00:00

Alright. This is a guest master class with our buddy, Andrew Wilkinson. We're inviting him on because if your world class is something I wanna learn from you. In fact, I had emailed Andrew a while back being like, hey, I have this company. It's working. We had scaled into the tens of millions in revenue, but I just didn't wanna run it anymore. I was tired. I wasn't the right guy for it. I was half in, half out. And I was just fantasizing about selling it or the day where I wouldn't be running it anymore. And he's like, dude, do you need to hire a CEO?

Alright. This is a guest master class with our buddy, Andrew Wilkinson. We're inviting him on because if your world class is something I wanna learn from you. In fact, I had emailed Andrew a while back being like, hey, I have this company. It's working. We had scaled into the tens of millions in revenue, but I just didn't wanna run it anymore. I was tired. I wasn't the right guy for it. I was half in, half out. And I was just fantasizing about selling it or the day where I wouldn't be running it anymore. And he's like, dude, do you need to hire a CEO?

00:26

And to me, that always felt like something that's easier said than done. Higher CEO, just find somebody to take over my baby, but he's done it. This guy's got forty companies.

And to me, that always felt like something that's easier said than done. Higher CEO, just find somebody to take over my baby, but he's done it. This guy's got forty companies.

00:34

He's got a CEO that runs, you know, CEOs that run them. He doesn't have to run any of them day to day. The portfolio's worth five hundred million dollars. So if there's anybody to learn from, It's Andrew on this. And so he comes in and he shares,

He's got a CEO that runs, you know, CEOs that run them. He doesn't have to run any of them day to day. The portfolio's worth five hundred million dollars. So if there's anybody to learn from, It's Andrew on this. And so he comes in and he shares,

00:45

how are you interviews them? What are the questions that he asks? Who is he looking for?

how are you interviews them? What are the questions that he asks? Who is he looking for?

00:50

How does he structure the compensation he's very transparent about, you know, how he structures it, how much is base comp, how much is variable, how to make sure everybody's aligned. What to do after you hire them? And so we go into step by step how to hire a great CEO for your business.

How does he structure the compensation he's very transparent about, you know, how he structures it, how much is base comp, how much is variable, how to make sure everybody's aligned. What to do after you hire them? And so we go into step by step how to hire a great CEO for your business.

01:04

This is not for a beginner. If you don't even have a business, never done this. This is not for you. This is for people who actually have a business, and they're scaling it up. And maybe it's year five. It's year seven. And you're sort of starting to realize you don't wanna do this for another five to ten years. And this that's when you have to have this conversation to figure out how you can hire a great CEO to scale your business. It worked for me. For Andrew. I hope it works for you. So enjoy this guest master class with Andrew Lopez.

This is not for a beginner. If you don't even have a business, never done this. This is not for you. This is for people who actually have a business, and they're scaling it up. And maybe it's year five. It's year seven. And you're sort of starting to realize you don't wanna do this for another five to ten years. And this that's when you have to have this conversation to figure out how you can hire a great CEO to scale your business. It worked for me. For Andrew. I hope it works for you. So enjoy this guest master class with Andrew Lopez.

01:37

Okay. We asked Andrew Wilkinson to come on and do one specific thing, which is teach us how to hire

Okay. We asked Andrew Wilkinson to come on and do one specific thing, which is teach us how to hire

01:43

CEOs.

CEOs.

01:44

He

He

01:45

owns and you own what? Forty companies now. The total portfolio is worth almost five hundred million dollars.

owns and you own what? Forty companies now. The total portfolio is worth almost five hundred million dollars.

01:51

And yet you're a pretty chill guy. Whenever I text you, your answer, you're always having fun. You're not stressed out overloaded, overworked, like every other CEO I know who's a CEO of one company, but you have forty. And so I think the way you've been able to do that is by hiring great CEOs for all your companies,

And yet you're a pretty chill guy. Whenever I text you, your answer, you're always having fun. You're not stressed out overloaded, overworked, like every other CEO I know who's a CEO of one company, but you have forty. And so I think the way you've been able to do that is by hiring great CEOs for all your companies,

02:06

and it's actually worked. Me and Sam wanna learn this from you So you're here today to teach us that. How'd you even realize that you needed to hire CEOs?

and it's actually worked. Me and Sam wanna learn this from you So you're here today to teach us that. How'd you even realize that you needed to hire CEOs?

02:14

Yeah. So I would say,

Yeah. So I would say,

02:17

it's not that it's less it's not less stressful. It's just different. Right? So I just have different problems. So someone running a company might be

it's not that it's less it's not less stressful. It's just different. Right? So I just have different problems. So someone running a company might be

02:26

you know, putting out a fire that's that's burning that day. I put out fires that burn over the course of a month or two, and they're bigger fires.

you know, putting out a fire that's that's burning that day. I put out fires that burn over the course of a month or two, and they're bigger fires.

02:34

And then someone else might spend a lot of time dealing with company politics. I end up dealing with,

And then someone else might spend a lot of time dealing with company politics. I end up dealing with,

02:41

you know, CEO comp packages.

you know, CEO comp packages.

02:43

So I wanna say to begin with. You know, this is not necessarily a greener pasture. It's just a different pasture.

So I wanna say to begin with. You know, this is not necessarily a greener pasture. It's just a different pasture.

02:49

And I think it you you really only wanna oversee CEOs

And I think it you you really only wanna oversee CEOs

02:53

if that's your skill set, if you're drawn to,

if that's your skill set, if you're drawn to,

02:56

being super, super high level and hands off, which some people, let's be real. They're not. They're they're, like, They wanna be Jiro from Jiro dreams of sushi. They don't wanna be the guy who starts Chipotle. They wanna be on the line. They wanna be making food. And so it ultimately comes down to your personality.

being super, super high level and hands off, which some people, let's be real. They're not. They're they're, like, They wanna be Jiro from Jiro dreams of sushi. They don't wanna be the guy who starts Chipotle. They wanna be on the line. They wanna be making food. And so it ultimately comes down to your personality.

03:13

And for me, my personality has always been, I'm incredibly lazy.

And for me, my personality has always been, I'm incredibly lazy.

03:17

So from the time that my mom told me to wash the dishes.

So from the time that my mom told me to wash the dishes.

03:21

I was furious. I was always trying to find ways to, you know, pay my brothers to do it, find, you know, systems to wash the dishes. Or effectively. So I had to do less work. And so I always joke that I'm Teflon for tasks.

I was furious. I was always trying to find ways to, you know, pay my brothers to do it, find, you know, systems to wash the dishes. Or effectively. So I had to do less work. And so I always joke that I'm Teflon for tasks.

03:35

And if you start delegating in your company most great entrepreneurs do,

And if you start delegating in your company most great entrepreneurs do,

03:39

you ultimately reach to this point where,

you ultimately reach to this point where,

03:42

you ask yourself, was there anything else I can delegate?

you ask yourself, was there anything else I can delegate?

03:45

And that final level of delegation, that final level of abstraction,

And that final level of delegation, that final level of abstraction,

03:49

that's hiring a CEO,

that's hiring a CEO,

03:51

that's hiring one to hire ten. They go and they run the entire company, and you just talk to them quarterly,

that's hiring one to hire ten. They go and they run the entire company, and you just talk to them quarterly,

03:58

sometimes

sometimes

03:59

annually. And there's some CEOs I have that I haven't even talked to in two or three years.

annually. And there's some CEOs I have that I haven't even talked to in two or three years.

04:03

You have something between thirty or forty companies. Do you have thirty or forty CEOs reporting to you?

You have something between thirty or forty companies. Do you have thirty or forty CEOs reporting to you?

04:09

No. The way that we do it now, so it's crazy. At first, it was like five companies. So I had five direct reports,

No. The way that we do it now, so it's crazy. At first, it was like five companies. So I had five direct reports,

04:16

that are CEOs. No big deal. And then over time, as we've scaled up, we've had to form operating groups And so we have these operating groups and they have their own CEOs who report into us. So for example, all of our digital services businesses are run by a guy named Pradeep. I meet with Pradeep.

that are CEOs. No big deal. And then over time, as we've scaled up, we've had to form operating groups And so we have these operating groups and they have their own CEOs who report into us. So for example, all of our digital services businesses are run by a guy named Pradeep. I meet with Pradeep.

04:32

Kinda biweekly, monthly whenever I need to, and he oversees a group of, like, six companies. Even if you're not gonna end up with kind of portfolio forty company structure. I've had this with you, which is, I think, a more common problem. I remember emailing you saying, hey, I have this business.

Kinda biweekly, monthly whenever I need to, and he oversees a group of, like, six companies. Even if you're not gonna end up with kind of portfolio forty company structure. I've had this with you, which is, I think, a more common problem. I remember emailing you saying, hey, I have this business.

04:48

It's working.

It's working.

04:49

So I I can't there's no there's no reason to shut it down. However, I don't wanna keep working on it. I liked it at the beginning. I don't love it now. I wanna go on and do new things. How do I do this? Do I have to sell this? Like, should I just sell the company? Do I can I hire CEO? And if so, where the heck am I gonna find somebody who I could trust to do this. So even on a one company level, I think that's where most founders are gonna be that, you know, step one is to abstract yourself out of a single company. So let's let's start with that. You you said something you're like, it's pretty common. Everyone loves your business and you're one. I forgot what's your exact quote? So, yeah, every time I talk to a young founder, they're like, gonna run this till the day I die. Doesn't matter what the business is. They think they're gonna be, you know, they're like, Mark Zuckerberg for twenty, thirty years. And then you talk to them in year seven or eight and almost all of them are just, like, how do I escape this hellish waking nightmare? Like, would they not wanna be there? I'm gonna run this till I'm twenty eight till the day I'm twenty eight.

So I I can't there's no there's no reason to shut it down. However, I don't wanna keep working on it. I liked it at the beginning. I don't love it now. I wanna go on and do new things. How do I do this? Do I have to sell this? Like, should I just sell the company? Do I can I hire CEO? And if so, where the heck am I gonna find somebody who I could trust to do this. So even on a one company level, I think that's where most founders are gonna be that, you know, step one is to abstract yourself out of a single company. So let's let's start with that. You you said something you're like, it's pretty common. Everyone loves your business and you're one. I forgot what's your exact quote? So, yeah, every time I talk to a young founder, they're like, gonna run this till the day I die. Doesn't matter what the business is. They think they're gonna be, you know, they're like, Mark Zuckerberg for twenty, thirty years. And then you talk to them in year seven or eight and almost all of them are just, like, how do I escape this hellish waking nightmare? Like, would they not wanna be there? I'm gonna run this till I'm twenty eight till the day I'm twenty eight.

05:45

Totally.

Totally.

05:46

So and it's really interesting because

So and it's really interesting because

05:49

people generally think about it in a very binary way. They're like, okay. There's two doors. Door one. Keep running my company. Door two,

people generally think about it in a very binary way. They're like, okay. There's two doors. Door one. Keep running my company. Door two,

05:57

sell get rich and live on Wajito Island. Right?

sell get rich and live on Wajito Island. Right?

06:01

But there's actually a door three, and door three is hiring a CEO.

But there's actually a door three, and door three is hiring a CEO.

06:05

Right? So you're you're in a marathon,

Right? So you're you're in a marathon,

06:08

and you can either ditch the marathon or keep running it. Well, it turns out that you can incentivize

and you can either ditch the marathon or keep running it. Well, it turns out that you can incentivize

06:14

someone else to keep running the marathon on your behalf. And I mean, this just goes back to what I was talking about before. Right? So there's There's all these different levels of delegation. And we all understand at least if you're a good entrepreneur, that if you don't like accounting, you just hire an accountant. If you don't like running your company, door three is you just hire a CEO.

someone else to keep running the marathon on your behalf. And I mean, this just goes back to what I was talking about before. Right? So there's There's all these different levels of delegation. And we all understand at least if you're a good entrepreneur, that if you don't like accounting, you just hire an accountant. If you don't like running your company, door three is you just hire a CEO.

