Episode Show Notes for The Perils of Partnership

I’m your host, Ryan Niddel, and this is Rethinking Business. In today’s episode, I’m going to share the perils of partnership and what you might want to consider doing about them. This is one of those challenging episodes. It’s challenging because I know there will be a point in the not-so-distant future when my partners listen to this very show. A lot of what I’m going to share, I haven’t spoken openly about ever before, someone to clue you into a secret.

This podcast isn’t actually for you. It’s for me. This is where I can come and talk through the issues I’m dealing with. This is where I can gain perspective. This is where I can go back and catalog my journey and the successes and shortcomings from it. That’s what today is.

I’ve been fortunate to have partners in almost every business I’ve ever been a part of. If I go back to the web hosting days, my first entry point into entrepreneurism, I didn’t jump on; I was on the ground floor, and I wasn’t a co-founder of the business. I was brought on as an affiliate manager. We had about 10,000 clients, and I came on board. I figured out how to drive sales. In hindsight, I can see what happened. I’ll give you the high-level version.

The company grew and grew. The two founding partners wanted to chase a new initiative, and they thought there was no one else better for the CEO role than me. That’s the story I would have believed for some time. There might be some truth in there. But probably not as much as I’d like to believe. When I look at it now from my understanding of business, the sales numbers I was hitting were so far outside what the original pay plan believed to be possible, that I was eating into so much of the net income. Instead of paying me out multiple six figures every month, it started to make more sense to offer me that present CEO role. The revenue would still stay on with the affiliate world. It stays; it’s pretty sticky. So the business would continue to thrive, I’d get a salary, and some profit sharing, but the net impact to the business will be positive. I can see that now. I didn’t see it then. I had a bunch of great partners in that business. However, the two primary founding partners went above and beyond to make me a partner. They took a chance on me, at that point, a 27-year-old young man who was self-assured and confident in his sales ability but probably didn’t fully understand all of the business world. Let’s remove probably. I might not have understood the difference between my ass and a hole in the ground as far as business was concerned. But I had convinced myself that I did.

These two individuals, Mark and Vinny showed me a whole new industry, showed me a whole new way of thinking, and introduced me to masterminds and these brilliant individuals whom they had befriended over their life, who are still friends today. I couldn’t be more grateful for what that partnership was at the time. I didn’t know that I was all that deserving. At 26, 27, and 28 years old – with tons of ego, started making great money and didn’t honor the sanctity of the partnership the way that I should have. It was all about me. As that business ebbed and flowed, we all took our different paths and ended up selling it off to a subsidiary of GoDaddy. We had a falling out because of the way that I treated the business as a whole. I treated it like what was in it for me instead of what was in it for them. I’m glad I got to learn those lessons. But at the time, it was pretty painful. All of a sudden, the company’s gone, and I’m sitting there, and these guys I’ve been friends with or think that I’m friends with, we have no communication. It was my fault; it wasn’t theirs.

Jumped into the custom clothing world, and I had a partner in that and the partner was great. Had a wool manufacturing partner. I just lost my ambition for it; it was hard to beat on the road. The money was good, but the scalability wasn’t there. I did own a finance deal to my head of sales but stepped away from that, and it worked out well. In the CBD business that I grew and sold, I had no partner and had a great staff to support the initiatives. Was all that exciting? It was two years of a lot of drudgery, and I just got burnt out. So, I sold off in December of 2018. Ever since then, I’ve been flying rather solo until this endeavor. You see the background on how I got involved.

perils of partnership

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The gray is where all your dreams go to die. The wishy-washy, the uncertainty, everything you want in life falls off the cliff into uncertainty.

