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Episode Summary
You hit $120M in revenue and thought you’d arrived. Eight months later it’s worth zero. That’s where Norm Brodsky opens the story I’d been waiting to hear. Bo Burlingham introduced us, and Norm has been in Bo’s writing for 20+ years for a reason: he learned the lesson most owners never sit with, that topline revenue is vanity and the only number that matters is how much of the sale you keep. We got into how he pledged the assets of his cash-cow business to fund the adjacent businesses and lost it all. How he rebuilt CitiStorage, a $25M business he sold for $110M because the EBITDA was $10M and the multiple followed. Why he sent his quarterly financials to Iron Mountain, his largest competitor. How he hires sales reps (never hot-shots, never from competitors, always two prior jobs). And why he killed a deal the day Inc Magazine put him on the cover for that very deal.
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## Top 10 Takeaways- Topline revenue is vanity. How much of the sale you keep is the only number that matters.
- When the business collapses, look at what you did to cause it before you blame the market.
- Never pledge your cash-cow’s assets to fund the adjacent business. Run them as separate entities.
- Build the business like you’ll own it forever and like you’ll sell it tomorrow. Same discipline.
- Your employees are the most important asset, not your customers. The people take care of the customers.
- Know what business you’re actually in. Storing boxes and renting cubic feet are different games.
- Never hire from a competitor. They’ll do to you exactly what they did for you.
- Don’t hire hot-shots. They won’t fit the culture and they won’t stay.
- Plan your exit five to seven years out. Most owners only see their real income after the deal closes.
- The contract doesn’t protect your culture after close. Pick the buyer, not just the price.
Sound Bites
“It’s not how much you do in sales, it’s how much of the sale you keep, how much of the money you keep, what are your profit, what are your margins.” (@TBD) — Norm Brodsky
“Smart people have to learn their own lessons and they make their own mistakes. Wise people on the other hand are people who learn from other people’s mistakes.” (@TBD) — Norm Brodsky
“Build a business as if you’re going to keep it forever and build a business as if you’re going to sell it.” (@TBD) — Norm Brodsky
“When somebody goes back on their word on one thing, you have to assume they’re going to go back on their word in a lot of things.” (@TBD) — Norm Brodsky
About This Episode
Norm Brodsky is a serial entrepreneur and longtime Inc. Magazine columnist who co-wrote Street Smarts (originally published as The Knack) with Bo Burlingham. He built his first business to $120M in revenue before losing it in eight months when the 1987 crash and the rise of fax machines hit the businesses he had pledged his cash-cow’s assets to. He rebuilt with CitiStorage, a $25M document storage business he sold for $110M, and has started 12-14 companies across his career. He’s a featured profile in Bo Burlingham’s Small Giants. This is an early episode of the podcast, a wide-ranging conversation on building profitable, sellable businesses without losing the people inside them.
Resources Mentioned
- Street Smarts — Co-written with Bo Burlingham, originally published as The Knack. Translated into 12 languages.
- Small Giants by Bo Burlingham — Features CitiStorage as one of the profiled companies.
- The Great Game of Business by Jack Stack — Open book management; Norm’s wife visited the company to learn the system.
- Zingerman’s Leadership School — Where Norm’s wife trained on culture-building.
- Telephone Doctor — Used to train CitiStorage staff on phone interactions.
- Iron Mountain — The largest competitor in the document storage industry; chairman Richard Reese sent a team to help Norm value his business.
- Built to Sell by John Warrillow — Referenced for the discussion on owner dependence.
- Norm on Twitter — @normbrodsky
- Norm’s email — brodsky13@aol.com
Connections
Phase + Module:
- Module 1 — Ownership Goals — Norm’s lesson on chasing topline vs. defining the real goal (profit, cash, sellable value)
- Module 9 — Operator Transition — The CitiStorage sale and the “is my company me?” question
Concepts referenced:
- The Owner-Operator Trap™ — Topline addiction without margin discipline
- Normalized EBITDA — $10M of EBITDA at a 10x multiple is what produced the $110M outcome
- The Four Value Levers — Profit and multiple as the real outcome of every operating decision
- Value Gap — The space between what owners think they take home and what the business actually pays them