The Lazy Millionaire: I Own 40 Companies, But Don't Run Any Of Them

Shaan Puri

Alright, this is a guest masterclass with our buddy Andrew Wilkinson. We're inviting him on because if you're world-class at something, I want to learn from you. In fact, I had emailed Andrew a while back saying, "Hey, I have this company. It's working; we had scaled into the tens of millions in revenue, but I just didn't want to run it anymore. I was tired. I wasn't the right guy for it. I was half in, half out, and I was just fantasizing about selling it or the day when I wouldn't be running it anymore." He's like, "Dude, you need to hire a CEO." To me, that always felt like something that's easier said than done. "Hire a CEO? Just find somebody to take over my baby?" But he's done it. This guy's got 40 companies, and he has CEOs that run them. He doesn't have to run any of them day-to-day. The portfolio is worth $500 million. So if there's anybody to learn from, it's Andrew on this. He comes in and shares how he interviews them, what questions he asks, who he's looking for, and how he structures the compensation. He's very transparent about how he structures it—how much is base compensation, how much is variable, and how to make sure everybody's aligned. He also discusses what to do after you hire them. We go into a step-by-step process on how to hire a great CEO for your business. This is not for beginners. If you don't even have a business or have never done this, this is not for you. This is for people who actually have a business and are scaling it up. Maybe it's year five or year seven, and you're starting to realize you don't want to do this for another five to ten years. That's when you have to have this conversation to figure out how you can hire a great CEO to scale your business. It worked for me; it worked for Andrew. I hope it works for you. So enjoy this guest masterclass with Andrew Wilkinson. Okay, we asked Andrew Wilkinson to come on and do one specific thing, which is teach us how to hire CEOs. Andrew, you own what, 40 companies now? The total portfolio is worth almost $500 million, and yet you're a pretty chill guy. Whenever I text you, you answer. You're always having fun. You're not stressed out, overloaded, or overworked like every other CEO I know who's a CEO of one company. But you have 40. I think the way you've been able to do that is by hiring great CEOs for all your companies, and it's actually worked. Sam and I want to learn this from you, so you're here today to teach us that. How did you even realize that you needed to hire CEOs?

Andrew Wilkinson

Yeah, so I would say it's not that it's less stressful; it's just different, right? I just have different problems. Someone running a company might be, you know, putting out a fire that's burning that day. I put out fires that burn over the course of a month or two, and they're bigger fires. Then someone else might spend a lot of time dealing with company politics. I end up dealing with, you know, CEO compensation packages. So I want to say, to begin with, this is not necessarily a greener pasture; it's just a different pasture. I think you really only want to oversee CEOs if that's your skill set. If you're drawn to being super, super high level and hands-off, which some people—let's be real—they're not. They want to be Jiro from "Jiro Dreams of Sushi." They don't want to be the guy who starts Chipotle; they want to be on the line making food. So it ultimately comes down to your personality. For me, my personality has always been that I'm incredibly lazy. From the time my mom told me to wash the dishes, I was furious. I was always trying to find ways to, you know, pay my brothers to do it or find systems to wash the dishes more effectively so I had to do less work. I always joke that I'm Teflon for tasks. If you start delegating in your company, which most great entrepreneurs do, you ultimately reach this...

Andrew Wilkinson

Where you ask yourself, "Was there anything else I can delegate?" That final level of delegation, that final level of abstraction, is hiring a CEO. That's hiring one to hire ten. They go and run the entire company, and you just talk to them quarterly, sometimes annually. There are some CEOs I have that I haven't even talked to in 2 or 3 years.

Sam Parr

Do you have something between 30 or 40 companies? Do you have 30 or 40 CEOs reporting to you?

Andrew Wilkinson

No, the way that we do it now is crazy. At first, it was like 5 companies, so I had 5 direct reports that are CEOs. No big deal. Then, over time, as we've scaled up, we've had to form operating groups. We have these operating groups, and they have their own CEOs who report to us. For example, all of our digital services businesses are run by a guy named Pradeep. I meet with Pradeep kind of biweekly, monthly, or whenever I need to. He oversees a group of about 6 companies.

Shaan Puri

Even if you're not going to end up with that kind of portfolio—40 company structure—I’ve had this with you, which I think is a more common problem. I remember emailing you saying, "Hey, I have this business. It's working, so I can't shut it down. However, I don't want to keep working on it. I liked it at the beginning, but I don't love it now. I want to go on and do new things. How do I do this? Do I have to sell this? Should I just sell the company? Can I hire a CEO? And if so, where the heck am I going to find somebody I can trust to do this?" So even on a one-company level, I think that's where most founders are going to be. Step one is to abstract yourself out of a single company. So let's start with that. You said something like, "It's pretty common. Everyone loves their business in year one." I forgot what your exact quote was.

Andrew Wilkinson

So, yeah, every time I talk to a young founder, they're like, "I'm gonna run this till the day I die." It doesn't matter what the business is; they think they're going to be, you know, there like Mark Zuckerberg for 20 or 30 years. Then you talk to them in year 7 or 8, and almost all of them are just like, "How do I escape this hellish waking nightmare?" They should not want to be there.

Shaan Puri

I'm gonna run this till I'm 28, till the day I'm 28.

Andrew Wilkinson

Totally! It's really interesting because people generally think about it in a very binary way. They're like, "Okay, there are two doors: Door 1, keep running my company; Door 2, sell, get rich, and live on Mojito Island." But there's actually a Door 3, and Door 3 is hiring a CEO. So, you're in a marathon, and you can either ditch the marathon or keep running it. Well, it turns out that you can actually incentivize someone else to keep running the marathon on your behalf. This just goes back to what I was talking about before, right? There are all these different levels of delegation. We all understand, at least if you're a good entrepreneur, that if you don't like accounting, you just hire an accountant. Well, if you don't like running your company, Door 3 is you just hire a CEO. So, my story on this is I started Metalab, which is a design agency, about 20 years ago. I feel very old to say that, but about 20 years ago, I ran it as CEO for almost 10 years. I had a great executive team, and I was able to delegate quite a bit of it. I was running other companies at the same time, but ultimately, the buck stopped with me. For the first 3 to 5 years, it was really exciting. I was learning new skills all the time. I was scrappily sending invoices and negotiating deals with clients. I was flying all over the world, and it was all new and exciting. But, you know, at a certain...

