Podcast Episode 6 with Transcription – Rem Oculee

I discovered the same process that improves valuation would improve business profitability and give me more free time. I am here to show you what I have learned. The best way to grow your business is to look at it from the perspective of someone who’s going to buy your company. Once you start thinking that way, magic happens, and you start seeing things you couldn’t see before. But that’s not all.

I also discovered the three principles that you must know to command a better price for your company. These principles are your product, your infrastructure, and your conversation with the consumer. Once you master these three principles, you will be on your way to increasing your profits and your company valuation and getting more work-life balance through your free time.

I will teach you through this podcast lessons from the trenches, and we will have dialogues with some of the greatest minds on the planet. Today I’m here with Amber. We’re talking about Phantom Losses. As you all know, with the Exit Mindset, there are three principles that we observe in creating company valuation.

One of them is the product, the other is the infrastructure, and the third one is the conversation. However, one overlooked aspect of doing business and company valuation is what I call Phantom Losses. So Amber, are you familiar with Phantom Losses?

Amber Giannone: I think I’ve heard of them before, but I really would appreciate you explaining it a little bit further.

Rem Oculee: Phantom losses are things that occur in all three parts of the Exit Mindset. They are anything that you would not make because you didn’t do it when you could have done it.

Amber Giannone: Can you give me an example of something like that to put into thinking around my business?

Rem Oculee: Yeah, sure. So let’s say your product is something specific that you can reconfigure to create a secondary product that could generate income, or more sales, or more revenues.

If you do not create that other product, you’re not going to make that revenue because it didn’t exist in the first place. However, you do know that you could make a second product, but you just don’t. Now in the day to day, you are looking at what you’re doing, and you figure, “Okay, I need to do this product.

But I got to do this, and I gotta do that.” You might prioritize things that are not necessarily as important as this product is. Instead of spending, for example, maybe a week perfecting that product, you decide to spend that week on something that probably would be important, and may not necessarily generate revenue.

However, had you took this week to perfect the product and create it, you’d be able to create something that would generate more revenue for you. As long as you have not created that secondary product, you are in a constant Phantom Losses state because you never built it. If you spent the time doing it, you would generate the revenues and avoid those losses.

I like to think that anything that you could do that could generate revenues, but you don’t do it is a Phantom Loss. That would apply to everything. So your infrastructure. There could be items in your infrastructure that, if you change, it would create leverage and create more revenues for you because they might be more cost-effective or might generate more yield for you, and you just don’t do it.

Lots of times, you use an excuse. I want to be blunt about it because many times we’re like: “Well, I’m busy with this” or “I’m busy with that.” But had you prioritized that, you would have created revenues. We all know you can do things in two ways. You either do it yourself, or you write a check.

The most significant element that could help businesses create more leverage, generate more profit, create more time is their ability to write a check. If you can’t write that check, you’re going to have to do it yourself. But then we all know that sometimes if you want to create something, you must do it yourself to write a check afterward.

So Phantom Losses are this strange area in business that’s hard to see because you never see what you didn’t make. You always see what you lost. So if I take – for example, if I take a hundred thousand dollars of your revenues, and I tell you, “Can I see for a second?”

You say, “Sure.” Then I take it from you, and I say, “Hold on a second. See this fireplace?” You say, “Yeah.” And I say, “I’m going to throw it in there. I’m going to throw a hundred thousand in the fireplace.” You’ll look at me and say, “You’ve gone nuts. What are you doing? You’re just burning my money.” I go, “Okay, well, why do you feel that way, though?”

You go, “Well, I see it. My money’s burning.” Well. Okay. That’s because you see it. But if I told you there are a hundred thousand dollars you didn’t make – it got burned because you just didn’t see it – because you didn’t make it, you wouldn’t look at it in the same way as if I’d taken your money and thrown it in the fireplace.

But, every day, you’re taking some of your revenues and throwing them into the fireplace by not making it when you could make it. By the way, Phantom Loss is something particular. So Phantom Losses are not like, you could have made $100 billion and didn’t make it. That’s not what we’re talking about here.

But you could have made $100 million a year. That’s not the issue. The big thing about Phantom Losses is that it’s a reasonable, correct amount of revenue that you could have generated. You just didn’t produce it, because you didn’t take specific actions that would lead to the creation of a mechanism that would create that income.

And that by itself, Amber becomes a Phantom Loss. They’re the easiest thing to dismiss. I’m going to be honest with you. I hate it when I see it. Sometimes you all fall into it. I mean – I will tell you, I have fallen into the Phantom Loss syndrome many times, and I hate it. I go back and reset. Sometimes it’s a question of resources. What resources do I deploy?

What resources do I move forward so we could create that real revenue? That comes out of what could have been a phantom revenue. If you think that way, you’re going to find many, many ways that you could generate more income for your company, and do better things and great things

Amber Giannone: You had mentioned that Phantom Losses affect all three principles.

How can you apply this or give some examples of how it affects the conversation principle?

Rem Oculee: Excellent question. The conversation is all about communication with the consumer. We talked about this; it’s a verbal and non-verbal conversation, meaning that the way you appear to the consumer is part of your conversation.

The colors in your building, your location, the verbal communication that you have with them, all sorts of things come into play. Now let’s just make it simple. Take the purest form of a marketing effort that you could have exercised and didn’t apply it. You just waited.