06:33

So, you know, my my story on this is I started Metalab, which is a design agency,

So, you know, my my story on this is I started Metalab, which is a design agency,

06:39

about twenty years ago. I feel very old to say that, but about twenty years ago,

about twenty years ago. I feel very old to say that, but about twenty years ago,

06:43

And I ran it first as CEO for almost ten years. And I had a great exec team. Like, I was able to delegate quite a bit of it. I was running other companies at the same time. But ultimately the buck stopped with me. And for the first three to five years, it was really exciting. Like, I was learning new skills all the time. I was scrappily,

And I ran it first as CEO for almost ten years. And I had a great exec team. Like, I was able to delegate quite a bit of it. I was running other companies at the same time. But ultimately the buck stopped with me. And for the first three to five years, it was really exciting. Like, I was learning new skills all the time. I was scrappily,

07:02

like, you know, sending the invoices and negotiating deals with clients. I was flying all over the world, and it was all new and and exciting. But You know, at a certain point, you know, after, like, year eight, year nine, I didn't wanna fly to San Francisco anymore. I didn't wanna have to, like, shake hands and kiss babies and do that. And I remember Chris, my now business partner, and at the time CFO

like, you know, sending the invoices and negotiating deals with clients. I was flying all over the world, and it was all new and and exciting. But You know, at a certain point, you know, after, like, year eight, year nine, I didn't wanna fly to San Francisco anymore. I didn't wanna have to, like, shake hands and kiss babies and do that. And I remember Chris, my now business partner, and at the time CFO

07:25

would come to me and be like, dude, You gotta fly to San Francisco. Every time you go down there, you close, like, a million dollars of new projects, but I didn't really wanna do it because AO is exhausted.

would come to me and be like, dude, You gotta fly to San Francisco. Every time you go down there, you close, like, a million dollars of new projects, but I didn't really wanna do it because AO is exhausted.

07:35

It wasn't new anymore.

It wasn't new anymore.

07:37

Didn't wanna travel. It didn't suit my lifestyle,

Didn't wanna travel. It didn't suit my lifestyle,

07:39

but also I was already rich. I was already making enough money. And so the business was kind of starting to plateau

but also I was already rich. I was already making enough money. And so the business was kind of starting to plateau

07:46

because I wasn't willing to go that extra mile. I was just saying, you know what? We'll just do whatever comes in. I'll do a a San Francisco trip once a quarter, and we'll close what we close because I don't wanna do that. Well, the beautiful thing was There were young scrappy people who, to them, the idea of flying to San Francisco and taking a client out for a steak dinner, was a dream come true. They'd never done that before. And so

because I wasn't willing to go that extra mile. I was just saying, you know what? We'll just do whatever comes in. I'll do a a San Francisco trip once a quarter, and we'll close what we close because I don't wanna do that. Well, the beautiful thing was There were young scrappy people who, to them, the idea of flying to San Francisco and taking a client out for a steak dinner, was a dream come true. They'd never done that before. And so

08:11

for me, I was looking at it and going, okay.

for me, I was looking at it and going, okay.

08:14

Running a five person agency versus fifty person agency. It's a very different job, and it was a job that I sucked at. You know, I really to this day,

Running a five person agency versus fifty person agency. It's a very different job, and it was a job that I sucked at. You know, I really to this day,

08:23

love running five person companies. I love running, you know, I can get to about fifteen people comfortably.

love running five person companies. I love running, you know, I can get to about fifteen people comfortably.

08:30

But I I wasn't enjoying it when we're fifty people. And I read every book about management. I did courses,

But I I wasn't enjoying it when we're fifty people. And I read every book about management. I did courses,

08:37

and I just kind of whipped myself.

and I just kind of whipped myself.

08:39

Why am I not a great manager? Why can I not be like Peter drucker, reincarnate?

Why am I not a great manager? Why can I not be like Peter drucker, reincarnate?

08:44

And so I would always just fantasize about selling,

And so I would always just fantasize about selling,

08:48

and I I kept trying to sell the business. And then we'd be, like, right at the last month, and then the,

and I I kept trying to sell the business. And then we'd be, like, right at the last month, and then the,

08:54

the buyer would change the terms,

the buyer would change the terms,

08:56

or something would go wrong in the business. And so I was kind of starting to lose it. I didn't wanna be running my company. I wanted to, but I I I couldn't sell it. And so around that time, I ended up reading a book about Warren Buffett, and I found out about door three.

or something would go wrong in the business. And so I was kind of starting to lose it. I didn't wanna be running my company. I wanted to, but I I I couldn't sell it. And so around that time, I ended up reading a book about Warren Buffett, and I found out about door three.

09:12

And here we are. I started hiring CEOs. I made a ton of mistakes, which talk about. But it's it's enabled me to create tiny, which I never would have done before. I'd probably still be either miserably running my business or would have sold for you know, a much smaller amount of money. It we'll get into, like, the actual tactics really quick though. The green pasture thing you told me is it's always grass is always greener on the other side. And, like, you and I joke where you're, like,

And here we are. I started hiring CEOs. I made a ton of mistakes, which talk about. But it's it's enabled me to create tiny, which I never would have done before. I'd probably still be either miserably running my business or would have sold for you know, a much smaller amount of money. It we'll get into, like, the actual tactics really quick though. The green pasture thing you told me is it's always grass is always greener on the other side. And, like, you and I joke where you're, like,

09:36

well, I don't wanna say what you said, but you'll just, like, be teasing about, running a small company and how that could be way more fun and being the CEO of small company, for a long period of time versus trying to, like, go big. What's the grass is always greener for you?

well, I don't wanna say what you said, but you'll just, like, be teasing about, running a small company and how that could be way more fun and being the CEO of small company, for a long period of time versus trying to, like, go big. What's the grass is always greener for you?

09:50

Alright, everyone. Really quick, if you've heard this podcast before, you know that Sean and I think that the most important skills that you need in business is copywriting. And so what we did was we went through all of the podcasts that we've done. It's like five hundred of them, and we found all the best copywriting tips, our resources, our frameworks, our templates, We aggregated all of them into one simple document. So you could skim it all and get everything that we've ever talked about with copywriting. It's in the link below. It's awesome. Check it out.

Alright, everyone. Really quick, if you've heard this podcast before, you know that Sean and I think that the most important skills that you need in business is copywriting. And so what we did was we went through all of the podcasts that we've done. It's like five hundred of them, and we found all the best copywriting tips, our resources, our frameworks, our templates, We aggregated all of them into one simple document. So you could skim it all and get everything that we've ever talked about with copywriting. It's in the link below. It's awesome. Check it out.

10:17

Well, I mean, I think,

Well, I mean, I think,

10:19

I there's a great Bob Seager quote,

I there's a great Bob Seager quote,

10:23

which is I wish I didn't know now what I didn't know then. Right? So for me,

which is I wish I didn't know now what I didn't know then. Right? So for me,

10:28

I I think think about it like this. I might have given this example before

I I think think about it like this. I might have given this example before

10:32

But imagine if you love chopping wood. Right? You just do it because it's fun. You're in your backyard chopping wood. And then your neighbor pokes his head over the fence and says, hey, dude, can I get a cord of wood? I'll pay you for it. And you realize, oh my god. This is a business. I've taken my passion, and I've created a business. And now I'm selling wood door to door I'm working with my five best friends. It's a blast. Right? I'm suddenly making money. I can afford to go to the bar. Life is good. And then you flash forward twenty years and you wake up and you're a lumbar magnate. You own five saw mills And all you do every day is you sit in a little air conditioned box looking down at the the floor. You have all these robots working for you and all these hundreds of employees And most of your time is spent doing doing Excel.

But imagine if you love chopping wood. Right? You just do it because it's fun. You're in your backyard chopping wood. And then your neighbor pokes his head over the fence and says, hey, dude, can I get a cord of wood? I'll pay you for it. And you realize, oh my god. This is a business. I've taken my passion, and I've created a business. And now I'm selling wood door to door I'm working with my five best friends. It's a blast. Right? I'm suddenly making money. I can afford to go to the bar. Life is good. And then you flash forward twenty years and you wake up and you're a lumbar magnate. You own five saw mills And all you do every day is you sit in a little air conditioned box looking down at the the floor. You have all these robots working for you and all these hundreds of employees And most of your time is spent doing doing Excel.

11:18

Right? I think that is the sadness

Right? I think that is the sadness

11:21

of building a large business and delegating.

of building a large business and delegating.

11:23

Your hands are not on the tools anymore. And so for me,

Your hands are not on the tools anymore. And so for me,

11:28

what's been sad about building the machine

what's been sad about building the machine

11:30

is I've built the machine that's freed me to do what I want, but the irony is I end up doing things I don't want as a result because ultimately I was a designer

is I've built the machine that's freed me to do what I want, but the irony is I end up doing things I don't want as a result because ultimately I was a designer

11:40

I love putting on headphones and being in Photoshop and designing websites and writing. And so for me, it's been searching. Where do I get the flow state that I used to get running a five person company. Right. Let's let's role play it here. So I have a company. I wanna hire a seat. I've I've realized I can do this third door.

I love putting on headphones and being in Photoshop and designing websites and writing. And so for me, it's been searching. Where do I get the flow state that I used to get running a five person company. Right. Let's let's role play it here. So I have a company. I wanna hire a seat. I've I've realized I can do this third door.

11:59

And I'm like, you know what? That's the right move. I should hire a CEO.

And I'm like, you know what? That's the right move. I should hire a CEO.

12:02

But where the heck am I gonna find a CEO that I could trust that's gonna not only not ruin it, but actually, you know, hopefully grow the business in some way. What's the what's step one?

But where the heck am I gonna find a CEO that I could trust that's gonna not only not ruin it, but actually, you know, hopefully grow the business in some way. What's the what's step one?

12:12

So

So

12:13

Step one, you have to really assess, is your business big enough? Right? Is this the right thing? Is this the right time? So ultimately, you wanna ask does your business have product market fit and can it actually afford a CEO?

Step one, you have to really assess, is your business big enough? Right? Is this the right thing? Is this the right time? So ultimately, you wanna ask does your business have product market fit and can it actually afford a CEO?

12:26

Right? Is this, is this a corner store like, where it's kind of an owner operator kind of business where you just kinda have to run it. And if you leave all the profit that's eaten up by somebody else, or is this something that's really scalable?

Right? Is this, is this a corner store like, where it's kind of an owner operator kind of business where you just kinda have to run it. And if you leave all the profit that's eaten up by somebody else, or is this something that's really scalable?

12:39

So I, generally, as a rule of thumb, will say, you probably shouldn't hire a CEO until your business is doing three hundred thousand dollars or so of profit. And if it is, that means that you can swap yourself out and you can afford to hire someone a reasonable base salary, and then you can incentivize

So I, generally, as a rule of thumb, will say, you probably shouldn't hire a CEO until your business is doing three hundred thousand dollars or so of profit. And if it is, that means that you can swap yourself out and you can afford to hire someone a reasonable base salary, and then you can incentivize

12:58

them to grow the business. And so one of the one of the really interesting things that people kind of obsess over is they say, well, you know, a CEO could cost five hundred thousand.

them to grow the business. And so one of the one of the really interesting things that people kind of obsess over is they say, well, you know, a CEO could cost five hundred thousand.

13:08

By business is only doing three million dollars and three hundred thousand dollars of profit. And what they kinda miss is that generally a CEO has paid a base salary, but most of their comp comes from bonuses.

By business is only doing three million dollars and three hundred thousand dollars of profit. And what they kinda miss is that generally a CEO has paid a base salary, but most of their comp comes from bonuses.

13:20

And the bonuses are based on the business growing. And so it's one of those things where it's like, if your business is doing three hundred k of profit, you can basically take two or three hundred k of that, invest it in the base salary for the CEO,

And the bonuses are based on the business growing. And so it's one of those things where it's like, if your business is doing three hundred k of profit, you can basically take two or three hundred k of that, invest it in the base salary for the CEO,

13:33

And then all of their additional comp will come from the growth of the business. And so you've aligned them with your goals.

And then all of their additional comp will come from the growth of the business. And so you've aligned them with your goals.

13:39

So first thing is my business business big enough. So you said two two criteria. Product market fit, meaning we we know what the hell we're doing. We're not in the figure it out, figure out the product, figure out the market,

So first thing is my business business big enough. So you said two two criteria. Product market fit, meaning we we know what the hell we're doing. We're not in the figure it out, figure out the product, figure out the market,

13:49

figure out the what is the offering and changing that every three weeks because it's not working. Like, you have a reasonable

figure out the what is the offering and changing that every three weeks because it's not working. Like, you have a reasonable

13:55

continuous

continuous

13:56

cycle of supply and demand for what you're doing. And then you said profit around three hundred thousand as the kind of that's the minimum bar?

cycle of supply and demand for what you're doing. And then you said profit around three hundred thousand as the kind of that's the minimum bar?

