Latest / Exit Algorithms / $300M Raised, Capital Stacks & Why Your Business Is an Asset Not a Baby | Tyrus Shivers (#48)
Transcript
- speaker-0: Welcome to exit algorithms, the podcast where we decode what it really takes to unlock growth, streamline operations, and prepare your business for a high value exit. I'm your host Pete Vera. And today I'm excited to bring on Tyrus Shivers as my guest. He's an air force veteran, serial entrepreneur, and founder of legacy wealth capital group, where he's already helped founders raise over $300 million in growth capital. There's a lot more to his intro, but I'll let him tell the story himself. Tyrus, welcome to the show. speaker-1: Thanks Pete, glad to be here. speaker-0: Yeah, excited to have you. I was getting pumped up that I was reviewing topics today. Do you mind, ⁓ we start off? ⁓ you share your business journey and what led you to Legacy Wealth? speaker-1: Yeah, absolutely. So I like to tell everybody that I'm going to give you the Campbell's soup version, just the condensed in the can really quick to warm up because it's extensive and I've done a lot over the years, but I will fast forward all the way to when I was medically retired from the Air Force in 2009, I went into government contracting. And so in government contracting space, I was working through system administration, system integration, engineering, all of that stuff. from a clear intelligence community perspective. But what I realized, Pete, was even though I made a lot of money as a government contractor, there wasn't generational wealth into that. And so at that point, I started looking at, ⁓ or what can I do? And around 2014, that when there was a I would a real estate hype started coming back with flipping, wholesaling. And those were the things and I'm like, I don't want to really get in the wholesale. It's a lot of work. You know, you got to do a lot to get that moving. And I was trying to figure out what business can I get into with the least amount of money because that's what they were preaching. No money out of your pocket. And that's what we love to hear. something that I could build into a real business and my mentor at the time was like property management. Owners pay for the properties. They pay for the ⁓ maintenance, they get you find a tenant, you get paid off of that, then you get a percentage every month off of the rent. No brainer. So he taught me how to put that business into play, really build systems around it. And from 2014 to about 18 months later, 2015 ish middle 2015, I went from zero to over 220 units, about a million in revenue, 1.2. And from there, I just continued to expand that business. mean, from construction, contracting work, I got all the licenses. And then around 2018, 2019, I was like, I'm imploding. 30 projects going on for other people contracting, doing my own flips, then managing this company with a small virtual team. Things start sliding through the cracks. As business owners, when we divide that attention and lose focus, then we make mistakes. so around 2020, right before COVID, I started to shut that business down, but, and we'll talk about exiting later. I didn't exit properly because I didn't know, but I lost over 200 grand moving into that. People wondered how, number one, I built a business so large, so quickly, and it was systems. So that's what I moved into coaching, consulting, running more of a... management consulting company and left property management alone, which led me into people scale, grow courses, grow events, which led me to two venture capitalists who were teaching about capital raising. And once I saw what they were teaching, I didn't want to just help them scale a course. I wanted to build a business. They took a company public about years ago, a telecommunications company. I said, I want to do that. I want to get into private equity, venture capital. And that's what Berkley legacy wealth capital group. speaker-0: Got it. Wow, yeah, that's awesome. Exciting. That's great you were able to do something with it. A lot of people try like that, no down, ⁓ and don't succeed, right? So it's telling that you ⁓ stuck it and got a of experience. speaker-1: Yeah, for sure. speaker-0: Yeah, I saw also you worked as a GM under Eric Thomas, that right? I was curious about that. what was that like? Any big takeaways ⁓ closely with him? speaker-1: ⁓ I love it. E, and for the audience that don't know, Thomas, ET, the hip hop preacher ⁓ I would call him the number one motivational speaker in the world. And so when you have Tony Robbins, you have Eric Thomas, you have Les Brown in that ⁓ of individuals. Working with E was, I was running all of his operations for all of his companies and organizations. And what people don't know is, he is not just a great speaker and speaking is the business. are more businesses underneath that umbrella. So I managed them all day to day. What I learned with working with Eric mostly was watching a person that actually operates and does what they preach. So getting up at three o'clock in the morning, first, being relentless drive and motivation and getting what you're doing. So from a personal development, it really helped me see to take advantage of every opportunity. He used to always say, advantage, take opportunity, or take advantage of the opportunity in a lifetime, in the lifetime of the opportunity, meaning don't wait, don't hesitate, get it done. And so working closely with him, I learned how to move fast, having ideas, always wanting to launch the next product, the next funnel, the next event, and then connecting to a lot of people through his connections, I was able to connect with operating operations team from Grant Cardone, Tony Robbins, ⁓ of the influencer at the high end level. was able to build with their teams and see what they did to build these massive speaker-0: Yeah, wow. Yeah, what an incredible opportunity. Yeah, just networking and then also imagine, you know, your mindset takeaways probably will ⁓ be to carry with you rest of your life, right? speaker-1: for sure. speaker-0: Yeah, it's exciting. So, okay, so when you work with a business, what's maybe some of the first things you focus on identify like, are they stuck? Why can't they get past a certain threshold, say, you know, 10 million revenue or whatever it is for that business? speaker-1: Absolutely. So every time I talk to a business owner, which I talk to business owners every single day, I look at one, their vision. A lot of times Pete business owners stay stuck because they don't have a large enough vision. They haven't created a vision for their business beyond, I just need to pay the next set of bills I just want to take an extra vacation a year. So they don't have a hundred million dollar business owner mindset. They still have an operator mindset. So one of the very first things I talk to businesses about is what is your end game? What does exit look like? I never thought about exit. Okay, let's start talking about that. What is your vision? And then most businesses that talk to me have already filled out some kind of qualification form. So I will know if they have productized services or products, if they have sales and marketing teams, if they have hired people. So with that, I know exactly where the bottlenecks are. Most of the time it starts with vision, then it moves into I don't have enough people or capacity, or I don't have enough funds to invest in these things, which rolls me back to, and I believe, and I've had this debate with everybody, capital is the root of all issues in business. I just believe that. Now we can have a lot of symptoms, but all those symptoms usually get solved with capital. speaker-0: Mmm, boils down to that at the end of the day. Interesting. Okay. Yeah, so what's common issue you see ⁓ with to capital, especially in that ⁓ small size? speaker-1: Yeah. Let's talk about everything that everybody's talking about today, AI. speaker-0: Sure. speaker-1: Let's get AI into the business. You need to make sure you're implementing AI into your business. AI can do your systems, your processes, everything, replace all these people. Well, in order to get AI into your business, you have to be able to afford to pay for your AI tools, whatever they are, from Claude, ChatGBT, to any of the others that have been built for these purposes. Most small business owners don't have the capital to afford to pay consistently. through AI and when you're a power user, you know that the tokens run out very quickly at cloud and it can get very expensive if you're really trying to do these things you say you want to do to revolutionize your business. So again, we come back to capital. A lot of times I see that the owner is the bottleneck. So they need to hire their number two, a COO, even at a fractional perspective, can't afford to do that. Or I talked to an owner today, she was getting ready to expand. but she would need to order all the materials ahead of time to build it for a large Well, the contract is not paying you upfront, they're paying you on delivery. So you got to front that money to be able to ⁓ and get paid. She doesn't have the money to front it. So again, capital to buy the materials. So everything that I see in businesses when they tell me their problem, marketing, ⁓ leads, well, run paid ads, you'll generate leads. But you gotta pay for marketing. You gotta pay an agency. That's where it comes back to cap. speaker-0: Got it. Thank you. Yeah, those are great examples. I love that perspective. Very unique. That's awesome. Yeah, I read also you ⁓ a specific kind of framework that you use, right? LBOS. Could you talk a little bit about what that is? speaker-1: So Elbos is a legacy business operating system. And when I went through a lot of operating systems, I'm a fan of EOS scaling up, strategic coach with Dan Sullivan. So I've been around the operating business systems in the world. All of them have their uses and purposes. What I found was most of them, 98 % of them don't cover capital at all. It's all about putting an operating system into the business. their specific way of setting goals and tracking goals and bringing a team together. But none of them talk about financial and governance and documentation and really building the framework of the business from an exit perspective. How do you build this business from day one to prepare to exit? So the legacy business operating system takes all of the information and data that I've learned from working with thousands of businesses and being in other programs and adding a capital layer. How do you raise capital? How do you talk to investors? How do you make sure your business is structured to do so properly? Can you even say, I'm going to give shares? prepared to go public. I'm ⁓ Y, and Z. Most can't because what do they do? They start an LLC. LLCs have limitations. And so we go through ⁓ of that part in the Elba system. And it also codifies all of my experience from losing. As I mentioned, I lost over 200 grand in real estate. I shut down a property management business that was profitable. I didn't sell it. I didn't sell the accounts to another property manager. I didn't try to exit it. I didn't know so I just closed it. How many businesses are closing every single day that are profitable that can sell? because they don't know. So those are the things that we cover in Elbos. speaker-0: Yeah, powerful. I love that. let's talk a little