David Royce Went from Door-to-Door to $500M - This is How | Ep 215

0:00Hey everyone, welcome back to Founder Story. Today we have a special guest because it's the first time that this person is an entrepreneur or serial entrepreneur or serial entrepreneur or serial entrepreneur. I mean, you've done incredible things, building a company with$500 million in revenue, fastest company in America, many times buying companies, exit companies. And now you're on sabbatical as an entrepreneur, which I think is almost the dream of everyone. I think every entrepreneur dreams of one day doing that and you've achieved it. So I can't wait to dive into every learning, every experience you've had.

0:38But first, David, what was the spark for entrepreneurship and then why that specific industry? Yeah. So it goes all the way back to college. I was a starving student working my way through college, trying to figure out how to pay for college. And I had a friend come to me and say, hey, what are you doing this summer? I went out last summer to Northern California and I sold pest control services door to door and I made about 25 grand. And that's about 24, 25 years ago. So that's about$50 ,000 in today's money. And I thought, dang, for a college student, that sounds amazing. And so I went out, I had no idea what I was getting myself into.

1:17Went out, drove out to Sacramento, California. And I was horrible as a salesperson when I started. It was a disaster. I didn't sell anything for the whole first week. Other people are selling one to four sales a day. And I got really worried. I went to a Barnes and Noble, for those that don't know, it's a bookstore. I bought like maybe half a dozen sales books and I just started reading for about an hour and a half every single day to try to figure out how to do this. And something clicked. And by the end of the summer, I was the top rookie in the entire company. And then the next year I went up, I went back again because I was so successful.

1:55I managed a sales team and I went to work for a smaller company and the smaller company didn't have a training manual. And so I actually asked the boss, I said, Hey, do you mind if I write a training manual. I want my team members to do really well. And he was super impressed with that. And by the end of the summer, our sales team had sold about twice as much as the other sales teams that he had. And at the end of the summer, he goes, hey, how would you feel about becoming the director of our sales program, becoming a vice president of sales? You create all the training and I'll give you a cut off every single person of a company if you get them to sell similar to how you guys sold at the, you know, that previous summer.

2:32And so I was like, yeah, that's amazing. By the end of my college career, I did it for another couple summers. I made 225 grand. So it's like almost half a million dollars in today's money. Like that's how much I was making per year doing this job. I had about a hundred salespeople that I recruited, trained, or overselled the management of. And guess what then? I go to my boss and I'm like, hey, I want to get into investment banking. I've been studying finance in college. I'm about to graduate. And he just looks at me and goes, what are you doing? Why on earth would you go work 80, a hundred hour weeks for somebody else?

3:09You're so good at this. You should go start your own business. And it hadn't even crossed my mind before. I thought, well, it's not as sophisticated. I've been studying. I'm a college graduate. Investment banking was the thing to go do if you could get that job in business right out of school. It paid the most. It was a total grind. But yeah, it took me a while to come around to it. It was a complete 180 from what I thought I was going to do. But I realized I had learned the business really well and he was actually selling his company and going to take some time off. So yeah, I ultimately decided to go for it and started my first company in Southern California.

3:45Fascinating story. It's like an accidental entrepreneur, no intention to do so building how important do you feel it is then for people to work at a job or work in some sort of industry and then become an entrepreneur because we we have we have both we have some people that worked then became some people that never even had a job that are like i only want to be a business owner but i am a big proponent of working for a company and learning skills but how was that how important was that for you i'm 100 behind you absolutely like there's no I don't think there's any substitute for real world experience, especially in an industry.

4:21I mean, I know I would be much more willing to invest in a company where the entrepreneur had already worked in that industry because they already know what they're doing. You're not paying for them to learn on your dime per se. Here's a good example. Well, 80 % of businesses, I think, fail in five years. That's typically the stats I hear. But franchises, right? It's like those numbers flip. Only 10 % to 20 % of franchises fail. And the reason is they already have their best practices set up. They already have financial targets. They already have the key metrics that you're supposed to be following from an operations perspective.

4:58And it totally de-risked the business. And so if somebody has experience, especially if they go out and they become really great at that industry, the transition is not that hard to go start a new business. So yeah, I totally 100 % agree with you. So you start this company or you buy this. Did you buy the company from him? No, no. What I did initially, he tried to get me to go just start my own company. And I was definitely worried. I was concerned because I knew the statistics of the likelihood of success in starting your own business. And so then he said, well, what if I invest into you as a silent investor?

