EFP 75: How To Decide When To Cut Your Losses
There’s something to be said about learning how to give up on something that isn’t working. It’s easy to listen to motivational speeches that encourage you to keep going, but when do you call it a day and cut your losses?
When to Call It Quits and Cut Your Losses
Today we share several stories about times where we had to decide to call it quits and the lessons we learned from our experiences. We talk about the leadup, turning point, confrontation, aftermath, and our final judgment of each event.
This is a really personal episode that took a lot out of both of us. It wasn’t an easy episode to record, so we hope you like it.
Check Out This Week’s Episode Here:
Topics Discussed This Week Include:
- New featured listing in the medical niche pulling in 2.4k/month on autopilot.
- When you cut projects that just aren’t working
- Failed partnerships and the importance of communication.
- Realizing how miserable we were.
- Becoming psychologically tied to something that you associate your business to.
- Finding new opportunities and what works.
- “Don’t get so psychologically tied to something. Be more open to adapting and changing your business.” – Justin – Tweet This!
- “When you get desperate and take a deal out of desperation it’s usually going to wind up badly for you.” – Joe – Tweet This!
Like I said earlier, this was a difficult subject for us. Although we gave our thoughts on when to cut losses, we want to hear your advice too. As always, you can leave us a message on SpeakPipe or comment below.
Speaker 1: Welcome to the Empire Flippers Podcast.
Speaker 2: Are you sick and tired of gurus who have plenty of ideas but are short on substance? Worried that E-book you bought for $17.95, won’t bring you the personal and financial freedom you long for?
Hey, you’re not alone. Join thousands of others in their pursuit of niche profits-
Speaker 1: Without the bullshit.
Speaker 2: Straight from your hosts, Justin and Joe, from Empire Flippers.
Justin Cooke: A Ho, ho, ho, welcome to the Empire Flippers Podcast. Episode 75. Joe is dying right now. I’m your host, Justin Cooke, and I’m here with, Joe, “Hot Money,” Magnotti. We’ve got a great episode lined up for you this week. What’s up, buddy?
Joe Magnotti: Merry Christmas everyone.
Justin Cooke: Yeah, Merry Christmas. Let’s talk about that really quick and the updates, news and information. First thing is, we had our company Christmas party last night, buddy, and it was fab. We had a great time.
Joe Magnotti: Got to wear my new suit, got to give a speech. I feel pretty good.
Justin Cooke: Yeah, we were all dolled up, man. This is the first time I think you got all dolled up ever in Davao.
Joe Magnotti: Yeah. I mean, I don’t think I’ve ever even worn a tie in this town. So, that’s a first for me.
Justin Cooke: I don’t think I’ve ever referred to myself as being, “Dolled up,” Before. It was great, man. So, we had a photo booth, our team had a blast. We did a bunch of games, silly games and stuff. It was really cool, man.
So, it was really great to get everyone together. We had our team there, a bunch of our team there, and they were able to bring family and friends together. It was just a great time. You know, the Christmas party was just fantastic. And, it was our largest, I think, having a company, ever.
Joe Magnotti: Yeah, hey 2013 was a great year. I’m really looking forward to 2014 and having a bigger Christmas party next year.
Justin Cooke: The next thing up is, we had some of our employees, my girlfriend, some friends, do our Christmas gift giving project. They went out and bought all the toys, today. So, my living room right now is entirely filled with huge boxes of toys that will be wrapped over the next few days.
We’re actually doing the Christmas gift giveaway this next Monday. Where, basically we rent out a [inaudible 00:01:53], put on our Santa hats, and we go around to some of the poorer areas of Davao, and hand out Christmas gifts to kids.
So, it’s really fun. I’m really excited we’re able to do that. We’re able to do that because of the limited launch we did with the pre-sell sites that we are creating right now, actually. So, we were able to take a bunch of money from that and apply it to this Christmas gift thing.
I think it’s going to be fantastic. I’m really excited to get this done.
Joe Magnotti: Yeah, I can’t wait for another video this year.
Justin Cooke: Next thing, man. So, here’s the thing, buddy, I want a Christmas gift. I want our listeners to give us an iTunes review, man. We haven’t had an iTunes review in what? Like, three or four weeks, it’s ridiculous.
Joe Magnotti: Yeah, Santa, come on, can you give us an iTunes review, please.
Justin Cooke: One before Christmas, I’ll be so happy, Santa, I’d really appreciate it. Seriously though, if you’re listening to this and you’re digging the shows, I’d appreciate an iTunes review, and you know, thanks.
Joe Magnotti: Yeah, and leave us a speed byte message, we’ll put you on the show.