more about ⁓ strategy. When does it make sense for a business to, well, to take out capital and then how would they choose ⁓ between you know, ⁓ other types sources of capital? Like, how do you recommend and triage that situation? speaker-1: Yeah. So I'm always going to tell people that whatever I say is illegal financial advice, go get an attorney license, financial professional, CPA to help kind of structure this. But if Tyrus was doing it for his businesses, which he is, this is the way I create a capital stack. All businesses from day one, Pete, need a capital stack. So we need to start thinking about capital day one. And we really do. We just don't say it. Our sense of capital in day one is bootstrapping. I'm going to put my own money into the business. That's a capital stack. When I look at a capital stack, I think about number one, bootstrapping. How much of my own money skin in the game am I'm going to invest in this business? Number two, are there friends and family who want to support me? who believe in my vision that I know personally. Number three, I start looking at from an investment perspective, angel investors that may want to come in. And this goes back to talking to your attorney, your CPA, depending on how your business is structured, what is the instrument that you're going to use to raise this capital or what is the security that's going to close and be secured against the money you receive. So you need to know that. After you move from angels, then we start talking about speaker-0: Yeah. speaker-1: Reg D506, crowdfunding with a regulation CF. Those are ways you can raise capital from ⁓ audiences. So let's talk a Reg CF. A Reg CF, you can raise capital, $5 million ⁓ year from a creditor and non-accredited investor using general solicitation. You have to file what's called a form C with the SEC and you have to use a broker dealer or FINRA register portal to facilitate that fundraise. But it's a marketing play at that. You just pump a lot of marketing into a great story and you can bring people in to support you. I would rather spend 150,000 and raise 5 million than to bootstrap my way and never be able to get off the ground for what I want to do. So ⁓ there, we can look at adding banks and loans and credit. All these are pieces of your capital stack. What we hear the most are incubators and accelerators, they talk about access to capital, but what they mean is structuring your business so you can go get a bank loan or go get a credit card. Yes, but all businesses are in position to receive loans because they have more stringent qualifications. And a lot of times you just fall through the gap. So then we look at capital raising from investors. And I will say this last thing and I'll cut it. Capital raising from investors is different from going to a straight venture capital firm. Because when we talk about capital raising, the mind of the business owner is, I'll go to a VC firm and they'll take 30 % of my business. Not necessarily. You can raise capital just like they raise capital if you structure it correctly. speaker-0: really good insight there. Yeah, I think that's a lot of fear of business owners is not really wanting to give up equity and control over their over their operation. When does it make sense, you know, long term to to go that that route either, you know, selling to a P P firm strategic buyer or even doing an IPO? speaker-1: Yeah, it goes back to vision. What is the extra strategy for the company? How big do you want to be? Because if we're talking 100 million, 200 million plus, you're going public. If you want to be a billion dollar company, at some point you're going to enter the public markets. If you are a 10, 20, 30, 40, 50 million, you may want to stay private. But to grow and scale, you're going to take on, it's easier to grow when you take on capital because it accelerates through acquisition. So that's a big thing. Now, a lot of people are coming out talking about entrepreneurship through acquisition, becoming a searcher. You have your, I would say, influencers in this space, Roland Frazier, Cody Sanchez, and a few others that are out there that are preaching. Don't start a business, buy a business. Well, people have been doing that forever. That's how Amazon grew. It's how all of your Fortune 500 hundred companies have grown, they don't grow by just building customer bases. They grow through acquisition. So it goes back to how far do you want to go as the business owner? Then you can start mapping that strategic plan. Am I going to acquire my way through? Am I going to go public and use that event to capital and then grow through that way? ⁓ am I going to structure my business to be valuable? to a private equity firm and sale. speaker-0: Mm, okay. Right, so it all comes down to vision and planning, kind of from the end, start thinking with the end in mind. speaker-1: Exactly. And we hear that all the time. And every day a business owner just thinks with the next day in mind, what do I got to get done today? What's on fire today? And they never look up. That's why less than 5 % of businesses ever reached $10 million in revenue of the 33 million small businesses that we have in the U.S. ⁓ speaker-0: Yeah. Wow. Yeah, it definitely, ⁓ it doesn't come natural to people, especially when, you know, they've spent years of hit nose to the ground and figure out how to make this business keep on, keep a, stay afloat. Right. speaker-1: And we got to get away from that Pete. We got to get away from struggle business. I'm just trying to keep my business afloat. I'm just trying to make sure I can keep the lights on. I'm just trying to make sure I can make payroll. Oh, those are capital problems. An investor told