Episode Transcript
[00:00:00] Speaker A: Welcome to the Independence by Design podcast, where we discuss what it means to be a business owner and ways to get unstuck from the day to day so we can design a business that gives us a life of independence.
So, John, when I was on your podcast, I think you said, brother from another mother.
[00:00:17] Speaker B: Yep.
[00:00:18] Speaker A: That's how you started it.
Man, what a journey you've had.
You've been able to articulate it in a book, which is awesome.
Yet I've had a couple different journeys.
You know, I thought a lot about, like, where do we start? And maybe, like, I wanted to get your thoughts of, like, the ownership red pill is what I call it, where you're like, oh, there's this whole, like, other game that's being played that I think a lot of owner operators like us, when we start out, we didn't realize that there was a whole nother set of rules that was going on.
What was your, like, experience of, like, when that veil got like your, like, oh, there's this whole, like, valuation, capital allocation, this whole other idea on top of the business. Like, where did that happen for you?
[00:01:07] Speaker B: Yeah, well, you know, it happened, I'd say, multiple times throughout my entrepreneurial journey. Right back in 2000, was part of a venture capital funded dot com startup that had $25 million of venture funding. I was like, hey, go spend. Go open up offices. Go do this. And then next thing you know, it's like, stop. We got no money.
The next 50 million rounds not coming right? And it's like, oh, my gosh, like, what is going on all the way through, you know, rebuilding a company and going through 2008 recession and realizing, oh, okay, money doesn't grow on trees and we got to start making some cuts or we're not going to survive. And what's going on here? But that small business entrepreneurial spirit all the way up until 2018, when I'm sitting in a boardroom after building a company for 15 years.
It was my vision, it was the love of my life, the team of my dreams, the culture of my dreams. Grew it to $55 million in global revenue and got fired from my own company.
And I was like, whoa.
And that was probably the moment where I was like, all right, I've been playing this Kumbaya. I'm an entrepreneur growing this business. This is fun to.
Oh, boy, there's some vultures out here. And I wasn't playing to protect myself. I was playing to play and grow and just have fun and realize that there's a. There's A darker world out there.
[00:02:38] Speaker A: What was your experience? Like, I. I think about it where, like, Because I've had my brushes with, like, pure malice, and I don't know if it was, like, pure malice or like, where, like, they're, like, the power dynamics become very apparent.
And, like, when I. Because I have a similar. Like, with my experience of feeling like the rug was pulled out from underneath me, where, like, there's this game that you're working towards, but then you're like, oh. Like, I learned, like, oh, the power dynamics are not what I thought they were.
Like, what was that experience for you? Like, when you had your business and all of a sudden someone else has got control over it and, like, you don't.
[00:03:15] Speaker B: I'm a pretty introspective guy. I think I've learned that over years.
And I don't believe, even though many of my peers and family and friends, people that love me would say that there was malice, I would. I look back and go, how did I put myself in that position?
I was dealing with people that didn't really care that we had a great culture and a great company and great things. They just were looking at the spreadsheet going, wait a minute, we can do this better.
And we're here to make a return on capital for our investors.
You look back and go, okay, well, how did I put myself in that position? And so I spent a lot of time, Ryan, in that moment, thinking through as the CEO of that business were the things and steps leading up to the moment where I actually even had to go get investment capital, or I didn't protect myself in the legal documents, or maybe I thought I was invincible.
They need me. This is my company and my vision. And so maybe I had this level of arrogance that just wasn't fair to really be truthful.
And those moments were pretty interesting for me in the aftermath to just have that level of vulnerability, introspection, to realize what I should have done differently. And that for me, where did you land it?
[00:04:43] Speaker A: Was it all a bunch of little teeny things?
And here. Here's the reason it's interesting that you said it wasn't malice, because, like, what I have learned is, like, as I've learned this game and, like, the very deep intricacies of it, there's very.
It's not a high probability of times that it's malice. You're like, people are doing evil on purpose. It's usually just a crazy. A bunch of incentives that are just getting pushed and smashed, whether it's boards or different people with Boards and different proxy votes or different, like, you know, timelines of capital and return and all that just kind of like won't. And the next thing you know, we're like on a train that we didn't necessarily want to be on.
Every so often, there are people that use that, like the jargon to their advantage to do evil on purpose. And I don't think it's a huge chunk of the. I mean, does that. Does that kind of resonate with you as far. How do you feel about that mapping of.
[00:05:37] Speaker B: No, that resonates. You know, show me the.
The incentive and I'll show you the outcome is. Is something that's said a lot. And, you know, I think that. I don't think people invested in our company and looked at me and said, let's screw, John.
I think their incentives and what they were trying to achieve was misaligned. So misaligned values, misaligned incentives, combined with my vulnerability and. And not protecting myself in the areas or protecting the company areas, I probably should have led to this. Right. So I'm sure it's been. I'm sure it's happened before where I've maybe terminated an employee and they think I did it with malice. I didn't do it with malice. I just, like my incentives of where I was trying to grow my company didn't align to their performance.
But I'm sure that they hate my guts now. Right. And they think that I'm a bad person because of it. And so do I. You know, do I have some resentment towards those individuals? Absolutely.
But I also have to look back and go, okay, what were the lessons I learned? Because if I'm not going to take anything from this, the lessons from this big failure to go pick myself back up the payment and figure this out when it was all for nothing. And so that was really important.
[00:06:42] Speaker A: What were some of the themes that you learned? Like with the introspection.
[00:06:46] Speaker B: Yeah. Well, I'll give it to you this way. So you mentioned earlier I wrote a book, so I wrote a book called the $100,000,000 Journey, just for disclosure that the title has changed to the 100 million spelt out, dollar spelled out journey spelled out, because I just got in the trademark dispute or copyright dispute with Alex Hormozi.
[00:07:08] Speaker A: At least you didn't label the $100 million offer.
[00:07:10] Speaker B: Yeah, that's a different story. Although my book came out before his. But that's a different. Different story for another day. But in my book, I talk about the seven principles of entrepreneurial success and they were really my, you know, of those seven principles, six of them were massive learnings from this thing. So I'll just, I'll run through them quickly and you can go wherever you want to go. Yep. Principle one is protect your equity at all costs.
You know, I had started the company with a couple friends. I said, hey, why don't we just split this a third, A third, a third. Even though I was potentially funding a little bit of capital or I had the vision, you know, I, we brought people on later on, hey, you take 10%, I keep going. At the time I got fired, I owned like 8% of the company right after bringing investors in and everything in, like my equity was going the wrong way. I could have, I could have grown a $10 million company and owned 100% of it and been a lot better than trying to grow a hundred million dollar company. 8%, you know. So protect your equity at all costs. Which also means principle two, you gotta build your own cashflow for growth.
If you don't build a cash machine that is the oxygen for fueling your growth, you're gonna go to banks or worse, investors to go get capital to grow, which then violates Principle 1. You dilute your equity, you dilute your equity and your equity value. So you gotta build a cash machine that can fuel your growth and know how fast your company can afford to grow based on the cash flow it's generating.
Principle three is reinvest smartly.
So we were doing a little shiny object, we were growing really quickly and we say, hey, you know what, this is great, let's go do this now. And we'd go invest in a new business line that would suck up all of our cash and then we would have to go get investors, bring out more cash to do something else. And that violated our cash flow, that which violated our equity.
Principle four is build the culture of intrapreneurship. I think this is something we did really, really well. But I felt, I see it's critical to growing an enterprise. You got to build a company and a team that wants to run this business and treats this business as if it's their own.
Principle five is protect the house.
We as business owners sometimes don't really spend the time to look at all of our vulnerabilities.
And it's like a game of whack a mole. If you don't have this in the legal document or that in a legal document, whatever, you haven't, you know, popped down, it's going to pop back up and you got to Be really careful. And there's a lot of situations there where I just didn't protect myself and the company from those measures.
And then principle six is how to access owner's liquidity. You know, for 15 years we grew this company and other than a salary, I didn't really take much out of it. And then next thing you know, it's gone.
You know, I was trying to keep the comp. The money in the business to keep growing. And I wasn't really smart with how to. How to enjoy the fruits of my labor for 15 years while I was doing it. And then principle seven is how do you move from CEO to chairperson? How do you put yourself in a position where you have a business asset and not a job?
