Knowing When to Quit in Business

Jason · 00:00Welcome to episode 231 of the Numbers Game. I'm Jace, I'm here with Nick and Marty. We are ready to flog some dead horses. What's happening, Marty?

Marty · 00:09Well, just the way you put that, uh, I'm not sure that's gonna come across strategic as, as, uh, as I had planned, but, uh, uh, look, I I just wanted to go over a. The dead horse strategy.

Marty · 00:22Let's, uh, bring it back into, sorry. Got it wrong. Yeah, we went a bit blue there early, but, uh, but, but the, uh, the dead horse strategy is an interesting one, and I've, I've sort of reflected on this myself. It's when it's when you actually, you're doing something well and you have another idea, and it might not be working as well as you want, or you're getting distracted from what you're doing Well, in order to go on a variant.

Marty · 00:49Um, and this can be in all sorts of different things. It might be an additional project, might be an idea that you have, it might be a service proposition, uh, or a person that you've bought on for some

Marty · 01:00particular reason that's not working out. So it's, um, it's interesting though. What I've always found is when someone has an idea for something new.

Marty · 01:10They really wanna back that idea 'cause they've come up with it. Mm-hmm. So it's really important to test and measure the idea to get some tangible results out of it. But it's amazing the absurd behavior that you can do in order to protect the idea and keep it going. And it can just burn time, money, resources, and I.

Marty · 01:29Yeah, I had a personal story in my first business when I had the mortgage business and um, our clients were asking us repeatedly going, oh, we trust you with our finances. You guys should sell our homes. You should get into real estate. You know, what a great idea. We trust you. We don't trust agents out there.

Marty · 01:48All this stuff was going on. So of course, stupid me goes. Yeah, that sounds great. Why wouldn't we do that given we've got the trust of the client. And of course you go out, you do your real estate course,

Marty · 02:00uh, you go into training, you, you hire people, and then you realize all you really needed to do was put on one more mortgage broker or do one more deal.

Marty · 02:09You don't think about the unintended consequences of actually real estate agents refer to you. I don't know how, I didn't join those dots like 15 years ago, but you just get excited about the idea and um, and it was, it was really strange. I come to that conclusion pretty much within 12 months going, what am I doing standing near an open home on a Saturday, like people complaining about, you know, the spas is wrong color, and, you know, and this is just crazy.

Marty · 02:36And I felt like I didn't have the trust I usually had. So in the end. You know, we tied it all up and spun it off and someone else bought it and did it. But, um, I just think of the distraction it caused to the momentum that we had and we were just literally flogging a dead horse because we weren't in the right area.

Marty · 02:55We were better funding those types of proposals, not actually trying to sell property.

Marty · 03:00And um, and I just think. It, even though we were still doing well. I just think the burn on time and resources, it was stupid. My business partner and I, on reflection were just going, why do we even think about that? You know?

Marty · 03:12So, but have you ever flogged a dead horse? Uh, Jace?

Jason · 03:16Uh, yeah. Look, I'd, I'd like to think over the years there's been a few, uh, attempts and strategies to do different things that have ended up going that way. And, uh, without going into too many specifics or, you know, actually we'll get, I'm an accountant, I run an accounting firm.

Jason · 03:31Um, but, you know, with a bunch of mates decided it was gonna need to sell gin. Um, you know, and, and it was one of those things for a long period of time. Trying to choose how to spread your energy, how much effort to put in. And a lot of the time it comes down to as well, when you put money and time into something, you don't wanna let it go.

Jason · 03:48So you keep on persevering and pushing and, and digging deeper and deeper and, and you know, even as an candidate advisor, when the emotional side of it also gets in the way. You wanna be successful, you

Jason · 04:00don't wanna fail, so you don't want to kind of let it go so you continue to flog the dead horse, even if it's, you know, there's riding on the wall, that it's not gonna go the way you want it to go, or give you the revenues and profits that you need to make it successful.

Jason · 04:13So, um, seeing plenty of times with our clients as well, they might be running, you know, great business in one particular area, um, and then get distracted by trying to add a different product or a different service. Um. And generally it does come down to quite a lot of emotion. There's emotion involved in the sunk time and the, and the money you've put into it.

