Rich Balot On…
The 5 Things Every CEO Should Focus On
Steve Sanduski: Hello, everybody, and welcome. I'm very excited to have our special guest today, Rich Balot. Rich, welcome to the show.
Rich Balot: Thank you very much. Welcome.
Steve Sanduski: Rich, you have been an entrepreneur basically since you came out of the womb. Tell me, how did you get started with your first business?
Rich Balot: Let's see. My first business was actually a mobile deejay company. I was a teenager. Unfortunately, my father had been unemployed. Actually, I was talking to a radio deejay, I guess like yourself, who told me I had a great voice and told me I should get into deejaying. I started off as an intern at a radio station, then decided to get into the private parties, and called every deejay in the phone book until I found one. Finally found somebody who'd hire me, and started doing private parties. Learned the business, and decided to go out on my own pretty quickly. Started that when I was 14.
Steve Sanduski: Fourteen. How did that business end up over time?
Rich Balot: When I was 16, I had seven deejays working for me. We were doing an average of 13 parties per weekend. I'll put it to you this way. I was making more money than both my parents combined at the age of 16, and still in high school, living at home. I don't want to tell you how much my dad charged me for rent back then.
Steve Sanduski: How did your parents feel about that? Were they proud of you that you were doing so well?
Rich Balot: Very proud. I come from a long line of entrepreneurs. My father was one for a while, and all my grandfathers were. He was very proud, very supportive of me. Eventually, I sold that company, I think, when I was 27 years old, because the other company that I'm primarily running today has grown so much.
Steve Sanduski: Okay. Today, you're the founder, chairman, and CEO of A Wireless, which is not a small business. This is a company that has over 750 million dollars in revenue, over 3,000 employees, and just a phenomenal growth rate. You founded this company. Tell me about the story of how this company got founded by you.
Rich Balot: Yeah. A lot of things in my life involve my father. Unfortunately, my father had been unemployed for a few years. We moved from New Jersey to North Carolina to get away from snow. Nobody wanted to hire a fat 50-‐year-‐old in North Carolina. After a while, my dad had been
unemployed, and my mom was getting about ready to divorce him. I went to my brother and said, "I've got a great idea to start a cell phone business." This is back in 1996. I said I thought cell phones were really going to take off, and it was a great way to get Dad back to work. The whole goal originally was literally just to get my father a job so my
mom wouldn't divorce him. Went to my brother to borrow money, not because I needed the money ... I was doing fine ... but because I knew if I had to fight with my dad, it was going to be better to have my brother on my side to get it two versus one, since it's not easy to fight with your dad. Started the first store. My dad was our first employee. Took off from there.
Steve Sanduski: How were you feeling back then? When you were starting this business, you were trying to keep your parents together. That's the first time I've heard that as a reason why someone has started. Take me back to that time. What were you thinking? What were you feeling? How were your parents feeling? Were they okay with their son helping them out that way?
Rich Balot: It's funny you say that. We never told my parents that was the reason we started the business until many years later. At the time, I told my brother that, but my father actually made me promise that the reason we weren't starting the business was to help him out. I said, "Dad, I promise, you're not the only reason I'm starting the business," which was a true
statement, because I also thought it would be a successful business and make me some money. Yeah, so that was the reason we started it.
Actually, the fun part was when we started growing from one store to two. I went to my brother and said, "Hey, Dave, I'd like to open a second store." He said, "You need more money from me?" I said, "No." He said, "I'm good with it." Then I went to my dad, and I said, "Dad, I want to open up a second store." He said, "Rich, what are you, crazy?" He says, "You've already got one great store. Why are you going to open a second one and risk it and jeopardize it?" Then I opened the store.
Then finally, it was doing well, and I said, "It's time to open a third store." I went to my brother, same story. Went to my dad, same story. He said, "No, don't do it. You're risking it." Opened the store. Then finally, on the seventh store, I went to my dad, I said, "Dad, I want to open a seventh store." He said, "I think that's a great idea." I said, "Really?" He goes, "No, but what difference does it make? You're going to do it anyway."
Steve Sanduski: These stores that we're talking about are, what? Tell me, what are these stores?
