Ep288: John North – Know Your Customers, Know Your Suppliers

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 to win an investing, you must take risk but to win big, you've got to reduce it. This episode is sponsored by a Stotz Academy which offers online courses that help investors, aspiring professionals, business leaders, and even beginners to improve the finances of their lives. And also of their businesses. Go to my worst investment ever.com right now to claim your discount on the course that excites you the most fellow risk takers, this is your worst podcast host Andrew Stotz, and I'm here with featured guest, john north. JOHN, are you ready to rock? Yeah. So john, North is a seven time number one international Selling Author about business strategy, and internet marketing, and his passion for squash. And as he says, not the vegetable. JOHN is CEO of evolve system group and has created many products and services designed to empower business owners, including evolve renewer, Dawn app, evolve renewer dot club and evolve global publishing. John's passion is to help business owners become more strategic and smarter about their marketing efforts. He constantly pushes the envelope of what's possible in the modern era and is widely regarded among his peers, as highly innovative and highly creative in his approach, john, filling a few tidbits about your life and thanks for that.

John North 01:44
cool intro. Yeah, my employer did in mind some time. Yes,

Andrew Stotz 01:47
you're hired.

John North 01:51
I'm I live in Sydney and I do have a passion for squash replace squash five times a week, competitively. So it's not just like, I guess down for the manual, slow hit, I just get going for five days a week squash so. So basically, yeah, so it's something to keep busy. And obviously it was very bad with through through delays with the pandemic, because I couldn't go and play until about three months ago. So I had to keep walking and talking is not as exciting as squash though. So yeah, I live in Sydney, I've got a wife and son who's working son works with me full time in the business. And we basically do publishing books in our online platform. So that's kind of neat at the moment.

Andrew Stotz 02:30
And one question is, when you went back to playing squash after taking the three months or so off, what was your body? Like? I mean, how much adjustment was there to get it back into competitive? You know,

John North 02:42
it was actually quite funny because we were playing blackmarket squash at one point there, right. So what happened was this other club that it wasn't my club, it's other club was actually running a scenario where you could book the whole club to yourself, like you and one other player, and you went in there and you had the key and you win in the like clean destination, and you played squash, and then you come back again, and you close the door, and no one else was there. So it's very safe, because no one else was there. And they might have separate courts. So you didn't find the same call to someone else, and they clean and stuff. And so we started playing that with my son. And when I first I hadn't played for about two months and started playing God often like a fall apart. Right? So we're lucky to sort of have some games before we started back in because when we started back all these other players again, I got a covert belly now I'm gonna lose like they couldn't know the injuries chopped up and stuff I had even in my back started flying up because five different playing once a week, or twice a week or so. Yeah, so it was it squashes the sort of sport that they always say don't get fit to play squash. Sorry, don't be don't use squash to get fit, get fit before. No, but when you're playing five times a week, it's easy to be that to reverse that, but it's hard on your body. So if you don't keep up with it, then you know basically will knock you over quick smothers. So

Andrew Stotz 03:52
Well, I think there's a lot of people listening that, you know, I've been trying to figure out how to get back into, you know, fitness and exercise routine after being kind of shut down. I know, in Thailand where I am. You know, luckily, we never went into like a full scale lockdown, as happened, for instance, in the Philippines. But in that case, it is allowed me to go out every morning and walk. And so I always, you know, kept walking. And then I started riding my bike early in the morning. And now yoga studios and other places are open again. So you know, we're back at it. But for everybody listening out there, you know, it's critical to get back into that routine. And, you know, the COVID bellies gotta go.

John North 04:31
Because in Australia, like we were essentially locked down for two months, we were allowed to exercise and buy essential foods in 18 months. So it was a long haul in Melbourne actually hadn't really four months of it. So and I remember seeing someone on the news saying this girl was at a coffee shop and so anyway, but my house never bled to me anyway, but my house, but they'd had enough of being at home. I think that's the thing. Yes, they're crazy. So winning and winning the coven came out the same way. So I started walking, and then since then I've lost a bit excuse So it's pretty good song. We've got a couple more guys. on time. Yeah.

Andrew Stotz 05:06
All right, well, now it's time to share your worst investment ever. And since no one ever goes into their worst investment thinking it will be. Tell us a bit about the circumstances leading up to it, and then tell us your story.

