Drew Goodmanson: The Entrepreneurial Inflection Point

Summary

In this conversation, Drew Goodmanson discusses the challenges entrepreneurs face as they grow their businesses, particularly the inflection point where their strengths can become liabilities. He emphasizes the importance of self-awareness, adapting leadership styles, and understanding the impact of childhood trauma on entrepreneurial drive. The discussion also covers strategies for creating value in businesses and the necessity of viewing them as investments rather than just personal endeavors.

Takeaways

• Entrepreneurs often face an inflection point where their strengths become liabilities.
• Self-awareness is crucial for effective leadership and business growth.
• Childhood trauma can influence an entrepreneur's drive and decision-making.
• Creating value in a business often requires letting go of control.
• Many entrepreneurs struggle with their identity tied to their work.
• Advisory boards can provide objective insights and challenge entrepreneurs.
• It's important to focus on the 'why' and 'what' rather than the 'how' in leadership.
• Entrepreneurs may sabotage their success due to irrational fears.
• Viewing a business as an investment can lead to better decision-making.
• Counterintuitive strategies can significantly increase business value.

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Transcript

Speaker 1 (00:00.192)
I made a decision to not be the hero villain and I wasn't going to solve the problems. So I would go on vacation for a month in, this is a while ago, back in a day where I didn't go to places with cell phone coverage, so nobody could get a hold of me. So it was like purposefully creating situations where they're going to figure it out. I mean, I'm not a phone call away and, know, and purposely getting people to a place where, you know,

They didn't need me. honestly, think I, you know, toward the end, I probably would have taken at least a year off and I don't think things would have skipped a beat.

Speaker 2 (00:40.888)
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Speaker 2 (01:02.166)
I want to welcome infamous Drew Goodman son looking forward to this interview give give us a two minute snapshot of what you're doing now what your business is now.

Yeah, so now I am, I've always been an entrepreneur. And so I built and sold companies, including when I sold a company to a private equity backed market consolidation. I was part of a group where we bought 40 companies and I realized in many ways entrepreneurs are playing the wrong game, at least the, you know, in terms of money and value and outcomes.

where these spreadsheet jockeys are becoming extremely wealthy. Well, you those of us that have the you know, the blood, sweat and tears poured for decades into something, you know, I think are getting taken advantage of. So after I sold, I took some time off and I decided, you know, my passion is really entrepreneurs. So when I when I sold, I just documented everything they were doing and realized like, okay, how do we help entrepreneurs put into practice the things after a company buys you ahead of time?

so that they get more value. So I'm working with companies in building plans, strategic plans that allow them to increase their valuation and then go to market and get a much more sizable return than they would normally.

Beautiful and that's why I I'm very intrigued with this interview because I think you've got a lot of Experience with on both sides as as an entrepreneur yourself and then as advising entrepreneurs so the the question I have for you is I came to the realization that the characteristics that we have as entrepreneurs that give us the

Speaker 2 (03:01.078)
ability to start a business and have initial success. Oftentimes those traits become liabilities as the, as the business takes on a form of its own grows. So what, did that, how did that look like for you in your experience personally?

Yes. So I, I now call that the entrepreneur inflection point. And I ran into it, not knowing what it was. For me, what I, what happened was everything that made me successful as an entrepreneur up until that point, actually became the very things that prevented me from moving the company forward. And so I got stuck.

And I was creating chaos and I was doing things where the company could only grow as far as I was. And that was going to be a plateau and cause a lot more problems than it was solving.

So where was that inflection point?

So for me, was when I was probably 2007 or eight in San Diego when I was building a SaaS company. It was when I was starting to get the next layer of leadership and had kind of grown beyond my capabilities to cover payroll and other expenses on a monthly basis. So the company had kind of outgrown just my own personal abilities to do things.

Speaker 2 (04:33.804)
Yeah, I'm sorry to interrupt. So what were some of the symptoms around that?