In MIT45, I had a coaching/consulting business, I had sold my CBD business. I had launched my previous podcast, a show called 15-Minutes To Freedom. Dalton, one of the co-founders of MIT45, reached out from a post I had in early February. Sharing that I was having a men’s event here in Columbus, Ohio, I was looking for 12 guys who wanted to mix it up to change their lives. I had known Dalton externally. We tried to conduct some business together before, but it just never connected; it never clicked. So I had a phone call with him. He’s asking me, “Tell me about this event.” I can’t tell all the participants everything about it because part of the way that that event worked was a level of surprise. I share with him some of the highlights, some of the overall structure, and he says, “Look, if this is one of those army types of boot camps, you’re gonna yell at me and beat me down then I have no interest in coming.” I said, “No, it’s not really like that. There’s some physical, mental, and emotional training that we do. There’s some psychedelic therapy that comes into it. A couple of different things – some biohacking. A lot of great things will happen over a three or four-day period.”
perils of partnershipHe opts to come. He comes to the event. I didn’t boldface lie to him, but I took some creative liberties with the truth. What I mean by that is part of this experience here for these men was helping them to destroy some of the stories they had been telling themselves. Part of the ways to do that, in my opinion, is to get a little uncomfortable and to get a little vulnerable, put yourself out there on that ledge. While yelling could induce that, it wasn’t a yelling-based situation, and it was just an intensity. So we got to the backside of the event, and I didn’t have an upsell, I didn’t have some magic way to monetize people. I sat in front of a room full of guys. I believe there were 11 in attendance, using behavioral psychology and a lot of other things. Right now you have been in this silo. It’s a siloed environment where all of you have been growing at this incredibly rapid pace. There’s going to come a point in the not-so-distant future, you’re going to get home, and the real world is gonna suck you back in. The self-confidence, the power, and the control that you feel right now, it’s probably going to go away. You’re faced with two choices. One, you guys can hold each other accountable. You don’t need me. You have all the systems and processes. Or two, we could figure out some sort of creative way to work together as we afford. I don’t believe in shame, guilt, and obligation. Those are low-vibration energies that we put out into the world. What I’m going to do is just step outside of the hall, and if anybody’s interested in what that can look like, step on out. I’ll be over in the corner. If you’re not interested, nobody comes out in the next three or four minutes, no hard feelings, I’ll simply use the restroom and hop back in. I went out and sat down. Dalton and nine other individuals came out. That’s because two of the other individuals, I had already been working with in a one-to-one capacity. We structure what makes sense for us at that time. I don’t remember what that is. Dalton pulls me aside and says, “Can I work with you one-on-one as well?”. I said, “I’m trying to get away from one-on-one, but we can figure something out.” I think back. It was $3,000 or $4,000 a month to spend time with me. Dalton said, “Sure, I’m in.” Now, at this moment, I know nothing about Kratom. I know nothing about MIT45. I know nothing about the industry. I just know Dalton.

perils of partnershipSimultaneously, two or three weeks thereafter, I got to go down to Rhythmia Life Advancement Center. If you’re unfamiliar with what Rhythmia is, it’s an Ayahuasca retreat center in Costa Rica. Ayahuasca is a psychedelic drink that is made from various leaves and roots of trees. My previous podcast led me down there. Down there, I have a great time. I’m talking to the owners of the business. They’re going through a couple of problems with operations and merchant processing. I give them some ideas, and they say, “Well, why don’t you consult for us for a little bit?” That’s certainly a no-brainer for me. I don’t know about you, but you don’t have to twist my arm too hard to say, “We fly back and forth to Costa Rica a couple of times. It’s on our dollar. Help us with the operation, and we’ll pay you.” That’s a pretty quick yes. I’m going through that, have this life-changing experience at Rhythmia, and I’m sharing it with my clients. Those clients, at that point, were not only the men from the event but had seven or eight other one-to-one clients at various investment levels. They all decided they wanted to go Rhythmia, too. So we scheduled, I’ll call it, a “family trip” in what I believe to be June or July. Seven or eight of my clients fly down, and I’m down there consulting. It’s a great time.

During this time, from March until then, I’ve been working with Dalton one-on-one and in a group capacity. Dalton brings down his partner, Sean. He comes to Rhythmia. They have their own story of how that all happened. But I remember meeting Sean, and there were no sparks that flew. A great guy walked around vaping a little bit. There wasn’t a deep conversation, it wasn’t a deep connection. So we flew home. I continued to have one-to-one conversations with Dalton, and he said, “When we were under the influence of the medicine, Mother Ayahuasca told me you have to work with Sean. You’re gonna start working with Sean one-on-one.” I said, “Dalton, that’s not how this works, buddy. He said, “Yeah, I hear you. It’s not gonna work that way. I’ve already paid for it. He’s already in.” I said, “Okay, that sounds good.” So next week, I hop on a call with Sean. Again, Sean’s now one-to-one and Dalton’s one-to-one, not the same environment, not the same time. Then, in the first conversation with Sean, he said, “I have no idea why I’m on this call with you.” I said, “Well, congratulations. That makes two of us. But Dalton’s invested in a month, so we’re gonna spend at least the next four weeks together.” He says, “Okay.” I’m just probing, just getting to know him. The business has been stuck. It’s $5 million to $6 million a year in revenue. He’s pretty burnt out. The conversations between him and Dalton were both independent of one another. They were just kind of over it. They both said, “I didn’t understand the industry. I didn’t understand the business. No one would ever want to buy it.” They were just fed up. I’ll take their word for it. They’re professionals. They’ve been in this industry at that point for eight or nine years. I commend them, eight or nine years to get to the point of finally hitting that $5 million or $6 million market. But being stuck there, kind of hitting that ceiling, how frustrating that was for both of them and how stagnant they felt with the business as a whole.