Andrew Wilkinson

You know, after like year 8 or year 9, I didn't want to fly to San Francisco anymore. I didn't want to have to shake hands and kiss babies and do that. I remember Chris, my now business partner and at the time CFO, would come to me and be like, "Dude, you gotta fly to San Francisco. Every time you go down there, you close like $1,000,000 of new projects." But I didn't really want to do it because, A, I was exhausted. It wasn't new anymore. I didn't want to travel; it didn't suit my lifestyle. But also, I was already rich. I was already making enough money. So the business was kind of starting to plateau because I wasn't willing to go that extra mile. I was just saying, "You know what? We'll just do whatever comes in. I'll do a San Francisco trip once a quarter and we'll close what we close because I don't want to do that." Well, the beautiful thing was there were young, scrappy people who, to them, the idea of flying to San Francisco and taking a client out for a steak dinner was a dream come true. They'd never done that before. For me, I was looking at it and going, "Okay, running a 5-person agency versus a 50-person agency is a very different job." It was a job that I sucked at. You know, I really to this day love running 5-person companies. I love running, you know, I can get to about 15 people comfortably, but I wasn't enjoying it when we were 50 people. I read every book about management. I did courses, and I just kind of whipped myself, asking, "Why am I not a great manager? Why can I not be like Peter Drucker reincarnate?" So I would always just fantasize about selling. I kept trying to sell the business, and then we'd be right at the last month, and then the buyer would change the terms or something would go wrong in the business. I was kind of starting to lose it. I didn't want to be running my company; I wanted out, but I couldn't sell it. Around that time, I ended up reading a book about Warren Buffett and I found out about Door 3. Here we are. I started hiring CEOs. I made a ton of mistakes, which I'll talk about, but it's enabled me to create Tiny, which I never would have done before. I'd probably still be either miserably running my business or I would have sold for, you know, a much smaller amount of money.

Sam Parr

We'll get into the actual tactics really quick, though. The green pasture thing you told me is that "the grass is always greener on the other side." You and I joke about it, where you're like, "Well, I don't want to say what you said," but you like to tease about running a small company and how that could be way more fun than being the CEO of a large company for a long time versus trying to go big. What's the grass is always greener for you? Alright, everyone, really quick, if you've heard this podcast before, you know that Sean and I think that the most important skill set you need in business is **copywriting**. So what we did was go through all of the podcasts that we've done—it's like 500 of them—and we found all the best copywriting tips, our resources, our frameworks, and our templates. We aggregated all of them into one simple document so you can skim it all and get everything that we've ever talked about with copywriting. It's in the link below. It's awesome! Check it out.

Andrew Wilkinson

Well, I mean, I think there's a great Bob Seger quote: "I wish I didn't know now what I didn't know then." For me, I think about it like this: I might've given this example before, but imagine if you love chopping wood. You just do it because it's fun. You're in your backyard chopping wood, and then your neighbor pokes his head over the fence and says, "Hey dude, can I get a quart of wood? I'll pay you for it." You realize, "Oh my god, this is a business!" You've taken your passion and created a business. Now you're selling wood door to door, working with your five best friends. It's a blast! Suddenly, you're making money, you can afford to go to the bar, and life is good. Then you flash forward 20 years. You wake up and you're a lumber magnate. You own five sawmills, and all you do every day is sit in a little air-conditioned box looking down at the floor. You have all these robots working for you and hundreds of employees. Most of your time is spent doing Excel. I think that is the sadness of building a large business: delegating means your hands are not on the tools anymore. For me, what's been sad about building the machine is that I've built the machine that's freed me to do what I want, but the irony is I end up doing things I don't want as a result. Ultimately, I was a designer. I love putting on headphones, being in Photoshop, designing websites, and writing. So for me, it's been a search for where I can get the flow state that I used to get running a five-person company.

Shaan Puri

Right, let's role play it here. So, I have a company and I want to hire a CEO. I've realized I can do this third door, and I'm like, "You know what? That's the right move. I should hire a CEO." But where the heck am I going to find a CEO that I can trust? One that’s not only going to not ruin it but actually, you know, hopefully grow the business in some way. What's the first step?

Andrew Wilkinson

So, step 1: you have to really assess if your business is big enough. Is this the right thing? Is this the right time? Ultimately, you want to ask: does your business have product-market fit, and can it actually afford a CEO? Is this a corner store, where it's kind of an owner-operator type of business, where you just have to run it, and if you leave, all the profit gets eaten up by someone else? Or is this something that's really scalable? I generally, as a rule of thumb, will say you probably shouldn't hire a CEO until your business is doing around $300,000 in profit. If it is, that means you can swap yourself out, and you can afford to hire someone at a reasonable base salary. Then, you can incentivize them to grow the business. One of the really interesting things that people kind of obsess over is they say, "Well, you know, a CEO could cost $500,000. My business is only doing $3,000,000 and $300,000 of profit." What they kind of miss is that generally, a CEO is paid a base salary, but most of their compensation comes from bonuses, and the bonuses are based on the business growing. So, it's one of those things where if your business is doing $300,000 in profit, you can basically take $200,000 or $300,000 of that and invest it in the base salary for the CEO. Then, all of their additional compensation will come from the growth of the business, aligning them with your goals.