So the symptoms were, so like I'm a pretty visionary person. And so that vision allowed me to see opportunity and create the company to begin with. But when the company needed to reach levels of maturity where it was just executing, what I would do is I would come in and disrupt everyone's day-to-day execution with shiny squirrel ideas that I was coming up with.

the magazine on the airplane where you see the little squirrel stuff and you start going, I want that, we should do this and we should do that. Or I go to a conference. And so there was analogies different people used. We were in Southern California. So one of the executives that I was with basically was telling his team later on, I heard this, that they needed to learn to ride the Drew wave. And I come in and I would disrupt everything and it's like, I know we have developers building this, but we're to go in this direction. And he was like, trying to...

coach them on how to like take the energy and the vision part of what I was saying, but riot it and then let it dissipate. then, you know, and so it was, know, there was other analogies about how to deal with me because I was creating chaos.

So how did you personally, now you said you had awareness about this inflection point before it happened.

Speaker 1 (06:04.744)
No, I wish I did. I'm saying the inflection point, I call it that now because I was like, what the heck just happened? So I brought in outside resources because I had some failures in the business that were a result of my decision making. And so I realized I needed help and I brought in a couple of different resources. I had an advisory board for about six months help me.

figure some things out and I brought in an outside kind of pooch to work with. And so I did some things just to kind of go like, okay, I've taken this and I'm hitting the drew wall as an entrepreneur. Okay, how do I grow so that I don't, the other term people called it, seagull management, where I would just fly over people's desks and poop on them with new ideas. so how do I stop doing this? then how do I use my...

You know, my superpowers for good rather than for evil, because I was creating so much chaos.

So at that point, you know, you brought in the external advisors, the coach, you realized that you were the problem. Was that the point where you decided that I need to sell?

No, that was the point where I decided to change how I led.

Speaker 2 (07:27.747)
Okay.

And in many ways, and I've worked with a lot of entrepreneurs now in a similar point, you know, I give the analogy that people, people can go in different directions. So either they're creating chaos or they're, they've, they've maintained a lot of the work that they're doing that is so outside of who they are. They hate it. And so I say that the term I use is like, every morning you're waking up and you are eating a giant plate of Brussels sprouts and you hate Brussels sprouts.

And it's like, you don't need to do this, but many ways, know, there's things like that where it's like, okay, how do I stop operating this way, either through chaos or doing stuff I hate? And how do I move into a place where I can really use what I have and bring value to the company in a positive

I will, this is an editorial comment. They don't like Brussels sprouts because they haven't been prepared correctly.

If you add bacon to anything, know, yes, it's...

Speaker 2 (08:29.55)
So, that point where you decided to adapt your leadership style, what did that look like?

variety of things. For me, it looked like, you know, going through self awareness and then realizing, you know, there's okay, so one, as as a visionary, and as an entrepreneur that are visionary, I think a lot of us are, it's why we create companies, we have a level of retardation. And I did too, when it comes to time, I can be in a meeting and talk about the past, present and future.

And because I see the future so clearly, I can talk as if it's the past and present and flow all in these different directions. And so that vision power, being the visionary is incredibly powerful, but it's dangerous if you don't know how to use it. And so I started to learn how can I use my vision and rather than the wave and the seagull, know, that I was, I started to learn how do I use my vision to work in the future and plan the work next

quarter and throughout the next year and leave everyone alone in the current quarter unless there was an economic crisis or some sort of like emergency. I had to basically work in the future only.

Did that look like you working less? Like volume of time?

Speaker 1 (09:55.084)
Okay, perfect. No, eventually, yes, but no, initially, meant, so this was another existential crisis. It meant getting out of the day to day and in the business stuff and rather than doing the work, learning how to lead people. And what I found was I didn't know how to do that. And so I had to develop skills and also like,

I helped grew the company through marketing and through product development, all these different things. had to basically kind of part of me had to die to not doing that work, but bringing in people and coaching them. And I learned that I needed to focus more on the why, was our mission and the what, the vision, but give people freedom to determine how. And that took a while to develop that. And I realized there was a couple leverage points, but until I did that,

I was constantly trying to be a hero or the villain. Like, man, you don't know how to do this, I'm going to do it. Or, you know, hey, I'll just jump in and fix this rather than learning some tools on how to coach and challenge people and not solve the problem for them. And so I had to grow personally in those ways in order to do that.

