Andrew: Hi there freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. Today, I’ve got an entrepreneur, a serial entrepreneur who ended up building a business that helps other companies grow their businesses. Chuck Blakeman is the founder of Crankset Group, which provides business advisory for leaders and companies worldwide. He is also the author of two books including, “Making Money Is Killing Your Business.” I invited him here to talk about how he built up Crankset.
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Chuck: Thanks. It’s great to be with you Andrew.
Andrew: I want to get into all the businesses that you’ve built and talk about how you are helping other companies. Before we even get into you as an adult, let’s talk a little bit about your childhood. Were you an entrepreneur growing up too?
Chuck: No, I was a lost little kid wondering what in the world I would do with myself. I grew up with this ringing in my head, you must be the dumbest kid alive. How dumb can you be? I can just hear that still ringing in my head. Turns out I could be pretty dumb. We raised ourselves. One of the principles I learned from my childhood is that we raise ourselves to people’s lowest expectation of us. I became pretty dumb, I graduated in, somewhere around 500 to 525, and that is not 25 from the top. They were discussing me the day of graduation to decide whether they would even let me graduate. They decided if we don’t let him graduate, we are going to have to put up with him for another year. They let me go. I grew up believing that if there was one guy in the world, if there were 525 people graduating and 524 who are going to get a job, I would be the last one standing. I would not get the job so that’s . . .
Andrew: Why was that voice coming to your head that said that you are just no good?
Chuck: Ironically, I don’t like to identify too often because it sounds like I had a horrible mother. She was actually pretty great. She was a depression baby. She was a matter of fact and she just had ways of saying things and always never really mean or spiteful. She was a wonderful mother in so many ways, or most of the time she was actually just joking. I would do something dumb and she would say, “How dumb is that? You must be the dumbest kid alive. How dumb can you be?” Then there were other times where she was aggravated with me she would say things like, “How dumb can you be?” But then it would pass and we had a great relationship. She died two years ago [inaudible 00:00:40]
Andrew: Chuck you are saying though that the conversations would pass, some of them would be in jest, others will be a little out of frustration, but still the thought embedded itself in your head. Can you give me an example of how it played out? What’s one big thing that you didn’t do or didn’t do well, because in the back of your head you had this thought, how dumb can you be?
Chuck: Yeah, for starters by the time I was in Six Grade in Elementary School I was getting D’s and F’s in school. I couldn’t understand what education was about. The whole thing escaped me. The other piece was I probably would have been diagnosed when I was a kid. I’m glad I wasn’t because that would have made it easier for me to play the victim. I was about the 88 one of those D’s, then there was part of that some playing in there but by Seven Grade I was just completely lost. I had to repeat classes all the time. I assumed that other kids were brilliant and I was the dumbest kid and I couldn’t get any of that stuff in. It was just self-fulfilling prophesy. It’s not like I heard this every day, I probably heard it twice a month but you lurch on the dumbest stuff and you believe it and you make it come true.
Andrew: You know what, it’s almost worse because you don’t hear it all the time and very clearly because if you did you’d be able to do something about it. When it’s just background noise in your head it’s a lot harder to notice and fight again them, am I right?
Chuck: Yeah it was very subtle so it wasn’t like a constant noise or like my parents were bad and I had to decide what to do about that. It was this little trickle in the back that I lurched on to that I embraced and I believed was true. Maybe the ADHD or whatever that crap was maybe that helped me make it come true. I could say see I told you so. Yeah, it was this little voice that was nagging we all have them. It’s actually is easier to confront a giant. Look there’s a giant in front of me I got a decision to make, but this wasn’t a giant this was just some little fly buzzing around my head all the time.
Andrew: Is there one thing you especially regret not having done because of that voice? Like for me I had something similar to that. It was I don’t know what to say to people. I remember there was this girl in one of my classes Philosophy class. I know that we…at least we could have had a conversation; I felt like maybe there was a connection there. She was interesting even if we didn’t date. I feel I would still have liked to have gotten to know her. I never even went and said hi to her, we would talk through the teacher to each other. I regret that, through the professor in college. Do you have something like that?
Chuck: Yeah the only girl I had in high school is the one who latched on to me.
Andrew: I see.
Chuck: I would never thought I could go out and talk to a girl and say, “Hey you want to go out?” That’s the only girlfriend I ever had and she stuck round a while, and she also had a pretty low self image. I would have to at least say, “Hey you want to go out?” Then the other thing I don’t regret it and that’s another important part of this I would to make sure people get this matters, right. I don’t regret a thing from my childhood. It was the most precious time in my life it made me who I am. When people embrace where they came from they learn from that one. When they get mad at it or get bitter about it or be sad about it, it’s wasted. I would say that bizarre I got an incredibly slow start life.
I mean I was in my late 30s or early 40s before I could find the bathroom. It was a slow realization I didn’t have something to offer the world. I look back and say, “Yeah, okay if I had been told I was brilliant when I was a kid and then picked up all that stuff I was really good at and accelerated that, I could have got that to a lot earlier but then I wouldn’t have a story to tell. I think my childhood as pretty good the progression was this, when I… the first day I left for college. I was riding to college… I had to go, I had a full scholarship in Music but they made me go a semester earlier and paid for it myself because they wanted to see if I could do the class work. On my first day going to this school I remember specifically, I can even remember where it was on the road it dawned on me, okay I can’t be a victim anymore, I can’t blame my parents I can’t blame my environment, I can’t blame… this is going to be up to me from now on. I have got nobody to blame it’s up to me.