Justin Cooke: Next point I want to make is, we just launched a new medical site for sale, it’s in the medical niche, and it is earning man. It’s 2.7 thousand dollars a month in net profit. It has mixed monetization sources, and the niche is really solid. The site itself is solid, and it’s a good earner.
So, if you want to check it out, we’ll link to it in the show notes. But, it’s a pretty interesting site if you are in that budget, or you have that budget for this type of site, I think it’s a great one to look at.
Joe Magnotti: Yeah, I mean it’s 95% passive. There’s a minor bit of customer service that needs to be done for the download, the click-bank download, for some people that don’t know how to unzip the file and stuff like that.
But, something you could have some sort of VA do for you or something like that. But, yeah I really like this site a lot.
Justin Cooke: Yeah, the thing is, you have to update the practice exam every year, but that’s already set for 2014. So, the seller is working with the writer to get that practice exam up and running. So, when you take it over, you’ll be ready heading over to 2014, to continue selling away with the practice exam.
Another thing we want to mention is, a little bit about our change in direction. 2014 for us, is going to be big, I think, in the $10,000 to $100,000 site broker range. I mean, that’s really what we’re going to be focusing on.
We think there’s a huge gap there. When you talk about $500,000, million dollar sites, I mean, there’s all kinds of you know, private equity firms, and you know, large brokers that are in that space. But, I think no one’s really owning the $10,000 to $100,000 range. I think with our team, with our expertise, it’s something we could absolutely crush; help buyers and sellers in that space.
I think it would be a big focus for us.
Joe Magnotti: Yeah, and I think, no one’s doing it the way we’re doing it, that’s for sure. There’s a lot of sites out there that are just trying to put a bunch of crap against the wall and see what sticks. But, the way we’re trying to do it with our vetting process, and making sure that we only put good sites on our marketplace. And that value, I think, that, that’s very unique.
Justin Cooke: Anyway, enough about that. Let’s get right into the heart of this weeks episode.
Speaker 1: This is the Empire Flippers Podcast.
Justin Cooke: So, the heart of this week’s episode is all about how to decide when to cut your losses. I was going through the list of potential podcasts episodes, and reviewing them. And, some of them are much more, I think straight forward. And, basically us explaining some of the things we do in our business, or outsourcing, whatever.
But, I really like this one because you know, it’s easy to say things like, “Don’t quit.” Right? “Keep going.” You know, “It’s darkest before the dawn.” You know, “You’re only an inch away from your goal. If you quit now, you’ll never achieve it kind of stuff.”
And that’s all positive and motivational. But, it’s not always true, right? I mean, there are some projects that you should quit. In fact, you should probably quit them early. So, I was going over this with Vincent, our apprentice.
When I mentioned this one he was like, “Yeah, what are the answers to that?”
Joe Magnotti: Yeah, you know what? I always loved that cliché, “It’s darkest before it’s dawn.” Because, it’s not darkest before it’s dawn. It’s darkest when it’s like in the middle of the night, you know?
Justin Cooke: Yeah, I know-
Joe Magnotti: How do you know when it is the middle of the … in business, how do you know when you should just walk away from a project? A partner? And that’s what we’re going to get into today, right?
Justin Cooke: Yeah, I really wish there was an, “Easy,” Button for this one. But, unfortunately, there are no easy answers. There’s no blueprint you can follow to absolutely determine when you should cut your losses on a project, on a person, on a thing. It’s really kind of, “You’ve got to feel your way through it.”
So, what we’re going to go through is, give some personal examples of times where we should’ve cut our losses, we should’ve cut them earlier. We did cut our losses. And, kind of, hopefully be able to get something out of this. And, be able to internalize this, look at your own business, and see what you should’ve cut, or what you should cut now.
Joe Magnotti: Yeah, and I would say, take this with a grain of salt. And, make sure you still are trying, you’re still doing your best, and don’t give up on those things. But, if you do see some similarities in the stories that we’re about to tell you, then maybe it is time to reconsider.
Justin Cooke: Let’s bit I’d say, some of these stories are pretty personal, buddy. So yeah, it’ll be interesting. All right, man so our first one is, cutting our business partner out of the business. It’s a rough one. So, we have five kind of … you know, we’re going to lead you through this.
The first thing is, the lead up. I think the thing that was happening between me, you, and our old business partner, is we were playing the, “Who can work less game?”
Joe Magnotti: The race to the bottom.
Justin Cooke: Yeah, so we were all getting paid the same on the business. I think the business was declining at that point. And, we were all getting paid the same. And, we started to realize that our third partner was just not really as involved in the business.