So switching gears to what you've seen in other entrepreneurs, not your personal experience, what are the challenges that entrepreneurs have in seeing that they need to change, they need to grow, and then doing it? So like, what do you see that are those challenges?

Biggest one is that existential crisis. They have to be willing to let things go and find their identity working through people rather than doing the work themselves. And we get so much value in what we do. You know, it's the first thing people ask when you go to a conference or a meeting, right? What do you do? So we found such identity in that, that it's hard for people to give that up and make that shift.

Speaker 2 (11:59.99)
Yeah. So, so let's lean into that because I, I think it's part of it is comfort, right? Part of it is predictability for me. I'm speaking in my experience and what I've, what I've done. so when the outcome is unknown or if it's going to have an outcome at all, right? Like you, you don't even know if this, is going to happen. think that.

I think entrepreneurs are more comfortable exploring those things, but the reality is when you have an existing business, you do gravitate back to the predictable and the known. I've heard it described as barnacles on a boat. They just drag the boat down because they're things that you don't really need to be doing, but you do because they're comfortable. But going into the...

existential thing, like what is my purpose? Like I, my experience was, I think it's been eight years ago, I got so frustrated with my business, I left it and I left it in the hands of my brother and I started a software company because that's what everybody does, right? And I told my brother at the time, I said, if this doesn't work, I don't know what I'm going to be doing, but I'm not going to be running an accounting firm.

I know that. the wheels fell off without my being there, which is kind of a self-fulfilling prophecy, right? And two years later, I had to come back into business because it was going the wrong direction. But I said to myself, okay, we've got to do something different. At the time, I had my brother and I had a third partner. And that's when we implemented EOS.

What?

Speaker 2 (13:57.65)
I had heard in EO several times is what gets you from point A to point B won't get you point B to C. But those things for me were externalized. They were like, okay, well that means there might be different people in the organization because we've got to upgrade the talent. We might have different processes. We might have different services. I might be doing different things or even doing them differently.

But I never internalized that statement to say, have to be different, right? And EOS was a tool. It was an external thing that I said, we have to do something differently and it worked. But what it showed me in implementing EOS was the things that I had to change about my behavior and what I had to do differently.

and who I had to, as you say, show up and be every day, had to change. And I don't think that's, well, I know that's not an easy transition. And I know that a lot of entrepreneurs just don't make it. they just, they may not realize it, but even if they do realize it, they choose not to.

Yeah, because it's an identity issue. That's why I say it's an existential crisis because even if they are recognized the changes and they go toward that change, the curve of addiction to come back in and be the hero and do the work, do these things gives them enough fulfillment and sense of self that they're willing to pay the price of all the shitty things that come from that.

Yeah, we, we, we, on, on, on previous interviews, we talked about addiction and entrepreneurship and the, the paper was discussing the dopamine addiction cycle, which that was interesting because I had never really understood the mechanics of it, but whether that translates into being addicted to entrepreneurship. And, and, you know, I think.

Speaker 2 (16:10.604)
For most people, they're not truly addicted to entrepreneurship. They're addicted to those feelings. And I don't know if they probably do in some way involve the dopamine cycle. But like, you know, when you are the hero, when you are the savior, you feel good about yourself. And I think I've even seen it where some people translate that into self-sabotage.

They create those scenarios where they can unconsciously, like they don't intentionally screw things up so they can come in and rescue things. But it can even be so bad as that you're actually creating those scenarios instead of just reacting to the ones that naturally occur.

Yeah. I mean, you went, you mentioned going and starting a software company. I didn't do that. I just created new problems and challenges in the organization to entertain myself and feed my ADHD or addictions or whatever you're saying. Right. So instead of starting, I mean, so I just started whole new things to create that, you know, to solve those same problems, to distract myself and to feed that.

