How to Turn Your Company into a Bonsai Business with Jim Shulman

Kathi: Hi everyone, this is Kathi, and as I promised you, I am here with the founder of the Bonsai Business Concept, Jim Shulman, and we're going to talk and show you how to create a bonsai business, because it's the best business in the world, in my opinion. So, how are you doing, Jim?

Jim: I'm doing great, and thank you for the invitation, Kathi. Looking forward to it.

Kathi: Oh, yeah. This is going to be a great conversation. Tell me, how would you define a bonsai business? I know it's something that I aspired toward, and I always have as a serial entrepreneur.

Jim: I'll begin with the description of what a bonsai tree is like. A bonsai only grows to be a foot tall, and it could be a hundred or 200 years old, but everything about it is perfect. Perfect pruning, perfect water, sunlight, fertilizer. And a bonsai business is similar. It's a business that doesn't scale, that doesn't get to be huge, but everything about it is made as perfect as possible. And that is to only have the close associates to the owner who really get the owner and are very effective and efficient and loyal. Only working with ideal clients and getting rid of those who were not ideal. And only working with products and services that are both ethical and offer a high profit margin. So with all of those things done in conjunction and constantly adjusted, much like pruning a bonsai tree, typically within two years, the owner of a small enterprise is going to double their revenues and increase the net percentage of profitability. They're never going to get to be huge, but they're going to get to be the company they'd really like.

It's a business that doesn't scale, that doesn't get to be huge, but everything about it is made as perfect as possible.

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Kathi: Yeah, that's the important thing. We all start companies to live our purpose or to live our passion. But then I think oftentimes we get caught in the minutiae of the day-to-day stuff, and then we think, oh, we have to scale. We have to scale. If we're going to make more money, we have to scale. And I've always been autonomous. People have been trying to get me to scale forever and create staff and have a downline of professional organizers and train them, and I just don't even like that whole idea. So I know I probably could have scaled. I probably could have made more money if I did it that way, but it didn't really resonate with me.

Jim: Well, think about it. There's one other point to consider, Kathi, and the word is control. Because as you scale, by definition you have to give up parts of control to others. And there are some entrepreneurs who are happy to do that. And there are many entrepreneurs who want to maintain very tight control, not only for psychological reasons going back to their adolescence and early adulthood, but also for quality control purposes.

As you scale, by definition you have to give up parts of control to others.

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Kathi: Yeah. That was actually a big concern of mine. If I have people out there in the field being organizers under me, what are they going to say? How are they going to treat clients? It's such a gentle thing that you really have to protect them. I feel very protective of my clients, I guess, is what it comes down to. And I want to make sure that if I was going to have anybody out there, they would be doing the right thing by my client. So you're right. I do have a little bit of control issues, but at the same time, I embrace it. I love being a solopreneur. I love having a support team behind me that supports me. But anyhow, it's so funny that I'm growing a bonsai. Did I tell you this earlier? I started three bonsai seeds eight weeks ago, and from seed, they're still in. You have to plant them, then you have to put them in a bag, and then after they're in a bag for a little while, you have to put them in the refrigerator for six weeks or eight weeks. So next week is going to be the week that I can actually take them out of the refrigerator and give them sunlight. It's called the gestation period or whatever. I love bonsai myself, and I've always wanted to grow them, so I'm finally doing it. But just like a small business, there's that period, right? There's that time when nothing really seems to happen, and that's what's happening with my bonsai as we speak. So I'm living your message here.

Jim: I'm glad you're enjoying the metaphor.

Kathi: Yeah, absolutely. So talk to me about the beginnings. How did you become interested in bonsai businesses? Where did you come from business-wise? Tell me a little bit about your background.

Jim: Well, my background, Kathi, has been in sales. I've been involved in sales now for over 40 years, as, frankly, any entrepreneur is by definition involved in sales.

Kathi: Yeah.

