Episode #265 – Building Your Business Legacy with the King of Exits, Eddie Wilson, Part 2

You're listening to the REI marketing nerds podcast, the leading resource for real estate investors who want to dominate their market online. Dan Barrett is the founder of AdWords nerds, a high tech digital agency focusing exclusively on helping real estate investors like you get more leads and deals online, outsmart your competition and live a freer, more awesome life. And now, your host, Dan Barrett.

0:39 Hey, guys, welcome back, you're listening to the second part of last week's episode? Let's jump back in. So if investing is a matter of removing emotions, we should think smart investing, I guess, right? Smart Investing as a matter of removing emotions from the decision making process. How do you go about ensuring that you do that? So something I'll just I'll make this personal, right? Like, what I noticed about myself, is that I get excited about things. And then I'm really good at like constructing an argument that's like, this thing I already was excited about. It's the smartest thing ever. And then it was like later, someone was like, you know, they're like, that thing never made any sense. And I was like, Ah, right. But it's like, at the time, I don't think of myself as like, being emotional. I'm like, I'm Mr. Logic pants, but enact. In hindsight, I'm like, that wasn't so smart. So like, it sounds like for example, you have like the 4040 20 thing where it's like, it's kind of a rule, a rule set that you kind of follow him that maybe that takes emotion out of it, but like, how do you ensure that you're not just fooling yourself into thinking you're thinking logically or really you're thinking? Does that make sense? You know, I do have the benefit today of having my own underwriting department, right? Like in the equity firms, like I run everything through filter now. But let's go back to the days I didn't have that, right, because that's where the average investor is. They don't have a group of guys and a CFO that was going like, Hey, this is a really stupid idea.

2:14 And the ones that you want are the ones that are like, stupid idea like that. Exactly. Yeah, this is horrible. What are you thinking? Yeah. But I'll tell you like, to me, I would say that there's kind of a criteria for investing. Number one, I if, if I it takes me to make the investment perform. I believe you always, you know, and this is an old adage, do you always bet on the jockey? Never the horse? Right. But what belief do I have in my ability to make this perform? Right, so a lot of real estate investors, it's still on them, they still have to rehab that house, they still have to be the, the GC, they still have to be the GP in a multifamily deal. And so I first of all, look at the jockey Do I believe in the jockey. So now that I've gotten more into passive investing, I'm vetting the person, I'm not necessarily always betting the deal. For instance, I have a, I have a process that I go through, when I buy a company, I use a thing called Predictive index. Predictive index is a is a people, you know, it basically is analyzing the drives of people. I'll run an entire company through predictive index, put it on charts and graphs, because in the end, it's like, I believe that in the in the human capital that comes with everything, whether it's a real estate investment, or private equity investment, that humans make all of those things successful.

And so Second of all, I then look at the deal, and I so it's really like four things I look at right? Number one, I'm looking at the jockey, right? And if I'm the jockey, I better assess myself just as pragmatically, right? Like, am I actually capable of doing this? I've ever done this before? Do I actually have the time to do this? The second thing is, is I have to look at the deal itself. Is it investor friendly? or sponsor friendly? Right? Like where, you know, where does the risk lie? Right? Like, is the risk on me the investor that's coming in? Or is the risk still on the person that's asking me to invest? Right? If I'm investing like as an LP and a lot of multifamily deals, which I do, I'm looking like, am I the one that's taking a lot of the risk? Or is the GP actually the one taking majority of the risk? And so I looked at it based on the weighting of the deal, right? Like, it should be fair, right? And we should have equal risk. And honestly, the people that are doing the work, capital is harder to come by than the work itself, right. That's why there's so many sweat equity deals out there. So I do like to see if my capital is at risk, I want to be taking less risk because I have I have less influence on the deal than the person that maybe is actually doing the work in the deal, because they have such little to risk. The third thing really after that is then looking at the actual strategy of the deal. It has this worked, will this work? Is it blue ocean, is it red ocean, or are we going into something that really just traditionally doesn't work? And we're trying to change culture trying to change the trajectory like you know, MX it is breaking it down on a strategy the deal

5:00 itself, right? Like, has somebody already tried this and they didn't succeed? And so we're looking more pragmatically at the strategy. And then lastly, I'm looking at my potential exit, how do I get my money back? And as an investor, I think it's the one, it's funny. The question that we should ask always is, how do I get my money back? And when do I get it back? Right? And then how much is it gonna bring with it? We kind of forget to ask that so many times, like, we so many people make emotional decisions, like, Oh, I really liked that product. So therefore, I really like this guy, I'm gonna give him my money, because he's really good salesperson, or he's really good marketer, or the product is really cool. And it's like, well, we never asked, but how to actually get my money back out of this deal, and how much does it actually going to bring with it? And what's the likelihood of that happening? Right? So there's kind of four things that I go through to just make sure that I'm not making emotional decisions. So let's talk about exits. You said you're the king of exits, right? Or the so called by Forbes, right. And you've sold a lot of businesses, you've exited from a lot of businesses, this is the part I always I always call this out. This is the portion of the podcast where Dan asked the question that he is selfishly interested in. And I don't care if the audience is interested or not. But you should be right. Because I have a business. I love my business, right?

