Your Business Isn't Worth What You Think It Is | Founder’s Office™ Lunch & Learn

It's Lunch and Learn, and we're in our new studio.

We're in our new studio.

Isn't it great? We got like producers over here, cameras over here, and there's a distracting thing over there where I can see myself on screen, which is super, super crazy. But, uh, uh, and we're missing Jackie, but we get her in 2 weeks.

We get her in 2 weeks. Yeah.

So sometimes, well, we're always live or not always live, but we're live together.

Yeah. Yes, we're in person. Okay.

So I'm Tom Powell. This is Candace Powell.

This is an hour to get me the whole 2 blocks from where I live to come to your house.

Well, then you stop the meat guy on the outside.

My husband is outside talking to the meat guy right now.

Yeah. Which is great. So disaster relief guy was driving down We— the neighborhood somehow, and all of a sudden we got that. So, uh, Lunch and Learn. I know we did a whole bunch of prep, and I was being my total ADHD self, which you'd be surprised. And, uh, Katie's not on camera with us now, so she's across the room, so she can't totally punch me.

Sling her ice hard at you today.

And Angela, same way. So what are we talking about?

We may have new viewers, Dad, so talk about welcome to Lunch and Learn. What is Lunch and Learn, and who's the Founder's Office? No, this is you. This This is you, dude.

Uh, what is Lunch and Learn?

Lunch and Learn.

Welcome to Lunch and Learn. I already said that, I thought.

So, mild elder abuse and education.

Absolutely.

Go ahead.

Yeah. So, uh, you know, this week I'm going to be doing a speech at, uh, Genius, uh, with Joe Polish and group down there. And if you haven't ever seen Genius, check into there. They do these 10-minute talks. So I don't know if it's live or not for— if you're not a member. I think eventually it makes it out onto the scenario. I actually really don't know how it works. However, in doing that and talking through with my good friend Joel Weldon, what am I going to talk about and come up with speech topics, we said we will talk about the Founders' Isolation Paradox. For those of you that don't know, I do have a doctorate, and one of the fun things about having a doctorate is you're expected to name things once in a while and name afflictions if you can. So this affliction came out of all of our work of working with founders for almost 4 decades. And several billion dollars in capital that we've deployed in over our companies and in our own family office, looking back at our history. And there's a point in time that I'm like, that's isolation, that's isolation, that's isolation. But the bigger part was when we got successful and said, that's still isolation, but it's a different isolation. And it became the Founder's Isolation Paradox.

Mm-hmm.

That's when we're surrounded with great attorneys and great accountants and great financial planners and great team members and boards of directors and family And all of that, and it's all intertwined, and they're still in the center of this universe, this almost nucleus is the founder. And it doesn't seem to go away until about $100+ million in revenue. And even then it doesn't seem to go away, right? And it doesn't seem to go away, I will tell you this, on repeated launches of new companies.

I don't know if it ever goes away. It's that you just kind of build skills and muscles to deal with things that would have You know, thrown you before that don't throw you now. It's funny you talk about this because I have a one of my best friends. Her husband has had a very long successful career. He decided to leave his company and launch his own in the last year doing this, and and he's they're doing very well. She they're going on vacation. She mentions she's like he is it sucks we're leaving for vacation. He is. so grouchy, so stressed. And I was like, oh, I didn't warn you that vacations are not that fun when you are a founder. Like, they get progressively less fun when you have your own business. And that's one of those things that you just kind of really, having been a serial entrepreneur, you kind of are used to vacations add a layer of stress where I think in a typical Like W-2, 9 to 5 as your escape and as a founder. So, and I think that's like one of those little extra pieces of that founder's isolation paradox where it feels like there's no real escape sometimes till you hit a certain level or until you've experienced enough challenges that things don't really maybe stress you out as much as they used to.

Yeah. When your resiliency, I think, raises to a level of where The founder's isolation paradox is still there, but you tolerate what's going to hit because you also know you've got survival skills that'll generally get you through anything.

Yeah.

As we kind of jokingly say, as long as you didn't kill somebody, we can fix it. We can figure it out. We can get through it. Don't backdate something because that— somebody would say, we didn't sign the document. And we start, you can't backdate because that's actually creating a crime. So you put effective date types in there, kind of those things that you Learn as you go along. That's what this show's about, and it's about founders.

Bring it right on back, Dad. Thank you.

Candice has been a founder on her own without regards to what we do on a number of different ventures, and we both have the joy of having fabulous wild success and wild failure.

Fabulous failure.

Sometimes in the same day, it feels like.

Sometimes at the same time.

Sometimes at the same time. And your wicked stepmother says, both of us should have come with warning labels.

Yeah.

And I try and let her know I did. It just rubbed off.

Yeah.

And for those of you that know founders, that is true.

Yeah.

That is all true, right?

It is true.

So.

So today's episode, to bring it, to bring it right on back around, I'm here to keep my dad on track here.

Wow. Just kidding.

This is a topic that I think is, is a hard one for a lot of founders, and every founder at some point will experience it. Your business isn't worth what you think it is.

Oh.

Um, so let's, let's talk a little bit about that. We also wanna say, even though we are now together, please still feel free to drop your questions. into the question, uh, Q&A section. Um, we've got producers in studio and they will, um, they'll make sure we see those questions.

And it's on, it's literally on, especially a day like today, it's on any type of topic. Doesn't just have to be what we're talking about. What are you dealing with as a founder?