That then leads to Sean and me eventually hitting it off. He asked me to come to town for an in-person. He asked me in October to come in November. I plan it out. “Sean, I will share with everybody before I come down. I’m kind of the big bad wolf, coming to mix things up.” Everybody’s super nervous. I walk in. I’m already a larger statue at 6’2”, 265 lbs., and with a rather muscular build, I could see how that can be intimidating in some capacities, and I like to dress well. I walk through the door, and this is a very laid-back environment. People are in flip-flops and cargo shorts. Certainly not in November, but the atmosphere is very laid back and very relaxed. I don’t come in laid back or relaxed. A little sidebar – I land in Salt Lake City on Sunday. Dalton and I get dinner together. We’re having dinner, he said, “What are we going to do those next couple of days?” I looked him dead in the eye and said, “I have no idea. I don’t know what I’m doing here. I don’t believe I’m qualified for this. I have a good feeling I have to refund your money, but I’m gonna figure it out anyway.” That was how little belief I had in myself at that point in something this big. Because to me, here are these guys with this, whatever the number was, million-dollar business. I hadn’t run a business of that magnitude for a little while. At the web hosting company, I got up to 40 or 50 million a year in revenue, but that felt like a lifetime ago.

The in-person day was two and a half days. I covered some very basic things, but some things that had escaped their purview. It’s very difficult, as you’re building a business, to see the business from the outside. I’m sure you can appreciate that. You’re in the thick of it, you’re in the weeds, and you’re putting your blood, sweat, and tears into things. How do you know what you don’t know? What’s pretty challenging unless you bring somebody in for an outside perspective, and fortunately, I had gained Sean and Dalton’s trust to come in with that perspective. I shared my findings and what people’s psychological underpinnings were. I co-created an assessment with some individuals from Johns Hopkins and Harvard. I had the staff take it and could see some reasons as to why some people weren’t getting along. I could see that there were a couple of potential issues kind of hiding under the bushes. I could see they didn’t have solid communication, a frequency of meetings, and a cadence to meetings. They didn’t have some of what I will call “basic.” But at that moment, it wasn’t basic. They were challenging. I ran them through a team meeting. Something that I would now call an all-hands meeting, a Level 10 meeting, or L10- just a structure to keep everybody on pace. On target, make sure you’re getting the most out of a meeting. I ran that meeting. They get to watch it, and we record it. I was packing up and getting ready to head to the airport, and I said, “It’s okay if you guys don’t find value in this.” Sean and Dalton were like, “Yeah, absolutely.” I said, “Well, I’m glad. I didn’t know if you would or not. Statistically, again, things are gonna break down. Right now things feel good, you’ve got a path on a plan, and we’ve got some objectives and key results for the next 90 days. But somewhere between day 60 or day 90, maybe even day 45, the wheels are gonna fall off this bus. Everything we worked on, people are gonna forget about.” There’s this chasm of chaos, as I referred to it. Is it easier to reach out and touch a new version of yourself in your organization? Or is it a retreat back to what is already familiar? That’s the chasm. Sean and Dalton said, “Yeah, maybe.” I said, “Look, I’m not trying to upsell you. I’m gonna put it on my calendar. I plan on coming back in 90 days. But let’s see. Maybe you guys won’t need it. I hope you don’t.” Well, I’m still having the one-to-one calls with Sean and Dalton. I think on day 60 or day 65, Sean and I are speaking and he says, “Ryan, what did you do to our company?” It’s not in a positive tonality. I said, “Sean, what do you mean?” He said, “Everything you worked on, it just all stopped working. What did you do?” Of course, we’re laughing. He was being facetious, but it reminded him of our conversation.