And so those are my seven learnings I talk about in the book. We can go wherever you want with those. But, you know, within those, I applied those principles to another business and successfully grew it to north of a hundred million dollars the right way since 2018. And that to me is kind of like the proof and concept.
[00:10:15] Speaker A: What was your process of like filtering through all of the lessons and how did you land on these seven? Like, like, what did you say? Like, how did you end up saying no to certain things and saying yes to these seven?
[00:10:28] Speaker B: Yeah, there's a deeper point there, right? What do you do in the aftermath of such a large failure?
That was tough, right? To wake up the next morning and realize you don't have access to your email anymore, you don't have access to your calendar anymore. And my personal email and work email were the same thing because this was my company. I started growing the same. Same thing. So I kind of lost that. I lost some, some relationships with it. Cause I was now an il dispute with private equity firms. I couldn't talk to my best friends in the business.
It was pretty dark time.
Decided to take some time for myself. Started journaling. I had never journaled before. Started journaling.
I think I started finding a lot of this introspection of learnings in my journaling, which I thought was kind of cool not never having journaled before. As I started journaling, okay, what am I going to write about? I'd write about where I effed up, where I should have done something different. And I. And, and so that started crystallizing a pattern for me. Well, if I hadn't done this, then we'd have more like, why do I have to go get investors? Why didn't. We couldn't fuel this ourselves. And so it started crystallizing all those ideas and then I started walking back to others that I know that either experience failure or success in business and interviewed them, and I started saying, okay, well, what did you learn? And as I started getting them all together, I realized that the companies that I interviewed that had grown to 100 million and plus successfully applied all of these principles.
And some of the ones I found that didn't, they missed on a couple of these, and they were drastic failures, mine included. And so then I took those principles, I said, okay, well, if this is true, it should work, and applied them to a company I was involved in that I'm now the majority owner of today and was able to apply those, like, just discipline of applying them to get my proof and concept. Okay, this must work, because it. When I didn't apply them, it failed. When it did, it worked.
And that's kind of my logic.
[00:12:30] Speaker A: Well, I mean, it's a. It's a sandbox for testing, right? I mean, with your podcast, with all the other things that you're doing, I mean, it's like, I very much resonate with you, John, because, like, all this stuff that I do, like, man, I just. I beat my head against the wall longer than everybody else, I guess, just to, like, come up with these universal principles. And that's why, like, as I look at some of your stuff, too, it's like anybody that, like, anybody that searches for the truth long enough will end up there and maybe different ways of wording it, but, like, it's not like my idea or like, you me, becomes a universal truth that I think is interesting to kind of like it. It brings me joy to have other people say that this is something that you've learned, too, with all of that experience. He's like, okay, well, there's something here that is above us as a truth.
What was some of the.
When you're reflecting, like what. Like, how did you balance not being hard on yourself? The resentment, the emotions that are associated with that, the regret? I mean, how did you process that?
[00:13:34] Speaker B: Gratitude.
Right.
I had a bad, you know, that. That sucked.
But I had my health, I had my family, I had my kids, I had my home. I, you know, think about people that don't have it so good today. I mean, as we speak now, there are people dying in hospitals. There are kids that are sick. There's, you know, we have to live in gratitude for what we have and have perspective.
So I think perspective and gratitude were huge things for me. Okay, this is bad, but, like, you know, pick yourself back up here. Like, let's go you know, don't let this define you was kind of a big piece for me as well. And one of my mentors, you know, said to me in that moment, like, you can be the Steve Jobs. Like, don't let this, you know, like, kind of.
So, like, just that motivation of, hey, this is not going to define me, but I also got to make sure this was worth it if I'm going to pay the price here and take my learnings and take my chops. So then that turned into motivation. That turned into, okay, I need to go kick some ass. Like, what am I going to learn from this? And. And. And pick myself back up and. And keep in mind, I also had. When that happened, my two boys were 10 and 12.
Right. So they're looking up at. At Daddy, wondering, okay, how's this going to happen? Whether consciously or not, like, how's this going to work?
And so I felt a lot of not. Pressure is not the right word, because it wasn't pressure. It was kind of like, okay, I got to make, like, lemonade out of these lemons here. That's. That's what I gotta get from this.
Otherwise, it's all for nothing.
[00:15:10] Speaker A: Isn't it so interesting, because, like, when I have gone through these different phases, like, the platitudes that get thrown around on all these motivational cards and stuff like that, like, it almost seems like to me, like, when, like, you know, at church, where, like, there's that one message that just resonates with, like, you know, a good chunk of the audience, you know, where, like, they start bawling. But then it's like, oh, like, that message wasn't for me at that moment or whatever it is. Like, it just kind of hits. You were like all these platitudes that you're saying. Like, it's like kind of like, duh. But then, like, being in the middle of the.
[00:15:39] Speaker B: Yeah.
[00:15:40] Speaker A: You're like, what's my choices right now? Be horribly angry and resentful or, like, through it. And gratitude is. I. It's. I love that because we have. I just love it.
[00:15:54] Speaker B: Yeah. You know, I will say the one area that. That still hurts today of any.
[00:16:00] Speaker A: Yeah, what's that?
[00:16:01] Speaker B: Um, it's that I didn't realize at the time my responsibility and protecting all those that worked with us and that moral obligation we have as a CEO, as an entrepreneur, to protect our business, to protect our people, that if you don't make the right decisions or handle your business with that care that it needs to sustain itself, the business could go under it could, you know, lose its customers. It could bring in investors and have that happen. And two and a half years after I left the business, Covid came and the company was in such disarray, culturally a mess.
Many of our best people left the business after I had left and the company basically went into bankruptcy.
This is a thriving business. Two and a half years earlier, best culture ever. And all of those people who had the best thing ever in 2018, when we were growing that company together, we all kind of lost something we had built together.
And that sense of responsibility I go back to in my, in my principles and learnings. What if I had done this differently? What if I had grown a little slower? What if I had kept the oxygen, the cash in our business to invest ourselves and not bring in these investors? We would have survived Covid, and there's no question about it in our industry.
And we probably still exist today, and it'll probably be my pride and joy today. But the moral obligation we have is something I still carry a little bit, that it disrupted a lot of lives and I was responsible at the top. We are responsible to make those decisions, to protect our companies and our people.
[00:17:49] Speaker A: On that line of thinking. One of the biggest challenges I have seen, the community that the IBD community deal with just coming off of the summit is like, so once people see, and I don't mean to make it all about the financials, because the financials just provide us, I believe, the view into the trade offs. It doesn't, it's not all about the financials. It's just like the trade offs become real.
The biggest challenge that I've seen, John, is like explaining to people you have to pay yourself first. And it's one of your principles. And so my definition of that is if we have a five year forecast and all three financial statements connected together, we can see in the cash flow statement, ownership distributions after working capital debt and taxes and the whole income statement, right? So like that bottom part, which is the ownership distributions and in relationship to our five year evaluation, that's the only way we can see like what those constraints. And I see that like our community is such like they're so grounded in servant leadership for all of the reasons that you just said, like, I mean like everything. I mean I feel like that what you just said could have been repeated by everybody in the community.
But then they're the ones that if they, you know, when they come to us, it's like, okay, well, they're just so sick and tired of giving their whole Life financially and their energy and their family and that What I see is like it's almost impossible to pull someone out of that nosedive emotionally with their energy and like, but like, what happens? I watched this revi. Revital, revitalization, if that's the right road of like once someone like I was on this call and this client was able to see like, well, that 30 grand a month, she's like, but then I still have to pay tax. Like, no, that's total distributions and you're all in. You're totally fine. So treating themselves like the bank will then allow them to keep pushing forward like you just said. So it's kind of like there's a lot tied into that. I'm curious on some of your comments there.
[00:19:51] Speaker B: Yeah, you know, it's, it's one of those, you talk about it, I think you call it the, the owner operator trap.
[00:19:58] Speaker A: Right.
[00:19:59] Speaker B: One of the things in the trap, I don't know if this is exactly what your model talks about with ibd, but in that owner operator trap, it's like, well, I want to grow. Okay, well, growth takes cash.
And so I'm either going to use the cash the business is generating to grow, or I'm going to go to the bank and put personal guarantees on to grow or I'm going to go get investors to grow. All three of those options kind of suck.
And the reality is people think, well, I need to like a lot of entrepreneurs, we need to grow. Like it's part of our, says my
[00:20:33] Speaker A: CEO peer group that I'm in and the 5,000 or whatever, the arbitrary, you know, trophies that we're putting up.