5:30Then I said, okay, that's great. I could grow faster and make more money. and then he said, when he sold his business, he just sold off the assets. He actually kept his company name and he sold off really just the customer base and the technician base. He said, hey, if you want to even take the company name, you can license the company name from me and go start it that way. I used his company name and then used his money to go start my own company. What a unique approach. I really like that. It really is the accidental entrepreneur. So fast forward to you starting to see success. When you get to that$1 million, let's say one, two, you know, two or$3 million revenue, what did you have to change to get to that point?

6:16You know, for us, because I already had the model, I mean, we hit$2 or$3 million the first year. Like we were running super, super fast. And that was one of the reasons I realized, initially I realized I needed growth capital. But then we almost went bankrupt the first year because we grew too fast. But we have to pay out commissions in advance of all the revenue coming in. And I actually had to go to some of my top salespeople and say, hey, can I hold off a couple months to pay you? I'll pay you 10 % interest on your money, but I need a little bit of time to be able to get that to you. Otherwise, we just did a lot better than we had anticipated originally.

6:52So money is so key in growth, right? And it's one of the reasons why that first business, I realized I had to sell the business in order to get the money to grow even faster, or at least keep up with the same rate of growth and to de-risk any potential danger of going bankrupt again. Wow. Our first business was e-commerce. And no matter how big we grew, it looked great from the outside, but all of our money was tied up into inventory and all these different things. And it was very stressful. So what were those moments for you in terms of as you growing and as you started to learn the financials?

7:30Because I think a lot of companies, like the 80%, many times they're going out of business because of something related to finance. Yeah, I'd say that I had a unique advantage in my specific industry. Pest control is not a very sexy industry. I always joke that there's not a lot of MBAs running into pest control. And having a finance degree was very unique for somebody in that particular blue collar industry. And so having finance, I understood it. The thing I had to understand was how to take the foot off the gas a little bit to make sure that we didn't ultimately go bankrupt, that we could grow in a solid and steady manner.

8:04Then how do you find the capital to continue to do that? But that first company is very much like working in a lab too, right? Like you're learning the operations. You're totally involved in the day-to-day. You're still working, training the salespeople. But I was also very cautious not to be too engaged in the day-to-day. I wanted to kind of be overseeing it all, learning it, trying new things. I worked at the bigger company that I first worked at was a$100 million company. And so I had that experience in my background. And then I worked at the smaller company. And then I asked my boss too. I said, tell me all the things you would change or work on.

8:39Tell me all your problems so that I can go make the bottle better. And with those different things, and then also with my finance degree, I felt like I had a really great advantage to get a head start in the industry. And it gave me that confidence to build multiple companies and continue to scale. Do you think a big part of your success was humility? I don't know if you can, a lot of people, they may not listen to others, even those that are more successful because maybe they think they know everything, but it sounds like you were very open to feedback, to understanding. You were open to asking the right questions.

9:13Do you think that played a big part into the continued success you had? Yeah, I definitely do in the sense that I think only the paranoid survive. I know Bill Gates used to say that a lot. And there's always somebody out there with a better business model, making more money than you, smarter, greater IQ you than you have. And so I think you got to be, you got to stay calm, you know, and, and stay humble, uh, continually be looking for new ways to improve the business, no matter what business you are. You know, I've heard this saying that, you know, there's, there's three different, um, three different stages of business.

9:47There's a startup, there's a scale up and there's a screw up, you know, and it's like, how do you, how do you make sure that you, um, you know, never get to that screw up phase. And the way you do it is you continually to evolve. You know, I love the phrase, if you're not growing, you're dying. And if you think about it, like the fortune 500 list, I think it was created in 1955. And of all those 500 companies that are on there today, you know, 70 years later or whatever, there's only 10 % of the companies are still on that list. And so to me, that's like a real testament of you've got to stay on your toes.

10:20You have to stay on your game. You can't just rest on your laurels, no matter how big you get, because ultimately you don't want to fall into that screw up base, you know, become a dinosaur or potentially go out of business. Yeah, you mentioned the bookstore. I was driving by, I was in my hometown recently and I drove by where they used to have the video stores and I had to laugh. I'm like, oh my gosh, like look at all this whole places. None of these big corporations exist anymore. None of the retail stores, they're all gone. And I was really fascinated, but I liked that. Only the paranoia will survive.

10:50So when you became 100 million, three, four,$500 million, dollars, what had to change within you? And then what had to change within the organization? Yeah. So I'd say like when we were going from kind of a regional company in that a hundred million,$200 million range, and you're trying to become a real national player, the hardest thing was looking for really smart people to join the organization. Um, and the most typical thing I ever had to do was to switch out my original executive team and level up to experienced executives who had worked at billion dollar companies to come in and then help us go, okay, how do you scale, you know, at this level?

