Author 4 Bestselling Books, Founder Vision Publishing, Mentor To Business Owners, Board of Directors 8 Companies

As you listen to this you’ll immediately feel Brian’s business acumen has come from an extensive background of experience. Sharing his insights on how to evaluate, structure and grow a business he also reveals some of the deepest traps he sees entrepreneurs make, and how to avoid them. His books are revered as business classics, and I even get time to soak up the essence of his best-selling philosophies.

In this interview you will discover:

– How Brian overcame incredible self doubt to launch a successful publishing company and become a best selling author

– Key Lessons from being headhunted on a small business advisory board with a large network

– Why everyone should ‘be in business for themselves’

– Habits of the worlds most successful business people

– Why most people fall in love with their product (bad) when they should be falling in love with their market (and how you can too)

– The importance of PE ratio

http://briansher.com.au/

Click Play To Hear Streaming:

Download the Podcast

[ mp3 – 43 mb – 46 mins ]

Full Transcript

Click To Read Full Transcript West Interviews Brian Sher

Speakers:
West: West Loh
Brian: Brian Sher

West: Welcome to the call, folks. And today we’re very privileged to have Brian Sher on the line. Brian was born in South Africa and moved to Australia to study a degree in Marketing but he’s since gone on to grow many companies, one of the main ones being Vision Publishing, where he’s got some books—which I actually have in my personal library and I’ve been reading for a long time now and it’s been very, very useful for me. And Brian’s also been recruited as a dynamic and exciting speaker and adviser to many, many top business owners and professionals. So we’re very lucky to have Brian on the call today. And welcome, Brian!

Brian: Well thanks, West. How are you?

West: Very well indeed. I’m excited to speak to you today. Before the call, I was actually just reading through one of your books, How to make Money Out of Thin Air. It’s a fantastic read and I recommend people to go and have a look at it.

So Brian, why don’t you tell us a bit about your journey, how you got into, firstly, running these books, that would be a good start. Yeah, what was the premise behind you being able to reveal some of these secrets?

Brian: A lot of people ask that question. And the truth of the matter is, is that I don’t consider myself to be an author, I don’t consider myself to be a speaker, I don’t consider myself to be a business consultant. I just—like many other people—started life by thinking ‘What am I going to do?’ And having left university, I suddenly realized that working in a job probably wasn’t for me. So I just set out to do the best I could, you know. And what that means is that when you’re faced with the prospect of not getting a job, you have to start looking at the alternatives. And sometimes it was quite scary, quite unsure what to do.

And going into business at a young age, you know, is always a great thing because you start off with a lot of energy, enthusiasm; but the flipside of it is that you’re quite naïve and therefore you do things that you wouldn’t do if you actually had some common sense. And that’s your biggest advantage, really. Because, you know, how many people have you spoken to who have been in business three, four, five years and they say, “You know, if I knew back then what I know now, I probably would never have done it.”? I’m sure you’ve heard that many times. And I was in that boat—it seemed like a good idea to go into business and I was excited about the prospect of doing that and the thrill of doing it. And so off I went.

You know, I started a number of businesses in different areas and I met some great people along the way. And like everybody else, I had to learn and struggle and find the right way versus the wrong way. And there’s many, many wrong ways to do things badly but a few ways to do them correctly and pay the price like everyone else. I just learned things along the way.

You know, one of my early businesses that you mentioned was a company called Vision Publishing where we used to summarize business books. And so I was in a very fortunate position that my product was ‘learning’ and my product was to be the best business books that were being published at the time. So every day, I was taking a lot of great information from some of the best minds around the world and I was applying it to my business. And I found that a lot of the stuff worked. So over a period of time, I built a lot of content, a lot of things that worked for me. Because obviously, every business is different; and some things work better in some businesses and some things work better in others. But I found what worked well for me in a business of my size. And usually small and medium sized businesses operate differently to large corporate businesses. And being in a small-medium sized business, I found that certain things worked. And I wanted to document those. So I thought the best way to do it was to just write them down.

So I never set out to write the book. I just set out to document the things that I found were working for me. And that turned out to be a book that a lot of other people valued and found that something was really good. So that’s the road to becoming an author.