I love it. It's, it's cool. I love it. But one of the things that I have thought about is I'm like, I don't understand how to remove myself from the business. Because in many ways, the business is like built around my ideas and the way that I think. And so it's like one of these things where I always go back and forth. I'm like, maybe it's more of a practice, it's not really a business in that sense. And I go back and forth. So like, one of the things that I've always thought about is like, we can make this more general here, but it's like, how do you structure a business? So it is an extendable business? Right? Like, how do you think about, you know, either going into a business or starting a new business with the idea that at some point, you might want to leave? And you've got to structure it accordingly? Does that make sense? Absolutely. Years ago, I bought quite a few companies, and I was at about 31 or 32 companies and I was operating in an operating system, right? Like a lot of operating systems are out there. And that operating system, I kept kind of bumping up against the ceiling of it, and decided that I would build my own operating system. So like, let's call it an operating model and an operating system, right?

So, so we're not confusing with like software, like a way of thinking a way of operating my business. Okay. And when I began to build my own operating model and system, what I realized is that there's really like five phases of business. And because what I was trying to do is like, I had a company at the time, that was like doing $4 million in top line revenue. And I had a brand new startup, you know, tech company with like two employees, you know, zero revenue. But I wanted to treat them the same, right? Like I wanted to treat them with like the same, kind of like KPIs and language and growth trajectory. And so I was thinking, like, how do I systemize business, right, like, and what I found is there's five phases of business, I'll just walk you through those real quick. So like, first phase is startup. Second phase is perseverance. Because it's kind of like the pre profit phase, like it's the grind. The next phase is viability, right? Like we actually have a viable company, you could actually go on vacation, you actually make revenue, right? Then you have scale, like then then it's like, okay, what do I do after viability? Well, then I could potentially scale it. And then the fifth phase is really succession. What do I do with it once I've hit the ceiling of what I'm capable of. So in that process, once I built that framework, then I began to build pathways or roadmaps between each one of those phases. Right? So this actually all exists in a company I built called the Empire operating system now, and we've got about 3000 companies global on the system. And I really built it as a greasy wrench for me, like, I just wanted to pull these things out, like, Okay, this is where I'm at, what do I do? What's my tool?

How do I interact? And I was trying to teach, I was trying to teach all my CEOs or leaders to operate without me, just like you're talking about, like, how do I get this place to, you know, autonomy, why they had to operate on a system. So long story short, what I realized is I wasn't really preparing all these businesses, while I was preparing them for viability and potentially scale, I was never preparing them for succession. And so what I started doing was actually laying foundation for what if this business had to operate without me? What if it had to operate without my ideas? What if it had to operate without my capital? What if it had to operate with you know, like, all the things that we as entrepreneurs, do, we make ourselves intrinsically valuable to the company, it can't operate without us? When I started thinking that way, and I began to do was change the way I structured my businesses, right? Most entrepreneurs will get to a place where they are the central cog. They are the thing that holds it all together. The first thing you have to do is you have to remove yourself from this as being the central character of the story, right? Like you have to, you have to become what I call significant but irrelevant, right? Like I still have some of the biggest relationships that drive success in my business. That's significant.

10:00 Since, but irrelevant, if I choose to go take two weeks off and go travel for my nonprofit or whatever, like, it doesn't hurt them, right? So like I want to be able to contribute. But I also want to be able to also exit. And there's lots of ways to do that. But the way that you start doing that is by succession planning, right? Like, what am I going to do, every owner at some point will move on from their business. And right now there's 15 million baby boomers that will leave their place of business within the next seven years. But most of them will actually like, just like you said, as a practice, they'll walk to the front door, they'll flip the open sign to closed, and they'll never walk back in that door. Again, they won't get value, nobody will buy it. Nobody buys their customers, and they're leaving just money on the table. The reason I know that is because I'm buying baby boomers businesses for pennies on the dollar right now, because they don't care because they don't know what to do with it. And they haven't planned for this moment. So I believe that part of your path to viability should be actually outlining what happens when I want to exit, what does it look like, when you prepare a company for exit? Oddly enough, the opportunities come to exit, you know, it's like in the preparation of it, it begins to open your eyes to everything around you.