He didn’t bring as much to the table. And, he wasn’t even fulfilling the roles that we had laid our for him. So, and I think, yeah, we didn’t address this very well when it first started happening. I’m not exactly sure why. It might’ve been the personal dynamics game in the play. But, we didn’t really address it all that well.
Joe Magnotti: We should be clear, this is the third partner that we had in our mortgage business back in 2005.
Justin Cooke: Yeah, no third partner at Empire Flippers. No way, man, not happening. So, the turning point I think, was the fact that he just wasn’t showing up, right? He just wasn’t showing up. He wasn’t getting any work done.
In fact, to be more clear and blunt about it, he was sleeping all day.
Joe Magnotti: Yeah, this is just crazy to me. Like, that’s I think what drove me over the edge.
Justin Cooke: Insane, basically.
Joe Magnotti: Yes.
Justin Cooke: I remember you lamenting to me … we were I don’t know, driving somewhere in the car and you were like, “I can’t believe. This is ridiculous, dude. The guy’s sleeping all day. He gets up at night, kind of does his own thing, and is not involved in our business. He’s just not involved.”
Joe Magnotti: Yeah, I mean, when you have to give a certain portion of money over to a guy that’s doing that, it’s sickening.
Justin Cooke: You were pissed. You were like, “Well, I don’t want to do anything. I feel like I don’t want to do anything either.” And, we were discussing this, kind of. We were discussing this a bit at least. But, he was kind of out of the loop.
You know, we started to talk to him. So, it became an issue where we were discussing it a bit, and he just wasn’t catching on. So, it actually came to, “Well we’ll call the confrontation point.” And, I think Joe, this was pretty rough, man.
It was literally me, you, our friend that was close, Dave, and our ex-business partner; and we sat down in the family room to discuss … it was like an intervention.
Joe Magnotti: Yeah, I don’t know if you guys have ever seen that show, Intervention. But, it was very much like that.
Justin Cooke: So, we sat down and we said, “Look, we are extremely frustrated with how this is going.” And it was probably a two hour conversation, and a lot of you know, trying not to attack and being defensive. And, trying to figure out if there was a way forward.
It was just … it got pretty ugly, honestly. God, it got ugly. I’m looking at you right now, I remember it.
Joe Magnotti: It did, it brings back such bad memories. I mean, we’ve come a long way, baby. So, we’re over that. But, the amazing thing to me was, that he wasn’t able to take the truth from the people that were closest to him, and he was just willing to walk away.
Justin Cooke: Yeah, I think … we really tried to put him in a position where he wouldn’t be defensive. But, it’s hard and here’s the weird thing about business too, right? Is, it does get personal, it just does, man. Especially, when things are not working out, right? When things are struggling or whatever, it is absolutely personal.
So, trying to keep personal issues aside, you can try. But, when the going gets rough, man, you can’t do it. It’s just … it’s not possible. So, you know, these are really personal for us.
Kind of the aftermath of this is that, our business partner left the next day. We had him sign away his shares. He agreed, he was out, he didn’t want anything to do with us.
Joe Magnotti: How do you jump … he got a bus ticket and he just went up north, and that was it, right?
Justin Cooke: Yeah, he was just out. I mean, he gave up the ownership. We had him sign out. You and I were just … we were left drained, right? We felt done, just done. It was a really stressful time. I think you and I both took a break from talking to each other, and doing much business at all.
We were so frustrated-
Joe Magnotti: Yeah, I think emotionally, it just took too much out of us. So, we needed some time off. You know, we probably needed to pull ourselves back together before we took on the next challenge.
Justin Cooke: Yeah, and so, we’re going to get into that a bit. But, I think our final judgment on this one is that, you know, what we could’ve done better is, we should’ve communicated with him earlier on in the process.
Joe Magnotti: Yeah, and you and I should’ve positively communicated and said, “You know what? How can you and I bring the company forward and get rid of him? How can we fix the solution instead of having that race to the bottom?”
Justin Cooke: At the very end. Yeah, but earlier on we should’ve been like, “How can we get rid of him?” I don’t think so.
Joe Magnotti: Maybe not, “How can we get rid of him,” That’s bad [crosstalk 00:10:57]-
Justin Cooke: Like, “How do we make him better? How can we make sure that we’re all on the same page?”
Joe Magnotti: Yeah, “How do we fix it?” Instead of saying, “How do we get out?”
Justin Cooke: Well, because you see what had happened I think, is that we were just bitching to each other.
Joe Magnotti: Yeah.