Rich Balot: Today, we're Verizon Wireless Premium Retail stores. The company name is A Wireless. Back then, we started off as ABC Phones, which stood for "Affordable," A, B, "Beepers," C, "Cellular phones." We were an agent for US Cellular back then. Went through a transition over the years from U.S. Cellular to selling everybody, to selling just Alltel. Then Alltel got bought by Verizon, and been very happy as a partner of Verizon's for the last five, six years. Actually, yeah, going on six years now.
Steve Sanduski: Okay. Going back to the very beginning, did you have a vision back in those early days that, "I really want to build a substantial business," or did it just morph over time? You opened the first store, the second store, and then you thought, "Hey, I might be able to build something really significant here"? What was the timeline of how the vision grew over time?
Rich Balot: Sure. I guess originally, I would say that I always set financial goals for myself. Unfortunately, my parents were not very wealthy. I grew up in a 1,300-‐square-‐foot house in New Jersey. We moved down South, got a little bit larger house. My goals were always financially driven. I decided I was going to have X amount of dollars by the time I was 30, and then I was going to have X times 10 by the time I was 35, and so on.
I knew I would never be able to really work for somebody. I never did. I worked a little bit when I was in middle school as a tile guy one summer and realized that I didn't like manual labor, and decided I had to go into
leadership. I always joke that I wanted to run a Fortune 500 company someday but that nobody would hire me to do it, so I'd have to build one. When I started the company, did I know that this company was going to
get as large as it is? No, I didn't. Did I see it over time as we were growing, and I went, "Wow, this could be really big"? Definitely. I continue to not only morph that vision but morph myself to be able to lead a company that was as large at that time as it was.
Steve Sanduski: In terms of leading the company, you said you've never really worked for anyone else before. Have you found it a challenge as a leader, as a
manager, to put yourself in the shoes of the people that you're managing, when you've never been on that other side?
Rich Balot: That's a great question. My father, again, taught us a great work ethic. Although I never was working for somebody else, when the company started off, I was doing sales. I was literally, I remember our second store, I got out a Saw and cut a hole in the wall, and framed it in and put glass in to make it look more like a retail location. At this particular company, I can say I've done every job, from cleaning the toilet ... I used to joke my title was "cheap janitor," because I was the one cleaning stuff up. Because of that, I've done their role, and I think I earn my employees' respect, because I would never ask them to do something that I haven't already done myself.
I'm sure there's going to be, with 3,000 employees today, I'm sure there's somebody out there who will say, "Gosh, this guy, he grew up with a silver spoon or something," and they don't know where I came from. Overall, I think my employees have always liked me, and respected me, and enjoyed the way I treat them, because I see everybody as equal. Again, something my father used to say. I can't say that, I guess, on the radio, but, "There's a toilet seat out there for every behind." I'll say it that way. Then we all go to the bathroom in the same place.
I try and stay grounded. Even as I become more and more financially successful, I would rather be the guy that people look at and think that I'm a poor person than somebody who has a lot of money, just because I don't value the outward appearance of money. I just prefer to be a good person and help others.
Steve Sanduski: Was there any moment over time where you had a challenging situation as a leader, where you had a situation happen, perhaps you didn't handle it the way you would have with the hindsight? Any situation like that?
Rich Balot: The hindsight part's a tough question, because hindsight's always 20/20. There's a lot of situations that, hindsight, I wish I'd handled differently. One that comes to mind when it comes to hindsight is I made a very bad hiring decision for a CFO at one point in time. It took me a while to finally get rid of him. Hindsight, I wish I'd done that much sooner, because it was the only time in my career that I didn't enjoy working, because I had such a negative person around me on a daily basis. I'm a very optimistic, positive person, so that was just challenging for me. As far as a business challenge, there was a much larger challenge back right after Alltel was bought by Verizon. We actually almost went out of business, and things got really difficult then. I'm sure I made some wrong decisions at that time, as well, but overall, I'm pretty happy with the way it turned out. Steve Sanduski: Okay. Take me back to that time during the merger. Tell me about, what
was happening in the business, and what decisions, as you think back, that you made that, again, in hindsight, you would have done differently, knowing what you know now?
Rich Balot: Sure. We were Alltel's largest agent in the country. I had a great relationship with Alltel, all the way to the top of the company, just an absolute great company. Then one day, I got a call saying, "Hey, guess what, Verizon Wireless is buying Alltel." Verizon, I didn't know much about them. I had no relationship there. I'm a strong relationship person. I believe most of the business world, people like to work with people that they like. I like to get to know the people I do business with and earn their trust and respect, hopefully for good reasons.
