. They'll tell them how much money is in the bank. But they will never tell you how much they owe somebody else. So the accountant The announced payable side of it is just not important to them. So if their margins are really good, that just means that they've paid all these bills. If their margins are not as good, the bills are sitting on his desk somewhere. They're just not addressing them. So the question becomes, that's one of the biggest things that's a task master. That's one of the biggest things. It's going to be a task issue. It's going to be a task issue because you don't don't know what the tests are because no one's handled them.

[00:13:02.19] - Rich Veltre

So the biggest thing is then, how do you change that? How do you change that mentality? And that's where I think I've seen that all these systems out there now that will do accounts payable with an AI component. They'll actually do it where the bill can be sent to their system, and OCR will actually look and try to pull most of the stuff off of the invoice for you. And then you just have to approve it to say that it's a valid bill, and then it's in your system and ready to be paid.

[00:13:31.09] - Dan Paulson

I believe Quickbooks will do the same thing for.

[00:13:34.06] - Rich Veltre

Quickbooks is one. Ramp is another. Bill. Com is another. Stampley is another. Stampley is one of my favorites, but it's very expensive. It's a bigger system set up. So I think that these are great, but they have to tie into the general ledger system. They have to tie into the accounting. Otherwise, what happens is You're processing everything out here, and then somebody has to go enter it over here. So the chance for, number one, fat-fingering things, that's what I always say, right? Your chance of fat-fingering it, chance of actually duplicating something, chance of actually human error in between, negates the advantage of the AI. So you have to have a base system that allows you to bring this stuff in automatically. Otherwise, you're going to wind up another person. The entire goal here that gets derailed when people talk about price, because all they think about is, I'm not going to spend that five grand. That's crazy. Well, it saved you 30 grand over the next 10 months.

[00:14:44.23] - Dan Paulson

Right.

[00:14:45.17] - Rich Veltre

But you only think about the five grand. So you stop and say, no, I can't do that. That's just not going to happen. People got to get out of that mindset, because the fastest way for you to fix some of the stuff we're talking about today is to automate. Yes, So the number in this is, no, I'm not going to do that. It's got to be out of my pocket. No, no, no, no.

[00:15:05.15] - Dan Paulson

Well, it's the same thing on the operations side. You're not dealing with controllers or bookkeepers, but you're often dealing with leads or supervisors, or maybe It's just somebody who's been in the company a long time. So I go around and start asking, well, where are systems? And there are less tools or there were less tools in the past for documenting and managing systems than there are today. So if you're lucky, something's in a three-ring binder. 99 % of the time, everything's in some guy's head who's been with the company for 20 some years that isn't the owner. That is also probably we're approaching retirement age. Now, what do you do? You got to extract that knowledge out of that individual who probably has never written down any of the systems, nor does that person know how to do so. And you have to put it in a format that can be editable It can be updatable. It's a living document. It's not something on a three-ring finder sitting on a shelf somewhere, because if there is anything documented, that's usually where it's at. And I remember one client, we started talking about this stuff, and I asked, well, you said you've got the system for it.

[00:16:16.22] - Dan Paulson

Where is it? Well, it's in a binder. Where's the binder? It took weeks, and he finally threw his hands up in the air. He said, I don't know where it is. So it's gone. Knowledge is lost. And it It's still there because he has the people there. But if something happens to that person, and now think of it again in a sell situation where now the founder has sold the company to somebody else, you're hoping to retain that top talent. And we both know that while there's a certain grace period where the smart people will know not to touch anything unless it's dire need to be fixed, they'll leave things alone. Once you get past that process where you're starting to change, Somebody who's 55, 60, 65 might be looking at this going, I don't need to do this anymore. I don't need to do this again. And they give you their notice and they walk out the door. And now you've lost all that knowledge. How are you going to get that back? Are you going to be able to talk that person to coming back to work? Are you going to bring them back as a consultant?

[00:17:21.11] - Dan Paulson

Now you're back in the same scenario where you now have to pay somebody exponentially more to gain that knowledge that you already had internally. So there's a lot of that, I think, going around in companies that, while it might be well run, were run by a singular person, not a team of people.

[00:17:44.00] - Rich Veltre

Yeah, I think The other... I just lost a train of thought.

[00:17:49.00] - Dan Paulson

I hate that. Great win off the tracks.

[00:17:52.14] - Rich Veltre

Yeah. I think that with accounting, I think it's... I I don't want to call it easy or simple, but it's repetitive.