11:29Um, yeah, more than anything, that was really it. I think, you know, a lot of this, a lot of scaling is just, it's funny. It's, it's so simple in my mind because it's, it's taking all your best practices that made you great as a single location and it's wrapping them into like beautiful policy and procedure manuals, great training videos, you know, having a culture that you build out. Uh, but otherwise it's just, For us, it was just a bunch of trucks and equipment and chemicals and computers or whatever. So yeah, I guess I'm trying to remember where I'm even going with that. The scaling part's not so bad.

12:05It's really like the people, that's the most important asset you have in the business. Having great wins around you. Or from other people successful as well, like yourself, that the people that got you here are not the people that are going to get you there. And that's many times the changes they need to make. When you look at happiness and you go back to, you know, just out of college, what made you happy then? When, you know, you saw success in your business, what made you happy then? And then now you're on sabbatical. What makes you happy now? And what do you think changed when it came to what makes you happy?

12:40Really good question. You know, there's so many different stages in a business in terms of growing it, right? And in many ways, I was probably happiest in the early days when I didn't know a lot. And I was trying to figure out solutions to all these different problems and building and really seeing massive change. Because a lot of the change later becomes more incremental because you've really got your business model already dialed in. But it's almost like that thrill. It's kind of like when a basketball game is really close versus one team, it's a total blowout. The other team's killing them by 30.

13:14And you're like, all right. It's almost boring, right? You're going to go home early before the game's even over. We got to that phase. And so I think the most fun part is it's those early years that it's exciting. I do think that a lot of entrepreneurs, we get addicted to the dopamine hits. It's like doing lots of things, like working crazy 14, 60-hour days. I loved it. It was so much fun. For me, it's like a sport. That's my sport of choice was business. But when you stop, every time I sold a company and then had a gap in between the next one, you know, although I may have been starting to ramp up the next company, I definitely felt like a loss and I was bored and not as happy.

13:53Um, I've had, in fact, when I would take vacations, even when I was working, I had to, I couldn't like slow down. I like in the mornings I'd have to wake up and work three or four hours. Part of it was feeling like I had to set the example, uh, to other people, even when they weren't around. But, uh, I did realize too, it's just like you get addicted to the dopamine and feeling like you're productive. And eventually you kind of have to pull your self-worth out of that. Like you got to take your ego out of the business and go, Hey, I can just like, it's a good thing to be able to relax and just sit on a beach and read a book and be totally comfortable doing that.

14:29And so it took me time and I'm, um, I'm much better off now. Like I'm, I, I'm not like going through massive withdrawals. Um, I do have the, the excitement of, okay, I'm, I'm curious about what's next, but I've told myself I'm going to take at least one year off to really be intentional about it. Think about it and, you know, no rush. I've heard this before from people as well. When they sell the company, they really get depressed and they, you'd think that would be the happiest moment that they hit success. They're financially free, but yet they get quite depressed. Um, I also like what you said, almost ignorance is bliss.

15:04It's, it's almost better to not know what to expect when you're younger, when you're in the, Like if you knew how hard things were going to be in the company, you may not have done it from the start. I am really interested to burnout. There's a whole topic now around can an entrepreneur be really successful and really navigate not working too much? Is it even possible? Some say, yes, you can do that now with technology or outsourcing or whatever. And then others say, absolutely not. If you really want to see a huge level of success, you are going to have to grind 24-7. Yeah. I would say I never got burnt out because of the work.

15:47I loved work. In fact, the only reason I started to slow down was to start out of the family and start having children. And my wife really needed somebody else there. It's like, hey, can you come home a little earlier than 9 or 10 o 'clock at night? We had this really crazy lifestyle where we got married pretty young and we were married for 10 and a half years before we had children. And she was a securities fraud litigator. She went to law school and then was a lawyer for a bunch of years. And I was working, you know, building companies. And so it worked out perfect where we could both really focus on our careers.

16:17And then we'd come home, you know, late at night, be together. And then once we had kids, like, threw it all up in there. It was a whole different ballgame. so um i think i think you can the the thing where i probably got burnt out the most it was certainly around after my my third business i just felt like i wasn't learning anything new so we had we'd expanded into maybe 2 000 plus cities um and i'm just like you know what like i'm not really learning that much i'm going to get myself even further out of the day-to-day i'm going to spend more time with my family i'm going to take some chips off the table and i'm going to have plenty and money to be able to grow the next business.

