Buy, Don’t Build A Company- With Serial Entrepreneur – Roland Frasier Ep69

Quotes:

  • “If I could only pick one skill to have to be successful in business, it would be to be good at strategy because those technical skills are hirable.”– Roland [23:19]
  • “To be a good investor you’ve got to know something about some part of the operations of the business.”– Roland [37:52]
  • “The challenge with many service companies is that they’re not providing a productized service, they’re providing a customized service.”– Roland [15:44]

Buy, Don’t Build A Company- With Serial Entrepreneur Roland Frasier

Are you thinking of selling your business or maybe buying a business to expand your investment portfolio? You can do so on the sidelines coaching the management team with strategy and still scale higher with the businesses

In this episode of the Page One Podcast, Luke Peters speaks with Roland Frasier about company acquisitions strategies and how he manages to be a serial entrepreneur investing in multiple businesses. Roland is co-founder and/or principal of 5 different Inc. Magazine fastest-growing companies. He’s a serial entrepreneur who has grown 24 businesses with adjusted sales ranging from $3 million to under $4 billion. He is the current CEO of All Channels Media, LLC, and principal in Scalable.co, DigitalMarketer.com, Traffic & Conversion Summit, and more.

Listen in to learn the seven major categories you can approach the acquisition of both companies and assets. You will also learn the importance of strategy over technical skills in the success of a business.

Key Takeaways:

  • Understanding the system to follow when looking to acquire assets or a company and identifying their existing benefits.
  • Understanding why business owners stay after selling control of their businesses and why you should stay after selling the majority of your business.
  • Why you need to only be good at strategy and not the technical skills to be successful in business.
  • The strategy of buying and selling businesses by not working in or out of them but above them.
  • The importance of understanding part of business operations to be a good investor. 

Episode Timeline:

  • [3:12] Roland describes how he works toward being his own investment banker and private equity firm plus working as a coach to CEO in companies he invests in.
  • [5:18] He explains why it is better to buy than start a company to avoid the failure rate that exists while starting a company.
  • [7:27] The seven major categories of assets and companies and how to approach each when looking to acquire.
  • [12:53] Roland explains the types of businesses he invests in and those he stays away from.
  • [17:09] The nine different ways you can run your business passively- handing management over to others.
  • [22:21] Why Roland describes strategy as the most important skill that anyone needs to be successful in business.
  • [24:08] The strategy that Roland and his partners use by investing in a competent and temporary team to help get a newly acquired company on track before they leave.
  • [27:36] The KPIs that Roland and his team look at quarterly through dynamic goals.
  • [32:54] Roland explains why he’s not a passive real estate investor or business owner but rather the businesses occupying a portfolio slot in his overall investment portfolio.

Speaker 1: Welcome to the Page One Podcast, a podcast featuring a variety of guests and thought leaders on topics ranging from digital marketing, sales channel strategies, influencer marketing, best in class product launches, and all the details about how to accelerate sales. Now, here’s your host Luke Peters.

Luke Peters: Thanks for joining On the Page One Podcast. I’m your host, Luke Peters, CEO of Newair Appliances and Retail Band Digital Strategy Agency. This episode is sponsored by Retail Band, where we can give business owners a blueprint on how to grow their digital sales, either direct to consumer or via channels like Home Depot, Wayfair, Walmart, and Amazon. To learn more, find me on LinkedIn or email me at luke@retailband.com. In this episode, you’re going to learn from Roland Frasier on why buying companies is better than building, how to find and buy companies and then how to exit your business.

Luke Peters: A little bit about Roland Frasier is co-founder and, or principal of five different Inc. Magazine, fastest growing companies. He’s a serial entrepreneur who’s built 24 businesses with adjusted sales ranging from three million to under four billion dollars. Currently CEO of All Channels Media, and principal in Scalable.co, DigitalMarketer.com, Traffic & Conversion Summit, Praxio.com, TruConversion.com, War Room Mastermind, a bunch of other businesses. Roland’s all over the place.

Luke Peters: His work includes infomercials with Guthy-Renker, publishing deals with Simon & Schuster & Random House, shows with major hotels on the Las Vegas strip, over 100 private and public offerings. His specialties are acquiring or partnering with entrepreneurs to scale businesses through acquisitions, strategic relationships and marketing, and he lives in San Diego with his family. Roland, thanks for joining me on the Page One Podcast.

Roland Frasier: Hey Luke, thanks for having me.

Luke Peters: I hope I covered everything there in the intro?

Roland Frasier: Yeah, man. It’s just too much stuff. I sound like a sketchy guy, I don’t trust them.