West: Wow. I just noticed on the back of the book here you’ve got a raving testimonial by John McGrath, someone who has followed in your footsteps and written a couple of books of his own. But he’s a very successful real estate agent. And also Simon Reynolds, who’s also a very well respected entrepreneur. So yeah, you definitely had an effect on some of these guy’s careers, Brian.

Brian: Well look, I mean, John McGrath and Simon Reynolds today are friends. I see Simon really and we do quite a lot of work together. And that’s one of the great benefits of achieving a certain level of success, is that you get to meet some really great people. I’m sure you’ve experienced it yourself, West. You find that people of that caliber rub off and you get to really lift yourself to level thinking that you wouldn’t otherwise achieve. So that’s a really good benefit and something which I treasure and value a lot.

West: Absolutely. I want to ask you, Brian, when you were looking at starting your initial businesses as a budding entrepreneur, did you have any really critical self doubts and barriers or obstacles or self talk that a lot of people go through? First, did you have them? And secondly, if you did, how did you break through them?

Brian: Well, you know, I would start this conversation by outlining for you one of the great things about being young and enthusiastic and having the great vision: the fact that you don’t see problems. You know, you just see all opportunity. And it’s only once you’re in business that you suddenly start your own limitations.

So starting out, I never had any doubts, really. I was just enthusiastic and I saw an opportunity and I went for it. I didn’t have to think too hard about it simply because when I looked at all my other options, there weren’t too many. So I just thought, ‘Gee, this is a good opportunity. I liked the idea of it and I’m going to do it.’

It’s only once you’re in business—and I do remember sort of three months after I started Vision Publishing and things weren’t going so well because the thought process that I had and how I was going to grow the business wasn’t working—and it was only at that point that I really had to start the true learning process. Because I thought I knew everything before going into business, but once you get there you realize there are a lot of things that you don’t know. And I went into a bit of depression, self doubt, loss of faith in myself. And I remember sitting in my office thinking, ‘Well, how do I get out of this without looking bad?’ That was my predominating thought. But fortunately, all the money that I had was invested in the business. And that kept me going.

West: So you were committed, basically.

Brian: I was committed. So all those personal development things that you read about—commitment and focus and persistence—those are all the things that are nice to read about but where they really come to play is when you are forced to make some really life changing decisions. Now I remember sitting in the office here in Sydney thinking to myself, ‘I really am going to be a disgrace to myself and to my family. And I’m going to let down my partners,’ ‘coz this thing’s going to fail. And I was in a lot of pain, you know, a lot of emotional pain. And this happens to a lot of people, not only to my self. And it happened to me many times. But because of that experience and having gone through that and succeeded beyond that first experience, I know every time I go to that place of self doubt, I know the way out. And a lot of people don’t know that because they get to a place of self doubt and they never found their way out.

I happen to be in that place of self doubt surely after I started my business, but the pain of it drove me to take greater risks and to try things that I ordinarily wouldn’t have thought. You know, it was a black or red scenario for me. So I decided, ‘Look, I’m just going to do this and see if it works.’ And I tried some things which worked really well. And the business dug itself out of making a loss to making great profits. And the business grew enormously as a result of that whole experience and that pain that I was in.

And I value that today because every time I have that self-doubt, I remember that and I know that that’s a good place to be because the greatest innovation and the greatest breakthroughs that ever happened in your business, in your life are at a time when you are in the most pain.

West: Wow. It sounds almost as if you…like expect to go into that phase whenever you take on a new venture or go through a phase in your business. And when you expect to go into that, you know that there’ll be a way out. And that’s a reassuring thought for anyone going into business.

Brian: Well, that’s a very fair comment that you made. Obviously, the smarter that you get, the more you learn, the less time you spend in that period of pain. The problems just become different. And then you need to learn different things at different times.

And you’re always learning lessons. You always find that there are things that you don’t know that cost you money…but at a different level. Rather than just judging success or failure, there are different things that cost you money that you still think, ‘Well, if I didn’t do that, I would have been far more successful rather than just successful,’ if you know what I’m saying.

