Financial institutions are begging to give you money.
First, you’ll need a Top-Tier team of advisors, accountants and lawyers to get the financial institutions to give you the capital you need to close your deal. This article is the first of four that will cover some applications of Dan Peña's QLA (Quantum Leap Advantage) methodology for generational wealth creation – growth through acquisitions.
Dan Peña is known as the "Trillion Dollar Man," for creating, millions, 10s of millions, 100s of millions, billions, 10s of billions and 100s of billions of equity and value through his mentees and devotees (students and followers). Dan's methodology is based on actionable steps. Each step builds on top of the one that came before. Failure is clear and success is measurable. This series of articles will focus on just four parts of QLA.
PART 1: BUILD A TEAM – TRADE EQUITY. Don’t hire credentials; hire attitude. Lead by example, delegate responsibility, encourage action and pay your team well. You don't need to know how to do it all, but you need a team that does.
PART 2: SECURE ACCOUNTANTS AND LAWYERS – ON SUCCESS FEES. All large firms do delayed fees; everyone is paid on close. Offer a bonus on success and discount on busted deals. Only work with the best. Top 10 or Top 25 or Top 50.
PART 3: FIND A DEAL – IT'S A NUMBERS GAME. Contact and close acquisition candidates, even when they don’t want to sell. It's not a deal if the financials don't work; free cash flow must cover debt service. Always talk to the decision maker.
PART 4: FINANCE YOUR DEAL – INTERVIEW BANKS. If you are asking for money for today, it is too late, you are wasting your time. Practice, practice, practice. Everybody gets turned down for financing – even Dan Peña and Donald Trump.
Dan's thoughts on building a team:
"Directors are your first and most immediate requirement...
Select an experienced chairman first, an individual with an established reputation, though not necessarily in your own industry. Your chairman should be, to the fullest extent possible, an executive heavyweight, a highly experienced person...
The rest of your board positions should be filled with individuals from varying backgrounds who share one common quality. They all have more business and financial experience and acumen than you. Your board ideally should include a financial person, an accounting specialist, and one or two other individuals..."
Excerpts from Dan Peña's seminal book, Building Your Own Guthrie // Your First 100 Million
There has never been a time with more available capital.
The chairman and board of directors (your advisors) will NOT be involved in day to day operations. You should have about one meeting per year with the entire board. Although you may end up working closely, you should ask for and expect no more than 5 hours per week from non-executive directors.
Perception is reality. Your team adds credibility to your deal. Raising capital is not easy and without a team it is a lot harder. Dan says, "you cannot make a Quantum Leap if you don't share the wealth with your team and employees – be it cash, equity, options or warrants that are tangible rewards for performance and loyalty."
Several basis points of free founder's equity in exchange for time is very tempting. Set the expectation that no one is paid upfront, but if the deal supports it, everyone can be paid on close. Remember that 70% of something tangible is better than 100% of your idea on paper?
My first exposure to Dan Peña was a random clip from his appearance on the Joe Rogan Experience. I couldn't get enough and knew immediately that I wanted to learn directly from him. In May 2017 I reached out to Dan's "crack staff" to sign up for a seminar. Three month later I was standing in front of Guthrie Castle.
Several times a year a determined two dozen make their journeys to Scotland from around the world for a single week of intense training and immersion. Dan calls this the Quantum Leap Advantage Castle Seminar where he teaches generational wealth creation within a fraction of the time normally required.
The grounds of Guthrie Castle are immaculate and include: a nine hole golf course, snooker room, trophy room with animal heads, turrets, a library, a consecrated church, two gyms and eight guest houses. Those that are accepted into the week long seminar stay in the castle guest bedrooms or the quest houses nearby. My wife and I stayed in a small two story cottage with private access to an incredible walled garden (access otherwise restricted).
Everything in Guthrie runs like clockwork, though Dan complains that something breaks every day in a 450 year old castle. The staff serves every, multi-course meal, on queue, menus in advance. While we waited for dinner, butlers asked to refresh our drinks. Every few days, the grounds staff manicure the estate, gardens, and golf course.
How to secure Top-Tier directors for your Board.
Out of the 22 that attended the August 2017 QLA Castle Seminar, just 6 successfully completed the year long mentor program. Starting on the first week, a steady drip of dropouts and expulsions continued through to the very last Zoom call. I barely managed to make it through, finishing with two of three strike. Although I completed the program, I am sure I would not have made it if Dan had not cancelled (no less than) a third of all weekly reports and monthly calls.
* I believe Dan changed the mentor program in 2019, from 1 year to 90 days.
I'm not initiative challenged and I don't need to be externally motivated. This definitely made certain steps in the program easier to complete. Be it because I was immersed in QLA methodology, Dan's formal mentorship or my experience running corporate on-boarding teams, I turned the process into a sales funnel and took advantage of my marketing background.
Truth be told – the team building step was and remains the easiest in the process. However, it was not until I completed the year long program that I realize that while the bulk of QLA devotees fail before getting started, the bulk of Castle Seminar attendees fail to get past the step that follows.
I don't personally know Dan's rockstars. I don't know what or how they did it. I don't know what they said or what terms they negotiated. This is how I did it... how I put together my first team of directors in the Fall of 2017:
* Since the August 2017 Seminar, Dan has added additional "NOTES, LETTERS, SCRIPTS, AUDIO/VISUAL AIDS AND BUSINESS PLANS OF PREVIOUS PARTICIPANTS."
STEP 1: CONNECT WITH MANY CANDIDATES
LinkedIn is by far the best available tool for building a team of professionals. As a social network it is unlike all others because of the quantity of people posting or searching for opportunities. You may be surprised by how many qualified individuals are out there. On the other hand, end up taking weeks to build up your network.
