What does it take to build a $25 million business?
Rick Day is a serial entrepreneur. For over 25-years Rick has been starting, growing, downsizing, restructuring, and selling his businesses. One of his more recent businesses not only survived the Great Recession, but it grew to over 55 people and over $25 million in revenue.
After a multi-million dollar exit, Rick became involved in several other businesses as an advisor, investor, and leader.
Say hi to Rick at businessbyday.com.
Read Raw Transcript Now:
Success Harbor: Hi everyone this is George Meszaros with Success Harbor and I have Rick Day with me. For over 25 years Rick has been growing, downsizing, restructuring and ultimately selling his business. Even though he sold his business of $25 million, he is very much involved today with businesses. Rick also blogs and advises entrepreneurs at businessbyday.com. Welcome.
Rick Day: Hey, thanks so much, it’s a pleasure to talk with you.
Success Harbor: Thank you for being here today Rick. I really appreciate it.
Rick Day: Of course.
Success Harbor: Before we get into anything else, I want to talk about your first business venture. What was your first experience being an entrepreneur?
Rick Day: Well it’s funny; it was not my telecom business. I had served 3 years in the Navy and got out of the Navy here in San Diego and I decided to put myself through college and finish college afterwards so I was an enlisted guy and so I ended up working at one place and it was redundant work and I had a buddy that I met in one of my classes and he was detailing cars and I didn’t know much about that business at the time, I was 22 and so I asked him to teach me and then I went and found some clients. So he taught me; I provided him with a couple days of labor, he taught me the business, showed me where to get my supplies and then I started just kind of knocking on doors and telling some friends that I was in the auto-detailing business and so that business actually got me most of the way through college, great flexible hours, met some really great people who drive nice cars which I like and then I ended up selling that business to another student.
Success Harbor: So, thank you for your service; I didn’t want to interrupt you but thank you for your service. And what was that first business experience like? I think a lot of people, you know, to look at the Facebooks and the WhatsApps of the world, billion dollar exit or sale, just unbelievable businesses but starting a business like this when you do everything from actually doing the work and marketing your business, everything from the nitty gritty to just running it daily, why do you think it’s important to have a business like that or have that kind of experience?
Rick Day: Well I think the first and the biggest step that I had to get over George, was just the fear of ‘what if this doesn’t work?’ and I had rented a room from my grandmother at the time and so, I’m living in her house and I’m talking with her a little bit about this and I’m going to college and I said you know what, I think I can do this but what happens if it doesn’t work? What happens if nobody wants to do their cars and maintain their cars for them and she said, “Why don’t you give it a try because you could always go get another job if you want to?”, and she really encouraged me but taking that leap was the most difficult thing. And then I just sort of, you know, my degree that I was perusing is in Finance; my degree is in Finance now and so I knew that you’d had to have the basic operations of the business. Somebody has to do the marketing and sales, somebody then has to perform the work or provide the service or the product and then somebody has to do the administration and the books and you’ve got to pay your taxes and do your banking and so, I had to do all of that myself.
Success Harbor: So then you decided to sell that business. So how long did you run that business and why did you decide to sell?
Rick Day: Good question. So I ran it for about 2 ½ years and I actually ended up picking up an account from–, so one of my bankers was a girl who’s boyfriend worked at this computer company and so I went down to the computer company and I said, “Hey, I would love to come and detail your cars.” They had really nice, like a Ferrari, they had some Porsches, they had a Corvette, the Toyota Supra, one guy had a Lamborghini, and it was really cool so they hired me and I was detailing their cars and we got to talking and they said, “Well what are you going to do when you get finished with school?”, and I said “Well I’m getting my degree in Finance and I love people and talking to people so maybe I’ll go and be a stockbroker or something like that”, and after some discussions they said, “Well why don’t you come and sell these computer systems with us, we’ll train you, if you like sales and you’re good with numbers we can help you with that”, and so it was really kind of a story of where, just taking that initial leap into one business led to opportunities in another business so they hired me and I had a buddy of mine at school and I said, “Hey, I’m going to have to turn over my business, would you be interested in taking it over and maybe we can work it out where you can buy it from me?”, and he said yes.
Success Harbor: So then, in ’92 after getting out of the Navy, you were still putting yourself through college and you founded ‘Daycom Systems’ so did you go right after this job selling telecom to start a business or what was actually the reason to strike out on your own?
