Drew Goodmanson: The Entrepreneurial Inflection Point

I made a decision to not be the hero villain, and I wasn't going to solve the problems. So I would go on vacation for a month in— this is a while ago, back in a day where I didn't go to places with cell phone coverage, so nobody could get a hold of me. It's like, so it was like purposely creating situations where they're gonna figure it out, right? I mean, they're like, I'm not a phone call away. And, you know, and purposely getting people to a place where you know, they didn't need me. Like, right. Honestly, I think, you know, toward the end, I probably could have taken at least a year off, and I don't think things would have skipped a beat.

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I want to welcome Infamous Drew Goodmanson. Looking forward to this interview. Give, give us a 2-minute snapshot of what you're doing now, what your business is now.

Yeah. So now I am— I've always been an entrepreneur. And so I built and sold companies, including when I sold a company to a private equity-backed market consolidation. I was part of a group where we bought 40 companies, and I realized in many ways entrepreneurs are playing the wrong game, at least the, you know, in terms of money and value and outcomes, where these spreadsheet jockeys are becoming extremely wealthy while those of us that have the blood, sweat, and tears poured for decades into something, I think are getting taken advantage of. So after I sold, I took some time off and I decided my passion is really entrepreneurs. So when I sold, I just documented everything they were doing and realized like, okay, how do we help entrepreneurs put into practice the things after a company buys you ahead of time so that they get more value? So I'm working with companies in building plans, strategic plans that allow them to increase their valuation and then go to market and get, you know, a much more sizable return than they would normally.

Beautiful. And that's why I, I'm very intrigued with this interview, because I think you've got a lot of, uh, experience with on both sides as, as an entrepreneur yourself, and then as advising entrepreneurs. So the, the, the question I have for you is I came to the realization that the characteristics that we have as entrepreneurs that give us the ability to start a business, uh, and have initial success, oftentimes those traits become liabilities as the, as the business takes on a form of its own and grows. So what— how did that— how did that look like for you in your experience personally?

Yes. So I, I now call that the entrepreneur inflection point, and I ran into it not knowing what it was. For me, what, what happened was everything that made me successful as an entrepreneur up until that point um, actually became the very things that prevented me from moving the company forward. And so I got stuck, and I was creating chaos, and I was doing things where the company could only grow as far as I was, and that was going to be a plateau and cause a lot more problems than it was solving.

So where was that inflection point?

So for me, it was when I mean, it was probably 2007 or '08, okay, in San Diego when I was building a SaaS company. It was when I was starting to get the next layer of leadership and had kind of grown, you know, beyond my capabilities to cover payroll and other expenses on a monthly basis. So the company had kind of outgrown, you know, just my own personal, you know, abilities to do things. So, so, and I was trying to Yeah, I'm sorry to interrupt.

So, so what, what were some of the symptoms around that?

Okay, so the symptoms were the— so like, I'm a pretty visionary person, and so that vision allowed me to see opportunity and create the company to begin with. But when the company needed to reach levels of maturity where it was just executing, what I would do is I would come in and disrupt everyone's day-to-day execution with with, uh, shiny squirrel ideas that I was coming up with. You know, the, the, the, you know, the magazine on the airplane where you, you see the little squirrel stuff and you start going, oh, I want that, we should do this and we should do that. Or I go to a conference. And so there was analogies different people used. Uh, we were in Southern California, so one of the, uh, you know, executives that I was with basically was telling his team later on— I heard this— that they needed to learn to ride the Drew Wave.. And, and I'd come in and I would disrupt everything. It's like, oh, I know we have developers building this, but we're going to go in this direction. And he was like, like trying to coach them on how to like take the, the energy and the, and the vision part of what I was saying, but, but ride it and then let it dissipate. And then, you know, and so it was, it was, you know, there was other analogies about how to deal with me because I was creating chaos.

So how did you personally— now, you said you had awareness about this inflection point before it happened.

