Craig Paxson: Your Growth Plateau Is a Positioning Problem

Nate Grossman: Okay, welcome, welcome, welcome. So you have tried the obvious things. You hired, you spent more on marketing, you put in more hours, and the needle barely moved. Here is what nobody told you. When growth stalls at your stage, it's usually because not because you're executing badly. It is because you have never actually defined why a customer chooses you over anyone else. You have a description of what you do, you do not have a position. And every fix you try keeps running into that same invisible wall. With me today is Craig Paxson. Craig is someone who I think can tell the difference between a positioning problem and an execution problem, which many owners have a difficult time telling apart because they're in it, you know. Craig calls himself competitive advantage art architect. is I think that's a great name, who helps service businesses break through growth ceilings by getting clear on the one thing their competitors have overlooked. He is a former CEO who turned a $500,000 loss into a $300,000 profit in two years, while a hurricane wiped out 80% of his largest I mean, that sounds miraculous. so he knows firsthand. what it costs to build a business around the wrong position. He is the creator the visionary position map and the visionary velocity method, and the author of three books on strategy. All right, Craig, welcome. How you doing, sir?

Craig Paxson: I'm I'm great, Nate. Glad to be here. Thanks for having me.

Nate Grossman: Awesome. Excellent. you call yourself a competitive advantage architect. When an owner tells you ⁓ their growth is stall, what do you see that they usually can't?

Craig Paxson: Yeah. know, positioning, I think a lot of times people think it it's just a marketing thing, right? We just we make our our ⁓ UPC or ISP or whatever TLA three letter acronym that you want. right. But we really haven't def what we really haven't defined and don't understand is what makes different than our competitors.

Nate Grossman: alphabet soup, yeah.

Craig Paxson: And what can our market actually support? And so you know, I run into a business owner and I say, you know, why would somebody choose you versus your competitors? And inevitably I run the same stuff. Better customer service, higher quality, you we're professionals, you know, all of that kind of we're strategic, you know, all of those kinds of things, right?

Nate Grossman: Lowest price, usually usually one of ⁓ Yeah.

Craig Paxson: And it doesn't tell anybody anything because everybody says it. Your website looks the same as everybody else's website. Yeah, it's got the right stuff on it, but you know, you're serving the same customers in the same way as all your competitors. And so you look the same, and now the only thing that a person has to choose on is price. that you got to them first, right? So It always ends it ends up invariably it ends up being lowest price or just pure owner hustle, right? Somebody making it rain. And that is not a way to live. There's only one thing worse than winning the race to the to the bottom it of price. Seth Godin says, it's coming in second. And we don't want to be there.

Nate Grossman: Yeah. what what you are doing or working on with businesses, I comes into the the visible layer. We talk about three things on this podcast. the visibility of a business, having the right people, you know, find you ⁓ because you're up in the right places, saying the right things, and presumably you are positioning yourself in such a way that makes them want to you, right? and then ⁓ the you know viability, right? Can the business stand on its own two legs? And of course, both of those things together automatically make a business more valuable, but ⁓ other things in there too. But I think what what you're doing really applies to that visible layer, whether those those right prospects can find you, understand you, and remember why you're the choice, I think is key too, right? ⁓

Craig Paxson: Yeah, I that that's definitely part of it. but you know, w we choose to be competitive really ⁓ involved lot with our profit model, how we actually make money, right? So making money at the beginning a relationship, and then never seeing the customer again or purely transactional model is completely different than a way to make money where we sell the sell at a loss at the beginning and make our money over time. Right. So think about razor blades, right? They sell you the handle of the blade for pennies compared to what they're gonna get for the the razor blades over time, right? And so many times business owners have not even thought of what's the profit model, how do we make money before they've thought about what is our position? How do we present ourselves to the market? And so a lot of what I do with businesses is figure out.

Nate Grossman: Yeah. Yeah. Yeah. Mm. Yeah.

Craig Paxson: What is a better profit model? What's a better way to make money? And then let's translate that into our competitive advantage.

Nate Grossman: Mm-hmm. Mm-hmm. excuse A lot of times when business owners they hit that ceiling, they their immediate kind of gut reaction is to we gotta go, we gotta find something to do. And it's usually like we gotta execute on something, right? It's gotta be it's usually that some of a a tactic, right? so they're gonna hire someone, run a campaign. ⁓ add more hours, you know, maybe I'm just not working long enough, right? Why, in your opinion, is that usually the wrong first move?

Craig Paxson: Yeah. they're they're they basically they're coming down to competing on price or hustle, right? I'm either the lowest price choice or I'm the first first choice the person saw, right? And some of these are real savvy buyers now they're not gonna go with their first choice. I mean, how many people buy the very first car that they ever see when they're car shopping, right? ⁓ or the very first house. Everybody ever house hunting, ⁓ walked into

Nate Grossman: Mm-hmm.

Craig Paxson: House number one and said, Yep, I'm not looking at any others. No, that never happened. ⁓ so so it's more than just visibility. ⁓ we have to think about what makes us different. Or else we're just gonna be always competing on those two things. It's hustle or price.