Shaan Puri

So, first thing is: "Is my business big enough?" You said two criteria: 1. **Product-market fit**, meaning we know what the hell we're doing. We're not in the "figure it out" phase - figure out the product, figure out the market, figure out what the offering is and changing that every 3 weeks because it's not working. Like, you have a reasonable, continuous cycle of supply and demand for what you're doing. 2. And then you said **profit around $300,000** as the kind of... that's the minimum bar.

Andrew Wilkinson

I would say so. In there, I mean occasionally you can... let's say you've got a friend who's super scrappy, who wants to sink their teeth into something. You've got a small business that's like... I always call them like an ember. It's not really a fire yet; it's an ember, and someone needs to come blow on it. You could do that, but I think there's a lot more risk there. You really want a machine that's operating. You want a car that can drive on the road before you put someone in. Then the other question is: can you make someone rich? Because ultimately, people who are good, great, or exceptional CEOs are looking for opportunity and upside. By nature, the fact that they're a hired gun CEO tells me they're not necessarily an entrepreneur. They don't want to take total risk; they want a nice salary, they want bonuses, and they're not necessarily willing to risk it all. But often, they want to know they can get rich in a CEO way. So they can make single-digit millions for the first time ever if everything plays out, or maybe they can get a big payout if the business sells or gets to a large scale, or whatever it is. But ultimately, you want to know that you can make someone wealthy with it.

Shaan Puri

And so we'll do the exact comp stuff in a minute, but the second question you have... So first was: "Is the business big enough and do we have product-market fit?" Then you also said to me once, "Are you willing to walk away?" I think there's a mental side of it too. Are you ready to hire a CEO?

Andrew Wilkinson

Yeah, and that's really hard. I mean, do you... I remember I got to the point where I fantasized about giving the keys away to someone else. When I finally did, I was elated. You know, but there are a lot of people who aren't like that. I can think of one of my friends; to him, his business is his baby. When people mess with his baby, he gets really angry and he doesn't like it. So, you need to be willing to walk away. Effectively, look at it this way: as entrepreneurs, we are all birthing these business babies. Now you're giving them to a foster parent. Can you tolerate that? Can you cope with someone else parenting your child? Because that's really what it is. Not only that, but you have to be disciplined for it to work. You need to either be all in or all out. You have to empower this person; you can't be sitting there looking over their shoulder. So, I think those are the two fundamental questions to this: Are you... is your business big enough? Are you willing to walk away?

Sam Parr

But when you're accepting... when you're saying, "Alright, I'm gonna walk away," is it: 1. "I'm walking away because this person's gonna make everything greater than I could," or 2. Are you walking away thinking to yourself, "I know it's not going to be as good with me in it, but it could be 80% as good and I won't have to worry about it"?

Andrew Wilkinson

Well, let me put it this way: let's say that you're an exceptional product person. You'll know the product won't be quite as good because generally, people who are good at marketing, sales, operations, and finance are just not as good at product. So, you're going to sacrifice on the product side a little bit, but you're going to know the business itself will be so much healthier and grow, at least from a financial measure. I found that going from being a checked-out founder, operating your business reluctantly, to somebody who's highly incentivized for growth and excited to do it, almost always results in the business doubling in the first year. I've been astounded by how much I had been holding back my business.

Shaan Puri

Yeah, that's a great question and a great answer. That seems pretty consistent with what I've heard. A founder the other day was telling me that after maybe 8 or 9 years of running his business, he hired a CEO. He planned to stick around, saying, "Hey, I'm here. I'm available for the next year for the transition." He's like, "Yeah, they haven't called in a little while. You know, we beat our numbers, which I wasn't able to do the last 3 years, and everything seems to be going really well." Turns out, they didn't need me as much. He's like, "A little hit to the ego, but also, wait, isn't this exactly what I wanted?" He was sort of pleasantly surprised on the upside from there. So, let's talk about finding the right person. How do you actually find a great CEO? What are you looking for?

Andrew Wilkinson

So generally, I like to find someone who's run a same or similar business that's double the size. Let's say I have an e-commerce brand selling candles. Well, I don't necessarily need to go find a CEO who's run a candle business before, but I want to find someone who's sold a similar product online. I will generally think about who my competitors are or what companies I admire. Then, I'll go on LinkedIn and I'll just look for a President, COO, or sometimes a CEO. Usually, I will recruit a number two. It's that person who's been eagerly awaiting getting, you know, knighted as the CEO, and they haven't stepped up yet. I find those are wonderful people to delegate the business to. Then separately, recruiters— and that's a topic we can dig into. People have a lot of opinions; I had a lot of opinions about recruiters that I've actually changed over time. But yeah, I find that broadening the spectrum with recruiters can be really helpful.

Sam Parr

We have to give a quick shout-out to Ty Burke, my old roommate. When I used to recruit, and I know you use them as well, you also use like crazy amounts of reference checks.