No, I wish I did. I'm saying the inflection point, I call it that now because I was like, what the heck just happened? You know? And so I brought in outside resources because I had some failures in the business that were a result of my decision-making. And so I realized I needed help and I brought in a couple different resources. You know, I had an advisory board for about 6 months help me figure some things out. And I brought in, you know, some, an outside kind of coach to, to work with. And so I did some things just to kind of go like, okay, I've hit, I, I've taken this and I'm hitting, you know, the Drew Wall as an entrepreneur. Okay, how do I grow so that I don't— you know, the other term people called it, you know, seagull management, where I would just fly over people's desks and poop on them, you know, with new ideas. And so, you know, how do I— how do I stop doing this? And, and then how do I use my, you know, my superpowers for good rather than for evil? Because I was creating so much chaos.

So at that point, you know, you brought in the external advisors, the coach, you realized that, that you were the problem Was that the point where you decided that I need to sell?

No, that was the point where I decided to change how I led. Okay. And in many ways, and I've worked with a lot of entrepreneurs now in a similar point, you know, I give the analogy that people, people can go in different directions. So either they're creating chaos or they're they've, they've maintained a lot of the work that they're doing that is so outside of who they are, they hate it. And so I, I say that the term I use is like every morning you're waking up and you are eating a giant plate of Brussels sprouts and you hate Brussels sprouts, right? And it's like, you don't need to do this. But, but many ways, you know, there's things like that where it's like, okay, how do, how do I stop operating this way, either through chaos or doing stuff I hate? And how do I move into a place where I can really use what I have and bring value to the company in a positive way?

I will— this is an editorial comment. They don't like Brussels sprouts because they haven't been prepared correctly. Fair enough.

If you add bacon to anything, you know, yes.

So, so that point where you decided to adapt your leadership style Yeah. What did that look like?

A variety of things. For me, it looked like, you know, going through self-awareness and then realizing, you know, there's— okay, so one, as a visionary and as an entrepreneur that are visionary, I think a lot of us are. It's why we create companies. We have a level of retardation, and I did too, when it comes to time. I can be in a meeting and talk about the past, present, and future. And because I see the future so clearly, I can talk as if it's the past and present and flow all in these different directions. And so that vision power, being the visionary, is incredibly powerful, but it's dangerous if you don't know how to use it. And so I started to learn how can I use my vision, and rather than the wave and the seagull, you know, that I was, I started to learn how do I use my vision to work in the future and plan the work next quarter and throughout the next year and leave everyone alone in the current quarter unless there was an economic crisis or some sort of like emergency. I had to basically work in the future only.

Did that, did that look like you working less, like volume of time?

Okay. Yeah, perfect. No, eventually, yes, but no, initially it meant— so this was an extent, another existential crisis. It meant getting out of the day-to-day and in the business stuff and, and rather than doing the work, learning how to lead people. And, and what I found was I didn't know how to do that. And, and so I had to develop skills in— and, and also, like, I helped grow the company through marketing and through product development, all these different things. I had to basically kind of— part of me had to die to not doing that work, but bringing in people and coaching them and, and, and, uh I learned that I needed to focus more on the why, what was our mission, and the what, the vision, but give people freedom to determine how. And that took a while to develop that. And I realized there's a couple leverage points. But until I did that, I was constantly trying to be a hero or the villain. Like, man, you don't know how to do this, I'm going to do it. Or, you know, hey, I'll just jump in and fix this, rather than learning some tools on how to coach and challenge people and not solve the problem for them. And so I had to grow personally in those ways in order to do that.

So switching gears to what you've seen in other entrepreneurs, not your personal experience, what are the, what are the challenges that entrepreneurs have in seeing that they, they need to change, they need to grow, and then, then, then doing it? So like, what, what, what do you see that are those challenges?

Biggest one is that existential crisis. They have to be willing to let things go and find their identity working through people rather than doing the work themselves. And we get so much value in what we do. You know, it's the first thing people ask when you go to a conference or a meeting, what do you do? So we found such identity in that, that it's hard for people to give that up. And make that shift?