14:03

I would say so in there. I mean, occasionally, you can Let's say you've got a friend who's super scrappy who wants to sink their teeth into something, and you've got a small business that's like, I always call them like an ember. It's not really a fire yet. It's an ember and someone needs to come blow on it. You could do that, but I think there's a lot more risk there. You really want a machine that's operating. You want a car that can drive on the road,

I would say so in there. I mean, occasionally, you can Let's say you've got a friend who's super scrappy who wants to sink their teeth into something, and you've got a small business that's like, I always call them like an ember. It's not really a fire yet. It's an ember and someone needs to come blow on it. You could do that, but I think there's a lot more risk there. You really want a machine that's operating. You want a car that can drive on the road,

14:26

before you put someone in. And then the other question is, can you make someone rich

before you put someone in. And then the other question is, can you make someone rich

14:31

Right? Because ultimately

Right? Because ultimately

14:33

people who are good, great exceptional CEOs,

people who are good, great exceptional CEOs,

14:36

they're looking for opportunity and upside. And by nature, the fact that they're a hired gun CEO tells me they're not necessarily an entrepreneur,

they're looking for opportunity and upside. And by nature, the fact that they're a hired gun CEO tells me they're not necessarily an entrepreneur,

14:45

they don't wanna take total risk They want a nice salary. They want bonuses. They're not necessarily willing to risk at all, but often they wanna know they can get rich.

they don't wanna take total risk They want a nice salary. They want bonuses. They're not necessarily willing to risk at all, but often they wanna know they can get rich.

14:54

In a in a CEO way so they can make single digit millions for the first time ever,

In a in a CEO way so they can make single digit millions for the first time ever,

15:00

if everything plays out, or maybe they can get a big payout if the business sells or gets to a large scale or whatever it is. But ultimately, you wanna know that you can make someone wealthy with it. And so we'll do the exact comp stuff in a minute, but the second question you have. So first was, is the business big enough to be a product market? Then you also said, to me once, like, are you willing to walk away? I think there's a mental side of it too. Are you, are you ready to hire a CEO?

if everything plays out, or maybe they can get a big payout if the business sells or gets to a large scale or whatever it is. But ultimately, you wanna know that you can make someone wealthy with it. And so we'll do the exact comp stuff in a minute, but the second question you have. So first was, is the business big enough to be a product market? Then you also said, to me once, like, are you willing to walk away? I think there's a mental side of it too. Are you, are you ready to hire a CEO?

15:25

Yeah. And that's really hard. I mean, you know, do you I remember I got to the point where I fantasized about giving the keys away to someone else. And when I finally did, I was elated,

Yeah. And that's really hard. I mean, you know, do you I remember I got to the point where I fantasized about giving the keys away to someone else. And when I finally did, I was elated,

15:36

you know, but there's a lot of people who aren't like that. I can think of one of my friends, to him, his business is his baby,

you know, but there's a lot of people who aren't like that. I can think of one of my friends, to him, his business is his baby,

15:43

And when people mess with his baby, he gets really angry, and he doesn't like it. And so you need to be willing to walk away and effectively look at it this way. As entrepreneurs,

And when people mess with his baby, he gets really angry, and he doesn't like it. And so you need to be willing to walk away and effectively look at it this way. As entrepreneurs,

15:53

we are all we're all birthing these these business babies, and now you're giving them to a foster parent. Can you tolerate that? You know, can you cope with that? Someone else parenting your child? Because that's really what it is. And not only that, but you have to be disciplined for it to work You need to either be all in or all out. You have to empower this person. You can't be sitting there looking over their shoulder. So I think those are the two kind of fundamental questions to this. Right? Are you are you is your business big enough and are you willing to walk away? But but when you're accepting the when you're saying, alright, I'm gonna walk away. Is it I'm walking away because this person's gonna make everything greater than I could, or are you walking away thinking to yourself?

we are all we're all birthing these these business babies, and now you're giving them to a foster parent. Can you tolerate that? You know, can you cope with that? Someone else parenting your child? Because that's really what it is. And not only that, but you have to be disciplined for it to work You need to either be all in or all out. You have to empower this person. You can't be sitting there looking over their shoulder. So I think those are the two kind of fundamental questions to this. Right? Are you are you is your business big enough and are you willing to walk away? But but when you're accepting the when you're saying, alright, I'm gonna walk away. Is it I'm walking away because this person's gonna make everything greater than I could, or are you walking away thinking to yourself?

16:33

I know it's not going to be as good with me in it, but it could be eighty percent as good, and I won't have to worry about it. Well, let let me put it this way. The the let's say that you're an exceptional product person,

I know it's not going to be as good with me in it, but it could be eighty percent as good, and I won't have to worry about it. Well, let let me put it this way. The the let's say that you're an exceptional product person,

16:46

you'll know the product won't be quite as good. Because generally people who are good at marketing and sales and operations and finance are just not as good at product. So you're gonna sacrifice on the product side a little bit. You're gonna know the business itself will be so much healthier and grow,

you'll know the product won't be quite as good. Because generally people who are good at marketing and sales and operations and finance are just not as good at product. So you're gonna sacrifice on the product side a little bit. You're gonna know the business itself will be so much healthier and grow,

17:01

at least from a financial measure,

at least from a financial measure,

17:04

I found that going from being a checked out founder operating your business reluctantly

I found that going from being a checked out founder operating your business reluctantly

17:09

to somebody who's highly incentivized for growth who's excited to do it, Almost always the business, like, doubles in the first year. I've been astounded by how much I had been holding back my business.

to somebody who's highly incentivized for growth who's excited to do it, Almost always the business, like, doubles in the first year. I've been astounded by how much I had been holding back my business.

17:20

Yeah. That's a great question. Great answer. I that seems pretty consistent with what I've heard. I I found it the other day was telling me after maybe eight, nine years of running his business. He hires a CEO.

Yeah. That's a great question. Great answer. I that seems pretty consistent with what I've heard. I I found it the other day was telling me after maybe eight, nine years of running his business. He hires a CEO.

17:30

He plans to stick. I'm hey. I'm here. I'm available for the next year transition. He's like, yeah. They haven't called in a little while.

He plans to stick. I'm hey. I'm here. I'm available for the next year transition. He's like, yeah. They haven't called in a little while.

17:37

You know, we beat we beat our numbers, which I wasn't able to do the last three years.

You know, we beat we beat our numbers, which I wasn't able to do the last three years.

17:41

And, everything seems to be going really well. Turns out,

And, everything seems to be going really well. Turns out,

17:44

Turns out they didn't need me as much. She's like a little hit to the ego, but also, wait, isn't this exactly what I wanted? And, you know, he was he was sort of pleasantly surprised on the upside. From there. So let's talk about finding the right person. How do you actually find a great CEO? What are you looking for?

Turns out they didn't need me as much. She's like a little hit to the ego, but also, wait, isn't this exactly what I wanted? And, you know, he was he was sort of pleasantly surprised on the upside. From there. So let's talk about finding the right person. How do you actually find a great CEO? What are you looking for?

18:00

So generally, I like to I like to find someone who's run a same or similar business that's double the size.

So generally, I like to I like to find someone who's run a same or similar business that's double the size.

18:07

So let's say I have an e commerce brand,

So let's say I have an e commerce brand,

18:10

selling candles.

selling candles.

18:12

Well, I I don't necessarily need to go find a CEO,

Well, I I don't necessarily need to go find a CEO,

18:15

who's run a candle business before, but I wanna find someone who's sold a similar product online,

who's run a candle business before, but I wanna find someone who's sold a similar product online,

18:22

and I will generally think about who are my com who are my competitors or what companies do I admire And then I'll go on LinkedIn, and I'll just look for,

and I will generally think about who are my com who are my competitors or what companies do I admire And then I'll go on LinkedIn, and I'll just look for,

18:31

president,

president,

18:32

COO,

COO,

18:33

sometimes CEO, but usually I will recruit a number too. And it's that person who's been eagerly awaiting getting, you know, knighted as the CEO, and they haven't stepped up yet.

sometimes CEO, but usually I will recruit a number too. And it's that person who's been eagerly awaiting getting, you know, knighted as the CEO, and they haven't stepped up yet.

18:44

I find those are wonderful people to delegate the business to.

I find those are wonderful people to delegate the business to.

18:48

And then separately recruiters.

And then separately recruiters.

18:50

And that's a topic we can dig into. People have a lot of opinions. I had a lot of opinions about, recruiters that I've actually changed over time. But, yeah, you gotta I I find, like, broadening the spectrum with recruiters can be really helpful. We have to give a quick shout out to Ty Burke, my old roommate, and so when I used to recruit, and I know you used them as well, you also use, like, crazy amounts of,

And that's a topic we can dig into. People have a lot of opinions. I had a lot of opinions about, recruiters that I've actually changed over time. But, yeah, you gotta I I find, like, broadening the spectrum with recruiters can be really helpful. We have to give a quick shout out to Ty Burke, my old roommate, and so when I used to recruit, and I know you used them as well, you also use, like, crazy amounts of,

19:11

reference checks So

reference checks So

19:12

here's what we do. So we buy the business and as we're buying the business, we start asking the question as soon as we know we're gonna buy the business or we're gonna delegate we we hire a recruiter immediately.

here's what we do. So we buy the business and as we're buying the business, we start asking the question as soon as we know we're gonna buy the business or we're gonna delegate we we hire a recruiter immediately.

19:24

Now recruiters

Now recruiters

19:26

really pissed me off before. It was, like, realtors.

really pissed me off before. It was, like, realtors.

19:29

Where I'm going like, man, why am I paying this guy a hundred thousand dollars to open a door for me? I can just go on, you know, like, Zillow and find the the the house I wanna buy. And here's this middle man charging a lot of money. And I kinda felt like, why would I pay some guy to go on LinkedIn and message a bunch of people for me? I can do that myself. But I realized that I'm distracted.

Where I'm going like, man, why am I paying this guy a hundred thousand dollars to open a door for me? I can just go on, you know, like, Zillow and find the the the house I wanna buy. And here's this middle man charging a lot of money. And I kinda felt like, why would I pay some guy to go on LinkedIn and message a bunch of people for me? I can do that myself. But I realized that I'm distracted.

19:51

And when I need to hire someone, I will often just go on LinkedIn or whatever.

And when I need to hire someone, I will often just go on LinkedIn or whatever.

19:55

For ten minutes. I'll text a bunch of my friends.

For ten minutes. I'll text a bunch of my friends.

19:59

I'll try and think of people that I have, like, in an Apple note that might be a good CEO.

I'll try and think of people that I have, like, in an Apple note that might be a good CEO.

20:03

I'm not going broad. And so,

I'm not going broad. And so,

20:06

basically,

basically,

20:07

I've come around on recruiters.

I've come around on recruiters.

20:09

There's some really exceptional recruiters like Ty Burke, who, from search partners,

There's some really exceptional recruiters like Ty Burke, who, from search partners,

20:14

who Sam introduced me to. He's one of my favorite. We also really like Matt Hollingsworth from a line.

who Sam introduced me to. He's one of my favorite. We also really like Matt Hollingsworth from a line.

20:20

And what I the way I use a recruiter is just to broaden the spectrum. So even if I'm gonna go on LinkedIn myself and look for someone, I might end up bringing the person to the table who we end up hiring. We now have somebody who's,

And what I the way I use a recruiter is just to broaden the spectrum. So even if I'm gonna go on LinkedIn myself and look for someone, I might end up bringing the person to the table who we end up hiring. We now have somebody who's,

20:34

reaching out to people I never would have spoken to.

reaching out to people I never would have spoken to.

20:37

And then they're also handling a lot of that administrative work pushing the process along. They're doing the initial interview.

And then they're also handling a lot of that administrative work pushing the process along. They're doing the initial interview.

20:44

And one really fascinating thing I didn't contemplate before is a recruiter saves you an insane amount of time. Let's say that you have ten candidates for CEO and every single one of those candidates, you're gonna have to do a zoom with, and that'll take thirty minutes to an hour. Well, I think we all know. We you've all had that experience where you interview someone. And in the first thirty seconds, you know they're a dingus. Right? And then you're just desperately thinking like, okay. How can I get off the phone as quickly as possible?

And one really fascinating thing I didn't contemplate before is a recruiter saves you an insane amount of time. Let's say that you have ten candidates for CEO and every single one of those candidates, you're gonna have to do a zoom with, and that'll take thirty minutes to an hour. Well, I think we all know. We you've all had that experience where you interview someone. And in the first thirty seconds, you know they're a dingus. Right? And then you're just desperately thinking like, okay. How can I get off the phone as quickly as possible?