Yeah.

Uh, obviously we talk a lot about raising capital and how do you get through those processes? Uh, that is in back shows, that's in future shows. What we're also talking about is how you extract value, which is I think where you're going on this conversation here. Is— and we were laughing about it because at one point we owned a mortgage bank company and we'd have people say, oh, you know, my house is so valuable. And the appraiser would come by and they'd open up their drawer and they'd show them the tack paper. I don't even know if people still use tack paper anymore, but that would be like, look at all this extra stuff I did in my house.

Right.

And the appraiser's going like, we look at a few things. What's the condition of your house? And what's the square footage of your house? And what's your neighbors' Yeah. And that's because that's a market value, and it's usually a trailing value, meaning as markets go up, they're using the last several sales, usually 3 or more sales. And so you're trailing behind. The problem with that also is as markets are going down, it's also trailing the downslide. Businesses are somewhat the same, except for that if you use a business broker and you get a valuation, they have a number of different ways To calculate how that's done. And by the way, if you equate it to real estate, it makes it a little bit easier. If you've got a building and you've got tenants in there, then you have a valuation based off the cash flow. However, if the tenant in there is Microsoft and they've signed a 20-year lease, that's a different tenant than if you have mom and pop, right? Because that Microsoft tenant is far more valuable. So even if they're paying the same money, The value of the building jumped up tremendously. And then they still say, okay, but what's it cost us to replace the building? And that also matters. Yeah, right. So all those things go into business the same way. But the end of the deal is a willing buyer and a willing seller and the ability to actually affect the transaction and make it happen. Right.

I think that's such an important distinction. And I think a lot of times people think of what is their business worth in connection with maybe like just a simple sale of whether it be an asset sale or however you're approaching a sale. There's so many reasons that the business valuation matters, right? And that business valuation may change depending on what strategy you're looking at. If you're looking at a strategic buyer, And this is potentially— has huge potential growth for both organizations, that value might be very different than going to a broker and selling your business, right? Like, there's various formulas. Like you said, there's various reasons to calculate. Now, what if you're using— what if you're getting valuation for other reasons? What if you're needing to actually go get more capital?

Yeah. So, you know, there's, there's so many parts to this topic, uh, that obviously cause us the ability to go off in tangents and talk about— let me give an example of somebody we helped not that long ago. Uh, a friend came and said, hey, I didn't— I built this company. It was an ancillary company, by the way, meaning it wasn't his primary company, which is not an unusual thing.

Mm-hmm.

Right. It wasn't the primary company, ancillary company. And he's like, and I just got an offer to sell for $10 million. This was a couple of years ago. And I looked at it and said, well, that's awesome. He had sold his other primary company and was now living off this. $10 million was going to be a ton of money. 68 years old and had gone through a cancer scare. And he and his wife were really excited about getting going on with life. And they're like, $10 million is great.

Mm-hmm.

I said, but one of the problems is, in looking at your financials, you take about $2 million off the company. And he said, no, I don't. I take $400,000 as salary. And I said, well, your wife takes a salary. You run the car through there. You take vacations. You do all these things. You call your vacations business trips because you tack on, which is totally legal with the IRS. There's nothing wrong with it, but you're really taking $2 million out for your lifestyle on this company. And at $10 million, by the way, the way you structured this, you are going to pay a lot of tax On this, so you're not going to get full $10 million. But even if you did, you only have about 5 years.

Yeah.

It's like, wow, so what do I do? So we met with them, we talked about a number of different things. We walked through our programs. We looked at the capital alignment method where they were. We extracted how they had actually had ownership in there and balanced out a number of key factors. We also removed some intellectual property, did some licensing agreements, and then a building lease. And so when it came down to it, unbeknownst to us, there was private equity that was actually looking to buy in this space. That wasn't part of the calculation.

So again, a strategic buyer.

A strategic buyer. Much different.

Very big difference.

$45 million exit. Mm-hmm. Uh, almost no taxes in the way that it was structured, retained the building. And now the buyer was a, was a better tenant than Them being the tenant in the building. So the building that they extracted had the same rent. Yeah, but the building value now became much, much higher. So then they could turn around and sell that on a 1031 exchange scenario. So that's an example of what they could do.

And that's an example of how what your business is worth changes depending on what the strategy is. If you take some time to make some really big, you know, to make those changes, right? That's not— those aren't changes you make when the buyer's at the table, when you're in the 11th hour. These are changes you're making 3, 5, 10 years in advance.

3 years is usually great. 10 years is phenomenal. 6 years starts getting into your trust.

Yeah.

Where most everything gets pretty bulletproof. And through the use, you know, we've talked a lot about insurance, through the use of certain insurance products, through a use of your entities and irrevocable trusts, you set up— so 6 years is a really good plan.

6 years is great.

And it doesn't matter that you actually are going to leave because there's lots of ways to stay in that business and extract a lot of that capital off. without actually having to leave the business and without taking on, um, business partners specifically. Yeah. I don't know. That's probably where you were gonna go with this.

So, I, I am, uh, I'm like steering to the skid, Dad. I am like trying to just drive this wherever you're going. So that's, that's great. That's great. Okay. We do have some questions coming in and I, I'll get to those. Thank you so much. Um, I wanna talk a, you talked a little bit about, The founder's number versus like the market's number, having a strategic buyer number. Let's move into like what actually drives enterprise value.