Yeah, so let's lean into that because I think it's— part of it is comfort, right? Part of it is predictability. For me, I'm speaking in my experience and what I've done. So, when the outcome is unknown or if it's going to have an outcome at all, right? Don't even know if this is going to happen. I think entrepreneurs are more comfortable exploring those things, but the reality is when you have an existing business, you do gravitate back to the predictable and the known. I've heard it described as barnacles on a boat. They just drag the boat down because they're things that you don't really need to be doing, but you do because they're comfortable. But going into that existential thing, like, what is my purpose? Like, my experience was, I think it's been 8 years ago, I got so frustrated with my business, I left it. And I left it in the hands of my brother. And I started a software company because that's what everybody does, right? And I told my brother at the time, I said, if this doesn't work, I don't know what I'm going to be doing. But I'm not going to be running an accounting firm. I know that. But the, but, you know, the wheels fell off without my being there, which is kind of a self-fulfilling prophecy, right? And 2 years later, I had to come back in the business because it was going the wrong direction. But I said to myself, okay, we've got to do something different. At the time, I had my brother and I had a third partner. And that's when we implemented EOS. And what I had heard in EO, uh, several times is what gets you from point A to point B won't get you point B to C. But those things for me were externalized. They were like, okay, well, that means there might be different people in the organization because we've got to upgrade the talent. We might have different processes, we might have different services. I might be doing different things or even doing them differently, but I never internalized that statement to say I have to be different, right?

Right.

And EOS was a tool. It was an external thing that I said we have to do something differently and it worked. But what, what it showed me in implementing EOS was the, the, the things that I had to change about my behavior, uh, and what I had to do differently, and who I had to, as you, you say, show up and, and, and be every day, uh, had to change. And I don't think that's— well, I, I know that's not an easy transition, and I know that a lot of entrepreneurs just don't make it like they, they just, they may not realize it, but even if they do realize it, they choose not to.

Yeah, because it's an identity issue. That's why I say it's an existential crisis, because even if they are recognized the changes and they go toward that change, the curve of addiction to come back in and be the hero and do the work, do these things, gives them such enough fulfillment and sense of self that they're willing to pay the price of, you know, all the shitty things that come from that.

Yeah, we, we, we, on, on previous interviews, we talked about addiction and, yeah, entrepreneurship. And the, this, the paper was discussing the dopamine addiction cycle, which, that was interesting because I had never really understood the mechanics of it. But whether that translates into being addicted to entrepreneurship, and, and, you know, I, I think for most people, they're not truly addicted to entrepreneurship. They're, they're addicted to those feelings. And I don't know if they— that they probably do in some way involve the dopamine cycle. But like, you know, when you are the hero, when you are the, the, the, the savior, you feel good about yourself. And I think I, I've even seen it where some people translate that into self-sabotage. Like, they create those scenarios where they can unconsciously— like, they, they don't, they don't intentionally screw things up so they can come in and rescue things, but it can even be so bad as that, that you're actually creating those scenarios instead of just reacting to the ones that naturally occur.

Yeah, I mean, you went— you mentioned going and starting a software company. I didn't do that. I just created new problems and challenges in the organization to entertain myself and, you know, feed my ADHD or addictions or whatever you're saying, right? So instead of starting— I mean, so I just started whole new things, right, to create that, you know, to solve those same problems, to distract myself, you know, and to feed that.

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And that's so for me that, you know, what that looked like. And this has really been over the past year. So these, these were at age 54. These are hard, hard-won lessons. They're not, they're not something that came to me without a lot of struggle. I just started working less. In the business because I wasn't contributing anything. And I realized that where I was trying to contribute, I was being counterproductive. Yeah. And so, you know, being hyper-focused on what my role is in the business and just doing that. But there was this challenge because it's like, well, if, if I leave every day at 2 o'clock or 3 o'clock, somehow I'm not doing enough. I'm not, you know, working hard enough. And I even had to find some alternative creative outlets. So, you know, like writing a script or, you know, this, this, this project is, is one of those things. And being comfortable with, with that took some, took, took some doing. Did you ever come to a point where you actually said, I need to work less? Like, let me tell you how bad it was. I'll tell you how bad it was. I moved out. This is my office that I have, and it's very comfortable. And so what I did was I took a room with no windows. I set up a standing desk and I said, this is where I'm doing my work. And so I, I forced myself into an uncomfortable situation so that I would only be there when I absolutely had to be there. I tricked myself and it worked. It worked.

