Interview with Warren Otter, Principal of Otter & Associates on Understanding Your Life Objectives as a Business Owner & How Mergers Can Save Your Business

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On this week’s episode, I Interview Warren Otter, Principal of Otter & Associates. Before starting his consultancy business, Warren took his business from $4.5 million to $8.5 million through three strategic acquisitions, ultimately establishing a business turning over $25 million in revenue. Warren helps business owners through what he calls the ‘maturity stage’ of business, where he helps turn them into independent growing companies.

He shares his own journey including some of the money beliefs he’s personally had to overcome, lessons from his youth, and how his attitudes to money has changed over time.

Connect with Warren:
Website: https://otterassociates.com.au/
LinkedIn: https://www.linkedin.com/in/warrenotter/

Show Notes:

00:00 – Intro

01:16 – Warren’s childhood influences on money and wealh

02:10 – Moving from Accounting to Business Owner

04:08 – Warren’s early investing journey

05:24 – Investing outside of the business

06:15 – The problem with being too focused on your business

07:35 – Financial losses and struggles

09:15 – Was making money easy or hard?

10:38 – Is success and wealth a scoreboard?

11:55 – How has your stewardship changed since building your wealth?

12:47 – What would you do if you were to start over?

14:04 – How businesses can survive COVID-19

16:56 – Finding the right reasons for getting into business

20:28 – The endgame for business owners

22:44 – Thank You

Q: What were the lessons that you gleaned throughout your childhood about money and wealth?

  •  Didn’t learn much from his parents but more from his grandfather
  • His grandfather was self-made entrepreneur and generous with what he had. He came from nothing and built a 100-person business

Q: How did you make the leap from not learning much from your parents about wealth and money to where you are now?

  • Warren started off as an accountant to understand business
  • His real passionate is about businesses and how private businesses work
  • Got into coaching after 18 years being an owner in a family business
  • He bought into his grandfather’s business and was mainly passionate about developing and creating wealth through business, rather than having a job
  • Ended up selling out of the business after a series of acquisitions. The business was initially making $4.5 million and after the acquisitions, was turning over $25+ million
  • Wasn’t necessarily passionate about the particular business he owned but more so about what it meant to be a business owner and what it took to be one

Q: As someone who’s been successful in business, how did the concept of investing apply to you? Were you investing?

  • He was primarily investing in the business itself with a small amount of external investments
  • If he had his time again, he would have a lot more external investments
  • When he sold out, he went out and invested in another business

Q: If you had done more investments outside of business, where would you be today?

  • If he had invested in shares or properties, he would have had an extra portfolio of other asset classes more so than he already had
  • When he had capital to invest, he was investing it back into the business that only contributed to the overall sale price of the business

Q: What you describe is a typical affliction of business owners – they’re all in on their business. Do you think that people would view investing outside of the business as a distraction? Is it good or bad?

  • A lot of business owners get very focused on their business. To have a chat to them about investing is difficult as they’re time poor or don’t have the expertise to do it
  • They end up dabbling in different investments, get burnt and don’t end up doing it again
  • This is why Warren is big on advocating for business owners to figure out how to free themselves out of the business as much as possible so that they have the bandwidth to think about other things

Q: Can you tell me about a time where you experienced financial loss, and how did you manage this?

  • The first acquisition in the mid-1990s resulted in their primary competitor being very aggressive in competing against them
  • The bank wanted to wind up the business
  • They stuck to their guns with a clear plan, taking no advice from the banks
  • Went and bought another business on vendor terms as well as switched banks at the same time
  • Business growth definitely wasn’t a straight line
  • The investment business he bought into after exiting his own business ended up being a loss as he felt he paid a bit too much for it

Q: On the spectrum of money making is extremely hard vs making money is extremely easy, where do you sit on this spectrum?

  • If you focus on an area of making money that you enjoy, it’s easier than you think
  • Some people complicate money making or find it hard because it’s a chore
  • Warren’s passionate about what he does and therefore it’s easier for him

Q: People might look at you and say you’ve got it easy with all the financial success you’ve had. How do you respond to that?

  • Everyone’s got a different threshold to what they’re comfortable with
  • You don’t judge poorly about what someone else has got
  • Respect what people have built and what they’ve done rather than shoot them down
  • Always encouraged people in business to use what they’ve as a reflection of a scoreboard so that it lets you know how successful your actions have been
  • Creates a bit more comfort in your life but not something to brag about

Q: You came from a middle-class upbringing. If you think about your journey professionally and as a business ownership, how has your stewardship of your wealth changed?

  • Not much at all
  • He feels he needs to develop it further
  • Self-assessed that he’s not very good with his stewardship but instead he’s more focused on what his passion of helping other people rather than himself

Q: You came from a middle-class upbringing. If you think about your journey professionally and as a business ownership, how has your stewardship of your wealth changed?

  • Not much at all
  • He feels he needs to develop it further
  • Self-assessed that he’s not very good with his stewardship but instead he’s more focused on what his passion of helping other people rather than himself

Q: The economic landscape has changed because of COVID-19 – where do you see the greatest opportunities for those who want to create wealth over the next decade?

  • Mergers and acquisitions
  • People are currently sitting back and figuring out when to buy back into investments
  • Lots of businesses are going to need saving. If you’ve got cash, you should be trying to bolt onto businesses that make practical sense to your strategy
  • There will be some triplicated costs as a result of this, but he’d much rather see businesses retain a portion of their workforce through a merger rather than the entire business shutting down
  • This is going to happen more and more in the foreseeable future
  • It’s a great time for businesses to merge together if they’ve got the right values, culture and to save on overhead costs

Q: You deal with a lot of business owners and the emotions that come with it. When you talk to business owners, how do you tease out financial success and help them understand what it is?

  • He tries to sit down and understand what business owners are trying to achieve in life
  • More than 8 out of 10 don’t really understand this
  • He sees a lot of business owners being okay with being in the day to day grind
  • They lack a “why”

Q: Why do you think people end up on this treadmill?

  • Too many are on autopilot because they don’t know why they’re going into business
  • Some of it is because they didn’t want a boss
  • They wanted financial freedom
  • They wanted more time to spend with family
  • Most business owners fell into business
  • Most don’t know how to be a leader, entrepreneur, business owner, investor, but not be the day to day manager
  • They end up being the CEO/Managing Director
  • They don’t trust a lot of people either

Q: What is the end game fit for a lot of these business owners?

  • Warren mainly works on the selling side of the business
  • A lot of business owners can’t sell their business because it’s not a saleable asset
  • They end up drifting on with their business and end up closing it
  • A lot of business owners don’t realise that when they stop investing in it, the business becomes tired and ugly
  • Closing a business down has costs – staff redundancies, stock and other costs
  • Sometimes it’s better to sell for $1 and let someone else takeover the liabilities
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