Well, let's back up to just a second there too. What we do at The Founder's Office, and we seem to be unique in this, and there are, I'm sure there's lots of other people out there that claim the same things, but we are the founder's advocate. I mean, and what that means is when we're looking at this, We're looking at the overall founder's life in there. And there's a great organization called CEPA, right, which is Certified Exit Planning.

Yep.

And they do a great job. Now, what we have found about most of those CEPA— and we love working with CEPA, so by the way, this is not a diss on them— but most of them are financial planners that look at the financial planning and help them do that. And that's really important. But they haven't necessarily done all the banking, Uh, the structured finance, the legal. Once in a while we come across a SEPA who is actually legal, but you're like, okay, we need to be able to put this. And so they pull together a team.

And that is the point of the organization.

Absolutely.

We're the team. I, I don't— yeah, there's no one silver bullet. We rely on outside experts all the time.

That is the who, not how.

Absolutely.

Um, so, so why I say that is because enterprise value has to do with It depends.

Mm-hmm.

What happens to most founders is they're so central to the organization in some manner, whatever their unique— Dan Sullivan talks about a unique ability— whatever their unique ability was became what the company wrapped itself around. So let's say they are phenomenal at cultivating the best relationships and holding on to those, or maybe they're phenomenal at holding on to the government contracts, or they're phenomenal at operations, which is generally not where they're phenomenal at when they're founders, but it happens. And so they've built this company that's around their unique ability. And in a lot of cases, what founders are really good at— putting out fires.

Yeah, good problem— like, typically good problem solvers.

They're good problem solvers, and they started with that.

How they probably were in the founder situation is they were probably solving one problem. And then, you know, moved on to— it became a business. We almost had a joint. I'm sad that that didn't actually happen.

This puppy was going to come get us.

One of the puppies was going to come in. He should have. He would have.

That would have been hilarious. Did he have— did he have the lambie with him? He pushed. I love it. Yes, we are—

full context, we're like an ADU. We're big dog people, so we have all of our— we have like anywhere from 3 to 10 dogs on property all the time. There's the dogs.

And it's not a small property. It's a very unique—

Dogs joining at any point in time are always a possibility.

Children, grandchildren.

Yes, and children. So, one of the things that I think we see a lot On enterprise value, I would say majority of the time when a founder comes to us and they tell us what their business is worth, they will tell us, they think they, they will tell us what they're worth. They're usually going off of their highest performing month or quarter, and that is how they are basing their enterprise value. I feel like that's at least for the first couple rounds of founders, we see it quite often, not in our clients per se, but I will say we see it a lot.

How many times have you— I mean, even running sales organizations and things, how many times have you seen that salespeople in particular, most salespeople, not all salespeople, but they take their best month and they annualize it?

Yep.

And then they annualize that and multiply that by whatever there was. And then they take out their expenses and they minimize the expenses.

Yeah.

And that's what we find with a lot of founders in their companies because they know Their tax returns and their real life are not the same thing.

No.

And they know that their tax returns, when they go to see the bank, 2 years ago seems like a lifetime in a founder's life. And it is. Oh, it is. It is a lifetime in a founder's life, right?

Yeah.

So they're used to saying, no, we're forecasting now based off of last month's production. And now that's our value.

Yeah.

And that's not how an institutional or a Generally, any buyer should probably buy a company.

No, not recommend, not how we would recommend.

And by the way, we are on the other side a lot of times too, where we're helping somebody acquire a company.

Yeah.

Right. So, it's coming in and saying, okay, what's that right value? And we do believe in getting a good price on a company, but we also believe in paying fairly for that company. So—

And meeting in the middle sometimes is the tricky part. I would say, There's so many other layers than just like kind of that top line performance number.

Oh, absolutely.

That's part of the equation. And we, we like to know that information, but a lot of times we're looking at IP, documented systems, founder dependency, customer concentration. Those are the areas that I think a lot of times that we are not able to get. Yes.

What about strategic buyer, though? Because again, when you come up with enterprise value, you've got this calculation. You can be doing the spreadsheets. You can be doing all the various pieces and inputs. And that is very important.

Yeah.

However, let's switch it back to real estate for a second. We have homes up at Lake Tahoe where we live that all of a sudden were $25 million homes or beautiful homes around the lake. And all of a sudden, it sells for $125 million. How does that happen? The house didn't jump up in that much value. What happened was you had multiple players that have unbelievable amount of cash.

Yes.

And they're bidding for that because it fits their need. It's on Nevada side of the lake. There's only a handful of those properties that fit this person's needs. And so all of a sudden they buy not just that one, but many of them type scenarios. And the same thing happens with companies. By the way, this company solves a need. And it's the one— and it can be, in certain cases, is that it takes them off the market because they're going to be a competitor. And you look at it and go, oh, it's antitrust. Well, is it? Or is it that they're growing and the person now had an exit and this company has the capitalization?

Yeah.

So enterprise value is a tough one.

It is a tough one.

There's a calculation, but it's not necessarily the right calculation for any given point of time.

Yeah. And we hesitate to like assign a direct number a lot of times right off the bat. There's so many reasons to continue to explore that number, continue to push the envelope on what it is that you can do to grow that number, whether it be through IP, through structure. Founder dependency is a big one. We have to deal with founder dependency almost—

Huge one.

Almost 100% of the time we are dealing with founder dependency.

And it's an affliction. And it's an affliction that we do over and over again, myself included on that. So it's like, it's a learned scenario. Dan Sullivan has so many wonderful tools out there and Dan Sullivan's still afflicted with it.

