Momentum Podcast: 658
Two Lessons That Cost Me Control of My Business
by Alex Charfen
Sometimes when you hear somebody share their story of success with you, it can sound unbelievable or unobtainable. The reason is because usually they're telling you the highlights of their story and they don't share the challenging details with you. As entrepreneurs, it's important that we're not only aware of the challenging details of our stories, but that we're also radically transparent about them. That's how we learn. It's how the people around us learn. In this episode of the Momentum podcast, alex is going to get really vulnerable about two lessons that cost him control of his business. He actually calls them some of his biggest business mistakes.
Sometimes when I share my story with people, it sounds unbelievable. The reason is, when you are telling someone your background, you only hit the highlights. most people don't share the challenging details. As entrepreneurs, it's important that not only we are aware of the challenging details of our stories, but that we are also radically transparent about them. That's how we learn, and the people around us learn.
There are a lot of entrepreneurs out there that are afraid to share the challenging part of their background, they don't realize, is if they don't they miss sharing some of the most important lessons you’ve learned. Our biggest challenges, typically result in our biggest periods of learning and growth.
This is the mistake that drove me to learn how to use attorneys and the law to keep me safe and business.
Full Audio Transcript
Alex Charfen: This is the Momentum podcast.
Speaker 2: Sometimes when you hear somebody share their story of success with you, it can sound unbelievable or unobtainable. The reason is because usually they're telling you the highlights of their story and they don't share the challenging details with you. As entrepreneurs, it's important that we're not only aware of the challenging details of our stories, but that we're also radically transparent about them. That's how we learn. It's how the people around us learn. In this episode of the Momentum podcast, alex is going to get really vulnerable about two lessons that cost him control of his business. He actually calls them some of his biggest business mistakes.
Alex Charfen: I'm Alex Charfen and this is the Momentum podcast. Made for empire builders, game changers, trailblazers, shot takers, record breakers, world makers, and creators of all kinds. Those among us who can't turn it off and don't know why anyone would want to. We challenge complacency, destroy apathy, and we are obsessed with creating momentum so we can roll over bureaucracy and make our greatest contribution.
Sure, we pay attention to their rules, but only so that we can bend them, break them, then rewrite them around our own will. We don't accept our destiny. We define it. We don't understand defeat because you only lose if you stop. And we don't know how. While the rest of the world strives for average and clings desperately to the status quo, we are the minority, the few who are willing to hallucinate there could be a better future. And instead of just daydreaming of what could be, we endure the vulnerability and exposure it takes to make it real.
We are the evolutionary hunters, clearly the most important people in the world because entrepreneurs are the only source of consistent, positive human evolution. And we always will be.
When I was in my twenties, I made a mistake that costs me control of my business. And it was one of the most challenging things I've ever been through. I want to share the details with you, because I think it's, in the entrepreneurial world today, I think a lot of entrepreneurs are very excited to share their successes and the things that they know, but a lot of us don't share our mistakes and the challenges and where were the places that we should have done one thing, but we did the wrong thing and how did it end up?
And yeah, the reason I'm doing this video and the reason that I want to share challenging issues as an entrepreneur is that when someone works with me, when someone works with my company, what they're buying, what they're paying for, is all the mistakes I've made and hopefully they won't have to make them, because as entrepreneurs we learn most when we make a massive mistake. We learn most when we have a challenge. Hey Tanya, hey Ariel.
We learn most when we mess something up. And you know, when I look at most of the content today that we use in our company, because everything we teach, we use, almost all of it has been put in place in some way to prevent a mistake from happening again, prevent a challenge from happening again, prevent something from coming up again. And you know, there's a lot going on in the online marketing world today. And in the past few weeks due to an issue we had with this guy named Dan Lok, where he almost page for page, not duplicated, but used almost the exact same look and feel, almost the exact same graph chart, everything that we have on Billionaire Code in one of his pieces.
So I've looked him up, but I really wanted to understand more of what was going on. And man, his background's very odd and strange. And it looks like there hasn't been a lot of mistakes, but then there has, and you know, I want to put like my real background out there so that people understand when they get involved with us, you know, what are they really getting? What are you really getting? And so this is one of the biggest business mistakes I've made.
So let me take you back to this period in my life. So I was in my mid twenties and I had been working in a capacity as a consultant for, since I was starting right around 21, late 21, almost 22. And what had originally happened was I started with one company where I was almost like a subcontractor for another company. When I first started my business, another guy had a contract. I was helping him work the contract in Florida. And then we worked together for a few years and we did some incredible things.
We worked with TDK Media, TDK Digital Cameras. We worked with SanDisk. So the first digital cameras, the first ATOM Multimedia, and nobody at Magnetic Media, I'm going to date myself like crazy, but we sold the first DLT tapes, the first Iomega zip drive cartridges, the old drives, and then also we sold the first camera memory. It was an incredible time. And then we worked together for a couple of years and things didn't work out. The more we made, the more he adjusted my percentage down. And so I ended up leaving him.