21:12

Not waste time, but not have this person think I'm a total asshole. And so now I have the recruiter do that call, and I get them to record the Zoom.

Not waste time, but not have this person think I'm a total asshole. And so now I have the recruiter do that call, and I get them to record the Zoom.

21:21

And then I just watch the first couple minutes. And if I'm vibing with the person, then I'll move them on to the next stage. So if you think about it from that perspective,

And then I just watch the first couple minutes. And if I'm vibing with the person, then I'll move them on to the next stage. So if you think about it from that perspective,

21:30

your time is highly valuable, and you've just saved ten hours of time. What is that worth? I think a lot. And then in some instances,

your time is highly valuable, and you've just saved ten hours of time. What is that worth? I think a lot. And then in some instances,

21:39

We've actually hired,

We've actually hired,

21:40

people that we brought in. That's fine. And I just pay the recruiter anyway. But in other instances, they brought people in that we never would have found. So the guy that runs Arrow Press, Gerard Meyer, we found him via tie. And he was a guy where,

people that we brought in. That's fine. And I just pay the recruiter anyway. But in other instances, they brought people in that we never would have found. So the guy that runs Arrow Press, Gerard Meyer, we found him via tie. And he was a guy where,

21:56

he had run sodastream US, and he just wasn't on my radar whatsoever. And he's one of our best CEOs.

he had run sodastream US, and he just wasn't on my radar whatsoever. And he's one of our best CEOs.

22:02

So I kind of look at the recruiters as a time saving mechanism.

So I kind of look at the recruiters as a time saving mechanism.

22:06

They broad note the the people you look at, but

They broad note the the people you look at, but

22:10

Ultimately, it's just like a tax I pay to have someone else be incentivized to push everything along.

Ultimately, it's just like a tax I pay to have someone else be incentivized to push everything along.

22:16

And so I'm actually a big fan of recruiters now. But you gotta use the right people. I find there's a lot of terrible recruiting firms, and we've used a lot of really bad ones over the years.

And so I'm actually a big fan of recruiters now. But you gotta use the right people. I find there's a lot of terrible recruiting firms, and we've used a lot of really bad ones over the years.

22:26

And the recruiting firm, what do they run you?

And the recruiting firm, what do they run you?

22:29

So usually it's a percentage of first year salary. I think it's about twenty percent. So you know, when you're hiring a CEO

So usually it's a percentage of first year salary. I think it's about twenty percent. So you know, when you're hiring a CEO

22:37

and you've got total comp of, you know, three hundred grand, five hundred grand, it can be expensive.

and you've got total comp of, you know, three hundred grand, five hundred grand, it can be expensive.

22:43

But I think it's worth paying for if you can find the right partner on it. Mhmm. And you've mentioned,

But I think it's worth paying for if you can find the right partner on it. Mhmm. And you've mentioned,

22:49

looking for a number two who's run a similar sized or similar,

looking for a number two who's run a similar sized or similar,

22:53

similar industry company.

similar industry company.

22:55

Here's what I take that to VIN. You tell me what I what I missed. So let's say you're the candle company. You don't need somebody who's run a candle company to exercise, but maybe you want e commerce. You want it maybe where Facebook was their primary chan sales channel,

Here's what I take that to VIN. You tell me what I what I missed. So let's say you're the candle company. You don't need somebody who's run a candle company to exercise, but maybe you want e commerce. You want it maybe where Facebook was their primary chan sales channel,

23:09

maybe you want, something like candles, like maybe selling to the similar customer base or a one time one time purchase product, not something that's

maybe you want, something like candles, like maybe selling to the similar customer base or a one time one time purchase product, not something that's

23:17

you know, a total different kinda like buying psychology.

you know, a total different kinda like buying psychology.

23:21

Is that right? Just first on that part? Yeah. You want someone who understands roughly how the customer thinks, and then also the channels by which that product is sold. Right? So one one fascinating thing I'll add to is when I'm interviewing them, I always ask myself,

Is that right? Just first on that part? Yeah. You want someone who understands roughly how the customer thinks, and then also the channels by which that product is sold. Right? So one one fascinating thing I'll add to is when I'm interviewing them, I always ask myself,

23:38

what is this person's hammer? Right? So there's that great quote to a man with a hammer, everything looks like a nail. And what I've seen with with CEOs is their hammer is either marketing

what is this person's hammer? Right? So there's that great quote to a man with a hammer, everything looks like a nail. And what I've seen with with CEOs is their hammer is either marketing

23:50

sales, operations,

sales, operations,

23:52

or finance. Right? They go to one of or or product. They go to one of those things and, you know, to the product person, We've released the most beautiful product in the world. And if you build it, they will come. To the salesperson,

or finance. Right? They go to one of or or product. They go to one of those things and, you know, to the product person, We've released the most beautiful product in the world. And if you build it, they will come. To the salesperson,

24:04

it's let's build a fifty person, enterprise sales team. To the marketing people, it's we're gonna spend a million dollars a month on Facebook ads. So you wanna be listening incredibly carefully

it's let's build a fifty person, enterprise sales team. To the marketing people, it's we're gonna spend a million dollars a month on Facebook ads. So you wanna be listening incredibly carefully

24:15

to what is the mechanism by which they grow companies because usually that's the one if they did it at their last company, they're probably gonna try and repeat it. Right. And so what you want them to do is when they look at your company, they go, Oh my god. Like, this is so easy. I've done this a million times before. I've taken businesses

to what is the mechanism by which they grow companies because usually that's the one if they did it at their last company, they're probably gonna try and repeat it. Right. And so what you want them to do is when they look at your company, they go, Oh my god. Like, this is so easy. I've done this a million times before. I've taken businesses

24:31

from a million dollars in sales to ten million dollars in sales. And I've done that you know, between one and five times in a similar business. So at this point, are you just constantly collecting people? I mean, is that kinda how you look at your job is I'm just always I mean, because if you're having to talk to all these people constantly and you have forty companies, that's like pretty much all your time.

from a million dollars in sales to ten million dollars in sales. And I've done that you know, between one and five times in a similar business. So at this point, are you just constantly collecting people? I mean, is that kinda how you look at your job is I'm just always I mean, because if you're having to talk to all these people constantly and you have forty companies, that's like pretty much all your time.

24:52

I'm always thinking about that. I mean, my worst fear is we're gonna be recruiting for a CEO role, and I'm gonna forget about that guy I met at that conference.

I'm always thinking about that. I mean, my worst fear is we're gonna be recruiting for a CEO role, and I'm gonna forget about that guy I met at that conference.

25:00

You know, five years ago or whatever. So Chris and I have a Apple notes that we share, and we just keep writing down names of people we think are interesting that are executives

You know, five years ago or whatever. So Chris and I have a Apple notes that we share, and we just keep writing down names of people we think are interesting that are executives

25:09

Sometimes or even within our companies, it'll be people that are come up and coming in one of our other businesses that we've thought might be a good CEO for another business.

Sometimes or even within our companies, it'll be people that are come up and coming in one of our other businesses that we've thought might be a good CEO for another business.

25:17

But, yeah, I'm always trying to scan the horizon for people who are,

But, yeah, I'm always trying to scan the horizon for people who are,

25:22

smart and I can bring in. But interestingly,

smart and I can bring in. But interestingly,

25:25

often it is

often it is

25:26

every process is different. And when we hire a recruiter,

every process is different. And when we hire a recruiter,

25:31

only, like, twenty percent of the time is that someone,

only, like, twenty percent of the time is that someone,

25:33

now that we've brought in often it is someone that they go source.

now that we've brought in often it is someone that they go source.

25:38

I love the, what's their hammer question?

I love the, what's their hammer question?

25:41

Because it's so true that the the more experienced somebody gets and the more successful somebody gets, they start to develop this hammer and they try to they go run around looking for for ways that they can apply that thing they know. To everything, whether it's the right thing or not.

Because it's so true that the the more experienced somebody gets and the more successful somebody gets, they start to develop this hammer and they try to they go run around looking for for ways that they can apply that thing they know. To everything, whether it's the right thing or not.

25:55

I think this is a good thing and a bad thing. I've seen the same advice given to it. It's kind of, y c type companies are in the in Silicon Valley, where

I think this is a good thing and a bad thing. I've seen the same advice given to it. It's kind of, y c type companies are in the in Silicon Valley, where

26:03

when you hire a CEO, if you hire a CEO that grew their previous company by creating a giant sales army, but you're trying to do product led growth.

when you hire a CEO, if you hire a CEO that grew their previous company by creating a giant sales army, but you're trying to do product led growth.

26:12

It's a total mismatch. You might say, oh, wow. They grew that company from ten million to two hundred million.

It's a total mismatch. You might say, oh, wow. They grew that company from ten million to two hundred million.

26:18

That sounds good, but if they did it in a way that's totally different than yours, very few people

That sounds good, but if they did it in a way that's totally different than yours, very few people

26:22

can repeatedly grow businesses using new totally new methodologies for sales and marketing. And I'm curious also what's your hammer? Like,

can repeatedly grow businesses using new totally new methodologies for sales and marketing. And I'm curious also what's your hammer? Like,

26:31

if if you're a man if you're a man with a hammer running around, what what is yours? Well, I would say I'm a man with a lot of different hammers.

if if you're a man if you're a man with a hammer running around, what what is yours? Well, I would say I'm a man with a lot of different hammers.

26:38

I've gone really broad now because I've seen so many different ways of growing businesses

I've gone really broad now because I've seen so many different ways of growing businesses

26:43

And I think,

And I think,

26:45

I have a lot of tools in the toolkit. My old hammer was product.

I have a lot of tools in the toolkit. My old hammer was product.

26:49

I would always just be like, oh, my actually, you know what? I do have a hammer. Okay. So So my old hammer was product. So I would always do field of dreams marketing. I would say we're gonna build the best product in the world. I'm a designer. You know, I really proud of what we're doing, and that'll solve everything. And I realized that really doesn't work very well. And now I would say my hammer is finance.

I would always just be like, oh, my actually, you know what? I do have a hammer. Okay. So So my old hammer was product. So I would always do field of dreams marketing. I would say we're gonna build the best product in the world. I'm a designer. You know, I really proud of what we're doing, and that'll solve everything. And I realized that really doesn't work very well. And now I would say my hammer is finance.

27:11

So

So

27:12

or operations. So, really, what I'm doing is I'm looking at a business and I'm going, if one if we could just change one thing, what would that one thing be that would give the business leverage? And often it's something really simple. It's like, oh, pricing.

or operations. So, really, what I'm doing is I'm looking at a business and I'm going, if one if we could just change one thing, what would that one thing be that would give the business leverage? And often it's something really simple. It's like, oh, pricing.

27:26

Right? Or they're just not selling ads properly. Something really boring. And to to be honest, I feel a little depressed as I say that because You're a sellout, bro. You're a sellout. The designer from twenty years ago would be really sad, and I still love don't get me wrong. Like so when we bought let me give aeropress as an example.

Right? Or they're just not selling ads properly. Something really boring. And to to be honest, I feel a little depressed as I say that because You're a sellout, bro. You're a sellout. The designer from twenty years ago would be really sad, and I still love don't get me wrong. Like so when we bought let me give aeropress as an example.

27:44

I I just unboxed

I I just unboxed

27:46

our new aeropress clear.

our new aeropress clear.

27:48

And I just checked out the designs for a couple unreleased products. And that was the best day of my month. Right? I love

And I just checked out the designs for a couple unreleased products. And that was the best day of my month. Right? I love

27:56

building great products. I love being involved with that, knowing that if we hadn't bought that business, that wouldn't have happened. But when we bought Arrow Press,

building great products. I love being involved with that, knowing that if we hadn't bought that business, that wouldn't have happened. But when we bought Arrow Press,

28:04

the boring assumption I made was

the boring assumption I made was

28:07

I'm just gonna do really good,

I'm just gonna do really good,

28:09

online marketing

online marketing

28:11

and e commerce.

and e commerce.

28:12

It's really simple. They didn't sell online. That was my one insight. That was my hammer on that deal. And now the bonus, the gravy, is we get to do amazing products. And I guess you don't deserve you got you you need to go throw away your Herman Miller chair and your birkenstocks and go put on a vest. You nerd. You're no longer. I know. I know. I know. I know. I wanna self flagellate.

