Lessons - How Taking Calculated Chances Built a Business Empire | Michael S. Liebowitz - Serial Entrepreneur

In this lessons episode, learn why betting on the right founder or CEO is the most important signal of long-term business success. Discover how adaptability beats rigid planning and fast changing markets. Learn why great entrepreneurs do not always make great investors and understand how people, not just products, are at the core of every successful acquisition. So one thing that I find interesting is when somebody's been a great entrepreneur and they built the business and it's been acquired and then they have a whole bunch of money that they're sitting on. They make a lot of investing mistakes because a good entrepreneur doesn't always mean a good investor. And now you've been doing it for 30 years. You're not new to this, but for somebody that looks at businesses, I think there's lessons in this for an entrepreneur who's building and also investors looking at putting their money into the right business and betting on the right person. What should an entrepreneur be thinking about? What should an investor be looking for that you've seen is a good signal for success? Well, the number one thing is the person you're betting on. Everything is a jockey bet. Everything. You better know that the person that you are as leading that business has the attributes that I mentioned. They're entrepreneurial, they've got a great idea. It's incredible. They know how to execute it. And if they don't know how to execute, that's okay, but higher people that can execute, right? Make sure you put the right team in place that's going to do it. And you want to meet that team. But it's all a jockey bet. Like when meta, right, was falling apart and the stock went from if you remember, from $300 to $88, I bought more. I bought more for one reason. I think Mark Zuckerberg is an absolutely brilliant genius. It was a jockey bet for me. And the fact that he changed the company's name from Facebook to meta at the top. He was at the top. And he thought he needed to change the name to bring that business into the future. How many entrepreneurs or CEOs of a company that are at the top have a trillion dollar business and feel the need to change the name of the company to bring it into the next century, as you would call it. And I said to myself, wow, to me, that told me everything about with that guy's thinking. And it told me is he's not going anywhere, right? That's another guy that like he's a CEO, he created this is his whole life. He's not going because if he's out of there, I don't want to own that stock. Okay. And so at the end of the day, when I look at businesses, I'm always looking at this. Who's the CEO that's running that company? That's the bet you're making. That's where you see some businesses where somebody takes over this decrepit thing that's going on and they turn it into the most unbelievable business that they could turn it into. And that's the only thing you're betting on in my opinion. There's a lot more, obviously, but that's the number one criteria for me is who's the CEO? You know, it's interesting because again, you mentioned like the the 5E button sold this business multiple times. I've seen many times where you have this incredible and to sort of further your point, there's always incredible founder CEO that builds a business and then it's sold the private equity or it's sold to a strategic buyer and then it goes to shit. And that's because the person isn't there anymore. Well, I sold the business to private equity. Okay. Before I sold it the last time. Okay. So I tell you about that business I bought it, I sold it back. I sold it in 2016 to private equity and then me and a private equity firm sold it again. Okay. The private equity funnel on name them because they're great is a stone point capital. And they always understood that they couldn't run the business. They understood from the beginning who the guy is or girl is that's running that business. Okay. And that's it. And when we got an offer to sell it, they said, we'll own this business with you forever. We don't care. Okay. But if you want to sell it, we'll sell it too. And again, it's the same thing. So you have private equity, you have people that, you know, companies that buy businesses and they're really smart and not just giving these other example. When I sold that business, I had another offer for it that was more. I chose to sell it to those guys because they've been around the block 500 times. I knew they would make me more money on the second hit and they were going to let me run that business how it needed to be run. Right. And that's the other thing again, they were making a jockey bet. It's like who's, you know, listen, after the settlement, I got calls from, you know, other private equity funds that I did business with in the past. And every one of them called me and said, Hey, is there anything for us to do with you here? They were making the jockey bet about me. Yeah. It was the same thing, right? That's all what it's about. There's other things you have to diligence to. But the number one thing, again, I had a thing on my family office website. I don't think we have that website up anymore. But it was a quote that I had and it said, you can't do a good deal with a bad guy and you can't do a bad deal with a good guy. I like the truth. It's the truth. You know, and you know why you can't do a bad deal with a good guy? Because ultimately, businesses goes up down. It's dynamic. It's this and that if you're doing it with the right person, you'll figure it out. You'll figure it out. You'll adapt. As an investor, you just have to figure out that right person, the one founder, the one CEO. That's really the person you're team or team. But the question or the point is, how do you take that idea and translate it into running a whole company? So how do you take that idea of finding that right person and then you just deploy that against the whole company so that you always attract the right people? Well, there's always stages of everything, right? So it's not all coming. You're not going to come up with it all day one. It's not going to be like, all right, we're going to put out this blueprint. I got this great CEO. I've got this great CFO. I've got this great product. And here you go. Here's the plan for the future. I've been at Douglas Alman for nine weeks. My business plan has changed 15 times. It may be different next week. And what I mean by that is that I keep learning new things. I keep meeting new people. I keep running across different things within the company. And I adapt to it. And if I said something to somebody two weeks ago and now I