Rick Day: Oh, well ok, so after the detailing business then I went to work for the company that I just mentioned, with all the nice cars and I started selling the IBM mid-range computer systems and equipment and that lasted about 3 years. It was a straight commission job so you really kind of ended up working for yourself, there was no salary, there was no safety net, but I was comfortable with that at that point and so I had some success there and this was ’87 so I got out of the Navy in ’85. So in 1987 then, I went to work for this other company, worked there for a couple of years and they ended up going out of business because they literally grew too fast and they did not have enough funding and enough money to purchase the equipment to fill the orders, that’s how fast they were growing. And then, so I ended up working for another company in a similar situation and I didn’t like the way they were doing things and so this was ’91 ’92 so then in 1992 I finally decided, you know, I think I can compete in this industry, I think I know enough people, I know enough of the tricks of the trade, I’ve got the right connections so if I could just put together a little bit of money, I can start my own business and that’s how Daycom started in 1992.
Success Harbor: Is this something that you recommend for people that, you know, maybe they have a job now but they want to start a business, to try to get a job with a business, to kind of learn the ins and outs instead of taking–, because that way it’s almost like somebody’s paying you to learn instead of just trying to strike out on your own and get into something that you don’t know that much about.
Rick Day: Yeah, I think that’s great and I think that’s where most opportunities really present themselves. I think if someone has an interest in a particular industry and they know nothing about it, they absolutely should be willing to go to work in that industry for a period of time, to learn as much as they can, to see how it works and then if they still want to–, I mean they might decide you know, this industry is too complicated or it requires too much money for me to operate so I’m just going to enjoy my employment here but there will be those entrepreneur that say, “You know what, I see how this works, I think I can do it better, I think I can do it faster or in a different way or with a different spin” and I think that’s a great way to start a business.
Success Harbor: So can you talk about some of the early challenges of growing Daycom? I’m very interested about the first 1-2 years in business because that’s when a lot of businesses fail so maybe you can talk about some of the greatest challenges especially, like I said, during the first couple of years in business.
Rick Day: Yeah, sure. So I started–, I knew that I didn’t have a lot of money to start the business and so I knew that I needed to keep my overhead low and I had to really watch my money so I rented just a cheap office and kept the overhead as low as I could and I just concentrated most of my efforts on sales during the day and then at night I would do my invoicing because I knew that it wasn’t productive for me to do that during the day so I really tried to maximize my sales and marketing time during the day and I tried to…
Success Harbor: So how were you selling? Were you cold-calling or what was your sales strategy in the beginning?
Rick Day: At that time, yeah, it was all over the phone. And you got to remember this is 1992, so I did have a pc and I had a fax machine but there was really emails just coming in and the web was just getting started and so a lot of our business was done over the phone and over the fax.
Success Harbor: And how difficult was it to get those first sales?
Rick Day: Well I had had some customer relationships when we talked earlier about people working for a particular company and then striking off on their own. Often times what happens is, when you’re working at a particular company, especially in a sales position, you’ll end up getting to know some customers and so when you strike out on your own, you can call those customers again and say, “Hey listen, I’m striking out on my own, you know, you had a good relationship with the company where we were before, if you’d like to see what I can do for you and how I’m changing the business and doing in a different way then I’d be happy to talk with you about how I might be able to do business so, it was cold-calling, it was referrals, it was a couple of customers that decided to give me a shot at my new company.
Success Harbor: Ok so, sales sounds like it wasn’t a big, big challenge in the very beginning, was it?
Rick Day: Well I think sales is always a big challenge for any business and it was really where I spent the majority of my time but like I said, I did have a couple of customers that would buy and I kept my overhead low and just trying to be really efficient about my time and make sure that I was doing the right things at the right time during the day.
Success Harbor: And you mentioned one of the companies that you worked with, grew so fast they just were unable to finance their own success so to speak, so what did you do in your business to be able to finance just your growth.
Rick Day: Well it’s interesting; I had just a little bit of savings but I only had maybe $10,000 in savings and that might seem like a lot of money to some people but when you’re buying and selling computer and telecom equipment and you have to buy it from your vendor and pay cash for it now and then ship it to your customer and invoice them net 30 and they’re going to pay you in 30 days per the contract and really the check takes 45 days – 60 days, which is one of the things you learn very quickly is, they like to use your money as long as they can. I ran out of money very quickly. So, like most businesses, the first place that you go is family and friends to see if they can loan you some money and so I talked to my grandmother who had been very supportive and she watched me progress over several years and I said, “Here’s the business, here’s what I’m doing, I’ve been doing it for a couple of years” and so I ended up borrowing some money from her and then every single dollar that I had, I rolled back into the company until I had enough cash that I thought that I can operate and then I paid my grandmother back too.