Andrew Wilkinson

So, here's what we do: we buy the business, and as we're buying it, we start asking the question. As soon as we know we're going to buy the business or delegate, we hire a recruiter immediately. Now, recruiters really pissed me off before. It was like realtors, where I'm thinking, "Man, why am I paying this guy $100,000 to open a door for me? I can just go on Zillow and find the house I want to buy." Here's this middleman charging a lot of money, and I kind of felt like, "Why would I pay some guy to go on LinkedIn and message a bunch of people for me? I can do that myself." But I realized that I'm distracted. When I need to hire someone, I often just go on LinkedIn or whatever for 10 minutes, text a bunch of my friends, and try to think of people that I have in an Apple Note that might be a good CEO. I'm not going broad. So, basically, I've come around on recruiters. There are some really exceptional recruiters, like Ty Burke from Search Partners, who Sam introduced me to. He's one of my favorites. We also really like Matt Hollingsworth from Align. The way I use a recruiter is just to broaden the spectrum. Even if I'm going to go on LinkedIn myself and look for someone, I might end up bringing the person to the table who we end up hiring. We now have somebody who's reaching out to people I never would have spoken to, and they're also handling a lot of that administrative work of pushing the process along. They're doing the initial interview. One really fascinating thing I didn't contemplate before is that a recruiter saves you an insane amount of time. Let's say that you have 10 candidates for CEO, and every single one of those candidates you're going to have to do a Zoom with, and that'll take 30 minutes to an hour. Well, I think we all know you've had that experience where you interview someone, and in the first 30 seconds, you know they're a dingus. Then you're just desperately thinking, "Okay, how can I get off the phone as quickly as possible? I don't want to waste time, but I also don't want this person to think I'm a total asshole." So now, I have the recruiter do that call. I get them to record the Zoom, and then I just watch the first couple of minutes. If I'm vibing with the person, then I'll move them on to the next stage. If you think about it from that perspective, your time is highly valuable, and you've just saved 10 hours of time. What is that worth? I think a lot. In some instances, we've actually hired people that we brought in, and that's fine. I just pay the recruiter anyway. But in other instances, they brought people in that we never would have found. For example, the guy that runs Aeropress, Gerard Meyer, we found him via Ty. He was a guy who had run SodaStream US, and he just wasn't on my radar whatsoever. He's one of our best CEOs. So, I kind of look at recruiters as a time-saving mechanism. They broaden the people you look at, but ultimately, it's just like a tax I pay to have someone else be incentivized to push everything along. I'm actually a big fan of recruiters now, but you have to use the right people. I find there's a lot of terrible recruiting firms, and we've used a lot of really bad ones over the years.

Shaan Puri

What do they run you for the recruiting firm?

Andrew Wilkinson

So usually it's a percentage of first-year salary. I think it's about 20%. So, you know, when you're hiring a CEO and you've got total compensation of, you know, $300,000-$500,000, it can be expensive. But I think it's worth paying for if you can find the right partner on it.

Shaan Puri

Mhmm. And you've mentioned looking for a number two who's run a similar size or similar industry company. Here's what I take that to mean; you tell me what I miss. So, let's say you're the candle company. You don't need somebody who's run a candle company to exercise, but maybe you want e-commerce experience. You want someone where Facebook was their primary sales channel. Maybe you want something like candles—like selling to a similar customer base or a one-time purchase product. Not something that's, you know, a totally different kind of buying psychology. Is that right? Just first on that part.

Andrew Wilkinson

Yeah, you want someone who understands roughly how the customer thinks and also the channels by which that product is sold. One fascinating thing I'll add too is when I'm interviewing them, I always ask myself, "What is this person's hammer?" There's that great quote: "To a man with a hammer, everything looks like a nail." What I've seen with CEOs is their hammer is either marketing, sales, operations, or finance. They go to one of those areas. For the product person, they might say, "We released the most beautiful product in the world, and if you build it, they will come." For the salesperson, it's, "Let's build a 50-person enterprise sales team." For the marketing people, it's, "We're going to spend $1,000,000 a month on Facebook ads." So, you want to be listening incredibly carefully to what is the mechanism by which they grow companies because usually, that's the one. If they did it at their last company, they're probably going to try and repeat it.

Shaan Puri

Right.

Andrew Wilkinson

And so, what you want them to do is when they look at your company, they go, "Oh my God! This is so easy. I've done this a million times before." I've taken businesses from $1,000,000 in sales to $10,000,000 in sales. I've done that, you know, between 1 to 5 times in a similar business.

Sam Parr

So, at this point, are you just constantly collecting people? I mean, is that kind of how you look at your job? Is it like, "I'm just always..." Because if you're having to talk to all these people constantly and you have 40 companies, that's pretty much all your time, right?

Andrew Wilkinson

I'm always thinking about that. I mean, my worst fear is that we're going to be recruiting for a CEO role and I'm going to forget about that guy I met at that conference, you know, five years ago or whatever. So, Chris and I have an Apple Notes document that we share, and we just keep writing down names of people we think are interesting—executives. Sometimes they're even within our companies. It'll be people that are coming up in one of our other businesses that we've thought might be a good CEO for another business. But yeah, I'm always trying to scan the horizon for people who are smart and that I can bring in. Interestingly, often every process is different. When we hire a recruiter, only about 20% of the time is it someone that we've brought in. Often, it is someone that they go source.

Shaan Puri

I love the "What's your hammer?" question because it's so true. The more experience somebody gets and the more successful they become, they start to develop this hammer. They run around looking for ways to apply that thing they know to everything, whether it's the right thing or not. I think this can be both a good thing and a bad thing. I've seen the same advice given to kind of Y Combinator-type companies or in Silicon Valley. For example, when you hire a CEO, if you hire one who grew their previous company by creating a giant sales army, but you're trying to do product-led growth, it's a total mismatch. You might say, "Oh wow, they grew that company from $10 million to $200 million," and that sounds good. But if they did it in a way that's totally different from yours, very few people can repeatedly grow businesses using totally new methodologies for sales and marketing. I'm curious, also, what's your hammer? If you're a man with a hammer running around, what is yours?

Andrew Wilkinson

Well, I would say I'm a man with a lot of different hammers. I've gone really broad now because I've seen so many different ways of growing businesses. I think I have a lot of tools in the toolkit. My old hammer was product. I would always just be like, "Oh, my... actually, you know what? I do have a hammer." Okay, so my old hammer was product. I would always do Field of Dreams marketing. I would say, "We're gonna build the best product in the world. I'm a designer, you know? I was really proud of what we were doing, and that'll solve everything." I realized that really doesn't work very well. Now, I would say my hammer is finance or operations. So really, what I'm doing is I'm looking at a business and asking, "If we could just change one thing, what would that one thing be that would give the business leverage?" Often, it's something really simple. It's like, "Oh, pricing," right? Or they're just not selling ads properly—something really boring. To be honest, I feel a little depressed as I say that because you're...

Sam Parr

A sellout, bro.