Accelerated to the time to come back out. As I came back out, Sean and Dalton sent me down and said, “Look, we’d like you to be our COO. We don’t have a COO.” I said, “Man, I’m flattered but can’t move to Salt Lake. I’ve got a family; I’ve got a wife and daughter in Columbus, and my daughter is not mine by blood. Her father is still actively involved in her life. I’m her bonus father. Nonetheless, all that stuff aside, I just can’t move.” They said, “It’s no problem. You can be remote. Just all the things that you do to structure the organization. Optimization it’s not how our brains work. We want you to fill that in from that COO role.” I said, “Fantastic. I’m also not going to shut down my consulting business. It’s something I’m passionate about, something I love doing.” They said, “Yeah, no problem, as long as it doesn’t impact the business.” I will stay as a fractionalized COO. The fractionalization leads to full-time pretty quickly. I don’t have it in me, no different than you. If you own your business, you’re wired the same way. I don’t know how to be half-pregnant. I’m either all in or all out. It’s either a hell yes or hell no. There is no middle ground. I laughingly said during the men’s training, “The gray is where all your dreams go to die. The wishy-washy, the uncertainty, everything you want in life falls off the cliff into uncertainty.” That was the approach in this business. Here we are. I’m in the COO role starting February 20. Then that crazy thing called COVID hits, and we start rolling up our sleeves, having to double down. It’s great for our business. It flexes the muscles on supply chain, demand planning, and some of the things that I have experienced in the background, but it’s interesting. Somewhere in the Fall of 2020, maybe a little bit later, Sean and I started having conversations about what it would look like for me to eventually take over the company and for him to step back a little bit. He is starting to see, acknowledge, or feel like where we are going is some uncharted territory for him. It might be better suited to my hands. I’m flattered by this. But I also still have to adhere to the fact that I can’t live in Salt Lake City. I’m not able to be there. We progressed that conversation throughout 2020 into mid-2021 before that transition happened. Somewhere in there, we become equity partners in the business, so that’s the background.

But let’s talk about why partnerships can create peril. You see, if I look at it very strategically from the outside, there was a point in time when the business was between five and ten million dollars a year that the two partners, I probably could have given them a couple of wooden nickels and a promissory note, and they would have stepped away from the business. They would have moved on to other things because they were so burned out in that moment. I can say that it’s easy to paint by numbers looking backward. The moment I met them, they were pretty fed up. I’m sure you can relate. There are those moments in time, and sometimes those moments turn into weeks or months. But there are those moments where, if you’re like me, you’re just burnout, you need some space, need some time, or you need new lifeblood to come in and help reinvigorate the situation. Well, that’s what it was. I was a new lifeblood. As we eventually worked into the partnership conversation, my equity split was low. Now, in all fairness, it wasn’t low for what I had contributed. See here, these two guys that have bled for this business, ten years into the business at this point. Sean has leveraged his house before, and Dalton slept in the office for months at a time. There are so many things that have happened. When they offer me 10% of the business with no buy-in to the business at that point, I’m flattered. Yeah, 10% is incredible. Here we are. The business might be doing $11 million a year. I don’t remember exactly. Let’s call it a 30% net margin or net income. However you’d like to view it. This is great, right? I’ve got a salary, and I’ve got equity in the business; this is fantastic. Then, the business keeps growing. Then, we start acquiring other businesses. Now, these businesses have turned from this five to ten million into the $70 million a year behemoth, and we’re probably the second largest Kratom company in the country. With the growth initiatives and things that we collectively have on tap for 2023, we’ll hit 120 million plus in revenue this year. That’s a knowing, as I share that. I can already see it, I can feel it, I know how to get there, and the team sees that as well. So we reformulate our agreement as we go forward and say, “Any new ventures, any new businesses we acquire, we’re going to do 33, 33, 33.” That is equal percentages. Of course, I love that because, on one side, they incentivize me to find acquisition targets because it makes me more wealthy. At some point, the selflessness has to take a backseat to what we’re dealing with here. That’s a business that, at this moment, is worth somewhere between $225 million and $300 million. We’re talking real dollars now. This is real money at stake.

perils of partnership

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Moments can stretch into weeks or months, defining our journey through time.

Now, the business has taken its ebbs and flows to get to this point of Sean and Dalton sitting there saying, in one capacity, they don’t have responsibilities. By design, when I first met Sean and Dalton, they either wanted to get out of the business or figure out how to make seven figures from the business working less than 10 hours a week. Let’s take great pride in the fact that we were able to co-create that together in less than 12 months. Maybe not the income part, but the hours and requirements there are. The business keeps growing. It’s a living, breathing organism. So now, we’re at the point where we build a board of directors. You have Sean, who wants to be chairman of the board, and Sean should be chairman of the board, but I can make the argument that Dalton should be a co-chair. What gets fascinating is when you look at what was required to be the chairman of the board and the responsibilities associated with the role. It’s not Sean’s specialty. What I mean by that is Sean is so big-thinking, so brilliant, and has such a way of bringing people together and inspiring people. But the detailed granular work of accountability and the checkmarks have to go into running a true corporate board, and I say, corporate board. We’ve elected not to take the fluffy, which requires a C-corp. We’re building a board as though we’re a publicly traded company with all the same bylaws and governance associated with it. To be the chairman of the board comes with a lot of responsibility. Sean is capable of the responsibility. Where he’s at? He’s just turning the corner to 60. It’s not how he wants us to focus his time, and it’s not how I think he should focus aside. Now this doesn’t mean we’re not getting along. It’s just that I look at him and say, “Is this really what you want? Or is there this necessity to feel a certain way from the business as a whole?” There’s no right or wrong answer. It just is.