It's really simple. They didn't sell online. That was my one insight. That was my hammer on that deal. And now the bonus, the gravy, is we get to do amazing products. And I guess you don't deserve you got you you need to go throw away your Herman Miller chair and your birkenstocks and go put on a vest. You nerd. You're no longer. I know. I know. I know. I know. I wanna self flagellate.

28:32

So

So

28:33

I wanna I wanna talk about, though,

I wanna I wanna talk about, though,

28:36

some of the things you have to accept about hiring a CEO. And also when you interview a CEO, what you wanna look for,

some of the things you have to accept about hiring a CEO. And also when you interview a CEO, what you wanna look for,

28:43

because I think that's probably one of the most important things.

because I think that's probably one of the most important things.

28:46

One of the so to go back to this whole hammer thing,

One of the so to go back to this whole hammer thing,

28:50

so when I interview a CEO,

so when I interview a CEO,

28:52

I'm looking for whether or not I nod along.

I'm looking for whether or not I nod along.

28:55

When I when I interviewed Gerard from aeropress,

When I when I interviewed Gerard from aeropress,

28:59

he told me what he wanted to do with the company, and I already had a lot of those same thoughts. And I nodding along and going, oh my god. He's putting it better than I ever could. And the reason that's important is because when you hire a CEO,

he told me what he wanted to do with the company, and I already had a lot of those same thoughts. And I nodding along and going, oh my god. He's putting it better than I ever could. And the reason that's important is because when you hire a CEO,

29:11

you are a rider on an elephant.

you are a rider on an elephant.

29:14

Right? So when you're a rider on an elephant, the elephant is gonna go anywhere at once, and you're just stuck. You can't tell an elephant where to go. It's way bigger than you. And ultimately, it's gonna follow peanuts wherever wherever wherever it wherever it wants to go. And so

Right? So when you're a rider on an elephant, the elephant is gonna go anywhere at once, and you're just stuck. You can't tell an elephant where to go. It's way bigger than you. And ultimately, it's gonna follow peanuts wherever wherever wherever it wherever it wants to go. And so

29:29

it's really important that you agree with their

it's really important that you agree with their

29:32

strategy. And one of the ways that this has failed for us is

strategy. And one of the ways that this has failed for us is

29:36

I've loved the CEO candidate.

I've loved the CEO candidate.

29:38

And they've said something like,

And they've said something like,

29:41

hey, I was looking at the business, and I really think we need to go hard into Facebook ads.

hey, I was looking at the business, and I really think we need to go hard into Facebook ads.

29:46

And I would kinda scratch my head and go, well, we already kinda tried that. I was kinda thinking more of this is like an email marketing,

And I would kinda scratch my head and go, well, we already kinda tried that. I was kinda thinking more of this is like an email marketing,

29:54

know, marketing strategy that we should deploy.

know, marketing strategy that we should deploy.

29:57

And they would always just double down. Right? Whatever they say the first time is usually what they're actually gonna end up doing. And they're just gonna use their hammer.

And they would always just double down. Right? Whatever they say the first time is usually what they're actually gonna end up doing. And they're just gonna use their hammer.

30:06

So that's incredibly important is having that alignment and that fit with what else are you looking for in that interview? Not along. What's their hammer? What else?

So that's incredibly important is having that alignment and that fit with what else are you looking for in that interview? Not along. What's their hammer? What else?

30:15

So, I mean, the most important question is do you get the creepy crawlies after you walk away? Do you feel

So, I mean, the most important question is do you get the creepy crawlies after you walk away? Do you feel

30:22

In any way, any cognitive dissonance, any weirdness,

In any way, any cognitive dissonance, any weirdness,

30:26

does your stomach feel off?

does your stomach feel off?

30:29

You know, you've someone can be incredibly charming. I often get this.

You know, you've someone can be incredibly charming. I often get this.

30:32

You know, psychopaths,

You know, psychopaths,

30:34

for example, they're very charming people. They are wonderful to hang out with. But you might walk away and be like, there's just something off, like, something in their eyes or Have you had that? Yeah. Yeah. And I'll tell some stories.

for example, they're very charming people. They are wonderful to hang out with. But you might walk away and be like, there's just something off, like, something in their eyes or Have you had that? Yeah. Yeah. And I'll tell some stories.

30:46

I think the most important thing is, you know, would you let them babysit your kids?

I think the most important thing is, you know, would you let them babysit your kids?

30:50

Right? I think, like, you know, either of you guys, I would let you babysit my kids. Right? But And that's important. You're gonna hand over your company, your baby, to this person. So you have to have profound trust. And so often, Chris and I, we look for people who are real.

Right? I think, like, you know, either of you guys, I would let you babysit my kids. Right? But And that's important. You're gonna hand over your company, your baby, to this person. So you have to have profound trust. And so often, Chris and I, we look for people who are real.

31:06

So they can be I don't like slick people. I like people who their armpits get really sweaty in the interview. Like people who get kinda nervous and scratch their face when you ask them hard questions.

So they can be I don't like slick people. I like people who their armpits get really sweaty in the interview. Like people who get kinda nervous and scratch their face when you ask them hard questions.

31:16

I wanna see that someone is a human.

I wanna see that someone is a human.

31:19

And when things get tough,

And when things get tough,

31:21

they will wanna do the right thing.

they will wanna do the right thing.

31:24

And so that's that's, like, really critical.

And so that's that's, like, really critical.

31:26

You know, do you walk away energized, right, you can really like somebody But if you don't walk away energized,

You know, do you walk away energized, right, you can really like somebody But if you don't walk away energized,

31:32

you know, that's that's not great. And then also,

you know, that's that's not great. And then also,

31:35

are they down to have alignment? Are they down to have skin in the game? Because ultimately,

are they down to have alignment? Are they down to have skin in the game? Because ultimately,

31:40

you know, the worst type of CEO would be this. So let's say Sam's hiring someone to run Hampton,

you know, the worst type of CEO would be this. So let's say Sam's hiring someone to run Hampton,

31:45

and, they say, I want a million dollars a year based salary.

and, they say, I want a million dollars a year based salary.

31:49

And you're like, okay. Well, you know, could we do some bonuses, do on equity, how could we create alignment, and they just want, like, low risk, cash guaranteed.

And you're like, okay. Well, you know, could we do some bonuses, do on equity, how could we create alignment, and they just want, like, low risk, cash guaranteed.

31:59

That's not someone you wanna be working with. You want someone who is willing to have skin in the game and risk with you and work on the long term. And there's a lot of very shiny, fancy executives

That's not someone you wanna be working with. You want someone who is willing to have skin in the game and risk with you and work on the long term. And there's a lot of very shiny, fancy executives

32:10

that basically want zero risk, and they just wanna make a shit ton of money, and you gotta avoid those people like the plague. Have you found any correlation between,

that basically want zero risk, and they just wanna make a shit ton of money, and you gotta avoid those people like the plague. Have you found any correlation between,

32:19

age

age

32:20

or where they live, like, if they're from a Silicon Valley company, New York company, middle America, or wherever the equivalent stereotype is of Canada.

or where they live, like, if they're from a Silicon Valley company, New York company, middle America, or wherever the equivalent stereotype is of Canada.

32:29

Well, I mean, the I wouldn't say that there's anything about,

Well, I mean, the I wouldn't say that there's anything about,

32:32

where they're from or even what they look like or how they dress or anything like that. Although I'll talk about that and the importance of matching your cultural DNA with their DNA.

where they're from or even what they look like or how they dress or anything like that. Although I'll talk about that and the importance of matching your cultural DNA with their DNA.

32:42

But the number one thing is the big company

But the number one thing is the big company

32:45

people. Right? You you really don't want the flashy person who's got the the, you know, the LinkedIn with

people. Right? You you really don't want the flashy person who's got the the, you know, the LinkedIn with

32:53

five years at Accenture

five years at Accenture

32:54

followed by IBM

followed by IBM

32:56

followed by, you know, whatever executive role. I find that when you take a big a

followed by, you know, whatever executive role. I find that when you take a big a

33:01

big company person and you put them in a smaller company, they just don't know how to function. They're not bad. There's nothing wrong with those people. They just don't know how to function. They're used to having, like, you know, an army of people doing everything for them. And it's kind of like,

big company person and you put them in a smaller company, they just don't know how to function. They're not bad. There's nothing wrong with those people. They just don't know how to function. They're used to having, like, you know, an army of people doing everything for them. And it's kind of like,

33:16

I always think about it, like, restaurants. So let's say that you have

I always think about it, like, restaurants. So let's say that you have

33:20

you hire let's say you have one restaurant with no systems and you go and you hire the chain restaurant, let's say you find a guy who runs, like, an olive garden, And you're like, oh my god. This guy really understands how to run, like, a tight tight ship and all the systems and stuff. You put them back in,

you hire let's say you have one restaurant with no systems and you go and you hire the chain restaurant, let's say you find a guy who runs, like, an olive garden, And you're like, oh my god. This guy really understands how to run, like, a tight tight ship and all the systems and stuff. You put them back in,

33:36

you know, your

you know, your

33:37

restaurant, and they're like, well, I don't know how to build the systems.

restaurant, and they're like, well, I don't know how to build the systems.

33:40

I didn't do this. I just go to my handbook, my olive garden handbook, and they tell me how to do everything. So you kinda get that in big company people. So you gotta avoid the big company folks. One nuance that you didn't say, but pulling out is you want somebody who's running company to exercise,

I didn't do this. I just go to my handbook, my olive garden handbook, and they tell me how to do everything. So you kinda get that in big company people. So you gotta avoid the big company folks. One nuance that you didn't say, but pulling out is you want somebody who's running company to exercise,

33:56

not twenty exercise. You would think twenty x is better. Right? No. No. No. It's not actually better. Two x is kind of the sweet spot of what you're looking for. Is that correct? Totally. Well, there's this funny,

not twenty exercise. You would think twenty x is better. Right? No. No. No. It's not actually better. Two x is kind of the sweet spot of what you're looking for. Is that correct? Totally. Well, there's this funny,

34:05

I I think of it as, like, there's a a variety of different skills.

I I think of it as, like, there's a a variety of different skills.

34:09

And if you let's use Chipotle. I look, for some reason, I always go chipotle.

And if you let's use Chipotle. I look, for some reason, I always go chipotle.

34:13

But,

But,

34:14

think about this. So there's the guy who invented the burrito. Right? That's that's kinda like If you think about it, that's, like, the founder of the founder. Right? Then there's Steve Els, the guy that started Chipotle. He went, hey. Burritos are great food. Let's scale this up. Let's turn this into a fast casual concept.

think about this. So there's the guy who invented the burrito. Right? That's that's kinda like If you think about it, that's, like, the founder of the founder. Right? Then there's Steve Els, the guy that started Chipotle. He went, hey. Burritos are great food. Let's scale this up. Let's turn this into a fast casual concept.

34:34

Then

Then

34:34

there's someone who came in and scaled it to a bunch of stores. Right? I think that was still Steve. That's a kind of a different skill set. He went from one store to, say, twenty stores.

there's someone who came in and scaled it to a bunch of stores. Right? I think that was still Steve. That's a kind of a different skill set. He went from one store to, say, twenty stores.

34:44

And then they scaled it to, like, thousands of stores, and then they managed a public company.

And then they scaled it to, like, thousands of stores, and then they managed a public company.

34:49

These are all different skill sets. Right? Each of those levels

These are all different skill sets. Right? Each of those levels

34:53

are some, you know, a whole different set of skills. Right? The guy who invented the burrito is very different than the person who would be great at scaling chipotle to a thousand stores. And so I think you really just wanna be accepting of

are some, you know, a whole different set of skills. Right? The guy who invented the burrito is very different than the person who would be great at scaling chipotle to a thousand stores. And so I think you really just wanna be accepting of

35:06

you're you're almost running a

you're you're almost running a

35:08

what's it called? Like, you pass the baton. What what is that? A a marathon? A relay race. Yeah. And so you might say the person that you hire, the CEO, you hire, to take your business from two to ten million.

what's it called? Like, you pass the baton. What what is that? A a marathon? A relay race. Yeah. And so you might say the person that you hire, the CEO, you hire, to take your business from two to ten million.