West: Mmm. Very powerful. Do you have like a certain sequence of questions that you ask yourself when you’re in that period of pain or period of self doubt and you’re just not sure where to go next? And I completely empathize with that feeling of doubting yourself and not knowing where to go next and not knowing how things are going to pan out. When you’re in that phase, Brian, what’s the process you go through to start clawing your way back on track and staying focused?

Brian: The answer to that question is varied. But the basic process that I go through is I try to look at things in the simplest terms because I also think that once you get to that point, you’re not thinking clearly. You’re at a point where you’re under a lot of stress…

West: Emotional.

Brian: Exactly. Your cortisol levels are very high…in most people. And when you’re at that point, it’s very hard to think clearly. So you’ve got to take yourself back to a place of excitement. You’ve got to take yourself back to that experience of joy, you know, “Oh this is a great thing and this is the reason why I got into it in the first place,’ and get that excitement back. Because once you’ve got that excitement back, then you can start to see clearly again. And at that point where you can start to see clearly again, you can then start to say, “Okay, it’s a matter of just connecting these three dots.” And if you keep it that simple and you understand that business is just a matter of building a good product and selling it and you do that many times and you become successful, then the complexities are taken out of it.

West: Hmm, that’s powerful stuff. So basically you need to get unclouded so you can see clearly the path ahead.

Brian: Well, you need to firstly realize emotionally where you’re at. And the hardest thing to do is to do that. And a lot of people who are suffering in business just can’t see that, you know, the forest with the trees. And that’s the hardest thing. And the hardest thing is to actually get your self out of that.

What I would do if I was in that situation—now I just couldn’t see the forest with the trees—I would spend whatever money I had or I had left or I could afford to get another perspective, whether it’s a friend that you trust your success on business or a business coach or mentor. But not just any business coach or mentor. Because one of the things that I find—certainly for myself—is that people go and get advice from other people that are more messed up than they are. And I can never understand that. That’s like going and asking someone who’s homeless for advice on finances. You’ve got to go to the right people.

West: Exactly. And you probably have to invest in that.

Brian: Exactly. Today I’m very fortunate. For me, I’ve got a circle of friends who are successful. So I can ring them up and say, “Hey, let’s have coffee later (or lunch). I need to bounce some things off you.”

West: But you weren’t always like that.

Brian: But I paid the price.

West: Exactly.

Brian: I paid the price to get those sort of people. And today, fortunately, I can call a few of them friends. So I can get that sort of advice.

But you’ve always got to understand that free advice is never free. Because unless you paid for that advice, you don’t value it. And you should go and try to find the best people that you can that you can afford to help you get through that process.

West: Very true. Now that’s awesome advice, Brian. Thank you for sharing that with us. That’s going to be something I think people should go back and listen to again.

So I wanted to ask Brian now…with the kind of things you do today—you mentioned you don’t classify yourself as an author or a speaker—what kind of activities are you mainly involved in today? I mean, do businesses come and ask you to help them grow their profits? Or do they get you to look over some of their constraints? What are kind of the main things that you do today as Brian Sher?

Brian: For the last eighteen months… I’ve just returned from the US where I grew a business over there for three years prior. And so I’m in the process now of buying into and establishing a number of businesses, new businesses in areas that I’m familiar with, some that I’m not so familiar with. But I’m also on a couple of advisory boards of about seven or eight companies. I do that together with Simon Reynolds. So there are a lot of small and medium size businesses who really don’t have anyone that they can turn to. You know, large corporations have Boards of Directors, whereas small and medium size businesses (SMEs) really don’t have that mentorship that large corporations do.

So I have set up advisory boards that Simon Reynolds and myself work on, where we will become an advisory board for small businesses. Like the board of directors, we will sit with the business once a month and say, “Look, here are the five things that you need to do and here are the eight things that we feel that you’re making a mistake of.” And that’s been very powerful and very effective.

West: It sounds like kind of a mastermind group where businesses that don’t necessarily have access to very large networks can access people who have experience and proven records in the industry.

Brian: Right, right. But we do that on a selective basis. And we find that that’s working really well.

But the main game for me is to always… you know, I’ve been in business for myself. Advising is fine and I do a little bit of that. But to be in business for yourself is ultimately where I think the value lies because the amount of money that you can generate in your own business far exceeds anything you can do by being a consultant or by being an author or any of those sorts of businesses.