Yeah.

You know, type scenario. So, and I hate to say that, Dan, I know if you were watching this, you'll be like, I am not. And Babs would go, yes, you are. So.

I, I think it's real though, because I think founders, uh, are, you know, have some sort of addiction to, to what they're building and it might just be to building in general. Which oftentimes it is.

I think that's my addiction. I, I really think it is.

It is what you're doing.

And so, um, how, how well did I do retirement the few times I've tried it?

You are constantly in recovery from that.

My staff who's been with me for all these years and various times, lots of companies.

One of the things you can do is you can, you can leave for bits of time. You do leave. Oh, I do. Yeah. Yeah.

You leave. I went skiing down in Chile for Yeah, several weeks.

We don't, and we don't talk to you, and we all celebrate because we're really excited. So, uh, we're—

I know you're leaving.

We're really— trust me, we all have it on our calendar. We're super jazzed. So, um, actually, and that's probably a good point, is your team excited when you leave? I think that's probably an indicator of how dependent your organization is on you. If they're stressed, if it's causing them more challenges, or if they're like, shoot, what are we gonna do? That's an important thing. If they're excited because they're like, whew, finally this guy's getting outta the way, we can actually execute for a little bit without the, the chaos train coming through. That's actually probably pretty great. I would say.

Why is everybody shaking their heads?

Everybody's looking.

You know, so it's not just, it doesn't even have to be for a long vacation. Sometimes it's just like, he's outta the room, we can actually get something done.

We can get something done. I mean, you and I did it today. We were on a call with a very specific, uh, agenda. That agenda has now been moved to a new call because you and I were on the call and not a single thing was touched on that.

Well, the biggest problem was both of us were on the call.

We were on the call. Yeah.

We were on the call.

I derailed it. So I think that's a really excellent, like, thing there. Um, so we do have some questions. I wanna, I'm gonna get to, uh, Mandy's here actually first, cuz I think Mandy's is, is timely because We have, we have founders that come to us in this, in the early stages. So, Mandy, I have been debating whether to start a company or an NGO for a while now. I am frozen by fear of failure to launch and no funding to invest. Any advice you have would be appreciated. Wow.

Um, this go— I mean, philosophically, one of the things about starting a company is When you do set out on your own venture, if freedom in of itself is not part of that, if it's to— meaning freedom of your thought, freedom of your activities, freedom to come and go as you please, which by the way, none of those actually exist when you're really in it at times.

True.

Because it becomes this, again, the founder's isolation paradox kind of ties you up. However, very rarely do I come across a founder that's made it through some of those learning lessons that doesn't think that it's been the greatest ride of their entire life. It may have driven their family crazy. It may have driven their bankers crazy. They may actually have looked and said, I would've made more money had I stayed in corporate America. Uh, there's a lot of times you look and say, gosh, I don't have a pension or a retirement plan type scenario. And we help founders with all of that, right? So this is part of it. Mandy, the first thing to do It's not about setting up your LLC properly. It's not about even getting the right attorney or anything else. It's really getting to that core value that at the end of the day, if you succeed or failure, is that going to break your spirit? Because it's not about— and I use skiing as the example and did a speech on that. If you fall down while you're skiing and you get back up, you teach yourself resiliency. And being a founder has that ongoing opportunity, right? You will never stop learning lessons. It is not— Yeah.

I think—

A little faint-hearted.

Changing your measurements of failure and changing your relationship with failure. I just, I text my dad, what, last night, 2 nights ago, we, my kids, we were watching Meet the Robinsons.

One of my favorites. If you have not watched that, one of my favorites.

Movie, highly recommend. It's a cartoon. It's a children's movie, Meet the Robinsons. And you need to change your relationship with failure because failure is inevitable no matter what in life. If you're not failing, that sounds like you're just playing it so safe. You're not taking any risks. And that's where really a lot of the joy and so much of the fruit of life comes from those risks. And so, the failure relationship has to change. And I think it's one of the things we do the worst in schools is failing kids and expecting them to be really well-rounded and like you must be all A's in every area instead of looking at their And we've made failure this awful thing and we call things remedial math. And I'm like, that is incredible that every kid who's taking remedial math should feel so proud of themselves because they are learning something that is really, really hard and they're flexing a muscle that maybe doesn't come naturally to them or they just don't have enough support in. And instead we start these relationships off really, really early on in life about failure is bad and you don't wanna do it. And if you do it, it's a mark on you forever and everyone's going to see your failure first. And in reality, we should be wearing failure like these battle scars of pride, like tattoos on our body of like, yes, I have tried. I have, I have like totally swung for the fences and it failed beautifully. But I tried and I, and most importantly, I got up and I survived and I did it again. Or maybe I didn't do it again, but I learned a hell of a lot about myself.

If you looked at every single thing essentially in life that actually ends up being great.

Yeah.

It is because of the ability to get back up and you start with the smallest, right? A child is learning to walk, we celebrate when they take their step. We don't punish them when they fall down and say, oh, no more walking. You can't do that again, right? I mean, from the very beginning, boy, I tell you what. Now, we may once in a while make fun of them. Well, you look like you're kind of drunk. But that's to ourselves as the other adults in the room type scenario.

Yeah.

But of course, they learn and they continue to learn and they continue to grow and they learn. When it's the older person and they fall down, we do giggle and kind of go, oh, I don't do that anymore.