John North 05:17
And summarize a bit of a better partnership. But when badly bad, really bad, and I've had partnerships in the time, and I kind of learned some lessons of it. And I don't even know why the stager went into this thing, like I looked at rose colored glasses. So the picture was we had, we had a software distribution company, essentially a competitor in the other side of Australia had a similar distribution that he had a situation where he was a competitor. So the but the problem was that this competitor bought out my company, in terms of the head office. So basically, they become merged. So suddenly, he was my competitor with a totally different solution. Now he was selling my solution, plus his solution. But I wasn't allowed to sell his solution, even though I was an exclusive distributor, so that they just changed the rules. So the what I realized with the agreements was there wasn't a piece of paper written on. And one of the comments was, you want to stop this, you'd like holding back the tide? So that was a good title, my supplier. So we thought that makes sense. Let's merge. Yeah, let's merge. So we've been had a conversation went through, everything looked pretty good. He was sending us in the months to me. So we did a 5050 partnership split. And we set a date, a time to Sydney, and the day that I was having a meeting, I had a car accident. So it wasn't really bad with bad enough over by this truck. So it was a bit vague. And, and so but I still had the meeting and stuff like it's been a little bit. So that was a bad sign, I should have realized that was like a reverse of stop it anyway, went ahead. Turned out. We didn't check the financials very well. And he has a Porsche. And I was paying his Porsche payments as it turned out. And he had a very expensive office in Perth. And over the period of time, and also he came back from meeting we bite everything out. And then he went back and he announced the merger before he actually asked anybody. So you completely destroyed the relationship with everybody he had with us with some of the bad ones. And now we're in a situation where we're trying to damage control, because he realizes guys do something wrong, and then apologize later. Right. So I think Trump does something wrong, Paul, maybe apologize, like maybe doesn't, right. And so yeah, so anyway, what I find out within six months is he set up another business inside my business. And he's now training this other company and all the good staff that he hires, the programs and stuff he puts on his side of the business, not mine. And I'm going man, this is crazy. And he doesn't think it's a problem. And I'll say leaves at five o'clock because his previous business partner was in hospital back in the fax days, and he's getting faxes, and he's on his death door. And he's reading these faxes from his business running. And this guy said, I don't be like that sentence goes home at five o'clock. That's annoying, isn't fun, don't work extra hours. And so this is a partner from hell. Okay, let's get rid of him. And I had a girl working for me. She was just paying me out. Let's get rid of him. And what I decided is I'll give you a workout roughly business worth us and he's half a million dollars. We pay you off over time. And we'll do that. And we'll get rid of you. Right. What I realized was he said yes to quickly. So what I should have done was have that value and come back as it is 250 K and said, see what happens right first lesson, living number you think of Harvard or double it. And you never know right? You always come down and meet in the middle. We never negotiated he just said yep, calm send me the paperwork. I go, Oh shit, I've done they're totally on price to like now. Suddenly, I was great, fine, no worries, got rid of him started paying him 10 grand a month for the next four years what it was and then my supplier decides to attack me. So my supplier now decides that they're going to bring someone else into the country and a third party to actually sell the same stuff as me and steal all my customers. So within 12 months period, we had this war going on where basically it was stealing my my dealers, my customers and their business dropped by 50% here I'm trying to pay this guy 10 grand a month and the money's gone down and we tried to fight them again it's like you're holding back the tide. And so we went through a seven year war over that and so the worst problem was that I paid him too much for it and then it was worthless at the end height so psych cost me I don't know minions in the end we sold the company I sold it twice actually interesting enough because actually sold it or read half of business to resell who bought off the distributor I sold it to so I was getting commission from him and commission from the distributor and the commission so I got some money back never got anywhere near what I got back but that's what pushed me into into marketing and starting a whole new business because, hey, you know, I had no choice in the end but we fought that company for seven years, and our business was going backwards. All The time like it was never likely to go up. And as soon as we tried to do anything different, like had a new product or something, we got accused of being disloyal to that company, we actually had to fly to South Africa, and pretend we would get forgave them or to get keep their business for another 12 months to survive. And so we basically said, We forgive you, you know, and, and also given because South Africa, very much a, you know, that, you know, whole party thing, and that, you know, the Truth and Reconciliation thing where they all got together and said, they were sorry, and moved on bullshit, but it is what they said, that's what I did. I pulled that off, and we managed to get another 12 months on this ridiculous target we've never going to meet. And they gave us time to sell the business to me 12 months to sell the business distributor and stuff. So it was a nightmare. And seven years and it gave me their cancer, I'm sure that they'll cancer about two years after. So when that guy you know, that famous actor died of cancer sign cancer, I got diagnosed back in same year 2016. And I came out I actually diagnosed early enough to have operation and not have to have chemo. But I reckon that just now. So that was a horror story. But I learned so much out of it.