Andrew Wilkinson

You're a sellout. The designer from 20 years ago would be really sad. I still love it, don't get me wrong. When we bought Aeropress, let me give that as an example. I just unboxed our new Aeropress clear, and I just checked out the designs for a couple of unreleased products. That was the best day of my month! I love building great products. I love being involved with that, knowing that if we hadn't bought that business, that wouldn't have happened. But when we bought Aeropress, the boring assumption I made was, "I'm just gonna do really good online marketing and e-commerce." It's really simple. They didn't sell online; that was my one insight, that was my hammer on that deal. And now, the bonus, the gravy, is we get to do amazing products.

Sam Parr

And I get it, you don't deserve... you need to go throw away your Herman Miller chair and your Birkenstocks. Go put on a vest, you nerd. You're no longer...

Andrew Wilkinson

I know, I know, I know... I want to self-flagellate. So, I want to talk about some of the things you have to accept about hiring a CEO and also what to look for when you interview a CEO. I think that's probably one of the most important things. To go back to this whole hammer analogy, when I interview a CEO, I'm looking for whether or not I nod along. When I interviewed Gerard from Aeropress, he told me what he wanted to do with the company, and I already had a lot of those same thoughts. I was nodding along and thinking, "Oh my God, he's putting it better than I ever could." The reason that's important is because when you hire a CEO, you are a rider on an elephant. When you're a rider on an elephant, the elephant is going to go wherever it wants, and you're just stuck. You can't tell an elephant where to go; it's way bigger than you. Ultimately, it's going to follow peanuts wherever it wants to go. So, it's really important that you agree with their strategy. One of the ways this has failed for us is that I've loved the CEO candidate, and they've said something like, "Hey, I was looking at the business, and I really think we need to go hard into Facebook ads." I would kind of scratch my head and think, "Well, we already kind of tried that. I was thinking more of an email marketing strategy that we should deploy." They would always just double down. Whatever they say the first time is usually what they're actually going to end up doing, and they're just going to use their hammer. So, having that alignment and fit is incredibly important.

Shaan Puri

What else are you looking for in that interview? Not along what's their hammer, what else?

Andrew Wilkinson

So, I mean, the most important question is: do you get the creepy crawlies after you walk away? Do you feel in any way any cognitive dissonance, any weirdness? Does your stomach feel off? You know, someone could be incredibly charming. I often get this... psychopaths, for example, they're very charming people. They are wonderful to hang out with, but you might walk away and be like, "There's just something off." Like something in their eyes, or...

Sam Parr

Have you had that?

Andrew Wilkinson

Yeah, and I'll tell some stories, but I think the most important thing is, you know, would you let them babysit your kids? I think, like, either of you guys, I would let you babysit my kids, right? But that's important. You're going to hand over your company, your baby, to this person, so you have to have profound trust. So often, Chris and I look for people who are real. I don't like slick people. I like people whose armpits get really sweaty in the interview. I like people who get kind of nervous and scratch their face when you ask them hard questions. I want to see that someone is human, and when things get tough, they will want to do the right thing. That's really critical. You know, do you walk away energized? You can really like somebody, but if you don't walk away energized, that's not great. Also, are they down to have alignment? Are they down to have skin in the game? Because ultimately, you know, the worst type of CEO would be this: let's say Sam's hiring someone to run Hampton, and they say, "I want a $1,000,000 a year base salary." And you're like, "Okay, well, you know, could we do some bonuses? Do you want equity? How could we create alignment?" And they just want low-risk cash guaranteed. That's not someone you want to be working with. You want someone who is willing to have skin in the game, risk with you, and work on the long term. There are a lot of very shiny, fancy executives who basically want zero risk, and they just want to make a shit ton of money. You’ve got to avoid those people like the plague.

Sam Parr

Have you found any correlation between age or where they live? Like, if they're from a Silicon Valley company, a New York company, middle America, or wherever the equivalent stereotype is of Canada?

Andrew Wilkinson

Well, I mean, I wouldn't say that there's anything about where they're from, or even what they look like, or how they dress, or anything like that. Although I'll talk about that and the importance of matching your cultural DNA with their DNA, the number one thing is the big company people. You really don't want the flashy person who's got the LinkedIn profile with 5 years at Accenture, followed by IBM, followed by whatever executive role. I find that when you take a big company person and you put them in a smaller company, they just don't know how to function. They're not bad; there's nothing wrong with those people. They just don't know how to function. They're used to having, like, an army of people doing everything for them. It's kind of like I always think about it in terms of restaurants. Let's say you have one restaurant with no systems, and you go and hire someone from a chain restaurant. Let's say you find a guy who runs an Olive Garden, and you're like, "Oh my God, this guy really understands how to run a tight ship with all the systems and stuff." You put him back in your restaurant, and he's like, "Well, I don't know how to build the systems. I didn't do this; I just go to my Olive Garden handbook, and it tells me how to do everything." So, you kind of get that with big company people, so you gotta avoid the big company folks.

Shaan Puri

One nuance that you didn't mention is that you want somebody who's running a company to be 2x the size, not 20x the size. You would think 20x is better, right? No, no, no, it's not actually better. 2x is kind of the sweet spot of what you're looking for. Is that correct?

Andrew Wilkinson

Totally! Well, there's this funny concept I think of as a variety of different skills. Let's use Chipotle as an example. For some reason, I always go back to Chipotle. Think about this: there's the guy who invented the burrito. That's kind of like the founder of the founder, right? Then there's Steve Ells, the guy that started Chipotle. He went, "Hey, burritos are great food! Let's scale this up and turn this into a fast-casual concept." Then there's someone who came in and scaled it to a bunch of stores. I think that was still Steve. That's a kind of a different skill set. He went from one store to, say, 20 stores, and then they scaled it to thousands of stores. Then they managed a public company. These are all different skill sets, right? Each of those levels requires a whole different set of skills. The guy who invented the burrito is very different from the person who would be great at scaling Chipotle to a thousand stores. So, I think you really just want to be accepting of the fact that you're almost running a... what's it called? Like, you pass the baton... what is that? A marathon?