That’s when the light began to go on. Then three years later I was in the Army, because I was pretty sure I couldn’t finish college because the only job I could ever hear was in the Army. So I joined the Army. I was writing my mother a letter from my bunk in basic training, and the topic of the letter was going to be, “Mom, I forgive you for being a rotten mother”. The letter came out, “Mom, forgive me for being such a rotten son”. I didn’t set out to write that letter, but that’s what came out and it was the right letter. That sent me on a journey of realizing that I got to own my stuff. Within four or five years I was beginning to realize how beneficial all of the things I learned through as a kid were if I respond to them appropriately. And really by the time I was… it took me to when maybe I was forty… forty five years I got to where I realized not only did I have the right childhood, it was perfect for me. Everything I went through made me who I am today and makes me… puts me in a place where I can be a gift to the world that I am.
Andrew: I see, so you accepted meanwhile I fight against it. I hate my childhood because I feel there is so much more I could have done if I only realized what was possible and what was holding me back. Me, I was holding me back.
Chuck: It’s all could have, should have, would have. The Chinese say the best time to plant a tree is 20 years ago. The next best time is today. Okay, look at all the things that could have been, but let’s talk about what will be. There’s really psychology in this, I am not a shrink, but people who are motivated by moving we always talk business owners Be motivated by moving towards something not away from something” because moving away is a survival instinct. I will never be like my rotten uncle the alcoholic. That’s not a motivation. The right motivation is, “I am going to live a wonderful life”. Move towards something in that way. That took me… that was a 25 or 30 year journey for me. At first five or six or eight years was moving away then there was the neutral part and then there is where I got to, “Okay, let use all of that to help me move forward and to help build things”. Turns out that childhood where I was to struggle on my own and I was literary on my own. I could leave the house at 7 in the morning come back at 7 at night nobody knew I was gone. Home alone was my movie that happened to me multiple times. I realized now that that made me who I am it put me in a position where I was able to build multiple businesses and have a story to tell that helps other people. So embrace it, know that it was ugly then cut it into a beautiful thing and figure, “How do I use that to build something positive and let’s move forward”.
Andrew: I am fascinated by this. Let me examine what you were saying earlier. You said “move towards something you want as opposed to away from something you don’t want” but I have noticed some entrepreneurs say that they are fired up by showing somebody that they were wrong. Fired up and go to work everyday to prove to the voice in their heads that they are not the failures that the voice sometimes says they are. It feels like that is more of motivation than saying, “I would like to build this $100 million company”. Why is that not as effective?
Chuck: Well, because it’s not lasting and even if it is lasting it’s like… it’s like a barnacle you just keep adding barnacles to your boat. It’s not a lasting motivation, survival is an incredibly strong instinct and that is a survival motivation. “I am going to prove to the rest of the world that I can survive”. Very motivating but it’s not a positive motivation and doesn’t build the kind of life that people want. For most people it’s not motivating to move away from something, and it’s much more motivating to move forward. The research shows this, one guy did a study for decades they tried to scare heart attack patients away from heart attacks by showing them ugly fat, ugly heart, bad… early deaths, they tried to scare them into going straight. Ten percent would come out of those classes changing their lifestyle. One doctor finally got the idea of showing people a great life. A great long life here’s all the things you could do to help with the existence; 85% of the people go through his program changed their lives. They are moving towards something the other guys are moving away. I am not saying somebody could not be motivated by that, I know that people that spend their whole lives motivated by that there is some bitterness there is little thing in there that they even themselves wish wasn’t there. Get over it, get past it and move on to something positive. Use that to get you to the positive thing. That happened for a reason to get into the good thing. Figure out how to use that childhood, “How dumb are you”. What that did for me is it’ll give you the term from me. People call me the bulldog today; which is interesting because as a kid I was called the quitter. I quit everything because see I can’t play basketball, I can’t play football, I can’t play this, I can’t play that, I can’t do this. I quit courses, I quit everything. My parents called me quitter my friends called me a quitter. I was a quitter. Now I am the bulldog. I never gave up. I will latch on to this, I am the last man standing, I will make this work. I will figure it out. My life’s vision now is this, “Why do I do what others can and will do when there’s so much to do that others can’t or won’t do. Give me the hardest thing that nobody else wants to do. I am going to do that”. There’s not a bone in my body that would have done that for the first 18 years of my life. That’s how I turned the negative thing into the positive for me.
Andrew: I see here from your bio, you began your career from the U.S Army followed by 13 years service in the non-profit leadership developing world. You started in group five small businesses, including one that you sold to the largest consumer fulfillment company in America. You helped lead 3 other companies between $20 million and $100 million dollars through repositioning and the markets support services industry. You did all that. What is the one thing that you’re proudest of, the biggest of accomplishment that makes you look back and say, “This bulldog attitude everything I learned in my childhood, everything that I’ve done, it paid off”.
Chuck: Steve Jobs, there’s a lot of things in him that they were ugly, but he got some great things figured out . He was what I would call a cat post in a positive sense of the word, and I would say Microsoft in its early days was more of an industrious company. Microsoft existed to destroy everybody else. Steve Jobs said this: “I never got up in the morning thinking about how much money I could make. I got up in the morning thinking about what cool technology could I build next that would help make the world better place to live.”