So like a lot of the companies, I never I've sold over 120 Some companies now. And it's like, I never intended to exit most of them. But I did prepare to exit them. And then in that preparation, it started helping me think through setting up the you know, setting it up for the right people in the right seats, creating autonomy, so I didn't have to be necessary in the business, you know, more relevant in the business. It also made me think through how to capitalize it properly. So it could go through bad times and wasn't always dependent on me. You know, it's like there's all these kinds of steps. And we have a system that actually takes people through that because there's frankly, there's no one out there teaching. What's the succession plan of your business? You know, it's like, there's a lot of people teaching you how to buy businesses, there's only people teaching you how to sell businesses. There's very few people out there telling you like how do you prepare for the potential exit of your business. When you prepare properly, you get such a higher level of return when you choose to walk away.

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12:43 In the process of preparing a business to be saleable or excellent. Do you think that almost just like by not obviously, I'm gonna by coincidence, but let's just say coincidentally, that is also a highly efficient way to run and grow a business? I think it's the only way. Yeah, I think it's the only way. Like, what happens is, is it actually puts it's like, I love basketball, right? Like I am a basketball fanatic. And the best advice I ever got was a shooting coach told me it's not necessarily about your form, it's about your aim. Well, you're like, okay, yeah, no kidding. He's like, no, no focus on the very back of the room, if you focus on the back of the room, stop looking at the front of the room, stop looking at the net, stop looking at every round, you look directly at the very back side of the room. Like I ended up being like a very proficient three point shooter and had lots of records in my, you know, in my area, and it had everything to do with aim. And it's like, there's something about aiming at the right target that then puts everything else in perspective, right? Like, a lot of people they're looking at the mechanics of their shot, is my jump too high as my jump too low is my form is my you know, is is my shot high enough? Is it enough ark in the ball. And it's like, obviously, you look at all these metrics, it's like, but if you aim at the right spot, it somehow just starts to take care of itself. That's awesome. By the way, my son is nine as I started playing basketball, and he's like way into it. So now I'm gonna go home and tell him to aim at the back of the room, and I'm gonna seem super smart. So you're getting me like parents?

14:15
Awesome. Well, we're I know, we're coming up on time. Obviously super busy. I do want to ask about some of your charity work. And specifically, I wanted to ask like, you've got all these experiences with for profit organizations where you're applying these principles and this principles about risk and investment and stuff. Do you find that it's the same process when you go into nonprofit and you're like, okay, the impact is not dollars. It's, you know, whatever it is people fed or whatever the thing is, do you find that the underlying principles essentially the same, it's just a different, you know, for lack of a better term industry, or are there fundamental differences there? Like how do you think about your nonprofit work and that's up? Yeah, I treat my nonprofit just like a business that's inside of my you know, like when

15:00 We have Tuesdays is when I'm going over, you know, my cash flow performance and my scorecards and all that stuff. And we treat the nonprofit the same. You know, too many people just treat a nonprofit as charity. And it's just like, Well, if the money goes in, the money goes out. I want to know what impact we're making. We have four areas of impact. Our first area is feeding underprivileged children around the world. We're in 108 countries right now. And we feed and educate underprivileged children show that wouldn't be fed otherwise. Yeah, we second thing is, is orphanages and, and we do house children that you know, don't have someone to care for them. The third thing we do is clean water projects. We've just found that as we've been serving in these communities, it's like so many of them just don't have access to clean water. And so we dig a ton of wells every year. And then fourthly, which is probably one of my favorites is we build sustainable businesses in these communities so that I don't always have to source capital, it's like, I can build a business efficiently here. I can build businesses efficiently there. And honestly, they're probably more efficient overseas. So we've, I think we've started to 17 or 18 companies in the last four or five years, where they actually have a massive give back. So like, we've got water buffalo farms in India and taxi companies in Ghana and woodworking plants in Laos and sewing factory in Mexico and a sewing factory in Nigeria.