Jason · 04:33So. Also that belief that no, it has to work out 'cause I've done this much now, so I'm gonna keep going. And no matter how many people talk to you, and you know, even from an advisor point of view, you can put it into real numbers. Try and set KPIs, try and set boundaries around it to remove the emotion and say, Hey, let's just unpack this from a, from a budget forecast, analytical point of view.

Jason · 04:55But sometimes you get the kickback that's like, no, nah, if I can just do these few more things, it's gonna work

Jason · 05:00out and it snowballs and goes again and again until, you know, um, sometimes, you know, I've seen it go right all the way to the very end when it becomes a, a liquidation event or, or, you know, a business needs to be shut down.

Marty · 05:11Ha. Happens to investors as well. They buy. Speculative stock. Mm-hmm. And it's like they go, it'll bounce back. Yep. We'll just hang on. Yep. It'll bounce back. Yeah. Uh, maybe we should buy some more on the dip. And it's like, and all of a sudden it's just a falling knife. So it happens in business, happens in investing.

Marty · 05:27Uh, everyone's been through it at some, at some level, but. People do tread tend to, they wanna buy a stronger whip sometimes. Instead of giving up on the strategy, you know, they wanna change riders on the idea. We haven't got the right person, we've gotta get another person to ride this. It's gonna be fine.

Marty · 05:41They appoint external committees to review the dead horse and to see can this work better? What are we missing? So all this time and effort. And then sometimes I'll say, we need to compound it. We need to put several dead horses together. It's the only way to get over the line here and. Win the race and it's uh, it's absolutely crazy stuff

Marty · 06:00as to what goes on the absurdities, right?

Marty · 06:01Emotions is that lead you, like you said, rather than having a logical test and measure strategy and having a sort of exit point in investing, you buy a stock, you might have a stop loss in business. You go, if we burn more than 20 grand capital trying to make this work and we're not seeing an upside trend, we're out.

Marty · 06:21You know, it's, it's methodology that's gonna win the day There. And that's what's important. Uh, Nick, from your perspective, any, uh, any ones that come to mind?

Nick · 06:30Not so much business ideas. There's, there's obviously business ideas for sure that, um, we've been flogging the dead horse on, but I thought, just to take a different angle on it, um, the first thing I thought about was, was partnerships or relationships.

Nick · 06:43Mm-hmm. Uh, personally and in business. Um, but I think, I think in business, like our, well innovate is very much driven by referrers and, and referrers, you know, sending us, um, clients of theirs to, to work on. So I think over the years there's been a

Nick · 07:00lot of relationships where, where we've thought, geez, that could be huge.

Nick · 07:04Um, and we put a lot of time and effort into it and we just don't get a result. So, um, but because you see the opportunity. You know what that opportunity could be like if hypothetically someone else was in that business, you know, you might have a, like future advisors or is is a good, um, partner of ours.

Nick · 07:23So you might look at it and you say, well geez, if they just had someone that thought like Jace and they understood if they did this, this, and this, that there could be lead flow come outta that business, then we can get them there and, you know. Particularly goes, um, oh, sorry. I particularly think about real estate agents 'cause they're so, they're so heavily focused on, uh, sales that they don't think about the finance opportunity within their business.

Nick · 07:47And sometimes we literally just flog the dead horse over and over again. We give them all the tools, we give them all the support they need, we try and drive the result outta that business ourselves and it still doesn't come. So at what stage you say, you know what? We're gonna

Nick · 08:00pour our f our energy into another relationship where we can get results and.

Nick · 08:04I think what we've got really good at, um, but we can always be better. But what we've gotten good at is expectations. So if a relationship is going to work, you talked about test and measure Marty, what would we expect to see outta that relationship, uh, in the first six months, in the first nine months, in the first 12 months?

Nick · 08:22If it's not lead flow, what kind of actions are we expecting to see? Um, from the people driving, um, driving the relationship internally, so it could be directors of the business or someone they've put on the relationship. Um, and we know pretty quickly now whether something's gonna work or not. The issue that we have, particularly with referrers is it is a really long lead time, so we kind of.

Nick · 08:44You know, we are in for the long haul, but at we, we've got a fairly good indication now as to when, you know, when do we step away because we know what we do is really good and what's the opportunity cost of us flogging that dead horse versus, you know, going, finding another business like, you know, future advisory, for

Nick · 09:00example, who actually will willing to work with us and put the effort into work with us.

