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What kind of entrepreneur are you? If you haven’t asked yourself this question yet, it’s high time you should! After all, having big ambitions is one thing, but actually achieving your dreams takes a roadmap for success — a thorough understanding of yourself and how your specific qualities and circumstances are going to impact your approach to business. Perhaps no one knows this better than Nik Hulewsky, co-founder of CoFounders and a fierce advocate for the five key frameworks that every aspiring entrepreneur should consider — risk profile, personality type, experience, skills, and capital.
Today, we’re breaking down these frameworks so that whether you’re starting a business for the first time or you just want to optimize your odds of success, you’ll know exactly how to identify prime opportunities and capitalize on the right ones for you. Let’s dive in!
Understanding Your Risk Profile
“You need to look at your risk profile and see where you're comfortable. The two areas that I like to look at are your family situation and your personal appetite.”
The first framework that Nik discusses is risk profile. How much risk are you willing to take, and what’s your comfort level when facing potential failure?
Your personal risk tolerance carries significant weight in determining your ideal entrepreneurial ventures. Are you comfortable with taking on significant financial risk, such as signing an SBA loan for a multimillion-dollar business? Or would you prefer starting a low-risk side hustle where capital requirements are minimal?
Your family situation and personal appetite for risk also play a major role. If you’re single with no dependents, you may feel comfortable taking bigger risks, but if you have a family to support, the stakes become much higher.
Know Your Personality Type
“For me, being with people gives me energy. I love it. For some people, being with people totally drains them, and that’s okay.”
Your personality type can be a determining factor in the success or failure of your business. Are you an introvert or extrovert? Do you draw energy from interacting with people, or does it drain you?
For extroverts, businesses that require constant networking, sales, and team-building may be ideal. For introverts, on the other hand, a business that requires less social interaction, or partnering with someone who can handle the sales and marketing, may be a better fit.
Leverage Your Experience
“If I was buying a home health and hospice company, and I've run and operated home health and hospice companies, then I would have exact experience. The bank would look at me and say, ‘Oh, he's done this exact thing before’.”
Understanding your own experience is essential when considering your approach to entrepreneurship. Nik emphasizes two types of experience: exact and analogous.
Exact experience means you’ve done this specific type of business before, whereas analogous experience means you’ve worked in a related field. If you have neither, the risk is much higher. A good rule of thumb is to start with what you know and build from there.
Evaluate Your Hard and Soft Skills
“You're making a picture of here are the things that I'm good at soft skills-wise, here are the things that I'm good at hard skills-wise. You're building a Venn diagram to then create the profile of the business.”
Every entrepreneur should assess both their hard and soft skills. Hard skills are technical and professional (e.g. coding, accounting, etc.), while soft skills are harder to quantify but just as crucial, like leadership and people management.
Understanding your strengths and weaknesses allows you to choose a business that plays to your skills, or to bring in partners who complement what you bring to the table.
Assess Your Capital
“I don't want you to put 20 percent down, but you should have 20 percent to put down so that when you buy the business, you have a cushion.”
Capital is a reality check for every entrepreneur. You may have a brilliant business idea, but do you have the funds to make it happen? More importantly, how much of that capital are you willing to put at risk?
The J curve is the dip a business experiences during the transition period when a new owner takes over. It’s crucial to have enough working capital to weather that period and avoid running out of money before the business starts to recover.
The Importance of Self-Awareness
“I'm really, really excited and passionate now talking about this with entrepreneurs, helping them understand who they are and what type of entrepreneur they are, because that's such an important piece of the puzzle.”
Nik's journey into entrepreneurship was filled with trial and error, but the key lesson he learned was self-awareness. He emphasizes that understanding yourself is the first step to success in business.
Before rushing into any opportunity, take a moment to be introspective, assess your strengths, weaknesses, and preferences, and use this information to find the right business fit.
…Class Dismissed!
Understanding what kind of entrepreneur you are involves looking at your risk tolerance, personality type, experience, skills, and available capital. These frameworks, as discussed by Nik, are essential tools for anyone looking to pursue any business opportunity. Whether you're just starting out or you’re a seasoned entrepreneur, taking the time to assess yourself through these five lenses will ensure you're setting yourself up for long-term success.
Want to hear the full interview with Nik? Click here!
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Transcript
Nik: [00:00:00] If you don't know yourself first, you're setting yourself up for a world of hurt. The world's gonna teach you this one way or the other, and you can be humble and introspective, or you can let the world teach you and get hit with a ton of bricks and cry your eyeballs out.
Brien: Welcome to the Millionaire University Podcast. I am your host, Brian Gearan, back in the saddle with you today, and on this edition of the Mu Pod, we are joined by Nick h Luki. He's the co-founder of Co-Founders. That's a fun way to say it. We're gonna talk about that. And you're also a wildly successful entrepreneur with multiple seven figure exits.
In the small to medium sized business space and a wealth of experience across multiple industries guys over the past five years Nick's companies have generated over 100 million dollars in revenue 100 million That's insane And he happens to be the host of the nickonomics podcast where he has in depth discussions with incredible entrepreneurs What a great idea that [00:01:00] is.
I wonder where Nick got that, but you know, Hey, discussion for another day. Anyway, Nick, welcome to the show, man. It's a pleasure to have you.
Nik: Brian, thanks for having me. You know, copying is the highest form of flattery. So I had to copy millionaire university and I'm sorry, I'm not smart enough to reinvent the wheel.
Brien: You've been caught red handed, man. I saw this coming. I just want to do it on air live with thousands of people. So here we are. Perfect. I'm in. Awesome. Awesome. Well, guys, today we're going to pose a single question to you, and Nick is going to be the expert that helps us dissect all angles of it, and maybe even facilitates a breakthrough for some of you listening today.
That question being What kind of entrepreneur are you?
