In this episode, David C. Baker—dubbed “The Expert’s Expert” by The NY Times—gives top entrepreneurial tips on repositioning your business to pinpoint and solve bottlenecks for your key target audience.
A renowned author and advisor to entrepreneurial creatives worldwide, David has now coached over 500 firms and written five books—including his latest bestseller, The Business of Expertise: How Entrepreneurial Experts Convert Insight to Impact + Wealth. A charismatic and much-loved speaker, David has given keynotes in over 30 countries and co-hosts 2Bobs—the most listened-to podcast in the creative service field.
In this episode we discuss:
Host: Josh Fonger
osh: 00:01-00:35 Welcome to the Work the System podcast, where we help entrepreneurs make more and work less using systems. And I’m your host, Josh Fonger. And today we have a special guest, we have David Baker. David is an author, speaker and advisor to entrepreneurial creatives worldwide. He has written five books, advised 500 plus firms and keynote conferences in over 30 countries. His work has been featured in The New York Times, where he was referred to as the expert. He co-hosts the most listened to podcasts and the creative services field to Bob. Alright David, welcome to the show.
David: 00:36-00:44 Thank you. What an interesting way to start to help people make more money and work less. Have you ever met somebody who hates that notion?
Josh: 00:45-00:49 That’s pretty broad. It’s pretty broad appeal. Yes, though. But the way to do it, that is the trick. Right?
David: 00:50-00:51 Yeah, right.
Josh: 00:52-01:02 Well, David, why don’t you tell us your backstory? How did you become, you know, write all these books and be allies for countries? Keynoting? What’s your history?
David: 01:03-02:33 So I grew up overseas, actually, my parents were medical missionaries, oddly enough, so I grew up with them in a tribe of mine Indians. Way up in the highlands of Guatemala, we didn’t have electricity or running water. And I came to the US to live for the first time when I was 18. It was quite a cultural shock. Finished school and grad school. And then halfway through a five year grad school program. I was taking a self-assessment and thinking to myself, you know what, this kind of bores me, I’m not that interested in what I’m studying to be. And so I went ahead and finished the program, but decided to take things in a different direction for myself. So I did something that a lot of people do, they have this entrepreneurial seizure, as Michael Gerber would say, and then started a business and discovered it wasn’t quite as easy as I thought it would be. I did that for six years, and it was just an ad agency in northern Indiana. And then through a strange set of circumstances, I began to advise my peers, so the other people who own creative firms. And so, that took over my life really quickly. So for the last 26 or so years, next month, I guess it is, I’ve been doing that. So I speak and write and advise principles of creative digital marketing firms, and it’s been a fantastic life. I’m so grateful for the opportunities that I’ve had. So that’s a thumbnail story of how I got here.
Josh: 02:34-02:55 So, that’s quite a story. What an amazing start to 18 years with my Indians. That’s, wow, that’s unique. Let’s get it probably give you a very different perspective. Let me ask you so. So with that, you know, first 18 years as formative years, has that given you some kind of unique edge or perspective on life or business that people just can’t get otherwise?
David: 02:56-04:08 Oh, yeah, I’m so glad you asked that question because it’s had such a formative influence on me thinking about, I’ll frequently hear, I’ll hear advice that comes around in the developed world and especially in the US and I’ll immediately think, does that apply to all the world? Or just to us? In other words, are we assuming that the whole world is like, here’s an example of that, you should do what you love, and then success will follow. And you it’s like a bumper sticker in our world. And I just don’t think it’s true. There’s a lot of people who simply don’t have the right or the ability to do just what they love. They’re doing what they need to do to exist. And so I don’t know from that it’s led to some deeper gratitude for the opportunities that I do have, because as it turns out, I am doing what I’m loving, but I don’t feel like that’s a right. I feel like it’s just something that’s a part of my life. And I’m grateful for it. Just thinking about opportunity and poverty and health and happiness and how those are not wound up together. It’s had a huge impact on me for sure.