Nick · 09:04So, yeah. And I just went, I, I, I just wrote down the three things. Um. And it wasn't even that, uh, re it wasn't even referrers. Referrers just came to me then. But the three things I wrote down was stocks, definitely, um, staff was another one. Um, you know, you know, when you, you've, you've invested so much time and effort into someone, you just want 'em to get there.

Nick · 09:29You want 'em to be what you want them to be, but you just gotta understand when to pull the, um, when to pull the bandaid off and, and know that it's just not gonna happen. And then the other one I wrote was just their relationships, girlfriends, boyfriends, like, like how many times did they go for too long?

Nick · 09:46When, and, you know, you should have, you know, it probably should have ended a year ago. Um, but people just don't pull the trigger.

Marty · 09:53Yeah, it's, uh, you, you, you triggered my first relationship. I was 19, the lady was 17. Nice enough. Girl

Marty · 10:00broke up four years into it lasted another four years after that. And it was like when you look back, you go, you know, four years ago, that's.

Marty · 10:08That was the time and everyone would've moved on and been happy. But, uh, it's amazing what you do, isn't it, in life. So all, all hindsight,

Jason · 10:16the, the staff one's definitely a good, good one to add there, Nick, you know, for people who, you know, maybe listen to this app and going, you know, the, the different business I didn't apply.

Jason · 10:25But actually the way you've expanded the lens of that, you know, we, we've had previous team members across the eight or so plus years of having RBK and then future advisory. Where, you know, we, we can reflect now we work with, um, HR partners now and, and it's definitely a bit better to have that person you can bounce off to unpack, you know, that gut feel when someone's a hundred percent like, oh, like my gut says this isn't working, but they're a good person and, and they did this, and, and I don't, you know, so we'll, we'll just keep going and.

Jason · 10:55You know, all of a sudden the emotional, the emotional side of the human side gets in the way and all

Jason · 11:00of a sudden time's gone by. And if you're actually looking at the right KPIs and the right metrics, maybe you would've made a business decision to not continue down that path. Uh, oh. My

Marty · 11:10whole methodology's changed around that.

Marty · 11:12Jace, it's uh. You know, it, it just is one of those things where you have a corporate responsibility to get a result. So I let the numbers dictate and then you sort of train within the, the numbers over a specified period. But otherwise you're looking, particularly, you've got an optimism bias in people where you can see where they could potentially go.

Marty · 11:33So there's what, there's a big difference about potential and where they will go based on their behaviors and actions, and it never, sometimes, never the two shall meet. So it's like, it's really important to have, you know, direct numbers and expectations in trend of increased numbers as a corporate responsibility.

Marty · 11:51That took me a long time to get. And I still don't. So I got a hundred percent right. But I'm a hell of a lot better at it now because I have

Marty · 12:00fundamentals that need to be met. Um, otherwise it's speculative and it's, um, it can be dangerous.

Nick · 12:06That comes with a growing business too, Marty. The um, um, 'cause I've definitely learned a lot and come a long way.

Nick · 12:12And just to also mention, we're never gonna be perfect at it. No. 'cause we're, 'cause we're emotional beings and, you know, sometimes, um. Well, not sometimes in a, in a lot of cases you do care about the other individual, so you know, you want a good outcome for all. But, um, I think as business, your business gets bigger.

Nick · 12:33That responsibility comes to the surface more and you realize the impact that making those wrong decisions has on the wider group, whether it's definitely profitability wise, whether it's, um, you know, causing issues with other staff and hindering their ability to perform. So, yeah, I've personally found that as our business has grown, I've been, we have been far more cutthroat with that and 'cause we understand the ramifications, it's not, it's no longer a small business where you can just.

Nick · 12:58Sort of let things go, you know, you

Nick · 13:00have to make a decision because the ramifications are, um, are too significant.

Marty · 13:04Yeah. And you put other people's livelihoods on the line by hundred percent by holding under performers. And that's, that's just not right from a company perspective. So there's been some good growth around that last few years.

Jason · 13:14And I would easily say that following our journey, future Advisory has always been a few years behind in the maturity and development of where Innovat is as something, as a business that's been around a little bit longer than us. And even though we get in this room and I've, I've had a lot of lessons and education along the journey of working with you two guys.

Jason · 13:31But you know, I could hands down say that we've been too slow to react on. Decisions and it's caused, you know, some pretty, you know, pretty annoying things to happen within the business where it's like, damn, you know, if we'd, if we'd made decisions earlier, we wouldn't have copped that loss or, you know, lost that team member or so on and so forth.