Nik: It's a great question.
Brien: It is a great question. It is a great. So I'm going to let that marinate for a hot second, like a nice piece of steak. I want to get a quick origin story from you, Nick, tell us how you got into entrepreneurship, your first business and how you parlayed that into seven.
Figure multiple seven figure exits. [00:02:00]
Nik: Yeah. So I got married in 2008, got married very young and I married a woman who's very risk averse. I was trying to be a musician at the time. And after we got married, we air quotes, we decided that I should go back to school and get a degree. So from the beginning, I've always wanted to be an entrepreneur.
I've always wanted to do my own thing, but my wife just wasn't comfortable. with me doing that yet. And in my mind, I was ready. What are we waiting for? I want to do it. I'm smart. I'm capable. I like people. Why can't I just buy a business? So over the next 12 years, I got a lot of experience. It wasn't 12 years.
It was actually 10 years. I got a lot of experience. I worked. In corporate America, I got my degree and each one of those experiences taught me something that I was able to carry forward with me to the next experience. Lots of failures, lots of wins, but also lots of lessons learned. And one of the main lessons that I learned over that period of time was that looking back.
I hate to say it. My wife was right. I wasn't ready. I thought I was ready, but I [00:03:00] wasn't ready. There was so much that I didn't know. I didn't know how to manage people. I didn't know how to run a business. I didn't know how to buy a business. I didn't know how to submit an LOI or value a company. I had no idea what it was like to finance things.
I was able to do those things on somebody else's dime. I was able to learn how to do all those things on someone else's dime. I was able to fail on somebody else's dime. I got fired multiple times, had seven figure failures during that period. So it was an amazing learning experience for me to be able to go through and get that education.
Finally, in 2020, I had decided, you know what, I'm done relying on other people's generosity and I want to control my future and my destiny. So I bought a business that was a medical billing company that was doing, it was a 3 million business. And I also started a home health and hospice. at the same exact time.
Long story short, I brought my other brother in law up and we partnered on the medical billing company. He ran that for several years. We ended up selling that for close to 7 million a few years later. And then I also grew the home health and hospice company from Zero to [00:04:00] 11 million we sold last year.
And along the way with those liquidity events, but also just other investments that I was able to make, I bought and sold other businesses from mobile home parks to crypto mining companies, to a tree trimming business that we have in Dallas. So I am grateful for the experiences that I've had, and I'm really, really excited and passionate now talking about with entrepreneurs and helping them understand who they are.
And what type of entrepreneur they are, because that's such an important piece of the puzzle.
Brien: That really is. And this all led to, as we mentioned in the intro, co founder of co founders. Is this part of what your gig is now, or is this like the holding company for all your businesses? What is co founders?
Nik: Yeah. So my best friend and I, we've known each other for almost 20 years, and we've always talked about We wanted to do something together. His name is Chris Kerner. He's had multiple lives with multiple other businesses as well. And finally in 2021, we decided let's do something together. Let's buy a business.
And so we bought a business and we [00:05:00] thought, well, what are we going to do with this? We don't necessarily want to be the ones running everything just because there's so much to do, but we want to continue to grow and we want to partner with people that we'd like. So we had this idea and thesis of let's build a company that partners with other like minded entrepreneurs.
Let's do really cool things with really cool people and we will give them a piece of the equity as we grow. And so that was the, that's why we call it co founders is because every business that we start has a co founder with us. Like we're not just the co founders. We have co founders with every of those operations.
That we have and spent 65, 000 and bought the domain. And so we own cofounders. com, which is rad. I think it's a rad domain. And we've been, we've been up and running ever since. So we have a tree trimming business in Dallas. We have a company that sells crypto mining. rigs. So Bitcoin mining hardware, we have an AI healthcare startup that is helping automate a lot of processes in the space.
We have a lead gen company and then we also are just launching this company that sells perfume vending machines. And that's a crazy story [00:06:00] that I could tell at some point, but yeah, that's what we're doing.
Brien: Okay, so co founders helps others co found and start brand new businesses.
Nik: Exactly.
Brien: Wow. Okay. So I'm going to go down this rabbit hole for a hot second.
Cause you have my attention on this. How do you identify some of these areas to get into like a tree trimming business in Dallas? You're in Boise. How did you find a tree trimming business? Why Dallas and how use that as an example?
Nik: Yeah. So we kind of have four criteria when we go and look at a business to invest in of whether or not we want to get into the industry.
Is it something that we have a competitive advantage in? And the question is the question we pose to ourselves in this kind of four areas that we look at. Do we have a competitive advantage with time? Like, are we able to dedicate more time, energy and effort to this? Then any of the other competitors, do we have a competitive advantage with capital?
Could we buy this business all cash? Can we move quickly? Is, you know, could we throw money at Facebook ads and blow up this product? Do we have an unfair competitive advantage with knowledge and experience? So if, you know, if it's a healthcare business or if it's a CPG business, yes, we do. Cause we have a lot [00:07:00] of experience in that space.
And then the fourth is, do we have an unfair competitive advantage with distribution? There's a saying in venture, which is first time founders focus on products. Second time founders focus on distribution. It doesn't matter how great your product is. If you can't sell it, if you can't communicate that to people.
So we look at that and say, all right, well, we've got a fairly large social media following. We've got, you know, close to 400, 000 people that follow us across platforms. Is this a media accelerated business? And if it is, is this acceleratable by our audience? So that's like the fourth area. If it ticks those boxes, then sort of the next thing down that we say is, all right, does it fall into sort of our continuum of investments?
And we make investments kind of on two ends of this continuum. On the one end, we invest in businesses that are not disruptible by artificial intelligence, or at least in our lifetime in the near future, not disruptible. Tree trimming. It's not disruptible by artificial intelligence, gutter cleaning, pressure washing, manual labor, sweaty startups, those types of [00:08:00] businesses are not going to be disrupted by artificial intelligence.