[00:20:40] Speaker B: If we're not growing, we're dying. Like we gotta grow. And people don't understand that growth takes cash. You can grow yourself poor.
You can absolutely grow yourself to a hundred million dollar company and make less money at a hundred million than you would attend. Right. Like it absolutely is possible and it consumes all of your cash flow.
And so one of the things that really was an awakening for me was how could I pay myself in a tax efficient manner that also wasn't taking the, the oxygen out of the business so quickly so the business could also grow. But also I was also paying myself first and there's some really cool ways to do that that you learn over time on how to do that strategically. One of those ways is just pay yourself first. Right. Idea, which is you just take 10% and you put it in a different account every month.
[00:21:28] Speaker A: Yeah, it's like the whole Mike McAllen
[00:21:29] Speaker B: use it for your payables first. Right, Right. Yeah. You don't use it for you. You realize, hey, and you put that away and put that away. And no one comes from time for profit distributions or tax distributions. You got a little nest egg over here and a bucket and it's already reserved for. And you know, we have a philosophy with my current partners, we do that still today. Every week money's going into this account and it's like break. You know, we don't take money out back into the business unless it's like, you know, in case of emergency, break glass kind of situation. Right. It's kind of like it's a one way street. It's gone this way.
And then when things get tight in the business, it's like we'll hit AR go like, why is our AR here? What's going on with APs? Like, we got too much inventory.
And it creates this financial discipline where you can actually pay yourself first. And when you do it in tax efficient manners that are good for you, good for the business, then it really helps pay everything first. But to what I just said earlier, I'd grown businesses for 15 to 20 years and I took a salary, but I never took money out because I had to put the money back in because I wanted to grow and growth was so important to me. And now I've flipped my message. I do want to grow, yes. And I don't want to grow over leverage and I don't want to grow by losing equity and bringing investors in. But I also want to pay myself first. How do you do that? That's the special trick.
[00:22:41] Speaker A: Well, and I think what's the byproduct of that is like I go back to like my experience being a parent where like if I'm like, if I show up, frantic, negative energy, crabby though it like my coach growing up always said, you set the temple, Ryan. And like if I am bad, if I'm crappy like that at home, it sucks for everybody because it sucks for me and it sucks for everybody else. And it's like, but if I go to the gym, if I get the negative energy out of my body, like whether whatever it is, whether the meditation, the journal, the exercise, I can show up better, but it takes selfishness of like, hey, I need 90 minutes everybody.
And then I will be better for the other 22 and a half hours.
[00:23:26] Speaker B: Yeah.
[00:23:26] Speaker A: You know what I mean? And so the, the pay yourself first is kind of like that. I think it's like we like, if people truly want to Be selfless. I think this is like the whole put your oxygen mask on first. There's a reason that that exists because you can be more beneficial for everybody else that look up to you.
[00:23:43] Speaker B: Yeah, well, there's a whole bunch of stuff and everything you just talked about. By the way, were you baseball, what sport were you soccer? Soccer. Okay.
I was hockey, so.
[00:23:52] Speaker A: Well, I read all that. I gotta say that all the hockey players would sit on the bench with because I was the captain. They would all sit on the bench because they were sitting out their minors that they got. Because you had to sit out a certain amount of times if you got caught drinking. They come sit out all the games on the soccer field and then they could, so they could go play their whole, their whole hockey season.
The soccer knockey guys were, were in the same club anyways.
[00:24:15] Speaker B: Yeah, absolutely. But you know, but, but regardless of whatever sport, right. That, that whole mindset is so critical and, and you know, you talked about, you asked me a question like how did I deal in the aftermath of this failure? And a lot of it was well, my mindset, like just because I, I lost last season or I'm in a batting slump or I haven't, whatever. In your sport you gotta, you gotta like, you gotta have the mental fortitude to get, to get through that to the other side.
And that all comes down to your self care.
And self care is not selfish. So paying yourself first is not selfish. It's taking care of yourself so that you can go the distance, you can live the long game. Right? And when you, and when you get to the spot that you were talking about earlier, and maybe it's nutrition, maybe it's not working out, maybe it's your mindset, maybe it's whatever it may be to take care of yourself, right.
Holistically, financially healthy, you know, everything. If you don't do that, you burn out. And if you burn out, what you're going to do is hand your company over to someone else who's going to maximize it and enjoy it.
And that's, that's the part too that people don't really understand you. If you don't run your business the way that the future person who's going to buy your business is going to run it, then they're going to come in and pay themselves first, you better best believe and run it professionally that way. So that's important for us to do. But, but certainly I think it's all part of self care, the mental state, the physical state of being an entrepreneur. And when you do have a failure, whether it be within your company or otherwise.
How you rebound from that and how you lead from a mindset standpoint is so critical is your team will follow that.
[00:25:55] Speaker A: So there's the concept of identity I want to unpack and then just planting a seed for us ownership structures and incentives like VC versus Private Hill versus Private equity. Just remind me if I forget. But like first on the identity and emotional stuff, John, you know Bo Burlingham's book finished big. Have you come across that?
[00:26:15] Speaker B: No, I have not.
[00:26:16] Speaker A: Oh boy, dude, you are going to love this. So Bo Burlingham, he wrote Small Giants, Great Game of Business with Jack Stack and he wrote a book called Finish Big. And John, that was the inception point of my journey after we sold.
And Bo, essentially the whole point is like how do you finish big as a privately held owner operator? And he, he said, summarizing the whole book, know who you are, what you want from the business and why. He talks a lot about identity. Well, I was miserable and so was my dad after we sold because this identity crisis, he said the worst thing you can ask an entrepreneur after you sold is what do you do? Because you say, well I used to insert your old business and like, so I have like the whole business, like the whole podcast. John. It started off the title, used to be called Life After Business. So the first like 100 episodes was all about like identity and me trying to understand investment banking and valuations.
And so I bring this up because I like I've gone super down this like, like psychological and role identity infusion that this Ali Harding talks about. And I had to go through my own process. Like I'm not a office equipment technology guy, I'm Ryan Tansom. And like I happen to do these things because like I, I sit on these calls with like, so I've got a handful of one on ones and everybody else is in the community for the group and the group coaching. So I have an intimate group of people that I've had been helping them build their board and do their one on ones with and like everybody will be like, well and they'll just list their supplier relationships, their biggest customers, their employ and like I don't know of any of these people, right. But it's their whole world. Like if I did this, my supplier manufacturer would think this or my local community would think that I'm a failure. And like there's just so much mental pressure and their identity is just infused to name the type of business at a young age going through that. I, I'M so like, one of the most, probably the most grateful things I have, John, is I went through that in my late 20s. We're like, oh, I am not my career.
But like, I watch, you know, older people go through that. You might be 60, 70 years old, then you come through this. And I think that's why there's this huge issue with retirement afterwards that people are digging their heels in because they're like, I don't know what I'm going to do outside of this thing 100%. Can you just speak to, like, how your relationship with your different ventures and what your identity is and how it's evolved over time?
[00:28:49] Speaker B: Yeah, that's a great question, Ryan.
Certainly as a young gun entrepreneur.
I was 24 in a venture capital startup with stock options. And I thought, I already figured it out. I was like, oh, this business thing is easy.
What are you talking about? My stock options are worth millions. This is the best thing ever to. Then bang, gone.
That's probably phase one of my identity going, huh, okay, maybe I'm not as smart as I think I am.
And then that kept growing and you mature and you see things and you experience things and you're in the room enough to kind of tell what's going on and you start growing and you form a different, maybe level of, you know, second level, mature, you know, business person that you, that you're kind of, you know, living through and you grow a company for 15 years.
And that was my identity.
Like, I was proud of the brand. Everybody knew me as the brand, as a global business. 700 employees, my kids were walking around with the apparel all over the place. Place. It was my dream business. That was my identity.
And then gone.
And I, I mentioned this earlier. One of my, my biggest regrets is still the people and the moral responsibility I had.
But I knew I was going to be okay.
