Ep611: Rick Jordan – Be Careful When Helping Friends

Andrew Stotz 00:02
Hello, fellow risk takers and welcome to My Worst Investment Ever, stories of loss to keep you winning. In our community, we know that when in investing, you must take risks but to win big, you've got to reduce it. Ladies and gentlemen, I'm on a mission to help 1 million people reduce risk in their lives and that mission has led me to create the Become a Better Investor Community. In the community, you get access to the tools that you need to create, grow and protect your wealth. Go to my worst investment ever.com Right now the clean your spot. Fellow risk takers, this is your worst podcast hose Andrew Stotz, from A. Stotz Academy, and I'm here with featured guests, Rick Jordan, Rick, are you ready to join the mission?

Rick Jordan 00:49
What's shakin, I am ready to join the mission. Let's go.

Andrew Stotz 00:53
I am happy to have you with us. And I want to introduce you to the audience. Rick Jordan is a magnetic personality constantly appearing on global media and speaking on stages across the United States. As an inspirational speaker, cybersecurity expert, and mindset motivator, Rick is the founder and CEO of reach out technology, which just had its initial public offering. And in his free time, as if he has free time, he is the host of the popular podcast all in with Rick Jordan. Rick, take a minute and tell us about the unique value that you bring to this wonderful world.

Rick Jordan 01:38
That was amazing. Thank you for that I love. I love that when I just look back, and I hear all those things. And you talk about the value, right? Because I think about when I hear all those things, it's like, wow, none of that happened overnight. And I think that's most of what the value is that I'm able to bring is just tremendous breadth of not experience. But experience is. In my life, you know, I think that's a good and important differentiation is experience versus experiences, right? Because experiences, I think are what grew wisdom. And as I've entered my 40s, I started to realize that I really knew nothing in my 20s and 30s. With what's been shaken down. Everything from the death of my dad all the way to bringing a company public into a public roll up with mergers and acquisitions, there's a big journey along the way.

Andrew Stotz 02:32
And one of the things that I love about business and having a an exciting business career is that when you walk into a meeting now, with that much experience, you know, you bring a lot of value to the table, then that value is not like, Okay, here's how you, here's how you create this product. It's not this narrow value, it's a much bigger skill set, hey, wait a minute, I've been through this, I've seen where it goes, you may want to consider X, Y, or Z. And for the teams that are open to listening, then, you know, they get some real value out of that. And I think I would also just mention about your podcasts because I know you've got about a 4.7 out of five rating on iTunes, which is fantastic. And maybe you can just talk a little bit about what you're doing with the podcasts. And what do listeners get when they come to this podcast? Because I know my listeners love finding new podcasts.

Rick Jordan 03:33
Well, thank you, brother. It's a lot of fun. And I've been asked me for a while I started the podcast and you know, almost similar to your story, right? Somebody told me I should. That's really what it came down to. This was four years ago, right? And now 300 episodes later, here we are, you know, to where we're both, you know, in multiple dozens of countries across the world. I'm so grateful for it. But I never stopped making it. Because as you say, In my free time, I love bringing value to people. I love being able to help them get from point A to B. And mindset is a big thing, because you were mentioning a little bit about the experience right in the wisdom that I can bring into a room. And I know that I can at this point and to not say that. I've got it all together because I look back. And I think that this is something an important key. And it's a shift that I had to make a few years ago, right? Because I would still walk into rooms and think like, oh, well, I've never done this before, you know, what value could I bring? And I think about a very specific instance, when I was asked to speak on a stage three years ago. It's like there's all these other people in the room that have accomplished so much more than me. But then as soon as I get on stage, which was supposed to be 20 minutes turned into an hour and 10 minutes because of q&a. And it was just blown away. You know, because I just showed up with everything that I had. I was all in in the moments and it was a shift for me almost like a slap in the face to recognize it. Even though it might not Be that exact thing, because our experiences and our temporary defeats not necessarily our failures, but our temporary defeats that we've had going along the way, which I know we'll talk about one of mine today, right with my worst investment ever. And moving that into what you were talking as far as applying that to what exists today. You know, as long as you can have compassion for yourself in those temporary defeats, and take the learnings from them, you can bring the value in those temporary defeats to multitudes of circumstances. So even if it's not a not a hey, I know the exact path you should take. It could be the question, What did you think about this? When you're giving advice? Because I went through this, or I could see this, and you don't even have to tell them why it's because of the other things you've been through.