So the thing I’m most proud of is that in the majority things that I’ve done the world is a better place because I have been there. I build a couple of businesses since you’ve read that biography; one in Africa and one here in the U.S. It’s now three continents. I was building those businesses I get testimonials every week from people who said, “The stuff you guys are doing is transforming my life, its transforming my business’ I want to make a difference in the lives of people and that’s the thing really floats my boat. By the way coming out of my childhood another thing that comes out of that, I was the kid that got harassed I was the shortest kid. I am still six one and a half now but I was the shortest kid even coming out of high school I was 5’8″. Going into ninth grade I was 5’2”. I got harassed and the whole bully crap. And so part of the things that thrills me now is I get to go well before I get to champion small business owners the little guys and the guy who’s getting the short end in this gig. I get to watch them get a leg up and get a hand up and get them moving again that kind of stuff that’s been transformative for me, that’s what floats my boat.
Andrew: What’s the name of the company that you sold, the most recent one?
Chuck: Well, we sold “Search wide Worldwide” it was a fulfillment logistics company. We sold it to the largest fulfillment company in America. We sold it for a lot more than it was worth because of the way that we had designed it and the customers we had. I had brought in customers like Microsoft, Apple, [inaudible 00:00:15], IBM, Adtel lots of them. Lots of family and technology companies those who are based. We built it from a couple million to nine millions in three years then sold it. I didn’t want to sell it but I was minority honored even though I was you know the guy building. In fact they bought the other guy out right away and required that I stay on and all that sort of thing to keep going.
Andrew: What did you sell the business for?
Chuck: What did we sold…you mean money-wise? It was a nine million dollar business when we sold it. We sold it for a little bit less than that.
Andrew: How much did you get from the sale?
Chuck: I was only a 15 to 20…I think it was a 20% owner at the time it had gone up. I just got maybe $300 or $400,000 out of it. It wasn’t a big pay up but they put me on staff ridiculous salary for the next couple of years to transition the thing. In the meantime I started two other businesses sold that as well.
Andrew: Which one was the one that gave you the biggest exit? The one that allowed you to go on the gold course and get so good that your friend from Ireland had to have a conversation with you? What’s the big one?
Chuck: That was the big one because I got another pay out down the road two years. It wasn’t a huge pay out but it was a little of millions. What really has allowed me to do it wasn’t the pay out it was actually the way I designed the next business. For five businesses in a row I created businesses that were dependent on me which is what most of us do. Because nobody is as good as I am nobody is as important and nobody is as committed, nobody is as experienced. We’ve got all these “nobodys”. In the six business when I created ‘Search wide World… when I created Crankset Group which is one of our two present businesses I went into not knowing what I was going to do but with the result mind. The result mind was, “I am tired of creating faster treadmills for myself, that’s all I ever do is create faster treadmills for myself”. “I am not going to do that this time”. I have always required my businesses give me money and this one gave me money. The next one is going to give me time and money. I required that the business produce time and money. I didn’t know what that meant but for use in and because I had that intention. I say this to our business owners, ” You get what you intend not what you hope for”. I intended to get both and four years in my first shot of getting both and this is really central to the book, “Making money is killing your business”, four years in I was working three days a week, I was getting the last week of every month off and I was getting a month a year. I was getting a minimum a day a week, a week a month and a month a year and it turned out to be two days a week.
I can get up in the morning and say, “What do I do today”. That’s what allowed me that kind of freedom. Was simply reimagining the way we do business and requiring that my business give me both time and money instead of just money [inaudible 00:00:25] . .
Andrew: That’s a good way to put it.
Chuck: . . . just to give you the other side a friend who does a million dollars a month. I am calling her on Saturday afternoon and she is in her office. She says, “If I’m not here this thing is starting to apart without me”. She is making a bucket load of money and she has no time. She did not require that her business give her time. That’s the classic scenario story and that’s what Crankset is built around is helping business owners build a life of freedom as well as money. We call the business owners game we can go into that if you want to as some point.
Andrew: I did watch you as you were setting up here. You weren’t setting up, somebody else set you up, somebody else scheduled. I am even looking at my calendar here and I see that there’s Crystal’s scheduled for an interview today and I thought well, “Who’s Crystal? Oh yeah, if I click on it I can see that Crystal Valentine for Chuck Blakeman that’s who set up the interview. You really have more help than almost every other interviewee that I’ve had on. This whole thing happened because your friend from Ireland talked to you about your game and said, “Hey, what’s going on?”
Chuck: Yeah, he called me after… actually before I had… or how did the bail out from that one company then I got in to do another one that had that golden handcuffs on it. He called me one day and said, “Chuck you boy nice to have you on board. You in Ireland I’m in Denver. He said well because you are one point nine handicap. I thought about it for a minute and said, “Well either I’m trying to go pro or am bored”. I wasn’t trying to go “Pro”. I said, “What you got?” He said, “Well, you’ve always humped the little guy you’ve always humped small business Orange and boys than helping people I think you should do that for a living”.
I said, “I got this golden handcuffs and that sounds interesting but not that interesting and not enough”. He said, “I saw some guys doing this in Virginia, let’s go visit them you’ll get the idea”. I said, “No”. He said, “There’s wine involved”. I said, “I’ll be there”. So we went and we saw this guys and I knew instantly that this is what I should be doing the rest of my life [inaudible 00:01:00] 2006.