[00:18:05.27] - Dan Paulson

Yes.

[00:18:06.24] - Rich Veltre

If you go from one company to another, the processes should be baseline the same. When I talk about accounts payable, I always talk about white, pink, and canary. And everybody goes, What do you mean white, pink, and canary? When everything was paper, you had a three-part paper that actually you put down what it was that you ordered.

[00:18:28.17] - Dan Paulson

Okay? Yeah. The white part.

[00:18:29.14] - Rich Veltre

And then when So it all came back to you that the stuff got delivered. You had a white part was the invoice, the pink part was the purchase order, the canary part was the shipping proof.

[00:18:37.18] - Dan Paulson

Yeah. Okay?

[00:18:38.16] - Rich Veltre

Go look at any one of these accounts payable systems, okay? And they all have one of those three components. The only thing that's missing Colors.

[00:18:46.14] - Dan Paulson

Right.

[00:18:47.10] - Rich Veltre

Okay? The three documents have to be there or you don't have a valid payable. Okay? So systems can be replicated. Stop making it out like you're so unique.

[00:18:57.23] - Dan Paulson

Yes.

[00:18:58.14] - Rich Veltre

From an accounting side, these So a relatively straightforward. And I think it goes back a little bit to what we've been saying all along, hire the right person. Okay? Because if someone doesn't know that, they're not the right person. If they don't know that those are the three pieces you need. And after that, you can look and say, do I really need a CFO person to say that? Or should the controller person be saying that? Should an ops person be saying that? Because the only way that that bill should even hit a finance person's desk is they should know that the Canary part was received.

[00:19:34.08] - Dan Paulson

Exactly. Okay? Yeah.

[00:19:36.18] - Rich Veltre

So it goes back to, do we have the right people? Did we pick the right people? Is our process of hiring the person the right process? Yeah.

[00:19:48.03] - Dan Paulson

And often there isn't a process for hiring people, especially in small to medium-sized companies. Medium-sized, you start seeing a little bit more of that because they might have a dedicated HR person or they have a company that they've outsourced So there could be more built in there. You still have the issue with systems being in place, though. And not having a lot of systems or having very inconsistent systems, I guess, would be a good way to say it. Somebody does things one way, another person does something different because they're more comfortable doing it that way. But again, from a training standpoint, so you said from the accounting side, a lot of things are the same no matter where you go. I would say on the operations side, depending upon, again, the company and what industry they're in, I would say there's a lot of similarity there, too. Accounting, you have to do. You really don't have a choice because if you don't do accounting, That means you're also probably not paying your taxes or not paying your taxes accurately, which then leads to other issues down the road, which makes Rich really happy because then he makes lots of money.

[00:20:54.25] - Dan Paulson

On my end, again, you have people who figured things out who then scattered that knowledge through basically word of mouth and stories. This is what you do. This is why you do it. If you don't do it this way, this machine will break. Okay, well, that's wonderful. But now, again, that one person has that knowledge. That knowledge is then misinterpreted multiple times. Inputs still get done. Raw materials go in one end, finished product comes out the other. But is the quality the same? Is the consistency the same? Is the speed the same? All of that becomes It's a major concern, which, again, the new owner or PE is going to look at and say, why is our error rate so high? Why does it take it so long to produce this product? Because compared to other companies of our size, we should be producing this product the next time. So there's a lot you have to look at when it comes to that. And that's where having a key person at the top level helps, but you still need the right individuals all the way down to the front line to do that. So that involves hiring right, it involves Training right and sharing that knowledge with that team that's coming in.

[00:22:06.12] - Dan Paulson

And to me, that's the next phase of this is now you got to figure out how to do that. And for me, doing that is you have to have a hiring system in place. You have to have some way to vet that person before they come on board in some way, shape, or form to see if they are capable of doing the task you're going to ask them to do. And then after you hire them, there's an onboarding and training process that needs to happen. Beyond that, there also then is a follow-up that needs to happen by a more experienced person who is, again, transferring their knowledge to somebody else. And then that accountability piece, the final piece is then testing to make sure that knowledge is transferred. In between is where all the documentation and systemization comes in that both you and I talk about. So as you're buying a company, you can't just look at what sales are, what profitability is, because assuming that that owner left and that the business isn't as turnkey as you think, there's going to be a lot of work you have to do on a team basis to really get that business ready to rock and roll without the owner being.