Andrew Stotz 05:49
Yeah, it's, it's interesting. And I while you were talking, I was just going online to see about, maybe you could just talk about the IPO, you know, and what you've recently done, you know, with that, and kind of what, what, what what, what have you learned from that so far? And then after that, we'll get into the story.

Rick Jordan 06:06
Yeah, the biggest thing I've learned from taking your company public, and you know, we've done it in a mini IPO fashion under Regulation A, you know, that's that's kind of the first step because you can be public without being listed in our listing. We intend to list on NASDAQ in the next two years after we throw up a lot of top line revenue and a big valuation, of course, and then that's even just another stepping stone to continuing our mission. But throughout the last three years, because it took three years, to bring this to fruition. And our press release just went out last week for our first acquisition for the roll up that we closed for $6.6 million. You know, coming from the point where I signed the deal, I inked the deal with a consulting company that put the team together to the point of our first acquisition was three years. So the biggest learning I had from that is it took three times as long and three times as much money, as I anticipated that it would.

Andrew Stotz 07:04
That is a lesson. And it also is a lesson in persistence, because I think a lot of people don't realize that many of their dreams could be farther away than they think. And I was just been reading, rereading Michael Gerber's the on the E Myth book, and he talks about the entrepreneurial seizure and that concept that we just get so caught up in our idea that we just really don't see and most people are in business because they went to an entrepreneurial seizure. And they're in it five years later, only because of that entrepreneurial seizure, and they can't get out.

Rick Jordan 07:39
I love his perspective on a lot of things. Yeah, he may it's the only the only difference between winning and losing is not quitting.

Andrew Stotz 07:47
Yeah, yeah. And you're in good company wreck, because today, it's October 5 2022. And on in a few days, I'm going to interview Mike Michael Gerber. And I'm looking forward to having him on the podcast and learning more from him about his journey of what he's been doing. So I'm excited. So it's a good dude. Yeah, interesting. And I'm really looking forward to it. So well, now it's time to show you the worst investment ever. And since no one goes into their worst investment, thinking it will be tell us a bit about the circumstances leading up to it, then tell us your story.