Andrew Stotz 11:09
But let's go through what you learned, because I'm really interested in the story is powerful. But what lessons did you learn?

John North 11:16
What was interesting, one of the things I learned the two things they were trusted supply, because the more the smarter they think you think they are. But secondly, own your own stuff. So yeah, biggest problem was I own nothing, I was a distributor, I was a person in the middle and your distributor, the trouble of distributor is, if they're really, really successful, they'll bring someone else in the country and take over. If you're not very successful, they'll shut you down. So somewhere in between, you've got to be reasonably successful, but not too successful. Because you get screwed in the middle. And I actually took that company over for free because it was almost bankrupt. And I took it over and saved it. And I was propped, you know, as basically promised exclusive distribute and never got that, right. So the promises are given whenever kept. Um, what I realized was, that's where credit evolved grain, and I sort of looked at Richard Branson, I thought, well, he has virgin, Virgin, rail and Virgin Books or whatever, I, I'll call it evolve something. So that's how we kind of evolved into like, everything's gonna be called evolve. And that's how we did it. So, but I'm own brand, own your own customers. And that was the thing, I never owned nothing, I think I get these letters that said, You're not allowed to contact this person ever again. So the transfer between software because the software company, the transfer from that customer to the other distributor, they sign a piece of paper, so I'm not to contact them never ever again. So lost that customer forever, could never go back and try and recover them. You know, everything was set against me. Yeah. And we fought for seven years. So learn a lot about business survival, I'm going to tell you because they breached every single rule of the company trading sector in Australia, but there's eight of them, they breached every single one.

Andrew Stotz 12:55
And one question before we get into kind of what I'm what I learned from this is what did you learn about you know, your energy in? I mean, obviously, you mentioned about the bowel cancer. And, you know, what did you learn? You know about your energy? And, you know, was it worth it to fight for seven years? I mean, I have a friend of mine, I'll tell you a story that a friend of mine, he started a very successful bank. And he started with a couple of other guys, and particularly one other guy, but and they the bank, we're talking about probably his value in that was, I don't know, 300 400 million us know, and then they had a split, and they had a fight. And they had a legal battle. And the legal battle went on for almost 10 years. And you know, he was just almost dying, fighting this thing, although he was very competitive. And he was very, you know, smart. And a friend of mine kept saying, you know, I don't understand why he keeps going like this, you know, and I'm like, are you gonna walk away from foreigner million dollars? Yeah, yeah. You know, whatever that number is, I'm a

13:59
lottery right?

Andrew Stotz 14:00
And, you know, in the end, after almost 10 years, you know, he won, and he got a settlement. And, you know, it was resolved. But you know, there was a lot of energy expended that you could argue, you know, if it was $10 million, well, for the average person, $10 million is a lot but for him, it wasn't, you know, but at that level, I'm just curious. What was your experience about that? You know, it's kind