And in my book, How to Make Money Out of Thin Air, which you have a copy of, I’ve outlined 20 habits of the world’s most valuable businesses and 41 habits of the world’s most successful business people. And those are the sort of criteria that I try to follow myself personally as well as businesses that I look at and get involved in. Because I think that by having that checklist, it allows me—and that’s the reason I wrote the book; obviously because I like to keep a documentary of my own thought processes—is that if I’m looking at a business or if I’m consulting to business or if I’m helping out in a business, I look and compare that business against the list of the twenty habits of world’s most valuable businesses. Because if you can do that and you can say, well, this business or this potential business should add these components or should have these components, suddenly you can change your business model to be a far more successful business model than you may have started out with in the first place.

West: Absolutely. It’s very powerful to see that list. And it just minimizes your risk, obviously, and it minimizes the businesses’ risks if they can follow those key criteria which have been proven time and time again.

So why don’t you tell me some ingredients that if someone’s looking to build a million dollar business now no matter the economic conditions, what are some of those key ingredients that you look for? Or if someone came to you and was looking to build a million dollar business now in the current economic crisis, what advice would you give them Brian?

Brian: Well, the first thing I pull out is this list of habits of the world’s most valuable businesses and say, “Look, let’s compare your business against these.”

And I’ll run you through a couple because I don’t have enough time to go through all of them.

West: Yes. Give us the key ones.

Brian: Well, the first and obviously the most important is you’ve got to look at what market you’re in. And that sounds obvious. But a lot of people going to business, they’re really not addressing the market potential for what they have.
So for example, someone might come to me and say, “Look, I’m thinking of opening up a news agency.”
And I’ll say, “Well, that’s great! What’s your long term goal? How much money do you want to earn? And what do you want your business to look like in 5 years?”
They might say, “Well, I want to have a business that’s pulling in a million dollars a month,” or whatever their goals are.
And then I look at their business and say, “Well, the market you’re doing doesn’t match your life goals. It doesn’t match your potential.
Because if they’re going to open up a news agency, the market is limited to their neighborhood. In other words, someone who lives in Perth is not going to fly to Sydney to go and buy their news agency. So you’ve got to understand that your market is probably the most important thing. And that’s why the internet is such an exciting breakthrough for many businesses because all of a sudden, the person—such as yourself, West, you’ve got an internet business—you have access to millions, if not, billions of people around the world. And you can operate it from a location in your garage or your home. And that’s why internet is such a fantastic tool.

But if you’re selling widgets, if you’re selling a service or you’re selling consulting services, you can’t distribute that through…

West: It’s limited.

Brian: If you’re a doctor, how do you sell your services to the internet? So you’ve got to look at your market. You’ve got to look at your product first and say, “Well, does this have huge potential?” And if it doesn’t then you’ve got to realize that you’re limited to the amount of customers that you have. And you know, what’s surprising is…

West: Sorry I lost you for a second there, Brian. So you were saying about people not realizing the market potential of their business.

Brian: That’s right. And what’s so surprising is that people going into business or starting a business, they fall in love with their product and they don’t fall in love with their market. So they look at their product and go, “Wow, I really love this new paper that I’ve got! It’s a really different sort of paper.” And then I’m thinking, well, you know, how big is the market for this paper? They’re not really looking at the volume of business that they can generate should they be successful in their marketing.

West: So when you talk to people you basically give them a reality check and say, “Let’s face the facts. Let’s take a look at your market and let’s really figure out what the true potential is. And let’s not kid ourselves.”

Brian: Correct. Yeah. And you’ve got to look at every circumstance and say, “Well, look. Your market is limited.” But where I get excited is about businesses that have unlimited potential. One of my clients, she’s selling courses on how to write, how to become a screenwriter or how to become a scriptwriter. And she was just selling it in Sydney. And I said, “Well, look. If you repackage this and you make it an online course, all of a sudden you can sell this around the world.” You always have the potential to grow the business to a worldwide business. She just didn’t realize it. So that’s a success story.