Right? So I know, I know.

I don't fall very often, but that's okay.

We have lots of pictures though, if anybody's interested. Our favorites are when you have had a pretty good wipeout skiing because you're such an incredible skier. We are quick to pull out the camera.

Wicked Stepmother is so quick to pull those out and put them on the On the photo album. And she puts them up in her PowerPoints when she's doing her speeches and different things.

Yeah, no, it's so important.

So, go to her industry, right? So, biochemist, scientist, looking at all this stuff. Could you imagine scientists that were afraid of failure? Because we would have nothing.

And didn't take the opportunity to learn from failure because almost at every failure, they're taking a look at What went wrong and what went right?

Yeah. Where do you take that?

So, I had a total bust with my— it was great, actually. We did a potato harvest, our first time trying to grow potatoes. One, I didn't do it at the right time of year at all. And, I jokingly sent out to the family because we got 4 itty-bitty teeny tiny potatoes. They are tiny. I was like, don't worry, we're potato abundant. One, my reaction versus my kids' reaction, because I thought it was funny. My kids thought we were the coolest people ever to grow our own potatoes. Like, their metric of success was like, holy cow, we grew potatoes. I think you're pretty cool. And really, when I think about it, I'm like, we proved we can grow potatoes. This is kind of awesome. Why am I deciding that there's some number around it that's marker of failure when really I grew a potato? Isn't that what I sought out to do? My kids had a great time.

Indoors with lights, right? Yep.

We just wanted to see if we could do 'em in our solarium.

Yeah.

We're gonna try it again because now it's heading to a better time of year to grow potatoes. But—

What if every farmer who had a failed crop stopped?

Right.

We wouldn't have farmers.

Yeah.

Ranchers that had all of a sudden, you know, I mean, anything that you look at. Yeah.

So getting comfy with failure is probably the biggest, and that's probably too, like leading back into what is your business worth? I can tell you your business is probably worth a lot more if you've failed a lot. If you've had pretty good failures because you've probably grown.

You've made changes. You know, we were working with a client a couple— well, probably 18 months ago, I guess. And one of the things I really liked about him was that he had gone through so much crap.

Yeah.

And each time built a new wall around that and a new moat around that. And in most cases, What makes founders unique is this entrepreneurial spirit. And the entrepreneurial spirit is different than most people. Most people say this is a problem and they tolerate it. The entrepreneur says this is a problem and I can solve it. And then the entrepreneurial spirit is this is a problem, I can solve it. And if I have this problem, other people probably have this problem too. And if I solve it for them, I fall into that Zig Ziglar pattern. If I help enough other people get what they want, I will get what I want.

Yeah.

And that's that entrepreneurial spirit. And that's the difference. You can be a founder and never be an entrepreneur. You can be an entrepreneur and never be a founder. Right? But it's that spirit that is a lot of times that we're working with and trying to extract that out and saying, where do they go?

Yeah. I think one of the cool things about being a founder too is, is that you get to measure your— you get to Define what success looks like for you.

Damn good thing, because everybody else would look at me and say like, wow, what a failure. If you count my failures up, it's like watching, you know, some of the basketball players. And you saw it with Michael Jordan, right? He's like, yeah, I got all these trophies on the wall, but look at this, I also missed so many key shots. And I do too. And it just is, you know, you look at it, you're like, ah, there's this point, point, point, point, point, point, point. And it's like, yeah, yep. And it helped me build this.

Yeah.

I mean, the SEC is a great example, right? I mean, from that standpoint. And now somebody actually pointed to that the other day. And they said, well, you took on the SEC to do this gag order type scenario so you wouldn't be gagged anymore. I said, no, I wasn't gagged. I wasn't afraid of the SEC anymore from that standpoint, from the gagging of me. I was talking pretty openly about it. What it was was that if they could gag me, they were clearly gagging others. And so I took my entrepreneurial spirit and said, I can solve this for others. I haven't figured out how to make money on that scenario, by the way. But, uh, I certainly have figured out, we estimate it's, you know, 10,000 people.

You've gotten really good at spending money on that. So.

Well, you know what? I felt better because Mark Cuban's, I just went back and looked at his scenario when he battled the SEC and he spent almost the same time.

Yeah.

You know, it started in 2004, battled up, it was 2013 by the time they actually got that thing all settled up. He spent $12 million, he estimated. Yeah.

It's, it's an incredible—

Mine only is about $10. So a little less.

A little less. Good job. Way to go. See, money in your pocket. It's basically coupon. Um, so Mandy, I, I really hope that you, uh— Bring it back. I'm bringing it back. Sorry guys, I gotta constantly bring this guy back around. Uh, Mandy, I really hope that you, uh, I hope that helped. I hope you feel comfortable taking some early steps into that. Um, we're here to cheer you on.

Hey, man, so I'm going to give you some tactical things, though.

Oh, yeah.

So we talk about this, but one of the things that happens when you move from being employee to founder is most of the system today, even though 250 years ago when our founders were starting this revolution, and that really was about independence in so many ways. And when they set up the Constitution, you know, 11 years later, that was really about Their freedom, financial freedom. Most of the systems around you now, the banks, the lawyers, the regulators are all about trying to actually strangle you for being a founder. And not in a bad way, it's just the way the system is. So if you go to get an— and I don't know what your business is going to be, but you're going to go get a loan at some point, they're going to not only lend to your business, they're going to lend to you personally. And that's a separate loan. So, you really need to go out to our websites and look at some of these things. We have a lot of free information on there about looking at what's called the Capital Alignment Method. Now, I think you mentioned one thing. She doesn't have a lot of capital.