Luke Peters: Yeah, I know. It’s funny. Well, it’s like, you don’t want to leave any of the important things out. So basically, for the audience, Roland’s got his hands in a lot of different companies, so yeah. All right, cool. So a little bit of background actually, before I get into this, just so the audience knows. I attended one of Roland’s in person events, really blew my mind. This was in San Diego at a beautiful place, by the way. And he talked about rolling up businesses, why it’s better to buy than to build and how to find them, how to then exit and in a way kind of act like your own PE where you’re rolling these up and you’re exiting and then the numbers behind it and why that works better financially.

Luke Peters: So we’re going to talk specifically about that because I know, in this period, Coronavirus, a lot of successful companies are looking at that right now, they’re looking at acquisitions and I thought that would be great for the audience. But Roland before we get started, I did mention a bunch of things. Is there a simpler way to describe what you do, so the audience gets a feel for what you do or maybe some of the products you sell or services you sell?

Roland Frasier: Yeah. I mean, I think what you said at the end of that wrap up is pretty accurate. It doesn’t really matter about the company to me. Terribly, I mean, there are areas that I tend to focus on now just because I’ve got experience in them or they seem like they’re appealing, but the whole process really is, effectively to be your own investment banker, your own private equity firm, to acquire interest in companies that are already profitable that are already going to do so with a minimal outlay of your own cash, with an eye towards growing them and scaling them up to exit.

Luke Peters: Okay, cool. And then, you know what I found interesting is, it seems like you manage… you’re really efficient. You got your hands in a lot of companies, but it sounds like mostly as an investor, how many total direct employees do you have? Are most of them outsource or just kind of how does your company stack look there?

Roland Frasier: Yeah. I don’t have any direct reports that are mine. Usually, I have some general managers or CEOs of companies that I wouldn’t say they report to me as much as I look at myself as a coach for any of the businesses that I have an interest in. And so that allows me not to be on any organizational chart, which means I don’t have a job description, which means I don’t have a job, which is kind of how I like it. So I get to take the things that I’m good at and share those things with other people to help guide them in the right directions, which are hopefully the right direction when I’m working with a company.

Luke Peters: Cool. And then, if I remember right, you’re an attorney by training, right?

Roland Frasier: Yeah. I am a recovering accountant, a recovering attorney, a recovering securities investor, I’ve had a 37 License back in the day and also real estate, so I’ve gone through. I have lots and lots of educational certification, like the kinds of things in my history, but not actively doing any of those things right now.

Luke Peters: Okay, great. And that’s good. It gives us kind of a baseline for everybody listening. And actually, I do have a real estate question later on, so we’ll jump into that. And why don’t we just start with the first idea here, buying is better than building. Can you explain why?

Roland Frasier: Yeah, I think there’s a lot of reasons. The biggest is that in terms of the effort that it takes to start a business up, it’s a tremendous amount of effort because you’re starting with a completely clean slate, so you don’t have a product to start with. You don’t have a group of customers to buy the product. You don’t have the relationships with the suppliers who are going to help you create it or with really anyone; you don’t have prospects. So everything is as hard as it’s ever going to be because you’re literally starting with nothing when you start a company. The excitement and joy of a startup, but it’s also the challenge.

Roland Frasier: And so, rather than having to create all of that and deal with the incredibly high failure rate, which is, it depends on who you ask, but the stats I see say, about 70% of businesses fail in the first year and about 90%, over the first 10 years of being in business. And even the big companies that do venture capital that have all the smartest people that they can get on their staffs, fail about 75% of the time. So with that super high failure rate and all the efforts and expense is required to start up a company, I just think it’s easier to find one that’s already gone through that challenging period of getting going and is past the big risk of failure and get one that’s profitable that already has customers, sales, product, employees, relationships, branding all of those things that they can take a long time to build up. And the failure rate on acquisitions, statistically, there’s only about 2% compared to 90% for those other companies. So I like those odds much, much better.

Luke Peters: Perfect. That makes sense. And now for the entrepreneur, who’s already, they got a successful business, maybe they want to buy companies just because they want to have other assets outside of their current, or they want to roll it in. I know you spoke about this in the conference, but it’s still is a difficult one. Where should they find these leads? What’s the best place to find acquisition targets?