On the other hand, there are a lot of people who try to look at their products and want to sell it on a worldwide basis but just never will and never can because there’s no potential to do that. So that’s the first thing, West.

The second thing is…obviously, I’m a big believer in selling what I call leverage products. And I think you know what that is. A leverage product is something where you’re not necessarily selling time—because time is a limited commodity—so in theory, if you’ve got twenty fours hours a day and you’re prepared to work twenty four hours a day, you’ve still only got twenty four hours a day. Whereas if you make any product that you can sell that’s made by a machine, you can sell as many products of those in as many markets as you potentially can get to. And every time you sell a product you make a profit. So if you can sell a thousand products an hour, you can make $1 profit out of every one of those products, you’re making $1,000 an hour and you don’t have to be there.

West: Exactly. That’s powerful. And I think not a lot of people really maximize that concept even though they’re able to. So I guess that’s where you come in as well, as kind of a coach and a mentor to some of these people that come and approach you, to help them realize that potential.

Brian: Sure. If that’s what their goals are, of course. And then one of the other habits that I’m really big on is if you’re going to make a sale, you should have some sort of residual income. And I know you guys are big believers in that and it’s become a lot more popular now with a lot of online…

West: Yes, we call it a backend in the internet marketing world where we continually upsell or we try and get more out of them. But you’ve probably been advocating this type of business model well before it became popularized in the internet world.

Brian: Right. I mean, the online businesses have really picked up on that and it’s become really popular. And there are a lot of guys now talking about what they call continuity programs. And then there’s new lingo out called forced continuity and volume continuity and white continuity and black continuity. There’s a lot of lingo and jargon that’s developed around this but the bottom line to keep it simple is, you know, the most valuable businesses where if you look at them, they sign you up with a customer and you end up using them every month. Look at companies like banks, credit card companies. You get a credit card every single month and you use that credit card. They don’t have to market to you every month. You buy now and you keep the credit card for ten, twenty years. That’s why credit card companies are very, very successful.

You look at some companies, they sign you up—these days, everybody realizes you get a mobile phone for free because they’re not interested in selling you the phone, they’re interested in your mobile phone bill every single month. Those are the sort of business models that you need to look at and say, “Well, how do I take my business from a one time sale into a continuity sale?”

West: Definitely. And I’m sure there have been many instances where people have come up to you and said, “Brian, I don’t think I can create an ongoing, continuous income,” but then you’ve been able to show them how to do that based on those principles.

Brian: Well, sometimes you’ve got be creative. And sometimes it’s easier than others. And sometimes it’s more obvious than others. And sometimes there’s just no opportunity at all, in which case, you need to adjust your business model.

West: Yup. Powerful stuff.

Now tell us about the power of the Price Earnings Ratio, Brian, because I know that you’ve mentioned that to me in the past and how most businesses don’t even take that into consideration. So give us—for those of us who don’t understand what it is—just a quick explanation what it is. And then tell us how, as business owners, maximize our P/E Ratio.

Brian: I love this topic because this is the real business end of getting rich. And when people talk about getting rich and going into business, there are so many people in businesses today that have a business that effectively is nothing more than a job for themselves. And while they’re self employed, they really don’t have much value in their business because they don’t understand the P/E Ratio and they don’t understand what that means and they don’t understand how powerful that is. And they don’t understand the fact that if you employed these 20 habits that I keep talking about—of the world’s most valuable businesses—your P/E ratio skyrockets. And if you can skyrocket your P/E, you’ll skyrocket your wealth.

So let me just answer your question as to what the P/E ratio is. The P/E Ratio is basically a price earnings ratio. And what that means is that your business is valued being the price relative to its earnings. And the ratio is just the proportion between what you’re earning and what the value of your business is. Let’s take around numbers as an example. If you’re making $100,000 profit or you’re making a million dollars profit, what is your business worth? Now you can be making a million dollars profit and your business is not worth anything. Why? Because for your business to be worth anything, it’s like the real estate market, for the business to be worth anything, there has to be someone who’s willing to pay that price.

West: Exactly.

Brian: So for example… let’s use real estate as an example. If you have a house—and it’s a beautiful house—but that house is built on a toxic waste dump, even if it’s got harbor views, I don’t think you’re going to find anybody that’s going to give you anything for that house.