Right.

So, what do you do? Well, in today's world, being able to drive revenue is probably as fast as it's ever been.

Yeah.

And to that point, I was walking with a young man and he's telling me about how people his age can't buy houses. And I'm looking and saying, well, I know lots of people that have bought your houses. We're working with one, you know, it's a nice young man building, blowing and going on a business.

Right?

It's like, certainly can build— the opportunities exist today. It's about how do you focus on it? What do you do? Get in the rooms of other founders so you have a support network, but don't spend so much time on the support network. Actually spend time creating revenue and then get the right people in place. Find out the who.

Yeah, for sure. Um, sorry. No, thank you, Mandy. I hope that helped. So, one of the things we tend to do, or one of the things we really do, is help move value out, you know, between the founder and the enterprise. We really want to be clear about that because a lot of times the founder's value, a lot of the founder's wealth is tied up in the business, in the organization.

Yeah. So, I think we really try and do We've defined it. We do 2 things, I think, really well. We look at how to identify where the founder is inhibiting the value of the company.

Yeah.

So a friend of mine a number of years ago, and he's ended up selling 5 companies to Microsoft. His first company he sells to Microsoft, and Microsoft says, you get to stay here for 2 years. Golden handcuffs. Was totally normal way to do it because Microsoft saw that he was actually the key part, and it would take about 2 years to extract Mm-hmm. Him out of that company of what they were buying because they were buying the technology. He goes back in, he works for the company, he looks and he says, you know what, uh, I can't stand this anymore. And at the end of 2 years, he goes out, he starts another company. Microsoft comes back and says, we want to buy that company. This time he's smart. He's like, I'm not taking a 2-year. He still had built the company around him, so he took a 6-month and they were willing to buy it. He then realized, wait, there's a business here. Microsoft needs all these companies. And they started looking at it and saying, okay, so now I'm gonna build companies, Microsoft.

Microsoft fell.

And I'm gonna build companies, not me.

But again, that's a strategic buyer in mind.

Absolutely.

Building with that intent, intention, removing, uh, thank you. Thanks, Dad. You didn't read the notes, but that led me right in. So, Really telepathic. I'm right here. Yeah, right here. Clarity about, uh, decisions, roles, systems. Um, less dependency on the founder is the biggest piece that we work on. Um, that's financial alignment. All as far as founder dependency, we work with a lot of clients that their organizations have grown so big, um, several hundred million dollars, and we cannot believe still how much risk is still tied to, I mean, we can't believe it.

Well, right now he's personally signed off all these loans and it's like you'll, Company.

Yes.

And, and sometimes it means that they gotta leave their bank. But the, you said the other one was the intellectual property. Most founders put their money and they don't document it properly. They put their time. Yeah. They don't get paid for that properly. And they put their thoughts into that company and they don't separate that out. And so the company has a value, but those other things all have separate values. And so looking at those, Extract it out. And then the other one that they oftentimes do is they maintain the closest business relationships. So they're stuck getting sold in that. But the second part, and I think you were probably heading there because I'm just reading your notes even though they're on a piece of paper, but, you know, is we also extract the company from the founder.

Yeah.

Because, you know, and I use Mills Lane, and for those of you that are too young to know who Mills Lane was, Candice remembers this. But Mills Lane taught this just great scenario of he's this lawyer and then becomes a judge, and he gets famous because of the biting of the ear, right? He's the ref in the ring for that. But he's just a really tough Nevadan, and he starts a— or he doesn't start, but they come to him and say, we want you to do one of these judges shows.

Was Mills Lane famous everywhere? I just know Mills Lane because I'm a Nevadan. Like he was famous.

Well, he's famous through the biting of the ear and being the, uh, you know, in the ring with them. And he was— then obviously, yeah, we know who he was.

Yeah.

But, um, so yeah, I mean, you knew Mills, so that was so— but Mills is doing this TV show, and I think it was Judge Wapner was the, you know, the People's Court or whatever it was. And so they— and Judge Judy was just kind of starting at the same time, and he does his first year It's going fabulously well. Producers come in second year and they're like, this is what you're going to do. And Mills goes— if anybody knew Mills, he'd do this— be like, I'm not going to do that. And they're like, no, here's your contract. And he goes, uh, no, I'm not going to do that. And they said, well, you have to do that. Here's a contract. And he said, uh, nope, I have fuck you money. And they said, what's fuck you money? And he goes, fuck you, and walked out.

So for our producers doing the F-bomb, we—

That's only 2.

Yet again.

It's only 3.

It was 3 or 4, Dad.

3 or 4.

Okay.

No, it's critically important because it is the ability to walk away.

Yeah.

And so when you have that ability, when you find yourself with a regulator, when you find yourself with a bank, when you find yourself with partners, when you find yourself with a buyer, when you find yourself being held hostage even by employees or other things, yes, to simply be able to say I quit.

That's freedom.

That's freedom.

I wanna end this cuz we're wrapping up on time. I wanna end this with a couple of prompts for our audience to take. I know we've got more questions. Still got some more questions. Oh, uh, let me see. Sorry. Uh, we're, we're still perfecting this like in-person thing.

Intellectual property.

Perfect. That, thank you for that because that leads me into Uh, some of our questions back to the audience. So what would be our first step in separating out our intellectual property? And that literally is one of my questions for the audience. What does your company do well that is actually documented and repeatable?