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Speaker 2 (17:59.886)
And that's so for me that, you know, what that looked like. And this has really been over the past year. So these, these were at age 54. These are hard, hard, one lessons. They're, not, they're not something that came to me without a lot of struggle. I just started working less in the business because I wasn't contributing anything. And I realized that.

where I was trying to contribute, I was being counterproductive. And so, you know, being hyper focused on what my role is in the business and just doing that. But there was this challenge because it's like, well, if, if I leave every day at two o'clock or three o'clock, somehow I'm not doing enough. I'm not, you know, working hard enough. And I even had to find some alternative creative outlets. So, you know, like writing a script.

or, you know, this project is one of those things. And being comfortable with that took some doing. Did you ever come to a point where you actually said, need to work less? Like, let me tell you how bad it was. I'll tell you how bad it was. I moved out. This is my office.

that i have and it's very comfortable and so what i did was i took a room with no windows i set up a standing desk and i said this is where i'm doing my work and so i forced myself into an uncomfortable situation. So that i would only be there when i absolutely had to be there.

I tried to myself and it worked.

Speaker 1 (19:56.366)
I worked different. I hear what you're saying about work less. I can see that. I also would say that I made a decision to not be the hero villain and I wasn't going to solve the problems. So I would go on vacation for a month in, this is a while ago, back in a day where I didn't go to places with cell phone coverage, so nobody could get a hold of me. So it was like,

purposefully creating situations where they're going to figure it out. Right. I mean, there's like, I'm not a phone call away and you know, and purposely getting people to a place where, you know, they didn't need me. Like, honestly, think I, you know, toward the end, I probably would have taken at least a year off and I don't think things would have skipped a beat.

They didn't need you. Let's lean into that a little bit. So, don't know what your story was. I find that a lot of entrepreneurs have some type of childhood trauma that affects, their decision to be an entrepreneur. And I define that very loosely. So I'm not talking about like,

physical or sexual abuse, like there's something that happened in your past when you were in your formative years that caused you to want to fix it. And one of the ways you fix it, a huge way you fix it is being an entrepreneur. So if that's self-worth, I mean, I think a lot of it is around that, like proving to others wrong that

I am worth something. And so when you say that feeling of being needed, did any of that fill a deeper need for you?

Speaker 1 (21:55.032)
So my trauma was different. It wasn't an acute situation like you said, know, sexual abuse or something, but it was a low kind of chronic environment where I learned or felt like I was on my own and I couldn't rely on authority or trust them really. And so my biggest fear would, you know, part of what drove me to be an entrepreneur is like I needed to be kind of in control and create my own environment.

because I couldn't trust authority to, you take care of the ways that I would think. And so that, you know, that's what drove me from a trauma standpoint, was more of that, you know, so I was, I'm willing to work really hard and do all these things, because I want to be lazy and comfortable. Okay. And so, you know, so I didn't, I, you know, to get to a place where people didn't need me was like,

joyful for me. I know there are the entrepreneurs that like, find said identity in doing the work, that it's hard for them to let go because they that wasn't my situation. I was like, you know, I went from not traveling at all to over 50 countries. Because I was like, I want to be gone as much as possible. And I love it. And I built that I had done other companies before us recurring revenue company.

But when I got the recurring revenue, I'm like, this is the land of milk and honey because it's so predictable and just stackable. like, it's on autopilot in many ways compared to when I did service models or, you know, I did staffing companies or this or that. Like, so it was just such a better world for me that I was like, this is heaven.

Right. And I know some people, I had one member of my forum and it was kind of a common theme that we all shared, but for him it was intense that like when the business is successful, it's almost like this anticipation that something bad is about to happen.

Speaker 1 (23:56.258)
Yeah. Right. Yeah. Yeah. Yeah.

Have you seen that in entrepreneurs that you have?

Yes. Yes. So I think those traumas, and part of what I did when I was working with entrepreneurs, I would bring in, you know, a former rabbi to almost check, you know, kind of look through where they are personally, because I realized, dealing with certain entrepreneurs, we have these fears that can become irrational. And you want to know where they are, because I've seen them blow up deals and people self sabotage because of that fear, including myself, like I went, you know,

Those fears drove me. So my fear was again, authority. that when I went to exit my like, I freaked out thinking about letting go and being under, you know, like giving up the reins. And I had to work through some of that. So I went and met with a therapist and process a lot of that and, you know, brought a lot of healing in those areas.