We found ourselves going from, at the time, I think, 50-‐plus stores. We had to shut down 14 of them, so we ended up with 38 stores for Verizon. Then, like I said, I was the largest national agent for Alltel, and I was just a small guy for Verizon. Had no relationships. At the same time, in the industry, the iPhone was just launching and was really totally changing the way our industry was as far as the telecommunications business. We were used to selling a lot of smartphones with Alltel, and Verizon was still migrating in that direction, hadn't gotten there yet. Financially and
compensation-‐wise, we knew they were going to there, but we weren't there yet.
We continued to do what we thought was right. Unfortunately at the time, financially, it was very unrewarding. For the first year in my life, I'd actually lost money, and not just a little bit of money. When I do things, I do them big. Unfortunately, losing goes the same way. I lost a ton of money. Went from having money in the bank and no debt, to having a
ton of debt and having to go to mezzanine lenders to borrow money for the first time in my life to be able to sustain the company.
Steve Sanduski: What were you doing that was bleeding the company back then? Rich Balot: One, we were growing really fast. We went from 32 stores to over 100
stores in just over a year. Opening stores as fast as we could was burning up capital. We didn't have the typical ramp-‐up time where we had cash-‐ flow positive. We were burning cash physically, cutback opening the stores, and then second wise, during the ramp-‐up. Then third, the way we were selling things, we were still selling smartphones that were not as profitable in the Verizon world as they were in the Alltel world. The model had shifted, and we didn't shift fast enough to match that. It turned out Verizon ended up matching the Alltel model shortly after, a year or so later, so that part was okay. For a few years there, it was a question whether we were going to be in business or not. A lot of nights that I lost sleep that I wish I could get that back.
Steve Sanduski: How did you end up turning things around?
Rich Balot: I looked at joining some organizations, particularly EO, Entrepreneurs' Organization, and YPO, at the advice of a very good neighbor, a gentleman named Eddie Smith who's the CEO ... I don't know if CEO anymore, but president, for sure, I think, of Grady-‐White Boats. Happens to be my next-‐door neighbor. I went out and looked at EO. I went to a great event at EO. Actually had a speaker by the name of Jack Daly. Through Jack, ended up hearing about a CEO coach named Mark Moses. Ended up joining YPO, Young Presidents' Organization. Didn't join EO at the time, because my company was a lot larger than most of my peer businesses in this area.
Hiring a CEO coach was probably the number one thing that I did to help turn my company around. Second was joining YPO and continuing my education as both a president of a company and just as an overall father, parent, husband, just getting to be a better person in general. Did that through YPO. Then, like I said, really, my CEO coach was probably a critical piece that helped me turn around, and then my team and definitely my spouse, my wife. Went through a lot of sleepless nights, a lot of crying, a lot of tears, but we pulled through in the end.
Steve Sanduski: Yeah. It's so critical to have that family support during times like that. That's great to hear that you had that.
Rich Balot: My wife has been amazing. She's been with us since, I think, we had nine or 13 stores. It's been a heck of a ride for 19 years now, by the way. Steve Sanduski: Congratulations.
Rich Balot: Thank you. Steve Sanduski: Congratulations.
Rich Balot: Nineteen years for the company. Thirteen for the wife, sorry.
Steve Sanduski: Okay. You mentioned you were with YPO or EO, and you hired Mark, Mark Moses, as your coach. Can you tell me anything specifically that you learned from Mark or from those organizations that were helping you pull out of the business?
Rich Balot: Sure. Probably Mark came in right from the start with, "Hey, Rich, if you're going to be a CEO, you have to act like a CEO. These are the five things that CEOs do," which I'm sure you're going to ask me what those five things are in a minute.
Steve Sanduski: What are they, Rich? I'll let you finish your story.
Rich Balot: Yeah. We started off with Mark helping me to organize the company, to take control of it, and most importantly, to plan the future instead of letting the future just happen, which is what we'd done for so many years. Things like setting a BHAG at the time, which was a ... You know what a BHAG is?
Steve Sanduski: A big, hairy, audacious goal.