That's the first part. What you just said, that last part?

Yes.

Because most people will say, oh, that was my idea. But they haven't documented it into processes and procedures, and they haven't named it.

Yes.

So, you know, again, back to Dan Sullivan, he's got great books on, you know, naming it and getting that stuff and moving that through the process. And there's these organizations that help you do that. By the way, the Founders Law Group, part of our organization, we do do that. So we help founders move through that process and say, identify it. Where do you go? It's probably— probably got far more than you think. And it's probably a little bit longer process to actually get it done.

Yeah.

So, but the first thing is naming it. The second part is naming and implementing and looking at the process.

Yep.

Because the process is key.

Documenting.

Document.

Repeatable. It needs to be part of your secret sauce for your organization.

And then the other part is to extract that value out in most cases, not in all cases, this is oversimplification, is When the founder can set up an IP company and that's where the founder licenses the IP, and then the license— that IP is licensed to the company. When it comes time to exit, either they can include that or put that in the price on top of it, or the new company that buys it is now paying a licensing fee.

Yeah.

Right?

Yeah. I mean, that's, that's a lot of times where we've seen that value, or at least Just the ongoing revenue.

Why is this so important? Because if you look at Wall Street, not just Wall Street, but publicly traded companies in the United States, it is estimated that over 80% of the value in Wall Street, in all of those publicly traded companies, is in what's called intangibles. And that's intellectual property that they own. And if you look at how many patents and trademarks and things Apple has done, it's not one. It's thousands. And sometimes Google puts thousands out in a year.

Yeah.

Right.

Yeah.

That's, it's crazy. So that's where you build wealth. That's where you go and you build longevity. And that's where it gets—

It's taking the skills and the things that we see working that big companies are using every single day. They have entire departments committed to it. Yep. And implementing that in your organization to, to benefit from that learned experience. So, I've got a couple questions for the audience just for you to take away, and then we'll go to— we've got some cool stuff to announce today. So, for our founders listening, what is one part of your business that still depends almost entirely on you? Really take the time to think through that. If you left for 30 days, what would fall apart first? What pieces of the organization could not could not make it till you got back? What would fall? Um, look at your customer concentration or employee concentration. Do you have a rainmaker in your organization that if they left today, your company would suffer significantly? You have to know those things. Um, a lot of these are just at least taking the time to face them head-on and Not waiting till they face you, right? Um, we're not saying do anything about them today, but you need to be aware. It's kind of like—

There's one more that I came up with for that 10-minute talk, and it's called the toast test. And the toast test is, if the company had to close down today, what happens to your finances? And so, yes, if, you know, if an employee loses their job, then they go work for another job. But the problem with being a founder is that in most cases, You have, and you know this, I mean, we, I know this a lot. Yes. Uh, you have trailing liabilities. You have trailing liabilities with just shutting down the damn LLC.

For years.

Right? For years. Years that you go, you don't just get to go to the new job. Yeah. And you cut it off. You're like, and here's the—

That's one of the gifts of a founder. You get to resolve things. I literally just still resolved a couple things from, from a business that— Yeah.

It, and it's like, wow. But oh my, my attorneys take care of it. No, they don't.

Nope, nope, nope. You're taking care of it. And you're paying a lot of money typically to take care of it. So, but it's fun.

So tell me.

Hey, yes. Well, let's— I, we're live and we, we, we're in person, so we don't know how we're doing this right now, but I'm, I'm gonna just—

we need cue cards.

Go to our— I know I need a cue card. We use a system in-house.

We need audience too. Where's that?

Oh, I know.

Do you not have that plugged in?

No, she does not.

Wow.

We use a system. We've been following a process for our— your career. I just chime in and have taken it, but we follow a process. We use a system that we follow for our clients, how we identify a lot of times the founder's isolation paradox is within these pieces, within their structure, within their risk, Within how they're, how dependent their organization is on them, various layers. It's a pretty extensive—

It is, but usually we see it in about 3 minutes by looking at their operations team.

Correct.

And their eyes, as soon as we start explaining it, their eyes are like, and then the spouse?

The spouse always knows.

And then they all giggle. And it's a scared giggle. It's a giggle. It's a scared giggle type scenario.

We've been working on our system to bring it more available to other founders and other advisors to founders. It's still our secret sauce. It's still what we use internally. We are inviting a few people to maybe see if it works.

Is this—

See if this—

I know.

So we wanna see, I know. Yeah.

We're rolling Compass out.

We're rolling Compass out. So again, this is our baby. This is like the thing we've been, we use, we built it, it is ours. And we are inviting a few founders and advisors.

And the wheels are gonna fall off. It's gonna break.

I, yes. That's right. To, yes, exactly.

Huh? Thank you.

Angela's sharing the link. So if you're interested in being considered to be one of the founders who maybe gets Or advisors who gets to participate in this trial. Again, this is built for us. This is a backend system that we are seeing if it is of value to people that are in business or advising business owners. Please, uh, scan the QR code and submit a request form. We are looking at a few founders and advisors who might be wanting, might, might wanna participate in that. So yeah, we're really excited.

So this was kind of fun conversation I had with you and your sister earlier in the last 2 days was, you know, why do we keep doing business? But one, it's just inherent in who I am and who we are and who you guys have, have, uh, become or are. Um, so when we see a problem, we create an opportunity and a new business out of it. So this is new business functions. We're going down saying, okay, these are some of the tools we've used. It's in the insurance business where we'll look at it and we've brought some, a number of different insurance guests. It's like we've utilized these products to help us do that.