Take a time machine back to the Spring of 2022. We’re at an off-site quarterly planning meeting. Everyone’s there, the entire leadership team, with Sean and Dalton. I didn’t realize this, but Sean and Dalton hated the off-sites. They loved the first one we did because it was a bonding between the three of us. We had a fourth partner and a separate business that came. It was fun and exciting, and it was well laid out. But the actual details, the minutiae of what it takes to run the business, they both find incredibly boring to have to sit down and structure and think about, and these off-sites take 8, 10, or 12, sometimes 14 hours to get through so much of that now with the leadership team, we’ve turned them into two-day events because it’s the most critical thing to me, we can do for the alignment of the organization. We’re at this off-site in the Spring of ‘22. We build out an organizational chart, and Dalton doesn’t have anywhere to fit on the organizational chart. He’s fine with it. So I said, “Dalton, you’re on the board now. You have no inherent roles or responsibilities that are required daily inside the business.” He’s like, “Man, this is awesome.” Because it’s what Dalton wants to do. He wants to travel, he wants to meet people, he wants to be the ultimate connector, and he’s incredibly good at it. He started to own that role. But as that’s happening, Sean is simultaneously questioning how much Dalton loves the business. “Is he owning his business right now?” On one side, I’m like, “Yes, he’s doing an incredible job of owning his business because he’s doing exactly what we asked him to do.” On the other side, I can see it from, “No, he could seem like he’s just out traveling, floating around taking distributions, and getting a good paycheck from the business.” The bullhead doesn’t quite feel right. I can see the dichotomy that exists between the two of them. As we go through that, Sean and I recalibrate our roles. I can only imagine the difficulty of a transition going from the founder, the chairman, and the CEO for ten years to slowly turning over the reins to me.

There were seasons in life when we butted up against each other. Where there was overlap, where there were disagreements behind the scenes. I think that’s natural. Strife and conflict build a level of resolve between powerful individuals like Sean and myself. Those moments in time brought us a lot closer and did the opposite of what I think happens to a lot of partners. As we went through the transition, I said, “Sean, what do you want for you? He said, “All I want to focus on is the people.” He saw a Gary Vaynerchuk video that one of the most important roles, maybe the most important role that any company can have, is that Chief Heart Officer of adhering people to the heartbeat of the business, like really unifying them around a common rallying mission, a rallying cry. Sean says, “I’m already a Chief Heart Officer.” He goes as far as to change the placard on his desk from Chief Executive Officer to Chief Heart Officer; he’s all the way, and he’s committed. But in doing that, we never really defined what that role met with the responsibilities were and were not. We have Sean who’s in Salt Lake City, who loves going to the office. He loves inspiring people. He loves enrolling people in the vision, and he’s brilliant at it. We have Dalton, who’s traveling, I’ll say, living the life of Riley or so, it would appear, but just doing what we’ve asked them to do. Then there’s my focus on the day-to-day operations. What’s happening, as the business continues to grow and we become more successful, is there are these recalibrations that are happening consistently. There are these thoughts that creep in that can be toxic. There’s a soft thought about Dalton not being involved in the business as much as he should be. We should figure out a way to get him to sell back some of his equity. Sean and I should split it. We should figure out how to have the company buy back equity. It’s like, “Is that the highest and best version of Ryan that’s speaking?” No, it’s a greedy version. It exists. I’d be lying to you and say that doesn’t run through my head. Then, on some part, I sit here and say, “This business has outgrown Sean and Dalton.” I want to stomp my feet like a petulant child saying, “When I came around, we’re at five, six, or seven million. This year, we did seventy million.”

perils of partnership

(Embed Gary Vaynerchuk Discusses the Chief Heart Officer YouTube Video: https://youtu.be/ICNoU6DOgCk?si=JYAHGtkAfJSfFdI0)

I’ve helped these two individuals become wealthy and establish true wealth, yet they’re bickering with each other. They’re backbiting each other, jockeying for a position on who owns what piece and how it all goes. It’s the only of these moments; there’s no actual weakness, no actual vulnerability inside the business. But in those moments like, “I should stay out of my frickin’ way, and let me keep growing this business, I need your help.” In very specific strategic manners, I need that help. I have found with Sean, Dalton, and I that when we get together and spend time together in person, away from the business, these things don’t happen. But when Sean and Dalton are traveling, and I’m on the other side of the country, getting together, away from the business for two days at a time, it becomes challenging. It’s not as simple. It’s not simple for them to understand what it means to just be a board member, but how can you know something you’ve never done before? I have to acknowledge that on their side, how can they know what it’s like to only be a board member when they bled for the company I now run? Although the company, if we look around at the staff that was there when I came on as COO to the staff that’s there now. There are three to four people left from back then in total, and one of those messages I share is, you rethink your business.