Rich Balot: A big, hairy, audacious goal. Yeah. Mine was, in 10 years, to be a billion-‐ dollar-‐in-‐sales business.
Steve Sanduski: Okay. Let me stop you right there, if I could. Why a billion? Obviously, you're going to be financially set well before a billion. What is going through your mind as to why I would want to have a billion-‐dollar business?
Rich Balot: You have to choose metrics that are going to help you hold yourself accountable and give you something to go towards. At the time, we were just over a 100-‐million-‐dollar company, so saying we were going to go from 100 million to a billion was just ... It was exactly what it says, a big, hairy, audacious goal. It's like, "Wow. A billion dollars." There's not too
many billion-‐dollar businesses that people start. That was just, "Hey, if we can get to a billion dollars in sales, we've really made it."
Steve Sanduski: Okay. Before I rudely interrupted you there ... Rich Balot: That's okay.
Steve Sanduski: Continue on what you were talking about there with some comments from Mark.
Rich Balot: Yeah. Mark helped us plan. We started doing annual strategic planning sessions, where we got our leadership team together. We did monthly coaching sessions where he held me accountable, because when you're the boss, nobody's holding you accountable. I remember one time specifically, we had a project that I was supposed to be working on that we thought could translate to about three million dollars in profit for the company.
Mark and I were talking, and I'm going through this frustration. I'm trying to open a store in the Outer Banks of North Carolina, and I'm telling him how the city is just crazy, and we're fighting, and we're behind schedule. He says, "Rich, just a simple question." I go, "What?" He goes, "How much do you think you'll make off this store if it opens now instead of in six months, like the city wants?" I said, "Fifty thousand dollars." He said, "Oh, that's fantastic." I said, "Thanks."
He goes, "Now, how's that three-‐million-‐dollar project coming along? I'm sure you're pretty far along on that, too, right?" I went, "No, I actually haven't started it. I've been too busy working on this 50,000-‐dollar project." He said, "Do you think you might want to readjust your focus here?" Things like that, where somebody throws it back at you, the same thing that you do to your employees, but nobody's there doing it for you. I came from sports. I'm used to having a coach. That has really been beneficial to me, where somebody can just call me out and keep me honest to both myself and my company and my family, to say, "Hey, you're smarter than this. Why are you focusing your efforts on something that's not going to get you the results you need? That's not the most important thing."
Steve Sanduski: Okay. You mentioned earlier that you made a bad hire. Just like you're getting some good advice from a coach, you've got to have the right people on the team. Take me back to that time when you had the CFO, turned out to be a bad hire. Looking back again, the hindsight here, looking back, what did you miss when you were making that hire? What
did you learn from it? How are you now implementing that as you hire new people going forward for senior positions?
Rich Balot: Sure. The person I'd hired was my CFO. Relationship-‐wise, the guy was very likable, a super nice guy. Really, what I didn't do properly at the time was I didn't call references as much as I should have. I also didn't get somebody who was the best I could get for that position. The reason I say that is I thought all CFOs are CFOs. What's the difference? He really was one of my first true CFOs, and I didn't have a lot of experience in hiring one. I said, "Yup, he's been a CFO. Great. Let's see if he's good. I like him, okay. He knows the accounting side." I hired him.
What I didn't think about was my particular industry is what I call "small-‐ box specialty retailer," and he came from manufacturing. He knew how to make a widget, mark the price up, and sell it, but he didn't necessarily understand retailing, where you have to do separate P&Ls for each location and things of that sort. He wasn't able to give me the guidance that I needed to give me the information that I needed to make the right decisions going forward.
If I had to go back in time, I would have reached out and gotten some expert advice. Mark would be an example of somebody I could have leaned on to say, "Hey, what should I be looking for here?" Somebody probably would have said, "You don't just need a CFO. You need somebody who's done small-‐box retail, somebody who's been at a
business your size." I think that would have made a big difference, if I had done that.
Steve Sanduski: If you do make a bad hiring decision, what have you learned in terms of, "Okay, this is the point where this clearly is not working out. I need to cut my losses, both for me and for the other person"? Because if it's not working out for you, chances are it's not working out for them, either. How do you as a leader decide, "This is just a bad fit. We've got to cut our losses here"?
Rich Balot: Sure. I guess the phrase that I like to use is, "Hire slow, fire fast."