Josh: 04:09-04:12 Well, yeah, I think that’s a great, a great point. And, you know, since I do work with a lot of consultants, and coaches, sometimes they do have this belief that if they love it, that it’s going to make them money. You shouldn’t necessarily value your passions, actually, you should try to be I guess you need to, you need to bring value. It would be a better way to put it if you’re bringing value to someone, and the ability to pay for it. And that that would make more sense maybe then.
David: 04:13-04:57 Yeah, it just doesn’t fit on a bumper sticker. That’s why it doesn’t work. Right? But I think you’re exactly right. You know, how many people love biking decide they’re gonna start to open up a bike shop, and then they discover, oh my God, I’m here 10-12 hours a day, seven days a week? And I don’t have time to ride bikes anymore. What, who’s decided this was a good idea, right?
Josh: 04:58-05:26 You’re, I think you’re you’ve already been, you’re listening to my brain. I’ve got a bike, a biker client, just like that. He’s in a bike shop. And now he’s like, how do I get rid of this thing? Let me ask you about your book, I’m holding your newest book in my hands right now. Very well done. And I’m excited to dig into it, I just started opening it as a business of expertise. Wise. Tell us a bit about the inspiration to write this book and what it shares.
David: 05:27-07:02 Yeah, I really blew that just to be honest with you, I sat down to work on this book. And I’d already outlined it. So I’ve gotten to the fun part, which is the writing of it. And I’m at our cabin, and I’m writing away, I’m about a week and a half into it. And the intent was to write a big reference volume about how to do this, how to be an expert from beginning to end. And I was just boring myself, and I just couldn’t even imagine how somebody reading it would have felt. So I decided to take a different perspective and just shorten it way down to about a third of the original length that I had planned. And turn it into more of a manifesto, arguing for the role of experts in our lives and how the world has changed, especially in the last two decades. So that experts can have that opportunity to not only make a difference for people, their clients, but also earn a really decent living for themselves. And so it’s a, it’s really a defense of expertise. And then once you buy that argument, that expertise is good. It talks about how to develop that position, how to act like an expert, how to make money from it, how to avoid some of the traps that we make when we think about how to narrow our expertise, because we make a lot of those mistakes. So that’s really what, how the book developed and was shaped. And in the end, I was really happy that I kind of had to give myself a dope, slap and take it in a different direction.
Josh: 07:03-07:57 Well, this is a really important book for a lot of my clients, because they have certain expertise, and a lot of times they feel like they’re spreading themselves too wide too thin. And I know you’ve got a big background in digital marketing companies and advertising companies. So I will ask you about that because I have clients where they’ve grown through their clients’ needs. So the client might come to them for let’s just say, Facebook ads, but then the client will say, can I also get something on YouTube? And by the way, I’d like some content. And by the way, you know, can you write a sales page and you know, and they say yes, and they grow and they expand and then all of a sudden they have kind of built themselves a monster and so becoming an expert, how do you go from if you’re like that situation? What kind of advice would you get?
David: 07:58-10:29 Yes, so you start by often saying YES to a lot of things and that’s how you learn till you stretch yourself. It’s how you experiment with different areas in the marketplace. But if that’s as far as it goes, then you end up being defined by your makeup as an expert is defined by whatever people are asking your help with. And many of them are asking for your help, because they trust you not because they necessarily believe that you can do great work, they just don’t want to go find another expert. So there’s nothing to lose, ask you to expand your expertise and help them. And that’s a natural part of this process. But at some point, you do have to flip that switch, and begin to say NO to all of the opportunities that are to most of the opportunities that you have, and start to dig much deeper so that you can distance yourself from the other experts in that field by seeing those patterns and monetizing that. But a simpler way to think about this is, is a situation where you use your example, you have a client, you have a good relationship with them, they asked you to do something else for them. And you think why not? This is a chance for me to make more money. But the question that you have to ask yourself is, will the rest of my clients also want to buy this same service for me, because as you add service offerings to your menu, as an expert, you should only be adding those things that most of your clients will want to buy from you most of the time. And, this is the asterisk, and for which they’re willing to pay a price premium. It’s not that difficult to stay busy as an expert, what’s much more difficult is to be able to charge a slight price premium, because your offerings are really unique from others, not just the offering itself, but the combination of offerings. And too many times we’re afraid we approach those decisions by just with a background of fear that we’re afraid that at some point, the spigot of opportunity will turn off, and will no longer have enough work. And then we’ll be so sorry that we said no to those that’re approaching it not from an abundance mentality, but more from a mentality of fear. And that’s not what experts do. Experts are really good at defining and telling people what they are not good at. That’s the mark of a great expert.