35:20

You know what? At ten million, you're probably gonna bring in some new person to run the company then, and they're gonna know their scale. And then you keep going through this. And, occasionally, you're gonna get people who read a lot and learn a lot and are highly adaptable and can keep going. But usually, you know, a CEO is really effective for between five and ten years. And every once in a while, you get these the special cases that can go the distance. And even those exceptions, even Mark Zuckerberg who's been running Facebook for twenty plus years,

You know what? At ten million, you're probably gonna bring in some new person to run the company then, and they're gonna know their scale. And then you keep going through this. And, occasionally, you're gonna get people who read a lot and learn a lot and are highly adaptable and can keep going. But usually, you know, a CEO is really effective for between five and ten years. And every once in a while, you get these the special cases that can go the distance. And even those exceptions, even Mark Zuckerberg who's been running Facebook for twenty plus years,

35:49

he has Cheryl, and Cheryl does a bunch of stuff so that he keep inventing the next burrito. He's like, oh, great. I'm gonna focus on AI. I'm gonna focus on Metiverse.

he has Cheryl, and Cheryl does a bunch of stuff so that he keep inventing the next burrito. He's like, oh, great. I'm gonna focus on AI. I'm gonna focus on Metiverse.

35:56

And somebody else will do, you know, add operations at this point because that's not what I wanna be scaling up. Or the Google guys did the same thing with Eric Schmidt. Right? They bring they brought in effectively,

And somebody else will do, you know, add operations at this point because that's not what I wanna be scaling up. Or the Google guys did the same thing with Eric Schmidt. Right? They bring they brought in effectively,

36:06

you know, a CEO to to run that so that they could keep going and creating the next chipotle. Can you talk about transitioning? I think this is actually the hardest part, of all this is transitioning.

you know, a CEO to to run that so that they could keep going and creating the next chipotle. Can you talk about transitioning? I think this is actually the hardest part, of all this is transitioning.

36:17

And, like, You have always given me advice. And whenever and I believe your advice was right, and I followed it. But at first, your advice is basically just bail,

And, like, You have always given me advice. And whenever and I believe your advice was right, and I followed it. But at first, your advice is basically just bail,

36:28

and you're, and and you're, like, just talk to him, like, once a month, and then once a quarter, and then once a year.

and you're, and and you're, like, just talk to him, like, once a month, and then once a quarter, and then once a year.

36:33

And I was, like,

And I was, like,

36:35

Well, I was gonna, like, keep working there and talk to him every single day and, like,

Well, I was gonna, like, keep working there and talk to him every single day and, like,

36:40

give feedback constantly and be in all these meetings. And you're like, no. So, Sam, is the question, like, you've hired the CEO. What are what are those first hundred days supposed to look like? Yeah. And then and then after six in twelve months, what's it look like? Because it's this is the hard part where emotion typically takes over logic. Totally. And it's terrifying to use the baby analogy. You know, you imagine you're you have this beloved baby and then you watch the foster parent and they're playing a little rough with your kid, and you don't quite like what they're they're feeding them. And, well, they don't really know the nap time routine. Right? So It's a little bit scary passing off your business baby to somebody else.

give feedback constantly and be in all these meetings. And you're like, no. So, Sam, is the question, like, you've hired the CEO. What are what are those first hundred days supposed to look like? Yeah. And then and then after six in twelve months, what's it look like? Because it's this is the hard part where emotion typically takes over logic. Totally. And it's terrifying to use the baby analogy. You know, you imagine you're you have this beloved baby and then you watch the foster parent and they're playing a little rough with your kid, and you don't quite like what they're they're feeding them. And, well, they don't really know the nap time routine. Right? So It's a little bit scary passing off your business baby to somebody else.

37:20

What I what I think you do have to rip the band aid and let them jump in the pool. I think it's incredibly important that you assert to your top executives.

What I what I think you do have to rip the band aid and let them jump in the pool. I think it's incredibly important that you assert to your top executives.

37:29

This person is in charge,

This person is in charge,

37:31

and

and

37:32

you can't come to me anymore.

you can't come to me anymore.

37:34

Right? So what I what I like to do, what I would do in the early days is I would make the announcement

Right? So what I what I like to do, what I would do in the early days is I would make the announcement

37:40

explain why I'm making the announcement, why I'm making the change. And then I would I would literally leave Slack.

explain why I'm making the announcement, why I'm making the change. And then I would I would literally leave Slack.

37:47

I would stop responding to texts from the executives,

I would stop responding to texts from the executives,

37:50

I wouldn't respond to email, and I would say to the CEO, look, you know, you're in charge. Let's do a check-in in a month. And then I would just completely check out. And I'd say, you know, look, if you want if there's any emergencies, you can always call me and get get an opinion. But do you give him, like, a guy that is? Like, are you, like, compiling everything in Noten?

I wouldn't respond to email, and I would say to the CEO, look, you know, you're in charge. Let's do a check-in in a month. And then I would just completely check out. And I'd say, you know, look, if you want if there's any emergencies, you can always call me and get get an opinion. But do you give him, like, a guy that is? Like, are you, like, compiling everything in Noten?

38:10

Like, I don't know. Like, what are you supposed to like handbook me? Yeah. Well, maybe maybe not. Maybe not quite a guide or something, but you're doing a lot of brain dumps. Right? You're gonna spend a couple days with them and go through everything.

Like, I don't know. Like, what are you supposed to like handbook me? Yeah. Well, maybe maybe not. Maybe not quite a guide or something, but you're doing a lot of brain dumps. Right? You're gonna spend a couple days with them and go through everything.

38:20

But, you know, business is funny. Like, everything tastes like chicken, like a competent CEO will be able to jump into most businesses.

But, you know, business is funny. Like, everything tastes like chicken, like a competent CEO will be able to jump into most businesses.

38:27

Within

Within

38:28

five, ten days, be able to kind of get the lay of the land and get moving.

five, ten days, be able to kind of get the lay of the land and get moving.

38:32

So I don't I don't do too much of that transition stuff.

So I don't I don't do too much of that transition stuff.

38:37

And and then for so first, you're checking in maybe every two

And and then for so first, you're checking in maybe every two

38:40

weeks. Then you're checking in every four weeks, then you're checking in every three months. And then if you want, you can go to six months or a year.

weeks. Then you're checking in every four weeks, then you're checking in every three months. And then if you want, you can go to six months or a year.

38:48

And I really think that The worst thing you can do is have them writing you a whole bunch of reports and constantly text them and engaging them and making them feel they don't have power. And then worse than that, the swoop and poop. Right? Like, so you bypass them, you text your old VP of marketing,

And I really think that The worst thing you can do is have them writing you a whole bunch of reports and constantly text them and engaging them and making them feel they don't have power. And then worse than that, the swoop and poop. Right? Like, so you bypass them, you text your old VP of marketing,

39:06

you say, I noticed you guys stopped AB testing this on the homepage. What's going on with this? And then before you know it, your CEO feels your undermining them, and all the executives go, well, I see who's still pulling the strings. You know, Sam's still in charge. I'm just gonna go back to Sam. And then the water, the stress finds its way back to you. So,

you say, I noticed you guys stopped AB testing this on the homepage. What's going on with this? And then before you know it, your CEO feels your undermining them, and all the executives go, well, I see who's still pulling the strings. You know, Sam's still in charge. I'm just gonna go back to Sam. And then the water, the stress finds its way back to you. So,

39:27

I'm a big fan of just being I mean, you gotta do your diligence. If you're gonna give this person your business, baby, you gotta know they're not a a epic piece of shit. Right? That's very important. But if you've done all that, we can talk about all the diligence stuff. You gotta get comfortable that passing

I'm a big fan of just being I mean, you gotta do your diligence. If you're gonna give this person your business, baby, you gotta know they're not a a epic piece of shit. Right? That's very important. But if you've done all that, we can talk about all the diligence stuff. You gotta get comfortable that passing

39:43

your business to this person is gonna be okay. Well, how many months or quarters of mistakes or misses do you let them have?

your business to this person is gonna be okay. Well, how many months or quarters of mistakes or misses do you let them have?

39:50

Well, it depends. I mean, you know, is it a hard business or an easy business?

Well, it depends. I mean, you know, is it a hard business or an easy business?

39:54

How stark is it? You know, was it the moment they started? Within a month, the performance went to shit. Is there a good reason for that? I think that's a really hard question. I mean, we've had very, very competent CEOs

How stark is it? You know, was it the moment they started? Within a month, the performance went to shit. Is there a good reason for that? I think that's a really hard question. I mean, we've had very, very competent CEOs

40:06

join hard businesses, and the business gets worse under their purview. Doesn't necessarily mean they're doing a bad job? It could be a macro problem, or there could be some other headwind I think that's up to you to assess.

join hard businesses, and the business gets worse under their purview. Doesn't necessarily mean they're doing a bad job? It could be a macro problem, or there could be some other headwind I think that's up to you to assess.

40:18

I always say,

I always say,

40:19

you know, you want flesh wounds, not mortal wounds.

you know, you want flesh wounds, not mortal wounds.

40:22

So

So

40:23

would I allow a CEO

would I allow a CEO

40:25

to

to

40:27

spend five hundred thousand on some r and d boondoggle

spend five hundred thousand on some r and d boondoggle

40:30

Yeah. Maybe. I don't want them to feel that I'm holding them back, but would I allow them to announce

Yeah. Maybe. I don't want them to feel that I'm holding them back, but would I allow them to announce

40:37

to all the in ways that they're changing the business model and shutting down

to all the in ways that they're changing the business model and shutting down

40:42

some critical revenue line. Maybe not. You know, I'd probably watch something like that. And ultimately, I think it's important that you say. I'll I'll never forget when I was reading four hour work week. Tim Ferris had this whole thing about anything less than five thousand dollars does not require my opinion. And I think it's important you set that control with the CEO. So you say, anything

some critical revenue line. Maybe not. You know, I'd probably watch something like that. And ultimately, I think it's important that you say. I'll I'll never forget when I was reading four hour work week. Tim Ferris had this whole thing about anything less than five thousand dollars does not require my opinion. And I think it's important you set that control with the CEO. So you say, anything

41:03

that that you wanna spend more than three hundred thousand dollars on, I want you to come to me. I want you to discuss Right? So you can kind of build a bit of a bounding box around that. We gotta take a drink every time you say a cute,

that that you wanna spend more than three hundred thousand dollars on, I want you to come to me. I want you to discuss Right? So you can kind of build a bit of a bounding box around that. We gotta take a drink every time you say a cute,

41:15

cadadian phrase,

cadadian phrase,

41:16

we've got Boondoggle.

we've got Boondoggle.

41:18

We have dingus. We've got creepy crawly.

We have dingus. We've got creepy crawly.

41:22

What else do you got for us?

What else do you got for us?

41:24

Dingus dingus isn't even Canadian. It's actually,

Dingus dingus isn't even Canadian. It's actually,

41:27

it's from Tim Tim and Eric. Do you guys ever watch Tim and Eric?

it's from Tim Tim and Eric. Do you guys ever watch Tim and Eric?

41:31

Yeah. I want I want more of that. Go ahead, Sean.

Yeah. I want I want more of that. Go ahead, Sean.

41:34

Let's do,

Let's do,

41:36

let's finish up actually in the hiring and diligenceing stuff. So I I am I have one more on the interview. So do you meet in person? Or are you trying to do everything in Zoom? Do you, like, spend spend time, you know, any extended time with them?

let's finish up actually in the hiring and diligenceing stuff. So I I am I have one more on the interview. So do you meet in person? Or are you trying to do everything in Zoom? Do you, like, spend spend time, you know, any extended time with them?

41:47

Yeah. I like to meet them in person.

Yeah. I like to meet them in person.

41:50

I think there's something to looking someone in the eye, seeing how they their body language is. You just can't get that same level of diligence. I have hired people sight unseen

I think there's something to looking someone in the eye, seeing how they their body language is. You just can't get that same level of diligence. I have hired people sight unseen

42:01

many times, but for major hires, I always wanna meet them in person.

many times, but for major hires, I always wanna meet them in person.

42:05

So in terms of diligence,

So in terms of diligence,

42:07

it this is the most critical thing, and this is where we've made the most mistakes. Right? You can avoid

it this is the most critical thing, and this is where we've made the most mistakes. Right? You can avoid

42:13

endless pain

endless pain

42:15

if you just diligence people carefully.

if you just diligence people carefully.

42:18

And this is, you know, anyone who's hired people at a company knows this, you know, check references,

And this is, you know, anyone who's hired people at a company knows this, you know, check references,

42:23

top grading. There's all these different ways of doing it.

top grading. There's all these different ways of doing it.

42:26

But there's a couple

But there's a couple

42:29

you know, there's this idea of, like, trust but verify. Right? So I'll trust my gut. That's my first screen.

you know, there's this idea of, like, trust but verify. Right? So I'll trust my gut. That's my first screen.

