Latest / The Start, Scale & Succeed Podcast / How to Win the Race When You're Not the One Driving with Eric Wiklendt (stage 6) - Ep. 424

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How to Win the Race When You're Not the One Driving with Eric Wiklendt (stage 6) - Ep. 424 · The Start, Scale & Succeed Podcast

• 0:00
  Scott Ritzheimer: Hello, hello, and welcome, welcome once again
• 0:03
  to the Start, Scale, and Succeed podcast-the only podcast that
• 0:06
  grows with you through all seven levels of your journey as a
• 0:09
  founder. I'm your host Scott Ritzheimer, and I want to talk
• 0:12
  to those of you out there who are either getting close to or
• 0:16
  have already made the move from being an entrepreneur or even an
• 0:20
  executive to becoming the investor, especially those of
• 0:24
  you who are at the true owner level of your journey. And
• 0:28
  here's what I think makes this level so disorienting, and that
• 0:32
  is that so many of the things that worked that got you here
• 0:38
  start to become a little bit more problematic. For example,
• 0:41
  if we were to use a just a quick metaphor, you win through levels
• 0:48
  one through five by putting your hands on the wheel at the right
• 0:50
  time. But here in level six, it's still your money. You know,
• 0:54
  it's still your name and reputation on the line. It's
• 0:57
  still a race to be won. But now, chances are somebody else is
• 1:01
  driving it, and you don't get to steer, which means that a lot of
• 1:05
  the tools that you would have gone to choose from, especially
• 1:08
  when things get tough, are no longer at your disposal. So how
• 1:12
  is it that we win here in level six? Well, you don't need to
• 1:15
  take it from me. We've got a much better expert available for
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  us here today, and that is Eric Wiklendt, who is a managing
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  director at Spaceside Equity, where he's responsible for
• 1:25
  sourcing, executing, managing, and exiting investments. Before
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  joining Spaceydequity, Eric was president and CEO of Keylux Heat
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  Transfer Systems. Prior to that, he held leadership roles at
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  Eaton and Hilti Corporation, where he oversaw M and A
• 1:40
  activities, established a manufacturing plant in Mexico,
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  managed a large marketing team, and directed industrial sales
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  operations. He's a graduate of University of Notre Dame and
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  obtained his MBA from Wharton School at the University of
• 1:55
  Pennsylvania. And he's here with us today, Eric. I'm excited to
• 1:59
  have you on. It can be tough to get guests who are great at
• 2:03
  level six of this journey because we're talking to
• 2:07
  founders all the time, and so having had my own kind of
• 2:11
  dabbling in this and watching several others go through the
• 2:14
  process, success in level five, like as a CEO, as a business
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  owner, is no guarantee of success in level six as an
• 2:22
  investor. What are some of the biggest mistakes that you see
• 2:25
  founders and other executive type leaders make after the sale
• 2:31
  when they jump into this investor game?
• 2:34
  Unknown: Yeah, I'd say in a sentence, being able to manage
• 2:37
  through people, processes, and systems. So you know. Said
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  differently, scalability and repeatability relative to
• 2:46
  managing the investment and creating returns. So, to your
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  point, I liked your analogy about hands on the wheel. It's
• 2:54
  it's a really good one. And when when you get to I guess what you
• 2:58
  would call level six, it's more like you're in the back seat
• 3:01
  telling somebody who's got their hands on the wheel what to do,
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  but without without trying to be like the annoying little kid
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  who's asking, "Are we there yet? Right, which is is hard to do.
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  Honestly, that's so you know you ask, "Okay, what's hard about
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  it? That's probably the hardest part because you know how you
• 3:19
  would do it, and you need to like understand that you're
• 3:22
  going to manage through people, processes, and and systems, and
• 3:27
  they're not going to do it exactly the way that you would
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  do it. So you're going to need to you know accept 80 to 90% of
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  how you would do it result, right? And by the way, sometimes
• 3:39
  it goes way better, but it's it's a little bit uncomfortable
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  because you don't have your hands on the wheel, and you know
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  you've probably steered out of some ditches in the past or
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  breaked in some heavy snow in the past, and know how that
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  goes. And watching somebody else can do it is a little bit
• 3:55
  terrifying. It's like teaching your 15 year old kid to drive in
• 3:59
  sitting in the driver's seat.
