Syed Balkhi’s Unconventional Wealth Building Strategies

0:00Alright marketing school listeners. This is a 20 to 30 minute segment of a full interview I've done with an amazing founder, entrepreneur, creative, visionary. You're going to get a ton of insights from this. And if you want to listen to the entire thing, go search for Leveling Up with Eric Su. That's the entire podcast that you're going to find. So you get 20 to 30 minutes here. And if you want the whole thing, you can just search for Leveling Up with Eric Su. And without further ado, enjoy the episode. In your own words, who are you? I'm a blogger. Yeah. Yeah. I blog and I help people build better websites.

0:40That's well said. You know one time we were at an event and People were introducing each other. This is at a private dinner and one guy walked up to Syed. This is Syed Balki everyone and Founder of Awesome Motive. He has a bunch of WordPress companies and they're like, so what do you do? And Syed was like I'm a blogger and then the guy immediately was disinterested and he walked away but I am a blogger right I do I started WP beginner which helps people build better websites using WordPress and WordPress is this open source software that powers 43 % of all websites on the internet so yeah I'm a blogger you and I look we're recording right and those that are watching on camera I am in shorts and I'm wearing slippers right now and we're in a hotel room so we thought we'd bring this you this conversation and uh because we've been doing this retreat for we call it the teleminati we've been doing it since 2018 or so yep and now we're now in 2024 and we thought we bring you some of these conversations over here so here sayed how do people have an exit every year in business you run a profitable business and you take draws i find it i i find it a little confusing i'm perplexed by some of the founders choices where they have no profit they're not running their business properly they're burning money and they're raising capital every time there is capital they dilute themselves and only at the end of the day maybe like eight years down nine years down the road they will exit and the amount of money that they make from that exit because they've diluted so much and with different liquidation preferences and so on five percent it doesn't yeah it doesn't turn out to be as as you know wonderful of a story but you know those big media outlets will never say this is what the founder walked away with.

2:23They will talk about what the exit size was. But most of the money in those situations went to the venture capitalists and the private equities or whoever invested under good terms, right? So I believe that most businesses are not going to hit venture scale. It's rare that you will make a Microsoft or Amazon or the Ubers of the world. Those businesses are rare. But there's so many more businesses that are wonderful businesses that grows steadily. And if you run them profitably, I think you would have more than enough money to live off. I mean, I don't have very much needs in my life. I'm a simple person.

3:05I have a beautiful family and that's what I focus on. I don't need to buy mega yachts or jets or anything like this. I told you I come from Pakistan. And for me, what I have, I'm really, really grateful for. And I think that to me is a way to exit. Run a profitable business. every year take a distribution yeah you know we so we have mutual friends where they're taking 20 30 40 million dollar distributions every single year and that's a sizable exit event every single year and the great thing is you still have the asset that you can continue to compound yeah absolutely and you you know when you build a business at that scale um you're able to deploy you're able to that that is life-changing amount of some buying assets yeah you can you can buy whatever you want at that point.

3:48But that is life-changing. And you can do a lot of good. You can give back to the world. You can donate to have philanthropy towards the causes that you want. What is your philosophy on masterminds, peer groups, things like that? Because I think for even if you're, whether you're an entrepreneur or not, it's something that's worth pursuing. Absolutely. I think one of the best ways to level up, at least what I've found in my career, is surrounding myself with high performers other like-minded people who are creative we're hard-working we're solving problems in a unique way and you can learn from their experiences and apply them in your own journey so I actually prefer this is my only way to network now I don't like going to those 5 ,000 10 ,000 20 ,000 people events because I feel you don't go deep you're you know on the surface and you're meeting thousands of people I prefer doing events like this where we're eight people but we're going deep and we're really talking about the struggles the challenges that you're having because they make a much bigger impact so let's say you're someone that you're like 18 20 years old so how does a teenager or early 20 year old start building a network I think you start following people that you admire that you're looking up to like when I was 23 or so 24 I discovered this value investor named Monish Babrai I read his book called dhandu investor and i followed all of his principles and so on and fast forward about you know 19 years um now i'm in a mastermind with him and we're in a small forum group and we've become friends and i've learned so much from him so i think you you start you know by following the people and then what you will find is you'll find other people that are following those same same people and the same principles and that's how you build your cohort so you know i have our cohort right here then i have you know a different group that i hang out with um that might be uh my mentors in some way or i would feel that you know i looked up to those guys and still do so and so for each of these cohorts can you define a little more like what are you getting out of this one what are you getting out of other ones because i think you need different masterminds or different groups or different things for for different situations absolutely yeah you know you're only going to get out of something what you're going to put in you know so that you have to be prepared So when we're coming and doing this Illuminati event, what I really like about it is that, one, we're all trying new cutting edge techniques, tactics, marketing hacks, business hacks.