Rick Jordan 08:25
Sure, yeah, there was a gentleman who actually stood up in my wedding. This was 21 years ago now. And he was in the same industry, right? He was actually an individual who I ended up partnering with when I initially formed my company when I started out on my own. And it was an interesting scenario, because there was some financial trouble that existed that I didn't know about. And so then through that, through that discovery, I decided to not take on a partner, again, you know, like, literally ever, but now, I mean, it's interesting, because I did an IPO I guess you could look at it as all the investors all the shareholders are technically some kind of partners in some way or another. But it's a different perspective. So he ended up teaching me a lesson to begin with, as far as you know, different viewpoints and then also different responsibilities within business. And this was 14 years ago. So then, I started launching, I started skyrocketing, and at the same time, he started declining. So if you think about it as almost like line graphs, right, you can see that there was a point of intersection to where I surpassed him within a couple years, he kept declining and I kept accelerating. And this was a good friend of mine, obviously, from way back when actually even a a leader in the youth group that we had, and looked up to him got to the point to where he was really, really hurting, right and maybe producing about $150,000 in revenue on an annual basis. That's it, you know, in before expenses. So you might think he was probably in that category that the SBA, the Small Business Administration, counts as saying the average small business owner takes home $59,000 A year, which I think is horrible, right, you might as well work for somebody else. In that case, it's horrendous if that's what it is, you've got way more stress is way more pressures, way more emotional load, than working for somebody else, if you're only doing that. So if you're not in the business, to build it to even sell to begin with, you shouldn't be in business at all personal opinion, it's treated treated me well with that outlook on life. He got to the point to where he was struggling, right asked me to borrow money, because we were still friends, even through the turmoil that we had. And I said, You know what, I don't think that's going to be the wise move. For me, I think the wise move, because I don't believe that you could potentially pay it back. So this would be more like a gift. I think the wise move, would maybe let's have a heart to heart. And maybe you should go look to work for somebody else. Because of your current states. And seeing is how I have a successful business, we passed seven figures in revenue. Now, I believe that I could just acquire you your customer base. So if I look at your, your past year, rate of $150,000, you're probably worth about one acts as a generous offer. Because that's inclusive of expenses and everything else. And that was my first mistake. My worst investment ever was over valuing the business, right? At a 1x. And at the same time, he was a friend. So there was a there was an emotional attachment that I had to this as well, my compassion runs deep man. And it always will, even without the possibility of knowing that I'm never going to be taken advantage of because I know that I will, by individuals that are out there, I'm never going to stop having compassion, because I believe that's what we're here on earth for is to help other people in whatever way we can. I know we'll be burned, I just know to be a little more careful in some scenarios, and ask them some better questions at this point. Oh, taking a look at that. I mean, we started looking through his assets, right. And I'm like, Cool, I can take on these customers. And I know that I can triple because I know what his offerings were. And I know how I ran my business. And I know what made me successful, I can triple is revenue pretty much overnights by taking all of these on, then he's got a good domain name, right, Chicago consultants.com. I saw him that domain name to this day not being used. But that was the one that I acquired. I'm like, I want your phone number. I want these assets. That way, everything that you did to operate and run business, that's what I want and will value you at 1x is like awesome. That works. You know, and I mean, just in tears, because it got him out of a lot of difficulties, you know, which was phenomenal, I am grateful for that part of it. within, within six months, none of the customers were still with me. Because they had all moved with him. There wasn't really any stolid documentation in place, it was just a very simple contract that we had for the purchase of those assets, no real noncompetes that was listed within this. And it was just more of a kind of on an honor system, just an understanding that he would be going to work for somebody else. Because after those six months, he ended up going back into business for himself. And of course, they all came back. Right. So looking back, there was a couple of things. I mean, it was a complete loss with the exception that I still have the domain name. That's really, that's really Yeah, I mean, it's not a bad domain name.

Andrew Stotz 13:37
And if any listeners want to buy it, I'm sure a good price would come out.

Rick Jordan 13:42
Absolutely. Yep. Someday I'll use it. I buy funny domain names, sometimes just as I have these crazy ideas in my head. But that's one that I've kept. I mean, even if I've just kept it just as a reminder, for real, you know that that was something that I never should have walked into without actually getting some, some more information. So there were there were three mistakes, and one I haven't talked about yet. The first one was obviously not under really understanding or over valuing his business. Right. The second was not having the correct legal structure in place, and not even, you know, I think I went to rocket lawyer.com or something, you know, and I was, I was young at the time to bring this up. So there wasn't really any non compete. And then all the customers went back to him after he went back into business for himself under a different name, mind you, right, because he couldn't, which was very interesting to me as well. But then the third one is that I allowed emotions to get attached to this in my motivation for doing it. Because my motivation out of the gate was really to help a friend. And I think that I think that there's certain directions that relationships can go and should go. I think business partners can become friends, but I don't think friends can become big And as partners. Now, because the motivations I don't believe are combat are compatible when it goes in that direction, and that was the emotional tie that I had, because I genuinely wanted to help the dude. That's, so now it's even talking with mentors in my life. It's what's, what's the way to go about this. And that's one of the things that I found is that business partners can become friends. But friends typically do not make good business partners or business associates.