But I was also embarrassed as the external view of my identity and what people thought or that that, like that external factor, right, was one of embarrassment, which is. Which, which was different for me. I'd never been embarrassed like that before. And that, that hurt for sure. Just that embarrassment piece of you just go in your cocoon. I just like disappeared. It disappeared from social media. I just, I didn't have email anymore. No one actually knew my email because I lost my email and I couldn't talk to people I used to work with. So I just started walking the dog more and reading books more and being like, okay, like I'm, I'm kind of. Then that's when I Started journaling and started finding myself again. Right. So I knew I was going to be okay. I had that perspective and that gratitude, but my identity was kind of shot. And my embarrassment of what the external world would have thought or was thinking at that time was kind of like, maybe the part that affected me the most more than me feeling I'm going to be okay. You know what I mean?
[00:31:02] Speaker A: So that is interesting.
No, it is super fascinating.
Is there something that, in, like, your childhood of, like, you're, I'm thinking about self confidence because I got, you know, daughters that are turning 10 and, like, that self confidence where, like, I also know plenty of people and I can see the dark side of myself of, like, intellectually I could.
Like, in, yes, I will be fine. But, like, holy, does this suck so bad? Like, I don't know if you ever had a propensity to drink or anything. Like, you know, because I'm, I'm a dopamine addict. So, like, whatever my dopamine is in front of me, I'm going to be like, I've reorganized my relationship with different fuels that are sources of dopamine. I'm just curious, like, so, like, was it something self confidence wise with you as a child? Like, hey, you're gonna be fine. You're just kind of regrouping or what? Did you actually have any where, like, you're walking the dog and you're just going, like, what the f happened?
[00:31:55] Speaker B: Yeah, no, like, I, I, I can't point to anything specifically. What I can tell you is that up until that moment in my entrepreneurial journey, I think I had a level of arrogance. Oh, I can do this. I got this. Like, yeah, what do I need to do next? Yeah, let's scroll. We're gonna grow 100 million. Let's, let's, let's go. This is, this is fine. We got this, right? We'll do this in five years. No problem.
And I think after that moment, there was a big level of, like, vulnerability and accepting vulnerability and accepting the art of being vulnerable with others. The art of accepting. Yeah, I failed. I failed. And here's why.
[00:32:30] Speaker A: Journaling. The journaling, that really helped.
[00:32:32] Speaker B: Yeah, that, that helped a lot.
You know, having just deep conversations and then learning just not to be embarrassed about it.
Yeah, let me, I'll go and talk to anybody about how I failed, and it's my failure and I own it. And here's what it was, and here's where I messed up, which also paid back to, like, it's not. They did this to me. This is, I did this. This is what I did. Here's what I could have contributed, right? And I think that really helped me own vulnerability. Just be so much more vulnerable than I used to be in my 20s or 30s or even 40s at this point.
And then it's like, what's my new identity? And this is the part that I think is the magic of your question.
I subscribe to Jim Collins. Good. The great Venn diagram. The hedgehog concept of what does success look like? And it's the Venn diagram of what are you most passionate about? What can drive your economic engine and what can you be the best in the world at?
And boy, did I spent a lot of time with that one because I had just lost the perfect, you know, three circles in my life. I was the best at what I was doing in that business. It was driving our economic engine. We were growing the business and I was so passionate about it, right? So I was like, okay, I just lost this identity. Now who am I?
And this is where I think you and I share a common bond, is I said, okay, what do I love doing? And I started evaluating all of this and I said, well, I love growing businesses, I love working with leaders, and I love working with entrepreneurs.
That's what I want to go do. I want to grow companies, help my own companies. I want to invest in companies and grow them, and I want to work with other entrepreneurs to make sure they never mess up the way I did. But I also want them to learn from my mistakes. So let me do take these learnings, put them into practice, and then I want to coach entrepreneurs and coach business leaders on how they build the business of their dreams without making themselves as vulnerable as I did back, you know, in that, in that mistake. And that became my new identity because I knew I could do that forever.
Like, I have a 30 year life plan right now. Like, I plan on doing what I'm doing for the next 30 years.
And that's my identity now. And no one's gonna be able to take it away from me versus my identity being tied to one company and or one situation. So I, I reframed my identity for myself in that process. And it was a big part of me coming back out into the world and going, okay, it's time to kick some ass. I got this because I had my new identity. I kind of knew what I wanted to go do and reframed it, knew how I wanted to act, knew how I wanted to be more vulnerable.
And it just really changed. I think a Little bit of the dynamic of if you had met me 10 years ago, maybe how I would have been on your podcast versus today.
[00:35:04] Speaker A: It's such a fascinating journey, isn't it, where, like, we're told as kids, like, you can do whatever you want, and, like, our mind is the biggest enemy of all of this. Like, I mean, it's so fascinating, isn't it? Like, because, I mean, I just look at. I mean, I've got a dear friend who is in an industry that is.
I said, john, I said, your whole industry's in a knife fight.
Bend down, let everybody stab the shit out of each other, and hopefully you can stand up and there's one person and you can stab them in the heart and you could be the only one there. And I was just like, but if it goes away, I said, who cares?
I mean, obviously, and I don't mean that flippantly, like, there's a lot of care and all the things that you and I would agree on, but, like, if it's out of our control, I guess is my point, then it's like we are who we are, and we can reorganize our people and our relationships into like. And, like, the things that we've learned in business are so insanely valuable because, like, what I think is so cool about you and your podcast and what you're doing, like, how many talking heads are out there where, like, they've never managed payroll, you know what I mean? And, like, and I've struggled, John, and I don't know if you've got any thoughts in this. We're, like, I've struggled with the last 12 years with the podcast and all the material. Like, this is not. Like, there's no easy button here. Like, if I see another survey, it's like, double the value of your company in 13 minutes. If you take this survey, it's like, really, like. Like, same thing with health. And so, like, I don't know, it's just like, the discipline and the thought process of, like, okay, what do I want?
How do I move forward? I mean, it's.
[00:36:38] Speaker B: I don't know.
[00:36:38] Speaker A: I don't know where there was a question in there. Just kind of resonated.
[00:36:41] Speaker B: No, but what you're saying, too, though, I see it through your. Through what you're saying on your journey as well, is that consistency and that persistence, just showing up and doing what you're passionate about, what you believe in, which you feel like you can do very well at, but doing, being persistent about it and continuing to move through adversity and challenges. It's part of the entrepreneurial journey, it's part of the leadership journey that we all have. And I think that plays back to your identity, right? Who you ultimately want to be and how you're showing up, which plays back to mindset. So it all kind of like, you know, all plays together over and over again.
[00:37:19] Speaker A: And the one thing John, that I guess like when I reflect on my journey and what I'm curious on yours is like there's this phrase that I heard recently was like, once I understand the game, then I can come up with a strategy to move forward through the game and win it. And so like what I, it took me this long. It's like, like because I sat down at the summit, I have Dave Deal, he's a dear friend. He runs Prayer Capital Advisor Chicago. They do 550 ESAT valuations a year. They are very reputable M A firm and they, they don't care whether you do an ESOP third party sale management bio because their incentive structure is diversified across all those different outcomes. But like I, I bring this up because he's a, I respect the, out of this guy. And we're sitting down at the summit talking about the cost of capital and rates of return and where money's going, different industries, different. I mean like truly, it's a complicated discussion but at the fundamental level it's like it's talking about capital and the business, the operating business has to produce the cash flow to yield the valuation. And so like when I think about that conversation that him and I were having, there was a bunch of owner operators around tree trimming business. There was a water treatment company, I mean like, and they're like listening to the like the jargon coming out of our mouth but they're slowly getting better and better at understanding it because what I, what I did there was this thesis that I had were like if we teach the owner operators how this works, there's a higher probability that they will have more sovereignty and protect their employees than if we taught the advisors who had never ran a company. So there's this whole like operator versus the owner and the capital. And when I say like learn the game, I was like, I had to. I mean my God, there was no framework to me to understand that those words and what they meant so I could chart my path forward. Like, and I think about your, your journey of like working for private equity versus venture capital versus your own capital.
Can you speak to like the game of ownership and how like the incentive structures of the capital impact, the operations. Because I think that's one of the things like that, that root level game that I was just not aware of. We're all focused on the income statement, the operations, but there's this whole underlying game getting played that is really important to understand.
[00:39:28] Speaker B: Yeah. And I'll, I'll take it, take this one in two different paths because one's really fresh for me.