6:22Because we're hackers, right? We all started with nothing. You started with nothing. I was 16 when I started using WordPress. And so we're very creative, and we have a unique way of solving problems. So my biggest thing every time I walk away with it is some cool idea that I can amplify. In my forum group that I am with, I am getting a lot of wisdom and life lessons and philosophies on bigger picture things of how you do asset allocation, how do you think about life, and how do you think about kids? I have a seven-year-old, and I think that's probably going to be my biggest contribution to this planet.

6:57Yeah, and your group, that forum group, by the way, it's a lot of great people in it. They're mostly capital allocators, right? Yes. And they're a little older than you right so it's a little different um yes and but i i do value the experience yeah and i think there's a lot of value you know to be part of that group i really enjoy the conversations and the energy that's there and the wisdom that's there is yeah next level yeah so from that one you get you get life wisdom you talk more about capital allocation this one is like you know we're entrepreneurs but we're also marketers right and then we're also around the same age too exactly so it's a little different you know we spent some time working out this morning too yeah so a funny thing is uh one thing i've learned is this right like you talked about following manish in your early 20s or so eventually you get to meet these people right like you and i like i messaged you when i was working on a company you were like 21 years old i think i was 25 years old or something um and then i was asking to do like an affiliate deal with you we did nothing happened there right but eventually like a couple years later we met up and then we met up at a mastermind too and i think the key takeaway here is like if you just keep putting one foot in front of the other every single day eventually you're all gonna cross paths if you give up any any certain point then you know you'll probably not cross paths with these people yeah i was listening to this uh tony robbins interview and something he said about you know steph curry and the amount of shots that he makes in private versus the amount of shots that he's made in his career and the ratio is so disproportional like millions of shot in private and then only a couple thousand shots that he's made and he's the world's greatest shooter.

8:29And the quote that he talked about that he said, and I was like, this is so powerful is that you're rewarded in public for what you do in private. And it was just like that, you know, you keep doing one step at a time and over long term compounding is probably one of the most wonderful thing that exists. By the way, Neil and I have an agency owners group called the Agency Owners Association. All you have to do, just go to marketingschool.io slash agency. Once again, it's marketingschool.io slash agency to learn more. And now back to the show. You had a phrase this morning, so we were working out, and it was the, there's a negative compounding phrase.

9:09What is it? Well, it was a mental model I was talking about that I came up with. I call it the frustration coefficient. and I think it leads us to make irrational decisions that will interrupt compounding unnecessarily and as the late great Charlie Munger said never interrupt compounding unnecessarily and the frustration coefficient it's as real as gravity you don't see it but it's happening and the way to think about it is let's say somebody did something and it made you a little you got a little annoyed you didn't say anything the next time that person did the exact same thing nothing different but your annoyance factor is x plus one and after that is x plus one plus one right so it keeps going up by a factor um and one day you just blow up and that can lead to a lot of negativity relationships getting broke and maybe you end up selling a business that you really loved um because you were frustrated about the wrong things your perspective on it and your attitude towards it was not right so frustration coefficient can be deadly and you need to be mindful about it so that's the situation where you should interrupt the negative compounding absolutely you need to practice radical candor and you need to you know be upfront and be transparent about what it is and you know clear the air yeah we talked about this maybe a couple years ago but what is the what is the right way for people to handle but okay let me Let me rephrase this.

10:37So let's say you have someone that you work with, right? They keep making the same mistake over and over. You learned over the years that it's not the right thing to blame the person necessarily. What do you do instead? Well, one is important to emphasize to the other person is that you're in the same team and you're working towards the same goal and towards the same mission. And when you approach the situation that way, it's no longer a personal attack on the other person. And when you're talking about, hey, I care for you and I am giving you this feedback because I want you to see you do better.

11:14So it's not about critiquing the person, you're critiquing the situation and learning from that situation and how we can do better. And that's what all of us are doing anyways, all the time. You know, it's interesting. It works, right? It works to an extent, but some people, they take it so personally still, even if you say you're attacking the problem. And then it's just like you just see them get more and more defeated others They get more and more motivated when you do flip it, right? Have you seen that happen? I think you know, it's hard not to take things personally because if Especially if you're a high performer and you take pride in the work that you're doing and if someone comes in and says Hey, you know there might be some opportunities for us to improve one You got to take a step back and say yes, everybody can improve and nobody's perfect And that's just sort of like your self-awareness at that at that level But when that happens, you have to stop, take a pause, and bring that centering exercise back.