Justin Cooke: We weren’t actually solving the problem. I think it was just … it was difficult to talk to. And that’s the problem with partnerships and poor communication is that, it leads to these things. It festers, like a zit. It pops, it’s horrible.
So, if we would’ve discussed it earlier on, I think we might’ve been able to avoid it, potentially. But, either way, that should’ve happened.
Joe Magnotti: Discussed it in a positive light, exactly.
Justin Cooke: So, your point, we were talking about this before the show, is that we probably should’ve put some protections in place.
Joe Magnotti: Yeah, I think if I ever would enter into a partner agreement again, or a joint venture agreement again; I would try to put stuff on paper. Whether it was some sort of exit clause, or some sort of-
Justin Cooke: Outage. If you want out, you can get out. And, at the time … and maybe it’s even every 12 months, you kind of revisit it. But, over time you determine, “Okay, either partner can get out. This is how they get out. This is the path that they take.”
Joe Magnotti: Yeah, I think that, that’s very true. And, I think that having a system in place, spells out their responsibilities. They really need to know the goals that they need to be able to meet.
Justin Cooke: Yeah, I’m not sure I’m on board with you, with that. I mean, I think that’s a … we were talking about this and you were saying, “Well if someone just doesn’t show up for five days …” Well, let’s just say right now if you went on vacation and I take that clause, and I say, “Okay, well you’re gone. You’re out of the business, buddy. I’m taking it all over.” We’re 50/50 partners on this, right? That wouldn’t be cool with you, I’m sure, right?
Joe Magnotti: No, and if your using clauses against your business partner, there’s probably something wrong there to begin with. There’s probably … that the relationship is sick in some way, anyway. But, I’m just saying that there has to be laid out responsibilities, and then set penalties if you don’t meet those responsibilities.
Justin Cooke: So let me do this, let me play devil’s advocate with you for a bit. It’s kind of like a prenuptial agreement or something-
Joe Magnotti: Right, mm-hmm (affirmative)-
Justin Cooke: … is what you’re saying. It’s a prenup in place. Doesn’t that hurt the love a little bit? Like, if you head into the business thing, “Okay, when things go shitty, we’re going to have this. I’m going to be able to take you out this way.” I mean, isn’t that a little aggressive when you’re starting off a business. Who actually sets that up?
Joe Magnotti: I mean, I think you should. I think you should just hope for the best and plan for the worst. This way, if things do go awry, there is an equitable sort of agreement that you came to, before those things happened. Before negative emotions got involved.
You can turn back to that paperwork and say, “Look, this is what we came up with beforehand, and this is what we agreed to.”
Justin Cooke: “This is the situation right now.” I agree that having some kind of out or exit clause, or exitability is important. I think it should lean towards like, only in a disastrous situation does that come up.
I don’t think it’s based on, “Oh, man you didn’t get payroll-“
Joe Magnotti: [crosstalk 00:13:51]-
Justin Cooke: “… Out in time. You’re out buddy. 50%’s mine now, I get the whole …”
Joe Magnotti: It wouldn’t be anything like that. It would have to be a long drawn out process that they would be able to unwind if they came back, no problem-
Justin Cooke: Yeah, yeah, yeah-
Joe Magnotti: But they have to start … be hit with penalties, you know?
Justin Cooke: God, see man, this is why this is so tough. Because, there is no for sure, or blue print for this. But, let’s move on to the next one. So, the second one we want to talk about is, giving up our mortgage company. Basically, letting it die.
So, at this point, we had let our partner go, basically, our third partner. You and I were on a mission. We still had deals going from the agents that we had on board. We were still closing those. But, it was much less than it was in months previous.
So, you and I started to look around for opportunities where we could join other mortgage companies that were bigger, that’d be able to weather the coming storm in the mortgage industry, and we could attach our wagon to, and help them grow.
Joe Magnotti: Yeah, this is late 2005. So the lead up here is, we’ve gotten rid of the sick partner. We’ve taken a little break, however long it was. And, we’ve decided to go ahead and hitch our wagon, like you said, to some sort of successful mortgage operation-
Justin Cooke: More established business, right?
Joe Magnotti: And that has the operations done for us, and we’re going to provide the sales, right?
Justin Cooke: Yeah, so we were going to bring in loan officers, have them close the deals, and that kind of thing. So, we actually went around to a bunch of different mortgage companies and I think it was one of the first times that I’d been kind of denied. Like, for job opportunities. It rarely … I would always kind of get what I wanted when it came to that.
We got denied. We weren’t getting what we wanted out of this. That was kind of a sign that what we were looking for, seemed a little off.