So we like those businesses because they're staying power, they're sticky, and we can get in quickly. The other end of the spectrum are businesses that will be Dramatically accelerated by artificial intelligence. So those are businesses like healthcare. I mean, I love healthcare and I think the goal of healthcare is to be patient focused, but we spend a lot of time on the administrative stuff.
Well, I think artificial intelligence is going to eliminate a lot of the administrative work and it's going to allow for more time at the bedside. So that's going to be an accelerant for healthcare. The messy middle are these companies that are sort of knowledge businesses or agencies, in my opinion, that over the long run, I think will be automated out of business and we just don't want to play in that space.
So that's sort of the continuum that we, the second lens that we look at the third lens is, okay, do we have someone? Is there someone that we know? Is there someone we've worked with? Is there someone that we trust that we can partner with on this? And are they someone we want to spend a considerable amount of time with, right?
Like time is a finite resource. We love our families. We love our [00:09:00] friends, but we spend more time with people that we work with most of the time than our friends and our family. So if we're going to spend all this time with them, do we actually enjoy working with them? Are they fun? Are they trustworthy?
Are they loyal? Are they hardworking? Are they enterprising? Are they curious? And so if that question is answered, we have the who, we have the what, we have the why, then that's a business that we are interested in investing in. And then we ask the next question is, can we get our investment back, our cash in back within 12 to 24 months?
If it's a startup idea, that's a non existing business. We hope to get our cash back within 12 months. If it's a business that we are buying and we've got to put down a significant chunk of cash, or our hope is to get that cash back within 24 months. So. Those are all the lenses that we look at when investing.
Brien: I love it. And basically you're building a holding of tons of different business, eventually tons of different businesses that are bringing in lots of revenue, operating independent of you. You're not down in Dallas trimming the trees. You've got a trusted co founder, a partner who is out there [00:10:00] running things on the ground and doing a great job.
Yep. It's a win win. I love it. Well, I think we, we stumbled upon what will probably be a part two with you someday because now I'm very interested in that aspect of what you do, but today we're going to bring it back to our original question of the book. What kind of entrepreneur are you? And you said, this is something that you're really working with.
You love working with entrepreneurs on discovering and bringing to the forefront, because I think it is very important, obviously, for an entrepreneur or an aspiring entrepreneur to know these things and to discover these things about themselves, because it's going to play a major role in. Whether you're successful or not, right.
Or whether maybe you find success, but maybe you can wiggle around a lot of roadblocks if you know this about yourself. So I want to give you the mic and kind of let you start going on this. And I, you mentioned you got some frameworks that could possibly help us out. So I'm excited.
Nik: I do. I have some frameworks.
This is going to be interactive. Yes. I love it being interactive as opposed to just somebody up here talking and then saying, welcome to my Ted talk or thanks for attending.
Brien: I'm too [00:11:00] curious to not be interactive. So don't you worry. Perfect.
Nik: Okay. So. Let me ask you this question. When you talk to somebody who's a wantrepreneur, and I don't mean that as a pejorative, I just mean somebody who's not yet an entrepreneur, they want to become an entrepreneur.
And you say, Hey, what are your plans? They typically talk about the business they're going to buy, or they say something from Warren Buffett. It was like, Oh, we're just trying to buy a good business at a fair price. But 99 percent of the time they're focused on the business, but there's two parts to this equation.
There is the business. And then there is you. And they are inextricably linked. If you are only focusing on the business, you're putting yourself at a disadvantage and a good analogy for this would be, do you exercise? You work out?
Brien: Yep.
Nik: Okay. Sure do.
Brien: I was just at the gym this morning.
Nik: Ooh. Okay. What day was it?
Today was full body. Full body. Okay. Did it all. It's like leg day for me. But if I came to you or if you came to me and said, I want to get shredded, I want to get buff, I want to get ripped. What are the two [00:12:00] variables involved with getting ripped?
Brien: The two variables? Well, you got to be able to have the time to go to the gym and you got to be dedicated to it.
Right.
Nik: Okay. I did something that I hate there and I'm so sorry for it. It's when like the professor asks an open ended question, but they're looking for a specific answer. So I'm an idiot. I'm sorry for doing that. The two variables are this, intake and output, food and exercise. If you want to get ripped, you've got to do those two things.
You have got to go to the gym, you've got to be consistent, you've got to lift weights, you've got to make sure, you know, you're doing reps to failure, you're doing drop sets, but you've also got to eat right. Like, it doesn't matter how consistent you are going to the gym, it doesn't matter how much you lift, it doesn't matter any of the, if you, if your diet sucks, you're not going to get ripped.
I mean, especially as you get older, you're like, you're not going to get a six pack, you're not going to get shredded. And what many people focus on is what, Brian, what do they focus on of those two?
Brien: Of the diet and the exercise? They're going to focus on going to the gym, but they'll totally forget about their diet.
Nik: Yeah, exactly, right? Like everybody's focused on going to the gym because it's this outward, [00:13:00] external variable.
Brien: Right.
Nik: People don't really focus on the internal variables first. My contention is, it is at least equally as important, if not more important, diet as exercise. And so, When you're looking at buying a business, you also have these two variables.
One being external. This is the business that I'm looking for. Right? And everybody has their profile and like, well, I want recurring revenue and it's got to have a moat when customers have to be sticky. And while I want to make sure that it's highly profitable and predictable, it's like, we all say the same things, right?
But what they don't do is the internal work on the other side of things and ask what's good for me. Like what works for me? What do I look like? What am I going to Excel at? And so I've kind of broken this out into, I think five areas, but as you're, as an entrepreneur, it's easy. It's seductive to get sucked into, Ooh, look at this business.