Success Harbor: So it sounds to me that you really did things right in the beginning. What do you think are some of the mistakes people make during the first couple of years being in business?
Rick Day: Well one of the mistakes–, and maybe this is just a matter of opinion but one of the mistakes is that people, I think, project when they start off in sales or they start off in their business, they project that sales are going to grow much faster than they really will and when you do that, you tend to be very optimistic about your sales, very optimistic about your profits and sometimes you take on too much overhead and sometimes you don’t have enough financing to really last though some very lean times so I always kind of tell people to look at their growth forecast and their sales forecast and then cut it in half and see what would happen then.
Success Harbor: Ok. I’ve heard you say that systems were very important for your success. Can you give us some examples of systems that you have created in your business?
Rick Day: Oh of course, yea. So when you look at–, the book that really got me going on that was Michael Gerber ‘The E-Myth Revisited’, and he talks about how you–, a business owner in early stages wears so many hats, you’ve got the sales and marketing hat, the production hat, the accounting hat, you know, everything right? And so then, as you start to bring people into the business, you’re hiring people to take over a particular area and so you need to be able to say, “Ok, I’m taking this hat off and I’m giving it to you so let’s talk about how I like to do that and how my customers expect that done”, and you write your procedures on that particular area or on that particular hat if you will, and then that person can take off and they can improve on it and they can grow. But as soon as you hire somebody, I think you have to start creating the systems whereby they can be successful and whereby they can do business the way you want it done.
Success Harbor: Ok. Now you grew Daycom systems to over $26 million in revenue with over 60 people but then in the early 2000’s the dot-com bubble burst. So, we know the story, a lot of companies ran out of business, it was just a rough time for business so what did you have to do to adjust to such a shock and what helped you stay in business at that point?
Rick Day: Yeah, I got to tell you, that was one of the toughest periods in my career. We were going really, really well, we were $26 million with 60 people and then the dot-com bubble burst and people stopped buying these big companies that I was servicing like Sysco and Intel and Geico and the Gap. So many of these big companies started and; they really slowed down on their technology buying and so my revenues dropped from $26 million to $20 million in one year, which is like 25% and I think I lost almost a half a million dollars that year and it was really, really painful and you know, as a young CEO who had only experienced growth and success after ten years, this was really a slap in the face and a reality check for me and I really had to just buckle down and do the work in figuring out where I could cut expenses and that was when we got into–, the first time I ever had to lay anybody off, it was terrible. It was very emotional, it was very scary. I was losing money, I wasn’t sleeping at night but we ended up doing it. And then the next year, we went from $20 million to $15 million so the sales continued to slow down but I started looking more at the prospect pipeline, the forward-looking indicators and that was one of the things that I did, was put in place where I could really look forward and project what the revenues were going to do and I could make changes sooner and that really helped a lot.
Success Harbor: Ok. So do you think the companies that went out of business were unable to adjust or refused to look at reality? What do you think are some of the biggest reasons some companies just can’t survive? And it’s true even today. This economy is still not a good economy that we’re living through now, although it’s not as bad as it was a few years ago so why do you think some companies are just not able to hack it?
Rick Day: Well you’re right about today’s economy. It certainly is not an easy economy and I think you have to be on your toes and you have to be really alert and you have to be really paying attention to everything and just on edge. It’s hyper-competitive if you’re going to succeed in today’s economy. But I think that the reason, to answer your question, a lot of people failed, was that they would stick their head in the sand and they would say, “Well, it’s going to get better next year, it can’t possibly be this bad”, and they don’t react, they don’t do the hard things that they need to do, like lay off their friends that are working there or cut their–, maybe sell their expensive car or return it on the lease or downsize their office building because they get so much ego involved, or they get themselves in over their head debt-wise so I really encourage that growth, especially in fixed expenses and long-term leases and things like that, keep that stuff low because you never know when you need to ratchet back and if you’re committed for a long term for big dollars, you’re going to be in trouble.
Success Harbor: So then by 2009 business was good right? Because ‘Daycom Systems’ was acquired, at that point you had $25 million in revenues, so how did that exit impact your life, selling your business basically?