As entrepreneurs we're taught, well, you need to sell something or else you don't have a business. So we focus on sales and then we sell something. We're like, okay, we got something to produce. We need operations. We focus on operations and then we put some money in the bank. We're like, okay, get some more sales and then we go do more sales and operations. We put some more money in the bank. And then at some point someone says, well, what's the P and L? And we look at the P and L and we go, okay, looks like we're making money. Keep going, give some more sales and we dive deeper. And we did a webinar for our community yesterday with Alan Miltz. Alan co wrote the cash section in the book Scaling up with Vern Harness.
[00:40:12] Speaker A: Okay. Yep.
[00:40:13] Speaker B: And he, he runs a company called Cash Flow Story.
And he, and he, what he says to entrepreneurs is, he says, looking at the P and L and think, you know, what's going on in your business is like reading the first chapter of a murder mystery novel. And you think who, you know, you think you know who committed the murder.
[00:40:30] Speaker A: I love it.
[00:40:31] Speaker B: He's like, the P L is just one indicator, one indicator. He's like, you need to go layers behind that to the balance sheet to really the net operating cash flow of the business to really realize how well you're performing and are things going well. And beyond that. That's in that area there is where I feel most entrepreneurs and business owners get really trapped up. They don't understand the beyond the profit and loss statement of their business.
They don't have time to because they're going to go get more sales and do more operations and going to get more sales and more operating. Let's grow the company, let's grow the company until they realize, well, where's all my cash flow and why can't I, why am I not paying myself enough money and what's going on? Well, it's all those other layers of the business finance instrument. And I think that's where I'll use private equity just as an example. I'll stay away from VC a little bit. That's where private equity I think really takes advantage of the small to medium sized business segment is they'll take a business that's you know, $20 million company that is not optimized on how it's running its financial performance, they'll come in and buy it at a 5 or 6 multiple and the owner feels great and next thing you know it's generating 20% margins as opposed to 5% margins because they know how the engineering of the system needs to work.
And so we as entrepreneurs need to have better financial discipline to really, really understand beyond the P and L.
That's the first place I go with your question because that's where I think a lot of entrepreneurs make the mistake and they don't really understand the mechanics behind it.
[00:42:03] Speaker A: Yeah, so I'll add to that and then I want to go to then like kind of the valuation and VC versus pe. I'll give you some of my mental models of how I'm thinking about this. Like so agree with you. That's why I've been talking about the three statement model for like seven or eight years. Because like once they're mathematically connected, like I always say, like people want to see the connection between revenue and then the checking account. Not gross profit, not net income, not even like it's just actual money in your bank account and they can see that whole through line using that three statement model. So like once people get it, like what I found John, is if we can talk about freedom and cash there people are willing to go down that rabbit hole. Next thing you know they're talking about cash conversion cycles and working capital. Like I didn't see myself coming here. Or depreciation.
[00:42:46] Speaker B: Exactly.
[00:42:47] Speaker A: Accumulated depreciation, appreciation, your cost of goods in order to see your margins. People like what it's like, oh, because you want to know should I do this or that so I can make more money. So like understood on that aspect from the financials. But then there's this whole other world that I in.
So I've got this framework and the, that I call the three lenses of value. And like how to, how to think about value. Because like there's all the different terms, book value, normalized ebitda, there's, I mean infinite discounted cash flow, I mean all of these different things. But the way I thought about is like should I keep the company? What's it worth to me?
What's the Zillow value of this? Like what is the market comps across all of the different buyers and then what's this deal structure that I can plan around based on my Zillow value and whether I should keep it or not. And so like essentially the first lens is the discounted cash flow where if you have the three statement model, you can see the distributions and then you can see the future five year valuation. So you can actually answer the question, should I keep it or should I sell? Like if you can go make more money in real estate, people always say, well you know, my iron, I got lots of iron. I'm like, well if you're yielding to 5%, you should go put in Treasuries. Quit. Yeah, quit doing all that work. So there's that, the, the keep it value, but then there's the market multiple times the normalized EBITDA net debt, working capital, which I call the market value Zillow lens.
[00:44:03] Speaker B: Yep.
[00:44:04] Speaker A: But then the way of using the, those concepts to have conversations, then I say, okay, well let's say you've got a 2, 2 normalized EBITDA times a 6. So you got $12 million and then you've got maybe $2 million of debt and no cat, no extra cash. So you've got a 10 million dollar enterprise, I'm sorry, equity valuation. But you might only get half your money at closing from a private equity firm or an ESOP or management recap. So we're trying to track that 5 million.
[00:44:34] Speaker B: Yeah.
[00:44:35] Speaker A: And so I'm, and hopefully I didn't lose too many people in this explanation because I think about that as like that lens helps us go, okay, what's my goal as the owner of this company, my equity and then where do I place my bets? But then allowing us to go to like a conference and talk to an investment banker or talk to a private equity firm or talk to a strategic buyer and know what we're trading in value.
Because if you and I, like I go back to commerce, John, like if you and I wanted to figure out whether you wanted to buy my phone or not, we would have to have an agreed upon valuation metric.
Like if you thought it was worth 100 grand, I thought it was worth two, we couldn't do so anyways. That's a lot of words to say. Like there's this understanding of valuations and then how like a third party buyer might want to double the value. Like, you know, like if there was a sports stadium going up next to me, they might want to pay 5 million for the dirt, but the Zillow value might be 800 grand.
[00:45:33] Speaker B: Yep.
[00:45:33] Speaker A: So there's a lot there, but it's just kind of this whole thought process, once you understand the, the cash flow, this lens of valuation and then how the ownership structure of like private equity versus venture capital and their need for value and timeline will dictate what has to happen in the operations. And that's what I meant by that game of ownership. That's very complicated and I even I'm right now I'm sick of talking, so I don't know.
[00:45:56] Speaker B: Yeah, well, listen, I think you bring up a really good point point that I think a lot of owners and entrepreneurs kind of sit at night and go, okay, where am I going here?
And I'll take this the way that I digest everything you just said, which I mentioned earlier. I have a 30 year life plan and I speak to a lot of entrepreneurs and entrepreneur groups. And when I say, and I'll ask your audience this right now, like raise your hand if you have a long term, 10, 20, 30 year life plan written down that you can pop up for me in a couple minutes.
No hands go up like zero.
And what are you doing this for?
[00:46:33] Speaker A: Why do you think that is, John?
[00:46:35] Speaker B: Well, I'll tell you why I didn't have one before my failure is because I just had this, okay, I'm chasing success here and if I grow my company, it's going to be successful and all things will get figured out.
That was kind of my plan. Right?
And so why are you growing your company? Let's start with why. Let's start with Simon Sin's why, why, why, why are you growing a company because you love running a company? Is it because you love your industry? Is because you love going to work eight to five? Like what, what are you trying to accomplish? Is are you trying to accomplish a certain dollar amount so you can go buy a house somewhere else and retire? Like what are you trying to do, I think is missing? And until you know what you're trying to do in your life, in all areas of your life, then how do you know what to do with your business? Whether you should sell, not sell, do it this way, do it that way, how are you going to do it? Right? So I think that all really, really starts there for me. The second one is if you're selling your business because you have intentionality, you want to go do something else specifically, I think you're in one zone. If you're not sure if you should sell your business because you're not sure what you want to do next, or you're just tired because you're working too much or whatever, there are Other solutions, like when you just gave that example, Ryan, of, you know, the value, the equity is 10 million and they're going to pay you 50% down and the rest with seller notes. And I'm sitting here, go, wait, the company makes two million. I was like, that's two and a half years. Just keep your business.
Like, go hire someone to put in and train them. Right, and own the business as opposed to operate the business and hold it for 10 more years and then sell it, you know.
And so I think a lot of times we get stuck in this operator mindset, as opposed to owner mindset, which is principle seven of my book. How do you move from CEO to chairperson? Because if you can move from CEO to chairperson and your business is cash flowing a strong amount of money, why would you ever sell your business?
You would do it if you have a specific purpose for that money or there's something you're trying to accomplish.
And so I think way too often we're focused on how much can I squeeze the lemon, how much is it worth this way, how much is it worth that way, what if I do it this way, what if I do it that way? When we don't even know why we're trying to do it or what we're trying to accomplish.
If we get past all of that and we get to just the business fundamentals, it's a cash flow game.
And you just gave a really good example. A lot of small businesses are, maybe they're bought for 5 or 6x, but they're 3x is down at closing and the rest is leverage and financed.