It was a couple of guys couple in small business always figure how to run businesses better. Wasn’t anything spectacular I could have seen that in Denver. I just didn’t know anybody in Denver doing that. I had never worked to small business owners I was a small business we never got over 10 to 12 million I did run a couple of businesses over 100 million, but my businesses never got, I could say 10 to 12 but they are always working, our customers are always giant pharma and giant technology companies. I didn’t know what small business was except that I ran one. But when we went out there I saw what these guys were doing I knew that I had better advice than they had because I’d started, by that time five or six businesses, now it’s really eight or nine. I knew that I’d made enough mistakes that I could keep people from making mistakes, even if I didn’t know what to tell them to do I knew what to tell them not to, and that’s more important most of the time. That’s what got us into this. Again that life vision of why do what others cannot do when there’s so much to do when others can’t or won’t. Everybody had always told me you can’t help small business owners there’s no money in it. So immediately I said if everybody is saying that then that’s what I will do. Everybody says you can’t or won’t do that. We spent from 2006 to 2010, three and half years, researching, how would you put together a business model where small businesses are truly transformed. I am talking guys with zero to ten employees, who have very little money, how do you put together a business that transforms them and allows the person doing the business to make 100 to $250,000 a year. We build that model and we put it to play in 2010 it’s called, “Three to Five Club” and now we are on three continents. Without [inaudible 00:22:09]
Andrew: We spent some time researching it, how do you come up with this framework that allows you to predictably help other businesses? What happened in that three point five years of research?
Chuck: That’s a great question because when I say research, I have a much more practical model in my head. Again, remember my background is am not big on education, I finally got a degree twenty years later to make my mom happy but the whole thing escapes me. So when I said research I mean sitting down with the business owner and saying, “What do you need?” And then trying to figure that out, then writing down what they needed, then looking through patterns as I meet with more and more business owners. That’s how we did our research; on the ground, in the trenches, what do you need, how are going to do that. Then experimenting with different models, mastermind groups, one to ones, group team meetings and workshops and speaking in engagements and just experimenting with all kinds of different things and coming up with it. My form of research has always been, I stumbled on to this probably because I’m ambitiously lazy, but I never looked at what other people did when it tried to solve a problem. I would recommend this for most entrepreneurs; the worst thing you can do in trying to solve a problem is go out to research how everyone else is trying to solve the problem. Because that would put in your head all the other ways that are not working. We never did that, I never looked to what my “competition” is doing to solve a problem. I just go out and try and solve it with customers in the context of mucking along and making a mess, we find ways to solve things that nobody has ever seen before, because everybody else is looking at what everybody else is doing and it’s just group think. So it was tremendous entrepreneurial principle in that.
Andrew: Talking to potential customers, you want to go after small businesses and saying what do you need? When they said back what I need, wouldn’t they have said, “I need more money, I need more time” That seems to be right but that’s not helpful enough, because that could send you in a million different ways.
Chunk: Like Henry Ford said, if I’d asked my customers what they wanted, I would have made a faster horse.
Andrew: What did you ask that allowed you to get that?
Chuck: Not listen between the lines. Between what actually people say they want and what they really need. What people want and what people need are always gapped. And you as a good business… as anyone building a product always looks for what people need not what they want. I would listen to what they want but I would say, “What are they really saying they need?” What they really said they need was time they didn’t more money, they needed time. We experience running out of money but what we really run out of is time. Because I would tell them if you just…if time … is money is your problem then just work twice as long. I am already working 40 hours a day. Okay then money isn’t the problem, time is. We came up with the business ….how do you make more money in less time. As I listen to people the first thing that came up after I listened to six really different business owners. I realized nobody knew why they were in business. They didn’t have what I would call what became known for us just the big “why”.
Everybody [inaudible 00:25:17]
Andrew: Oh I think we just lost you for a second. Let’s give the connection a chance to reconnect and if it doesn’t then I will call you right back and we’ll pick there we go. Sorry Chuck I lost you there for a moment. You were saying what you call the big “Why” and then the connection dropped off for a moment.
Chuck: Okay, so yeah they didn’t have the big “Why” what they had was a negative motivation. The negative motivation of survival. I need to pay my mortgage. I hated working through the men so I went out on my own. They are all negative motivations but nobody really knew why they were in business in terms of the positive. What did they want to build for the next five, ten, fifteen years? What was the result that they wanted done there? We created a lifetime goals workshop. We did that for free for six months and we tested it out on people before we started charging money for it.
The second thing I found out people needed was a plan. Nobody has a plan everybody does this dumb thing called business plans which are absolutely worthless, there isn’t a fortunate 500 alive that has ever been built on a business plan. Planning is really important so we developed some of the ideas in one of my businesses was a simple little two-page strategic plan. We branched that up we made a workshop out of that, we did that for six months to make sure it worked then we turned that into a paid product. And then freedom mapping, nobody knows how to get themselves separated from, get this stuff out of their head under a piece of paper so they can be free. We came out with this thing called Freedom Mapping. That became our third tool and on and on and on and on.
Andrew: Freedom Mapping meaning how to systemize your business so the business runs without you. I like the name of it too.
Chuck: You are still there when the business is gone. A lot of … we use a tool called, “Process Mapping” which is very common. We don’t want… the result isn’t the process we want to name it based on the result and the result should be freedom for you and the people who live and work in your business. We teach all our business owners Freedom Mapping, which is the fundamental behind the business owners game, how you make more money in less time. Freedom Mapping is the one the ground in trenches answer to that. It is a very analytical, logical linear way to get off the treadmill.
Andrew: Take me through the first bad version that you came up with on the road to what actually work. You had this problem in mind, you knew your target audience what’s the first bad idea that didn’t work?
Chuck: The first bad idea was, I am going to do a workshops and people are going to flock to my workshops. That’s a long, long road. I bought a URL for a future book called, “Gradually Then Suddenly” because the idea behind it is nobody is really suddenly successful, they gradually began with this long hard road before that hockey stick happens. I realized that the only reason I could charge $500 for workshops was because I’d already written two books and had a lot of customers behind me and had a lot of credibility and I didn’t have any of that. That was version number one.