You just sat down and thought, “Okay, well, I’ll do this later. Maybe a week, a month, or six months from now.” You know, that particular marketing effort is going to generate revenues for you, and if you do it, it’ll create massive leverage, but you’re not doing it right now.

You’re just waiting. So every day you’re not doing it, you’re incurring losses. Especially if you can – especially if you have the ability and the means. If it’s a matter of reorganizing and reconfiguring your workflow to get to the point where you can make it work, that’s what is needed. But it involves sacrifices.

Phantom Losses are one thing that you need sacrifices to avoid. So in other words, you have to say, “Okay, I’m going to drop X, Y, and Z for the sake of achieving that particular outcome that creates revenues and avoids Phantom Losses.” The reason most owners and most company executives don’t do that is simply that, Phantom Losses are something that they don’t think about that much.

Amber Giannone: Understanding what you’re saying, resetting and reprioritizing – For business owners to think like buyers, they need to dig into their Phantom Losses. Correct?

Rem Oculee: Absolutely. That is a must. A vital component of this is the decision-making process. The problem with that whole thing is that as you move forward, you’re going to find that the dynamics of the day will take over.

You have employees, you have people working with you, you have vendor partners, you have every – Everybody’s got some limitation. You’ve got to know that limitation because you’ve got to do what you have to do. But it’s on you to pull people and reprioritize. You’re going to get some resistance from people. They’re going to tell you, “Well, no, we can’t do this because of this and that.” But what you need to do is stand your ground.

Insist on what needs to be done, because you know the greater good. If you do that, you’re going to find that people will be receptive, especially if they see the results. Also, if you’re looking out for the company’s best interest, you have to consider that your job is to make sure that you increase company revenues. You, as a business owner, are in charge of lots of lives.

You’re in charge of a lot of vendors. You’re in charge of a lot of things that need to be done, and in charge of a company that needs to thrive and survive. If you do not make the decision and execute, nobody will do it for you. Nobody’s going to come to you and say, “Hey, let’s go ahead and do this.” Sometimes people will, but again, they’re going to defer to you.

So you got to take leadership and engage the process in a way that makes it move.

Amber Giannone: Rem, as you always say, “Action is everything.” If you were to give a business owner a tip on where to dig into Phantom Losses and revenues today, what would that be? Where to start?

Rem Oculee: The first thing you start with is a point of reflection and a dissection of your operation.

Try to understand what it is that you’re missing out on. Most business owners know what opportunities they are missing in their own space. You’re very rarely going to find somebody that doesn’t know. I mean, if you don’t know, you probably shouldn’t be running a company. But you do know. The way it works is that you’re going, “Well, I could do this.

If I do this channel, if I do this, if I do that, that would work out. That will generate X amount of results for me,” but you just don’t do it. That’s very natural, by the way. Don’t feel bad. That’s how it works. That’s how life works. The thing about life is that you have to go against what’s natural and comfortable.

Because gravity’s automatic. You’re going to be dragged down automatically. What you want to do is just go against it. The exercise metaphor is an excellent way to look at this thing. When you lift weights, you’re going to find resistance, and it’s going to be hard. It’s going to be uncomfortable.

You lift it and keep lifting it until one day you go, “It worked. I can lift that weight without too much resistance.” Then you go to the next one and the next one. So that’s the same thing here. The key to this is that you must continuously go against your natural tendency to move on to what you need to do for the day.

Amber Giannone: How much weight do buyers put on this? If I were selling my business.

Rem Oculee: “Well, Phantom Losses end up being part of your overall valuation and profit and freedom. So let’s look at it this way. If you have minimized your Phantom Losses and maximized the amount of revenue you can get based on your business model – because every business model has got some limitations to what it can do.

By default, you’ve created an optimal model. What does a buyer look like when they look at your company and come to buy it? They look at, is it optimal? Do I have to do a lot here? Is it automatic? Is it generating the right amount of revenue? Does it have the right infrastructure?

All the other things we’ve talked about in terms of the Exit Mindset from product to infrastructure to the conversation, all the elements involved in that – The buyer is going to look at all that and make a determination that this is a model I’d love to acquire because it is an investment worth what I’m going to pay for it.

What they’re going to offer is based on all those things, from revenues to the other three elements that we talk about in the Exit Mindset. So, you are essentially increasing your company valuation and creating a better situation for yourself. Which in the end, if that’s what you’re looking at – You’re looking to develop an Exit Mindset that allows you to sell the company for a reasonable premium.

Then again, it’s an asset that he might want to keep. Again, all this is about improving your company’s situation and improving your time, profits, and valuation for the sake of having it if you want to exercise the sale or not, but that would be totally up to you.

Amber Giannone: So Rem, if there is one thing that you can say to do today, what is that?

Rem Oculee: When it comes to the Phantom Losses, take action, because action is going to make the difference. The hardest part about the whole thing is taking action because many times, you’re going to be deterred and not going to move. But you’ve got to move despite the hesitation, and despite what goes on day-to-day.

And when you do that, you’re going to find success.

Amber Giannone: Thank you so much for your time today, Rem. I appreciate it.

[Rem Oculee: Absolutely.

Amber Giannone: You just listened to the Exit Mindset podcast with Rem Oculee. If you haven’t yet subscribed or followed, please do so in your podcast listening app. Or better yet, visit ExitMindset.com to join the conversation, access the show notes, and discover our bonus content.

Lastly, we want to help as many business owners as possible. If you know anyone who could benefit from the information given in this podcast, please feel free to share it with them. Until next time.