I worked different. Like, I, like, I, I hear what you're saying about work less. I can see that. Um, I also would say that I made a decision to not be the hero villain, and I wasn't going to solve the problems. So I would go on vacation for a month in— this is a while ago, back in the day— where I didn't go to places with cell phone coverage, so nobody could get a hold of me. It's like, like, so it was like purposely creating situations where they're gonna figure it out, right? I mean, they're like, I'm not a phone call away. And, you know, and purposely getting people to a place where you know, they didn't need me. Like, right, honestly, I think I, you know, toward the end I probably could have taken at least a year off and I don't think things would have skipped a beat.

They didn't need you. That— let's, let's lean into that a little bit. So how— I, I, I don't know what your, your story was. I find that a lot of entrepreneurs have some type of childhood trauma that affects, influences their decision to be an entrepreneur. And I define that very loosely. So I'm not talking about like physical or sexual abuse, but like there's, there's something that happened in your past when you're, when you were in your formative years that caused you to want to fix it. And one of the ways you fix it a huge way you fix it is being an entrepreneur. So if that's, if that's self-worth, I mean, I think a lot of it is around that, like proving the others wrong that I am worth something. And so when you say that, that feeling of being needed, did any of that fill a deeper need for you?

So my trauma was different. It, you know, like you said, it wasn't an acute situation, like you said, you know, sexual abuse or something, but it was a low kind of chronic environment where I learned or felt like I was on my own and I couldn't rely on authority or trust them really. And so I, my biggest fear was, you know, part of what drove me to be an entrepreneur is like I needed to be kind of in control and create my own environment because I couldn't trust authority. To, you know, take care of me in the ways that I would think. And so that, that, you know, that's what drove me from a trauma standpoint, was more of that, you know. So it was— I, I was— I'm willing to work really hard and do all these things because I want to be lazy and comfortable. Okay. And so, you know, so I, I didn't— I, I, you know, to get to a place where people didn't need me was like joyful for me. Like, like, I know there are other entrepreneurs that like find that identity in doing the work that it's hard for them to let go because they— that wasn't my situation. Like, I, like, I was like, you know, I, I went from not traveling at all to over 50 countries, you know, because I was like, I want to be gone as much as possible, and I love it, right? And I built this— I, I had done other companies before, a recurring revenue company But when I got to recurring revenue, I'm like, this is the land of milk and honey because it's so predictable and just stackable. And like, it's on autopilot in many ways compared to when I did service models or, you know, I did staffing companies or this or that. Like, so it was just such a better world for me that I was like, this is heaven, right?

And I, I know some people— I, I had one member of my forum, and it was kind of a common theme that, that we all shared, but for him it was, it was intense that like when the business is successful, it's almost like this anticipation that something bad is about to happen.

Yeah, right. Yeah, yeah, yeah.

Have you, have you seen that in entrepreneurs that you have worked with?

Yes, yes. So I think those traumas— and part of what I did when I was working with entrepreneurs, I would bring in, you know, a former rabbi, you know, to, to almost check, you know, to kind of look through through where they are personally, because I realized dealing with certain entrepreneurs, we have these fears that can become irrational, and you want to know where they are. Because I've seen them blow up deals and people self-sabotage because of that fear, including myself. Like, I, I went, you know, those fears drove me. So my fear was, again, authority. So that when I went to exit, my, like, I freaked out thinking about letting go and being under, you know, like giving up the reins, and I had to work through some of that. So I went and met with a therapist and processed a lot of that and, you know, and brought a lot of healing in those areas.