Jim: But I have sold everything from auto restoration equipment to polyester pants. I sold china to college women over the phone. I think I'm personally responsible for the Do Not Call law as a result of that job. I've sold knockoffs of Franklin Mint models back when Franklin Mint was a huge deal, 30 years ago. And for the last 23 years, I've had my own businesses. I started with a marketing services business that did very well, but I hated it. And the reason I hated it was that people were buying the services and masking over underlying problems. For instance, if you have a lousy salesman, they'll blame the product and then the marketing. So, as I described it, I created incredibly good marketing so they could still sell poorly, but now with incredibly good marketing. And I didn't like it, because I wasn't moving the line. What changed it for me is I was standing in the hallway of a major company in the Philadelphia area one Christmas week, seeing an admin push a dumpster down the hallway yelling, "Bring out your marketing materials," because their national marketing and compliance department had changed eight semicolons and two of the bad iStock pictures so they could justify their job for another year. And people were coming out of their offices flinging these unopened packages of marketing materials into a dumpster. And I said, "I'm never going to make dumpster food again for the rest of my career. This is over." And then it was, well, what do I do now? And I realized I love working with the entrepreneurs, where the world thinks it's the pretty brochure with the iStock pictures, and you and I know it's anything but that.

Kathi: Yeah.

Jim: People who had to create their own enterprise, people who had to hire employees, because really, when you hire an employee, it shows you invest in yourself. And that's a huge leap for many entrepreneurs. And it turned out they were all specialists in their fields and had taken years to be able to build a rapport with a clientele and to be able to function effectively. But this is a group of folks who are always looking for the next thing. What am I missing? What can I learn? Where is there another opportunity to grow? And what are the problems that I have by definition, from my being an entrepreneur and the people around me not being entrepreneurs?

Kathi: Yes. Exactly.

Jim: I look at it this way. There are two types of folks, Kathi. There are folks like us. We live on what we sell. And there are people who get a deposit in their bank every two weeks by breathing, as long as they're an employee. And one group is never really going to understand the other, which is fine.

Kathi: Yeah.

Jim: But it goes back to this: it's very lonely when you're the entrepreneur, when the people around you not only probably don't understand you, but many of the people in your immediate orbit are financially dependent upon you. So who are you going to have as an advisor? In other words, are they all people who depend upon you? And what I realized is that I was able to assume a role of trust with clients. As I put it, they paid me a lot of money to tell them to go to hell. And in essence, that's what worked. But getting to the bonsai business, about every five years I will look at my roster of clients and see if there are any commonalities. At one point about 10 years ago, I saw a commonality: every single client had at least one employee. Okay, that was a switch, saying, when I look for clients, I'm going to look specifically for at least one employee. Typically it's between two and five. But about a year and a half ago, I looked through my roster and I said, what's in common that I'm seeing? None of them have scaled. All of them have dramatically increased their revenues. All of them have either kept the same size staff or shrunk it slightly to only the most functional folks.

Kathi: Mm-hmm.

Jim: They all shed clients who were pains, and they all focused on products and services that were exactly what they wanted to offer, that were ethical and profitable, and they were all thriving. So all of a sudden it says, wait a minute. Small, thriving, taking care of very minute things to have controlled growth. This reminds me of a bonsai tree. The light went off.

Kathi: Ah, yeah. I get it. I had a corporation. I had employees. Been there, done that, when we had our publishing, printing and design agency. And you're right that the mindset's not the same for people getting a paycheck versus people that are creating the paycheck. I think that there is such a big gap between them that in this latest iteration of my career, for the past 20 years, I have opted to subcontract. I love to hire professionals to do what I need them to do, and they aren't beholden to me and I'm not beholden to them, and we're just professionals working together. That to me is what really works for me. And I know that there's no one way to do anything, and some people really love having that number one on staff. But I found that settling into that, hiring professionals to do what I don't want to do or what I shouldn't be doing or what I can't do, and they do it very well, is a perfect thing. And creating that symbiotic relationship where it's a win-win.

Jim: You're absolutely right. And the other thing is, if you bring in employees, they have to complement your skills in some way, and that's hard to find. Being an objective observer of who actually would complement you as an owner is extremely difficult.

Kathi: I think that's why they have the DISC test and all the different tests. You can find that perfect employee, but I still think there are a lot of blind spots around who you are as a business owner versus who you need. We'll tend to hire people like us, and those aren't the people we should be hiring anyhow.

Jim: Absolutely not. The other thing I look for, especially with entrepreneurs who are driven, and many people say we're crazy because of who we are, is somebody who understands us. That's the key. A visceral understanding: someone who can put up with us and translate our vision into activity. And a perfect example of that, if you've ever seen the movie The Devil Wears Prada.

Kathi: Mm-hmm.