16:52And I'm going to put my CEO in place to be able to run that. So I think it's really important to know how you're feeling and not get completely burnt out to the point where you're just like, I don't want to do this anymore, but how can I still continue on with the business, put people in those positions to do the work maybe that I don't want to do if it's no longer helping me grow. You mentioned earlier about if you were to invest in someone, you would hope that they would be, let's say, working in their industry. Let's say you now are at a point where people might be coming to you, or maybe they already are because they want, hoping that you would invest into their company.

17:30For those people that are trying to get an investor, what do they need to know from an investor's perspective? Is it the right pitch deck? Is it proving the right thing? What specifically would you say are the things that you look for if you are going to invest with someone? I really enjoy investing in entrepreneurs who already have a track record. So that makes it hard for brand new entrepreneurs that maybe haven't done something. But if they have worked in an industry and they're like, hey, I want to go start this company. I was at the very top of what I did there. I can transfer that into a business.

18:05I just need the capital. I already see them best practices and that sort of thing. that made me much more likely to do that i think anybody can create a slide deck you know sexy high tech and we're going to make this much but the reality is is you bet on people you know not just best you know not just a business model because i think there's millions of ideas i think i think our business world is littered with um good ideas executed poorly right and so it's the team ultimately that you're investing in not really the product or service spec i think there's a lot our products or services out there right now that they weren't the very best product or service, but they had the best go-to-market strategy or the best team behind them and they made it work.

18:46Looking at yourself, thinking about other people that you know that have been successful in business, is there a trait or a few traits that you say, okay, really successful entrepreneurs typically have these traits? And also the reason why I say this is I am not the firm believer that everyone can be a successful entrepreneur. I think anyone can start a business for sure. But I really do feel like I wouldn't even say that I'm necessarily a successful entrepreneur. I always say my wife is just because I have a lot of hard times with dealing with some of the mental game in business. I'm just not really cut out for everything.

19:26But what would you say are some traits that you see that most successful people have besides being crazy enough to think of or being crazy enough to do something, remove that one, anything else that you think? Yeah. You got to be a lifelong learner, right? So reading is key and I have ADHD. So to be honest, I, I audible everything. Uh, every once in a while I'll find a book that I can't actually audible, but, um, I usually consume at least two books a month. And for honestly about 15 years, the only books I read were business books. So I read hundreds, maybe a thousand plus books at this point.

20:03And, um, you know, business is always changing, right? Like, so, you know, technology is changing. Now we have like AI getting integrated into everybody's business model, like softwares in the world, they say, um, but there's always new techniques and that's why you've always got to be evolving. So it's part of that philosophy of, you know, evolve or die. you've got to find ways to keep growing, to keep learning. And I don't know, if you have that attitude, I think that talent is directly proportional to desire. And so if you're continually passionate to continue to read or about your business or whatever, I think you can learn a lot of those skills.

20:43That's a big question. I know Andreessen Horowitz, for example, likes to really invest in entrepreneurs and try to teach them leadership skills so they can continue to actually run the business because they believe that the founders are the best people to run the business because they know it, you know, six plays till Sunday. So yeah, I think there's a lot. I don't think everybody can do it. You know, I think some people maybe lose their passion or just get like, let's run. When you realize you need to hire, it's usually already too late. I've been there wasting weeks waiting for decent candidates.

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22:30It's just like this obsession to continue to keep going, to keep learning. And if it's fun, you know, you're not going to stop. College was really frustrating for me. And honestly, all education was really frustrating for me until I got in my business classes. It was, you know, just really tough to like go to class and be excited to learn because I didn't understand how it transferred to the business world or how to make money in life. But when I got in my business classes, my economics classes, you know, my business law classes, and I couldn't get enough of it. It was great. I wish it had taken just four or five years of straight business because I feel like I would have been a better entrepreneur.

23:08I don't think you can judge people if they don't have passion for something. I think it's pointless. So I feel sad for everybody who goes to school or college. They drop out early like, this isn't me. And maybe just find what you're passionate about. I think we need more flexibility to be able to learn what we want to learn. That was me, David. I dropped out. My wife made me go back because she said she wouldn't marry me unless I had a college degree. I just wanted a license plate that said no degree on a Lamborghini or Ferrari. That was my goal in life. That's all I wanted just to prove the point.

23:43But I'm with you. I took two things away there. Really important. Desire. Desire. So important. How much do you want to win or how much do you want to succeed? It reminds me of if you look at the most successful athletes, they typically have more desire to win than the ones because their skills might be the same. But how much do you want it? That's amazing. This has been great, by the way. One last question for you is this. You have a class, you're at college. And the reason why I bring this up too is you mentioned college. And I'm glad you bring that up. I'm glad you bring up college because there's, I think a lot of Gen Z, I'm not sure if they want to go to college anymore.