Yeah. Yeah. And so do you you run across

Speaker 2 (24:59.594)
entrepreneurs that you work with that like are the idea of self-awareness. They're kind of oblivious to it. In other words, the way I define that is do you know why you say and do what you do?

Mm-mm. No, a lot don't.

Okay, how do you change that?

what I, what I try to do is, is rather than getting into a long-term engagement with people, do a shorter one and more of a discovery that takes two or three months and create awareness around that situation and see how coachable and responsive they are. And so I, I, it isn't my job to change that. You, just want to know what are we working with and is this going to be something where like, okay.

you know, like it needs therapists, you know, so I have definitely told people and recommended, you know, therapy and other things to, to lean into that because it's like, man, I'm not, you know, the go I call it, you know, the three month project is like dating before we get married. And I'm like, man, I'm not gonna hitch my way and get married to this person because this, these traumas and these fears and these issues are going to be, you know, like, you know, like they're

Speaker 1 (26:23.0)
They distrust things so much that their fear is irrational that there's no one else can win because if they win, that means they're losing. It's like, can all win together. Those are the types of situations I've seen where I'm like, my God, like life's too short for this.

So there are some people then that are not coachable and you have to walk away.

Yes. And that has happened a number of times because I'm like, again, life's too short to work with those people because it won't end well.

So looking at what you do as far as helping people put these processes and other items that build value into the company pre-sale, is there a reason why every business shouldn't do those things, regardless of where they are in the exit continuum?

Yeah, I mean, so fundamentally, creating value often can include, you know, creating as much profit as possible. Right. So, so as long as people want those things, yes. But you know, the challenges, like I said, like you're talking about this, this fear and people finding their identity. A lot of times people want to play small and aren't willing. You they're almost afraid of success. They're afraid of letting go of these things. So they can't

Speaker 1 (27:45.166)
that's the existential crisis. They can't get through that inflection point to go beyond themselves and let go and actually create the business that could be highly valuable, valuable, because part of that value means it doesn't need you in the business. Right. It should be on the business. So everyone, you know, I would, you know, I would say, yeah, everyone should. But, but, but not everyone's capable or wants that even if you show them like, this is a better world. you know, there's still

going to be stuck in this other world because they haven't, they're not willing to do the work from that side.

Have you ever run into a business that you were talking to that didn't have the potential to add value?

No, with the caveat that there are companies where I, you you can create a lot more value based on what you're seeing and others that are running pretty damn good where it's like, yeah, I could probably create some, but you know, for me to get involved and do all these things, you know, you know, I've always kind of said, I want to create at least $10 million of value. Okay. And so if you're kicking ass and doing amazing things and things like, okay, I would just say, just keep on keeping on. you there's a couple of tweaks here and there, but

you're doing a lot of the right things. So it's only because they're creating value so well on their own.

Speaker 2 (29:05.474)
But those are the outliers. Yeah, so you'd say most businesses have a lot of untapped value.

Those are the outlines.

Speaker 1 (29:16.43)
including that a lot of things that create value can be counterintuitive and opposite what an entrepreneur would think.

Give me an example.

So I was working with a company that built websites as part of their service offering. And in going to sell, they were going to build their own website. That website, they want it to be kind of an example of the incredible work they can do. Well, it's like, if you build your own website, it would cost them two, three, four million dollars of value.

loss because A, they were taking revenue producing people that were billable and working on an internal project. they were losing, it was expenses of those salaries were eating into the EBITDA. The loss of revenue was going to cause a huge hole. so, it made more sense, it would make more sense for them to pay a competitor to build their website and they could do it as an ad back and maintain the revenue creation.

But pay their worst competitor, the people they hate the most, give them two, three hundred grand. Doing that would make more money, it would be worth millions of dollars of them if they do that than doing it themselves.