Nate Grossman: Yeah. Yeah. Mm-hmm. okay. So you I I think ⁓ somewhere you you you have said that most businesses between one and ten million have a description of what they do, but not necessarily a competitive position. So can you tell us what it was the difference there? I think we we're kinda s we're kinda like circling around it here, but ⁓

Craig Paxson: yeah, look, ⁓ competitive advantage is a reason that a customer would choose you over every available alternative, deliberately built and consistently delivered. That is a competitive advantage. It's those it's those things, right? It's a reason that people choose you over else. But it's not just one that you happen to luck into or you were heard the business from your father, and so you just keep things going the same. It's deliberately built. It is deliberately chosen through a process, and then it's consistently delivered. Not only do you have an advantage, but you also have the infrastructure to deliver that advantage consistently over time. All of that together makes a true competitive advantage.

Nate Grossman: Why why does that matter? Why is that such a big deal?

Craig Paxson: Well, it you know, for small businesses because you know, they don't want to compete just on price, that just that does nothing but lower profitability, lower revenue, increase owner stress. Most small businesses, the founder, the owner is involved in the day-to-day and they just can't or don't wanna put in more hours, right? So we're trying to get to that position where the owner doesn't have to hustle more in order to make more money. Right. So if we can figure out a way to why customers choose the that business, over available alternative where it's not just price. Now customers have a reason to choose them as different. And that is that is, you know, the that that is the key, right? If we haven't defined that, deliberately chosen that advantage, we're gonna come down to the one thing that customers can see. And that's price.

Nate Grossman: The the the sticker, right? okay. So how, know, if a business owner is in the thing they're doing it, how how can they tell if w their problem is a positioning problem rather than, we're just not, ⁓ you know, working hard or we're not doing this over here, that there?

Craig Paxson: Right. Right. Yeah. There's there's really two to two ways to see that. One, if you look at your website or have some anonymous person look at your website and your top three to five compares websites, if you could swap out the logos, the names, and the colors and you wouldn't know who's who, that's one sure sign, right? That you're not different. The second thing is that I ask a lot of owners, did you inherit

Nate Grossman: Mm-hmm.

Craig Paxson: Or deliberately choose a competitive advantage. And almost nobody can say, yeah, we went through a process and we deliberately chose to be different in this way. Nobody says that. So if you haven't gone through that process of creating a competitive advantage, and your ⁓ your website looks like everybody else's website, and your business card looks like everybody else's business card, ⁓ you go to your B and I meeting. or your local networking meeting and your pitch is the same as everybody else's pitch that you hear, you don't have an advantage. you're back to competing on price or owner hustle.

Nate Grossman: Hmm. I guess you kind of started answering my my next question, but when when they when a business does not have a clear position, what operationally and in like sales conversations? Does it the pricing or and I assuming also it probably affects the the way the team talks about the company?

Craig Paxson: ⁓ everything. Yeah. And I'm gonna I'm gonna flip that on its head ⁓ and say if we do have a deliberately chosen competitive advantage that nobody none of our competitors can say, what does that do? That's a much more interesting and fun question for me. So first let's talk about internally, right? If if the whole team, if all the employees know that I'm just gonna make something up, that reason that people choose us, and this is what I always tell all of my clients.

Nate Grossman: Yeah. Okay. Okay. Okay. Yeah.

Craig Paxson: We want you to be able to tell your tell your employees. The reason people choose us is X. The reason people choose us is because we answer the phone in 20 minutes. Let's just make up something. We answer it by the third ring. Every time no questions asked. Now, everybody internally knows that's the standard. And it's not just because, well, Craig said so, Nate said so. It's the reason we answer the phone by the third ring is because that's why people choose us.

Nate Grossman: Mm. Yeah.

Craig Paxson: Now there's actually a tie to the market. There's a tie to who's gonna buy our stuff. It's not just some random edict out there, right? Everything now that we do as a business owner can be traced back to that. Hey, Joe, you haven't been answering the phone. 80% of the phone calls that come to your desk are not answered within the third ring. Well, now we're holding somebody accountable to a standard that isn't just arbitrary, it actually ties back to the value proposition. With my clients, we tie everything back to the value proposition. Employee conversations back to value proposition. Hey, Nate, you weren't wearing your branded t-shirt ⁓ today, and you know part of the reason that people choose us is because we show up in our branded stuff and they know it's us and they feel safe to open the door. Right? Now that's so everything we do ties back to value. So that's the internal conversation. It's so much easier if everybody understands why people pick us. ⁓

Nate Grossman: Hm. Yeah. Yeah.

Craig Paxson: over the alternatives.

Nate Grossman: Okay. like that. I like that. Okay, so let's dig in on that. talk let's get into how you actually are solving this. You take you say that you take an outside in approach, which is ⁓

Craig Paxson: Yes. Yes.

Nate Grossman: way of thinking about it, I think. you have a very specific way of placing a business before a single goal s ⁓ gets So can you walk us through that?

Craig Paxson: Yes. Yes. Absolutely. And I'll start with the start with an example, a story. most companies, and if you you know, if you look on LinkedIn or Facebook and you see somebody who's promoting the fact that they're doing strategy planning, and the very first thing in their pyramid or their flow chart is something about vision, right? And we start with the vision. We're looking internally, and then we make all of our plans around what we want to do internally. Well, I'll give you an example.