West: Yup. True.

Brian: But that house is undervalued to you if you’re prepared to live in it. It’s the same thing with the business. If your business is not structured properly and it’s dependent on you as an individual and it doesn’t have leveraged products and even if it’s making a million dollars profit, and it doesn’t have these twenty habits of the world’s most valuable businesses built in, your price earnings ratio is going to be almost zero.

And people who sell their time, who are consultants or doctors, lawyers, those sort of businesses really don’t have a lot of value and their price earnings ratio is very, very small.

On the other hand, you’ll find other businesses that are well systemized—again, which is one of the twenty habits—they have residual income, they sell leverage products, they create powerful brands, they’re not dependent on any one person, they’re usually the market leader, they attract the best and brightest people, they have few real competitors because they’ve differentiated themselves, they have high margins on their products, they don’t have a lot of real competition because they’ve differentiated themselves properly. And what they’ve also done is they’ve built an exit strategy from day one. Now, if you do all that, all of a sudden your price earnings ratio starts to skyrocket.

And the value of earning a dollar is different in two businesses. So if I was going to start a business, I’d be wanting to start a business or grow a business that has the potential for a really high price earnings ratio. And the reason for that is because if I’m going to build a million dollars worth of profit into a business and it’s going to take me five years to do that, what I want to do is make sure that when I sell that business like I would want to sell a house, I want to sell it for the highest value that I could. And to get a high price earnings ratio is the way to do that.

So if I was going to build a million dollars profit, I would rather try to sell my business for $10 million at a P/E of 10 than at a P/E of 1, which means I’m only going to get a million dollars for my million dollar profit. And if you try and sell your business at a P/E of 1, there’s almost no reason to sell it because why would you sell a business that you can earn a million dollars out of anyway? So there’s no point and no one will want to sell a P/E of 1. So every dollar that I’m going to earn over the next five years, I want to make sure that not only am I earning a million bucks but I’m earning a million times 10 (million X 10). Because I’m earning $1 million every year but at the end of that period, whether it be three years or five years, I’m then going to sell that $1 million for $10 million or I’m going to sell it for $5 million or I’m going to sell it for $20 million.

And that’s a really incredible thought process that very few people talk about when they start growing their business. Because if you can build a business with a high P/E ratio and you can build all these twenty habits in, you become instantly rich.

West: And it’s a completely different way of thinking from how most people approach business and business foundations, isn’t it?

Brian: The words are: “Start with the end in mind.” And that’s one of the Seven Habits of Highly Effective People.

West: Yes. Stephen Covey.

Brian: You know, millions of people have read that book but if people take those principles and apply it to themselves on a daily basis, they can make a huge difference to their lives.

So when I think about business or I try to help people, advise them, I try to think of it in those terms and I try to drum those concepts into their head because if you’re going into business, there is no point in—unless you’re doing it as a hobby—but the point of going into business is to make a lot of money and to give yourself a lifestyle that you will enjoy, appreciate and you can maximize and you can value. But the best way to do that is to earn the most amount that you can in the shortest period of time. So I would rather have a business where it’s producing half a million dollars a year and has a P/E of 5 than a business that’s producing a million dollars a year and has a P/E of 0. Does that make sense to you?

West: Yes. Absolutely. Different mindset from what the masses are thinking out there. So I’m curious, Brian, with regards to online businesses…is it more difficult to determine the P/E ratio if the business is primarily online? Because I noticed you’re talking a lot also, obviously about offline businesses with staff and systemization and all that sort of stuff. I’m sure a lot of the principles will also apply for online businesses.

Brian: They absolutely do. The great advantage that online businesses have is that immediately a lot of those habits are already built-in. I mean, if you’ve got an online business, the first thing you have is you have a huge audience, you have a huge market that you can access to. Obviously if you’re selling left hand knitting business or something that’s really a niche market, you might find that you’ve got a decent size business because you’re able to sell around the world, which wouldn’t succeed if you were just in Australia. However, it’s still a relatively small niche market. But if you’re able to attract a larger niche market around the world, then it’s automatically built in. So that’s the first thing.