Jason · 13:49And, you know, so I think the lesson to learn out of this is around how do I identify. You know, and when you're flogging a dead horse, for lack of a better term, Marty, and then what are

Jason · 14:00some of the things you can put in place to make sure that you're checking these things as they go, whether it's a new business idea or team members.

Marty · 14:08Yeah, and I think the, the external HR that we have, um, has been such a big help to actually. Like talk through your own thinking around something based on the metrics, based on person's development, uh, just to have sort of mentorship around that is so useful. So you can get your thoughts outta your head and come back to the practical guidelines and even how to execute on the performance as well.

Marty · 14:33How to do that successfully. It always feels like it takes a bit longer than it should, but at least you're going about it the right way and, um. You know, you're not feeling overwhelmed by it as well. So very, very helpful. Alright, well I have got a case study in regards to, um, you know, the dead Horse strategy.

Marty · 14:51Do you remember Godfrey? Mm uh yeah, the vacuum place. Remember the vacuum where they used to? Is there a commercial with the bowling ball? The bowling ball,

Marty · 15:00yeah. Got it. You know, iconic, you know, started back in 1931, had over 200 stores across Australia, you know, heaps of people employed. Um, but they. They, uh, they didn't pivot.

Marty · 15:12They didn't pivot with the market. They had an outdated business model. They basically were flogging a dead horse in a number of different ways. And I've written down a couple here, they had a huge reliance on physical stores. Uh, they clung to that extensive network of, uh. Bricks and mortar businesses, even as online shopping surged, uh, competitors like JB Hi-Fi, Harvey Norman and Amazon just captured the market and actually had more brands, um, ultimately that they could deliver to the consumer.

Marty · 15:42And they missed out on, uh, cordless robotic vacuums that Dyson and Roomba brought in. So they didn't secure exclusive deals in this next wave of, of vacuum cleaners coming through. So they just didn't, didn't shift to technology. They, and you can go through

Marty · 16:00the, you know, the Kodak, very similar stuff like that.

Marty · 16:03But in 2022. Godfrey's had 31.3 million in debt and breached loan covenants. And in January, 2024 went into voluntary liquidation, owing millions to creditors, administrators, closed 54 stores and laid off 190 staff. And they tried to find a buyer, but in the end, no one wanted them because they, uh. They didn't come up with the goods and there wasn't a way out in the end.

Marty · 16:30So they continued along their path even though the world was changing around them and they didn't adapt to that change. And uh, they continued. Once was a very good horse. A stallion turned into a dead horse and they kept whipping it. And unfortunately it's dead

Jason · 16:47pee for a 93-year-old horse to go out that way.

Marty · 16:50Terrible. And, um. You know, so that's what you gotta ask in your own business as well. I think you should ask that every year, you know, at least to go,

Marty · 17:00what are the changing dynamics of our market in our industries? What's, what's on the forefront? Like sometimes it takes a long time for actually these things to kick in, but you gotta ask the question and you just, you know, you gotta pivot in real time.

Marty · 17:13Sometimes it makes the adjustments that enhance your business, and I find those people, sometimes it's evolution, not necessarily a revolution, as long as you're evolving. With the genuine market in each industry, um, you know, you're pretty much okay, but some people are held back going, we did this in 1995 and no, we're gonna ride it to 2035, but they're not gonna be there.

Marty · 17:34So I just wrote down some things to resolve the dead horse strategy, and sometimes you do have to take an idea behind the shed and shoot it. Sometimes there's no if buts or maybe you just gotta dispose of it. But number one. Let go of the ego, except every idea or project, you know, will not necessarily succeed.

Marty · 17:55And that's okay. So avoid the sunk cost fallacy. Avoid the

Marty · 18:00prime, uh, the pride fallacy. If it's not working and you've tested, you'd measured, it's time to move on and you've gotta make that decision And cut quickly. Once that's been established, uh, recognize the signs, think objectively about the situation.

Marty · 18:16Is your strategy actions achieving a result? If no, it could be a dead horse. Evaluate alternatives, step, step back and consider options. Could your energy and your money be spent elsewhere? You see this in investors a lot. The bag holders, when the market dips and they're holding a falling knife of a stock they could have exited if they had a methodology and could have invested that money elsewhere.