To get to where you want to get to, it’s probably going to require a different team. It might require multiple different teams, depending on how far you want to push. I have to acknowledge that I sometimes forget this. I mean, this was sincerity. I understand that a $70 million a year business is $70 million a year. It’s not common. The $70 million year business isn’t normal. The roles or responsibilities are unique in themselves, especially as we start looking at the board. There’s this tug-of-war that exists at this moment between Sean and Dalton for equity that we’ve already signed off on and agreed to. There’s the internal amount inside of me that says, “If anybody should get pissed off, it should be me. I want more equity in the business.” I can quiet that down on myself, but I have to acknowledge that it exists. This partnership at this moment is incredibly important to me because I see the inefficient, ineffective partnership and how I treated the hosting company, and I made it all about me. I focused on every system and process that we created inside of MIT45. It’s created in such a way that I don’t have a company credit card, I can’t take money from the business, I can’t write a company check. I’m not in the bank because I never wanted to be able to “make it all about me” or use the company as a piggy bank. Certainly, as a C-Corp, that would be very challenging for me. But we’ve got a hierarchy that we build, and we built in controls to make it. That’s not possible even if we wanted it to be.

I learned from that first shortcoming, that first mistake, in my first foray into partnership (then a custom clothing company). The lesson I’m taking from that is, number one, we can work well remotely. But if we’re not in alignment with where we want to arrive at the end of the day, that’s going to be an issue. That’s really where we’re at right now inside of MIT45. Sean is a sixty-year-old man who has incredibly different goals than I do as a 38-year-old man. I look at this as an Act One of a Three Act Play for me. MIT45, we will grow into a billion-dollar enterprise value organization. I am convinced that we can hit fifty million, even this year. I’m convinced we can do an IPO (Initial Public Offering) at a 20-time multiple of EBIT (Earnings Before Income and Taxes), and I am convinced our market capitalization can be more than a billion dollars. I think we can do that all in the next 12 months if we decide to. Now there are pros and cons to that. Another episode for another time. But they exist, that is a possibility. Even if that’s not something that we want to do, there’s still something that makes sense, which is to me taking chips off the table. We have grown and grown.

perils of partnership

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To get to where you want to get to, it’s probably going to require a different team. It might require multiple different teams, depending on how far you want to push.

But much like you inside of your business, if more than 90% of your net worth is tied up in your business, I think at some point, it becomes fiscally irresponsible to allow that to continue. Think about you as an investor in the stock market, in Crypto, whatever it is. You would always diversify your portfolio to spread out the risk. We, as entrepreneurs, keep pushing all the chips to the center of the table. At a certain point, why would I keep pushing the chips in the center? Why would I keep pushing and convincing myself to just keep doubling down? It makes sense to say, “Okay, we should sell off a portion of the company.” But as we talk through selling off a portion of the company, I know the private equity world. Private equity shops want controlling interest in the company, they want 50, 60, and 70%. On my side, it makes a ton of sense. We have grown the business for this year, our trajectory has this towards $120 million, and our net margin and net income remain the same. All of a sudden, now we’re looking at a half-billion dollar value of the operation, we sell off 70%. So probably with the way it would all structure out a $300 million exit. That takes care of our staff. Our staff are co-owners of our business with us. We did Stock issuance to all employees, and so they co-own our business with us. We’ll take care of them and their families, well take care of our own families, for generations. This is generational wealth that we get this moment in time this opportunity to create. Then, if the right private equity partner came in, private equity would have a 98-plus percent success rate. The likelihood of a private equity shop coming in and buying us, and anything happening other than the business growing is miniscule. You look at small business as a whole. Now we’re past the small business mark, we’re past that $50 million mark. But if you look at businesses overall, less than 5% of businesses make it to 10 years. So, there’s less chance of you making in 10 years than private equity failing once they buy a business. I look at it personally: we could sell off 70% of the business, have a great payday, and still stay in the business, and the business would still thrive. Have private equity help us double or triple the business again and then take it public. Now that extra 30% that we’ve held on to, we’ll call that interest that we carry forward inside the business, now we get to recapitalize that during an IPO. Well, if the business triples in size at 30%, of course, it’s worth more than the first 70% we sold. In three years, there’ll be another $300 or $400 million payday.