me, and I didn't mean, just, you got me jumped into this because I hear that all the time. I went to an investor one time for my business and I asked for $150,000 and he told me no. And he said, the only reason why I told you no, I love the idea. I love everything that you're doing. You didn't ask for enough money because 150,000 is nothing. You're going to blow through that and you're going to come right back to me asking for more money. And so far, everybody is listening. If you own a business and you think about raising capital, here's how you raise that initial capital. You take your operating expenses of your business and your trajectory for three years. And then you go raise that money. That way you can operate the business for three years without worrying about paying payroll, being able to service or deliver products, being able to just use money to put software in place. Get the money you need and operate the business. Now don't blow the money. This is how you end up on American green when you're buying houses and cars and you got to use your use of proceeds. You got to do it and be honest with it. and grow the business. I have been telling business owners if I knew what I know today years ago, I would have never bootstrapped my first four companies. I will put some skin in the game, but I wouldn't grow them with all my own money. And I also tell business owners today that I'm not starting another business from scratch. I'm going to buy a business doing something similar to what I want to do and go from there. speaker-0: great insight. Well said. Yeah, ⁓ mean, we could go on a lot of different topics here. Let's focus on AI. You mentioned it earlier, as a to improve operations in business. How are you using AI, ⁓ maybe inside legacy wealth personally or just on a daily basis? speaker-1: Yeah, I would use AI as what it is, a tool and a great assistant. But with that, a great assistant and a tool needs to know the functions. have to create the vision for AI. And the way we utilize AI is content, of course. ⁓ give it the vision, the plan, and I drop it in. It helps me create content and scripts so I can go do podcasts and recording and get my organic content out. It helps me with strategy. So as I put in my ideas, my financials, all of that, creates and does analysis for me. I use AI in our booking and in our confirmation. So when you fill out our quiz and go through our site and work through that, an AI agent is going to call and verify the information, almost like a setter would do in a sales process. So we're using AI as the setter. If you book an appointment, We want AI to confirm that appointment, confirm your information. And so we're taking roles that individuals used to do and seeing how we can embed AI in it. Now I'm hearing people say, you're getting rid of people. We are getting rid of some functions of business where AI agent will be able to scale and serve a little bit better than a human element. And we're placing people in larger positions. Now can talk about how we structure our business as far as humans and we believe in elitism. So the way I structured the business is we have core team members that operate at a very high level. We think Navy SEAL approach. There are six to eight operators in a Navy SEAL squad. We think Michelin star restaurants. There's only so many sections in that restaurant that have leadership sitting in it. Think pit one and formula one. there's only so many people on that pit crew and they have a designed systemized process of changing a tire in two seconds and then they adjust to the millisecond. So they're trying to shave milliseconds off. So we operate at high level, we high operating people. And when we bring those individuals in, they are tasked to utilize AI as their assistant. speaker-0: Love it. Yeah, that's a great analogy. Yeah, AI, think, you know, ⁓ reading the AI driven leader right now, Jeff Woods, I believe is his name, but it's mind opening, how to use I think there's a lot of bad ideas out there or just lack of knowledge ⁓ on the proper way use AI. And, you know, you can it as a thought partner. ideas, interview you. But love what you said. It's not necessarily taking away jobs, although it can ⁓ in specific use cases, but it's allowing your team members to amplify their ability. Exactly. 2x, more productive potentially depending on the situation. speaker-1: Exactly. You should be able to operate a hundred million dollar company with eight solid people. And of course there will be other positions that may be contract 1099 fractional, but your core team, you can do eight people and then be able to outsource other pieces to get things done. Now, if you're doing manufacturing, factory work, those eight people are your leadership and you will hire everybody else underneath them. But AI is a great tool to use to your point to amplify productivity. What I see online is people playing with AI. They're having fun. They're creating videos. They're creating graphics. All these images and designs and these cool things will have you sold those things. I don't care how many sites Manus AI can put out. What are you doing? Is it revenue generating? Is it producing? And that's what business owners have to separate. They got to get away from being hype driven. and cool driven to being revenue driven. speaker-0: Yes, well said right there. That's probably going to be a clip. love it though. Yeah, you got to focus on an ROI. Like what exactly is this going to accomplish in your business? speaker-1: Yeah. And can I add a little bit to that before you move on? Yeah. That goes back to what hats a business owner is wearing. Most of the time, a business owner is wearing an operator hat. Then we read