[00:23:17.08] - Rich Veltre

Yeah. And I think it's an important piece to remind people that when we talk about system, we are not necessarily talking about an app or a piece of software or a subscription. Okay? System can be interchanged sometimes with process. And it's very important to realize that a lot of people lose a lot of money because they don't understand their process. So they think that this fancy bells and whistles app actually is the process that's going to work for them, but they don't test it. And then you sign up and you try to use it and it doesn't work for you, and you just wasted a couple of months of trying to get it to work. So Process first, software second.

[00:24:02.10] - Dan Paulson

How many times have you seen companies that have spent money on software and only use 20 to 30 % of the capabilities of that product?

[00:24:13.11] - Rich Veltre

I've seen it more times than I care to admit. I've seen it where we get involved and people are still paying for software that they haven't used in forever. And they haven't They haven't used it in forever, yet they're still paying for it because they're on a subscription contract. Or they just haven't looked and it's still sitting there, and every month is sitting their card, and they don't know. Their accountants just say, Oh, well, it was software. We know it's software, so we book it the software. Well, why are you renewing it every month? Why are you continuing to pay for it? If you're not able to use it, it doesn't work. So months down the line, you realize, I've been paying for the software forever. Try to get that refund back.

[00:24:59.11] - Dan Paulson

Yeah. It doesn't happen. No. It doesn't even come close. They're happy to take your money. If you're not using it, that's your problem. They will be more than happy to explain that. So that's really where you or somebody else has to come in and look at the tools that they are currently using, determine if those tools are being used to their fullest capacity or if they are even the right fit. Because that is one quick way to stop the bleeding is if you've got something that you're paying a monthly or yearly subscription for, assess it and determine if That's something that you need to continue going forward. So Rich, as we wrap up here, what's your takeaways or what would you tell a new business owner the first three steps they need to do?

[00:25:43.26] - Rich Veltre

Map your process, insert your people around the process, and assess the level of person you need for each step of the process. So process people Task, I think.

[00:26:03.03] - Dan Paulson

It's probably. I'd say mine is pretty consistent to yours. I would also add, so my three would be assess, Step back, look, ask a lot of questions, and then from there, determine, do you have the right structure to support that? If not, build the structure. From there, build the process and systems So in line, I'm probably taking one step back from you and making sure, do we have the right people in the right seats on the best, doing the right things, which often, again, takes a little bit of time to process. There are ways to speed up that process, though, and here's our shameful self-plug, either Rich or I or both of us, can come in and help do a value assessment of the business that you've acquired or are going to acquire to determine what work you need to do on Rich, what type of things would you do from that?

[00:27:05.26] - Rich Veltre

And. Well, I think nine times out of 10, I can identify the pieces of your system that you don't have written down or you don't actually follow or understand. And I would implement some of those processes around, number one, calling good financial controls, and number two, making you scalable. So The less that you have these in place, the harder it will be if you're seeking to sell at some point. You want to have these things in place so that you can say, my numbers are reliable because all my systems are followed. So without If you're not happy about that, you're just going to flounder a bit. You might make money and put it in your pocket. But are you going to get the big money when you sell it? I don't know. We'll find out. But I'm happy to help. I'm happy to help if I can.

[00:27:58.11] - Dan Paulson

And I take care of the other end. So I look at the people you have on your team, the systems and structures you have in place from personnel operation side. From there, we then get down to systems and process on the actual, I'll call it manufacturing side, whether it's in construction, whether it's in a service-based industry or whatever it might be. And then there are same thing. We make the determination, is this scalable or not? And if it's not scalable, what are the steps you need to take? So I encourage you to contact either myself or Rich. Rich, what's the best way to get a hold of you right now?

[00:28:34.05] - Rich Veltre

Send me an email, rveltre@veltregroup.com.

[00:28:37.13] - Dan Paulson

And you can get a hold of me at danpaulsonletsgo.com. And I think we can make a slight announcement here that some things are going to be added to that in the near future. I'm shooting for October first that we're going to have a new opportunity, and we will share that in one of the upcoming episodes. But there could be a way that you might actually be able to get a hold of us at the same email address or a similar email address. So we'll be talking about that very soon. Rich, thank you again. Good luck on your finishing up the taxes for the end of the year, and we will chat next week.

[00:29:11.06] - Rich Veltre

Sounds good.

[00:29:12.23] - Dan Paulson

All right. Take care.

[00:29:14.03] - Rich Veltre

Talk to you later.