Roland Frasier: Yeah. I think if you’ve already got, and think about too, that it doesn’t have to be that you’re buying company. It can be that you’re buying assets, as you mentioned. So maybe you want to acquire just some particular asset that’s going to help you with your [acquistic 00:07:42] business. So, I look at really seven major categories of acquisitions of either companies or assets. The first one that most people know about that’s the most common is just simply to look at who’s your competition, both your direct competition, people doing exactly what you do to the exact same target audience and indirect competition, which might be doing the same thing you do to a different audience, to a different geographical location or a substitute or replacement product so that you’re selling umbrellas, but somebody else is selling sunscreen. Those can be two products, one might be a substitute for the other. That’s the first place that I would look.

Roland Frasier: And so, in there you could think about buying an entire company, or you could think about buying a product that is being sold in a different market, or that could be sold to yours. The next place then would be to look at media. And media would be anyone who’s already aggregated the attention and eyeballs of your ideal customer profile. Whoever already has done the work of becoming a center of influence that has a lot of your ideal customer, those are assets that you can acquire. And that might be anything from a Facebook group or a YouTube channel or Instagram page to sites that are SEOs that rank on Google and the other search engines. It could be a podcast like this one that everybody’s listening to, or a trade show, or even a complete company that has a newsletter or a magazine or a show or something like that.

Roland Frasier: Then the next category after that would be looking at, who’s got resources that you would be interested in having in your company? Who’s got maybe even a team of people that would be good for you and your company. Like if you want to go into software development but you don’t know how, maybe you could just acquire a company that already has a software team and you don’t even care about the software that they’ve got. They just have a proven development team that could get things done or an inside sales team or a team of sales reps. Those would be things that you would consider. You can also do what they call acquihires, which is that you’re acquiring another company to effectively hire the management team that’s there. So, that’s another category.

Roland Frasier: Then another category would be services that are already being sold to your ideal customer profile or to your existing company. Another category would be products that are already being sold that way. And another would be your supply and distribution chain. So where are you getting your products made that you are selling and how are you selling them? Are you selling them direct to the consumer yourself, or are you selling through maybe affiliates? You could acquire those affiliates, or through websites, you could acquire those websites, whatever the distribution and manufacturing channel or chain is for your product or service, that makes sense to acquire up and down that.

Roland Frasier: And then, last but not least intellectual property, is there intellectual property that’s out there? It could be a brand that would be comfortable or comforting and known to your audience that is acquirable. It could be a software as a service kind of thing, it could be a patent or copyright, trademark, all of those things. So I like looking around that grouping of seven different major categories of assets and companies to start with, because I think they’re the ones that are going to grow your business the fastest. If you think about, if we go back to that and say, “Okay, so let’s look at each of those categories, what am I going to get from that?”

Roland Frasier: What I’m going to get from competitors is customers. What I’m going to get from media is leads. What I’m going to get from team and resources is infrastructure. What I’m going to get from products and services is the ability to expand my market. So, that’s going to give you more margin. Another margin increaser would be up and down the supply chain, you’ll be able to get more of the margin because you’re not giving it off to somebody else. And then intellectual property provides you with additional margin as well in that you have more people that are going to come to you as a result of having that. So when you think about that, it’s like, I can build any business very quickly, if I can get leads, customers, increased margin, increased team and resources. And that’s what each of those seven categories ultimately can provide.

Luke Peters: Hopefully, everybody can rewind that. There’s a lot in there. And I’ll simplify or zero in on one point, just from the conference that I was at. I think you said something to the effect of, “Hey, look, who you’re writing your checks to right now.” And those could be synergistic buys. They could be add-ons to your company. I think that’s an easy process that everybody can go through any business owner that’s listening right now. And Roland, you talk about also the different types of companies, what about the different sectors? What do you like right now? Or does anything stand out right now, October, 2020, as far as obviously, digital media is always hot? But part of, some of the other ideas you had was, “Hey, there’s a lot of baby boomers that are going to be getting out of their businesses and there’s going to be a lot of opportunity.” And those usually, are not going to be digital companies. What do you see right now? Anything stand out?

Roland Frasier: In terms of industry, it doesn’t matter a whole lot. To me, it’s more about the things that I don’t want and the things that I do. So let me start from that. I generally like to stay away from businesses that have very low margins. So anything that has a historically low margin of, let’s say under 10%, that’s not going to be appealing to me. So if you think about, probably the most famous would be supermarkets because they have such like 1% margin, because there’s really a lot of places to make errors there that are going to get you in trouble. And I want to have the ability to have some flexibility to try some things and make some mistakes.