Sam Parr

A relay race.

Andrew Wilkinson

Yeah, and so you might say the person that you hire, the CEO, to take your business from $2 to $10,000,000... You know, at $10,000,000, you're probably going to bring in some new person to run the company then. They're going to know their scale, and then you keep going through this. Occasionally, you're going to get people who read a lot, learn a lot, and are highly adaptable and can keep going. But usually, you know, a CEO is really effective for between 5 to 10 years. Every once in a while, you get these special cases that can go the distance.

Shaan Puri

And even those exceptions, even Mark Zuckerberg, who's been running Facebook for 20+ years, he has Sheryl. Sheryl does a bunch of stuff so that he can keep inventing their next burrito. He's like, "Oh great, I'm gonna focus on AI. I'm gonna focus on the metaverse," and somebody else will do, you know, ad operations at this. Because that's not what I want to be scaling up. The Google guys did the same thing with Eric Schmidt, right? They brought in effectively, you know, a CEO to run that so that they could keep going and creating the next Chipotle.

Sam Parr

Can you talk about transitioning? I think this is actually the hardest part of all this: transitioning. You have always given me advice, and I believe your advice was right. I followed it, but at first, your advice was basically just to bail. You said, "Just talk to him like once a month, then once a quarter, and then once a year." I was like, "Well, I was going to keep working there, talking to him every single day, giving feedback constantly, and being in all these meetings." And you're like, "No."

Shaan Puri

So, Sam, is the question: "You've hired the CEO. What are those first 100 days supposed to look like?"

Sam Parr

Yeah, and then after 6 and 12 months, what's it look like? Because this is the hard part where emotion typically takes over logic.

Andrew Wilkinson

Totally. And it's terrifying to use the baby analogy. You know, you imagine you have this beloved baby, and then you watch the foster parent. They're playing a little rough with your kid, and you don't quite like what they're feeding them. Well, they don't really know the nap time routine, right? So it's a little bit scary passing off your business baby to somebody else. What I think you have to do is rip the band-aid and let them jump in the pool. I think it's incredibly important that you assert to your top executives, "This person is in charge, and you can't come to me anymore." What I would do in the early days is make the announcement, explain why I'm making the change, and then I would literally leave Slack. I would stop responding to texts from the executives. I wouldn't respond to emails, and I would say to the CEO, "Look, you're in charge. Let's do a check-in in a month." Then I would just completely check out. I'd say, "Look, if there's any emergencies, you can always call me and get my opinion."

Sam Parr

But do you give them like a guide? Are you compiling everything in Notion? I don't know, like what?

Andrew Wilkinson

Are you like...?

Sam Parr

A handbook.

Andrew Wilkinson

Yeah, well, maybe... maybe not quite a guide or something, but you're doing a lot of brain dumps, right? You're going to spend a couple of days with them and go through everything. But you know, business is funny. It's like everything tastes like chicken. A competent CEO will be able to jump into most businesses within 5 to 10 days, get the lay of the land, and start moving. So, I don't do too much of that transition stuff. First, you're checking in maybe every 2 weeks, then every 4 weeks, then every 3 months. If you want, you can go to 6 months or a year. I really think that the worst thing you can do is have them writing you a whole bunch of reports, constantly texting them, and engaging them in a way that makes them feel they don't have power. Worse than that is the "swoop and poop." You bypass them, text your old VP of Marketing, and say, "I noticed you guys stopped A/B testing this on the homepage. What's going on with this?" Before you know it, your CEO feels you're undermining them, and all the executives think, "Well, I see who's still pulling the strings. Sam's still in charge. I'm just going to go back to Sam." Then the stress finds its way back to you. So, I'm a big fan of just being... I mean, you gotta do your diligence. If you're going to give this person your business baby, you gotta know they're not an epic piece of shit, right? That's very important. But if you've done all that, we can talk about all the diligence stuff. You gotta get comfortable with passing your business to this person and knowing it's going to be okay.

Sam Parr

Well, how many months or quarters of mistakes or misses do you let them have?

Andrew Wilkinson

Well, it depends. I mean, you know, is it a hard business or an easy business? How stark is it? Was it the moment they started, within a month, the performance went to shit? Is there a good reason for that? I think that's a really hard question. I mean, we've had very, very competent CEOs join hard businesses, and the business gets worse under their purview. That doesn't necessarily mean they're doing a bad job. It could be a macro problem, or there could be some other headwind. So I think that's up to you to assess. I always say, you know, you want flesh wounds, not mortal wounds. So would I allow a CEO to spend $500,000 on some R&D boondoggle? Yeah, maybe. I don't want them to feel that I'm holding them back. But would I allow them to announce to all the employees that they're changing the business model and shutting down some critical revenue line? Maybe not. You know, I'd probably watch something like that. Ultimately, I think it's important that you say... I'll never forget when I was reading "The 4-Hour Workweek." Tim Ferriss had this whole thing about anything less than $5,000 does not require my opinion. I think it's important you set that control with the CEO. So you say, "Anything that you want to spend more than $300,000 on, I want you to come to me. I want you to discuss." Right? So you kind of build a bit of a bounding box around that.

Sam Parr

We gotta take a drink every time you say a cute Canadian phrase. We've got "boondoggle," we have "dingus," and we've got "creepy crawly."

Andrew Wilkinson

What else you got for us? "Dingus." Dingus isn't even Canadian; it's actually from Tim and Eric. Do you guys ever watch Tim and Eric? Yeah, that's right.

Sam Parr

I want... I want more of that. Go ahead, Sean.