Marty · 18:41Same in business. It's pumping more money into something that's not working. They could have gone with the natural trend of where it was working and made a simple addition to that and got a two to three time, you know, buildup on benefit or something different altogether that might be better. So, yeah.

Marty · 18:58Interesting. Jace, just

Jason · 19:00having, as you said, those deadlines or triggers, um, so that you're not continuing to go down a path, you know, get ego outta the way. Set the metrics so that there, there is a test or, or some kind of budget to measure against. And I think the only other thing to add is generally a lot of people who find themselves getting too far down the road are going it alone.

Jason · 19:19They don't have the mentor, the coach, the advisor. And you know, when you think about buying or selling shares, who's their financial advisor? If you think about setting up a set, another business stream in the same business structure. Who's their accountant? You know what? Why are we adding extra risk into the same business structure if we're starting a whole new line of products or services outside of what we normally do?

Jason · 19:38Should it be in another structure?

Marty · 19:40Yeah. Advisory boards companies have them. You can have your own personal advisory board, you know, when you want to map out an idea. And I, not that I'm gonna say who it is, but I've been telling one person on a, on an idea that I don't think is a good idea for about three years, but that person's f flogging the dead horse.

Marty · 19:57And I'm going, if it comes off

Marty · 20:00great, but I just can't see it. But I'm, I'm sort of giving that advice. So even when there's external parties, you know, sometimes you take it on board, sometimes, you know, nick's laughing 'cause he knows who it is, that's where there it's, but uh, but uh, they're the sort of things where you have to put your ego on.

Marty · 20:16Uh, to the side, get feedback from other people, and then, um, you know, they, they'll see stuff that you might not be seeing and can give you a clear cut, uh, idea of when it's time to actually cut the, cut the opportunity. So select a clear criteria, have measurable results that you can, you can work towards and adapt quickly.

Marty · 20:36Just be willing to pivot or abandon the effort entirely when it's evidence that it's actually not working. So, so it's all fundamentally the same what I'm saying there, but again, there's a, there's some criteria there on how you can test if it's a dead horse and uh, and working towards something that's much more productive, uh, for you and the business.

Marty · 20:55Nick,

Nick · 20:56I was gonna say, you should still have a crack as our producer Tommy would

Nick · 21:00say, um, not to deter people from having a crack, just understand, you know what, absolutely the clear signs as to um, you know, what determines whether or not it's gonna work and. And pull the trigger away from it when you have to and or take it behind the shed.

Nick · 21:16Not that you take a horse behind the shed to shoot it, but you take an idea, Marty. But not a horse. Not out, not outta the horse

Jason · 21:23track. They, they just put the screen up in the middle of the track. Yeah. So at least behind the shed's, probably a little bit more us. Oh, I thought

Marty · 21:29it was a bit more humane. But, uh, I'm a nineties child.

Marty · 21:32I was eighties child, so I think that's

Jason · 21:34a good, I think that's a good point, Nick. 'cause you know, the, the entrepreneurial spirit or, you know, the Aussie dream in the business owners. You know, you, you want to encourage innovation and having a crack. So we wanna see people trying new things. Um, but yeah, I think that that clear criteria of what it means to be successful, what is the goal or deadline?

Jason · 21:52You know, how much money will I invest before enough's enough? And then being able to adapt quickly, pivot, abandon the effort if you need to, when you realize

Jason · 22:00something's not working and if you're good enough to go it alone and do it yourself with your own metrics and, and kind of milestones, great. But if not.

Jason · 22:07Surround yourself with people that haven't been there, done that experience, or someone that can have you back and, and be your accountability buddy really before you get too outta control.

Marty · 22:15Yeah, absolutely. And I've seen many companies that take on investment funds. It's amazing how easy it is to burn money on a dead horse if, uh.

Marty · 22:24If, if you're not making the money yourself too. So I've seen that a bit. But look, ultimately, I hope that's been helpful and um, yeah, share it with friends, share it with business owners. Uh, just share our podcast in general. We are here to help. And, uh, don't, uh, don't flog a dead horse when you can ride a white stallion.

Marty · 22:42I. Game over lads.

Jason · 22:45This podcast is for educational and informational purposes only. The conversations are of general nature and do not qualify as financial or tax advice. We recommend before you make any financial decisions, you consult a licensed professional. Individuals on the podcast may hold

Jason · 23:00positions in the company's discussed. ---