• 4:01
  Scott Ritzheimer: I'm sitting here like having hot flashes
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  because that's exactly what's going on in life right now. I'm
• 4:05
  teaching my 15 year old how to drive, and I can tell you, no
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  matter how hard I push, my brake pedal on the right side has not
• 4:11
  worked yet. Like I don't, I don't know what's wrong with
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  that. And and you saying sitting in the back seat's a whole whole
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  nother level because at least in the front seat I can reach for
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  the wheel and avoid the curb, but in the back seat, you just
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  don't have the options. Here, I see a lot of folks, and this
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  isn't just true of you know level five to level six, but any
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  one of these transitions forward, we kind of romanticize
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  the next level. We have a tendency to think about what
• 4:37
  happens when it works, but lack the skill to deal with it when
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  it doesn't, and so I like that you brought up that it's not
• 4:47
  going to be done the way that you do. Having done this for
• 4:50
  some time now, having you know been around successful
• 4:54
  endeavors, you've probably seen some that weren't as successful
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  and needed turning around. What are. Skills that allow investors
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  to to recognize those problems and and see their solutions
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  without being able to just grab the wheel themselves.
• 5:11
  Unknown: So, in my my opinion, it's having appropriate feedback
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  mechanisms in the business and being able to like read those
• 5:22
  feedback mechanisms. So in our businesses, we do a couple. You
• 5:28
  know, we do board meetings every month. But part of what those
• 5:30
  board meetings entail is the team, the management team,
• 5:36
  reporting on a couple key, well, few key items. The first thing
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  we have is a deal thesis scorecard, which is a scorecard
• 5:44
  that lays out how the business is creating equity value, and
• 5:48
  then the next thing is an operational scorecard. So the
• 5:51
  first one is a results scorecard. Then the second one
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  is what I would call a diagnostics and activity
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  scorecard. So like one is okay, what results are you getting?
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  And then the next one is, are you getting the results the
• 6:03
  right way? That's kind of diagnostic part. And then
• 6:07
  there's there's two other things, which are it's basically
• 6:12
  key projects for the year that we'll review. Usually, we'll
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  pick somewhere between one and seven key projects for a
• 6:19
  business, depending on what's going on and what's important
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  and how big you know the a project may or may not be, and
• 6:26
  then there's a there's a fourth thing which I guess is always a
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  key project. So if there are no other key projects and
• 6:33
  initiatives, we're always doing continuous and process
• 6:36
  improvement. So that that project's always there. That's
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  why it's not zero to seven; it's it's one to seven, because
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  that's that's that, and it really comes that that
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  methodology comes from the strategy deployment process.
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  That's kind of well known. Some people know it as like the X
• 6:55
  matrix that's used, and it's about breaking down things into
• 6:59
  smaller tasks and monitoring them, and that's the way we
• 7:03
  choose to monitor them, and it works pretty well. And then that
• 7:07
  way you can kind of take a step back, and you know, for me
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  personally, like all the portfolio companies I'm
• 7:13
  responsible for, you know, every month, you know, I get those
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  reports, and I can tell in about probably 10 minutes how that
• 7:20
  business did for the month, and how they're doing for the year,
• 7:24
  and it becomes like I kind of then like know like okay what do
• 7:27
  I what do I really need to focus on here and how do I manage by
• 7:31
  exception right because then that way if you're just managing
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  by exception you you're not that annoying little kid in the back
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  the car you know being a micromanager, asking if you're
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  there yet, and you you really just focus on the things where
• 7:46
  the management team may need help. And what I kind of explain
• 7:50
  as the chairman of the board, my job is kind of the chief
• 7:53
  impediment removal guy.
• 7:56
  Scott Ritzheimer: Yeah, I love that. So, founders in
• 7:59
  particular, which is a lot of folks on who listen to the show,
• 8:03
  tend to be visionary in nature, right? They they see
• 8:06
  opportunities, and especially later in in their time inside of
• 8:11
  an organization, being able to see those opportunities and kind
• 8:13
  of hand them off to a team that executes them tends to be a
• 8:17
  skill that they start to develop. Is that the same game
• 8:21
  in in the investor space? Are you looking for opportunities in
• 8:25
  in the same way, or is there a better approach?