Roland Frasier: I also don’t like heavily regulated industries because there’s people that make money in all of these, just for me, I’m a low friction person. So anything that has friction, to me, there’s friction if there’s not enough profitability, there’s friction if there’s governmental agencies that are looking over your shoulder. And they’re heavily like the health industry, you’ve got to comply with HIPAA and all these other things or financial services and that kind of thing, even though those can be great companies for people, for me personally, I just want a simple business. I like profit, so I don’t invest in any business I don’t really understand, and that’s kept me out of tech.

Roland Frasier: I actually liked tech because I understand it. So I do like software. I do like e-commerce except for the inventory component and not one that’s completely dependent on a single source for distribution like Amazon, because you going to have a hard time acquiring Amazon. And I like e-learning, I like services businesses because inventories can be challenging. So, unless there are really strong opportunities to shift the responsibility for financing inventory off of the company, to either the manufacturer through a consignment type program, or just in time inventory delivery program or to the customer through pre-sales or some other deposit type mechanism, then I generally stay away from those types of businesses.

Roland Frasier: And obviously, with everything that’s happened recently in the economy and the world, the businesses that I see growing the fastest are not dependent on foot traffic. They are capable of operating whether people are able to visit the physical facility or not.

Luke Peters: And speaking of service businesses, I mean, they have their challenges too, because a lot of them are all selling the same service. So it’s hard to differentiate. We’re talking about the non SaaS businesses?

Roland Frasier: Mm-hmm (affirmative).

Luke Peters: Do you like them because they should have higher margins? It’s funny, because I know a lot of people that run them and they don’t have high enough margins. But generally, service business should have like 25% net profit margins or something, right?

Roland Frasier: Yes.

Luke Peters: Is that’s what appealing?

Roland Frasier: Yeah, it is exactly. And there, the thing is the challenge with many service companies is that they are not providing a productized service. They’re providing a customized service. And so they’re dealing with like an ad agency, or a graphic design agency, or a digital marketing agency, that they don’t have a product as much as they have a service. And so I like services that can be, or have been turned into products so that they can be scaled. Because if you need to depend on the people who are providing the service to do a customized thing that they deliver to each customer every single time, it’s very difficult to scale and operate at a larger volume, which you’re going to need to do to be able to grow the company to the point where it’s going to exit profitably. So that’s something that’s very important in that process for me as well.

Luke Peters: And then, if you’re acquiring these companies, well, I have a couple of questions in here. Main question is, how do you look to hire people to run these? But it sounds like, correct me if I’m wrong here, that you’re able to run these passively, that you don’t have to be the active day-to-day CEO, you have other people that are running these businesses. Can you kind of talk a little bit about that and like structure and just get… business owners right now dreaming or thinking about a different way of how they could be living their lives and running their business.

Roland Frasier: Yeah. I think it works out to about nine different ways that you can do this as far as not running it yourself. So number one, I generally, I like to look to the smart people that have already figured things out so I don’t have to. And one of the things that you see very common in private equity firms that are buying companies is that they don’t buy 100% of a company, they’ll typically buy on average, I’d say 80% is the most common, but maybe they’ll buy 90. Maybe they’ll buy 70. They typically always want control, and they typically want to have at least 70%. So I like that model. And if you don’t acquire 100% of the company, then you are leaving in the management who is already there.

Roland Frasier: Now, people say, “Yeah, but why would somebody sell their company and stay?” I mean, it happens all the time. And the reason is that they believe that with the resources that you’re going to bring as part of the acquisition that they will be able to have an exit later with their remaining 10%, 20%, 30%, that might be even greater than what they get on the initial acquisition when you buy control. So the story as an acquirer that you want to tell is, I mean, you want it to be true obviously, is that, “Hey, I’m coming in and I’m going to acquire control of this. And then we’re going to do some things to professionalize this business and package it for sale and then go through the process of finding a buyer. And we’re looking to have a significant increase in the value of the business on exit.”

Roland Frasier: And typically that’s at least a five X and hopefully it’s a seven or eight or more X on the business. So here’s, what’s cool, if I buy the business from you now and I buy 80% and you keep 20, but we five X the business. That means that you’ll get basically, the full value of the business that you’re selling today almost twice because that 20% multiplied by five equals 100. So that can be a significant and frequently bigger exit for you once we get this thing professionalized and ready for sale than it would be if you were just to sell the whole thing right now. So that’s why you should stay.

Roland Frasier: Now, how you should stay, might be in one of several ways, maybe existing… So I’ll just go through kind of a few scenarios. So you’ve got the founder CEO stays and they stay as an employee. The founder CEO stays as a minority owner, which is the scenario I talked about a minute ago. The founder CEO stays as a consultant and not an employee, but a consultant for some period of time under contract, then you get to, “Okay, well maybe that person isn’t going to stay. So who is the person who is currently running the company?” Because very often when a founder is thinking about selling the company, they’ve already got somebody else who’s running it. And they’ve kind of stepped away from the helm a little bit. So who is that person that’s running the company right now? That might be a general manager in a smaller company, or it might be a COO in a larger company.