Oh, it's got good margins. But just like the saying, if you stand for nothing, you'll fall for anything. Like if you don't have a business that you're actually actively looking for, then everything looks attractive [00:14:00] and you can talk yourself into any deal. Have you bought a business before?
Brien: I have not purchased one.
No. Started a few.
Nik: Well, it's very common when you're in the process of looking and many of your listeners who are in this process, it's very common that when you're looking, you start to convince yourself that a deal is good when it's not a good deal. In fact, there's this scene from Arrested Development that I love where Tobias is talking to his wife, Lindsay, and they're having this conversation and they're talking about having an open marriage.
And Tobias is a therapist. And Lindsay says, You know, does it ever work for these people? And Tobias is like, no, no, no. They somehow glue themselves into thinking that it'll work for them, but it never does, but it just might work for us. Right. And like, that's, that's what happens as you're looking for a business is like.
You can start to convince yourself that actually maybe I could overcome this customer concentration. Maybe I could overcome the key man risk with this owner. Maybe I could, whatever, do X, Y, and Z. And if you haven't done the internal work to identify sort of what your core values are, where your strengths [00:15:00] are, then you're much more likely to fail.
To fall victim to buying a business that you really shouldn't be buying. So that's my preamble. Area one that I really, really like to evaluate is your risk profile. How much risk are you willing to take? Because when you become an entrepreneur, it can be incredibly risky. You can go on one end of the spectrum, sign an SBA loan for 5 million.
Your house is on the line, your 401k, like everything is on the line. And if it goes South, you lose everything that's that can be very risky. And then there's also reputational risk that accompanies it, but you could also start a side hustle. You also could do some consulting on the side that's exceptionally low risk.
There's not as much capital involved. And it's something that even if it failed, you're not destitute. So you need to look at your risk profile and see where you're comfortable. And the two areas that I like to look at are your family situation. And your personal appetite. So what type of family situation are you in?
Are you single and have nothing to lose? You can probably [00:16:00] take on a lot more risk. Do you have a family? Do you need income month one? How do you feel about losing 30, 000? So like, those are some questions that you need to ask yourself on the family side, on the personal side. This is my favorite question, and I'm going to ask you this question, but I think it's a really good way to sort of test.
Where you are from a risk standpoint. So Brian, if you had two options, which one of these two situations is more painful to you missing out on an opportunity that later became highly successful. So maybe you were like, Oh man, I was an early employee at Facebook and I quit. Dang it. Like, does that give you more pain or pursuing an opportunity that you were incredibly passionate about failing and going bankrupt?
Which one of those two gives you more pain or stresses you out more?
Brien: Gives me more pain or stresses me out. In the first option, did I end up doing okay? Sure. [00:17:00] Sure. The one that gives me more pain would be the, intrinsically, the opportunity missed, but I don't know. I'm an entrepreneur. My brain is wired to be like, Okay.
I went out and did that and I failed, but I learned something. I'm going to continue on. So maybe, maybe I'm fudged your answer there, but.
Nik: No, you didn't. The FOMO is
Brien: real. If you miss out on an opportunity where you were there and then you left.
Nik: Yeah, no, you answered it. You're somebody who's like, I got FOMO for my wife.
It's B. My wife, like, wouldn't care about missing out on the opportunity as much as if, you know, we pursued something and we went bankrupt, right? So, just knowing that about yourself tells you a lot of things. Number one, it tells me a little bit, you're a little more risk seeking. That's okay. You like to swing for the fences again.
That's okay. So you can take on some more risk as you buy these businesses. Maybe for you, it wouldn't be a good idea to, to start an agency and be hyper conservative and do a side hustle. You might be somebody who [00:18:00] needs to actually jump into something full time and really be committed to it. But if you haven't actually even gone through.
The assessment of your risk profile. You don't know how comfortable or uncomfortable you are with risk. And the final thing I'll say on risk is there's a second piece to it, which is if you're married, you need to go through the same risk assessment with your spouse or your partner. But you just need to know and both be on the same page with what level of risk is okay.
I may be okay with putting it all on black every single time. My wife is not. So where do we meet? Like, you know, where is the middle ground? Where's the happy medium? Because nothing will get you divorced faster than failing and having the other person say I told you so. If you guys are at least on the same page when you go into it and there's a failure, There's this shared level of commitment of like, well, you know, we both kind of agreed to this.
So,
Brien: right. Exactly. That would be my advice.
Nik: Well, I can give you
Brien: a quick story on that. My wife is very similar to yours. Risk averse. She's got a great job full time. Like a lot of what allows me to be an entrepreneur and take some of these risks I owe to my wife for being the, like, [00:19:00] she loves her job. She's a dietitian at the VA hospital.
It's paid very well. And awesome. She's my rock, right? Yeah. Gives me the ability to be a little more risky. However, we have a discussion. If I'm ever starting something, we talk about it. And at one of my businesses that has failed, we had that discussion. And unfortunately, like we kicked it off the week my son was born.
So it's kind of an inside joke. Cause I hear about, she's like, this isn't going to be like that one company when you kind of weren't there the first week your kid was born. Nope, honey, I've got you loud and clear. We're good,
Nik: but I am hearing you and affirming what you were saying.
Brien: Exactly. And, but having that discussion, like if I never mentioned it, or if I just said, Hey, this is what I'm doing, blah, blah, blah.
Like it could have been awful. Like it just, you have to, you have, you're right. You have to do that. You have to bring your spouse, your partner in. And tell them what's up and make sure everyone's on the same page.
Nik: And I've done this before and it, it sucks. I made an investment without my wife knowing that was, I hate saying this, mid six figures.
There we go. That's the number. The worst part is it worked out [00:20:00] and we made really good money on it, but I lost a lot of trust with her because like, she didn't care that we made money on it. She was like, wait, what? You, you flew to this place. You looked at this, like you made the investment without us even talking about it.