Employees don't like to hear that, but like you said, it's the truth. It's the best for both sides. If I've already decided that this person's not a good fit, I need to make that decision and execute it quicker. For that particular individual, I decided that he was the wrong person probably three to four months before I finally got rid of him. Those three to four months, I'll bet you I aged more in those three to four months than any other time in my life, because it also coincided with when the business was doing very poorly.
I literally had somebody telling me daily I was going to go out of business. Instead of sitting down, saying, "Here's the results. Here's what we need to fix," it was, "Hey, you're going to go out of business. Why are you even bothering?" My advice to people is, once you've decided, when your gut tells you need to part ways with this person, just get it over as fast as possible and do it in a way that's respectful for both you and for them. Steve Sanduski: Today, when you're hiring people in the organization, do you have
sophisticated assessments that you go through? What is the process you use to hire people today?
Rich Balot: Sure. Yeah. We've started using assessment tools, benchmarking, particularly, where we'll give people a ... I call it a psychological test. That's probably not the right description for it, but a test that they can answer multiple questions. Then it will spit out whether we think they're going to line up with our company's beliefs and structure properly. That's easier for the entry-‐level positions and the standardized positions. I've got a lot of sales consultants. I've got a lot of store leaders. I've got a lot of district leaders.
When you get higher up in the organization, to the executive team, those tests are not as meaningful, because you don't have a benchmark for a CFO, particularly, inside your organization. For that level position, I'll look to the experts to make sure that this person's qualified. I'll check
references, without a doubt. Then I'll do a very thorough interview, which is more than just a one-‐hour session. I'm going to be taking them out to dinner, meeting them over a multi-‐day period once they get to the final level. Then I'm really going to look at their prior patterns of success to see if I think they're going to fit in and be a productive member of the team. Then most importantly, we're going to start off with a really strong
launch plan. I'm going to do a DiSC assessment so I know how to interact with that person. Then we're going to set set evaluation period so I know, "Okay, they joined my team. After 30 days, I expect them to be here, 60 days, here, 90 days here." I'll set the expectations up front, hold them to it, and be able to make a quick assessment. Ever since I've started
following that, I've actually had great success. Since that one bad hire on my executive team years ago, probably five years ago now, I haven't made a mistake close to that in a long time.
Steve Sanduski: Great. We started talking about the five things that a CEO should focus on. One of those is the vision and direction of the company. I think we've touched on that a little bit, about how that has morphed over time for you. Second is cash. You had a near-‐death experience. What are you
doing today in terms of how do you manage the cash? You've got the new CFO on board. What metrics do you monitor, or what's your process for making sure that you're not running out of cash?
Rich Balot: Great question. Cash goes on two sides. You have one, are we making it, and two, do we have it, because a lot of people in business realize that you live or die based on cash flow. The first is are we making it, so we're reviewing our profit and loss statements on a monthly basis, on a regular basis and a structured basis, to make sure we're making money, looking for where we're not making money and making adjustments to those stores, in my case, or product lines, to make sure we're making money. Two, we're checking to make sure we have cash flow on a daily basis, so making sure we have proper line of credit if we need it or money in the bank, and reviewing that. We do a monthly KPI sheet that has a rolling 13-‐month average, along with the monthly basis. We review that every month in our executive team meeting. That has various financial and other metrics on it that are indicative of trends to make sure that we're doing well. That's really how we make sure we're on top of the cash side, that we have cash-‐flow cash and then, like I said, P&L cash.
Steve Sanduski: Do you have software? What software are you using to actually monitor all that and track all that?
Rich Balot: Sure. From a software, we're using QuickBooks, believe it or not, up until recently.
Steve Sanduski: A lot of people do.
Rich Balot: Yep. We found QuickBooks is a great product. Recently, we're migrating to Microsoft Dynamics, or Great Plains, as it's commonly called. Then we use a point-‐of-‐sale system that's specific to our industry called RQ4. Then we've written some customer reporting tools behind the scenes. We have a great development team that gets us daily live real-‐time metrics that are awesome.
Steve Sanduski: Okay. Good. That's cash. The third thing to focus on is to get the right people in the right job. We've already touched on that a bit. The fourth is key relationships. Tell me about, how do you identify the key
relationships for your business, and how do you maintain and enhance those key relationships?