Roland Frasier: And then, if I don’t have that person, I’m going to say, “Okay, well, who is number two, three or four down the line to the people who are running the company right now if they’re going to exit and leave, are those people who have the opportunity to step up into a position of running the company?” And so that gives me another group of people to look at. And then I can say, “Okay, well, If I can’t find those people then what about my network? Is there anybody that’s out there in my network?” If I can’t find anybody in my network that has experienced with that, then I’ll say maybe we should acquire or partner with a competitor because the competitor has the same skills.

Roland Frasier: So, then I can go to the competitor and say, “Hey, I’m in the process of acquiring this company. We’ve been a competitor of yours for the last 12 years and we’re looking to exit. And if we work together, we can build a company that’s stronger and going to exit for more money. I need an operator. How about if we do this, then I basically contribute my company. You contribute your company, you operate, I handle the exit process and we work together to do this.”

Roland Frasier: And then you can go from there to, I need to talk to a recruiter or a search firm. And then, I guess the worst possible case would be that you’re just running ads someplace. So there’s a lot of places to go to find those people that can run the company.

Luke Peters: Okay, cool. And Roland, you’re a founder or owner with DigitalMarketer and that is kind of an inherent advantage. I mean, you have, at least and what I want you to tell me if I’m right or wrong here, or maybe give me a different example, but so just so the audience knows, DigitalMarketer, Traffic & Conversion Summit, you guys started that and you, in the company have a lot of digital expertise. And it seems like you’re able to really leverage that on companies that are… they maybe have a good product or a service, but then, they don’t know how to rank or get eyeballs to the site and you guys can leverage that. Are there examples where you’ve purchased companies or invested in them and where that wasn’t an opportunity to provide upside and you had to just do it with other skill sets or the old fashioned way, how much of an advantage has it been that you have the DigitalMarketer as the framework?

Roland Frasier: It’s really funny because you would think that it would provide a tremendous advantage. And certainly, being good at marketing or sales is an advantage because that’s what rings the cash register. But the truth is, is that if you ask me or my business partners in DigitalMarketer to rank a page right now, we wouldn’t know how to do it. If you ask us to run a Facebook ad with any level of skill beyond being able to click the obvious button, we wouldn’t be able to do it. If you ask us to do really anything other than I guess writing copy, we’re all decent copywriters, we’re decent at creating offers.

Roland Frasier: But those aren’t the things that usually move the needle in terms of your skills, because those are readily available skills at any good digital marketing agency that’s out there. And it’s not the highest and best use of your time because to me, the thing that gives us the biggest advantage is, we’re good at strategy, and if I could only pick one skill to have to be successful in business, it would be to be good at strategy, because those technical skills are hireable at really defined, not expensive market rates. Even if you might say, “Well, a good CMO is going to cost me 120, 150 grand a year.” Okay, that’s not that much money in a company that’s generating seven figures plus in profit. And so, it really isn’t the advantage that you might think it is.

Luke Peters: That’s a great answer. Talk about strategy. So when you let’s say, you purchase a company or you now are getting involved, your first week, your first month, are you using any type of planning process that gets all the strategies, goals envisioned together? Curious if you have anything written down there, what you like to use.

Roland Frasier: Yeah, we do. In our company, we have a company called scalable.co. And we have a strategic system, it’s three primary components of strategy, each of them has multiple components that go with them. And so, we have a playbook that we run when we go into a company as to the things we’re going to address first, how we’re going to do each of the things, who are the right people to put in place, et cetera.

Luke Peters: And then is that you going in? Do you have the same team that goes into all the different companies or is it?

Roland Frasier: Yes.

Luke Peters: Oh, okay, cool. And what types of people are they, are they a marketer or a salesperson, a finance person or just, what’s the basic outline?

Roland Frasier: Yeah, it depends on the company. So, the one key thing that is consistent across every deal is the strategist and that’s going to be me or one of my partners. And so then we’ll go into the company and we’ll assess where are the opportunities and where are the weaknesses in the company, and that’ll determine who are we going to bring in, and DigitalMarketer since you mentioned is a great example. So when I came into DigitalMarketer several years ago, we didn’t have a really good salesperson. We didn’t have a good events person. We didn’t have a good sponsorship person. We didn’t have a good CEO at the time, other than the people that were there who didn’t want to stay in that position. We didn’t have a good finance person.