These are all incredibly exciting to me, but Sean looks at it like, “Holy cow! If we sell this business, what happens if everything goes south? What if it doesn’t work where I put the money? What if we go broke? What if I don’t have a place to go, meaning an office to come to? What if I don’t have people to inspire and people to help?” Those are all very real in Sean’s world. I have to appreciate it from where he’s at in his life. He’s got a beautiful family, six children, he’s got grandchildren, he’s got things built into his life that I don’t have right now. So it’s not as important to me to have those structures laid out. I look at it like, if we sell this business, I’m gonna get to do it again and then one more time. Because I love the feel of this. I love the rush of this. I love that we will get north of $100 million this year, north of $120 million this year. Saying like, “Holy cow! I came on when we were 5 or 6 million, and now at 120.” Being able to play a role in that is incredibly inspiring. I look at someone like Dalton. I think a little more parallel with wanting to allow ourselves to experience other things in the future, with wanting to de-risk our portfolio. It’s fascinating, is to go back in time to 2019 when these two individuals were like, “I just want to but, I don’t think anybody would want to buy it.” Now we’re sitting there looking at, “Now let’s just keep holding on to it, and get it up to a billion dollars before we consider anything.” Kratom is an emerging market, which I do agree with. There’s a conflict, it’s not a conflict. It’s a conflict in the micro, but in the macro, it’s not because Sean, Dalton, and I can go into a room, close the door, and duke it out with each other in passionate, heated, direct conversations. We can say things that are not meant to hurt other people, but to people who don’t understand our relationship might hurt other people’s feelings. We get on the same page before we leave the room and it’s a unified front when we leave. Our operating agreement supports that. We designed our operating agreement that we have to be in unanimous approval of any decision. It was done very intentionally to make it so we couldn’t kind of oust someone.

As I look at the perils of this partnership, it’s as we continue to grow and the business becomes worth more and more money, what happens? Can Sean and Dalton step into those true board seats? Own what it means to be a board member. Can they hold me accountable as a CEO to specific desired outcomes that we mutually agreed to, that they challenge me to hit? If we don’t hit that, can they terminate me? Because they should. I’m still a shareholder, I still maintain equity. I believe I should have to not fight for my job so much, but I should have to earn my job consistently. Right now if you as a CEO, are not waking up, hungry enough to maintain ownership of your position, you don’t deserve to be the CEO. I’ll say that one more time. If you are waking up and going through the motions, and you haven’t created a system where someone could challenge you for your position, I don’t believe that you deserve to be the CEO. I believe your business could grow faster, I believe you can get further, I believe you could experience a different quality of life if there were systems built to challenge you and see what you’re capable of doing, especially once you hit critical mass. For us, when the business had enough contracts in place, I knew that $30 million a year was almost a guarantee. It’s all of a sudden like, “Okay, we can cruise, kick our feet up a little bit.” If you don’t challenge yourself, that is an easy thing to lull yourself into that level of complacency. If I’ve been there, I have to imagine you’ve been there at some point before as well. So, we’re gonna have to battle through some of these things with determining what’s important to us now versus long term. Laying out all of our fears on the table.
“If you’re just going through the motions without a challenge-ready system, you might not be fit for the CEO role.”
I don’t know Sean and Dalton’s fears. My fears are short-term and long-term, I have a fear that something will happen and all that we have built for some reason, I will have miscalculated something, and it won’t go as planned. I’m fearful, and I have to look at my partners and say, “I made a catastrophic mistake. It’s costing us hundreds of millions of dollars.” We have a lot of safe harbors put in place to make that challenging. That’s a fear that I have. There’s a fear that we wait too long and there’s compression in our margins. While revenue is growing, our EBIT does not, and the value of our business is decreasing, although we’re growing top-line. That’s a fear. I have a fear that something’s going to happen to one of my partners, and there’s going to be a state of turmoil and chaos because we haven’t done a great job in the succession planning. We almost have it all dialed in right now, but it’s not all the way perfect. What happens if that happens? I have a fear that the business is going to outgrow Sean and Dalton to a capacity that they won’t have an understanding of what it even means to be a part of the business. Yet they will continue to try to be. I also have the fear the business is going to outgrow me, and that my skill set will become obsolete. The good news on that side is that fear is causing me to run ads for a new CEO as we speak, not because I want out of my chair, I want to have to fight for it. But because there’s someone else who wants a job that has gotten companies to a quarter of a billion dollars in revenue or taken them through an IPO before. It would be inappropriate of me not to interview that person to take over my role. As a shareholder, I have to be conscientious of maximizing shareholder value. That’s the way to do it. Now Sean and Dalton will eventually share with me their fears, and each in their own right has, probably not as candidly as I’d like to. There’d be a natural fear that if we sold the company, at some point in the future, we wouldn’t maintain the close level of friendship we have now. On one side, that can be true. We could all ride off into the distance, into the sunset, or on directions. Or, we could co-create another business to make sure that we stay connected, we do have frequent conversations. That’s ultimately left up to us for our determination.
 