Joe Magnotti: Yeah, I think we expected to be paid. We expected to come in there and say, “Look, we have some experience, you have a call center, or a sales center that’s not working so well. Let us lead the sales center and you pay us some sort of minimal salary.” But, no one wanted to do that. Everyone said, “Commission only, commission only, commission only.”
Justin Cooke: Yeah, so what we ultimately ended up doing is, hitching our wagon to another mortgage company. It was fairly far away so we were driving there everyday, running … we had a piece of the office that we were running loan officers out of.
But, there was a bit of a turning point. So, we had a book of business, basically. A bunch of loans in the pipeline. And, then we started adding some potential new mortgage deals. The problem was is that, there were no value in homes anymore, right? The LTV wasn’t there. Home prices started dropping, people were mortgaged to the hilt, and there was no value there.
So, people were not able to get the loans they wanted, the deals were not going through, and you and I were eating into our savings, right? We were sucking up our savings that we’d built up in previous months and-
Joe Magnotti: Yeah, because commission only and if you don’t have any income, your savings goes out the window.
Justin Cooke: We were paying for staff, we were paying for leads, and we were paying for everything out this point. So, we were handing out money, hand over fist. That started to get pretty painful. And, I think that kind of the confrontation, we were just horrible. We were miserable.
We were miserable to each other. We were just so unhappy. It was a rough period, for sure-
Joe Magnotti: It was. Yeah, so I would real confrontation, the absolute apex of this confrontation; I remember, we were driving home from the call center one day and you were in your car, and your car broke down on the side of the road.
Justin Cooke: We were so miserable. It was late at night or something. It was like, 7:30 or 8:00 at night. We just threw our hands up in despair.
Joe Magnotti: I don’t think we even had the money for the tow truck. We were like, “How are we going to get home-”
Justin Cooke: It was just … we were just screwed. We were screwed, man. Oh, God that was painful.
Joe Magnotti: We were talking before the show, if I could back and meet those guys on the side of the road [crosstalk 00:17:34]-
Justin Cooke: “Son, it’ll be okay.”
Joe Magnotti: Only in seven years, it’ll be okay.
Justin Cooke: Yeah, so that was rough. Shortly after that, the aftermath was that you know, we dug through our savings, we were broke. I had to go get a job, right?
Joe Magnotti: You had a bit more cash still in the bank. [inaudible 00:17:52] poker.
Justin Cooke: Yeah, you were trying to make some money … just poker. You were squeaking out a living doing that. That was just … it was miserable. We figured, we were never going to have a business again. That was our shot at business … or, we might but, we didn’t want to.
Joe Magnotti: Yeah, I was like, “I’m not a successful entrepreneur-“
Justin Cooke: Done-
Joe Magnotti: “… I don’t know how to run a business.”
Justin Cooke: Yeah, I just didn’t want to worry about everything you have to worry about as an entrepreneur. I mean, you have to wear so many hats. I was just like, “I want to go work and own my little piece of the pie and make that pie grow.” But you know, “I don’t want to own the whole thing.” I needed a break.
The final judgment, buddy … I still think it was a good idea to shop around for companies and explore options there. It wasn’t fruitful, but I think it was a good move. I think you’re probably right in that, when we didn’t find anything that was probably a good match for what we were looking for; that should’ve been a good sign that we should end it.
Joe Magnotti: Yeah, I mean looking back, the commission only thing was the deal breaker. Maybe the couple of weeks that we spent meeting with mortgage companies, and running through the possible options, wasn’t really a waste of time, and what could it have cost us, two weeks?
Justin Cooke: Yeah, I think that was a good idea. But, taking a bad deal was a bad idea.
Joe Magnotti: Yeah.
Justin Cooke: And, we were at a position at that point where we were … we had a book of business, but we knew that, that was dwindling. So, I think we were too desperate. So, we put ourselves in a desperate situation where-
Joe Magnotti: And that’s what I was going to say, desperation. If the one thing our listeners could take out of this little story is, when you get desperate like that, and you take a deal out of desperation, especially since [inaudible 00:19:25] sort of, commission only, desperation. It’s usually going to wind up very badly for you, don’t do it.
Justin Cooke: Yeah, we’ve done … since then, we’ve done some sales positions that are commission only. I don’t think they’ve ever really turned out well. I think the problem is, is that as an entrepreneur, business owner, whatever; you know, you’re thinking, “Oh, this is a great deal. Only if it works out, will I have to pay out. Only if they’re making me more money, will I have to pay out.”
I think that kind of attitude draws in the desperate. That kind of offer draws in desperate people. And, those desperate people aren’t going to make it work anyway. They’re clinging onto hope. I know commission only works on much higher level, when you’re doing very high level B to B stuff. But I just don’t think it works much in the entrepreneurial community.