Next version very quickly was, “I’m going to develop what I call mastermind groups and charge $500 to$800 for a business owners and since people need groups and I’m going to run them and facilitate the A’s and B’s of business genius, because I’ve run a lot of businesses and so they’ll learn a lot from me. That actually worked but it was just a treadmill. Because what I realized was the facilitator had to be really experienced to make that work and anybody who is as experienced as I was didn’t need me to develop a mastermind group. I can just give them the idea off they go and they do it themselves. That was a bad idea too. There were two or three others, along the road to this one and… but the masterminds and the workshops and [speaking] engagements and a few other things led me as an aggregate to this thing we called, “Three to Five Club” which is a larger version of a mastermind group with 204 people in the group mildly…radically different in some ways but the point am trying to make here is and I tell business owners this all the time, “You want to add something again you are running out something getting this in your head or something run it as hard as you can as if it’s the only thing that would ever work until you are sure it won’t”. Usually, what would happen in the midst of running two guides is that it’ll give you the second idea.
Grab the second idea and run with that one as if it’s the only thing. We went through three or four iterations before we came to Three to Five Club. Just exactly what most businesses go through five to fifteen iterations before they find the thing that will make the money. The problem most business owners is they double. I am not sure this is going to make money so I am just going to play with it. You had me sold out to it until you sure it won’t make you money and that leads you to the next idea and then you are totally sold out. You are always sold out and that’s what most people hate about entrepreneurs, is they are always talking about this thing as if it’s going to hang the moon. If they have to stick their toe in the water and experiment, they’re dead.
Andrew: How did you get people to come to all those experiments? You didn’t have a mailing list, you didn’t have a following, you didn’t have the reputation that you have today. How did you get them to come out?
Chuck: Well, again I… when I first saw these guys doing something genius the first requirement was I know I had been… I should have been doing these my whole life. Then I realized no, if I hadn’t had 25 years of business experience behind me I have got nothing to offer. I went to business owners here in Denver and said, “Hey, I don’t know how to do business advisory, coaching, consulting whatever you want to call it I don’t know how to do that. But I do have 25 years or so of businesses, I did a number of them badly, I did a few of them good. I have got to some stuff, I think I can help you. If you are willing to work with me I will start with you on the cheap. I am going to do this less than what I think it’s worth down the road because you don’t know me and I don’t know you. And I am going to do month to month. There are no contracts. The first time you think this isn’t worthwhile bail.
Andrew: You got them… you got them from, were they business lunches that you organized to get to know the first customers?
Chuck: Yeah, that’s the first thing I did… the first thing that I did that actually worked it was three or four, five and six many months in, I was marking out all kinds of things to try and find the people. And the thing I landed it was actually an idea that somebody else gave me that’s usually the way good stuff happens. Be humble enough to take somebody’s idea and run with it when they don’t. Somebody gave me the idea, “Hey you want to start a luncheon just invite people and talk about business stuff. You have got all kinds of business stuff that you can talk about”. They paid for their own lunch, everybody buys his own lunch, get a private room they buy their own lunch and I, its stand up time in front and talk for 45 minutes about a topic. Marketing, Sales, Operations, how to start and how to grow and all kinds of stuff. So I went around recruiting people for that and went to…I did networking which I stopped doing after three years but we had two years, we went anywhere that there was business stars and I would tell them about my lunches.
I spent 20 hours of the first two weeks recruiting for my first luncheon we get 24 people over lunch. Then I went to 18 then I went to nine, then I went to 8. In six months I said I won’t need this it’s a bad idea then I went to ten and came back and forth in three years later I was not even sent out an email and seven to five people were coming for lunches. The story there is again not to that I am brilliant but that people give up too quickly. Most of us give up when it’s about to break up I went from 24 six months later down to 8. We said well maybe this isn’t good enough idea, you know it just takes time to get traction. I call it the friends talk principle. Fred the way he starts the cars he peddles like crazy and the thing doesn’t even move and finally it gets moving he pulls speed at it. Every business is the same way, I peddled like crazy for two years to get thing moving. By the third year it had a lot of its momentum and they were a lot of times where I get to pull my feet in and today it has all of its own momentum and I don’t have to do a lot of peddling.
Andrew: I am looking all the versions of your website, the one that was out 2009 didn’t have really much on the site there’s largely Twitter it seems like and then 2011 there is instantly something on the site that says, “Three to Five Club, where could your business be in just three to five years?” That’s an idea that came to you on the shower. What was the seed of that idea?
Chuck: The seed of that, again, was the sensational desire from myself to build a business that would make money when I am not there. Number one how do I build the business and that should be sealed. That’s really hard to do because people want to buy without consulting they want to buy the hero. It’s really hard for those guys to get off the treadmill. That was the motivation behind this, how do I build a business that makes more money in less time. The genesis of this was the mastermind groups, I played with those and I realized, okay, takes a guy with lot of experience to run those. I still liked the idea of having group sessions because that way small business owners can pay a couple of hundred bucks a month instead of 6 or $800 a month.
If I can figure how to put together a simple piece of material that can actually help these guys maybe I can get people who are every bit as talented as I am, but who didn’t have thirty years-experience behind me to actually want to buy this. Because they can see the value in the syllabus. Rather than having to be the living syllabus. I can create one, so I wrote the book, “Making money is killing your business”. In there the four building blocks, the seven stages of business ownership, the seven elements of successful business, we put all of the tools in there, we created a methodology out of that. Fourteen months of syllabus and again we created all those ones, separated time to make sure they worked in the trenches, then we rolled that out to people and said, “Here, you don’t have to be really experienced at owning a business you require every facilitator to have at least owned and failed at one business”. They didn’t have to be successful. But they had to have all of that and then they have to own their Three to Five clubs. We don’t know them, they own them. We were owners helping owners.