Jim: Okay. There needs to be a Nigel for every Miranda.

There needs to be a Nigel for every Miranda.

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Kathi: Yes. Absolutely. There needs to be that sidekick that can know what you're saying without your saying it. I'm blessed to have that in my husband, who I consider a business partner as well. He calls it goo-goo. He knows what I'm saying even when I'm not making any sense. It's a good thing. You need someone like that.

Jim: Absolutely.

Kathi: So now you're doing the Bonsai business model and you're helping entrepreneurs do that. If someone's very curious about this, because people listening probably have not even heard this concept, and I think it's a brilliant concept, what advice would you give them as they're leaning into this type of scenario for their own business?

Jim: Number one would be: do they fit the description of that person? Now, very often when people start, they don't think in these terms. This is something that somebody comes to based upon experience, such as yourself, where people were saying, scale your business, you're going to make so much more money, and you recognized through your experience that you didn't want that. So that would be the first point. Meaning, do you see yourself in this position through your current experience?

Kathi: Yeah. Step one.

Jim: And step two would be: what do you want to do with the business? Where do you want to take this? And what is most important to you? And if the answer is control versus scale, if control is more important, that's wonderful. Then it's a question of how do you nurture the business to maintain tight control while helping it to grow. And that requires a hard look at the three areas I mentioned: your support staff, your products and your clientele.

Kathi: Yeah, that's the kicker right there. Those three things.

Jim: Sure.

Kathi: And you need all three to be purring in the background and working harmoniously together, I'm sure.

Jim: And you're constantly readjusting them. You're constantly making minor course corrections. It's a little bit like driving a car from point A to point B. There are the general directions, but then you might have to change course if there's a slow car in front of you and you want to pass. Or if there's a roadblock, you might have to turn onto another road and find a different direction, but ultimately the direction is the same.

Kathi: Yeah, the end goal is the same. I'm a sailor, so it's like tacking versus jibing. When you're against the wind, you make little adjustments with your jibing. You're going to go the opposite way, which could or could not be good, depending. I love that. Is there anything else that we've left off of that scenario, as far as part-and-parcel advice for people who want to look into this?

Jim: Yes. One other thing to consider is that one of the pressures people feel when they're asked to scale their business is, you're going to be able to make so much money when you sell this enterprise. And my response is, there are so many variables about where you might be at that point. Over 70% of all businesses that scale flop. It is surprisingly high. Over 70% flop. And I'll have discussions with my clients saying, if you are taking home a significantly larger amount of money as a result of a bonsai company, you can invest that. You can use various vehicles for investment and so forth. And if you sit down and plan this intelligently, preferably with a financial planner, you may well wind up with more money than you ever would have had in this Valhalla of a scaled business. And for that matter, you might get to that point with the scaled business and the industry changes, there are personnel problems, there are issues with products, and it could torpedo the value. I have two friends who, by the time they were ready to sell their businesses, had both hit major changes within their industries, and they did not make nearly as much as they had expected to make a few years earlier for their exit strategy.

Kathi: Right. Exactly. I've been thinking a lot about legacy lately myself. Do you think it's easier to sell a bonsai business than a larger business, or is it more difficult?

Jim: I'm going to answer, it depends. It depends upon the industry. It depends upon where the market is. What I can say is that many scaled businesses do not necessarily have a very good profit margin, whereas many bonsai businesses have an exceptional profit margin and exceptional revenues relative to size, which is something that buyers look for. If you don't mind, here's a famous example of this. Most people have heard of Desi Arnaz with Lucille Ball in the show I Love Lucy. Well, Desi Arnaz was a brilliant businessman, and he and Lucy bought a movie studio called RKO and turned it into one of the largest television production companies in the United States. It got to be huge, and they had processes, and he was going 24 hours a day, practically, running the studio. And in his memoir he said that at the end of the year he had a profit margin of 3%. And he said, I could have gotten three and a half percent at the savings bank down the street without killing myself.

Kathi: Yeah. Truthism, for sure. And all that work, right? And is it a legacy or is it not a legacy? That's always a question. Did he leave that legacy? I don't know.

Jim: Well, in his case, in the divorce settlement, Lucille Ball got the studio, and then she sold it about seven or eight years later, but it was scaled very differently. And obviously he wanted to do different things with his life other than drive himself crazy running a studio with all of those moving parts.