Josh: 10:30-10:38 I like that I’m gonna actually write that down myself. What are you not good at? And start to remove these things.
David: 10:39-10:47 So if you’re not sure, just ask, ask somebody that’s important in your life, like a significant other, they’ll be able to tell you what you’re not good at. Right?
Josh: 10:48-11:11 So with the expertise, as an expert, do you think it’s more important to be an expert at a certain technique or service offering or an expert at handling a certain type of clientele? Or do you need to, I mean, do you need to be an expert at a few different variables and then line them all up together to have a superpower?
David: 11:12-12:40 Well, and the way you answer that question will actually change over time as your expertise deepens, and as the world around you changes, so you have to keep asking yourself that question every three to five years, typically. But at any given point, you want to orient how you answer that question around either vertical or horizontal expertise. So vertical expertise is defined by industry. So my expertise is defined around serving a particular vertical niche. Other expertise definitions revolve around horizontal expertise. So that would be defined by either a demographic, so let’s say I want to work with young people, or old people, or maybe it’s Latinos, that would be a demographic or a particular service offering. So I want to help anybody who starts a business and once they get it up and running, then I’ll leave them on their own, and I will go help somebody else who’s starting a business or who’s willing, who’s wanting to sell their business, that would be a horizontal positioning. And there are real advantages and disadvantages to either one of those choices. So you have to evaluate what makes the most sense for you, for instance, it’s much easier to find your clients, if you have vertical positioning, it’s there’s a lot more variety in your client base if you have a horizontal positioning, so you just think about what’s your personal makeup and what makes the most sense for you.
Josh: 12:41-13:43 Well, then help me out. Okay, so everyone who is not one of my employees doesn’t listen. But for just you and me. We have this company called Work the System, right? And so we have this demographic, and I talked a little bit about it as we got on the phone, which is if you are a business owner, and you’re doing the work yourself and so you can’t take long vacations, because you’re stuck in the business, right? And you want to move to being a true business owner where you’re actually overseeing it, and managing it and actually scaling it. So it’s not, you’re not the bottleneck anymore. So that’s right. I would say as a horizontal, because we’ve got clients. We get clients, whether they’re in Singapore, or Australia, or Eastern Europe, or wherever they are, US. And so that’s across the board. And we have this issue where we have podcasters and achier pyramids and people who own sheep farms, every single vertical under the sun, right? And so, is this a bad approach? Or do you think this is one that can work?
David: 13:44-14:50 Oh, it can definitely work. And most people in your shoes would, out of the gate would prefer a horizontal positioning like you have. And the reason is, because it offers so much variety, it’s so interesting to learn the inside of all these different kinds of businesses, right. And that’s, while that’s true, if you, you have to make sure that you can get over that primary hurdle of horizontal positioning. And that’s Can you find your clients, and if you can find them, then a horizontal positioning is fantastic, because it offers so many other opportunities. For one, you don’t have to have what’s called a conflict strategy. In other words, your clients are not usually going to be competing against each other. So you’re free to take on almost any client, which isn’t true for verticals. Another advantage is you’re a little bit more immune to an economic downturn, because your clients are from so many different industries. So, it’s not a recipe for failure at all. As long as you can find enough clients and find enough opportunity, then horizontal positioning is a great choice.