The end result of this and I was in my late 50s when I got this idea. I couldn’t run it all by myself. We took a young woman came to us who was 30 I believe, 29 or 30 at the time. Everybody is gifted as I am probably more so in every area but with no experience. She took the syllabus and fact that she had three years-experience at running your business and not doing it all that bad and not doing it all that good. She laid all that down and she put these in place and within nine months she was pulling down 110 to $115,000 a year, working essentially 16 hours-worth of meetings a month. Then during her recruiting in the off times, now two years later she is making 150 plus, she can easily pull two, she is working three to four days or three days a week tops. She uses our methodology so I was able to get that stuff out of my head through my hands onto a piece of paper and now I make money off of her and she[inaudible 00:36:10]
Andrew: She facilitates these groups called the Three to Five clubs, she owns it, she runs it, she leads it based on your documentation of what you’ve learned over the years and I see and…
Chuck: And I make money off of that. There are 16 groups here in Denver now. I run four of them, she runs four of them we have got three other facilitators who run one to three each and they are building their business we got them in Boise, Virginia, Philadelphia, in Nairobi, Ireland and these guys are all running their own thing. We are all, worldwide we are all the same topic every month. We run 14 topics a year, it used to be nine, we grew it from there slowly as we saw other things. We have got 14 topics we run every month. We run right to the end of those and fourteen months later we start over. And people are [inaudible 00:36:56]
Andrew: I see fourteen topics in each session there’s a different topic that’s the focus and everyone discusses it. The Three to Five Club means, the three and five is a reference to the maturity date of a business. What does that mean?
Chuck: Three to Five clubs meet twice a month. The first meeting is us giving the topics, second meeting is them coming back with their finished assignment. One of the major goals of being a Three to Five club is for them to build a business that begins to give them both time and money within three to five years.
Andrew: I see.
Chuck: It’s easy to get a business to give you money right away. But it takes time to get it to start producing money, or time, as well. Money is easy, time is the harder one but if we teach them as they go and here’s the tools for building a business that gives back to you. I drink the Kool-Aid that I have everybody else doing, never did anything that I tell other people to do that I won’t do myself. We use [inaudible 00:37:57] freedom maps, we have a strategic plan we have a big why. I told people you can do the business that gives you a significant amount of time and money in three to five years. There isn’t a business in the world that can’t do it and I raised my hand for it and I put it in the book. Three years before I got to what I called my business for training, I put it in a book and said four years I split the difference and said I will build it in four years. Four years of building a business card. I am going to be able to leave for a month and this business will run itself and it’ll make money while I am gone. When I come back I will regularly every week be able to get time off and I said I will be able to do that in four years.
That’s a business maturity date, and I set mine for four years from the day I printed the business card; that was February 18, 2011 at 10 a.m. That’s when I said to myself is that at 10 a.m. I am walking out of the office February 18, 2011 and went down in New Zealand for four weeks and this thing will make money without us. Eleven months before I left I still didn’t have a single employee/stakeholder, we call them stakeholders didn’t have one. I had the first person in ten and a half months now and about two months into it I figured the idea what I was trying to do and get out of here in nine months at the time and she laughed at me and said, “You are never going to make it”. By the time we left February 18 we had four full time people, we had a couple of part time people. We left, the thing run itself the only times we checked in for an entire month was to check the bank account and sure enough the money went up not down.
The point I want to make to that end is I am not a genius and the proof is that I did this wrong for five or six business in a row all I did was make money and sometimes not very much of it.The first time I decided and intended to build the business that made both time and money I got it. I can give you scores of business owners since then in the last four years dozens here in Denver hundreds around the world that we know of, who applied the same principles and the same tools and after ten or fifteen years of being slaves to their businesses two years later they got… they work three days a week and taking the last week of the month off whenever they wanted to. One guy, Matt Brubino [SP] he was in his business for five or six years, he employed these principles and two years later he and his wife took a year-long tour of the U.S. in a Winnebago to teach a school from Satellite and there’s … and he built two businesses during that time and these are the people one of them scores of stories like that. That’s the real intent of a three to five club is to get you in with a bunch of other business owners who can say three magic words, “I don’t know”. And figure out how to get to their business maturity dates using the tools that methodology we give to them.
Andrew: And still there was a period where you struggled with it. Actually, you said you were going to do it in four years, it seems like the first three years you weren’t getting it the last year you more than made up for it. What happened in the first three years that kept you from hitting that target?
Chuck: Gradually then suddenly, Andrew. And that comes from a book by, “The Sun also Rises” that not Steinbeck [inaudible 00:41:00]
Andrew: No, that’s… what the name with an “H” who used to go to Cuba.
Andrew: Hemingway, thank you.
Chuck: Yeah, E. M. Hemingway wrote the book and in the book, “The Sun also Rises” he… there’s two guys talking one guy says to the other, “So tell me Bob, how did you go bankrupt?” Bob hangs his head says, “Two ways, gradually then suddenly”. As I read that it dawned on me that’s exactly how most business owners… that’s how most successful businesses are actually built. Tell me Bob how did you become successful, two ways gradually, I beat the hell out of this thing for three or four years and then suddenly it finally popped. And so I didn’t do anything wrong the first three years it just takes time there’s a lot of peddling. Another analogy who uses an airplane, an airplane will burn something like close to 50% of its fuel getting to 35,000 feet just taking off. Then other 50% getting to Europe. Business is done the same way. It’s gradually and there’s no other way to do it the Beatles beat their heads against the wall for eight hours seven hours a day for four years in a German pub and then they came off an airplane here in the United States and said, “Look here’s those overnight successes” no it’s all gradually then… It’s a matter of building the momentum and building the momentum so you can pull your feet in so the thing gets its own momentum. That’s what happened in the fourth year. Most business owners will introduce that, they think it will have its own momentum from day one.