I think you need to invest in your people. You need to put them in a safer position. It’s kind of like our apprentice position, right? We put them in a position where, you know, their stuff’s paid for, all their bills are paid for, they get some cash. It is a safe place to be.
We were talking to another entrepreneur here in Davao who was talking about taking on an apprentice. His idea was to pay more cash, but not to have him set up with a place to live, and internet, and furniture and all that. Like, make him go find that.
But, can you imagine how difficult that would be. Like, you get on the ground in Davao. Now you’ve got to find an apartment, you’ve got to make sure your Internet’s set up, you’ve got to do all these things.
So, I guess getting back to the point, the point is, you need to invest in your people. You need to make sure that they’re in a safe place. Anyone that will take a deal otherwise, is probably in a desperate position.
Joe Magnotti: Yeah, I love that analogy and I really think that, that’s bringing it home.
Justin Cooke: So, third point I want to talk about is, letting go of our first office in the Philippines. I’ll start with a lead up to this. So, we lost our first major client at the end of 2010. Heading towards the end of 2010.
Joe Magnotti: Yeah, I think it was like, November of 2010.
Justin Cooke: October, maybe it was the very end or something like that. This is pretty close to when we started the niche site stuff, I think in December. And, that’s basically how we got started. But, we lost this client, and we ended up having this office that was heavily empty.
We had this big office and a bunch of the desks weren’t being used. Definitely not being used on all the shifts that we had available. And, there were times where we’d go in there and it just seemed pretty empty, right?
Joe Magnotti: Yeah, and we should paint the picture here. This was an office that was on the southern side of Davao. And, Davao is a very large city in terms of land mass. And, we had employees from all over the city. So, travel time to this very southern tip could be a bit of an issue.
Justin Cooke: Yeah, so that’s kind of the turning point. Is that, we originally said, “Okay, we’re going to replace them with other clients. We’re going to give it a few months, kind of see how it’s going.” Employees were kind of complaining about their travel time to work, the expenses they were paying.
We were looking around saying, “We have a more than half empty office, we were losing money on the deal.” Why even bother having the office open? It just felt like-
Joe Magnotti: Yeah, it was a lot of overhead. I mean, you had an office, you had an electricity bill, you had internet bills.
Justin Cooke: It seemed silly like, “Why are we paying all this?” So, we started to realize that. We said, “Okay, let’s just give it some time because we’re probably going to get some other outsourcing clients. This niche site stuff … whatever, who cares? You know, if they can just pay for their salaries, that’s great.” But we’ll really replace them with outsourcing clients.
A few months goes by and I remember the confrontation between you and I was pretty clear in my mind. We were on the balcony of the office. And, having a pretty heated argument or discussion, right? We were you know, kind of yelling at each other about what we were going to do. What we’re going to do with the office, why we’re going to keep it open. “Are we going … how are we going to do this?”
I remember feeling psychologically, that if we shut the office down, it’s like shutting our business down. It felt like that to me. I think you were arguing that it’s not the same. But, I just thought you were full of shit.
I remember I was like, “You know what? He’s full … no, no, he’s crazy. We share this office, now we’re basically just quitting and giving up.” So, that was painful to me, and I finally went along with it. I think the reason I did was like, you forced my hand. You said, “Well, I’m not going to do anything with it. So, do you want to be in that position where it just dies?” Or something. It was really, really rough.
Joe Magnotti: Yeah, well I mean, from an accounting perspective, I think it just didn’t make sense to keep the office anymore. I didn’t want to have to force your hand. But, I felt like if we didn’t, that the coming expenses of an empty office would crush us.
So, looking back on it, I think it did work out.
Justin Cooke: So yeah, it was stressful. We ended up closing down the office, taking everyone out. The aftermath was basically, us sending the computers home with employees, giving them additional cash to pay for their own internet, and then everyone’s going to work from home.
The plan was to open up another office, and that we were going to close it down temporarily. This would be six months or something. Then, find another office and move people in there. We felt honestly, I felt relived after shutting down the office.
So it was a burden, a stress, right? It was added stress that I don’t think we really needed. And, our employees ultimately were happier being able to work from home. Not having to come into the office all the time. They were stoked about it.
Joe Magnotti: Yeah, we got more efficient employees. We got better work done. People were willing to work longer hours working from home. So I mean, that really worked out for us. We almost lost a major outsourcing prospect that was unhappy to hear that we closed our office.
But, once I told him, “Hey, we’ll open another office just for you.” He jumped on the deal, and he’s been one of our long standing outsourcing customers.