That's not okay. And I had to learn that the hard way. That was a really crappy situation because it didn't matter that I was right. It didn't matter that we made money on it. Like I had betrayed trust. So if you're not bringing your significant other along your partner in life, you've at least got to have the initial conversation of, How involved do they want to be?
Chris, my business partner, his wife is fine with whatever. Like she's like, yep, make your decisions. You're good. And that works for them. My wife is like, okay, there is a financials. Have we gotten zero K ones yet? Is the income statement here? She's on it, which is great for me.
Brien: Yeah, that's funny. I think my wife is a bit more like your business partners where she's like, As long as I don't come home and the bank account says zero, go do your thing.
Like I trust you. And I'm like, good, that's perfect. I'll keep you abreast of things. But she's like, give me the two minute rundown and we're good.
Nik: All right. So after you've kind of thought about your [00:21:00] risk profile, the second thing I like to think about is your personality. And you'll see, we go from like softer, more nebulous concepts to more Concrete answers and questions, right?
So like right now, this is like the exploratory phase. And then by the last couple of items, it's like, Oh no, it's very clear black and white, yes or no type of questions. But the second thing I like to look at is just your personality type. And this is very broad. I'm not talking about taking a Myers Briggs test or anything like that, but.
Are you an introvert or are you an extrovert? And the question that I like to ask is. Does being with people give you energy or does being with people drain you of energy? For me, being with people gives me energy. I love it. I love conversations. It's like, it's incredible for some people being with people totally drains them and that's okay.
You just need to recognize what that might mean for you. So for an introvert, Who gets drained by people, you probably either need to partner with somebody who is really, really good with people, [00:22:00] or find a business that has a sales and marketing team and has a management team. Like if you're not good with people, then make sure you're supplementing your weakness By getting a company that, that has those things to supplement your weakness.
Don't buy a company that doesn't have sales and marketing figured out that doesn't have people management figured out because then you're setting yourself up to fail. If you are an extrovert, you should either partner with somebody who is an introvert and has this like systems and processes piece figured out or find a business.
That can handle the operations that's consistent, that is reliable, and that doesn't need you to be the COO. Again, those are very broad strokes. There's a whole world of gray in between those like staked out black and white positions, but the better you know yourself and what gives you energy and what drains you of energy as you're looking at these businesses, you like, you won't even waste your time on businesses that will require you to do something that you know you intrinsically hate.
It doesn't matter how profitable you think it's going to be. If you hate doing it, [00:23:00] it's not going to be successful.
Brien: Exactly. And it could be a wildly profitable business and anybody else might look at it and be like, why wouldn't you buy that? But if you identify that, Hey, I'm an extrovert, but this business doesn't have the insides, the infrastructure isn't there, and it's a weakness.
It would be a weakness of mine to go and try and fix that. You know, that's bad for you. It's a great deal for someone else. It's a bad deal for you.
Nik: Number three. So we've talked about risk profile and your personality. Number three is your experience. So you need to understand your experience for two reasons.
Number one, obviously for the business to be successful, but number two, if you're getting a loan on this business, The bank's going to underwrite to your experience and whether or not the business that you're buying will translate to the experience that you've had. So in my mind, there are two types of experience.
There is exact experience and then there's analogous experience. So I'll give an example, personal example. If I was buying a home health and hospice company, I've run and operated home health and hospice companies. I would have [00:24:00] exact experience. The bank would look at me and say like, Oh, he's done this exact thing before.
I think he's going to figure it out. He has a track record. That's your business experience. If, however, I was a vendor and I sold supplies to home health and hospice companies, the bank would look at that as analogous experience. They'd say, okay, he hasn't had experience running and operating a home health and hospice company, but he knows this industry really well.
He understands how the business functions. It is analogous. And so they may give me more credit because I at least know the space. If I went and I had home health and hospice experience and I decided I'm going to buy a digital agency. That does digital marketing. And I have no experience in that space.
That's stupid. Like that, that is a bad idea. Not only will the bank not underwrite it, you will probably not be successful. And I know anyone can point to a million examples and say, well, so and so did it and they were successful. The question is, do you want to bet your life savings on the exception [00:25:00] or by playing the rule?
And if 95 percent of the time with experience, you're successful. And 75 percent of the time with, without experience, you're successful. That's a big Delta. There's a 20 percent difference there. Do you really want to risk the fact like failing when you don't have experience? And like my answer to that question would be no.
So you need to understand. What hard skills do you have that apply to the business? And what experience do you have that apply to the business? And then look at those types of businesses as you're purchasing.
Brien: And this also applies to correct me if I'm wrong. This can apply to if you're someone who's starting your own business, right?
Like it's one thing to go and say, I want to go do this thing cause it's cool. Well, do you have any experience in it? No, maybe you need to go get that experience. If this is truly what you want to do and you want to operate a business in this space. Find a way to get that experience. Maybe it's a side gig or side hustle, or you go to a BA W2 somewhere and learn that industry.
I think it's, you know, you gotta, like you're saying, you have to have [00:26:00] that experience and if you're starting something, it's not wise to get into something you know nothing about.
Nik: Well, and like as you go through this assessment profile and you're like, okay, well I'm willing to take risks. But I also don't want to go bankrupt.
So I'm like in the middle, I love working with people. I have really, really good experience in this space. In fact, I'm a top 10 employee around the country for the role that I'm doing in the space that I'm working in. I've got these skills. I've got anyways, the other checklist you're starting to build a profile where you're like, Yeah.
Why would I buy a business? I don't need to, I don't need to buy a business. I have a network. I could launch a business. I could take the 250, 000 that I have in the bank and launch from scratch. And then the next logical question would be, well, do I have experience launching from scratch? If the answer is no, then obviously there's a little bit more risk there.