John North 14:24
of similar cuz when I arrived in Sydney, because my previous business had gone, not not broke, but basically shut it down. And that was in in North Queensland because of GST came in new tax came in, they completely destroyed my business overnight 80% down because everybody bought accounting software, and then they didn't want it anymore, right? They would, and they were scared of spending money because they knew tax was out, right. And so when arriving in New South, or in Sydney, I had $50 in my wallet, that was it. And so they gave me a job at six months out this, I don't mean plus six months in last 30 years, and that was it. And so I got that job. And so I spent the next six months recovering and then took the company I've been doing really well. started to get some way. And I only had like 100 grand sit in the bank for the first time of my life getting somewhere. So my fear was losing that. But the problem was we threw so much at it, I'm still paying that debt back, I had to pay the tax office back a half a million dollars, I personally had to pay it back. So I spent three years doing that. And so I've been paying that debt for that thing in to this day, I still pay back then. So it was so like trying to solve their problem financially in my head, if I fought them, and we won, I'd have how I was going to win it before them and one then we get somewhere. But it was a 12 month agreement, which wasn't worth anything, right. And my business was worthless, and I didn't. And it's like, it's at the end of the day, we had nothing else to choose. And I, we sort of fought and fought and fought. But our idea was we'll transition to something else, and it'll work and we'll move away from them, screw them, right, we've got the infrastructure, we've got the, you know, 23 staff, we've got premises, we've got thousands of customers, surely to goodness, we can turn something around. That was the printer because either 523 people otherwise, yeah. Um, so it was like too much to lose. But when I look back at it, I don't know whether it would have paid me enough money to pay me out. Like, there was a couple of numbers thrown around at the title called pay, you know, as such low numbers wouldn't even cover my cost to get out of it. So I was like, had no choice but to stick it out, and try and make myself the thorn in their side. And that and you know, what, every year that's I was gonna go broke that year. And we lasted seven years. So we really In fact, we nearly sent, the other guys broke, if I'd actually held out a little longer and kept the prices lie like we did, we would have put him out of business. I didn't know that six month window, we would have won that war. Yeah, that we didn't know.

Andrew Stotz 16:39
So let me summarize what I took away from your story. I think there's a few things that I was thinking about. And the first one is that businesses is about trust and personalities, you're not about products and all of that, you know, that product is a secondary item. But you know, the people that you work with, and the trust that you have. And I think for a lot of young people in particular, they learn business from books, and this and you know, all that, and they missed that trust element. So this is a great example of the importance of that. The second thing is, you know, there's external factors, you know, that that hit us. You know, we have in one of my businesses, we have a supply agreement with a high end company, that's, that's selling espresso machines. And, you know, they've come and said, Well, we want to put in two suppliers in, you know, Thailand. And

John North 17:34
so that's what I that's what I started with me. Exactly, that's like a warning sign.

Andrew Stotz 17:38
Exactly. And so, in fact, we were just strategizing about that last night. And this gives me some, you know, some things to think about as we continue. And then, also, I did some research A while ago on m&a deals. Globally, I looked at 5000 m&a deals across the world. And I did two pretty simple things in an academic style of research. First thing I did is I asked the question, what was the share price performance of the company that was acquiring and the company that was being acquired. And what we found was the company that was being acquired was a little bit more went up a little bit more, because of the bidding process and all that, but on average, it costs 5000, it wasn't by that much. And part of that is because we looked at the announcement date, and then we use that kind of as the time that a public investor would be able to get into it. So we found that some countries, you know, are really, the information is leaking out, you know, before the deal. But the second thing was more important to me is what happened to the return on investment of the buying company, the parent company. And what we did is we looked at the return on invested capital, and we asked the question, between three to five years, what percent of the time was in return on invested capital increase versus decrease, and we found that 80% of the time, the return on invested capital, fell after three to five years after an m&a deal. And it taught me a lesson that, you know, you really, really have to have a skill in mergers and acquisitions as a company to make it work. Otherwise, it fails and it fails because of a clash of culture. And that is

John North 19:23
to say culture was the one that's what we had trouble with. Because the guy had sold the business or merged the business overseas he'd sold it that's when in mind realized me realize my mistake that it wasn't a merger we weren't leveraging each other he was getting out. And he had owed a lot of money as we turned out Tuesday to pay all the suppliers as well as part of the merger deal and it turns out and so yeah, he was trying to get out to destroy the relationships with for us on the way through didn't introduce us properly. So all these guys are taking you over. You know, I'm not Don't talk to me anywhere in your game. So well. Yeah.

Andrew Stotz 19:53
And that it the last lesson I take away is the difference between a job and a business, you know, in a sense what you do. described previously of not owning your clients not owning your brand, not only your products, not owning your services, is ultimately you may think you have a business, but actually you just have a job.