Rich Balot: I want to step back for one second, because we talked about making a mistake on the right team, but I want to really re-‐emphasize, having the
right team is so important. Not just the right team in the sense of "is everybody good," but "are they the best person you can get that you can afford for that job" is so important. That's probably one of the biggest things I learned from Mark, is really, that right team, it matters. It's made my life so much better, having the right team. I just didn't want to skip over that too fast, if that's okay.
Steve Sanduski: Right. No. Along with that, I always tell people that to get the best
people, pay them really well, because if you pay 20 percent or 30 percent or 50 percent over what the market is, and you get the very best person, that person will give you 5X, 10X better results than just the person that you pay at the market rate. That little extra comp is going to get you a multiple in return.
Rich Balot: A hundred percent right. That's assuming you can design that comp model to be aligned with your goals. That's the other part of that, is having the right team and building the comp model to where they're aligned with the goals of both the company and the leadership team is great. Once you get that recipe for success, the company just takes off. The results that we've seen over the last few years have just been absolutely amazing.
Moving on to key relationships, though. Key relationships, I define it as anything that can put you out of business is a key relationship, so your vendors, your banks, your attorneys, the accountants, and then anybody that can really make a huge difference to growing your business. In my case, Verizon's an obvious one. Verizon's my largest key relationship, and it's made a huge difference in my business.
I can tell you without a doubt that some of the things that we've been approved for are a direct result of the relationships that I've built and the trust that they have in myself and my company to continue to deliver day in and day out based on a relationship. We've gotten into special
programs as a result of the relationships.
Key relationships are something that I excel in, at least I'm told I do. I go out, and I foster them with very specific methodologies, and making sure I do handwritten thank-‐you cards. I learned that from Jack Daly, by the way. Then sending gifts, wedding, and texts for birthdays. Then face-‐to-‐ face meetings are very important. A lot of people these days, we're so used to technology with email and Skype ...
Rich Balot: Skype or even a phone call on a cell phone. These days, you can do Skype right on your mobile phone. There's nothing like getting face to face and breaking bread together. That's my Jewish roots there. I think it makes a difference to build those relationships, is getting that face-‐to-‐face time, which is tough to do with a family sometimes, I'll tell you.
Steve Sanduski: How many key relationships do you work with today?
Rich Balot: That's a great question. Verizon's structure is one that requires me to have a lot of key relationships. I would tell you I probably, on the Verizon side alone, have 20 of them there, which is significant, more than most people would have to have in their business. Then outside of that, probably another 10. I've probably got about 30 key relationships, from our major vendors to our banks.
Steve Sanduski: I know this is getting nitty gritty, but people like to hear this stuff. Do you have software? Do you have a CRM system that you use to track
birthdays, and conversations, and little tidbits of information about your key relationships? How do you monitor all the personal stuff that really helps enhance a key relationship?
Rich Balot: I'm pretty basic. I'm not a big CRM guy, unfortunately. I just use Microsoft Outlook. If you go onto my calendar, I have all the birthdays pop right up in there, little pop-‐up saying so-‐and-‐so's birthday is today. In the people section with the contacts, I'll list little bits. I've got a fairly good memory on most of that stuff, and I'm regular with the people enough.
Then I use my calendar to make sure certain people that I wouldn't necessarily speak to as often that I think are important, whether they're currently high-‐level executives or whether they're growing to be high-‐ level, and I'll set a calendar reminder to make sure I reach out to them, whether it's once, twice, three, four times a year. Then every time I have that call, I'll set the next reminder to make sure I don't forget.
Then of course, Mark, on our call, is asking me, "Rich, how are you doing on key relationships?" Particularly when we were building them, he would literally have me list out who I needed to build a relationship with. He would ask me, "When are you meeting with this person? What are you trying to accomplish? When are you meeting with this person? What are you trying to accomplish?" Then you met with him, he goes, "Great. When are you following up? When are you doing your next meeting?" Mark would guide me right down that path to make sure that I was building those key relationships. I think Mark would tell you, like I said, that I've done an outstanding job building them.
Steve Sanduski: Would you consider some of your key executives to be your key
relationships? Are they included in that, or is it more external people to the organization?