42:35

And then I'll perhaps introduce them to, like, one or two other people I trust. So, like, Chris might talk to the CEO as well, someone else from our team, we'll assess, okay, do we get any creepy crawly

And then I'll perhaps introduce them to, like, one or two other people I trust. So, like, Chris might talk to the CEO as well, someone else from our team, we'll assess, okay, do we get any creepy crawly

42:47

vibes?

vibes?

42:48

If that's not the case, if we don't, then we'll move into actual diligence.

If that's not the case, if we don't, then we'll move into actual diligence.

42:53

And we've learned the hard way. We've made a couple really bad hires,

And we've learned the hard way. We've made a couple really bad hires,

42:57

that burned us. And so we actually use these former CIA

that burned us. And so we actually use these former CIA

43:02

guys to do background checks. They're called business intelligence advisors,

guys to do background checks. They're called business intelligence advisors,

43:06

kind of like CIA, but with a b. And they're incredible. They will interview the so they call up the person. They'll talk to them for an hour or so, and they'll write down every single thing they say. So if they say, oh, in college, I was a athlete,

kind of like CIA, but with a b. And they're incredible. They will interview the so they call up the person. They'll talk to them for an hour or so, and they'll write down every single thing they say. So if they say, oh, in college, I was a athlete,

43:21

they'll they'll verify that. If they say,

they'll they'll verify that. If they say,

43:24

oh, I left that company because x y z. Well, they'll go and, look up that company and they'll message five people who might have worked with them. And so you end up getting this dossier on the person that gives you a high level thing of what are the what are the positives, what are the negatives,

oh, I left that company because x y z. Well, they'll go and, look up that company and they'll message five people who might have worked with them. And so you end up getting this dossier on the person that gives you a high level thing of what are the what are the positives, what are the negatives,

43:40

And then also

And then also

43:42

have they ever been,

have they ever been,

43:44

you know, accused of a crime? Have they ever had, like, a track record of, like, not paying bills?

you know, accused of a crime? Have they ever had, like, a track record of, like, not paying bills?

43:50

Legal records, all that kind of stuff. So I think that's really important. And

Legal records, all that kind of stuff. So I think that's really important. And

43:54

we,

we,

43:56

we've made a really bad hire,

we've made a really bad hire,

43:59

about ten years ago,

about ten years ago,

44:00

and the guy basically was, like, full of shit about a whole bunch of stuff on his resume and it ended up being a nightmare. And so after going through that experience, I think it's a well worth paying between ten and twenty thousand dollars to get this deep reference check done.

and the guy basically was, like, full of shit about a whole bunch of stuff on his resume and it ended up being a nightmare. And so after going through that experience, I think it's a well worth paying between ten and twenty thousand dollars to get this deep reference check done.

44:18

And so that I think that's just so critical.

And so that I think that's just so critical.

44:20

That's that's amazing. Do you, sounds like between the recruiter

That's that's amazing. Do you, sounds like between the recruiter

44:24

and the reference check, the the background check people,

and the reference check, the the background check people,

44:27

you might be spending

you might be spending

44:29

anywhere between fifty and a hundred thousand dollars of transaction costs.

anywhere between fifty and a hundred thousand dollars of transaction costs.

44:33

In recruiting a CEO.

In recruiting a CEO.

44:34

I'm assuming you can't do that when it's a three hundred thousand dollar a year profit business. What is the minimum bar

I'm assuming you can't do that when it's a three hundred thousand dollar a year profit business. What is the minimum bar

44:41

you

you

44:42

use when you're gonna when you're gonna pay for both the the, you know, the good recruiter and the the background checks. And what would you do for the if you're the person who is is more at the three hundred thousand a year profit,

use when you're gonna when you're gonna pay for both the the, you know, the good recruiter and the the background checks. And what would you do for the if you're the person who is is more at the three hundred thousand a year profit,

44:54

and maybe can't afford those transaction costs. How would you do it? DIY? Well, I would just follow the same process. Right? So you know, you're not gonna be able to hire the recruiter and afford them. And so you're gonna try and cast your net really broad. You're gonna talk to a lot of different people. When it comes to verifying

and maybe can't afford those transaction costs. How would you do it? DIY? Well, I would just follow the same process. Right? So you know, you're not gonna be able to hire the recruiter and afford them. And so you're gonna try and cast your net really broad. You're gonna talk to a lot of different people. When it comes to verifying

45:11

what the person tells you,

what the person tells you,

45:12

the number one thing is never call the references they give you. Right? Any sneaky person can find three buddies who can, you know, say that they're great or whatever it is. I always try and scuttlebutt.

the number one thing is never call the references they give you. Right? Any sneaky person can find three buddies who can, you know, say that they're great or whatever it is. I always try and scuttlebutt.

45:24

So I'll say, okay.

So I'll say, okay.

45:26

My friend invested in that company, and I'll ask them to ask the CEO why that person left. Or if they recommend. I also have this trick. I don't remember where I got it, but I love this one. You email a whole bunch of people who used to work with them or the former CEO they worked for, and you say,

My friend invested in that company, and I'll ask them to ask the CEO why that person left. Or if they recommend. I also have this trick. I don't remember where I got it, but I love this one. You email a whole bunch of people who used to work with them or the former CEO they worked for, and you say,

45:44

hey, I'm doing a reference check on this person.

hey, I'm doing a reference check on this person.

45:49

I'd love to talk to you about them. If you don't respond to this email,

I'd love to talk to you about them. If you don't respond to this email,

45:53

I'll take it as you didn't have a good experience. Oh, eyes cold. And it's such a great it's such a great trick. It's such a great trick because if they don't respond,

I'll take it as you didn't have a good experience. Oh, eyes cold. And it's such a great it's such a great trick. It's such a great trick because if they don't respond,

46:02

people will almost always respond because they don't wanna shit on somebody.

people will almost always respond because they don't wanna shit on somebody.

46:06

If they,

If they,

46:07

if, you know, if they have anything good to say, but if they have something bad to say, it gives them an out. Because a lot of people I found are worried about legal liability. They don't wanna go and, like, you know, say this person's a piece of shit and then that person sues them or something like that. Dude, I'm gonna use that line for any email I want I'll just, like, ask someone anything. And, like, if you don't, if you don't reply, I'll assume you hate yourself and your family.

if, you know, if they have anything good to say, but if they have something bad to say, it gives them an out. Because a lot of people I found are worried about legal liability. They don't wanna go and, like, you know, say this person's a piece of shit and then that person sues them or something like that. Dude, I'm gonna use that line for any email I want I'll just, like, ask someone anything. And, like, if you don't, if you don't reply, I'll assume you hate yourself and your family.

46:31

Yeah. Exactly.

Yeah. Exactly.

46:33

Sales guys do that all the time. That's the worst.

Sales guys do that all the time. That's the worst.

46:36

Okay.

Okay.

46:37

So do you found the person?

So do you found the person?

46:39

How do you negotiate

How do you negotiate

46:41

and structure the comp package for the CEO. So,

and structure the comp package for the CEO. So,

46:45

I always like to make the first offer,

I always like to make the first offer,

46:47

because ultimately you kinda know what you're willing to pay and what makes sense based on who they are. And I think you kinda have to scale up or down based on their experience. So there's times where I've taken a risk where I've said, you know what? This person was, they're a VP marketing, but they really have CEO energy, and I'm going to take a chance on them. I'm gonna try and,

because ultimately you kinda know what you're willing to pay and what makes sense based on who they are. And I think you kinda have to scale up or down based on their experience. So there's times where I've taken a risk where I've said, you know what? This person was, they're a VP marketing, but they really have CEO energy, and I'm going to take a chance on them. I'm gonna try and,

47:08

you know, pay less for someone like that. I'm not necessarily gonna put them into, like, full CEO comp. I'm gonna try and go high variable low base.

you know, pay less for someone like that. I'm not necessarily gonna put them into, like, full CEO comp. I'm gonna try and go high variable low base.

47:15

But someone who's more established,

But someone who's more established,

47:17

you know, I'm gonna give them basically what they what they want and,

you know, I'm gonna give them basically what they what they want and,

47:21

and whatever we think the range is there.

and whatever we think the range is there.

47:24

And then the most important thing is to use total compensation.

And then the most important thing is to use total compensation.

47:27

So when you make the offer

So when you make the offer

47:29

so let's say let's say I have a business that's doing three hundred thousand dollars of profit.

so let's say let's say I have a business that's doing three hundred thousand dollars of profit.

47:34

And I can comfortably afford a CEO based salary

And I can comfortably afford a CEO based salary

47:39

of a hundred and fifty grand. Right? So

of a hundred and fifty grand. Right? So

47:42

Let's say this person is worth three hundred grand a year, four hundred grand a year, I'm gonna go to them, and I'm gonna say, I'm gonna pay you three hundred grand a year. It's gonna be a hundred and fifty thousand dollar base, and it's gonna be a hundred and fifty thousand dollar bonus. And the bonus

Let's say this person is worth three hundred grand a year, four hundred grand a year, I'm gonna go to them, and I'm gonna say, I'm gonna pay you three hundred grand a year. It's gonna be a hundred and fifty thousand dollar base, and it's gonna be a hundred and fifty thousand dollar bonus. And the bonus

47:56

is if you get me to

is if you get me to

47:58

six hundred thousand dollars of EBITDA. Right? And so you're basically using the profits that they've created to pay them the bonus, and you've created alignment between the two of you. But it's important never to just say, well, I'm gonna offer you a hundred and fifty thousand dollars a year plus a bonus. Because in their head, they're going like, no. I'm a three hundred thousand dollar a year person. Right? So I always lead with what's the total compensation,

six hundred thousand dollars of EBITDA. Right? And so you're basically using the profits that they've created to pay them the bonus, and you've created alignment between the two of you. But it's important never to just say, well, I'm gonna offer you a hundred and fifty thousand dollars a year plus a bonus. Because in their head, they're going like, no. I'm a three hundred thousand dollar a year person. Right? So I always lead with what's the total compensation,

48:22

and then what needs to be true to achieve that compensation?

and then what needs to be true to achieve that compensation?

48:25

I'm also a big fan of uncapped bonuses.

I'm also a big fan of uncapped bonuses.

48:28

So for example,

So for example,

48:29

let's say the target is, you know, six hundred thousand dollars of EBITDA. Well, if they do one point two million dollars of I want them to get double the bonus. Maybe even triple the bonus.

let's say the target is, you know, six hundred thousand dollars of EBITDA. Well, if they do one point two million dollars of I want them to get double the bonus. Maybe even triple the bonus.

48:40

And that's worked really well for us. So the idea of saying, look, I'm gonna offer you three hundred thousand dollars a year, but it might be six hundred thousand. It might be a million dollars a year depending on how you perform.

And that's worked really well for us. So the idea of saying, look, I'm gonna offer you three hundred thousand dollars a year, but it might be six hundred thousand. It might be a million dollars a year depending on how you perform.

48:51

And then the other thing is equity is just hard.

And then the other thing is equity is just hard.

48:55

I'm not a big fan of stock options.

I'm not a big fan of stock options.

48:58

I like to try and find people who are willing to if they want equity, they're willing to write a check. So If a CEO comes to me and they say, okay. But I need, you know, I need equity. I need skin in the game. I'm gonna say something like, okay. So you want

I like to try and find people who are willing to if they want equity, they're willing to write a check. So If a CEO comes to me and they say, okay. But I need, you know, I need equity. I need skin in the game. I'm gonna say something like, okay. So you want

49:13

forty thousand dollars of equity

forty thousand dollars of equity

49:16

per year.

per year.

49:17

Are you willing to lower your compensation

Are you willing to lower your compensation

49:19

by forty thousand dollars? Or

by forty thousand dollars? Or

49:22

are you willing to write a check? You know, do you have

are you willing to write a check? You know, do you have

49:25

do you have a stock portfolio you can sell and you can inject the money into the business? And I'll let you buy in at a really great valuation.

do you have a stock portfolio you can sell and you can inject the money into the business? And I'll let you buy in at a really great valuation.