Andrew Stotz 15:30
Yep. So if I, I'm going to just first summarize the lessons that you learned. The first was, you learned about overvaluing. And the second one you learned about is getting the right legal structure. And then the third one is about emotion. And don't let emotion drive that and maybe I'll share a few things I was writing down, you know, that $59,000? I think we need to talk about that for a moment. Because for the listeners out there, basically, what this $59,000 is that you've quoted is coming from, according to you, the Small Business Association, saying that the average business owner is paying themselves $59,000 a year now, the average college grad is getting something like 45, or something like that. I don't know what the latest is on that. But so the average business owner is not making much more than let's say, the average college grad. And what's been happening in most businesses is that they're underpaying themselves, because if they were to pay themselves fully, they will be making a loss. And basically, I always give advice when people say, How do I increase my exit value? And I say, first thing to do it and do it today, double your salary. Go. And what people say is I can't my business can't sustain that. And I say, exactly. Because if me as a financial guy, if I look at your company, and I either think about buying it myself, or one of my clients looks at buying it, we're gonna say, Okay, let's imagine you walk out the door, and your management team walks out the door, and I have to replace all of you at market price. I have to go out there and hire some great people to run this business. Is the revenue of this business sustainable enough to manage to be able to generate a profit out of that? And usually the answer is no. Now that brings me to the second point of advice that I give, besides a doubling your salary. And that is, every small business, in my opinion, is a race of raise to three to $5 million in revenue. Bingo. And the reason why is because the in order to operate a proper business and not just destroy yourself and all of your employees, you need infrastructure, and that infrastructure has to do with hiring good management team of three to five good people in marketing and production, whatever, those main cane main areas sales, you can't do it all. So you have to build a sustainable business. And that means you need a management team. But it gets worse because you also need an operating system for running the business. It could be if it's a production, it could be an ERP type of system, you may need a CRM type of system, you may need an accounting system, you may need all these human resource systems and all of a sudden you realize, holy crap, there's a lot of infrastructure you need to build a quality and sustainable business. And that also reminds me of one of the episodes in your podcast where you say consistent growth beats raw talent. And you could just say, even worse than raw talent, just blood, sweat and tears. Now, we need consistent growth and not in revenue, but in profit. Now, the last thing I will say about this aspect is the concept of the dividend. To be successful in business, your number one goal should be to pay a dividend. Why is that? That is because a dividend must be paid out a profit. So in order to produce real evidence that you have a sustainable business, you need to get not number one, you need to get to three to $5 million in profit. And number two, you need a start in revenue. Number two, you need to start paying out dividends because ultimately, as an outside investor, that's the only thing that I can get out of your business. So those some things that I thought about. And the other thing I'd thought about is there's all there's a saying that people say there's no such thing as a bad asset, just a bad price. Well, maybe the price in this case could have been zero. But you know, that that, you know, makes me think about key man risk, which we always talk about when you're acquiring businesses. And the key man risk is okay, what if this key man is ours, and we have to run this business what's going to happen? But you don't often think about the other key man risk. What if this guy goes and set up, sets up a competing business? Now of course we have non-compete clauses and things like that, but eventually that person is going to go and set up an I think when you're buying a company, you should think that to think, Okay, how do we make this company better, stronger, faster, so it can compete, when that person gets out of their non compete period and decides, I understand this a lot better now. And I'm going to start on new company. And the last thing I just wanted to say is, if you're a business owner, if you're a business manager, and you have an opportunity to help a friend, stop, your obligation is to help your customers, your employees, and your shareholders. And if you break that obligation to those people, you are breaking trust. So if you want to help a friend, I liked the idea that you did that you said is maybe I should just give a grant or maybe something like that, you know, not alone. People come to me for loans, I don't give loans, but I do give, you know, gifts, and here's 100 bucks. Anything you would add to that discussion,