• 8:30
  Unknown: Yeah, great question. So, in the way that we do
• 8:33
  private equity at Spayside, 100% yes. And the reason why is that
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  we tend to be looking for things that we can improve, and in one
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  of two ways: either operationally, in which case
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  we'll improve the EBITDA margins or the profitability of the
• 8:49
  business, or growth, like grow the top line of the business,
• 8:53
  either through acquisitive bolt-on acquisitions or
• 8:57
  organically. And so we tend to have a very you know structured
• 9:03
  approach to how we do that, and it it ends up in what's called a
• 9:07
  three to five year value creation plan, which to your
• 9:10
  point is kind of the vision for the business, and then we'll
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  we'll think about how to execute that in the business with the
• 9:17
  human resources, the human capital that we have, and a lot
• 9:21
  of that is about very strong and appropriate delegation. The
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  challenge that a lot of people have, right, with those sorts of
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  things is that they're not great delegators, frankly. Number one,
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  because either a they don't have a vision, or b they don't really
• 9:40
  know how to get from point A to point B, and or C, they don't
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  have the skill set to delegate. They just outsource it, kind of
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  like they just like pitch it over the fence and like hope
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  somebody else like gets it done. And the reality, I don't know.
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  In my my view, the world is business is like 1% strategy and
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  99% execution. Like strategy is actually pretty easy. The
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  hardest part about strategy and vision is deciding what not to
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  do, more so than deciding what to do. But like once you decide
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  what to do, you should be able to lay that all out on pretty
• 10:14
  much one piece of paper, right, to explain what the three to
• 10:17
  five year vision is, and then to execute it. You know, the 99%
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  execution should be a big project plan, which you break
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  break down into yearly chunks and monthly, quarterly chunks
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  and monthly chunks, and then appropriately delegate. And I
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  feel like most people in the world, you find very very few
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  people that can do both vision and execution, strategy and
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  execution, so strategy and tactics. It's it's extremely
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  rare, right? Most people are good at one or the other, not
• 10:49
  both. But when you find somebody who can be good at both, they
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  tend to be the people that you know build unicorns or have you
• 10:57
  know really strong return on investment and things like that,
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  and it's not easy. Sometimes, sometimes one comes naturally
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  and the other doesn't. You got to learn the other. For some
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  people, they both come naturally, but that's pretty
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  rare.
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  Scott Ritzheimer: Yeah, one of the advantages of operating
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  inside of a company, at least a mature one, is that your team is
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  relatively well defined-not perfectly, but but you kind of
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  have an idea, and and hopefully by level five you have people
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  who will challenge you when you have a harebrained idea. It's
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  not always a given, but hopefully that's the case. Well,
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  when you let's say you leave that team behind to a successor,
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  or you sell that business outright, and and you're you
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  know you're on your own, if you will, how do you how how do you
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  keep from making those harebrained decisions by
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  yourself? What does what does making investing a team sport
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  look like?
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  Unknown: Yeah, so I I did not know this. I was entertainingly
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  enough. I was watching a a TikTok about this the other day,
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  but apparently metacognition is a rare thing, which is where you
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  think about how you think. So that, though, I think is a good
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  skill to learn, and because it it makes you like take a step
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  back and be like, okay, this is how I'm thinking about
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  something. Am I thinking about it right? And the other thing
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  too is like I don't know, like the way I think about most
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  things or like have experienced things is like I'll come up with
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  a framework or a model in in my head, or sometimes I'll even
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  write it down, and then I'll push as much data through the or
• 12:39
  data or data points through the model or the framework as
• 12:42
  possible, with the idea that hey, I'm going to be willing to
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  change the output of you know the the model right. If you
• 12:51
  think about it as an equation, you know y equals you know alpha
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  plus mx blah blah blah whatever, right? Well, as you push more
• 13:00
  data through the right side of the equation, your y may change.
• 13:03
  You know your your output, and that's fine. Then the question
• 13:06
  is like metacognition helps you with should you actually change
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  like the model or the framework, right? Is the stuff to the right
• 13:13
  actually the right part of the equation, and can you know do
• 13:17
  you change that as you go? And I think you really got to force
• 13:20
  yourself to do that, based on like being honest with yourself.
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  Like, what are you trying to achieve, and then also like
• 13:29
  being honest with yourself, like, what don't you really
• 13:31
  know, right? So, what part of the like equations or the
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  equation set, like, are you like, I think it's like this,
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  but maybe I should go ask an expert if I'm really getting
• 13:42
  that part of the framework right. I do that a lot, and so
• 13:46
  you said like, how do you do it by yourself? And the answer is
• 13:49
  partially like, hey, go go find some new people to bounce ideas
• 13:54
  off, and then also just be critical of your own, you know,
• 13:59
  your own your own framework and your own output, and be willing
• 14:02
  to change with new information. Don't get, don't don't don't
• 14:08
  become a victim of your own biases. That's hard to say. Like
• 14:12
  we're all humans, right? Like so, we're going to have some
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  biases, and and that's okay. But try to realize what they may be,
• 14:19
  and then try to think about that as you think through the the
• 14:22
  problem, and try to avoid them.