Nate Grossman: Mm, yeah.

Craig Paxson: Several years ago, I was met this company. They're ha running a very popular business operating system, and they said they were going to double their their EBITDA to 20%. I ⁓ interesting. Okay. So I looked that looked it up in a database that I have, and best class EBITDA for their industry was 14%. I said, So you're telling me you're gonna be fifty percent better. Than the very best company in your industry. Are you gonna do anything radically different in order to reduce your cost by a tremendous amount? Are you gonna do anything radically different to where you can increase your pricing by a tremendous amount? And they said, No, we didn't know that. They had taken an inside out view, the normal thing. We want to increase by twenty percent. Why twenty percent? I don't know. Just sounds good, right?

Nate Grossman: Mm-hmm. I mean it sounds good, right?

Craig Paxson: But it wasn't supported by the market. The market would not support it. Give you an another example. If you want to grow your revenue by 20% the market that you're in is growing by 20%, all you have to do is maintain market share and your revenue will grow. If you want to grow by 20% and the market is state is flat, is not growing, you have to steal market share from somebody else. How are you going to do that? Those

Nate Grossman: Yeah. Yeah. Yeah, yeah. Just status quo. Yeah. Yeah.

Craig Paxson: Those are those are two completely different operating models, two completely different questions to be answered maintained market share or steal market share, even though they both have at the core growth of 20% ⁓ revenue. Two completely different situations. Well, if we don't look and understand if the market is growing or shrinking, or is it stable? If we don't understand what our competitors are doing. We have no idea if the goals that we're setting, if the vision that we have is even reasonable.

Nate Grossman: Yeah. Okay. So s so in other words, you're starting with the market and the competitors before you get into a single internal goal. Okay. I and yeah I guess you kind of you kinda touched on this, but Why is that why is that important for a business to do something like that? Think about the outside first rather than concoct some kind of a thing ⁓ exclusive of that on their own.

Craig Paxson: Right. Right. Yeah, I mean I think in the the two examples that that I just said, what they really do is one, make so that we're setting appropriate targets, right? Targets that the market will support. So that's one thing. If we say we're going to grow revenue by twenty percent in a shrinking market and and we don't understand the market is shrinking, we're setting a goal that is almost certainly not going to be met. It's it's terrible.

Nate Grossman: Yeah. Yeah, yeah.

Craig Paxson: Right, not not meeting a goal, right? Especially when you had no possible hope of meeting it. The second thing that it does is it gives us the right problem to be solved. Right? Growing revenue in an expanding market and growing revenue in a stable or shrinking market are different questions and different problems. So it gives us those two perspectives of setting appropriate targets and knowing the problem that actually needs to be solved.

Nate Grossman: Mm-hmm. Yeah, that kinda helps you to to hone in on what sort of like you know path to take, in other words, if you're more informed about what is actually happening from the outside. Okay. I l years and years ago had another job. I thing we talked there was setting yourself up for success versus yourself up for failure.

Craig Paxson: Right. Mm-hmm.

Nate Grossman: And it seems like if you're looking at that from the inside out, you're almost setting yourself up for failure in that case, because yeah. Yeah. ⁓ okay. So visionary position map. Let's talk about that a little bit. from what I understand, it places a business in one of nine strategic moments. What are you actually looking at to place ⁓ someone why nine?

Craig Paxson: Absolutely. Absolutely. Yep. Yep. Yeah. Right. Yeah. Yeah, that's a good question. Why nine? but basically looking at the market in in one of three ways. The growth of the market. Is the market growing? Is it stable or is it shrinking? So that's the first thing. We call that the market read. And that's the easiest thing, right? But then we're also gonna look at the competitive well what I call the competitive read, which is is the market highly commoditized or completely commoditized, right? Think of grain.

Nate Grossman: Yeah. Yep, tip, tip, tip.

Craig Paxson: Right, grain is completely commoditized. There's there is there's basically nothing but price, right? Until you get into crazy things like, you know, is it is it organic or you know, there's certain things, right? But for the most part, grain, oil, energy, right? Those things are commoditized. So how commoditized is the market? Is it highly commoditized? Is it highly differentiated, or is it somewhere in between? We call that emerging, right? And so now between those three axes.

Nate Grossman: Yeah, yeah. Mm-hmm.

Craig Paxson: The the the two axes each with a three, we come up with nine. That nine what I call strategic moments. So for instance, a shrinking commoditized market is a different looking market than a growing commoditized market. Right? A shrinking commoditized market is very different from a shrinking differentiated market. And so we place ourselves in one of these nine squares, and that tells us what is the problem that we actually are trying to solve. strategically competitively what are the potential profit models or business models that would work inside of that strategic moment and that now will help us help inform us about what kind of business should we running not our not our industry not our HDAC but what kind of a profit model what kind of a business in HDA should should we be running right And so those that's how that ties together.

Nate Grossman: Yeah. I like that. Let's talk a little bit about let's let's think about this from a a hypothetical. Let's say have a service business and they're doing like two or three million, and they have a team of let's say twelve. What does ⁓ that that's of high, huh? ⁓ what what does what does finding a comparison?