Online businesses don’t automatically have high margins. They don’t automatically have residual income. They don’t automatically have real competitors. So you still need to address a lot of those principles with online businesses. You still need to have an investor entry and exit strategy if you want to grow the business. You still need to keep innovating. Those are all the things that online businesses still need to do which apply to online or offline businesses. But, you know, online businesses have some advantages…just intrinsically.

West: Absolutely. I can’t speak highly enough of online businesses. I completely agree. I love having that worldwide audience being able to purchase from me while I’m out playing golf and while I’m sleeping. So that’s an advantage that I enjoy as well.

So is it an exact science, Brian, calculating the P/E ratio? I mean, can someone who doesn’t have a lot of experience or doesn’t have an MBA or an Accounting degree…are they able to pull from these factors you mentioned and get an idea of their own P/E ratio or do they need to follow some strict guidelines in order to look at how their business is currently standing if they have one?

Brian: Look, the P/E ratio, the market determines that; you don’t determine it. what I’m suggesting is that if you have these 20 habits built in to your business or as many of them as you can built in to your business, then your P/E ratio will be higher than if you don’t have them built in. Now what does that mean? I mean, what does higher mean relative to your own particular business? If you go to the Financial Review and you look at a lot of the public companies that are listed there, they will have a column next to their daily price quotes which determine their price earnings ratio. Now the price earnings ratio is simply the value that the market puts on the company based on the current earnings. So for example, if the company is doing a $10 million profit as a public company and the company is valued or the company share price is, say, $10, then how do you determine whether what the price earnings ratio is? Well, you have to look at hoe many shares are issued.

So let’s keep this really simple. To determine your own price earnings ratio, firstly, it’s only a calculation that you do yourself, it’s the value of your business that someone will pay when they buy your business relative to your earnings. So if you’re doing a $1 million turnover and you can sell your business for $10 million, then your P/E is 10.

Now most small-medium size businesses, if they’re private, will be valued somewhere between 3 and 6. That’s a rule of thumb. In other words, someone will come along and depending on how many habits you’ve got built in to your business… By the way, when I say 3, that’s a business that already has systems or already has products developed; it’s not a service business that depends on a doctor or a lawyer because that’s virtually worth nothing. But I’m talking about a business that already has a profit, it already has systems built in, it has a customer base, it’s got a track record, it’s been going for a number of years. You’ll typically get between… today, maybe a little less because the whole market’s depressed and the recession; if you were to sell your business, maybe 2 ½ to 6 as a private company.

But the idea is that if you are able to go in the right industry and you’re able to build your business where you have built in your exit strategy from day one, you may find that there’s a public company out there that has a price earnings ratio of 28 or 30. And by approaching that company and saying, “Look, would you like to buy my business?” they may offer you a price earnings ratio of 10 or 12 because they’re buying you at a multiple of 12; but for them, the value is 28. Does that make sense to you?

West: It does.

Brian: So they’re buying your business at, say, $12 million. At a million dollars profit, they may give you a check for $12 million bucks and they’re going to take your million dollars profit. But that million dollars profit is worth $28 million to them because that sort of capitalizes their business at.

So if you understand that principle and you understand that by thinking about your exit strategy from day one and always identifying a company that has a very high P/E ratio relative to yours and making them the target of your business, then you effectively could have an extraordinary result from a very small amount of effort.

West: And that’s the goal of business, isn’t it, Brian?

Brian: Well, yeah. It is a goal and certainly, you know, if I was getting up in the morning and saying, “Look, I’m going to start a business and I’m going to work really hard for the next five years,” I would rather walk away with a check for $12 million than a check for $2 million, wouldn’t you?

West: Yeah, absolutely. Absolutely.

So if people are looking at getting into business or selecting a business to go into—obviously we’ve talked a lot about the P/E ratio and the factors that go into that—are there any other factors that you look at apart from those key pillars? You know, maybe in terms of personality, whether it fits or lifestyle. Or are they the main things that you advise people to look at?