Justin Cooke: Yeah, so I mean, ultimately, you know, final judgment on this. I think we were three months, maybe late, possible. Like, we kept the office open, hoping to pick up new outsourcing deals to kind of replace people we’d lost, and kind of fill the office up. To make it in a position to where it made sense.
We could’ve probably shut it down earlier. I’m not sure that would’ve been a good idea, maybe? But I think it was worth taking a shot, to see if we could’ve gotten more outsourcing … I think we pretty close to being right on in our timing here.
Joe Magnotti: Yeah, I think the lesson learned here though is, don’t get to a point at which overhead forces you to close stuff. You know what I mean? Try to cut stuff off before that-
Justin Cooke: Make a decision-
Joe Magnotti: Yes.
Justin Cooke: I think the learning part for me on this, was don’t get so psychologically tied to something, that you feel like, “Oh, this is my business.” So, if you’re stuck thinking, “Oh, if I lose this then, what do I have?” Or, “It’s not real anymore.” That’s probably crap. I mean, be more open to adapting and changing your business. Understand that, that’s going to happen.
It’s funny, because our business after that was just fine. I mean, our clients stayed, everyone was good, our employees were happier. It’s just funny that, that was really a psychological barrier for me to cross.
The fourth one we’re going to talk about is much more recent actually. It’s our decision to no longer chase outsourcing opportunities. The lead up to this, Joe and I were realizing that we’d had quite a few fruitless emails. There were a lot of calls we were on, there were dinners we had, there were meetings we had.
Joe Magnotti: I mean, there were travel expenses. I’ve actually flown to other cities in the Philippines-
Justin Cooke: [crosstalk 00:26:43], Manila, to meet up with people. And, we would get a small deal here, and we lost a little deal over here. But, it was just not really worth it. And, you realized too that … the turning point kind of is, us realizing that high margin is better than low margin. We hated it.
You didn’t really like shopping for the outsourcing deals. But, I think it’s funny, because it’s a reverse situation that, it was more psychological for you. You thought … at one point you had the dream in your head, “We’re just going to land 100 [inaudible 00:27:15] deal, and we’re going to make a bunch of money, and we’ll just crush it.
But I think you know, we didn’t really have the opportunity to really land that deal. And, it’s like winning the lottery, it’s like a lottery ticket. From my perspective, but I kind of let you run with it because I wanted to see what happened.
You, overtime started thinking it wasn’t so great.
Joe Magnotti: Yeah, I mean I don’t think it’s as bad as a lottery ticket. But, I understand where you’re coming from. The sales cycle is just so tough on the outsourcing side these days. That, I just gave up, I just couldn’t do it anymore.
You know, if I talked to another guy where, I have to figure out his process, I have to develop the relationship. Then I find out he doesn’t really have the money at the end of the day, and I spend all this time, effort, energy. I mean, it seems like a lot of followup for something that may or may not work out.
Justin Cooke: Yeah, and I think the confrontation in this situation was, you were just done. You were done with it. So, you brought it to me and you said, “Look, buddy. I think I’m done with the outsourcing.” And I said, “Great, that’s cool.” So we went through it, to make sure that it was a good decision for us to make.
We spent a little time, I think a week or two thinking about it, talking about it, and then decided to shut it down. That was it, it wasn’t this big kind of blow out thing. It was just like, I felt like I was kind of waiting for you to come to that conclusion, and you did.
The aftermath, I think for both of us, and this has been pretty recent, this was in you know, the second half of 2013; the fact that there was less pressure, right? There was less pressure on us to meet with all these potential customers, and outsourcing customers. There was definitely more focus available for us, on Empire Flippers.
So, we were able to focus on the side of our business that we’re really driving. And, there wasn’t this kind of nagging distraction that kept pulling us back to the outsourcing [crosstalk 00:28:57]-
Joe Magnotti: Yeah, I mean, every time we get an email that somebody wants to sell or wants to set up a four person office, or you know, wants two VA’s, we know where to push those leads now. And we know what to say, “Thank you very much, but we just don’t do that anymore.” And it feels nice to say no. It feels nice to go back to what I feel is our main business, which is Empire Flippers.
Justin Cooke: Yeah, it’s funny too, so we talk about final judgment on this. I think it’s still a little too new to tell. In fact, you know we were talking last night about it a little bit. You were saying, “What if an outsourcing current client that brings more deals?” Or, “How do we balance our focus there? What if a new deal kind of popped in our laps?”