Roland Frasier: So I brought all of those people in through relationships that I already had and several of those people, seven years later, are still there today. And so as I go into, there’s a new company that I just met with today that I’ll be investing in and that will have some weaknesses and I will bring in people that I know. I know people who are good operators, people who are good marketers and people who are good finance people. And so, those are the three key categories that I would say that I have a pool of people who are well-versed and talented in those things and depending on what they’re doing at any given time, I’ll reach out and bring those people in. And the goal is that they don’t stay. Sometimes they do, like a few of the people at DigitalMarketer. Two of them in particular, decided that they wanted to stay for the full ride.

Roland Frasier: But usually, it’s to get to the point where we cannot just do this with a software company. So we brought in a temporary COO who is helping the company get its operations in order, and then they’ll be moving on. And part of their job is to find a COO who will be the permanent person for that position. That part depends, but the one consistent thing throughout everything is to me, a strategist.

Luke Peters: Yeah, okay. That’s super helpful. So let’s talk about metrics. Again, you’re able to run these… Obviously, you’re actively getting in there with the strategy, but what’s appealing for a lot of people here listening or on the sideline is, it’s almost in a passive way. You said, you buy the companies, you roll them up. I think you even talked about this, kind of like using your money to buy the S&P or equities you’re just buying businesses and it’s the same thing.

Roland Frasier: Yes.

Luke Peters: What metrics, if any, are there? Of course, everybody’s looking at a P&L balance sheet cash flow, but is there something special that you like to put together a dashboard or metrics or KPIs that you like to track your companies by?

Roland Frasier: Yeah. So we have a system for identifying what’s the overarching goal for this next quarter and what are the three things that are going to help us achieve that goal? And then, we identify different KPIs based on what our quarterly goal is. So the things that will drive… So you start with the goal then you go, what are the three pillars that will help us achieve this goal? Then you say, what are the metrics, the four key metrics, that will help us achieve these three pillars? And then what are the key initiatives, eight or nine of them, under each of those three key pillars. So that gives us quite a bit of things to focus on. And then the dashboard is malleable. And so it’s dynamic based on what are we after this quarter?

Roland Frasier: So, one quarter we may be focused on increasing MRR, monthly recurring revenue, transactions, the number of transactions that we do because we find that the leading indicator for other things that are good, it might be a reduction of the customer service hours in response time and then one of them might… It’s very often as the growth go on on revenue. But then the next quarter, it might be the total number of packages shipped and the total number of customers retained, so we’re working on churn.

Roland Frasier: And so, that does change. We get a daily dashboard with the report of whatever the metrics that are important to us, for the quarter to achieve our big goal for the quarter and what we call the big three. And then, that also becomes the basis for the weekly leadership meetings that we have of the people who are the heads of each division and typically, that’s five to seven people that are on the leadership team. And then each week, those people have a big three that drives them towards the attainment of each of the initiatives and pillars that are to achieve the big thing tracked by metrics.

Roland Frasier: And so in those meetings, we go over what’s going on with the metrics? Are we on, are we off? What’s the gap? How are we going to fix it? And then we have a kanban board that we use to track the movement of those key initiatives from ideation through completion. I hope that makes sense. I know that’s a lot. But that’s really the thing that drives us is, not just to randomly pick a static set of KPIs that we’re going to watch forever but to say the business is dynamic and our goals are dynamic on a quarterly basis. So, how do we decide what those are and then have KPIs that align with the attainment of those goals, and then have leadership focused on that and then track the progress of how we’re moving towards those over the quarter using the kanban board?

Luke Peters: No, that’s perfect. It makes sense. We do it in a different use and a different method, but it breaks down very similar to what you’re talking about. So, that’s perfect. Do you guys make infographic about that, that’d be kind of cool to have?

Roland Frasier: We do have one for scalable, which I think is launching next month.

Luke Peters: That’d be kind of cool to see that visually, but.

Roland Frasier: The thing is that we really, we’ve been doing this for a while and so we like to have it as close… it’s never perfect, but it’s close as perfect as possible before we say, “Hey, this is what we’re doing,” and share it with the world. We don’t want to give them something that we’re not using actively and all our businesses have tested quite a bit.

Luke Peters: I hear you. And for the audience, Roland just comes off as like he’s really a casual guy, mellow, having a great time, but I can tell you’re very driven and you’re very process-oriented. And I think that probably you joke around about your legal background and stuff, but you are really process-driven. A lot of business owners or investors are not. You seem to have a process for everything, like that book you had out.