Craig Paxson: Whoa. And I'm going, Whoa, too many full people? Woo

Nate Grossman: a real competitive advantage look like in practice? Does it is it is it based on the industry or like is that gonna be an important information to know or yeah.

Craig Paxson: Absolutely. Absolutely. Yep. Yep. So once we've once we understand our strategic moment and the kind of profit model that we should be running, we want to look ⁓ our competitors in a very specific way. And so the way that we do that is I use the in the blue blue ocean. they have what they call the the the buyer experience cycle. And so there's seven stages across the buyer experience cycle. The first one is price. right now price is not just amount. There's four components to price. So we have the actual amount, we have the timing, is is having to having to you know pay before delivery or after delivery are two different things. We have the duration and the timing, right? So we have four different components to price. There's also now in the experience, there's What does the buyer experience for purchase look like? What is the buyer experience for delivery, for use? Are there supplements that go along with that particular purchase? and how you know, how do we how do we look at that? All the way through disposal. How do we dispose of whatever it was that we bought at the end? Think about batteries, right? I know for a lot of us, you know, we have a used triple A battery and we just throw it in the trash, you know. ⁓ if you have a Tesla, you can't just throw your used Tesla battery in the trash. There's disposal for that. Yeah, yeah, exactly. And we're gonna put it in the sun. but what we now do is I wanna look at myself, our and our competitors across ⁓ the entire spectrum to say, okay, is there anything we I have a zero three three scale, zero meaning that this is completely irrelevant, nobody

Nate Grossman: You just shoot it into space, I think that's what you do.

Craig Paxson: even looks at this or chooses this at all up to a three, which is customers choose this particular vendor for a particular reason and that's why they do it and that would be a three, right? So we're gonna we want to map our our competition and ourselves across those seven that gives us a shape, right? This it gets kind of complicated here without visual. ⁓

Nate Grossman: Yeah. Yeah.

Craig Paxson: But we can now look at this and say, okay, look, there's there's huge disposal cost for some reason. Nobody's ever addressed that. Let's address disposal cost in a way that would make main make it so that now disposal of that item is a competitive advantage for us. And we can use that map in order to figure out where where should we be different.

Nate Grossman: Okay. you're doing this is ⁓ little bit off the ⁓ off the the path here, but I'm kind of curious. When you're talking about from the outside in, I'm assuming that you ⁓ you you've been talking about competitors, you're doing competitive like research analysis. Are you are you running the visionary position map on each of the competitors then? Okay.

Craig Paxson: No, no. Yeah. So the nine strategic moments are for the industry and they really they're gonna fit, right? So, you know, we think about competitors and I will run the competitive read and the market read based on that particular industry in that particular market, right? So if somebody is a VAC company in in Tullahoma, Tennessee, close to where I live, that may be a different

Nate Grossman: Okay. I say. Gotcha.

Craig Paxson: ⁓ strategic moment than if they're an HDAC company in Minneapolis, Minnesota, just to make something up, right? so we're we're but we're gonna look now to find our strategic moment and then we're gonna map out our three to five most important competitors that we actually do compete against.

Nate Grossman: Okay. That's interesting. So once you've cre

Craig Paxson: But you're right when you talk about research. Yeah. When w you talk about research, that is a huge amount of what I do help determine one, what does the market actually look like? Right? ⁓ so I'm doing research on is the market growing, at what rate is it going to grow? What's what's is does it grow next year? Does it shrink next year? What are the th economic things that could come into play to make it grow or make it shrink?

Nate Grossman: Mm-hmm.

Craig Paxson: And I'm doing the research on the top three to five competitors. Part of my intake process is tell me your competitors. And I'm gonna go out and look at their websites, brochures, Google reviews, all of that stuff to figure out, okay, what does their strategy curve look like across those seven factors of the buyer experience cycle? That's part of the research that I do, but that's hugely important. We can't actually create a competitive position if we don't understand what the competitors are doing.

Nate Grossman: Mm-hmm. Okay. let's say that the the company has figured out their position. Okay. Where at point do systems come into ⁓ so that it's not just dependent on the the founder.

Craig Paxson: Yeah, yeah. Yep. Right, that's right. Yep. Remember the the the things about a competitive advantage is it's a reason why people would choose us over every available alternative. deliberately chosen, we've talked a little bit about that, and consistently delivered, right? So we have what I call the business capabilities matrix. Every business, whether it's the mom and top mom and pop donut shop down the street, up to Amazon or General Electric, has four basic functions. One, you have to sell, you have to create a paying customer, right? So I lump sell sales and marketing, I lump all that into one thing. We're creating a paying customer. Second thing is we have to deliver product or service to that paying customer. The third thing is we have to collect the money that's owed to us. Right. I sell something, I go deliver it, I don't collect the money, I go bankrupt. And then the last thing is we have to we have to lead and govern the organization, right? We have to hire people, fire people, file taxes, get or whatever it might be, right? Those are the four functions. Occasionally I run into a business that has a fifth function. I have a recruiting company, they have another function of recruiting, right? Of of getting in talent that they can then serve to their to their clients. So that's our four columns. We have now rows. One of the rows is what are the key activities inside of each of those columns, right? So what's the key activities for selling, delivering, collecting, and then governing the organization? What are the tools and resources that we need, right? Websites, trucks, raw materials, whatever it might be to do all four of those functions. What the skills and abilities that we need, the people that we need? do those four things again, sell, deliver, collect, and govern the organization. what policies do we need to have in place? Right? Do we need to have a policy if we say that if we say that part of our competitive advantage ⁓ is no question returns we have to have a policy that says no question return anytime, right? So that's a a policy. Policies are really easy, it's just a stroke of the pen. And then finally, the last thing is what are the measurements that we need to have to make sure that all of those things are functioning so that we're delivering on our competitive advantage. So that is the that is what I call the the business capabilities matrix. Right. Once we have all those things listed out, now we know exactly what the business needs to look like in order to to deliver that competitive advantage. And now we just manage to that matrix.