Rich Balot: I would definitely make it more external. To me, the right team is part of the key relationship piece. I'm always focusing on the outside, because the people inside my team, I'm communicating with them on a daily basis and going to have the relationship just for them to work for me. As I learned with that bad CFO, I've got to be able to communicate and like them on a daily basis, and vice versa.
I've never had any of my employees under employment contracts, which is just a matter of trust, and unusual, I think, in a company our size. I never saw the need for it. I always felt it was a negative thing, because my opinion of contracts in general is if you have to pull out the paper and look at it, you have a problem. With my employees, particularly my executive team, I never had a contract with any of them, because it was all based on relationship.
Steve Sanduski: I think that is such a great point, because I see so many businesses that ... and maybe it's a scarcity mentality, a fear-‐based mentality, where they do have detailed non-‐compete agreements that just try and lock people in and lock them out from doing anything. I agree with you 100 percent. I think that if you can build a business, if you have a management style, if you create a culture in an organization such that people want to work there, they want to see the business succeed, they want to see the leaders succeed, that you have that trust, if you have that trust in your employees, they're going to have that trust in you. I just think that's a great way to run the business.
Rich Balot: It's served me well. I think people need to be able to trust their leader and know that if I say something, it's going to happen, good times and bad times. It's worked well. If you can develop that culture, like you said, the culture is so important, by the way. It's the unwritten, in my opinion, sixth thing that Mark would tell you to focus on, would be culture, particularly with a sales team. We're mostly a sales organization. I've seen such a difference in the output of my company by really structuring our culture and focusing to build a very positive, sales-‐oriented,
motivated culture. Jack Daly would be proud, I think, of what we've done on that side of the house.
Steve Sanduski: The fifth thing was to have a process of continuous learning. It sounds like with your EO and YPO and having a coach that you're way in sync with that.
Rich Balot: Yeah, without a doubt. Small detail that I think's important, I read CNN, Fox News, Yahoo, Wall Street Journal, everything online every day. Then YPO, I'm in a forum in YPO, one of the best things I've ever done, both business-‐wise and personally. I go to my YPO forum about once a month. Then having Mark, of course, continues my education, having a resource to lean on when you face something that you've never seen before. When I call up Mark and I go, "Mark, I just had the craziest thing happen, and here it is." Then he goes, "No problem. Had that happen before. Here's what we do. We'll take care of it right away. Call this person. Here, here's the expert on that situation."
Having that resource between Mark and YPO, absolutely amazing. Makes life so much easier. Who wouldn't want to get an expert involved on any problem every single time, if you can afford it? Knowing where the experts are sometime is difficult. That's where Mark really comes into play, is helping you find those experts and giving you the guidance to get with the right people.
Steve Sanduski: As you think about all the business advice that you've received over the years, whether it's someone who told you something, or maybe it's something that you read or an insightful quote that's really been inspiring to you as you have been running and building your business, what would you say that piece of advice is?
Rich Balot: That's a really tough question. I've gotten so much great advice over the years. I'd go back my father. Being brought up to treat others how you want to be treated, I know that the old Golden Rule, if you will, it still really applies. That's always been the way I've done things. I know this sounds really weird to say, but I've never worried about the money. I've always felt that the money will fall into place if I do everything else right. That's not typical for most businesses, and definitely not for most CEOs, and probably not the best advice to give somebody. I've always focused more on the people side of it.
Steve Sanduski: I also had a piece of advice here recently with another very successful entrepreneur that I was talking to. He said, "The more important you are to the business, the less valuable the business is." That was really all about, as the business grows, it's got to be less about you and more about the other people within the business. You've got to let go of your ego. You've got to let other people make decisions throughout the organization and not have it all be a bottleneck at you.
Then I also tell people that the business can only grow as much as you grow. I think that's right in line with what you're talking about. It gets
right back to this whole concept of continuous learning. For all the folks that are listening to this, I can't encourage you more to make sure that you're part of other organizations, whether it's YPO or EO or other organizations, and have a coach, someone, a group of people that you can talk to who are going through similar challenges that you are that can really support you and give you that guidance as you continue to move forward.
Rich Balot: Yeah. Actually, I did get some advice similar to what you said. I wish I remember what he told me, but they said, years ago, they said, "You can tell if you're a good leader because the company or team or whatever will run 95 percent as well without you as it does with you." Same concept, of making sure you're not so important in the organization.