Shaan Puri

Let's finish up, actually, with the hiring and diligencing stuff. I have one more question on the interview. Do you meet in person, or are you trying to do everything on Zoom? Do you like to spend extended time with them?

Andrew Wilkinson

Yeah, I like to meet them in person. I think there's something to looking someone in the eye and seeing how their body language is. You just can't get that same level of diligence. I have hired people sight unseen many times, but for major hires, I always want to meet them in person. In terms of diligence, this is the most critical thing, and this is where we've made the most mistakes. You can avoid endless pain if you just diligence people carefully. Anyone who's hired people at a company knows this. You know, check references, top grading—there are all these different ways of doing it. But there's this idea of "trust but verify." I'll trust my gut; that's my first screen. Then, I'll perhaps introduce them to one or two other people I trust. For example, Chris might talk to the CEO as well as someone else from our team. We'll assess, "Okay, do we get any creepy crawly vibes?" If that's not the case, if we don't, then we'll move into actual diligence. We've learned the hard way; we've made a couple of really bad hires that burned us. So, we actually use these former CIA guys to do background checks. They're called business intelligence advisors—kind of like CIA but with a "B." They're incredible. They will interview the person; they'll call them up, talk to them for an hour or so, and write down every single thing they say. For instance, if they say, "Oh, in college I was an athlete," they'll verify that. If they say, "Oh, I left that company because X, Y, Z," they'll go and look up that company and message five people who might have worked with them. You end up getting this dossier on the person that gives you a high-level overview of what the positives and negatives are. Also, have they ever been accused of a crime? Have they ever had a track record of not paying bills or legal records? All that kind of stuff is really important. We made a really bad hire about ten years ago. The guy basically was full of it about a whole bunch of stuff on his resume, and it ended up being a nightmare. After going through that experience, I think it's well worth paying between $10,000 to $20,000 to get this deep reference check done. I think that's just so critical.

Shaan Puri

That's amazing! It sounds like between the recruiter and the reference check, the background check people, you might be spending anywhere between $50,000 to $100,000 in transaction costs to recruit a CEO or more. Assuming you can't do that when it's a $300,000 a year profit business, what is the minimum bar you use when you're going to pay for both the good recruiter and the background checks? And what would you do if you're the person who is more at the $300,000 a year profit and maybe can't afford those transaction costs? How would you do it DIY?

Andrew Wilkinson

Well, I would just follow the same process, right? So, you know you're not going to be able to hire the recruiter and afford them. Therefore, you're going to try and cast your net really broad. You're going to talk to a lot of different people. When it comes to verifying what the person tells you, the number one thing is to never call the references they give you. Any sneaky person can find three buddies who can say that they're great or whatever it is. I always try and do some scuttlebutt. I'll say, "Okay, my friend invested in that company," and I'll ask them to ask the CEO why that person left or if they recommend them. I also have this trick—I don't remember where I got it, but I love this one. You email a whole bunch of people who used to work with them or the former CEO they worked for. You say, "Hey, I'm doing a reference check on this person. I'd love to talk to you about them. If you don't respond to this email, I'll take it as you didn't have a good experience."

Sam Parr

Oh, ice cold. That.

Andrew Wilkinson

Is that a good trick? It's such a great trick because if they don't respond, people will almost always respond. They don't want to put someone down if they have anything good to say. However, if they have something bad to say, it gives them an out. A lot of people, I found, are worried about legal liability. They don't want to go and say, "This person's a piece of shit," and then that person sues them or something like that.

Sam Parr

Dude, I'm gonna use that line for any email I want. I'll just ask someone anything like, "If you don't reply, I'll assume you hate yourself and your family."

Andrew Wilkinson

Yeah, exactly.

Shaan Puri

Sales guys do that all the time. That's the worst. Okay, so you found the person. How do you negotiate and structure the compensation package for the CEO?

Andrew Wilkinson

So, I always like to make the first offer because ultimately, you kind of know what you're willing to pay and what makes sense based on who they are. I think you have to scale up or down based on their experience. There are times where I've taken a risk. For example, I've said, "You know what? This person was a VP of Marketing, but they really have CEO energy." I'm going to take a chance on them. I'm not necessarily going to put them into full CEO compensation; I'm going to try and go high variable, low base. But for someone who's more established, I'm going to give them basically what they want and whatever we think the range is there. The most important thing is to use total compensation when you make the offer. Let's say I have a business that's doing $300,000 of profit, and I can comfortably afford a CEO base salary of $150,000. If this person is worth $300,000 a year or $400,000 a year, I'm going to go to them and say, "I'm going to pay you $300,000 a year, but it's going to be a $150,000 base and a $150,000 bonus." The bonus is if you get me to $600,000 of EBITDA. You're basically using the profits that they've created to pay them the bonus, and you've created alignment between the two of you. It's important never to just say, "Well, I'm going to offer you $150,000 a year plus a bonus," because in their head, they're thinking, "No, I'm a $300,000 a year person." So, I always lead with what's the total compensation and then what needs to be true to achieve that compensation. I'm also a big fan of uncapped bonuses. For example, let's say the target is $600,000 of EBITDA. If they do $1,200,000 of EBITDA, I want them to get double the bonus, maybe even triple the bonus. That's worked really well for us. The idea is to say, "Look, I'm going to offer you $300,000 a year, but it might be $600,000 or even $1,000,000 a year depending on how you perform." The other thing is equity is just hard. I'm not a big fan of stock options. I like to try and find people who are willing to write a check if they want equity. If a CEO comes to me and says, "Okay, but I need equity; I need skin in the game," I'm going to say something like, "Okay, so you want $40,000 of equity per year. Are you willing to lower your compensation by $40,000, or are you willing to write a check? Do you have a stock portfolio you can sell and inject the money into the business? I'll let you buy in at a really great valuation." If they don't want to do that, sometimes I'll even loan them money. I'll say, "I will personally loan you the money, and then you're going to write a check and buy it. I have the right to buy back your stock if you leave at whatever multiple of their earnings at the time or whatever it is." How do... how do...