Roland Frasier: Yeah, processing data, absolutely.

Luke Peters: Yeah, there we go. So anyways, you handed us out like 400 slides, I think I’m still trying to finish that thing. So I want to move on to a quick question on real estate but before I did, for the audience, we went through your philosophy on, why buying is better than building, what types of things you can buy. Talked a little bit about sectors and how to structure it and how to find people to run it, and talked about KPIs and a few other things. Before we leave that topic, was there anything else that I might’ve missed?

Roland Frasier: No, I think you hit on a lot of great stuff.

Luke Peters: All right, cool. So a lot of business owners also like real estate, maybe they own their building or maybe they own other real estate, there’s definitely some good tax deductions and depreciation advantages for some people in that area and I know you like real estate too. How do you compare the whole process of real estate investing versus buying a business? I ask this just because real estate at least it seems more passive, it often needs less time, I guess you could say it has maybe less risk especially of going to zero, but it can have similar returns. Of course, businesses obviously have the more exponential returns, maybe that’s the advantage you see in it or, I’d like to see your breakdown of how you look at the two different investments.

Roland Frasier: Yeah. They are similar the way that I do them and it kind of depends, because there’s lots of different ways to do each of these things. So if you’re thinking about investing passively in a business, then an exchange traded fund, the index fund is a great way to go because then you’re going to have a basket of stocks that you’re investing in. To me, that’s passive investing in business. And passive investing in real estate, might be that you invest in a real estate investment trust or fund or something like that that somebody else is doing or you’re buying a property and then you’re going to have a rental company handle the leasing of the property and you’re renting it out.

Roland Frasier: Although right now, I know lots of people that are doing that, that are having a heck of a time because their tenants aren’t required to pay by federal law, they can’t kick them out and I doubt they’ll ever collect on the rents because these people don’t have the money. They’re experiencing the challenges of the current time. So it’s kind of an interesting weakness in the model of people that thought they had their retirement set by having an apartment building or two or seven and right now, it’s how are they paying their mortgage when their tenants aren’t paying? So, I think that’s passive investing.

Roland Frasier: But the real estate investors that I know, more often are very active in the business and they are… Not that they have to work in it every day, but if they’re in the business of renting properties, they’ll typically go in, find a property that’s under market because it needs some work or it’s an area that is in the process of gentrification or something like that and they’ll invest, they’ll ideally buy under market. They have a maximum, allowable, rehab allowance.

Roland Frasier: So they’ll say, “I need to buy this at 20% or 30% off current markets because this is an easy number.” If market’s a million dollars for a home, in that market I need to buy it for 800,000 or 700,000 and then I’m going to spend no more than 100,000 or 150,000 to fix it up. So all in, I’m still in 90% of market so I could sell it and make a 10% profit over a period of say four to five months and then I’m going to either rent that out and have all of the wonderful benefits of income depreciation and equity appreciation and leverage or I’m going to just flip the thing and make money.

Roland Frasier: I know a lot of people that flip houses and I like flipping houses. I’m actually on the phone in a house right now that we just put carpet down and are in the process of selling. So that’s not exactly a passive business, it’s not a business that requires 100% of your time. And buying companies and fixing them up effectively, rehabbing companies and flipping them which is effectively what we do as well, that’s not completely passive because the business is the business of flipping. And that’s something that is a big thing for me that I think is an insight that once you get, it changes how you think about everything in terms of business.

Roland Frasier: And that is that, the businesses that I own, they are my product. So I’m in the business of selling businesses and I’m in the business of selling houses, because I do invest in real estate too. So I’m not in the business of selling whatever my businesses sell, that’s not my business that’s the business of the business. That’s the job to focus on or the person that has the job title in that business. And the same thing is true with real estate. I’m not in the business of renting out real estate properties even though I might have some properties that are rented, I’m in the business of looking at this portfolio of assets and saying, “How do I acquire more assets under market that are likely to be able to be sold at or over the market price that I acquire them at?”

Roland Frasier: That’s a huge mind shift as to what you should be focused on. So, I don’t care that the business sells coffee cups or wooden trays or lights or ice skates or whatever, I only care that the business has certain fundamentals in certain markets that are likely to achieve certain returns for me. And somebody else is going to be concerned about selling the thing the business sells, I’m going to be thinking about, where do I get investors? How do I find my buyers? What other businesses should I be acquiring to tack on to this? And that’s my focus. So I wouldn’t call myself passive, I would just say I’m not working in or on any of those businesses. I’m working above them as the owner, with them occupying a portfolio slot in the overall investment portfolio that I’ve got.