I took on a partner, this guy named Joe, and we started a similar company because by that time I knew enough people that I actually was able to take some of the business that I had at his business with me and Joe came on and he had relationships at Logitech. And so we were able to go out and get a contract with Logitech for all of Latin America.
We then got targets for all of Latin America. We got some really incredible, incredible opportunities. And our business was exploding. It was growing like crazy. And we were doing pretty well. And along came this competitor that we had, his name was Ken and made an offer that we would buy in. So he had a company that was larger than ours. He actually had offices throughout Latin America. He had a bunch of people. He had some serious contracts, people he was working with, like what he had was much better than what we had at the time.
And so we got into a negotiation to do this buy-in and become part of his business and kind of merge our companies. And here's what ended up happening. Joe and I didn't have experience to understand what questions we should ask and what we should look at. We didn't have a lot of money. So we tried to do everything using as little legal help as possible. And man, Ken was way more experienced than we were. And so he kind of led the negotiations.
And I remember he told us to bring a balance sheet and he told us really specific things, but he didn't tell us to bring a profit and loss statement. And he didn't tell us to bring, he told us to bring all the contracts for all the people we represented and how much money we were making. But we didn't, Joe and I didn't know the right questions to ask Ken. We didn't understand how to drive a negotiation to buy a business. He was somewhat difficult to deal with.
As I talk about this now, I'm like, wow, I wish I could go back and talk to my younger self. I was so ambitious and so excited to have a bigger company and a bigger team and kind of leapfrog a little bit that we didn't get it right help. We didn't ask the right questions. And here's what happened.
Joe and I thought we were buying into a much larger company that was doing much better and we never verified any of that. I was young and inexperienced and made serious mistakes in this process. And we did look at financial documents, but it was kind of hidden veiled how the company we were buying into actually wasn't making money.
And when we merged Joe and I had a partnership, so we merged with Ken, so our partnership shares were worth less than Ken's individually. So I lost control of my company individually. I had a partner, but now, now there was another person who had more of a share than we did. And it was a disaster. It was absolutely a disaster. When I look back at that time now, it's hard to even talk about. But when I look back at that time, now I wanted to grow and I wanted to be bigger and I wanted to do more.
I had just read a book where it had talked about giving up control in order to grow. And I was like, oh, maybe this is one of those ways that you do this. You know, I'm going to take on a partner who kind of knows more than we do and is going to run the company and make the decisions. And then, I'll learn a lot more, it'll go a lot faster. And it was totally disastrous.
We ended up doing the deal and within a month, Ken was saying how we weren't making money and how we needed to go out and make more money and how we might have to more money in and we'd already bought in, and how we might have to put more money in to make payroll. And this was like immediate. This was a huge mistake. So understand I'm thinking back, I'm like, how did I and make the mistakes so huge?
Well, at the time I'm Kim was like a well-known person in our industry and had a huge reputation and had been in business for like 10 or 12 years. And so we didn't do our due diligence. We didn't look under the covers. We didn't ask enough questions. We didn't involve enough attorneys. We didn't do what we should've done.
And so what that did was it sent me on this quest to understand contracts like crazy, because here's what happened. We started working together. We ended up finding out how terrible everything was. Joe and I had to scramble to figure something out, to help the company grow within about three or four months. Ken and Joe were really not getting along. In the moment. I thought it was like a personality, conflict looking back, I feel like it was on purpose. Ken was just pushing him out and it was brutal to live through.
And I remember Joe left the company and because Ken had written the agreements that we had, and he used his attorney and we did use an attorney, but we didn't pay a lot. We didn't get somebody who understood business strategy. We just got somebody to review the contract. And they said, yeah, it's a valid contract. You know, there's a couple of places you might try to negotiate here. So we tried to negotiate, but we didn't hire an attorney who was a business strategist.
I'll talk about that in just a second, the type of attorney you always want to have, believe me, lesson learned, now these days, I know the law. Like sometimes I'm setting strategy before our attorney set strategy or I'm offering alternative strategies to our attorneys. And when we finally use mine, in some cases, things advanced quickly, and we get things done faster because after this happened to me, with Ken, I became paranoid about legal issues and contracts and understanding what I was getting into and how I was going to be involved.
And these days, I mean, like I said, I know how to use attorneys incredibly well, but this was a massive issue. And part of the reason I'm sharing this is that these days I see entrepreneurs all over the place getting into partnerships and getting out of partnerships. But entrepreneurs are quick to jump into partnerships fast. I've seen people form partnerships at weekend events. But not, we're going to joint venture and try something together. No, we're going to combine our businesses this weekend and starting Monday working together. You know, my strong suggestion would be to slow that down and really think through what you're doing, because partnerships are challenging.