And I think what we need to look at as entrepreneurs, when we think about the enterprise value of our business, what we're trying to create, is one, I would go back to my earlier statement, which enterprise value is not just your profit and loss statement, it's your working capital, it's your not operating cash flow. It's the opportunity to fuel future growth through the business. It's not you running everything. And you're the chef, cook and bottle washer. And you don't have hired the right people in the right spots. You got to professionalize your business and professionalize the finances, because that's why somebody would want to buy it, because they want to buy it to grow it or to take it to new heights. Right? So you got to prepare your business for that.
And I think when you evaluate, should I or shouldn't I, I think you just need to go back to the, well, what am I trying to accomplish?
And stop trying to squeeze the lemon when you don't even know what you're trying to do.
[00:49:52] Speaker A: I love it, John. And like, it resonates with me because, like, I think over the last decade, it's like most of my podcasts, like, why are you, like, what is. What is everyone marching towards? And like, after 75 or 80 visage workshops and 3,003 and a half thousand people going through my workshop, like, no one has a freaking plan or a clue. And it's just like. And like, there's this assumption that everyone else has it figured out. And I'm like, there are no adults. Everybody, like, none anywhere, let alone in politics. Right? So, like, you go, well, that just then what happens is, I've watched John. Then it just. All of a sudden the mirror comes, like, right at people. And I think there's that fear of, like, holy, I have to make a decision of what I want.
[00:50:40] Speaker B: Yeah.
[00:50:40] Speaker A: And that becomes scary, I think, for
[00:50:43] Speaker B: a lot of people.
[00:50:43] Speaker A: For whatever reason.
[00:50:46] Speaker B: I love. I'd love to hear your perspective, though, on why you think that is. Like, I. I recently did a TED talk here in Portsmouth, New Hampshire, and the TED talk was literally that, like, why do we have business plans? We have five year business plans. We know we're gonna go, but we don't have life plans. Like, we don't. What? What? Like, why don't we have a plan for our lives?
Why do you think that's the case? That we just. We don't take the time to plan out all the different segments of our life with intentionality?
[00:51:14] Speaker A: I will unpack because this is. I'm supposed to be interviewing you. I'll unpack it to a certain degree. And, like, what. You can maybe if you want to unpack the. Or a little bit more. But, like, I'm. I'm just a total nutcase, I think, because I have had a life plan forever. So, like. So, like, it's what I love. It's what I'm addicted to. Because, like, at the. I mean, it sounds so cliche, but I want to do whatever the hell I want every day.
And like, anything other than that is insanity to me.
Like, being told what to do makes me want to explode. Like, ask my dad and my parents, those poor two human beings that, like, I mean, like. And I had to learn all of this the hard way. That, like, in order to have complete freedom, I have to create value.
Or, like, you know, I have that icky guy here, which is that Japanese term, which is what? You know, there's Jim Collins just Essentially took it from the icky guy, the Japanese term. And it's like, like, what do I, what am I good at? What do I, what am I, what do I love? What do I make money off of? And so, like, this whole concept of time to me is like, if you need me in a dysfunctional way, I'm not free because I want to go skiing. Like, I was in the, like before this. I was in the sauna at 10 o' clock this morning going to Lifetime because I don't want anybody to need me. And so, like, it's been unacceptable to me to have anything other than that. So the whole business and all my companies have been to orient the world around that.
And so then like, it's like, okay, well, what do I love? What am I good at? And I had to really think through all this at first, to your point. Like, I mean, it was like, oh, I think this copier business can be my vehicle for that. And it was the copier and it business. And then the rug got pulled out from underneath me. My. That was where my identity broke like glass. And I was like, holy. This financial machine that I thought I had is gone. So how do I rebuild myself out of the ashes where what I did is I was like, I refuse to raise money from someone that sucks because whether it's a bank or capital. And I look at them and I have an allergic reaction to incompetence.
And I'm like, well, you're gonna tell me what to do in your effing suit. And like, I'm just professionally unemployable and people don't know what to do with me. So, like, there was only, like, what I'm doing now was the only way for me to make money because I was, because of all of it. So, like, I have like my life in weeks. I gave myself to 100. Every single week is a checkbox. And I've got my big ass calendar for the year right here. And maybe it's like, well, that's why I've designed a coaching program. Because, like, I sit there and go, I cannot believe how many people eat every day.
And they either a don't want to be doing that and it has nothing to do with their goals. And it's like, did you know person like, you don't have to do this.
And it's like, well, okay, well then what are the things that matter to me? Well, you have to have enough cash flow. So if you need 250 a year or 350 a year, whatever the hell it is. Let's say it's 30 grand a month. Okay. Can you do that sustainably doing something you love that? Well, how much wealth do you need over time? And like depending on where you save your money, you can either hedge the debasement of the dollar, you can hedge all of the inflation.
And like those are the trade offs. Time, cash for wealth. And it's like, I don't know, John, it's like so fascinating to me that like I look at around in people and they're just doing random every day and Joe. Ever heard of Joe Dispenza?
[00:54:30] Speaker B: No.
[00:54:30] Speaker A: Joe Dispenza wrote a book called Becoming Supernatural. He's big in like quantum and like, and he's been on like Chris Williams and Steve Bar lit and all that kind of stuff. And by the age of 23, 96% of our habits are wired into our, into our prefrontal cortex. So essentially everybody's just an algorithm doing random every day and they don't think twice about it unless you're meditating or you maybe had some trauma that made you rethink things.
And so like, it's fascinating to me, John, because I don't have a direct answer for you other than like, it's so.
[00:55:03] Speaker B: Well, there is an indication though in what you just said, which I, I find to be somewhat relevant, which is, and this goes back to my comment, you know, you're a brother from another mother, but like, you know, we had traumatic events and those traumatic events, they definitely shaped me looking into my future, going, okay, like I gotta this, I'm gonna control what's going on from this point forward. Like this is not gonna happen again to me. And I think we just get caught in the rat race, the tail wagging, the dog, whatever, where you want to put it, where we just start going and life just starts happening. And so we just get up and we could do the same thing over and over and over again. And then when we have a big goal or a big vision, yeah, I'd like to leave my job, but I can't see myself making $30,000 a month. Like how am I ever going to get there? We don't see the pathway to two or three years of hard work to have freedom for the next 30. Right. We have a hard time seeing past that consistency and that persistence that's needed to, to, you know, to do that, to execute the plan.
But it is interesting that it wasn't until I had my big failure where I will kind of woke up and go, man, I Don't even, I don't even have a plan. I don't even know like, where I'm going here.
And sounds like you had a little bit of an awakening at that moment too. But why does it take that awakening for people to realize, hey, look, you listen to two people who just had that and like, this is what you need. And so that's, I'm preaching a lot of that today to anybody that will listen, which is there is a way. And if you don't know how to lay out a 30 year life plan or a life plan for yourself, then get a hold of us. We'll help you
[00:56:36] Speaker A: just start thinking about it. Right. And I think it's go back to like church and that sermon at the church where it might not resonate with you, but then for some reason there's one thing that happens. You're like, this is relevant for me today. And I think, you know, what's really cool is like, what you've been doing, what I've been doing, and various other people that are on this mission of like 10 years ago, there wasn't a path, there was no free statement model and a podcast I could listen to. You know, I mean, like, I was just like by myself going on. This sucks. And so like, you know, the, I think committing to getting the clarity is enough sometimes where instead of like, we want clarity immediately and we want all the answers immediately, it's like committing to the process. It's like, you go to the gym, you're not going to be perfect tomorrow.
You showed up, you showed up and there's that like, it's the long tail. Like, you want to like, have that long progress over time.
How have you, you know, with your current business and you, so you get, you turned your current business into a holding company and now you're buying other businesses. Right? Like, how have you designed your business in life? Like, what are some of the big monumental decisions that were like trade offs, John, that were not obvious, but because of your clarity, you were able to make some of the hard choices.
[00:57:52] Speaker B: Yeah, I think the first one is I want to be an owner, not an operator.
And so the decision to turn my business into a holding company to acquire and or help grow other businesses with entrepreneurs I love and care about and want to develop and foster was a big one for me because I have diversification. I have diversification of my talents where I can apply them against different people. I love working with people, so I love developing leaders and helping them grow their business. And so working with other entrepreneurial leaders is something I'm extremely passionate about. So it fuels that bucket of mine in terms of my identity and where I want to be.