Andrew: What’s the biggest challenge then with this, with Crankset Group?
Chuck: With Crankset Group? The biggest challenge is finding gifted facilitators who want to do the work to build their clubs.
Andrew: Have you heard a bad facilitator. You did the… you had the… what happened there?
Chuck: Not one, early on people were running at me I want to do this and I wasn’t ready because I didn’t want to build a franchise on the backs of other people then make all my mistakes on them. We committed to do this for three years in Denver before we sold it to other places. In the meantime, we had probably fifteen people run on us here in Denver and other places saying “I have to do this. I love it, it’s genius” because they can see it. But we weren’t ready. I relented and I let four or five of them start their own groups they were the wrong people, the wrong time all kinds of things. But yeah, we probably had… we’ve got I would say seven or eight successful facilitators right now. We’ve probably run through fifteen more to get to those, but we’re getting better at it. Every single time we did tell them we are not ready for you and in some cases we even said “We don’t believe you are the right person.” But I am entrepreneur, and so I would tell people “I don’t think this is right for you, I think it’s the wrong thing for you. I don’t think this will work for you but if you have that vision who am I to tell you, who am I to disabuse you of that vision.” Because I learned over my life that I am wrong a lot. We met a lot of people that have done this badly but we are getting very good at finding people who are hungry, who simply are good recruiting people and who want to make a difference in people’s lives.
Andrew: What’s your thought back mechanism with the… with the leaders of the groups? How can you tell what’s not working so you could either improve it in the system or realize that the group just isn’t led properly?
Chuck: The first thing is right back to the customer. Some groups have very high turnover earlier on so we are seeing the reason that is, is because the facilitator is recruiting wrong people. He’s recruiting people thinking they are networking group or they are just they’re hobbyists, they are just the wrong people. Other groups I think along that way is… his groups were so stable he’s got the best people and they’ve been in there for three to four years of the time before they decide to move on. He builds his groups very slowly, but boy they stick; and he’s figured out to find the right people so we profiled those because as you know he recruited this other person, we teach people. Don’t recruit these kinds of people if they say these kinds of things or at this stage in their business or they have that kind of mindset that they are going to be wrong.
Andrew: How can you tell that the reason that the group didn’t work out is because the people there have the wrong mindset?
Chuck: Because those groups collapse and the others don’t.
Andrew: So how would know that it’s because of that mindset? What kind of research tells you it’s, they are coming in for networking they are coming in to share connections.
Chuck: We have the two page application that we instituted within six months of starting Three to Five clubs. We realized we need an application, so these people know what they are getting into. We have a two page application and we have 15 questions. “Why do you want to join Three to Five Club? “Do you want to be …We set it, kind of bait it. “You want it for networking or do you want it to build your own business and so depending on which boxes they tick we which notice they give us and then each group has a membership committee which we train to take those applications and vet those. Then they do in… they actually ask for referrals and they call the referrals of these business owners to see if these people are actually serious about building a business. It’s a vetting process that goes on now, that’s designed to help us get the right people into the groups. If you consistently get people who are going in and out and they all have the hallmark of a networker that’s one indication you got the wrong people. But over here we got people who want the education and those people tend to come and build they stick longer. They go for the 14 months and they are in and out. They are schoolers, they are educators. We [inaudible 00:00:17] who want the businesses to be transformed and they want to live in business community and say, “I don’t know what I am doing please help me” [inaudible 00:46:43]
Andrew: I see. Most of them just want to learn are often not doers and that’s the wrong fit for you. I am looking at a video here on YouTube of Three to Five Club in Ireland. How do you get the message out? How do you get new people to organize these groups especially outside of the U.S.?
Chuck: We haven’t done anything prior to this year. The first year we are actually… we are getting a proposal right now from one of my friends who we respect who will give us a proposal for how to market this stuff. This place it’s been all word of mouth. I can tell you the book, “Making money is killing your business” that book has been very helpful for us. It was the number one read business book for 2010 and we’ve got 60 different referrals and testimonials on Amazon. 58 out of the 60 or something like that are five star and as people say this is a best business program ever read. This transformed my life. This transformed my business. I didn’t know what we had when we wrote it but I knew it was working in the trenches and on the only question was can we get on paper. That book ones we got it out there we regularly have people call us from the middle of nowhere saying, “Do you have a Three to Five Club here or can I start one?”
Andrew: I see.
Chuck: That’s how we got Pennsylvania, that’s how we got Boise, that’s how we got Nairobi. We are growing we are at the advantage of having a book that puts it all one place so people can see the whole story. It’s like a watching a movie rather than watching a movie clip.
Andrew: What kind of revenues are you guys doing with the business with Crankset Group the organizer, the owner of these clubs right? It’s Crankset that owns the Three to Five Club business, yeah.
Chuck: We own the Crankset, we own the franchise. We are technically not a franchise, we are finding ways to get around that because we want people to own their own businesses. They all own their own businesses but the typical club that has four full groups we will be doing 150 to 200,000 a year in revenues from the groups. Then the facilitators are also doing one-to-ones they are also doing workshops and other things so they can easily, not easily but they can put more money on top of that.