So, it’s obviously still really new for us. But, I think the lack of focus on, Empire Flippers, led to some opportunities missed or lost … I’m sorry the focus on the outsourcing, led to some opportunities lost on the, Empire Flippers side in 2013. I think the kind of, splitting up our focus on things that weren’t really our growth areas wasn’t good.
I think … I’m actually feeling a bit bad about letting it carry on. Maybe I could’ve said you know, could’ve argued the point that outsourcing is just no good. Instead, I just kind of was like, “Well, it’s Joe’s baby, I’ll let him run with it.” Maybe I should’ve been more persuasive in how that’s not our future.
Joe Magnotti: Yeah, it’s always a hard thing to do, right? But, you know, I think the one thing about the focus, that’s another advantage we didn’t talk about. Is that, it becomes very easy for people to recommend us. They no longer recommend us as an outsourcing company. They only recommend us as a marketplace or as a product and services area if you want to build sites.
Those are the only two things we do-
Justin Cooke: Yeah, you’re building, buying, or selling sites, Empire Flippers are the guys you go to. I think yeah, I think that’s a very clear mission. Very clear directive, and anything else is distraction.
I’ve got to say, Joe, as we move up the value chain, and hopefully continue to do so. You start to realize that, it’s distractions that kill you. Its not any particular piece of the business going away or anything like that. It’s the lack of focus that keeps you from achieving what you could.
Joe Magnotti: Yeah, because you can only do so much, right? And you have to take advantage of that time that you have. If that time you have is laser focused on the biggest opportunities, then of course, you’re going to be more successful.
Now, early on, don’t make this mistake and early on in your business, be so laser focused that you miss up awesome opportunities that may come on board. So, I think we talked about this before that, maybe a shotgun approach early on, finding out what works and then [crosstalk 00:31:35]-
Justin Cooke: But niche sites and stuff, once you get a winner, you double down, triple down on that one. So, that’s when you become laser focused. As soon as you find something that’s winning. Something that comes to mind for me is, the Derek Sivers approach. You know, “Hell yes, or no.” Right? If you are not fired up about it, if you don’t see a ton of opportunity, and really want to go for it. Or, if it’s outside of your core, don’t bother.
We still struggle with that. We still chase after things that are probably not core. That maybe we’re not, “Hell yes,” About. But I think we have to tighten that up through 2014 as we continue on with our business.
Anyway, enough about that. I hope you loved the episode. Let’s move right into our tips, tricks, and plans for the future.
Speaker 1: You’re listening to the, Empire Flippers Podcast with Justin and Joe.
Justin Cooke: All right, so our tip for the week is actually, Awesome Screenshot. It’s a chrome plug-in that allows you to take scrolling screenshots of the entire page. We had a need for this the other day and Mark was telling both Vincent and I about it.
I’d used one previously, but I must have removed it or something. It’s just nice to have something that, when you have a really long page you want to take screen shots, a really full image of the entire page, it’s great.
Joe Magnotti: Yeah, there are a lot of screen shot plug-ins out there. And, this one is one of the better ones. I really like this one as well. I mean, I use Skitch for modifying and editing. But, it doesn’t have the scrolling feature. If you want to get the whole page, you can’t do that with Skitch.
Which, seems like a really bad limitation. I don’t know when they’re going to fix that. But-
Justin Cooke: Yeah, or something … what do we use it for? I think when we take screen shots for a listing or something we’re going to put in the marketplace. And, we want to make sure we have all the information, best way to do that is something that takes pictures of the scrolling.
So, check it out. Awesome screen shots, it’s a Chrome plug-in, you definitely won’t be disappointed.
Well, that’s it for episode 75, the Empire Flippers podcast. Thanks for hanging with us. Hope you have a fantastic Christmas, and you can check us out at Twitter, @EmpireFlippers. And, give us a shout.
Joe Magnotti: Bye, bye everybody.
Speaker 1: You’ve been listening to the Empire Flippers Podcast with, Justin and Joe. Be sure to hit up EmpireFlippers.com for more. That’s EmpireFlippers.com.
Speaker 2: Thanks for listening.
Photo Credit: Freddie Alequin- Flickr
Great podcasts guys , i’m listening to all of ’em , some of which I’m listening them on repeat!
Love this show, you guys are great and make more podcasts, like weekly .I would love to listen to em!
From Romania with respect 🙂
Awesome, David…glad you’re digging the show!
Great podcast … we learn from your mistakes … also i just downloaded the “Awesome Screenshot: Capture and Annotate” Chrome plugin! thanks … Great suggestion. Merry Christmas … looking forward to a great new year!
Happy New Year to you as well! Hope you like the plugin…I’ve been using it quite a bit over the last few weeks!