Josh:14:51-16:02 Okay, but you brought some of the initial concerns when we first started our business was, gosh, you know, we’ve worked with two insurance salespeople to work on insurance companies, or wait, now we’ve worked with four different realtors, we did realtors, and it was like, well, maybe we’ll just stay in this horizontal. And I think we’ve kind of gotten over the, you know, over the hump there. But that is very interesting. So in what cases, would you advise somebody to do the opposite, I’ll give you a little scenario. So I have a client who is a digital marketer, and he had kind of worked with everybody. But then all of a sudden, he got a client who does semi-truck repairs, semi-truck mechanics, if you can believe that. And then that person told five of his friends who also were semi-truck mechanics, and now he has 40 clients. They’re all semi-truck mechanics. Now he’s a keynote speaker for semi-truck mechanics. And now all of his clients are on this one vertical. And it’s great. But then it’s also a concern, right? What if they all of a sudden don’t like him anymore? And he’s like, well, oh, my experiences in one place, make sure to diversify, or should you just stay in one vertical?
David: 16:03-18:03 He should stay in one vertical without hesitation. I can say that. And the fact that he has such a large audience and he knows so much about that space, even if there were a downturn, the downturn is likely just to knock out his competitors, and kick their legs out from under them and he’ll still be left standing. So you do have to be one of the top two or three in your space just to protect yourself against something happening in your particular vertical. But that is a beautiful positioning that one of the, this is what I’m going to say next, probably sounds crazy to you, but a positioning like that bores me to death? Right? And that is actually the hallmark of a fantastic positioning is that it bores most everybody else to death. And that, that’s great. It’s fantastic. Because it’s an exercise in irrelevancy. The more irrelevant you are to most of the possible clients, then the more relevant you are to a very small subset, who are just hanging on every word because you know the world so much. So that’s fantastic. And what, what I could add here is that he’s going to take advantage of some of the advantages of vertical positioning. I talked about the advantages of horizontally with your business with him. One of those primary advantages is that the water coolers are all the same. It’s just my phrase for that, but they read the same publication s, they listen to the same Sirius XM channel, they read the same blogs, the word spreads very easily. The second huge advantage there is that when you lose, when you lose a client in a particular vertical, they’re likely to take another job in the same vertical and you pick up a new client that way so organic growth is much easier with vertical positioning. So both of you have made really great choices, but for very different reasons.
Josh: 18:04-18:17 That’s very interesting. So. But if someone’s kind of in the middle there kind of a quagmire you don’t want to be in is that? Is that a case for you? May we ever choose both? Or it’s always a combination, I suppose.
David: 18:18-19:20 Well, sometimes you do choose both. So using you as an example, you may years down the road, you may discover, you’re at a companywide meeting with all your team and you say, you know what, we have noticed that we are getting so much better traction and results with x. And you might say, Okay, let’s slowly pivot, Work the System to work with just x because we’ve had such opportunities there. And there is plenty of opportunity out there for us. Or you might create a sub brand that says work the system for this particular vertical. So when somebody chooses a horizontal and a vertical, or to use your truck friend, it might be diesel mechanics, just on Cummins, or just on Detroit, diesel, or just on Ford or something like that, then that’s considered even tighter, actually. And you have I just picture it as a bullseye. So you’re combining a vertical and a horizontal? And in that case, you’re just unstoppable. Nobody can knock you out, really?
Josh: 19:21-19:30 So what advantages come with kind of getting this bullseye higher or as close as you can? You know, what, what do you get for doing that?
David: 19:31-20:19 Two things primarily, one is that you’re going to make more money, your expertise is more highly valued. But I think the other one, the second one is more important. And that’s, that you will be in a position to be so much more effective for your clients. So when I have a conversation with a prospect, that’s right in my sweet spot, they frequently tell me that they feel like I have a camera in their office and say I know their world so well. I’m sure you experienced the same thing you can. In fact, I was reading through what makes an ideal client for you for Work the System, and I was just struck at how, how well you know, your prospective client, and that, that’s the primary benefit of focus is just how much more effective you can be because you understand your client’s world so much more carefully.
Josh: 20:20-20:26 So it’s not just purely selfish, you want to get this bullseye just so you can be more effective.