Sam Parr

People react to that conversation because that's very different from where a lot of people are probably coming from.

Andrew Wilkinson

Well, I want them to value the equity, and they don't value the equity when they get stock options. They just look at it; they don't even consider it as part of total compensation. So, let's say, here's the kind of thing I'd hear: they say, "I want to make $400,000 a year, and I want equity." I'd say, "Well, okay, how is the equity going to work?" They go, "Well, I think I should have 5%." Let's say the business is worth $100,000,000. They've now said, "Okay, I want $5,000,000." And you're like, "Okay, well, you're worth $400,000 to $500,000 a year based on your track record and your experience and all that kind of stuff. How am I supposed to give you $5,000,000 of equity? It just doesn't make sense." So, I always try to talk about it in terms of what's the cash value of the equity that they're receiving and how do we create a scenario where we have shared downside. A lot of people in Silicon Valley are used to stock options. The way stock options work is, let's say, Sam, you joined my company, and the stock price is $100. I say, "Here's $100,000 of stock options at a $100 share price." If the shares drop to $50, it's a lotto ticket, and it's a zero; it's not worth anything. If it goes up, then it's worth a lot. So, you end up with this kind of binary situation where they have this lotto ticket that pays out big or is a zero. What that means is if the value of your business goes down even 10%, they're basically at a zero, and so they're disincentivized. I just don't love stock options. In general, I only like giving equity to people who are willing to sacrifice something for it. Otherwise, you know, why wouldn't I just pay you a really fat bonus? If you get down to it, that's usually what executives want. They want to do an addition to their house; they want to go on crazy vacations. They like cash most of the time.

Sam Parr

A quick kind of question as we round up to what the downside of all this is: everything you're saying sounds... when I hear it, I'm like, "This is the way." Is there a fair argument against this? That founder-led companies typically have more innovation or more soul, and that it's better to have one thing go big versus many things that are potentially okay? Is that a fair argument, do you think, or no?

Andrew Wilkinson

Yeah, but I think, like I said in the beginning, it comes down to personality. For me, when I was running Metalab, I started five other companies in the first three years because it was irresistible to me. Now, I knew the right thing to do might have been to focus on the business, but my personality is that I want to go do other stuff. So, Sam, you seem super focused, right? Maybe you're better off just having one focus. You wake up every day and think about one thing. But if you start finding yourself getting drawn into other businesses, it would be a huge disservice to continue to run that business. Ultimately, it comes down to being true to yourself. You shouldn't, if you're listening to this, go, "Oh, I should go do this." You should only go do this if you're drawn to it. It's the same advice I give to entrepreneurs. They say, "Well, should I go and work at a company or should I be an entrepreneur?" I kind of go, "Well, if you have to ask that question, the answer is probably no." For me, I could never consider working for someone else. Whenever I had a job, I just wanted to shove the boss out of the way and take the wheel of the business. To me, it'll be obvious if this is something that appeals to you. You'll know. You'll be listening to this, nodding along, and going, "Oh my God, I can do this! I just didn't know I could do it and not feel guilty."

Sam Parr

Well, dude, this is awesome! We love having you come on. What do you think, Sean?

Shaan Puri

Yeah, this is great, and it's also earned information. This is not something you might be able to read in a book, but a lot of the nuance of what you described comes from hard lessons learned—things that went right, many mistakes, and things that went wrong. We all get to benefit from your 20 years of experience going through this process yourself. For me, it was a huge unlock to be able to hire a CEO and do that successfully. I was like, "Wow, this is cheat codes! Oh my god, the business is going to do well. It's going to do better than if I was doing it." I get all of the reward without any of that work. It's a totally great trade for this person because I didn't really appreciate how many people are entrepreneurial but maybe not entrepreneurs. There are people who are great CEOs, but they also have two kids and don’t want to take on full risk. They want that kind of medium upside and low downside. Finding that fit has been pretty huge for me. A lot of the things you said stood out to me. The golden nuggets for me were to find the number two at a business that's 22 times bigger but similar to the one you're in right now. Figure out what's their hammer because that's probably it. Everybody's a man with a hammer, and you just have to make sure that it's the right hammer for your business. Then, pay up on the reference checks and the recruiter to make sure that you get enough candidates and find the right person. That's a necessary tax you have to pay once the business is big enough that you can support this.

Andrew Wilkinson

And then leave them alone. That's the other thing. Most people don't leave them alone. They say, "Well, it didn't work." You know, in the first two weeks, they did something I didn't agree with, so I had to fire them.

Shaan Puri

What's the balance there? Like, you leave them alone, but you don't leave them completely alone. I think for you guys, they send you a finance-only update every month. Is there anything else to it? Like a strategy planning thing, or did you do anything else?

Andrew Wilkinson

So, what we used to do is create a report every single month. They would write, "Here's what's going on in the business; here are the numbers." That was just crazy. We couldn't keep up, and it also wasted a lot of their time. Now, we just send the numbers to head office and meet with the CEOs annually. Often, there are certain CEOs we don't even meet because they're within operating platforms. So, we usually meet with the CEO of that operating platform, typically on a monthly or quarterly basis to check in. By the way, this is the number one thing I get emails about. Literally, every single day, I receive questions about it on Twitter and via email. So, I actually wrote a PDF, which is basically a checklist on "Are you ready to hire a CEO?" and "How to hire a CEO." If you sign up for my newsletter at **never enough.com/newsletter**, I'm going to post the PDF next week, I think.

Shaan Puri

Awesome! Okay, great. I think that's the pod. Everybody should go check it out at **neverenough.com** / **what newsletter**.

Andrew Wilkinson

Newsletter, yeah.

Sam Parr

And we'll link to it in... yeah, we'll link to it down here. Alright, dude, thank you. That's the pod.