Nate Grossman: Mm-hmm. Nice. yeah, okay. Is that so is that the kind of thing where you are implementing matrix, you're setting it up for the business, and eventually you're kind of working yourself out of a job in that case? Yeah.

Craig Paxson: Yeah, I mean, yeah, as a as a competitive advantage architect, my job is to help them figure out, yeah, what does the matrix need to look like? Then help them identify gaps, right? Well, we don't have this tool or resource. We need to, we're gonna have to go get it. this particular process, you know, we we we consistently answer the phone on the sixth ring, but our competitive advantage is the third ring, so we need to improve that process, right? So I'm helping them identify gaps.

Nate Grossman: Yeah. Gotcha.

Craig Paxson: Then I hand it off to somebody else who's actually gonna do this stuff, right? Whether it's an EOS person internally, another fractional person, whatever it might be. Now, one of the cool things about the way that I've set this up is that the capabilities matrix is linked directly back to their profit model. So if some if a somebody's profit model is a subscription service, let's just make sense, just make something up, they need different capabilities.

Nate Grossman: Catch you. Yeah.

Craig Paxson: Than if it's a transactional model, they sell and they're and they're it's gone, right? And so each of the different nine profit models that I have have a different template for what kinds of capabilities are required. So it makes it's not just us brainstorming. we think we need this. No, I've got them all mapped out. Here's we're running this profit model, then here are the capabilities that you're gonna need in in the template of those. Now we know, okay, we're gonna need a policy around.

Nate Grossman: Yeah, yeah.

Craig Paxson: collections, we're gonna need a pot we're gonna need ⁓ these ⁓ tools and resources for doing this, whatever it might be. And so there it's all linked together. It's not just brainstorming. It is a very linear factual process.

Nate Grossman: Okay. So think kind of we're kind of again dancing around this, just to kind of crystallize it, y ⁓ let's say that you've successful, you've helped them ⁓ an owner find the position for their business. What has to be true in the rest of the business? ⁓ let's say in how how they sell it, how they price it and deliver it. for that position to actually hold.

Craig Paxson: Right. That's right. Yeah, you pretty much you've pretty much just said it, right? right, yeah. I mean, the this is why, you know, the word strategy has become so ⁓ ubiquitous stuff, it almost it almost means nothing anymore, right? People say, Yeah, I do strategy, marketing strategy, or whatever. Well, here's here's what it really is. Strategy is all about competitive advantage. Why do people choose us as opposed to anybody else?

Nate Grossman: okay. ⁓ Yeah.

Craig Paxson: From that competitive advantage strategy, now we're gonna dive down into our operational strategy. How do we deliver on that advantage? Our sales and marketing strategy, how do we make people aware of that competitive advantage? How do we convince people to turn over their money based on that competitive advantage? Right? Our financial strategy, how are we gonna fund that competitive advantage? How do we fund the business? All that stems from this overarching competitive advantage strategy. All of that comes from that. So we just don't go into and say, well, here's our marketing strategy without understanding that competitive advantage and the profit model that we're running. We right? We just don't say, well, we're gonna fund we're gonna fund our business bootstrapping if we don't have a profit model.

Nate Grossman: Mm-hmm.

Craig Paxson: that allows for bootstrapping. It just wasn't it wouldn't fit. We're going to fail. Right? So we have to start up top with why do people choose us and how do we make money off of that before we get into anything else.

Nate Grossman: Okay. once figure that out, then all of the other sort of like subcomponents of that throughout the business needs to also have its own strategy. But everything needs to be linked to the main overarching strategy. Okay.

Craig Paxson: Right, right, right. And just making sure that we, you know, know strategy is really why do people choose us and how we make money off of that. That is what strategy is. Everything else after that. It is it's it's it's not I it's not simple, but it's not it's a pro it's a it's a defined process that I've created to do this. So it's not it's not

Nate Grossman: Yeah. Y you you make it sound so simple. Well n yeah. Yeah.

Craig Paxson: You just have to go through the process.

Nate Grossman: Yeah. and you know, that's that difficult for some some sort circumstances, so ⁓

Craig Paxson: Yeah, right. Yeah. I mean, you know, for all here's a here's a thing that you I think you're coming back to a lot is sort of owner dependence, right? So, right, and know, I think a lot in the exit planning world, we talk we all know we talk through owner dependence lessens value of a company that wants to exit, right? We all understand that. But what's interesting, actually doing a thesis on this.

Nate Grossman: Definitely, yeah. Yeah.