David: 20:27-20:38 And then there are other benefits, too. I mean, it’s so much easier to market to them, find new clients and all that stuff. But yeah, the two primary ones are greater effectiveness and making more money for yourself.
Josh: 20:39-20:54 So are there any tests you can take to prove yourself that you’re making the right choice? Because this is a difficult choice for people to cut away some of their business? And like, are there any kind of? I don’t know, is there anything I should do to help them make this choice?
David: 20:55-22:46 Yes, there is actually. And it is terrifying the notion of sink, closing off some doors is particularly terrifying to Americans, because we live and live in the land of opportunity, right? So we have a pretty particularly unique view of, of how we want just boundless opportunity around us. Yeah, there are. So when you think about positioning, there are a bunch of tests, but the first one that you always start at is the size of your addressable market and the size of your competitive space. So in the professional services, space, and this would be a little bit different for your listeners who aren’t in this space, but you’re looking for a position where you can find at least 10 competitors. So if you can’t find 10, firms that are doing what you’re proposing to do, then you’re either too new to this, or you haven’t defined it carefully enough, because the odds of creating something new are really, really low. So you want to do something where there’s proven expertise, proven opportunity. And then you don’t want more than about 200 competitors in that space. And then in terms of the number of prospects, you’re looking for somewhere between 2,000 and 10,000 prospects, because it’s the studies that I’ve done show that you can safely assume that you will lock up about 1% of the marketplace. So if there are 2,000 potential clients for your positioning, you can safely assume that you’ll have 20 concurrent relationships going on at any given point sometime somewhere between 20 and 100 current client relationships so that’s what you’re aiming for. And that’s the first test you’d apply as you think about positioning.
Josh: 22:47-22:51 Like that, so it’s not just following your feelings you actually do need to do a little research in the numbers. Oh?
David: 22:52-22:54 Yeah. What a surprise right?
Josh: 22:55-23:13 It’s funny how that works. Well, so far. In no way because of your international experience here. What is there that works really well in the US? That doesn’t work well, in other countries? I mean, and maybe why is that?
David: 23:14-24:42 Yeah, probably the biggest difference would be the assumption of sophisticated markets. So in the US, if you are not generally busy, you may not be making a lot of money, but you’re making enough to make it and you’re generally busy. If that isn’t true, then chances are, you’re just somewhat incompetent. This is why I don’t have much of a career as a motivational speaker, you can tell. But there’s just opportunity falling off the trucks in this marketplace. You step out of this marketplace to say Canada or Australia, or parts of Europe, and it’s a lot more work to be an entrepreneur, there’s more regulation, there’s less of an addressable marketplace. Financing is more difficult. Costs are higher. So it’s quite a challenge. So you have to understand these different marketplaces. And then you go one step further. And you think about developing countries, say Colombia, or Chile or you know, there’s examples all over East Asia as well. And it’s even more of a challenge. So it’s important to understand, I’ve worked in 30 different countries and visited 44 of them, and, and I have to really adapt what I’m doing to my expectations around performance and how much opportunity there is. Yeah, it’s very different.
Josh: 24:43-25:14 Yeah, that is, that is definitely worth considering. So the markets are, yeah, all those barriers to entry. Competition is different. But supply and demand, I suppose still equals out. So I, Amanda, times going fast. I wanted to make sure I get this question in before we wrap up. What’s one thing that I mean, because you’ve written a lot of books, a lot of things you could share about what’s one thing I didn’t ask you about, but I probably should have?
David: 25:15-26:06 Ah, it’s maybe how, what are some of the most difficult decisions that I think entrepreneurs make? And I think saying no, is one of the most difficult decisions and it doesn’t fit with what we think about, about growth. And I’d say the other one, if I could have a Part A and Part B answer to this is just to rethink growth. I’m, almost everybody around me, worships growth and thinks that it’s the holy-grail to achieve. I don’t think that I think it’s quite possible to have a business that has a flat top line and a flat bottom line that is still a fantastic business. And that puts me in a very small minority of business counselors, but I think we’re in love with growth for the wrong reasons. So I’m a little bit nervous about it.