And I also knew I could do it for a long period of time and it wasn't tied to one identity. So we're looking to potentially sell one of our companies in the next few years. I'm not tied to that one company anymore, and I have my reasons as to why we want to do it. And it all fits in the grand scheme of the plan, but it's really taking the steps of what do I really want to be doing every day? Back to your point, what do I want my life to be like and what do I want? What am I passionate about? That I'm excited to go have this conversation with Ryan because this is fun for me.
This is what I want to be doing. And that was a big switch versus what do I need to do to make money?
What's the job I need? Right. And so, so I'm very passionate today about, you know, owner operators moving more to the owner side than the operator side. How do they replace themselves?
[00:59:21] Speaker A: Did you have to hit some sort of financial milestone, cash flow wise or wealth wise, where you started reinvesting to, to be. To do this? Like, did you invest ahead to get here or did you have to wait till you got here? Like, how did you think through those trade offs?
[00:59:39] Speaker B: Well, I, I had done, you know, even though I didn't take a lot of money on my companies, as we talked about, I, I did pretty well, you know, in my 20s and, and 30s, in my career, early 40s as well. That gave me the ability to choose a path.
But there twice in my life I was offered an opportunity to go get a job.
And both times I said, no, I am going to stick to my entrepreneurial roots and go build this way. And both of those turned out to be key moments in my life because I could have chosen to go get a job with a company, made great income and been happy for the next X amount of years, but my entrepreneurial juices were like, no, no, no, no. You got this.
You can have more impact and make more money influencing a company with your leadership than you can to go get a job, right, and go help that owner make money or that company make money. So. So for me, no, it was, it was, I'd say, a mixture of both. It wasn't as if I, you know, created so much wealth I could do whatever I wanted.
It was a moment of, okay, how am I going to deploy myself and What I have to go build something of significance.
[01:00:55] Speaker A: You said leadership in there, which I thought was really cool. I'm gonna pull that thread. So how has you understanding the game of ownership impacted the types of leaders that you attract and how you interact with those type of leaders?
[01:01:12] Speaker B: I would say the word partnership comes to mind.
I love working with people and I love helping them be the best they can be.
I'm not. I want to go build something myself and, you know, be the CEO. And this is my company. Like I. That. That goes back to the vulnerability and just my, my learnings over the years.
And so I love working with people and I love working people. I love working with. Right. That no rule is fully at play in all of our businesses. And it's just like I'm here to enjoy what I do every day and enjoy who I'm working with.
And having the luxury to do that is something that so important to me.
And so part of that whole idea is if I'm going to work with partners and leaders that are running our businesses or leaders that don't, I coach other entrepreneurs that I don't own equity in their companies.
You know, my sense of pride in terms of a mentor, a leader or coach is to help them achieve what they're trying to achieve, which goes back to knowing what they're trying to accomplish.
And I truly believe from a leadership perspective, if you're leading a business, your job is then to develop the leaders underneath those leaders, which goes back to building a culture of entrepreneurship. How do you build a culture within your business where everybody treats the business as if it's their own and they make the decisions like that and they create the culture that they want. That to me, is what makes this thing all fun.
[01:02:51] Speaker A: Playing the game with fun people. Yeah.
What kind of.
Speaking of the game, what industries do you like, where do you see like, the economy and like really putting on your investor hat? Like, because we were sitting at the summit last week and we had Alan Bolio from ITR Economics, who is the dad of Kim, one of my colleagues. And like, so we were. It's like, ah, we're gonna just make everybody super depressed for a little bit and then we're gonna.
And like, so that this economy is like, interesting for a lot of reasons from an operator perspective, but also from an like an investor perspective. So like, where, where you were you excited about? Where do you have concerns about, like, what's got your attention right now?
[01:03:37] Speaker B: I've always loved B2B services, so that's an area that I Have a lot of experience in, spend a lot of time in.
The area that I really love right now is the trades.
I think it's one of those that's not going to be disrupted by an AI robot coming to fix your toilet anytime soon.
And I think there's a lot of movement there to really refocus in, on, on, on the, on those, on like those trades. You know one of my businesses is a commercial facilities maintenance company.
Have a lot of experience in, in, in kind of the trades area. Like if, you know, if you came to our event, we do an event every year and our entrepreneurs United empowerment experience. Like probably 60, 70% trades companies that are there. So a lot of experience there and
[01:04:26] Speaker A: so commercial, residential, any, any focus.
[01:04:29] Speaker B: Yeah, like the company I own is a commercial based company but have a lot of network with the residential side of it too. And I just think there's a huge opportunity there.
We're hearing a lot of people trying to, you know, consolidate some trades right now.
You know, the issue is can you find the people that actually do them? And that's a whole other investment side is getting people back into the trades. We think that's going to, I think that's going to happen a lot too because people are going to potentially be more entrepreneurial with you know, I coming around. Okay, what am I going to go do? And I want to go start my own business.
Home services is going to, is going to be pretty strong for, for time to come. So I think home services B2B serve. You know, when I say home services like the trades, B2B Professional Services, I think you're going to continue to be really, really important.
Yeah, that's kind of what you know, I think you know, the AI thing is just an interesting play. Like I, I do a lot of stuff in AI myself for my companies and, and, and what we do.
But where that's going to go with all the different businesses and you know you think about legal and, and tax and, and you know, just some of the how fast you compute and do things and you kind of question where that's going to go. So it's.
Those are trades that are probably, you know, or industries I'm probably staying away from at this point. Not sure where it's going to happen. What's going to happen.
[01:05:53] Speaker A: Yeah, it's interesting I think about like if a company and their services is their main business is in sgna of some other company, that's a problem.
[01:06:07] Speaker B: Yeah.
[01:06:08] Speaker A: You know what I mean? Like and when I think about okay, well you could be an sgna, but you could be a mandatory. Like I have companies in like boiler services or commercial cleaning or, you know, water treatment, like you need it never going away. And that's kind of how I think about it. So I resonate with what you're saying. And I was, as we were talking, we had an AI panel and a whole long evening session last week and we were talking about. Because with Dave Deal values, all these companies, we were talking like, how is it coming into the prices of companies? He's like, well, the market hasn't priced any of this stuff in yet. And when I think about it, it's really fast because we were talking about as the whole group, like who's seeing crazy cost savings or extra margins. And the way I, I think I'm summarizing a very large group discussion. But like, you know, you heard that phrase like AI is not going to take your job. Someone else using AI is going to take your job for sure. I think it, I think it's applies, John, to companies like AI is not going to take you, but like some other company is going to outcompete you.
And so like either their pricing mechanisms that they can maintain their situation because they're nimble, they've got a plan like you and I are talking about and they can deploy AI, they're going to be able to price things and have better services than someone that doesn't.
That's kind of right.
[01:07:17] Speaker B: There's gonna be a lot of price pressure. I agree with you. The price pressure is going to be massive. And you bring up a really good example of, you know, the SGNA components because some of the SGA components that you might be outsourcing somewhere else, you might be able to bring in a lot tighter and. Or find somebody who could do it a lot cheaper because they automated it.
[01:07:34] Speaker A: Yeah, SEO, blog, website companies, or like, you know, payroll or expense report. I mean like, I think in over and over and over these apps and these different systems that it's like. That's right, yeah. Fascinating.
[01:07:46] Speaker B: Yeah. I know nothing about marketing, but I could do your SEO for you if you'd like, because I. Because you know, my AI can do. Right, exactly.
[01:07:53] Speaker A: Yeah.
[01:07:53] Speaker B: That's popping up everywhere. I think that was just kind of dangerous because I think a lot of good companies may lose their positioning over companies that, you know, are faking it till they make it kind of situation using so much AI and it's going to cause a lot of disruption.
[01:08:09] Speaker A: But then I think what I'm actually seeing in our Community is that the people that stick around long enough, they come back and then they're willing to deal with the price increase because they're like people just need the outcome and so they switch for a quick hit and then they realize oh my God, I got totally bamboozled into believing that you could do it. So I think there's, you know, and I also think that the private equity pressure of fully leveraged companies that are like to the tilt in debt with this economic turmoil. I mean I think, I think there's a lot of opportunity for just normal businesses like you and I are working with.
If we just stay the course and we just do that hedgehog that like slow and steady. I think the opportunities are going to be so freaking insane that like it's hard for us to wrap our heads around to be honest.