Craig Paxson: But what's interesting here that some of nine profit models, some of those profit models are completely owner dependent and some are not. So should we should we or move from an owner-dependent profit model to a non-owner-dependent profit model as opposed to trying to document the owner dependency away? Because that

Nate Grossman: Mm. Interesting. Ha. Yeah. Interesting.

Craig Paxson: Profit model implies a certain a certain kind of business that is dependent on something or someone. Right? We might document that away, and now somebody else knows it, and we sell that person along with the business. But if that person now leaves, then what happens, right? So structurally, it's transferability of a business is more dependent on the profit model.

Nate Grossman: Mm. Okay. Yeah. Yeah.

Craig Paxson: business than on the documentation of the owner's knowledge or whatever.

Nate Grossman: Yeah. That's so an that comes to mind in that case would be you have that one annoying engineer, software engineer who knows everything about how it works and they have to be in the business. ⁓ You know, ⁓ depends on guy. ⁓ that that's interesting. ⁓ that that seems like a liability in that case. But ⁓ what are you gonna do? If you're if you're a software selling company, what are you gonna do, right? In that case. ⁓

Craig Paxson: Right, right, right, right, yep, yep. Mm-hmm. ⁓ absolutely. Right, right. know what's interesting here though is that if we have a business model that has reliance on a on a key person, right, especially on the owner.

Nate Grossman: Mm-hmm.

Craig Paxson: It gives us freedom now to not just say, well, we have to remove owner dependence. It gives us the freedom to say we can transfer to a business model that doesn't require as much owner involvement. So now we're not worried about documenting and taking everything out of the owner's brain and putting it somewhere on paper or transferring it to somebody else's brain or whatever. We're removing the dependency the owner completely away from how the business runs. That

Nate Grossman: Yeah. Mm-hmm.

Craig Paxson: that that is a freedom that most people who are doing exit planning and business evaluation have never thought of. And that is the sub that is the subject of my of my doctoral studies. ⁓

Nate Grossman: Interesting. Can you Wow, wow, wow. Can you can you give us a an example of this of this scenario?

Craig Paxson: Yeah, so just you know two easy things. One is if we have a tran if we have a transactional or a subscription based model, right? So ⁓ a subscription based model, we sell something and they get they get something on a recurring basis no matter what from now until they cancel, right? That inherently doesn't the the owner is not going to be involved in every single one of those subscription things, right? So so that their that business model

Nate Grossman: Mm-hmm. Yeah. Yeah. Yeah.

Craig Paxson: does not depend on the owner to make sure that we're that the business is making money, right? ⁓ if we have a transactional model where basically we're selling, right? So now the owner or the rainmaker is involved in every single sale. Right. So if we can and I just did that, I took a company, we went from transactional to a mix of transactional and subscription. And so now a lot of the nobody else in the industry has ever done this.

Nate Grossman: Mm-hmm. Okay. Yeah, catch you.

Craig Paxson: Now they have a subscription model in their industry. Nobody else does it. That is the what I call the courage question for an owner. Do you have the courage to be the only one in your industry doing it? And for a lot of owners, they they don't have it or they have to develop that courage. It's scary. It was scary for this individual to move to a subscription model when nobody else does it. Is it gonna work? I don't write and but.

Nate Grossman: Mm-hmm. Mm-hmm. Mm-hmm. Yeah. Yeah. Yeah. Yeah. Mm-hmm.

Craig Paxson: Because we translated that business model into capabilities, we were able to execute on those capabilities that made sure the business model worked.

Nate Grossman: Nice, nice. yeah, very interesting. Okay, so let's into what I to call the This is where, know, we talk about what changes when the finally c competes from a real position instead of a description, like you as you say. and because, ⁓ know, theoretically, is where everything starts to feel different, right? So when an owner competes from ⁓ a real position, what you say starts working that used to feel like a grind?

Craig Paxson: Yeah. Yeah. a couple things. One of them is the internal stuff, like I touched on before. Everybody knows why customers choose them. ⁓ much easier for them to make decisions. Is this a is this ⁓ this decision, is choosing this option going to support that differentiation or competitive advantage, or is it not? Right. So all the internal decisions get easier because it's all about that competition.

Nate Grossman: Yeah. Yeah.

Craig Paxson: That's supporting that competitive advantage. The other thing is that now we're not competing on price. So it's not like I have to go back and sharpen my pencil. you I'm currently winning 30% of bids, and so and never go up. So, in order for me to make sure that I make payroll or grow, I have to have a certain number of bids or increasing amount of bids, That stuff goes away.

Nate Grossman: Mm-hmm.

Craig Paxson: Because now we're not competing with somebody else on the strictly on the basis of price, we're competing on the basis of something else. And so that process of trying to find chase new leads and all that stuff, it goes away. And so it's a it's a big relief. If we move to a subscription model and we replace 25 25% of the revenue with subscription revenue.

Nate Grossman: Mm. Even better. Yeah. Yeah.

Craig Paxson: Even better. I mean, yeah. So right? So so mean, those kinds of things, you know, it makes it easier internally with the staff and the team and it makes it easier externally with with prospects because we were because we look different. We can support that difference.