Kathi: Okay. Well, this is all good information, and good food for thought for myself and my company. So now, looking back, you've had some perspective. Is there something you would have told your teenage self that you know now that you didn't know then? Is there any piece of advice you would give him, looking back on what you've done throughout your career?

Jim: Yes. I would give my younger self the advice: work for yourself, not for somebody else. Number one, you don't play well with others. And number two, eventually, Kathi, almost everybody is fired from a W-2 job. You get to be too old, not pretty enough, not flexible, which is the euphemism for ageism. And you and I both know many people who got to middle age and are now stuck trying to figure out, what am I going to do? They send out a zillion resumes and they get no responses. So my point would have been: beat the rush. Just start an enterprise right now, because you're going to have to at some point.

Kathi: I've been a serial entrepreneur since I was 18, so I get that. And it makes me think of the Great Resignation. God love all you women who have departed and are starting your own thing. I got so excited when I heard about the Great Resignation and all the women that are starting businesses after COVID. More power to you if you're listening and you're one of those people. Kudos to you, because you're now in charge of your life, and now you can create anything you want in your life. That's where it's at. That's why we do what we do, right, Jim?

Jim: The answer is yes. It's what we do. And I also have a recommendation. There's a fellow on YouTube named Joshua Fluke, F-L-U-K-E, who has videos analyzing the dysfunction of companies and how they mistreat employees and how they lie, and who very often does takedowns of major corporate gurus who give lectures. And his point is, you're probably going to be fired. Go for the best deal you can, and don't believe anything the company says.

Kathi: Yep, I'm with you on that. All right, let's stop bashing the corporations and switch gears and talk about organizing. I can't not talk about that. Do you have any favorite organizing hacks, tactics or programs that you live by that support you? And if so, what are they?

Jim: Okay. The first is that the greatest blessing known to mankind's technology is synchronized calendars.

Kathi: Exactly.

Jim: The second is talk-to-text, because it eliminated all the Post-it notes, the scribblings on the back of restaurant receipts, trying to decipher my cuneiform. By talking into my phone and directing it to the right place, I still had the information I needed when it was time to bring it back.

Kathi: I'm with you on that. I just taught one of my clients to do that yesterday, and it's going to save her light-years on taking notes for her corporate job. I love talk-to-text. Thank goodness, because I'm a terrible typist anyhow. So it's quick, it's easy, and generally it knows what you're talking about.

Jim: But when you read it back, you always know what you were talking about.

Kathi: Right. And you can always go in and make a couple of changes if it didn't understand something.

Jim: Yeah, of course.

Kathi: Oh, I love that. No one's ever given that one, Jim. So that's pretty cool. Talk-to-text, that's a big one for sure. So let's see, what else should we talk about? What do you have to say for yourself? Is there anything I should have asked you that you think would be good tidbits and knowledge for the gang that's listening?

Jim: Yes. And the number one thing is: know yourself. Your gut is worth its weight in gold. If somebody is pushing you to do something that does not feel right, stop and consider it carefully, because it might be right for the other person, either in terms of something they're selling or their life experience, but it isn't your life experience. And also, by knowing yourself: are you being reticent or avoiding something without good business reason? That means asking yourself, why is this making me uncomfortable? It could be a logical reason. It could be something that's stuck in your head. That's the reason why I hire three different coaches for myself. First of all, there was a colleague of mine who once said, "Jim, we have to eat our own dog food." Meaning, I have to do what I'm telling other people to do, which is seek outside advice. And the huge advantage of having multiple coaches, just as every professional athlete probably has half a dozen to a dozen for every aspect of their life, is to have an independent, objective sounding board for what's going on with my life and my business.

Your gut is worth its weight in gold.

Kathi: Absolutely. I will second that. So what are your three different coaches? What do they do? What are their modalities?

Jim: Okay. Number one's a business coach. Number two is somebody who is exclusively focused on work-life balance, and that person also looks at avoidance. Are there things that I'm putting off that I shouldn't be putting off? And the third coach is money. Where am I toward my financial goals? And how are we measuring this?

Kathi: So a financial advisor.

Jim: Absolutely. I think everybody needs a financial advisor, frankly, once you have a level of wherewithal that would merit it.