[01:08:53] Speaker B: Yeah, the, the non sexy get your hands maybe dirty from time to time.
Businesses that people don't look at as the shiny object on, on the hill, but people have to do the work and, and have to maintain their, their teams and their cultures and their customer service levels and everything else.
I don't think that's going anywhere anytime soon. I think they get distracted. For those companies get distracted with AI is probably a little dangerous. They can bring efficiencies into their business. Fantastic.
But still delivering the, you know, the service right, doing it the right way. I don't think those principles are going to change anytime soon.
[01:09:29] Speaker A: I agree with you and as we're getting close to a home base here, like I'm curious like on, on your investor thought process like when you're looking at companies because I think one of the fate like my favorite ways of really having like the eyes get opened up by owner opers like looking at your perspective from buying companies.
So like how are you using capital? How are you you know, structuring these deals? Like how do you think about value and like where you want to place your bets? I mean it sounds like we kind of talked a little bit about this, but any thoughts through the lens of the investor and there's someone that's looking to deploy capital?
[01:10:08] Speaker B: Yeah, I'd say cash.
I, I've, I've seen a couple of deals happen recently where the deal doesn't even cash flow and the owner who bought, you know some businesses looking back on oh my gosh, like what did I do? It was just fun. I could go buy this business. But where they didn't finance it right. The business wasn't spitting off enough cash. They were just looking again back at the revenue and what the profit and P and L says.
So I really look at the business fundamentals like that three statement that you were talking about before, like what is it? Looking across the board and having solid fundamentals in the finance side of things is like so critical.
And I think I see way too many small businesses that are just messy. Like you know, either the owner's putting way too many expenses through their business for tax reasons or they're not paying themselves fairly enough or the just numbers aren't right.
And so this goes back to my thought.
When I'm buying businesses, I'm looking for a professionally run business and not a mom and pop operated back in the napkin operation because it's just fraught with issues and things like that. I want to go into a business and see a culture, see a team, see tight financials, see a tight process.
That gets exciting for me because then if structured right and financed right, it can cash flow and if it can cash flow itself, you can do more and you can keep, you know, it's accretive to the growth of the company.
And I have made some acquisitions over my time that, that didn't happen right where you, you think you're buying the right business and it, it hurts your cash flow overall as a company and brings you back the other way.
So I think that's my view on it. I think there's, there's, there's going to be a lot of consolidation and I think for owner operators to really professionalize their business through some of the things you do at your summits and the coaching that you provide, like professionalize your business to the point where your business can be run without you, increases your enterprise value to a degree that you should be proud of because you've built something that's professionalized and ready to be passed on, which also protects your people because your people are now part of a professional organization that can thrive without you. If you were to move on, and I think that's, that's one area that I think a lot of entrepreneurs really need to focus on even if they're not planning on selling their business anytime soon as your business today, so it's run the right way, what would you
[01:12:34] Speaker A: say to the person that says, well, John, I love what I do right now. So I like, I already love it.
And I, maybe I'll add to that additional clarity because when I, when I say what you just said, people go well, but I'm enjoying it right now, whether that's the CEO, the CRO, whatever. So like how would you rebuttal to someone that says they love it? So why do some of this stuff right now?
[01:12:55] Speaker B: Yeah, so my, my, my first point to those individuals was, would be can you share with me your 30 year life plan or like what are you trying to accomplish?
Right. That's my go to for anybody, which is like before I can even answer that, like what are you trying to accomplish?
But then I would also say that's great.
I'd love for you to do more of it then if you love it so much and, and do it on your schedule and your timeframe. But you have to build the redundancy within your business so you're not vulnerable to just you.
Because if, yeah, that's great that you love it, but your first job as a leader is to replace yourself in all the roles that you function with other people so you can move on to more strategic levels of your business. You can still do that. No problem. I can still jump into any of my companies today and do the things that I love.
But I also can go to the sauna lifetime fitness at 10 o' clock if I want to. And I could also go invest in other companies and spend time with loved ones or go on vacation for two weeks Italy. Because I am an owner, I own my business.
I'm not subject to having to be at every beck and call of the business when I maybe don't want to.
So I think it's having more, more full control and authority over what you're doing versus being a slave to it because you enjoy it. You should still enjoy it and keep doing the things you love. That's fantastic, but professionalize it.
[01:14:11] Speaker A: Well said, my brother.
What am I not asking that I should.
[01:14:23] Speaker B: Probably.
What was of everything we just talked about?
What is the biggest lesson I've learned through my journey?
What is it?
Patient ambition.
The idea that I always had ambition, but I had zero patience.
I wanted it now.
I wanted to grow my $100 million company tomorrow. I wanted to make millions of dollars a year right now.
And all of that ambition led me to make dramatic m.
I'm not saying that you should be patient from the perspective of not trying hard or not working hard, but you need to have that patience in your ambition to make the right calculated moves and realize that what you just said there that sorry a little bit ago.
If you go to the gym today, you're not going to have big biceps tomorrow.
You got to go every day and every day and consistently keep showing up with patience that it's going to come if you keep putting in the effort and the work and the persistence with ambition.
So I think entrepreneurs lack patience. That's where shiny object syndrome comes in. That's where all those other components come in. But if you know where you're going to go long term, you know, long term. Here's where I want to be as a person, and you have a strategic business plan five years from now. Here's where I want to be as a business.
And you just have that patient ambition to show up every day and keep driving towards that result. And the patience does not have to do the next deal because it looks sexy or hire the next person because they look great. You have that patience to make the right calculated decision.
That's been my biggest lesson. Patient ambition,
[01:16:17] Speaker A: wow. Do I agree with you.
I was laughing at the beginning because, man, I just, I resonate with that. And I think that's been the theme of a lot of the people in the community, is like, I want it all perfect now.
Snake Agreed. And I, I think it. What's been helpful for me is like, if I see what good looks like, then I can get rid of the anxiety of not knowing. It's like, okay, that's what good looks like. I have a gap, but then being addicted to the progress instead of resentful to the gap.
[01:16:50] Speaker B: Yeah.
And you know what helps for me? For me, what helps is.
And if you know where you want to be 10 years from now, five years from now, let me bring it down. If you know where your company wants to be in five years from now, the enterprise value needs to be in five years from now.
What I think coaches like you and I could be really effective at doing is, okay, if that's where you want to be in five years, where do we need to be in three in all these different areas? Okay, where do we need to be in one? Okay, what do we need to do next quarter? Okay, what do we need to do this month? Okay, what are we talking about right now?
And we can have that patient ambition to. Okay, what we have to do this week is not sexy. I get it. But it's what we need to do for the building blocks. So we can hit the one year plans, we hit the three year plans, we hit the five year plan. And when they see the roadmap on what they need to do, it's more digestible and it's easy for them to now buy into. Okay, if I show up at the gym every day and do bicep curls, I'm gonna get bigger biceps and sure enough when they see that result a year from now and two years from now and three years from now, like, okay, this is working and they ultimately can get to the destination they want versus they just show up every work and do the work and just anticipate things are going to change. I think it's a different approach, the
[01:17:59] Speaker A: tracking mechanisms and feedback. The feedback loop.
[01:18:02] Speaker B: Yep.
[01:18:03] Speaker A: Well, you've got your book that we'll put the link to. Where should people go? How do they find more of you?
[01:18:09] Speaker B: Yeah, you can get the $100 million journey on Amazon. You can go to 100m journey.com which is my website. And then on all social networks like LinkedIn or Instagram, just, you know, John St. Pierre is the handle. Slash John St. Pierre. So love to connect with anybody connecting you.
[01:18:29] Speaker A: And Rich, got a good podcast out there.
[01:18:31] Speaker B: Yeah, yeah, exactly. I'm also the co host of the Entrepreneurs united podcast. We're six seasons in around 320 some episodes. So I go out every Monday and yeah, we have conversations just like this. We had you on one of our podcasts, which we really enjoy.
[01:18:44] Speaker A: You got me to, you got me to have a 40 minute conversation, which is very, very difficult.
You guys did a very good job.
Isn't that so crazy? You could have a, you guys have a 300 some plus podcast. We had 500 and we just hadn't. That's how big this ecosystem is. Yeah, you know, it's. Well, thank you for all the good work that you're doing. It's so fun to have you on.
[01:19:04] Speaker B: Yeah, absolutely. Ryan, thanks for having me on. Enjoyed the conversation again.
Sat.