Brian: Well, look. I’ll jump to the other list that I spoke about, the 41 habits of the world’s most successful people. Because I think if you’re not passionate about your business—in other words, if I’m looking at somebody and they’re asking me for advice and I’m talking to them about their business, they may just don’t have the burning desire to succeed, which is, I think, the very first habit that you need to have and you don’t have the energy and you don’t have that passion about your business, then it doesn’t matter how good the idea is, I just don’t think you’re going to succeed.

West: Absolutely. And I strongly recommend everyone…is your book still for sale on shelves, Brian? Is it still out there in the market or can I buy it through your site or…?

Brian: The What Rich People Know, I think you can get on Amazon. You can order that on Amazon. And the How to Make Money Out of Thin Air, I think you can order that through Penguin. I don’t know which bookshops have them or still have them. But Penguin Books has it. I’m sure they can order it through those two sources if they really want to get it.

I think that it’s a great list to have. And it’s a great checklist.

West: It is. Absolutely.

Brian: I go and explain each one. And by the way, we started this conversation by saying that these things work in recessions or no recessions. It doesn’t really matter. It works equally and powerfully for you in a recession. In fact, I personally think the recession is really a good time to start a new business.

West: Because things aren’t as expensive. People don’t tend to chuck their prices up so your starting prices might be a bit lower or…

Brian: Well, yeah. You can get reasonable office space. You can get good stuff, you can buy desks and fans and whatever you need at discount prices. I mean what a great place to start.

West: Definitely. Definitely. Cool. Well that’s been a really good content packed call, Brian. I want to thank you for your time.

Actually, I want to ask you one more question before we sign off today. It’s actually about your books. I’ve been doing some courses recently that have all recommended having a book. And I was wondering for you, has it made a significant difference in your credibility, your ability to interact with people in gaining trust and building relationships? And would you strongly recommend that everyone has one?

Brian: Well, look. That’s a really interesting question. I believe that books should be strategic. And just writing a book can damage you as well if the book’s no good. I mean, I’ve seen some excellent books out there obviously. But if you’re going to put a book together, my advice is this: make sure that you’ve got some really good things to say that other people will value. There’s nothing wrong with documenting. That’s what I did. I just documented my thought processes and I think that everybody should do that. But the value of your book—if it’s not well researched and it’s not well written and it’s not professionally put together, it can do a lot of damage to you.

So don’t just think by going out there and writing a book, it’s automatically going to serve your purpose. Because one thing that I learned is that there are probably more people that I know that have written books than people who haven’t. And that’s probably because of the circles I sort of hang around in. But the bookshops are full of books and it’s very hard to know what’s good and bad. But writing a book is a really good thing to do to document your thought process. And I suggest that everyone at least start that process and see where it takes you. You’ll never know…you might be the next New York Times bestseller.

West: It sounds like it was almost a journal of yours that you decided to share with the world.

Brian: Yeah, absolutely. I must say I started this interview, again, by saying I’m not an author and I don’t consider myself one. I write that stuff down because I thought, ‘Look, I want to keep this fresh in my mind and I want to document it.’ And certainly, if someone wants to know how to do things the way I do it, well, they can just read it. It’s certainly up to them.

And I’ve been fortunate that the book’s been successful. I think it’s in twenty countries now, in different languages. It’s very nice to see that happen but that’s not the ultimate goal. The goal is just to go out there and do the best you can and learn as much as you can from everybody and certainly, you can learn from someone, a person sitting next to you in the bus. You can. And you’ve just got to keep your eyes open and learn from everyone and everything around you. Use what you want; throw away the things that you don’t and I’m sure you’ll be successful.

West: Sure. For sure. So if people want to find out more about you, Brian, where do they need to go if they want to…do you have like a coaching program or a website that people can sign up for a list? Do you offer anything to the public that people can benefit from your knowledge, besides your books?

Brian: I’m doing some sort of advisory on a selective basis. If they want to get in contact with me, they can just go to my website which http://briansher.com.au/work-with-brian.html. Or just email me at briansher@bigpond.com and let me know what they’re thinking or what they’re interested in and we’ll go from there.

West: Great. Beautiful. Well thanks for your time, Brian. I really, really appreciate your knowledge and wisdom you’ve imparted on us today.

Brian: You’re very welcome. And thanks for the opportunity.