But if you're like, no, I've built stuff from scratch before working for other companies, at least you have some analogous experience. To go off of, but yeah, I'm very much like a risk mitigator where I'm going to take the path that has the highest probability of success [00:27:00] coupled with the lowest probability of failure.
Whereas some people are like, I'm going to go for the one that has the highest ceiling, but also the highest probability of failure. And that's okay. You just have to be upfront with yourself about what kind of the things that you're optimizing for.
Brien: Yeah. Calculated risk, right?
Nik: Totally. Yep. So the fourth area I look at are skills, and this is really important as well.
It's sort of bridging off of your experience, but you need to sort of have two areas, hard skills, soft skills, hard skills are going to be technical skills or professional skills. So are you a coder? Are you a developer? Are you an engineer? Are you a lawyer? Are you a CPA? Are you, uh, I'm trying to think of something else that has a certification, but like some other professional service.
List those things out and then soft skills. These are the ones that are harder to quantify, but are you a good manager? Are you good with people? Are you a systems guru? Do you have an even temperament? Like list all of these things out. So you want, so you're like making a picture of, okay, here are the things that I'm good at soft skills wise here.
The things that I'm good [00:28:00] at hard skill wise, perfect. You're building your Venn diagram to then create the profile of the business around. So we've gone through the risk profile. We've gone through your experience. We've gone through your personality. We've gone through skills. The last step is to like really take a sober assessment of the available capital you have to put into a business.
And I would start here again, this should be done with a partner, a spouse, or whoever you're sharing your life with. Start with can, how much money can I put at a business towards a business list, everything for one K cash, other assets, anything that is easily liquidable, just list it out, have it on a spreadsheet.
And then you go with the next step of Okay. What am I comfortable with? And that's the hard part, but it's like, okay, what's the worst case scenario look like? How much am I okay with losing? The rule of thumb I like to look at when buying a business is you should, in a best case scenario, have at least 20 [00:29:00] percent to put down.
I don't want you to put 20 percent down, but you should have 20 percent to put down so that when you buy the business, you have a cushion. There's this thing. Have you heard of the J curve? Yeah. I'll explain it. And then you will correct me because I'm sure you know how to say it much better than I do.
But there's this thing called the J curve. And the reason they call it the J curve is because it looks like a J. When you buy a business, you know, you start up here. Let's say this is just equilibrium. Well, when you transition that business, there's a dip inevitably. Why is there a dip? We've got new management.
Maybe you've got to put them on a new payroll system. They've got to come in and do trainings. They've got to meet you. There's all of this extracurricular work for them to do outside of just providing services to customers. And that's got to be factored in. So you're paying more in wages and you're probably seeing less in sales just because there is a transition and that's okay.
That's very normal, but you dip. And so during the dip here, the question is, do you have enough cash to sustain? Do you have a war chest? Do you have enough working capital? And if you go into a [00:30:00] business and you put every dollar into the down payment and you don't have a safety net, it makes the J curve very, very, very difficult to navigate if you don't have a line of credit or if you don't have something else as a backup.
So that's why I like to say go in with the expectation you're going to put 20 percent down. Hopefully the SBA gives you the option where you can put 10 percent down and then you use that other 10 percent as a cushion. Just have it there as a safety net because then what happens is you bottom out and then you start to rebound.
So you get the J, the J curve. But if you're going in and just saying like, it's going to take every dollar I have just to buy this business, you need to figure out how you're going to get through the J curve if you are going to actually put every dollar into the business.
Brien: Yeah. And that's one of those things where you can go for broke if you want, but in business, if you don't have that cushion, you're setting yourself up for failure because at the chance, a good chance that something goes wrong or, you know, that you stay in that dip a little bit longer than you thought you would.
Yeah. And there's just a bunch of pebbles in the bank account, you're screwed, right? You could, [00:31:00] this could turn into the bust that you thought would never happen.
Nik: Yeah. Like it's good to be optimistic. I'm optimistic, but the plan can't be optimism. You can't go into it and be like, yeah, we're going to figure it out.
I'm going to start paying myself in month one with the capital piece. You need to ask yourself, am I okay going without a salary for a month, six months, a year? How long am I okay going without a salary? What's our monthly burn? All right. How does that change once we buy this business and really having those conversations with the spouse where you're saying, okay, what is.
Discretionary. And what is non discretionary? Well, your mortgage is probably going to be non discretionary outside of your mortgage. You probably don't have a lot of non discretionary spending. You could sell a car. You could stop two days a week of daycare for the kids. I don't know. Maybe daycare is non discretionary, but you get what I'm saying, where you need to like actually look at and have a plan because if you're prepared for the worst, you are going to fare so much better when you actually get hit with those curve balls.
Then if you're just optimistic and clear [00:32:00] eyed and, Hey, we're going to make this work. I've got grit. I'm just going to grind it out. You know, like it just doesn't work that way.
Brien: I like to call it realistic optimism. Optimism is a proven mindset that can help you live longer. But if you're just brazenly abusing your optimism and you're not infusing it with a little bit of realism or reality, then you're setting yourself up for a bit of a bruising, right?
It's going to be brutal.
Nik: So that's my initial framework to get through the process of like understanding yourself. And I have like, I've created my own little quiz of like, okay, these are the questions I ask. And it just helps you think through it. Once you know that, then you can start to create a plan of, okay, here are the things that I know about myself.
What kinds of businesses fit this profile? And you can then start to get hyper specific. Okay. What geography do I want to look in? How big of a business, how much am I willing to put down? Do I want to do B2B or do I want to do B2C? Do I want to have something that's hyper regulated or do I want to have something that's fairly [00:33:00] commoditized?