I compare all this to an individual named Ken, who owns a company in Salt Lake City. Ken was introduced to me by our CFO (Chief financial officer). Ken is brilliant. Ken is a kind-hearted, incredible individual that I’ve tremendous respect for. Ken took the solo path. Ken is the only owner of his business, was the only owner. He sold to a private equity group. He stayed on in some capacity, he’s more than doubled. I think he’s tripled the size of the business after private equity came in because they’ve got the financial leverage, they’ve got ways to get deals done quicker. This business has now tripled in size. I’ll say the past 24 months with Ken sitting more on the board than any sort of C Suite position. As he sits on the board, I don’t know this for certain, but I believe his net worth starts with a B now versus an M. Billion dollars of net worth versus millions. You wouldn’t know it for meeting Ken, but seeing the difference in this man who had belief in himself, had belief in a system, had belief in a process, ran it solo, and invested in having people to bounce ideas off. Invested in brilliant talent, invested in mentors in different capacities.
 
I think that’s incredibly powerful, versus the conversation around partnership. I only know what I’ve been through and I see the benefits of a partnership because you have people that are bonded with you, people that have your back in the heat of battle. But the same aspect as things grow, and we all take our life’s journey and our life’s path, the likelihood of three, two people, or more, growing at the same rate, in the same duration, in the same direction, consistently becomes less and less. Right that one-degree variance for three people in three different directions for a series of months leads to multiple degrees of difference in the desired outcome. There are just inherent perils built into every partnership. The more you can think of those perils and document them early in the process, that contingency plans. It’s like, “When’s the best time to talk about a divorce decree? Once before you ever get married?” Same thing in a business partnership, when’s the best time to consider what it would be like to break up when we are nowhere near breaking up? We get along, and we’re great friends, but the best time to consider breaking up is before you sign the contract, solidifying your partnership, and what that would look like. Those things collectively help smooth out the Perils of Partnership.
 
I’m Ryan Niddel and this has been Rethinking Business.

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Pull Quotes

  • The gray is where all your dreams go to die. The wishy-washy, the uncertainty, everything you want in life falls off the cliff into uncertainty.
  • Moments can stretch into weeks or months, defining our journey through time.
  • To get to where you want to go, it’s probably going to require a different team. It might require multiple different teams, depending on how far you want to push.
  • If you’re just going through the motions without a challenge-ready system, you might not be fit for the CEO role.
  • The best time to consider breaking up is before you sign the contract, solidifying your partnership, and what that would look like. Those things collectively help smooth out the Perils of Partnership.

Key Takeaways From Today’s Episode

  • Understanding the dynamics of partnerships, planning for contingencies, and maintaining alignment is crucial for long-term success.
  • Recognizing your impact on net income and adapting to the changing dynamics demonstrates effective leadership.
  • Treating business decisions with a long-term perspective fosters healthier relationships.
  • Communication, alignment of interests, and treating partners fairly are critical aspects of successful partnerships.
  • While financial success matters, sustainable growth, and personal well-being are also as important.
  • Implementing structured team meetings (such as Level 10 meetings) ensures alignment, accountability, and efficient communication. These practices enhance collaboration and productivity.
  • The business should continue to grow and adapt. It’s described as a “living breathing organism,” suggesting ongoing development and change.
  • Just like investors diversify their portfolios to spread risk, entrepreneurs should consider diversifying their net worth beyond their business.
  • Balancing roles, responsibilities, and perceptions within the evolving business requires ongoing adjustments and open communication.
  • The business situation involves balancing individual desires, business requirements, and the responsibilities associated with leadership roles. There’s no definitive answer; it’s a matter of finding the right fit for the business as a whole.

 

About Ryan Niddel

Ryan Niddel is a dynamic entrepreneur and CEO of MIT45 Inc. and is renowned as Ohio’s foremost business growth specialist. With a lifelong entrepreneurial spirit, Ryan began his journey at 10 with a lawn-mowing business and later gained mentorship that shaped his career. As CEO of two 8-figure companies and a board member of several others, he specializes in rapidly increasing revenue and profitability, culminating in lucrative acquisitions. Passionate about philanthropy, Ryan supports various charities and is launching a foundation focused on youth education in business and capitalism. With over 700 success stories, Ryan is hailed for his innovative thinking, strategic partnerships, and ability to optimize business operations. He freely shares his insights through podcasts, videos, and blog posts, advocating ethical business practices and empowering entrepreneurs worldwide.
 

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