Rick Jordan 21:01
just just one, and that has to do with the acquisition that I just closed, I mean, going from $150,000 to 6.6 million on an acquisition is a big jump, there was a couple others in the middle of that. But throughout this process for this one, you know, having learned the lessons, and this is the the emotional detachment that I know you have to have. Now, at this point, you know, even though you want it to happen, and I still one of the pillars of why I took the company public was to build wealth within individuals within these owners who are only making you know, 70 $80,000 a year to give them a chance at real wealth. With a public company. It's a great mission, right to create real wealth for this industry. Through the process, I had one of my VPS asking me because we got down to some negotiations in the deal. And there was a couple of things that I would not budge on. And she asked me the question, okay, are you willing to walk away from this? Or she phrase it better? Like you're willing to walk away from it? You know, almost like out of out of surprise, said, Yeah, I am. Because to your point, Andrew, it's the responsibility that I have to the business itself, to the shareholders, to the employees that are currently working for me to keep the right position for them. That's the responsibility that I bear now, at least back then it was me and maybe two other people, but now it's me and several dozen people, it's a different story.

Andrew Stotz 22:25
Yeah. And as a, as an analyst, since my career started in 1993, looking at public companies all of my career, you know, that is the lesson when you go public, you know, you now have 6 million shares to think about, yeah, and they're going to be distributed across a lot of different people. But if you stay true to providing an I also would I have a little rant that I'll just mention, and it's not to do with you or anything, but this is be very careful. If you hear about shit, stake holder, capitalists, capitalism, bullshit. Do not let that distract you, from delivering shareholder value to your shareholders. Nothing wrong with being engaged with share stakeholders, whether that's employees, whether that's a community is fine. But be careful, because you don't want to get distracted to your mission, which is to deliver value within society's legal framework to deliver value to your shareholders. So just a little, a little high horse,

Rick Jordan 23:30
you got it. I appreciate that. That perspective that's in my head literally every day, man. Yeah, that's the Republic,

Andrew Stotz 23:37
I just put out a little post on LinkedIn saying, I'm looking for someone to debate me on ESG. Everybody's in favor of environmental, social and governance. And I would like to have a debate about this topic, because I have a lot of thoughts on it. But that's a debate for another day. Now, based upon what you learn from this story and what you continue to learn. Let's imagine a young person in your same situation. What what action would you recommend our listeners take to avoid suffering the same fate?

Rick Jordan 24:06
Oh, goodness, that one of the best books that I've ever read, that has gotten me through a lot of things is called The Wisdom of Walt. And it's about Walt Disney and the journey that he took and the perspective that he took in building Disneyland. It didn't have much to do with his motion pictures or anything. But the wisdom that is literally in that book is what's gotten me through a lot of things over the last couple years. It's incredible,

Andrew Stotz 24:29
right? And I'm just typing that into the wisdom of Walt and ladies and gentlemen, I'm going to put that into the show notes. So you can just click on it and go to it. I think that's a great resource. So my last question for you. What is your number one goal for the next 12 months,

Rick Jordan 24:51
or the next 12 months 50 million in top line revenue, pushing up as many acquisitions as we possibly can to build the value for the shareholders.

Andrew Stotz 25:00
That is a clear mission ladies and gentlemen, a great example and listeners. There you have it. Another story of loss to keep you winning. If you haven't yet joined the Become a Better Investor Community just go to MyWorstInvestmentEver.com right now to claim your spot. As we conclude, Rick, I want to thank you again for joining our mission and on behalf of A. Stotz Academy I hereby award you alumni status for turning your worst investment ever into your best teaching moment. Do you have any parting words for the audience?

Rick Jordan 25:29
Let's go all in anything that you decide to do don't have asset go all in.

Andrew Stotz 25:35
Go all in ladies and gentlemen, and that's a wrap on another great story to help us create, grow and protect our well fellow risk takers. Let's celebrate it today. We added one more person to our mission to help 1 million people reduce risk in their lives. This is your worst podcast hose Andrew Stotz saying, I'll see you on the upside.