Your first step in building a team is to expand your network and connect with candidates.
Seeking a veteran legal director from a Top-10 international law firm? Does location matter for this role (ie. you're in Chicago and he's in LA)? Executive or non-executive role? Retired, consulting, full-time?
You're going to send a connection request to everyone with partner or director in their job title, past, current, retired and not. As your network grows you'll see more and more candidates. Invite everyone you can; the connect request button is often hidden in the "more" dropdown.
You may need to start at the bottom, connect with associates and work your way up to managing partners. You may need to connect with your target's network or everyone in their office before they accept your request.
Quality does matter, but quantity is also important. An effective strategy is to focus on quantity until 500 connections are reached, then focus on quality. In the long run, it doesn't matter. Connect, Connect, Connect.
HOT TIP: Add a custom message to each connection request and you'll get a notification+message each time someone accepts.
Can't find who you're looking for? Try Premium / Paid LinkedIn / 30 Day Trial. [This is not an ad, but I'll take the commission – contact me]
STEP 2: SEND OUT MANY MESSAGES
If you followed Step 1 you're going to have no shortage of phenomenal connections. Quickly check if there is a general match for what you're looking for and send them a "short" message with just a few lines: (1) mention that you are reaching out regarding a potential directorship; (2) add a sentence about your your exceptional idea; (3) offer to share more info via email.
Don't skip this step and cold email candidates more info without their consent. This will backfire in virtually all situations. You should message, followup as needed and continue to add connections. Your goal is to send out lots of more-info emails. Send, send, send.
Focus on quantity. At this stage neither side has committed to anything. If you realize that you've made progress with the wrong candidates say something along the lines of, "we've made a decision to go in another direction" and thank them for their time or interest.
STEP 3: SEND 10+ "MORE-INFO" EMAILS (per position)
If a 'qualified candidate' agrees to connect with you and agrees to receive an email with more info, you have about a 50/50 chance of getting a phone call. Don't screw this step up. All you have to do is send a 'brief' email explaining your idea, offer to schedule a call to discuss and attach a document outlining your business idea (attach either a 1-2 page 'executive summary' or 5-10 slide 'executive deck'.
State that you "see a tremendous opportunity" with an 'exit' on the horizon. Mention an industry specific shift or paradigm. Include your objective (to build a team) and your role (can't help you here). Mention that the attached document will provide more details. Close by offering to schedule a call to discuss further.
STEP 4: SPEAK WITH 3+ CANDIDATES (per position)
Be it over the phone, video or in-person, you are not going to convince anyone of repute or secure anyone that will add value via text, chat, or email. No heavy hitter will risk their 20, 30 or 40 years track record if s/he does not hear your idea from your mouth. Top-Tier candidates are effective professionals, usually with significant experience interacting with peers. In other words, they know how to play well with others and move towards their own interests.
This step is your sales pitch. A phone call is the easiest path and an in-person meeting can be the most effective. Either way – script and practice, practice, practice.
HOT TIP: Whether you are in a high rise office or in your basement, do not forget you are conducting the interview.
Take the lead during the call. Start by thank them for jumping on and confirm that the "additional materials" you sent in advance were reviewed. Then go through the call's agenda: (1) about yourself and business idea; (2) about their backgrounds; (3) questions for you. If you do everything correctly, just about any director will say the magic words, “how can I add value?” or "how can I help?"
HOT TIP: Use your script, take notes and STFU and listen!!!
Thank them for taking the time to speak with you. Inform them that you'll follow up within the next two weeks and offer to be available for additional questions.
STEP 5: MAKE DECISIONS and NOTIFY EVERYONE
There's never an easy time to make a hard decision. If made it this far by following the steps, at least, you'll have great options to chose from. These numbers are of course approximates, but talking to three candidates (for the same position) will net you at least one candidate that will be available and qualified.
HOT TIP: Don't wait longer than needed between steps. Send out more info and schedule calls as soon as possible. This is a first-come, first-served sales funnel.
After you talked to several candidates, compare and make decisions. Start by sending your top candidates emails offering them positions. If they turn you down and there were no misunderstandings, move to your runner-up or continue the search. After all the positions are filled, send the remaining candidates emails letting them know you went in another direction, but would love to stay in contact and potentially work together in the future.
HOT TIP: Always keep the door open and don't burn any bridges you can avoid. In case your top pick doesn't work out, you should have backups.
Part two of four will cover how to secure Top-Tier accountants and lawyers on success fees – so you don't have to pay them out of pocket before you close your first deal.
ADDITIONAL RESOURCES: SCRIPTS 1: BOARD OF DIRECTORS IN 30 DAYS
High Momentum - High Performance - Serial Entrepreneur
Oleg Melikhov has 15 years of Product Architecture, Product Design and Product Development experience. His professional career was built on a foundation of Entrepreneurship, Marketing, Advertising, Social Media, Search Engine Optimization, Digital Content Distribution and Graphic Design. He currently holds leaderships roles with a focus on deals, financing and strategy.
Oleg is a serial entrepreneur that has continued to learn from 20 years of success and failure. After launching his first business in his early teens, he launched and participated in dozens of technology startup companies. One of his eye-opening professional learning experiences was working with thousands of nonprofit organizations around the United States in an effort amplify their reach through digital channels.
A graduate of University of Illinois at Chicago (UIC) with dual degrees in Marketing and Entrepreneurship, Oleg prefers hands on experience over traditional academia. Additionally, he completed a non-degree International Business program at Sophia University (上智大学) in Tokyo, Japan.
Contact via LinkedIn: https://www.linkedin.com/in/olegmelikhov/