• 14:26
  Scott Ritzheimer: Yeah, it's it's one of those things that's
• 14:30
  easy to say on a podcast, can be challenging to do in the real
• 14:33
  world. So yeah, I love this idea of of really having the humility
• 14:38
  to bring in experts. I I think that's so important for this
• 14:42
  stage, Eric. There's this question that I have for you.
• 14:45
  It's a question I ask all my guests. I'm interested to see
• 14:47
  what you have to say, and the question is this: What is the
• 14:51
  biggest secret you wish wasn't a secret at all? What's that one
• 14:55
  thing you wish every founder watching or listening today
• 14:57
  knew?
• 15:02
  Unknown: Hmm. I I guess I would say, well, as it relates to me
• 15:06
  personally, as a guy that buys and sells businesses, and some
• 15:11
  of those businesses I would like to buy, is basically be
• 15:17
  realistic about what a selling process looks like. You know, I
• 15:22
  wish everybody knew it takes. It's a little harder. It takes a
• 15:25
  little bit longer. Your baby's not as beautiful as you think it
• 15:30
  is to the outside world. That that would be one thing that
• 15:33
  like sometimes in private equity world is a little bit
• 15:37
  frustrating when you're you know buying a business from somebody
• 15:41
  who's never sold a business before, first time exit, you
• 15:45
  know, person. If I were to go back though, in like, you know,
• 15:50
  20 years or something, and like give myself some advice and
• 15:53
  probably some things that I would give like newer founders
• 15:57
  or younger folks advice on would be like be a little bit patient
• 16:02
  and try to be a little more patient than you think you have
• 16:06
  the ability to be, and then like also like maybe don't don't be
• 16:12
  so self critical. Like not everything is going to go
• 16:15
  perfectly. It it just never does. It's you know that's life.
• 16:20
  God oftentimes, or karma, whatever you want it, or the
• 16:24
  universe, however you want to think about it, laughs at your
• 16:26
  plans and gives you a new path, and that's okay. That's how
• 16:31
  things go. Don't don't get so worked up about it if it
• 16:35
  happens. It's it's just it's just how it is. So yeah, those
• 16:39
  those would be the two two big things, I think.
• 16:42
  Scott Ritzheimer: Fantastic, fantastic, Eric. If someone is
• 16:46
  either wanting to sell their business or or succeed in this
• 16:50
  this investor stage, or if they just want to know more about
• 16:52
  you, the work that you and your team do, where can they learn
• 16:55
  more about you? Where can they find out more?
• 16:58
  Unknown: Yeah, they can find me on LinkedIn. It's just my. If
• 17:01
  you just look at my name, I think I'm the only guy in the
• 17:04
  world that has it because my last name is spelled somewhat
• 17:08
  uniquely. And so I'm on LinkedIn. You can you can get my
• 17:12
  cell phone number and email there, or if you go onto our
• 17:16
  spaceside equity.com website, you can find my information
• 17:20
  there. Happy to yeah chat with anybody that wants some help
• 17:25
  thinking about you know investing in businesses or
• 17:27
  selling businesses or whatnot. I was happy to do that. And if you
• 17:32
  got any folks out there that have any really good Industry
• 17:36
  4.0 businesses that are looking for customers in the
• 17:41
  manufacturing space definitely hit me up on that as well. We're
• 17:44
  looking for good partners in that space to fuel our LBO
• 17:49
  investments and make them better.
• 17:52
  Scott Ritzheimer: Excellent, it's a lot going on. A lot of
• 17:55
  exciting opportunity. Highly recommend checking them out.
• 17:59
  Eric, thank you so much for being on the show. Really was a
• 18:02
  privilege and honor having you here today. And for those of you
• 18:05
  watching and listening, you know your time and attention mean the
• 18:08
  world to us. I hope you got as much out of this conversation as
• 18:12
  I know I did, and I cannot wait to see you next time. Take care.
• 18:18
  Hey everyone, Scott Ritzheimer here. Thank you so much for
• 18:20
  listening to the Start Scale and Succeed podcast. I hope this
• 18:23
  episode gave you exactly what you need for the level you're in
• 18:27
  right now. If you want to discover what level you're in,
• 18:31
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• 18:35
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• 18:39
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• 18:42
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• 18:46
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• 18:49
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• 19:00
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• 19:03
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