John North 20:10
Yeah, yeah, it's a phantom business and a job to appease them to change those change the rules every year to By the way, so they come in and go new settings. We want to make this as your new targets and stuff. So yeah, there's a crazy person running your business if you had no choice, but to kind of follow.

Andrew Stotz 20:25
Yeah. And in some countries, I know, Thailand, the employee rights are pretty strong, you probably have a lot more protections as an employee than as a business partner in that kind of a situation. So

John North 20:38
yeah, yeah, yeah, absolutely. So yeah, I think I think seeing it from the outside and taking a look up and looking at the risks, we we sort of went with the flow, because it seemed logical, it seemed natural to do this. And in a big picture, it did look like obvious and natural. But when you look at the underlying, and we didn't look at these financials deep enough, he didn't give me enough information he should have. He was his personality wasn't taken into account when we talked to him. Right? We didn't take those, those and I had a girl that was really good at picking this stuff up. But she didn't pick it up.

Andrew Stotz 21:12
So let's go back in time, to when you were making your decision. And I'm gonna want you to think about that. And also think about the listener out there, who's facing the same exact situation right now of coming together with his business, or her business and another's. And I'm going to ask you this question, which is based on what you learn from this story, and what you continue to learn what one action would you recommend our listeners take to avoid suffering the same fate?

John North 21:39
And I think you're looking at this come back to the center, why did I do it? Right. And I think I did it out of fear. Because what happened was, if I fear the unknown, if we if we don't know to this guy we lose control was suddenly a competitor against us what happens then what happens in reality was that based on his business, if we know more about him, we could have killed him in the business, he was useless, like he was bad. With our services so much better, we could have just massacre that gonna cost us nothing. We didn't think that way. We actually came from fear. So no decision from fear, Tom. And I think if I had to step back a little bit and thought, Well, what if we do this instead, what happens?

Andrew Stotz 22:16
It's a great lesson. And for the listeners out there, you know, take a step back from the deals that you're doing right now in the interactions that you have, and make sure to assess, to what extent are we doing this because of fear. And, you know, sometimes fear is very healthy, but other times it drives us to consider, it drives us to consider doing something that may not make sense. It drives us to do things too quickly, and not pay attention to the details. And you know, it's just such a valuable lesson, john, from my own business in my own life, that it's a great reminder for all of us. So, last

John North 22:55
comment, actually, on that subject was, I heard a guy saying from a very famous indigenous in Australia at the time, and he's at risk, and he's dead now. But he said, if you can handle the downside, you can handle the upside. And that was his investing. And I think that's a very good thing to think about. Can you handle the downside? What's the worst that can happen? Yep. Will it matter in 10 years time? And nothing much does?

Andrew Stotz 23:19
Exactly. All right. Last question, what's your number one goal for the next 12 months.

John North 23:24
Our goal was to launch out a platform in a big way. And in this sort of pandemic thing kind of made a bit interesting, because, and then an election coming up and all this stuff going on. And so actually interesting, the floodgates open to this morning, after the election, I'm getting all these inquiries, we've had nothing for like weeks. So you can see those people may pent up waiting for what something I don't know. So basically, my goal is to get the software off the ground, particularly in a in an area of podcasting. We want to be a game changers in certain industries. And podcasting is one of them. And also, so a golden x is really produce a killer finish off this app, when we've got much more features to go with big three months rent to kind of get this thing really working, and then have a big 21 in terms of a launch. To me it's 100 million dollar company. I can make it work right.

Andrew Stotz 24:11
Fantastic. Fantastic. Well, listeners, there you have it. Another story of loss to keep you winning. Remember to go to my worst investment ever.com to claim your discount on the course that excites you the most. Now, as we conclude, john, I want to thank you again for coming on the show. 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

John North 24:39
the audience? Um, yeah, I guess, own your own stuff. And, yeah, and be always looking at the big picture. I mean, that's the thing is that people don't go step back much and have a look, go way hold on something, do something. Don't just sit there and make a big decision on a day. I think

Andrew Stotz 24:57
we've got the episode title right there. Only Your own stuff is a great, great message and that's a wrap on another great story to help us create, grow and most importantly protect our well fellow risk takers. This is your worst podcast host Andrew Stotz saying I'll see you on the upside.