Over the years, it's amazing, when I look back 19 years, and I remember when I could never step away for a weekend because I was afraid what would happen, to this past weekend, where I decided I was going to turn my phone off and just go and spend time with my family and relax. It's just a great feeling of success when you realize that you've built a team that can do it without you, because it's awesome. It's like when your kid learns to ride a bike, and they don't need you anymore. You spent all that time teaching them, but now they can do it without you. Which, by the way, my four-‐year-‐old just learned to ride her bike without training wheels this past week. Unfortunately, I wasn't there. My wife did it when I was at work one day, but same idea.
Steve Sanduski: Yeah. How ironic, a guy who makes his living in the phone business, turns his phone off on the weekend.
Rich Balot: That's definitely ironic.
Steve Sanduski: Rich, I've asked you a lot of questions here. Is there anything that I haven't asked you yet that you'd like to share?
Rich Balot: I'd like to tell you one other thing that I think a lot of entrepreneurs need to know, which is that sometimes ... This is really hard advice, and it's tough for my employees even to hear. Sometimes the person who takes you from A to B can't get you from B to C. That's another thing I'd say along the growth curve that you have to learn, is that you want to be loyal to your employees because they're loyal to you.
Part of that loyalty involves realizing when you've outgrown somebody and saying to them in a nice way, "Hey, look, I love you, but this isn't the right position for you anymore. I need to find somebody who can help
take us to the next level. I'm going to make sure you have a soft landing, and I'm going to find something appropriate for you, whether it's inside the company or outside." Those difficult conversations with the people that you care so much about have to happen over time. It's part of the cycle of a business, because if you're not willing to make those decisions, then you probably shouldn't be in the leadership role that you're in. Steve Sanduski: Years ago, I had a client. She called me up one day, and she said, "Steve,
I've got a problem." She said, "I've got an employee that is just toxic. It's my company, yet I can't even stand to go into the office because of the toxicity that this person brings." I asked her, I said, "How long has this been going on?" She said, "Nine years."
Rich Balot: Wow. Yeah. I get it. That was my CFO that time. I hated going to work. That's when I realized I needed to fix it. I get it. Yeah, that toxic attitude. We've had it once or twice. We've had some other people who were toxic in the company. It was funny, one time, we decided we needed to hire somebody in charge of HR. We hired a guy, and he was toxic. The guy in charge of HR started creating all these issues. Fortunately, I identified it very quickly and just told him, "Go away. You're causing problems," which was really funny, that HR caused the problems for us.
Yeah, toxic people happen. The key is, just like I said before, you got to know when to fire them fast. You got to do it. Yeah, it's tough, especially, like you said, you get used to having people there. You're comfortable with them. You know them. You know their kids. I remember one guy I had to let go, I was a godfather to his children. Who wants to fire your godchildren's dad? That's part of life.
Steve Sanduski: That's part of building a business, that if you really want to be a successful entrepreneur, you're going to have to have those tough conversations. You're going to have to make those tough decisions. The leaders that cannot do that, they're leading companies that aren't going to get to that next level.
Rich Balot: Yeah. Look, I told you I started off, my first employee was my father. I've hired cousins, and aunts, and uncles, and all of them over the years. Today, I've got one family member who works for the company, but he wasn't family when he was hired. He ended up marrying my sister-‐in-‐law. Other than that, I don't have any other family. I've had to fire multiple cousins and multiple uncles and aunts. Unfortunately, I hold those folks to a higher standard than I do my regular employees, not to a lower standard.
You're right. You realize over time, part of the job is having those tough conversations and saying goodbye to people for the better of the overall company, because for my company, it's not just myself that I'm worried about. I got 3,000 families out there that are dependent on me to make those right decisions. Where I might be impacting one person's family in a negative way, I'm protecting the 2,999 others. Sometimes you have to look at it that way to make yourself feel better and be able to sleep at night.
Steve Sanduski: There was a famous philosopher by the name of Spock who once said, "The needs of the many outweigh the needs of the few or the one." Rich Balot: That's correct.
Steve Sanduski: I think we'll leave it at that, Rich. Rich, this has been a great conversation. I really appreciate you taking some time today and sharing with us your story, your entrepreneurial journey. I wish you just great continued success going forward.
Rich Balot: Thank you, Steve. Have a great day. Thanks for having me today.