Nate Grossman: Okay. So going along that vein then, you as you've said that the owners who break through are not necessarily working harder, they're competing differently. so would you say actually changes in the business when that shift happens? I think we've kind of been talking about this, but

Craig Paxson: Yeah, I mean it is it's that whole that whole know the whole mindset of of why do people choose us and how do we make money off of that. Like think of Walmart, right? Walmart low prices, low prices. Their entire business is built around low prices. So what does that mean? Efficient warehouse operations, efficient purchasing and supply chain.

Nate Grossman: Yeah.

Craig Paxson: Efficient trucking, right? Everything is around efficiency because that is their differentiator, is low cost, right? Nothing wrong with being low cost, just that we don't want to be that's how we compete as a small business owner. We're not Walmart, right? But we think now about about Amazon. Are they competing against Walmart on price? No. They're competing on Walmart on mostly on delivery.

Nate Grossman: Yeah. Mm-hmm. Convenience.

Craig Paxson: Right. It's like I might pay a convenience. I just go onto my onto my phone and I go on the Amazon app and I pick what I want. Now I'm a prime member and I pick by and sometimes it's here, it's at my house before I get home if I'm out. Right. So there's a different business model. So their business model is built to deliver a different business promise, but we had to build a completely different infrastructure, right? And so so have understanding

Nate Grossman: ⁓ yeah. Mm. Yeah.

Craig Paxson: Why do people choose us and how do we make money off of that? Informs the entire rest of the business from sales and marketing to delivery to how we how we get paid. Everything comes off of those two things.

Nate Grossman: You're that sounds expensive, Craig. ⁓ Well it well, shifting the like your entire delivery model, you know, around and that kind of thing, that that that seems like that could get into that's a very complex project right there, I would say, but yeah.

Craig Paxson: What? Being being Amazon or Walmart? Yeah, that's expensive. Yeah. Yeah. Yeah. Yeah. You know you know what's more expensive though going out of business ⁓ right not making the money that you need to make in order to really stay in business. That's more expensive. So, you know, yes, can you know, and it's I've I was talking to somebody else about this a while ago, and it's okay, I want to shift from this business model to this business model, and that's gonna require these things.

Nate Grossman: Yeah. Yeah. Yeah. Yeah.

Craig Paxson: How do I one fund it and how do I sell it to the customers I already have? Right? Well, it's not like it's Tuesday and we're doing this, and now it's Wednesday and we're doing this. Right? There is gonna be a a process of implementing that new thing that we have to figure out, right? What do we do with existing customers who may be on a different kind of plan that doesn't that doesn't really fit with how we're gonna make money now? Right? What do we do with that? We have to figure that out.

Nate Grossman: Yeah. Yeah. Yeah. Yep.

Craig Paxson: How we gonna how are we gonna make sure that we have the technical infrastructure and the people to support answering the phone by the third ring every single time? How are we gonna do that? Well, we might not be able to do it tomorrow, but that's where we're gonna get to. So we have to put together a plan in order to make it happen, right? But if we don't do it,

Nate Grossman: ⁓ yeah. And what if what if you have the employees that are bucking it, right? And they don't wanna they don't wanna answer in the third because they're used to answering six. ⁓ ⁓

Craig Paxson: Yeah, right, right. But if we don't do those things, what are we doing? We're competing on price or we're competing on owner hustle and those things aren't aren't gonna last. So this is not a choice but this is a choice between nothing and continue to be the same or and and to either survive or thrive.

Nate Grossman: Mm. Yeah. Hmm. Nice.

Craig Paxson: And I I think I think Nate, a lot of people know that innately. right? Kind of just you kind of know that, yeah, we we need to change over, but they don't have a process of doing it. They don't know how to do it. How do I figure out what the right way to make money is? How do I figure out right, absolutely, yes, inertia is that's true. And so it is. So we have to have a process to to walk through to be able to figure that out.

Nate Grossman: Yeah. Yeah. Yeah. In inertia. Yeah. Yeah. Powerful thing, yeah. Yeah. Mm mm.

Craig Paxson: And that's what that's what that's kind of what my method does. Not kind of, it is what my method does. ⁓

Nate Grossman: Mm-hmm, mm-hmm. Yeah. You're you're you're shaking them loose. You're you're you're breaking the breaking the mold and getting people to think differently about the the situation that they're in, assuming that they want to get to a different place, you know. ⁓ there are some there are some businesses out there that don't want to, right? Or they decide, I'm assuming, that they don't want to. And that you know, they just they just stay even, even keel, status quo, long slow death, right? So it's like yeah.

Craig Paxson: Absolutely. Hopefully. Right, right. Right.

Nate Grossman: okay. Let's the ⁓ clarity round. All right, so just you know first thing that comes to your mind for these questions is little little tidbits that for the audience to take away. One question every owner should this month to test whether they have a position or just a description.

Craig Paxson: look at your three to five competitors' websites and see if they all look the same as yours.

Nate Grossman: Okay. Okay. All right. if an owner has never worked on competitive advantage on purpose, what the first step?

Craig Paxson: beside after call me, I guess. ⁓ first step is called Craig. no, the very first step is to understand what the competitors are doing. So go out and do that comparison. Look at the the buyer experience cycle and figure out where in that curve do your competitors lay and where do you lay. That's the very first step.