That's then when you can start having those questions. But if you don't know yourself first, you're setting yourself up for a world of hurt because the world's going to teach you this one way or the other. And you can be humble and introspective, or you can let the world teach you and get hit with a ton of bricks and cry your eyeballs out.
So like, which one do you want? Either one of them are going to be a hard experience.
Brien: When you were starting out and when we started the episode, you said that you thought you were ready to be an entrepreneur. You told your wife, I'm ready to jump in. Now's the time I got to go. Are these all the things that you had no clue about yourself, or did you learn these even once you started in entrepreneurship?
Did you learn these on the job or did you sit down and actively beforehand write these things out? Or did you have a mentor? Someone tell you this? Or was it, did you learn by, uh, you were cruising for a bruising and you got hit a couple of times.
Nik: Yeah. For me, it was trial and error. Like there was some things I specifically knew about myself.
I knew I was good with people. I knew I could build trust. I knew that I was smart. I knew that I was creative. There were also some things I had no idea about myself. One [00:34:00] of them was. When I got my first job, I started working for this home health and hospice company and they were like a 15 million segment of a large publicly traded company and over the next three years, we turned into 150 million segment of the business and I was one of the key people that was leading that growth.
I was very successful, won the awards, made a lot of money, got lots of stock. It was cool. It's a great experience. Well, I got some hubris and I was like, Hey, what I did over here should work anywhere. I was really, really, really, really good at operations. I'm an extrovert, but I'm not like somebody who's gonna be doing the operations every day.
But I'm really good at seeing the forest through the trees, mapping it out and handing it off. And so I thought that'll apply anywhere. And so I lobbied to, to buy this company in Southern California. 'cause my wife and I wanted to get back to Southern California to be closer to family. And so we buy the company and I get there and very, very quickly I realize.
My skillset, which was managing and building teams, operations. It did not fit [00:35:00] this company. What this company needed was somebody who was amazing at sales that was going to go out, beat the pavement and drive business because they were small and it didn't matter how much I trimmed. I was never going to cut my way to a growth in revenue.
And because of that experience, I got fired. Like I had lobbied to buy this company. We spent a lot of money buying this company and it was a disaster and I retreated into my strengths. I didn't try to figure out how to go and grow business. I went back into my office and was like, no, I could figure this out in Excel and if we just cut this person and optimize this one thing, it was like I was focusing totally on the wrong things.
I didn't have the foresight or the understanding that I should be bringing people in to supplement my weaknesses or that I should be focusing on the things that about the business that That were terrible, not trying to double down on my strengths. So for me, for example, that's where the personality and the experience assessment comes in is like, now I know anytime I go into a business, I need to have at least one operations person around [00:36:00] me.
Who I can hand things off to, and a person who's very, very good business development, sales, and marketing. If I have those two things, then I'm good to roll. So I don't like to do startups from scratch because I think you have to be good, not great. You have to be like good at all of those things in order to start from scratch.
I'm not good at all of those things. I'm good at maybe like one or two of those things. And then one or two things I'm bad at. So I need to buy something that has more scale so that I can afford to bring people in that then I can manage coach and mentor and support into success. And so like, that was one of the key lessons that I had to learn about myself.
And I've carried that with me. Ever since. And thankfully it's, you know, it's worked out. Like I was saying in the beginning, if you don't give yourself opportunities to fail on somebody else's dime, you're going to fail on your own dime. And if you haven't had the time and experience to look back and understand these things about yourself, you're putting yourself in a poor position.
At the same time, you also need to sit down and write these things out. [00:37:00] Like it may feel like you're wasting time, but list them out. Spend some time like being really introspective and thinking about, okay, I've got fired from two jobs. Hmm. What was the common denominator? It's really easy to say. Like my boss sucked or, Oh man, well, we had this one externating circumstance.
Okay, cool. Throw those out. What could you have done differently? And it's in those moments that you're able to find the golden nuggets that will help you be successful in the future. If you're unwilling to do that, you're going to continue to repeat the same mistakes over and over and over again.
Brien: Yeah.
And I think it's, that leads into a question I had where you can't really bandaid over these things because we are who we are, whether we acknowledge parts of our personality or not, or if we, maybe we don't even know what about ourselves yet. We are who we are. And when you're going in, especially in your case, so you're going in and buying a business.
If you're not checking all these boxes, then I think, tell me if I'm wrong, but have you ever felt that, hey, I can [00:38:00] put a band aid over this? I mean, I don't have the experience, the exact experience that we should probably have for this, but, Tom, Dick, or Sally over there, they know how to do it. We're good. Is there exceptions to these rules, or is it absolutely no band aids?
You've gotta check these out.
Nik: So this is where it gets hard. Yeah. Of course there's exceptions. There's exceptions to every rule. Have you ever heard of the fat pitch analogy that Warren Buffett uses?
Brien: No.
Nik: Familiarize me. Okay. Do you know who Ted Williams was?
Brien: Oh yeah. I've got a model of Ted Williams on my stand back here.
I'm a big baseball guy.
Nik: Ted Williams is the best hitter in baseball history ever, which is crazy in and of itself. The way that they measure success in baseball is by the percentage of times that you hit. And anybody who hits between 30 and 40 percent of the time is considered. a hall of famer. Like that's nuts to me.
Isn't that crazy? Like you're successful 30 percent of the time. And it's like, you're in the hall of fame. But with Ted Williams, he developed this system where he knew in the [00:39:00] strike zone where his fat pitches were and he would sit and he'd wait. And there may have been places in the strike zone where you would hit the ball 30, 30 percent of the time or his batting average was 300.
Right. But he would sit and he would wait for his pitch. And because he waited for his pitches. His hitting, his batting percentage was much higher. That's how I feel about business is like, could it be successful? Could Ted Williams have hit in these other zones? Absolutely. He could have hit in those other zones, but he knew his fat pitches and he stayed disciplined to his hitting philosophy.