And it's like an like, what one example is like, we actually are rescuing girls that have been sex trafficked in Mexico Guadalajara specifically, we're actually teaching them to trade in the sewing center and paying for their college education. And we also that sewing center right now, that's about seven months old, profits about $2,500 profit per week, which allows us to feed 500 More families feed educate 150 Kids, in addition to the revenue i that the money I put in, right, and so, so does all this great, like, you know, work and like it's training young girls, it's helping us, you know, rescue a bunch of them. It's given them a college education, but then like, even the fruit of their labors producing capital, that then just goes back into build a bigger ecosystem. So again, like you can see, like, I treat it as a business, right? Like, I treat every facet of it as a business. And then I'm even building businesses overseas to generate more, you know, opportunity and impact. I mean, that's so cool. Because I mean, it strikes me as it's literally the exact same thing you were talking about when we were talking about succession, right? It's like, how do you build the business aiming at the idea that it has to be self sustainable if I step out, right, so just like you said, like view, you're not just being the one that's pumping money into it, it's still going to be producing something that can benefit everybody, right?

And so and that's, that's exactly how we got there. Right? It was like, we were going through the succession planning of our nonprofit, we were like, Well, when I pass this on, me, I might have a bunch of revenue now because I have all these companies. But what happens to the next guy, or the next girl that runs this thing? Like, how are they going to source all this money? And that's exactly what happened in succession planning. We're like, we have to add this fourth component, which is building businesses to essentially sustain all of these things. This is so cool, man. I mean, just what a neat, like just absolutely massive impact to have. Look, I we've been going a while and I know I don't want to keep you we talked about it right at the beginning. Official aw is your website. You can go there. Also Eddie Wilson official. Before we bounce, can you tell me a little bit about the Aspire tour, we're talking about that before we started recording? I know that's the thing that you're kind of doing right now, it sounds like this. You mentioned you're gonna be at Madison Square Garden, which by the way, is like, that's like one of my dreams is like to play Madison Square Garden. So like, what is the deal, man?

Like, what is the aspire to? Or what's this thing that's like this, John's like this really big, awesome deal? Yeah, so we have an entrepreneurial event that we put on every single month around the country in big cities. And we're getting four or five 6000 people at these every single time and we've got big speakers like Alex Rodriguez, or Kevin O'Leary, or we just had Mark Cuban in Dallas, like, we tried to go specific to that area and pull in big names, you know, Kevin Hart comes out and speaks for quite a few of them. And and so what we're trying to do is just inspire people. And so it's like for aspiring entrepreneurs who are just looking for that next step, maybe a little bit inspiration. We're just trying to pull them all together and trying to create a community of people that just are forward thinking. Again, it goes back to the reason we do it is impact others, I am trying to inspire a bunch of people to as they create success, go give back go make impact on someone else's life. And that's the theme of these events. And I think that's why it's growing because that's very altruistic, you know, reason to do it. And we do have, we have a Madison Square Garden coming up my my business partner, Andrew Caudill, His birthday is on July 20. And he was like, Can we do Madison? It's like his dream. We didn't Madison Square Garden. I was like, That's a horrible idea. Like why do you want to fit like Madison Square Garden seems crazy. He's like, it's my birthday. And it was like, his birthday present ever. And I was like, Well, yeah, okay, you know, so so we were going for it will be in LA in March. And then I think we're

20:00 In Denver in April, and then we go to Miami in May and then Orlando in June and then we go to Madison Square Garden in New York City in July. Wow, this is gonna be so sick. It was gonna be awesome fun. Madison, MSG is like I'm from Connecticut, or it's like, massive. It's like the hallowed halls. You know what I mean? It is. We went to a concert recently just to see it. And Andrew an idea. We flew up there. And it's like, you're sitting there. It's like, mentally you're like, oh my gosh, like did like this will be the greatest thing ever. You know, it's like, I think he did that. Just to get me to say yes, but yeah, it's gonna be fun. I also love it. It's like, Well, why do you want to do it's like, it's my birthday. It's like, alright, that's the perfect reason.

20:39 Any, we talked about official ew.com where you can go and check out all of your links, as well as Eddie Wilson official anywhere you find you by yourself your social media. Dude, thank you so much for coming on the show. Man. This was an absolute blast. And I really deeply appreciate your time. So thank you so much. Thanks, Dan. Have a great day. All right, that's gonna do it for this week's episode of the REI marketing nerds podcast. We love having you here. Thank you so much. For listening. I really truly appreciate it. You can go and find all of our past episodes at AdWords nerds.com. Just go up to the top where it says blog or podcast or whatever you will find show notes you will find links, you will find recordings, everything you need to know about all the past episodes of this show. Go check it out. We've been going for many years now. They got a lot of people in the bank. Really incredible entrepreneurs and investors that you can learn from just like I do. As as I always say every week I really appreciate you being here. Thank you for listening. Thank you for giving me my time, your time. I really value that and feel free to reach out anytime go to adwords.com Hit me up. I read every single email. Alright folks, I will talk to you next week. Have a great one.

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