Rick Day: Well it was interesting because after the dot-com bubble burst, we really had to go, and I say ‘we’ because I had a really good management team at that time that I surrounded myself with and we really had to look at the business and re-tool the business, and so, you’re correct at $25 million and 50 or so, 55 employees when we sold, but it was a much different business when I sold than it was when I began and that’s another important lesson for people, is you have to continue to morph your business and change in response to what your customers want. So then after I sold the business, I had a bunch of money that came in. I began to invest and then I volunteered at Connect here in San Diego to be a volunteer mentor and entrepreneur in residence so I could help other small businesses grow and I invested in a sailboat and powerboat dealership that I am now a part of and so, just travelled a lot and had some fun and did my earn out for a couple years.
Success Harbor: Ok. So today you’re involved–, you mentioned this dealership, a sailboat dealership so you’re a partner in that business right?
Rick Day: Yeah, that right, it’s really fun. When I bought myself a new sailboat in 2007, I became friends with the guy that sold me the boat and then in ’08 and ’09 we had that very difficult financial crash and the company that he was working for went out of business right about the time that I was selling my business so again, it’s one of those fortunate situations where, when you’re doing something, sometimes the timing just works out and you see another opportunity and so he told me that he had a great relationship with Beneteau, the French baker, the largest yacht builder in the world and that he could become the dealer here in San Diego and he asked me if I would help him start it, if I could help him get the financing together and if I would help him run the business and operations and so we did that and we’ll be 5 years old in September and doing great.
Success Harbor: So how is this new business different from your ‘Daycom Systems’ business in terms of, what are you learning now about business, how has the business environment changed with this recession. Can you talk about how you had to adjust basically?
Rick Day: Sure, well I think the first thing I would say is how surprised I am that it’s very similar to my past business. If you understand that in my last business we would consult with the customer, we would provide the telecom equipment and the software, we would install it and provide the services, we would take care of the customer in the long-term and then offer them upgrades when they wanted to upgrade their business systems. You could say the same thing about boats right? So we consult with the customer, we provide a boat, we provide our services, we help them maintain it and then when they’re ready for something different, we take their old boat back and sell them a new boat. So in that way it’s very similar. The big differences are that this is marketing to consumers so there’s a lot of social media involved so business to business sales are much different than business to consumer and it’s been a big learning curve for me, especially around the social media. But also, what we’ve learned is that the boating business is a lifestyle business and so you’re providing people with those dreams and answers to those dreams of sitting on a boat in a harbor or watching the kids swim or having a cocktail with friends and so not only do we provide the boats and the services but we also schedule a lot of social activities and we give people a reason to use their boats and that community develops so, the community development part has been a big learning curve for me.
Success Harbor: Ok. Now you mentioned earlier that we’re living in a hyper-competitive environment right now so what advice do you have for entrepreneurs to take their business to the next level? What do we have to do today in this kind of environment to really just stand apart, stand out from the competition?
Rick Day: Well I think anybody who’s had the passion and the guts to start their own business, that’s the first step, is you’ve got to have that courage. I think maybe a second point would be that you have to stay connected with your customers and ask your customers what they see coming and things that they see in their future so that you can move there with them and offer them the services and products that they will need in the future. I think you have to continue to look at technologies and how new technologies can benefit you, such as social media today and all of the free marketing. I mean it’s essentially a free referral system out there so those are key things and then just be committed to learning; learning more about your product, learning more about services that you can provide and learning more about your customers and their needs.
Success Harbor: So you had a successful exit when you sold your business. I want to ask you about why so many businesses are unsellable and what can we do to prepare our business for sale?
Rick Day: Well, that’s a great question and I think a couple things are key. One is, it goes back to why I’m such a believer in systems, my opinion is if you want a business that’s saleable, you have to create and you have to visualize a money-making machine and so ultimately it becomes your vision, your values, the product and customers that you want to serve but you’ve got to put those systems in place and you’ve got to get everybody the right operation systems, the right compensation systems so that people’s compensation is aligned with what they’re supposed to do in the business and ultimately, you’ve got to get it to a place where you can step out of the business and the business runs itself.
Success Harbor: Ok.
Rick Day: That’s a big key and I think a lot of businesses don’t sell because if you take the founder away, the business can’t function without that person and it’s really difficult to take a person from the outside and put them in there and you’ve got personality conflicts and you’ve got learning curve and those businesses are hard to sell.
Success Harbor: So it comes back to creating systems right? So try to think about systems and try to create systems from as early as you can.