Luke Peters: That’s a great explanation. It’s truly like the investor instead of the operator, even though you get into the operations.

Roland Frasier: Yes. I mean, I think that to be a good investor, you got to know something about some part of the operations of the business, whatever your skill is, if it’s digital marketing, cool, you know enough about marketing to say, “Hey, it doesn’t seem like we’re getting any leads now, we need more of those.” But you don’t have to know, should I use a Google GTM code that targets people that have consumed 50% of a video to 75%? That’s not what we should be focused on, your way in the weeds on that. You need to be looking at the field from the sky, not down in the weeds.

Luke Peters: Wow. Well, that’s awesome. Hey, before I move off that topic though, I’m sure there’s reasons you like both of them. Do you favor one over other, real estate versus buying and acquiring businesses?

Roland Frasier: Not really, because I think businesses are really interesting because I like all of the levers that can be pulled. I think there are a lot more levers to pull for value with business and I think there’s a lot more upside in businesses than there is in real estate. But I love real estate because I like design and decor and moving walls around and I deal to both real estate and business, offers the ability to look for deals and find hidden value and create… both of them allow you to exercise your creative muscle. So, I don’t think you have to choose though, I mean, I think that the business stuff that we do allows us to do real estate stuff and the real estate stuff we do allows us to do business stuff. So, I think you can do both if you want to.

Luke Peters: For sure, 100%. And like you said, real estate is just fun.

Roland Frasier: It is, yeah, both of them.

Luke Peters: Well, listen, I really enjoyed having you on the podcast. Before I let you go, is there a favorite book that you like or maybe a business leader that you follow? Curious if you get inspiration from either one.

Roland Frasier: Yeah. I think in terms of books, just to give one that I think is really, really fantastic but doesn’t get referred a lot, there’s a great book called Black Box Thinking. And it was on Richard Branson’s, I interviewed him last year at our big Traffic & Conversion Summit event. And in prepping for the interview, I always look and see, find out as much as I can about somebody. And he had a list of like 63 books that were his favorite books of all time. And so I read most of them prior to the interview, and that one was really full of fresh thoughts and interesting things. So I would highly recommend that book. And then in terms of people that I find to be… if I was going to pick one super eye-opening, inspirational kind of person to follow that you can get lots of breakthroughs if you dig in, would be Charlie Munger who is Warren Buffett’s business partner at Berkshire Hathaway.

Luke Peters: Awesome. I have this, gosh what’s the book that he wrote?

Roland Frasier: Oh, Charlie’s Almanack?

Luke Peters: Yeah, I got to go through that, I have that at the house it’s pretty… I’ve paged through a little bit of it. Cool.

Roland Frasier: Yeah, great stuff.

Luke Peters: Well, listen, thanks again for being on the show. How can listeners find more about you or learn about you?

Roland Frasier: Sure. Thank you for having me, I really appreciate the opportunity to share. The best places if you’re a podcast person, I have a podcast called Business Lunch that is available on all the podcasty places. Also, I’ve got a business challenge that I’ve been doing, a five-day challenge on how to identify businesses to acquire for no money out of pocket. That’s one thing we didn’t talk about was, how do you acquire these businesses or pay for them? You don’t need a ton of money to do it. Most of the time, we’re acquiring businesses using the assets of the business itself. And that is a five-day challenge that’s available at getepicchallenge.com. And then I’m on social everywhere, /Roland Frasier.

Luke Peters: All right, cool. And we’ll put that in the show notes. And I’m a listener of the podcast, so definitely check it out, audience, Business Lunch. And we’ll put the link to the five-day challenge in there as well. And thanks again, Roland. I want to thank everybody else for listening to this episode of The Page One Podcast, sponsored by Retail Band. If you are seeking to improve your digital sales, Home Depot, Wayfair, any of those channels like Amazon and the other large channels, go ahead and find me on LinkedIn or email me at luke@retailband.com. And I hope you all enjoyed the interview today. Really appreciate reviews on iTunes. And hope you join us, for the next interview. Take care.

Speaker 1: Thanks for listening to The Page One Podcast with Luke Peters. If you enjoyed this episode, please help us out by leaving us a rating on iTunes. Want to double your online sales, check out www.retailband.com., and don’t forget to join us next week, with our next amazing guest.

Mentioned Book:

Black Box Thinking by Matthew Syed

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Episode References:

Contact Roland Faiser: LinkedIn

Contact Luke: luke@retailband.comLinkedIn 

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