Yeah.

So, you know, anytime we're looking at it and you look at it and you go, well, this is the same thing that, that Mark Cuban does. He goes out and he's like, this problem needs to get solved. And it doesn't matter, you know, it's not because trying to create more wealth, that's fine. And with wealth becomes opportunity and different things. But it's like, I just inherently, we see a problem. And so, what I'm proud about the Compass is it was a systemization from the team. Coming up and saying, look, we're doing this, other people could use this.

20 years of how we do more than that.

And I think we even used our outside resources. I think Joe Stolte's team helped us put this together, who's been a guest on the show, our own internal people, and said, okay, this is how we can make it usable elsewhere, right?

Yeah. And we use the same process. Like, the process is The same, and I say that loosely, no matter where you're at. We have business people that are really going into launching businesses, and we have people that are in, you know, several hundred million dollar businesses. It's not that the solutions are the same, but what we look at and identifying where the founder is, um, at risk, where the business is dependent.

Does it matter what size company they are?

Really?

Nope.

Matter. And when we work with founders earlier on, we can usually set them up structurally so much better.

Well, that's one of the things with one of our young founders who's doing incredibly well. It is the old adage of, best time to plant a tree is 30 years ago. The second best time is now. And so in that case, and that goes back to the question, is the best time to look at those things, don't get stuck In the weeds.

Yeah.

Build, build revenue, all these things.

Yes.

And have that and bring the right advisor to you.

And in some ways this—

That's super exciting.

Yeah, it is exciting. The system makes it easy. Part of it—

It surprised me.

I, yes. Part of it is, uh, the founders we typically work with love to have these tools that we have at their disposal. So we've been slowly releasing parts of our backend to our active clients because they wanna see it in a tangible form. And it kind of expanded from there of like, wow, we could really help more founders if they had access to these tools and these reporting. So I also want to— you are starting a new season of Powell Perspective.

What?

Well, you know this because you're doing it. I want to— so I want to just let our audience know we've got a new season of Powell Perspective coming out. It's really exciting. There's some old content on there, but a new season is going to be launching. Soon in the next few weeks.

I'm so young on some of those.

So young, just a baby. And so if you want to get the new granddad version of Powell Perspective, you can like and follow. And if you click auto download on wherever you get your podcasts, the nice thing is that's what I've been doing lately.

I still don't know how to do that.

I know, I will help you. We'll get one of your grandkids to help you navigate your phone. So that's exciting. Yeah, there you go.

I'm excited. It's been fun. It's fun recordings. Uh, your younger sister has been taking me through my background in life and, and experiences, and we keep recording these different things and being like, wow, it's actually really interesting. Yeah. Um, so it has been interesting to go back there. So it is a founder's life experience. Uh, The Powell Perspective is simply about, you know, if you ever looked at my library or my experiences in life and I have a unique perspective, not just because of being— all of us have unique perspectives, but I've worked all over the world. I've worked with some of the most amazing people on the planet. I've seen wild success, and I've seen wild failures, and I've participated in both sides of that transaction. I have a marvelous family, and it's just in great health, but it doesn't always go well.

Mm-hmm.

And so the perspective is, how do we deal with that? Got a doctorate in law and policy. So we bring in this constitutional stuff. It's all these various things. And I ski once in a while, like a lot.

All the time. Yes. Right.

So that's where you go.

Be sure to follow and like wherever you can find us.

And those are recorded. You won't see us live, but this is live. But next week is not live.

Next week is not live. I don't know. Great. Okay.

But tell me about WTF.

Yes. WTF.

Women Talk Finance.

Launching. So last week's episode was with the Cash Flow Queen, and that was a really exciting episode. Amy, she was wonderful. Something I think a lot of founders can relate to. You know, she shared her— how the anxiety of some of her financial decisions caused her to truly have a, like, physical body breakdown. And from that, she built a business from that moment. And so I thought that was really wonderful. So it was great to to chat with Amy. So again, on WTF, Women Talk Finance, you can get that wherever you get your podcasts. You know, follow, click that auto download, helps our numbers to be fully transparent. And it's a nice way to—

Well, we produce more shows because we know actually somebody's watching it.

Listen to it. But it's nice when you log into your podcast too and it's automatically downloaded to listen on your go.

And I will do a shout out, you know, we had another big win this week for the organization, although it's kind of got my name on there, but we're in Reason Magazine.

Reason Magazine, yes.

The Wall Street Journal, The Hill, Reason Magazine, sharing these. Yeah, yeah, all sharing these things out there about what's going on and impacting founders' lives. And that's kind of a cool—

If you want ways to get those, uh, I think we'll put up the dad's QR thing. Uh, you can find all of his recent publications here. Um, click the QR code and—

Only it's because I texted to the 5 people that follow.

Well, yeah, I now have to subscribe to all these different, uh, things. So thank you for that. All right, good job, Dad.

Our first one in our studio. We'll be back here live in a couple weeks, and, and, uh, Jackie's gonna be— Jackie will be in studio, right?

Studio, yes.

Well, thank you to the team for setting up our studio and being our Our— what's the— producers, I guess?

Yes.

Yeah.

And thank you for the questions. We love hearing the questions. Feel free to, you know, follow along.

Have a great day.