Andrew: What about you as an organization; Crankset?
Chuck: Well, we’re topping a million dollars for the first time this year. In 2010 when we… when we after four years of stumbling around on this research we did about $180,000 a year. In 2011 that went to 300, in 2012 it went to five and 2013 it went to 680 in 2014 we did 820. We’ve grown about 664% in the last five [inaudible 00:49:20]
Andrew: It’s amazing. The 820 in revenue, is that our cut of . . .
Andrew: No that’s overall. So if there’s someone who’s organizing an event in Ireland all the revenue that comes from that event is what you include in the Crankset revenue of 820.
Chuck: After paying ourselves, average, we got six people in our full time seven people in our full people group and they are all averaging over 70,000 a year and they are getting a lot. We still netted 12% profit last year after we paid ourselves
Andrew: Twelve percent of the 820.
Chuck: Yes we are looking at like 60,000 in [claim] money the one we’ve done. This year we think it will be double that. But again that’s sounds…that’s nice but we did that without marketing. We believed that as we get into marketing our projections for this is just very modest growth of 22% very modest, we think we will blow that up. That will get us over a million and we figure we’ll be too lean next year three million in the next year. We’re in the hockey stick now.
Andrew: You tell entrepreneurs know your metrics, have one to two numbers that you follow slavishly. What are your one to two numbers that you focus on as a business?
Chuck: Yeah, the first number it changes depending on where your business is at. When I first started the only number that I followed was cups of coffee. I knew that if I did my ratios, I met with enough business owners over the months, I put together the ratios and you realize that 27.5% of the people that I meet with at Panera Bread would buy something from me, one out of four. I also realized that I needed four new customers a month to get to the numbers we needed. I needed one new customer a week I need four cups of coffee a week. That was the only number that mattered in our business. We called it first domino. Every early stage business or every sales person needs that number what is the only number that mattered is once you get that number all the rest of the numbers fall from that one. If you can get four people to show up at Panera Bread once a week, you can get your one new customer a week and you [inaudible 00:51:22]
Andrew: Why not? Why not say I need a new customer a week? Why instead say I need to meet with four people over coffee a week?
Chuck: This is not specific enough. How are you going to get one new customer that’s just wishful thinking. I had actually went back in how do I get four new people to show up Panera Bread, well I came up with my business leaders inside lunch once a week and we started doing workshops. Then I purposed to actually touch ten people a week personally. We had those numbers to get to four people to show up then
Andrew: I see and those are numbers… that’s an event that you can control having four people come to Panera Bread getting one of those people to eventually signup is not 100%. It’s out of your control it’s more in their hands. I see.
Chuck: But it’s in my control on average. Because over three or four months I knew that I can go for three weeks and no one will buy and then for four cups of coffee a week or four cups of coffee straight in one day everybody will buy and right back to 27.4%.
Andrew: I see.
Chuck: So control what you can. I can control the average I can control four cups of coffee. In that vein I always had five cups of coffee because I am not a victim. Most business owners are victims. When I set my four cups of coffee and two of them cancelled, it’s not my fault. You know it’s going to happen and set five. Anytime somebody canceled I had four and if they didn’t I got more.
Andrew: That’s an early stage goal, later on what was that number?
Chuck: Later on it was number… number Three to Five clubs. We start number of starts each year. Now it’s becoming number of facilitators that we get each year. We want…we will be thrilled to put on four new facilitators this year, eight next year, sixteen year after that. We’ve put on probably one a year in the last four years. That aggressive is four. That’s the number and there… and in the middle of that we would say there’s two numbers we watch slavishly one is profit. But the one we watch all the time and every business has to watch all the time is cash flow. I watched that from 2006 until this day. Can I make my payroll, can we pay our bills. Every 15th and every 30th cash flow, cash flow, cash flow. It doesn’t matter what size your company is that’s the most important number you will watch on a regular business.
The reason for that we had one business that went from two million to eight million and we had to sell it. We grew so fast we run past our cash flow. That’s a lesson for business owners we think that if you go from $200,000 a month to $400,000 month in revenue you should be ecstatic. No, you should be scared out of your wits. Because it’s possible you are killing your business. The faster you grow the less money you have. Let me say that again business owners, “The faster you grow the less money you have”. Because it’s spread out all over your business and receivables and equipment and expansion. You will find yourself starving to death the faster you grow. That’s the other number we watch medically is cash flow.
Andrew: Cash flow.
Chuck: We haven’t projected out six months if I spend $5000 this month what is that do for me six months from now. I pay somebody $150 bucks a month to get me a report that tells me what my cash flow is. Money well spent.
Andrew: You are doing so much better than your mom used to kid you about doing when you were growing up. The business is growing congratulations on it. Anyone else who wants to find out more about it can go to 3to5club.com the number 3 the word to the number 5 club.com or what is the other URL cranksetgroup.com. Thank you so much for doing this interview, Chuck.
Chuck: Thanks Andrew, Andrew it was fun being with you.
Andrew: You know what, actually I want to start doing some closing credit letters, let everyone know who put this interview together with me so that they don’t think that it’s just me. And here’s who helped me out. The pre-interview, the producer who did that her name is Miss April Dykman. People might have heard me talk about her before. Research is done by Stephanie Littlefield and Andrea Schumann. They both help me get some background on you. Arie is going to post the interview up on her site, excuse me up on Mixergy, and we were referred by Crystal Valentine who I mentioned earlier who helped set this up. Thank you so much and thank them all. Thank you and thank them all. I thank them all and I want to thank the audience thank you all for being a part of it and bye everyone.