Speaker 2 (30:37.25)
So let me clarify what you're saying. So this business was, the website was part of their deliverable to their customers, right?

is one of their service offerings. Not everyone did it, but they often had people building custom websites, high-end websites. part of what

and it was something that they had always done.

They've plenty of people for it and they built their own and showcased the amazing stuff they could do by building their own websites.

And, because of the internal costs, both the hard costs and the soft costs, the opportunity costs, it was, it made more sense for them to pay somebody else to build the website, then, then they do it internally.

Speaker 1 (31:16.332)
Yep.

Speaker 1 (31:27.265)
So yeah, so if let's say it was going to cost 200 grand of salaries, 500 grand of lost revenue, that's 700. And let's say they end up paying someone 300 grand. That's an ad back that they're going to get credit for. That a million dollars, you you know, if you look at what the profit of that, let's say it's even, you know, six, 700,000 with the ad back, you know, that you're talking about almost at a 12 X multiple, you know, that that's worth what? $9 million of value.

And their sticking point was, that's what we do. That's what we've done.

No, in this scenario, they actually did what I'm saying. Okay. And it made them millions of dollars. it's so like, what? Like, as an entrepreneur, you would never do that. Right. I mean, you're just like, I'm going to showcase the amazing stuff I did. so I'm saying, that's just, you asked for an example. That's just one example of like a decision that's so counterintuitive to anything an entrepreneur would ever think. But from a, you know, from the spreadsheet jockey, you know,

financial whatever, know, that makes millions of dollars to do it, which is like you and I would never do that.

Yeah

Speaker 1 (32:41.746)
Like it'd be more sense potentially if you wanted to sell as in a CPA firm to pay someone else on contract to do financial and CPA work for you, then do it yourself because of those kinds of things. Right? So I'm just saying there's counterintuitive things that, you know, I call it, so it's not, call it, but so post-acquisition economics. So you're trying to think about like, you know, what is your company worth, but what is your company worth to someone else? And what are the things you can do?

that are kind of like this financial engineering that is different. It's a different way of thinking that entrepreneurs like myself would never think where you're like, this is crazy.

Yeah, because we're either focused on a problem that we're trying to solve, or we see this vision of the future and opportunity that and we're not. I guess it's more of how you frame the question. Like what is the outcome you really want?

Right. Yeah. And in this scenario, they got it and they're like, you know, we want to sell for, you know, I mean, so this one, you went on to eventually to sell for over $500 million because they were doing all those kinds of decisions on top of, you know, we acquiring companies and, and, know, a lot of other things that were, you know, big moves.

Yeah. Yeah. And I will say that one of the common holes I see in entrepreneurs is they don't view their business

Speaker 1 (34:18.797)
They're not like a business owner, right?

Right, right, right. So, you know, this conversation I was having with a colleague and he was really stressing about taking money out of the company. And, you know, it's like, if you if you owned a share of Apple, and they didn't send you their dividend, what would your reaction be like? And actually looking at your business as an investment.

and having expectations around profitability and growth and valuation, return on equity. They don't ever think about it in those terms, but it's actually very liberating when you start to treat your business as an investment.

Yes. And for me, part of that process was bringing in an advisory board who was objective and challenged me on a lot of things and caused me to go, wow, what, why haven't been doing things this way? I need to think of things differently. And so, you know, including as an entrepreneur, I was drinking my own Kool-Aid around like why I thought my business had a competitive advantage and why we were going to win the market. these things that were unique.

And I realized it was all bullshit. I was good at marketing and we were good and we did some things right. But man, we were missing a huge opportunity. so now it's helping entrepreneurs even think about like doing the math and doing the work to understand their secret sauce and their competitive advantage and where they can win disproportionately. Because I hadn't thought like

Speaker 2 (36:04.024)
Yeah. Well, Drew, this has been very insightful. I appreciate your time. Do you have any closing thoughts?

I love the entrepreneur world, so I'm excited for people to grow and learn. I know this is the journey that I went on and many of us, I just know that a lot of us all go through this. So I love that there's the community people that have these kind of conversations. So thank you.

Well, thank you, sir.

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