Yeah, yeah. And, and so do you, do you run across entrepreneurs that you, you work with that, like, are the, the idea of self-awareness They're, they're kind of oblivious to it. In other words, the way I define that is, do you, do you know why you say and do what you do?

No, a lot don't.

Okay, how do you, how do you change that?

So, um, what I, what I try to do is, is rather than getting into a long-term engagement with people, I do a shorter one and, you know, more of a discovery that takes 2 or 3 months and create awareness around that situation and see how coachable and responsive they are. And so I, I, it isn't my job to change that. I just want to know what are we working with and is this going to be, you know, something where like, okay, you know, like it needs therapists, you know. So I have definitely told people and recommended, you know, therapy and other things. To, to lean into that because it's like, man, I, I'm not, you know, to go for— I call it, you know, the 3-month project is like dating before we get married, right? And I'm like, man, I'm not going to hitch my wagon, get married to this person because this— these traumas and these fears and these issues are going to be right, you know, like, you know, like they're— they distrust things so much that their fear is irrational, that there's, you know No one else can win because if they win, that means they're losing. It's like, well, no, we can all win together. You know what I mean? So those are the types of situations I've seen where I'm like, oh my God, like, like, life's too short for this.

So, so there are some people then that are not coachable and, and you have to walk away? Yes.

Yeah. And that has happened a number of times because I'm like, again, life's too short to work with those people because it won't end well.

So, so looking at what you do as far as helping people put these processes and other items that build value into the company presale.

Yeah.

Is there a reason why every business shouldn't do those things regardless of where they are in the exit continuum?

Yeah, I mean, so fundamentally creating value often can include, you know, creating as much profit as possible. Right? So, so as long as people, you know, want those things, yes. But, you know, the challenge is, like I said, like you're talking about this, this fear and people finding their identity. A lot of times people want to play small and aren't willing, you know, they're almost afraid of success. They're afraid of letting go of these things. So they can't— that's the existential crisis. They can't get through that inflection point to go beyond themselves and let go and actually create the business that could be highly valuable, because part of that value means it doesn't need you in the business, that you should be trained on the business. So everyone, you know, I would, you know, I would say yeah, everyone should, but, but, but not everyone's capable or wants that. Even, even if you show them like this is a better world, and you know, they're still going to be stuck in this other world because they haven't— they're not willing to do the work from, from that side.

Have you ever run into a business that you were talking to that didn't have the potential to add value?

No, with the caveat that there are companies where I, you know, you create a lot more value based on what you're seeing, and others that are running pretty damn good where it's like, yeah, I could probably create some, but, you know, for me to get involved and do all these things, you know, you know, I've always kind of said I want to create at least $10 million of value. Okay, and so if they're kicking ass and doing amazing things, and then it's like, okay, I would just say you just keep on keeping on. Like, you know, there's a couple tweaks here and there, but you know, you're doing a lot of the right things. So it's only because they're creating value so well on their own.

But those are the outliers.

Those are the outliers.

Yeah.

So, so you'd say most businesses have a lot of untapped value, including that a lot of things that create value can be counterintuitive and opposite what an entrepreneur would think.

Give me an example.

So, um, I was working with a company that built websites as part of their service offering, and in going to sell the— if they, you know, they were going to build their own website that website, you know, they want it to be kind of a, you know, an example of the incredible work they can do. Well, it's like, well, if you build your own website, it's— it would cost them $2, $3, $4 million of value loss because A, they were taking revenue-producing people that were billable and working on an internal project. Um, so, so they were losing— it was expenses of those salaries were eating into the EBITDA. The loss of revenue was gonna, you know, cause a huge toll. And so it made more sense, it would make more sense for them to pay a competitor to build their website and they could do it as an add-back and maintain the revenue creation, but pay their worst competitor, you know, the people they hate the most, give them 200, 300 grand. Doing that would make more money, it would be worth millions of dollars to them if they do that than doing it themselves.

So let me clarify what you're saying. So this business, was the, the website was part of their deliverable to their customers, right?

Is one of their service offerings. Not everyone did it, but they often had people building, you know, custom websites, high-end websites. It's part of what they do.