change it and they call me and say, but you said this, I don't really care. Okay. I'm going to do which right at the moment that is there. And if you're not a CEO that doesn't know how to adapt to current events, you're the wrong CEO and you're running the business with your ego because the only person that won't change as a person that's ego is in the way, right? So for us at Douglas Alman, our business plan may be a little bit different. It may be a little varnished a little or maybe a little polished or it may be adjusted in another month or two months. Right now we're coming up with plans. Obviously we have plans. We think about plans every day. We have a team that we think about what we want to do with the business. And I think generally we have a generalized blueprint of what we want to look like. But within that blueprint, things may change. Some people may change. Some business plans. Maybe somebody brings us an unbelievable idea that we say, you know what? Wow. We haven't seen that before. I'm not passing on that idea. I want to maybe I want to implement that. We were a piece of technology that I think is transforming to our business. And now we need to basically, you know, turn the wheel a little bit to the left. That's what we're going to do. And we're going to be dynamic. And you know, the business that I sold that we talked about, it felt like a new business the day I sold it because we were always innovating. We were always doing new things. And Douglas element is going to be an entrepreneurial, mean, lean, innovative, winner attitude, business. That's going to be dynamic. Okay. And do really interesting things. Be on the forefront of our marquee real estate business with a name that is the best in the business. And we have an amazing opportunity here. And again, we may look a little different than everybody else in 12 months or two years. And we're excited about that. I think that first of all, I think that you have the right, I think the best CEOs are entrepreneurs. I truly do believe that. I don't think that you can air drop an MBA and be as good as CEO. I mean, this is like, I'm sure there's some great CEOs that do have the Ivy League education. But I think that entrepreneurs just how fast they think and how comfortable they are with radical ideas. I think that's more and more where you're going to have to see in that C-suite because technology changes so fast, world changes so fast, you can't just be comfortable with an idea and set it and forget it. I don't think business exists like that anymore. Well, it's interesting. So I met with a an engineering, coding, you know, technology developer a couple of weeks ago, right? And we started talking about building a piece of technology for us. Okay, I did that for one of my insurance businesses we built technology. They told me it would take six to nine months to build. It took two and a half years. It ended up being great technology. But the insurance business is a different business in residential real estate. And the problem with building our own right now is by the time we finish building our own and conceptualize it and beta test it. It's probably going to be obsolete. Okay. And today, there are so many companies out there building technology for residential real estate. We don't need to build it. We don't need to. And it really goes along the lines of what you're saying, right? Is that you want to build and you want to do all these things. But the market is moving so fast that, you know, and listen, we have competitors that went out and built, expensive fortune and money building technology. And we see their technology. It's fine. It's not groundbreaking anymore. It may have been groundbreaking two years ago when they released it. There's nothing groundbreaking about it. You could buy it off the shelf today. So you know, like you said, things move so quickly. If you're not willing to adapt as a CEO in business in real time, forget it. And when you do, when you do make those acquisitions, you have to make that you give that acquired company the air to breeze. You don't just stifle the innovation that made them who they are too because I see that happen a lot as well. You acquire a company and then all of a sudden just corporate bullshit just destroys that entrepreneurial innovation that made that company so great. Most of the time, when you see acquisitions and you know, at that company, I was with NFP while I was there, we did 400 acquisitions. Okay. So you see every bit. And again, it gets back to who you buy. Who is that person? Because you don't want to buy a business and the people that built it created a great leaf. Yeah. Of course. We don't want to buy a business, right? That the people, because we're buying a people business, unless we buy a product, you know, so you want to make sure that those people that you're buying are going to stay and are motivated. And like you said, let's do this element is bought other brokerages that were profitable before we bought them. And now they're not. Okay. Well, what went wrong there? Right? Did you buy the wrong entrepreneur? Did we put too much bureaucracy on them? You know, did we not innovate? So for us, if we're going to look at an acquisition, it's going to be an accretor from day one. It's going to add value from both businesses, right? So let's say we pay a five multiple for something, right? We want our effective multiple post closing to be a two or three, right? Because they're operating efficiencies, we have the platform. Maybe they don't or maybe we've got redundancy someplace and we're going to fold them in and eliminate the redundancy. So like, you know, those mathematical decisions. And then again, you have the people aspect of it too. And that's why it's also important to take your time. Don't find a deal. This is the greatest thing and rush to close it because the diligence period is an incredible period of time to find out about the people that you're dealing with. People show themselves, right? So go through that. It's like the interview process. Don't do one. I hired one person in my life on the spot. Okay. Went in my insurance business. And just so you know, she was one of the best people I ever hired. Okay. But that was lucky. I think I was very lucky. That was lucky. My process after that is like a five, six, seven, eight, nine or ten, you know, period of time, you know, to hire because you learn a lot in that process. Thanks for tuning in. If you found this valuable, don't forget to hit that subscribe button so you never miss an episode. And if you want to dive deeper into this conversation, check out the links in the description to watch the full episode. See you in the next one.