Josh: 26:07-26:16 Well, okay, I need to peel this back a little bit. Those are great. Two great points. So how can I learn to say no better?
David: 26:17-26:45 The safest way is to give themselves a lot more opportunities so that there’s not as much risk in wasting some of it. And once they get practiced at wasting opportunity, they’ll fall in love with that. And they’ll always size their capacity to be under what their opportunity is. So the best size of your firm is such that you’re small enough that you can still say no to things. That’s the key, I think.
Josh: 26:46-27:30 Like that. My phraseology always starts with no. So as an entrepreneur, everything that comes to you, the first instinct is no. And then you have to reassess your business, your strategy and your time then, if there’s something you’re doing at this new opportunity, it’s going to replace its better than you say yes, but otherwise kind of start with the boundary. Otherwise you can burn yourself up. What about this? This flat is okay, because I have clients who are perfectly content, you know, just having more efficiency and more time, but they don’t necessarily feel like they need the growth. What? I mean, is there something different in the psychology of an entrepreneur who wants to be flat and happy as opposed to growing and have heart attack?
David: 27:31-28:48 Yeah, because the biggest change that happens in your life as a business owner, if you’re committed to growth is that your own personal role must change. So you must do less and manage slash lead more. And if that doesn’t come easy to you, then growth is a huge mistake, because you’ll avoid the things that the larger business requires of you. And everybody around you is going to slowly become less and less happy. So, I think it’s really we should frame the decision about growth around what the owner personally wants to do. If you’d like to be involved on the front lines, don’t add people. If you like to manage and lead and you’re good at it, then add people as long as you’re not taking too much financial risk. But don’t feel like you’ve got to grow in order to be relevant in our world. There’s this message, you know, like the E5000. What is it about? It’s about how much you’ve grown year over year. Nevermind, you’re wearing people out by hiring them too fast and not managing them well, and incurring all kinds of debt to fund the growth. And it’s like, it’s what are we doing here? This is ridiculous. Growth is not bad. Nor is it good. It’s just neutral. It’s whatever fits for whatever you need in your business.
Josh: 28:49-29:30 Yeah, I really like that. That’s a really great concept, though. A chiropractor client of mine years ago, he wrote a strategy and that his strategy was such that this company was never going to grow more than like, $100,000 a year like that, that was going to be it. And it would be capped out, right? He probably never got to the million multi-million dollar mark ever. And he’s like, oh, that’s great. That’s, that’s just what I want. I want a business where I can help people the way I like to help them. And that’s it. And I was like, oh, how freeing how, but a great concept of life, because he was gonna help people the way he’d like to keep it simple. And he was a great businessman, actually very efficient. So.
David: 29:31-29:32 I think it’s great.
Josh: 29:33-29:46 All right. Well, this has been very helpful. Hopefully, those of you listening, I really enjoy what David’s had to share with us today. David, where can people find out more about your business, and we’re gonna be speaking next.
David: 29:47-30:13 Sure. So most of your listeners probably wouldn’t be a good candidate for what I do. But if you want to learn kind of what I do for a living, it’s David C. Baker dot com. And then if they want to know more about the book, it’s at expertise dot I-S or expertise.is and download free samples and so on. Some people want to sign up for the free weekly email, there’s no selling at all. It’s just an inside article every week and love to have you aboard.
Josh: 30:14-30:58 Great. But David, again, thank you for sharing your wisdom. And all this time research that you put in this is very helpful. I’ve got a page of notes for myself. So thanks for that. And everyone, stay tuned. Next week, we’re gonna have another great guest like David. He’s going to share with you how to improve your business so you can make more and work less. And if you want a copy of Sam Carpenter’s best-selling book, Work the System, make sure to go to Work the System dot com you can download the PDF for free. And if you want a free copy mailed to your house, leave us review. Now wherever you’re watching this or seeing this listening to this, leave us review, take a screenshot and email it to info at work the system dot com and we will be drawing one name out of a hat week, and you could be the lucky winner. Alright, thanks again everybody.
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