Rick Day: Yeah. Yeah, and hire the best people that you can afford right; and you’re not going to create all these systems by yourself right? You want to hire great people and they can help you create these systems but ultimately, you’ve got to work yourself to where you can walk away from your business for 30 days like I did back in 2007 when I did an Atlantic crossing on the sailboat; I walked away from my business for 30 days and they didn’t miss a beat, it just kept going.
Success Harbor: Wow. What do you think is the biggest time-waster for entrepreneurs?
Rick Day: I would say worrying. Worrying about the future, worrying about what might happen if things go wrong and then I would say the second time-waster would be, when you start off on your path and you start a company or you’re pursuing your dream, that attracts a lot of people and you make a lot of noise if you will or if you’re a boat, you know you’re kicking off a big wake and people are attracted to that and they want you to–, they want to join you, they want your advice, they want you to sell their product for them and so, you get so many distractions that come at you, you really have to stay focused and say no to a lot of things.
Success Harbor: If someone came to you, maybe somebody in your family or a good friend that currently had a job and they saw your success as an entrepreneur and they say, “Rick, I want to become a successful entrepreneur”, what would be the first thing that you would teach that person?
Rick Day: The first thing that I would teach that person would be, look at yourself and what you can offer and then find a problem to solve. Find somebody’s problem, maybe it’s your own problem, maybe you hate the way your dry-cleaner works or maybe you hate having to wait in line for a particular service and so, solve a problem and then ask around, so you really have to assess the market, how big is the market, how much–, how strong is the need for the service or the solution that I would like to offer and then do my skill sets fit that ability to fill that need or to offer that solution and if you get those 2 things, then the rest of the things will fall into place.
Success Harbor: So, you had a lot of success in business but I’m sure you’ve made some mistakes so perhaps you could give us an example of a really good learning experience or a mistake. I don’t like to call it ‘mistake’ but you know, maybe a learning experience is better for our audience that you could share with us.
Rick Day: Yeah. No, I think I agree with you on that you know. One of my favorite authors Tom Hopkins, and this is early days of sales back in the late ’80’s but, he said something along the lines of, “I never see failure as failure, only an opportunity to improve my presentation” right? So you can use that same thing in many areas but I would say big failures and mistakes that I made were at Daycom when we were coming out of that dot-com bubble. I created services for my business and kind of morphed the business, we talked about that, but I also tried to add on another product line, in fact I tried to add on 2 new product lines because I thought I would diversify and I was overwhelmed by the technical training, I was overwhelmed frankly by my people’s resistance to learning something new. They would always go back to their comfort zone. So even though we had product ‘A’, if I told them, “I want you to offer product B & C”, they would always gravitate towards going back to product ‘A’ because that’s where they were comfortable and I really underestimated how powerful that was and lost a lot of money trying to do that.
Success Harbor: Wow. So today, tell me a little bit about ‘Business by Day’. What is that business, what are you there; how do you help businesses?
Rick Day: Well great, thank you. So I told you that when I sold my company, I invested in South Coast Yachts and helping them and I invested in a couple other small businesses, one didn’t work and a couple more did but in my volunteer time at Connect here in San Diego, one of the things that really occurred to me was all of these companies, these young companies that we were seeing coming through the Connect system, they had great products, they had great services but they were all asking the same questions. They’ve been inspired to start their own business but how do they manage sales and marketing, how do they do products, how do they protect their intellectual property, how do they finance their business and I thought, you know, ‘they don’t have enough money to afford a full time consultant but if I could somehow package these answers and provide this advice and make it available at a lower cost, then my only answer is I’ve got to have the scalability’. And so, that’s when starting the blog occurred to me and then I’m just getting ready in July to launch my first coaching class and it’ll be for 9 people where I can say, “Ok, let’s talk about your business, let’s talk about the problems that we need to solve”, but we’ll do it in a classroom environment that will also be interactive. And then it’ll be more affordable for them but they’ll still get great advice.
Success Harbor: Well that’s great. I appreciate you coming on today to share your story Rick. Where can people find out more about ‘Business by Day’ or about you or connect with you perhaps?
Rick Day: Oh great, thank you, yeah. The website is: businessbyday.com, just like it sounds. My last name is Day so businessbyday.com. I have also, a podcast that is called by the same name and also it’s named ‘5 Minutes to a Performance Business Podcast’. So that’s being picked up in I don’t know, 40 countries now, which is really fun and exciting and then my email address is: email@example.com.
Success Harbor: Well Rick, thank you very much. Everyone out there be sure to check him out at businessbyday.com. Thank you very much.
Rick Day: Yeah, thank you very much too. I enjoyed talking with you.