49:33

And if they don't wanna do that, then sometimes I'll even loan the money. I'll say, I will personally loan you the money And then you're gonna write a check and you're gonna buy it. And I have the right to buy back your if you leave, I have the right to buy back your stock. At whatever multiple of the earnings at the time or whatever it is. How how do how do people react to that conversation? Because that's a very than where a lot of people are probably coming from. Well, I want them to value the equity and they don't value the equity when they get stock options. They just look at it. They don't even considered as part of total comp. So let's say that, like, all here's some here's the kind of thing I'd hear. So they say,

And if they don't wanna do that, then sometimes I'll even loan the money. I'll say, I will personally loan you the money And then you're gonna write a check and you're gonna buy it. And I have the right to buy back your if you leave, I have the right to buy back your stock. At whatever multiple of the earnings at the time or whatever it is. How how do how do people react to that conversation? Because that's a very than where a lot of people are probably coming from. Well, I want them to value the equity and they don't value the equity when they get stock options. They just look at it. They don't even considered as part of total comp. So let's say that, like, all here's some here's the kind of thing I'd hear. So they say,

50:07

I wanna make four hundred grand a year,

I wanna make four hundred grand a year,

50:10

and and I wanna equity.

and and I wanna equity.

50:12

And I'd say, well, okay. How's the equity gonna work? And they go, well, I think I should have five percent.

And I'd say, well, okay. How's the equity gonna work? And they go, well, I think I should have five percent.

50:16

And let's say the business is worth a hundred million dollars. So they've now said, okay. I want five million dollars.

And let's say the business is worth a hundred million dollars. So they've now said, okay. I want five million dollars.

50:22

And you're like, okay. Well, you're you're worth

And you're like, okay. Well, you're you're worth

50:26

four to five hundred k a year based on your track record and your experience and all that kind of stuff. How am I supposed to give you

four to five hundred k a year based on your track record and your experience and all that kind of stuff. How am I supposed to give you

50:34

five million dollars of equity. It just doesn't make sense. And so I always try and talk about it in terms of what's the cash value of the equity that they're receiving.

five million dollars of equity. It just doesn't make sense. And so I always try and talk about it in terms of what's the cash value of the equity that they're receiving.

50:43

And then how do we create a scenario where we have shared downside? And a lot of people in Silicon Valley are used to stock options.

And then how do we create a scenario where we have shared downside? And a lot of people in Silicon Valley are used to stock options.

50:50

And the way stock options work is, let's say, Sam, you join my company, and the stock price is a hundred dollars. And I say, here's a hundred thousand dollars of stock options

And the way stock options work is, let's say, Sam, you join my company, and the stock price is a hundred dollars. And I say, here's a hundred thousand dollars of stock options

51:01

at a hundred dollar share price. If the shares drop to fifty dollars,

at a hundred dollar share price. If the shares drop to fifty dollars,

51:07

It's a lotto ticket and it's a zero.

It's a lotto ticket and it's a zero.

51:09

It's not worth anything.

It's not worth anything.

51:11

If it goes up, then it's worth a shitload. And so you end up with this kind of binary situation where they have this lotto ticket

If it goes up, then it's worth a shitload. And so you end up with this kind of binary situation where they have this lotto ticket

51:19

that pays out big or as a zero. And so what that means is If your value of your business goes down even ten percent,

that pays out big or as a zero. And so what that means is If your value of your business goes down even ten percent,

51:27

they're basically at a zero. And so they're disincentivized.

they're basically at a zero. And so they're disincentivized.

51:31

So I just I don't love stock options. And in general, I only like giving equity to people who are willing to sacrifice something for it. Otherwise,

So I just I don't love stock options. And in general, I only like giving equity to people who are willing to sacrifice something for it. Otherwise,

51:39

You know, why why wouldn't they just pay you a really fat bonus? If you get down to it, that's usually what executives want. They want to do an addition to their house wanna go on crazy vacations. They like cash most of the time. Well, quick kinda question as we round up to what the downside of all this is is like, everything you're saying I think sounds.

You know, why why wouldn't they just pay you a really fat bonus? If you get down to it, that's usually what executives want. They want to do an addition to their house wanna go on crazy vacations. They like cash most of the time. Well, quick kinda question as we round up to what the downside of all this is is like, everything you're saying I think sounds.

51:58

When I hear, I'm like, this is the way.

When I hear, I'm like, this is the way.

52:01

Is a fair argument against this

Is a fair argument against this

52:04

that founder led companies typically have more innovation or more soul and things like that, and that it's better to have one thing go big versus

that founder led companies typically have more innovation or more soul and things like that, and that it's better to have one thing go big versus

52:13

many things that are potentially

many things that are potentially

52:16

okay.

okay.

52:17

Is that a fair argument? Do you think or no?

Is that a fair argument? Do you think or no?

52:20

Yeah. But I think, like I said in the beginning, I think it comes down to personality.

Yeah. But I think, like I said in the beginning, I think it comes down to personality.

52:25

Like, I think if you're so for me, when I was running Metalab,

Like, I think if you're so for me, when I was running Metalab,

52:29

I started five other companies

I started five other companies

52:31

in the first three years because it was irresistible to me. Right? Now I knew the right thing to do might have been to focus on the business. But my personality is that I wanna go do other stuff.

in the first three years because it was irresistible to me. Right? Now I knew the right thing to do might have been to focus on the business. But my personality is that I wanna go do other stuff.

52:42

So, Sam, like you seem super focused, right, and maybe you're better off just having one focus. You wake up every day. You you think about one thing. But

So, Sam, like you seem super focused, right, and maybe you're better off just having one focus. You wake up every day. You you think about one thing. But

52:52

if you start finding yourself getting drawn into other businesses,

if you start finding yourself getting drawn into other businesses,

52:55

it would be a huge disservice to continue to run that business. Right? So I think ultimately it comes down to being true to yourself.

it would be a huge disservice to continue to run that business. Right? So I think ultimately it comes down to being true to yourself.

53:02

You shouldn't, if you're listening to this, go

You shouldn't, if you're listening to this, go

53:05

Oh, I should go do this. You should only go do this if you're drawn to it. It's the same advice I give to entrepreneurs. They say, well, should I go and work at a company or should I be an entrepreneur?

Oh, I should go do this. You should only go do this if you're drawn to it. It's the same advice I give to entrepreneurs. They say, well, should I go and work at a company or should I be an entrepreneur?

53:14

And I kinda go, well, if you have to ask that question, the answer is probably no. Right? Because for me, I could never consider working for someone else. I if I whenever I had a job, I just wanted to shove the boss out of the way and take the wheel of the business. So I think To me, it just it'll be obvious. If this is something that appeals to you, you'll know. You'll be listening to this nodding along and going, oh my god. I can I can do this? I just didn't know I could do it and not feel that guilty.

And I kinda go, well, if you have to ask that question, the answer is probably no. Right? Because for me, I could never consider working for someone else. I if I whenever I had a job, I just wanted to shove the boss out of the way and take the wheel of the business. So I think To me, it just it'll be obvious. If this is something that appeals to you, you'll know. You'll be listening to this nodding along and going, oh my god. I can I can do this? I just didn't know I could do it and not feel that guilty.

53:43

Well, dude, this is awesome. We love having you come on. What do you think, Sean?

Well, dude, this is awesome. We love having you come on. What do you think, Sean?

53:48

Yeah. This is great. And it's also,

Yeah. This is great. And it's also,

53:50

earned information.

earned information.

53:52

So this is not something that you you might be able to read it in a book, but a lot of the nuance of what you described is from hard lessons that were

So this is not something that you you might be able to read it in a book, but a lot of the nuance of what you described is from hard lessons that were

54:02

things that went right, many mistakes of things that went wrong, and the lessons you've learned. So we all got to benefit from, you know, your twenty years of experience kind of going through this process yourself.

things that went right, many mistakes of things that went wrong, and the lessons you've learned. So we all got to benefit from, you know, your twenty years of experience kind of going through this process yourself.

54:12

And, I know for me, it was a huge unlock to be able to hire a CEO and do that successfully. And I was like, wow, this is cheap Oh my god. I get the business is gonna do well. It's gonna do better than if I was doing it. You know, I get

And, I know for me, it was a huge unlock to be able to hire a CEO and do that successfully. And I was like, wow, this is cheap Oh my god. I get the business is gonna do well. It's gonna do better than if I was doing it. You know, I get

54:25

all of the reward without any of that work. And it's a total of great trade for this person because I kinda didn't really appreciate

all of the reward without any of that work. And it's a total of great trade for this person because I kinda didn't really appreciate

54:33

how many people are entrepreneurial

how many people are entrepreneurial

54:35

but maybe not entrepreneurs.

but maybe not entrepreneurs.

54:37

They're people who are great CEOs, but they also got two kids. They don't wanna take full on risk. So they they want

They're people who are great CEOs, but they also got two kids. They don't wanna take full on risk. So they they want

54:44

that kind of medium upside,

that kind of medium upside,

54:47

low downside.

low downside.

54:48

And,

And,

54:49

finding that fit has been pretty huge for me. So I think that's great. A lot of the things that you said that stood out to me, the golden nuggets for me was find the find the number two at a business that's two two x bigger but similar to to the one you're in right now.

finding that fit has been pretty huge for me. So I think that's great. A lot of the things that you said that stood out to me, the golden nuggets for me was find the find the number two at a business that's two two x bigger but similar to to the one you're in right now.

55:04

Figure out what's their hammer because that that's probably it. Everybody's a man with a hammer, and and you just have to make sure that the right hammer for your your business,

Figure out what's their hammer because that that's probably it. Everybody's a man with a hammer, and and you just have to make sure that the right hammer for your your business,

55:13

and then

and then

55:14

pay up on the on the reference checks and the recruiter to make sure that you you get enough candidates and then you find the right person because that's a it's a necessary tax. You have to pay once the business is big enough that you could support this. And then leave them alone. That's the other thing. Most people don't leave them alone. They say, well, it didn't work, you know, in the first two weeks, they did something I didn't agree with. So I defer it. Well, what's the balance there? Like, you leave them alone, but you don't leave them completely alone. I think for you guys, they send you what, a fine a finance only update every every month.

pay up on the on the reference checks and the recruiter to make sure that you you get enough candidates and then you find the right person because that's a it's a necessary tax. You have to pay once the business is big enough that you could support this. And then leave them alone. That's the other thing. Most people don't leave them alone. They say, well, it didn't work, you know, in the first two weeks, they did something I didn't agree with. So I defer it. Well, what's the balance there? Like, you leave them alone, but you don't leave them completely alone. I think for you guys, they send you what, a fine a finance only update every every month.

55:43

And then

And then

55:44

Is there anything else to it, like a strategy planning thing, or did you do anything else?

Is there anything else to it, like a strategy planning thing, or did you do anything else?

55:48

So what we used to do is we'd do a report every single month. And they would write, like, here's what's going on in the business. Here's the numbers. And that was just crazy. We couldn't keep up, and it also wasted a lot of their time. Now we get just the numbers to head office. And we meet the CEOs annually. And then often,

So what we used to do is we'd do a report every single month. And they would write, like, here's what's going on in the business. Here's the numbers. And that was just crazy. We couldn't keep up, and it also wasted a lot of their time. Now we get just the numbers to head office. And we meet the CEOs annually. And then often,

56:05

there's certain CEOs we don't even meet because they're within operating platforms. We just meet with the CEO of that operating platform,

there's certain CEOs we don't even meet because they're within operating platforms. We just meet with the CEO of that operating platform,

56:12

usually, like, monthly or quarterly in check-in.

usually, like, monthly or quarterly in check-in.

56:16

By the way, this is

By the way, this is

56:17

The number one thing I get emails on, like, literally, like, every single day I get questions about it on Twitter and on email. And so I actually wrote a PDF

The number one thing I get emails on, like, literally, like, every single day I get questions about it on Twitter and on email. And so I actually wrote a PDF

56:26

on here, like, a checklist based on are you ready to hire a CEO and how to hire a CEO? And if you sign up for my newsletter, it's never enough dot com slash newsletter.

on here, like, a checklist based on are you ready to hire a CEO and how to hire a CEO? And if you sign up for my newsletter, it's never enough dot com slash newsletter.

56:36

I'm gonna post the PDF,

I'm gonna post the PDF,

56:38

next week, I think.

next week, I think.

56:40

Awesome.

Awesome.

56:41

Okay. Great. I think that's that's the That's the pod. Everybody should go check it out. Never enough dot com slash what? Newsletter?

Okay. Great. I think that's that's the That's the pod. Everybody should go check it out. Never enough dot com slash what? Newsletter?

56:48

News letter. Yeah. And we'll link to it in yeah. We'll link to it down here.

News letter. Yeah. And we'll link to it in yeah. We'll link to it down here.

56:52

Alright, dude. Thank you. That's the pod.

Alright, dude. Thank you. That's the pod.

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