Warren Buffett uses the same philosophy, except it's an investing. He knows what his fat pitches. So there's lots of opportunities he could have invested in. He could have made money, but he's like, no, no, no, no. This is my core strategy and this is my core criteria. And that's where it goes back to what we're talking about in the very beginning is you look at these deals and you start to convince yourself that it's okay.
Oh, this might be the exception. It just might work for us, right? Like that's the question that comes in your mind and you're right. It just might hope is not a strategy. [00:40:00] And especially when you're buying your first business, you need to be as sure as you reasonably can be that it's going to be successful.
And then once you have secured the bag for yourself or your family, You can take more risks if you want to do that. If you want to do something that just might work for you this time, go for it. Like that's your prerogative to do that. But the first time, the first business don't make concessions. Don't try to be the exception to the rule because most of the time the exception is not proven.
The rule is,
Brien: yeah, I love that analogy. Know your hot zones and know your cold zones and wait till you find something in the hot zone. Cause if you know, you bet zero on high and outside pitches, Don't swing at them. But if you knock them out of the park, middle in, go for it. It makes total and complete sense.
So that as a perfect analogy, as a baseball nerd, anybody watching the video on this, you'll see all the. Baseball paraphernalia I have behind me, but all right. Well, I love this stuff. I, this, and this applies to entrepreneurship, obviously across the board. Nick, I want to make sure I honor your time. I'm sure you have multiple [00:41:00] meetings coming up on your day here of many successful things that you're working on.
So
Nik: successful.
Brien: Oh, I love it. I love it. As we start wrapping it up here, I want to ask you in all your years of entrepreneurship, what is, if you could distill down what you've learned? To a single piece of advice for our listeners out there today, whether they are aspiring entrepreneurs just about to start, maybe they're a young entrepreneurs just started, or we've got plenty of listeners who are established entrepreneurs.
What is a single piece of advice that you could give that could leave some inspiration for our listeners today?
Nik: The single piece of advice I would say is be humble, always be curious, always be asking questions, never assume you know the answer, even if you think you know the answer, do the research. Like there's just.
So much power that comes with being humble and asking questions. That's like broadly tactically, I would say if you're young and you want to be an entrepreneur, go spend a couple of years working for a corporate company and get experience, learn on somebody else's dime. Like there's lots of time for you to be an entrepreneur, but go get some experience first and [00:42:00] then translate that into being an entrepreneur.
The other thing I would say is once you've decided you're going to be an entrepreneur and. You know what your fat pitch criteria is. If you're going to dream, you might as well dream big, maybe go a little bigger than you thought you were going to go. And I know that sounds counterintuitive now that I'm sitting here like, no, risk mitigation, risk mitigation.
I still believe in risk mitigation, but I wish I wouldn't have sold some companies that I sold. I wish I would have bought some bigger companies that I passed on. I looking, I wish I would have bought a bigger house, you know, when I was looking originally, because unfortunately you can have a limiting mindset at times.
It's a hard balance, but yeah, I mean, I think Donald Trump said it. If you're going to dream, you might as well dream big. Now make sure you have the plans to back that up, but those would be my three pieces of advice.
Brien: Speak softly and swing a big stick, right? That's right, man. I love it. I
Nik: love
Brien: it.
Nik: You are a baseball guy.
Brien: I am. I am. And, uh, I'm partial to Teddy Roosevelt too. So there we go. Ultimate, a lot of presidential [00:43:00] quotes here today. Well, Nick, you've been very presidential. You've just dropping knowledge nuggets left and right here today. I want to make sure that our listeners have the ability to reach out to you, to follow you, to keep gathering these bits of knowledge from you.
How can we get a hold of you? Where can we find you? What's the best place to do so?
Nik: Shoot me an email, Nick, N I K at cofounders. com. Check out my podcast. It's called Nickonomics, N I K Onomics. And you can follow me on Twitter, cofounders, Nick. So I'm pretty active there. If anybody has any questions or It feedback that I really blew it on here.
I
Brien: love it. That's co founders, Nick and IK, and I've got to put in a plug for your pod. Cause now it's like shooting to the top of like my favorite pods. I'm listening to, I think you and I can nerd out on about the same stuff here, but you have a plethora of awesome guests that you bring on there. So guys go out and check out the Nickonomics podcast as well.
I think in tandem with millionaire university, There's just so many things that can be learned [00:44:00] and absorbed. And Nick, you're a gentleman and a scholar. Thank you so much for joining us today.
Nik: Thanks for having me, Brian. Pleasure.
Brien: And there we have it, my friends. Nick Kuluski spitting some hot business fire.
It was a pleasure having him on. And guys, as a review, The five frameworks that he mentioned, one being risk profile, personality type, experience, skills, and capital. If you keep these things in mind and run through them, whether you're just starting out your business, maybe you're in entrepreneurship and you haven't done this before.
Use these frameworks to decide what it is about yourself that you know, or that you need to discover so that you can use it and go forward and do the best that you possibly can. In business. All right, folks, that's going to be it for me. But before I sign off, I want to ask you to do two things. If you enjoyed this episode, and I already know you did, so go ahead and hit the link button in the episode and send it in a text message to your best friend, maybe a family [00:45:00] member or a business partner.
If you think that they would enjoy this episode as well, please share it with them. And number two, if you haven't already, please go to millionaireuniversity. com slash training and pick up your free business course. This has all sorts of information that will suit you, whether you are an aspiring entrepreneur.
A current entrepreneur or years long entrepreneur. There's so much stuff in this little free course. That's going to set you on the right path or maybe correct the path that you're currently on and get you to the promised land a lot quicker. So folks, thank you again for joining us on the millionaire university podcast.
I cannot wait to welcome you back to our next episode. I hope you all go out there and absolutely crush it today. We'll see you next time.
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