Kathi: Yeah. Absolutely. And in my first book I have a whole chapter about masters hire masters. The most masterful people in the world will hire others to help them see what they can't see, do what they can't do, and guide them in a direction that they hadn't thought of. All the while, I agree with you on listening to your gut, on whether their advice resonates with you internally. We can feel it if we just pause to listen. We can feel if things are good, bad or ugly or fantastic. We can tell if we listen. And sometimes fantastic could be a warning light too, that you're too euphoric or your rose-colored glasses may be masking something.

Jim: When you talked earlier about masters seeking masters, it reminded me of a quote from the French philosopher Voltaire, who said even the Pope has a confessor.

Kathi: Truthism. Yep. Absolutely. We all need that, especially as a bonsai business, because we get in our own way. We can't even see. It's like we were talking about earlier, trying to figure out who we should hire, and we can't see who would complement us, typically because we don't even see who we are half the time. We're blind to all that oftentimes, right?

Jim: And also, entrepreneurs are not personnel managers. They're not HR specialists. It's an entirely different skill set. I can't tell you the number of clients I've had over the years who made major hires based upon a bar-stool conversation, when the person said they were unemployed and my client said, "Boy, I need somebody in my office. What are you doing Monday?"

Entrepreneurs are not personnel managers. They're not HR specialists.

Kathi: Yeah. I always said, when we had all of our employees with the corporation, I'm the worst boss ever. I'm just the worst boss. I have no tolerance for ineptitude. I don't have any tolerance for lackadaisical, and I'm not very nurturing. So I was not a very good boss, and it's better for me to not be a boss. Anyhow, I think as entrepreneurs we all have that. Some are more nurturing than others, but we're out striving for excellence ourselves. So oftentimes, if you're like me, we don't appreciate a level less than that. And back to that point: employees aren't going to give you everything, because they're employees. It's not their company. They're not going to get it. They don't even understand what that means. I remember back in the day, they thought we were making so much money, and all the money was going to the employees, right?

Jim: Right. They don't make payrolls.

Kathi: Yeah, exactly.

Jim: And again, that's another experience. In a sense it reminds me, going back to horticulture, that there are certain trees that thrive incredibly well in polluted urban environments. They're just really hardy. And an entrepreneur needs somebody who can work well with them but doesn't need a ton of nurturing, because they're not in an environment where they're either able or really willing to do that.

Kathi: Yeah, absolutely. Did you study horticulture at all?

Jim: No. I can turn green things brown with amazing speed.

Kathi: That's funny. I asked because I studied horticulture in high school. I ended up going to vocational school just because I was so bored. I knew I was going to go to college, but I popped off to vocational school and studied horticulture for two years, and I think that's why I became enamored with bonsai. But I had no idea it was going to be such a long thing to get a little seedling sprouted. Anyhow, same thing with business. It takes a while to sprout.

Jim: It takes a while. I have given advice to some people in one profession where I said it'll probably be three to five years, but the faster you get to $100,000 in revenue, the faster you're going to get respect.

Kathi: Yeah, absolutely. Okay, well, this is really good. I hope, if you're listening out there and you have any questions, you connect with me or Jim. And I know that Jim has something that he's going to offer that's available to you. So let's talk about that a little bit, Jim.

Jim: Absolutely. I offer a complimentary half-hour conversation for anyone who wants to ask more about the bonsai business. And at the end of that half hour, you'll get my assessment of whether it's for you or whether it's not for you.

Kathi: That's awesome. So all you women out there who started your business and are wondering what to do now, you're into it, right? You're probably at that point where you're trying to figure out scale, not scale, bonsai, scale. So that's a brilliant offer. I really appreciate that.

Jim: Absolutely. And I'll supply you with the direct link for that, so that somebody can easily click and get the information.

Kathi: Yeah, it'll be right below the podcast, gang. Just look on the page, you'll see the link. Click and talk to Jim. You're going to get a wealth of knowledge, and you'll get a real, true response. Jim is authentic and will tell you like it is, baby. So if you really want someone to look at your business as an objective observer, someone who has been around the block and knows exactly what it is to scale and what it is to bonsai, he's your man for that. I really appreciate this conversation. This has been a good one.

Jim: Thank you, Kathi. I've had a wonderful time, and I'm glad you found it worthwhile.

Kathi: Absolutely. Okay, until next time, gang. We will see you then. Happy trails. Have fun with your business.