And it was something that they had always done.

They, yep, they build plenty of people for it, and they built their own and showcased the amazing stuff they could do by building their own websites.

And, and but because of the internal costs, both the hard costs and the soft costs, the opportunity costs. Yeah, it was— it made more sense for them to pay somebody else to build the website than they do it internally.

So, yeah. So if let's say it was going to cost $200,000 of salaries, $500,000 of lost revenue, that's $700,000. And let's say they end up paying someone $300,000. That's an add-back that they're going to get credit for that $1 million. You know, you know, if you look at what the profit of that, let's say it's even, you know, $600,000, $700,000 with the add-back, you know, that you're talking about almost at a 12x multiple, you know, that that's worth what, $9 million of value.

And their sticking point was, that's what we do. That's what we've done.

No, in this scenario they actually did what I'm saying. Okay. And it made them millions of dollars. But it's so like, what? Like, as an entrepreneur, you would never do that, right? I mean, you're just like, I'm going to showcase the amazing stuff I did. Like, so I'm saying, that's just, you know, ask for an example. That's just one example of like a decision that's so counterintuitive to anything an entrepreneur would ever think. But from a, you know, from the spreadsheet jockey, you know, back, you know, financial whatever, you know, that, that makes millions of dollars to do it, which, which is like, you, you and I would never do that. Yeah, like, it makes more sense potentially if you wanted to sell ads in a CPA firm to pay someone else on, you know, on contract to do financial and CPA work for you than do it yourself, right? Because of, you know, those kinds of things, right? So I'm just saying, um, there's, there's counterintuitive things uh, that, you know, I call it— so it's not— I call it— but so post-acquisition economics. So you're trying to think about, like, you know, what is your company worth, but what is your company worth to someone else, and what are the things you can do that are kind of like this financial engineering that is different? It's a different way of thinking that entrepreneurs like myself would never think, where you're like, this is crazy.

Yeah, because we're either focused on a problem that we're trying to solve, or we, we see this vision of the future, an opportunity that— and, and we're not— I, I guess it's, it's more of how you frame the question, like what, what is the outcome you really want, right?

Yeah. And in this scenario, they got it, and they're like, you know, we want to sell for You know, I mean, so this one, you went on to eventually to sell for over $500 million because they were doing all those kinds of decisions on top of, you know, we acquiring companies and, and, you know, a lot of other things that were, you know, big moves.

Yeah, yeah. And I, I will say that one of the, uh, common holes I see in entrepreneurs is they don't view their business.

They're not like a business owner, right?

Right, right, right. So, so, you know, this conversation I was having with a colleague, and he was really stressing about taking money out of the company. And, you know, it's like if you, if you owned a share of Apple and they didn't send you their dividend, what would your reaction be? Like, and actually looking at your business as an investment and having expectations around profitability and growth and valuation, return on equity. They don't ever think about it in those terms, but it's actually very liberating when you start to treat your business as an investment.

Yes. And, and for me, part of that process was bringing in an advisory board who was objective and challenged me on a lot of things and caused me to go, oh wow, what— like, why I've been doing things this way, I, I need to think of things differently. And so, you know, including as an entrepreneur, I was drinking my own Kool-Aid around like why I thought my business had a competitive advantage and why we were going to win in the and all these things that were unique, and I realized it was all bullshit, you know. You know, it was— I, I was good at marketing, and we were good, and we did some things right, but man, we were missing a huge opportunity. And so, you know, now, uh, you know, it's, it's helping entrepreneurs even think about like doing the math and doing the work to understand their secret sauce and their competitive advantage and where they can win disproportionately, right? Because I hadn't thought like that before.

Yeah. Well, Drew, this has been very insightful. I appreciate your time. Do you have any closing thoughts?

I'm— I love, you know, I love the entrepreneur world, so I'm excited for people to grow and learn. I know this is the journey that I went on, and many of us, you know, I just know that a lot of us all go through this. So I love that there's a community of people that have these kind of conversations. So thank you.

Well, thank you, sir.

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