books like E-Myth, E-Myth Revisited, Traction, all of these great books, and they tell you to take off the operator hat, put on the owner hat. Yeah. So now you got a lot of business owners trying to think like an owner. I'm out of the day to day. I'm thinking like an owner. What we need more of is for a business owner to take off that owner hat and put on an investor hat. the difference in thinking between an investor and a business owner? Business owner thinks that the business is their baby. They have to nurture it. Nobody knows my business like me. Nobody's going to perform in my business the way ⁓ will. An investor doesn't look at a business like that. An investor looks at a business as an asset. It's not my baby. I'm not emotional about it. Does it have a return on my investment? And if it doesn't, what do we need to do in order to make sure that it produces a return? And so investors look at businesses as assets. That's why investors can own a lot of businesses because they're not emotionally tied to any one of the business. So I want owners to get out of the mindset of the business as my baby and being stuck to thinking about this as an asset. And that also, Pete, and you probably see this in the exit side of the world, that helps you exit a little bit easier. Some business owners get to the end and they're just, I don't know what I'm going to do with my baby. I don't want to just let my baby go. It's asset. That's how you should think about it. speaker-0: Absolutely. Yeah, I couldn't agree more. That psychology there, that mindset about it is absolutely ⁓ to a successful exit from your business or hopefully into retirement if you don't have someone to pass it on. ⁓ Thinking of as an asset, yeah, it's very valuable. Man, yeah, I know you're steeped in, you've started a bunch companies, speaker-1: What that? speaker-0: you're using technology, where do you, from your perspective, where do you see it going? I know it's like, it's improving at a, you know, increasing rate, right? All these developments with AI. So it's hard to predict, but I'd love to get your take on it. speaker-1: From an AI perspective, and especially the way we're using it, our business, we're planning to go public in about five to seven years. I believe that from there, we will just continue to scale up, through acquisition, buy other businesses. We have a lot of LOIs out now. We are looking at building resources and spaces, really embedding ourselves in the industry. And we want to take over. We want to dominate the... small business landscape in training, in capital, and in accessibility. Now, where I see for other businesses, if you don't get on the AI train of actually embedded, you will be left behind. Not by a robot or computer doing the work for you, but by a human that knows how to use AI at a high level. And they're going to do 10, 20 times the work that an individual can do in the same amount of time or less. And that's what's gonna create the value. There's gonna be people who can solve massive problems in short amount of time. And that's always been what we wanted. We wanted people who could solve massive problems in the least amount of time. Now it's gonna be people who can just do it even faster. speaker-0: Yes, yeah, I love that perspective. That's, I think, spot on. Man, yeah, we could keep on talking probably forever, Tyrus, but I know we're coming up on time here shortly. I love, you you don't mind sharing with listeners, what's one practical tip a business owner can implement to start preparing their business for a successful exit? speaker-1: Strategic planning and visioning. That's the core. If you're not crystal clear on where you want to be in the next five, 10, 20 years, get there first. Nobody can help you if you don't have that. I do a lot of consultations and I spend and waste a lot of time just listening to people think about what they could be doing. Well, maybe I can do this. Maybe I can do that. Figure out what it is that you really want to do. And it may take time. It may take you sitting through. It may take you just taking action. That's why Tony Robbins always talks about, take massive action and just move so you can fail fast and figure out what you don't want to do. Property management was a great lesson for me. It let me know that I didn't want to be in real estate in that capacity. I grew a million dollar business. I didn't fail. I learned that I didn't want to do that for the rest of my life. And there are some people that that's what they do and they love it. Get really clear from a strategic perspective. And then number two, dial that in to your day to day life. Like once you get crystal clear, now you operate that way. Bob Proctor used to say that he could make a decision in 30 seconds or less, no matter what it was. And people will always ask him, How can you make a decision? How do you make big decisions so fast? And he used to say, I am so clear on my vision and my purpose. I can tell that this thing is going to add value or move the needle in that direction. And if it doesn't, it doesn't mean that's a hard no. It means it's a not right now. And so if you can't make decisions based on your vision, if you're like, you're not clear. So get clear. That's my one thing that a person can do and they can do that for free. You don't even need money to get clear on your vision. speaker-0: True. Man, yeah, well said, Tyrus. conversation's been full of insights and lessons. I really appreciate your time. can listeners you easiest? speaker-1: legacywealthcapitalgroup.com. If you go to the website, anything at legacy wealth capital group on social media, you'll find this. speaker-0: I'll leave that in the show notes. speaker-1: Perfect.