That one was incredibly challenging. Like I said, Joe ended up getting, getting kind of pushed out of the company. He left, he quit, but I feel like he was kind of pushed out of the company or that's what it felt like at the time. I ended up working with Ken and selling a ton and we did very well. And we actually had an events business that became the largest events business in the retail and distribution space in Latin America. It was huge. We did really well in the rep firm.
And then Ken went to an EO meeting. I think it was EO. And somebody there talked about stepping out of the role of CEO and hiring a CEO. This was my real life experience. Ken hired the guys who wrote the book, Topgrading, Geoff and Brad Smart. They came in, did a 360 evaluation on Ken. And I was hanging out here as a partner, but did a 360 evaluation on Ken. And they told him that what they needed or what he needed was somebody more experienced than me to run the company. And so Ken hired them to go find somebody who replaced me, this guy named Hank, we'll just leave it at hank.
He's removed us from his LinkedIn and everything, but he came in and in nine months, maybe 10 months, tanked the company. It ended up no, not tank the company. In nine months, I left, I took a part of the company and that's what I ended up really growing to where I hit huge numbers. And he ended up bankrupt running the company about nine months after I left the business.
And so it was a disaster, it was a colossal disaster. But in retrospect, working with somebody like Ken, who I got involved with initially, I realized I needed to learn a lot better than he did because he used it in a way when we were getting into our contract and into our agreement where there was some manipulation, at least I felt like there was. And so I wanted to make sure that never happened to me again. And so the other lesson that I learned besides careful with business partners is here's the type of attorney you always want as an entrepreneur. Unless you're doing a patent. Well, no. You know what? I was going to say another lesson then I'm like, nope, no, no, it's still the same. Here's what you want. Whenever you are in a legal issue, you want an attorney who is a strategist. You don't want an attorney who doesn't understand strategy or won't discuss strategy with you. And that means it's an attorney who looks at different sides of a case and different sides of an issue, that doesn't just look at the contract, that asks you about the business behind the contract. What is it? What is it imposing? How does it really work? You want an attorney who's a strategist. I've used the same attorney, well, Kenny and I have a legal team, but one of the ones that we call most often with contract issues and business issues, we worked with him since 2007 and he is a total strategist. He will jump on the phone with us for a half hour to an hour just to answer strategy questions. And then we turn over legal work to him, but he is a strategist first. And so that's why we work with him. And so, as an entrepreneur, one of the places you shouldn't skimp is legal advice and it's one place you do not want to DIY. Find an attorney you can trust that is a strategist, that is willing to spend and talk to you about what's going on and will give you a fair quote on what things are going to cost. We usually get a price up front from the one we work with, or at least a really close estimate and use attorneys because had I had an attorney back when I was in my twenties, I never would have gotten into that deal. We were kind of on a roll in the business we had, it probably would have been a completely different outcome. You know, at the end of the day, I wouldn't go back and change anything because I ended up here and I'm married to an incredible woman and I've got great kids and I love the business that I have today, but there's a total lesson learned there. And today I would never make that mistake again. In fact, when we get into the legal issues, a lot of the times, the first few interactions, I handle them myself. I don't even hire an attorney because we don't need to. We've been through so many of them and this has become an area of obsession. You know, I'm thinking I'm like a lot of entrepreneurs where when I was in school, when teachers would say, you need to pay attention to this, or you need to apply yourself here, I always had trouble with pay attention and apply yourself. But when somethings gets interesting to me or I feel like I need it to get to where I want to go, I don't need to pay attention or apply myself. I just know how to absorb a ton of information and I go down rabbit holes like crazy. And I've done that in the legal space with the businesses that I've had. And so, this is one of the most important lessons I've learned is hire an attorney. Who's a strategist, do not skimp on legal advice and be really crazy careful who you're getting into a partnership with and have, if you've never done it before, find someone who can advise you, who's done it a bunch of times and get their advice and make sure they're looking at the deal with you. If Joe and I had done that, we would've never done this deal and things would have turned out different. By the way, if you are interested in working with an organization that can help you with the process, structure and routine to grow your business, plus being a community where you will avoid making mistakes like the one that I just shared, you can go to BillionaireCode.com, answer a few questions from my team and jump on a call with one of our coaches. We don't have salespeople. Everybody you'll talk to is a coach. We have a negative pressure sales system. When you call in, you actually get on a consultation call. They will ask you a few questions about your business. And then go through a process so that we can understand where you really need help and then share with you whether we can help you there and it is the most straightforward call you'll ever be on. So if you're in a place where you want clarity on how to move forward, you want to be able, you want to understand with confidence, what you should be doing next in your business. You want to be able to start getting the help you need, build a team and move into a place where you're not doing everything yourself. And you're actually growing with momentum, go to BillionaireCode.com, connect with a member of my team. And I appreciate everybody. Thanks.