Nate Grossman: yeah. ⁓ Mm-hmm. I I once had was working with a client who's a kitchen bathroom modeler ⁓ and had the idea, I'm gonna I'm actually going to call them up as if I'm ready, I want to purchase their services, just so I can get an idea of what that's like. do you things like that or yeah. Yeah, yeah. ⁓

Craig Paxson: Yeah. Absolutely. Mystery shopping, I mean, you know, that that's that's a great way to to get intelligence, right? I mean the very first thing is to look at at the website and Google, Google reviews, right? That's the very that's the that's the easy easiest way to do it, right? But if that's not enough, yeah, employer, be a mystery shopper and call ⁓ up and just find out, right? Absolutely.

Nate Grossman: Easiest. Yeah. Yeah. Yeah. Yeah. Yeah, because I would think, you know, you're kind of outside in looking at it. It's er you know, you can make something look amazing from the outside, but underneath, maybe different story, right? ⁓ so okay, how about the most commonplace owners are pointed wrong when they believe they already have a position.

Craig Paxson: Right. Right. I find with a lot of of people who work with business business owners is they ask business owner what makes them different. There are three that we know, maybe there are three uniques ⁓ or like that, right? But those are never actually tested. They're just assumed as fact. So we end up with these things like higher quality. Higher quality than what? Can you quantify that?

Nate Grossman: Right. Right. Yeah.

Craig Paxson: Right. We end up things with ⁓ like we're st we're strategic, whatever the heck that means, right? Can you quantify that? How is how is that actually different? A lot of business consultants, coaches, et cetera, what they do is they just take that on faith, I guess you might say, without going doing research to see is it actually true.

Nate Grossman: Mm-hmm. Nice. so are you ⁓ just out of curiosity, are you a big fan of sort of third party surveys, you customer surveys to get actual customer input and opinions ⁓ on the that they've been provided and that kind of thing or?

Craig Paxson: y yes and no. Yes, from a are we delivering on our brand promise? but you know, twenty-five or so years ago, you know, Steve Jobs famously said something like something like, you know, customers don't want don't know what they want until we give it to Right. ⁓ you know, hundred and fifty a hundred and fifty years ago, if you would have asked a farmer what they want, they would have said they want a a a faster horse.

Nate Grossman: Nice. Yeah.

Craig Paxson: Right. It wouldn't have talked about a car. So from a forward looking standpoint, not really. now I wouldn't talk to customers about that kind of stuff. However, and part of part of our model is look at what are the factors that are going on outside the business, socially, economically, politically, that we can take advantage of, right? So, you know. A big one coming up is multi-generational families are increasing at a rapid pace, right? You got mom and dad living with the kids, right? ⁓ that's happening a lot. Now, how do we take advantage? Does that does that expanding multi-generational family ⁓ situation, how can we take advantage of that if we're a home builder or home remodeler or whatever, right? So we can look at socioeconomic political trends to figure out.

Nate Grossman: Mm, mm. Yeah. Mm, mm.

Craig Paxson: Maybe what can we do differently in order to create a competitive advantage, but going and asking somebody what they want? really.

Nate Grossman: Okay. all right, so last one, finish this sentence. You have a positioning problem, not an execution problem when.

Craig Paxson: When you when nobody knows why they choose you your competitors. And I probably phrased that really badly. And know, I I I know ⁓ I well yeah, I'm going I'm going more than one ⁓ one sentence here I really try to stay away from the word positioning because it sounds like marketing, right? And we're not about marketing, we're about creating an advantage, right? It's

Nate Grossman: I understood it. Mm. Yeah.

Craig Paxson: Once we have an advantage, we can position that advantage in front of different people in different ways, but we have to have the advantage first.

Nate Grossman: Okay. Okay. right. Very well here my synthesis, I think, this. The the the ceiling a lot of owners hit is not necessarily about the effort or lack thereof in the business. It oftentimes is clarity ⁓ on anyone or you know, one chooses them, right? And when you start from the market from the outside in, instead of know, inside with your own sort of like imagined goals, and you're building the business around a real position instead of just a description that you've created, then you stop competing harder necessarily, and you start competing differently. And is often the difference between one million and ten. So ⁓

Craig Paxson: Movie.

Nate Grossman: All right, so everybody out there, if what Craig shared resonated and you suspect you have a positioning problem wearing an execution costume, connect with him at visionary results.com and find him on LinkedIn under Craig Paxson. His books, including Strategy is the menu and visionary velocity, are a strong next step. if this conversation made you realize that you're not sure what your biggest growth constraint actually is, that is what we like to dig into every week. Subscribe to the newsletter at thegrowcealing.com. each week you get one real growth constraint and how to spot it in your own business, whether that's positioning, as we've been talking about today, or advantage, competitive advantage, or something else entirely. and then of course, last but not least, subscribe to the Growth Ceiling wherever you listen. And if this episode helps you see something differently, send it to someone who needs to hear it. Craig, thanks a lot. And yeah, we'll have to have you on again at some time here.

Craig Paxson: Yeah. Yeah. Thanks, Nate. It was awesome.

Nate Grossman: Awesome. me ⁓ here we go.