12:07Hey, remember, I am not attacking you. I believe that you are very capable. You're a smart person. You're a high performer. And we're working on the same team. So our goal is not to tear each other apart. The goal is to tackle the problem head on and learn from the mistakes that we're making or the opportunities that we have to improve. And if someone says that they have no room to improve, I think you have an impasse. Yeah. Well, let's go with this one. So the air gets thinner as you continue to climb higher, right? And earlier we talked about the importance of masterminds and everything, but how do you maintain your friendships with other high performers?

12:44Because high performers like hanging out with high performers, right? Yep. I think you always have to have something valuable to contribute to a group. If you are a taker, over time, your circle will get smaller and smaller. But if you give unconditionally, what it does, it compounds goodwill. I think that's probably the most powerful form of compounding is when you're compounding goodwill in the world. Relationship capital. Relationship capital. um i i just say compounding goodwill because there's no um i'm not expecting anything in return if you ask me a question today about anything that's going on in your business and i you know share my perspective or my experience with it i don't own any equity stake in your business there you know whether you do that or you don't do that it has no impact on my personal life whatsoever but if it does end up doing positive for you i think the world would be better and And that's the way I approach it.

13:46And I think when you approach it that way, and a lot of high performers that at least I'm friends with have the same worldview. Right. We used to be in a lot of different masterminds, but now it's like, okay, there's probably one forum, you know, one like, you know, like a peer, like a reach founders retreat, like what we do over here. What did you, okay, in your early 20s, how many of these groups were you in and how many are you in now? You know, when I first started, I was going to every conference because you have to do that when you're in the early days. Nobody knows you. Yeah, nobody knows you.

14:17You're putting your brand out there. So I was going to a lot of events. I mean, that's how you learn what works, what doesn't work, what you like, what you don't like. I was on the stage. I was speaking at conferences, thousands of people. I was doing a lot of that. Like, I don't even remember. I've attended hundreds and hundreds, maybe thousand conferences over my career. Now I'm very, very selective about the groups that I'm in, the conversations that I'm having. I would much rather prefer to go on a one-on-one lunch or one-on-one dinner with a friend and catch up versus going to a 300-people event.

14:54I'd much rather prefer a 10-people event like the one we're at right now than larger ones. Yeah, and what I'm hearing is you want to go deep instead of wide. I think you learn more that way. When you are at an event, a large event, everybody's talking about wins, right? Nobody talks about failures. I think we learn more from failures than we learn from wins. I think one of our advantages at Awesome Motive or basically any of my companies is that we fail faster than other people. One of my companies is failing at something and another one is failing at a different thing. Another one is failing at a different thing.

15:27And it is my job to learn from those, combine that knowledge and distill it back out to all the different teams. I think that's probably our biggest advantage is we fail faster than anyone else. So let's talk about Awesome Motive. So what does that look like now? To me, it's a holding company of WordPress businesses, but you can go ahead. I don't like the word holding company, and it's actually not a holding company. What do you call it? It's a management company. Okay. Explain that first. So when I was starting out, all of our businesses are completely separate businesses because I believe that you cannot build solutions to solve problems that you don't fully understand.

16:06That's very important. So when one company tries to do 18 different things, they're terrible at all 18 of them. But when you put relentless focus and go deep on that one thing, you're going to build the best solution. So all of our companies are independent, independent leadership, independent operations, independent GMs, independent everything. No resource sharing going on in there. So ultimately what Awesome Motive is doing is it's a glorified management company where, you know, I will give advice. I'm an investor in many, many companies at this point. Some I own wholly, some I own majority stakes, some I own minority stakes.

16:47And yeah, so that's how I think about Automotive. Okay. And how many acquisitions, how many wholly owned acquisitions did you do last year? And what else? We'll start with that first. Last year, we did 12. We did 12 full acquisitions where I just bought the whole companies. And then I did four minority stake deals. I call them the growth fund. There's no other investor in my fund. So it's just my personal capital where I invested to acquire 30 % or more minority stakes. Yeah. And so why, I mean, people might ask, why 30 %? Why not go for a majority of 51 %? When you're working with founders, you realize that not every founder wants to exit the whole business.

17:37They're really committed to what they're doing. One of the investments that I did that we actually just announced earlier this week is called Groove HQ. It's a top-rated customer support software. Alex, the founder, believes that the work he's doing in Groove is his personal legacy. He did not want to exit. He had offers to exit to a private equity company. He didn't want to exit. Rather, he wanted a strategic partner that has the same values. I'm a bootstrap founder so I understand what the founders are looking for and not every founder builds the business to make it a Billion-dollar company that's not true vast majority companies are not gonna be billion-dollar companies So sometimes you're doing it a lot of times you're doing it because you're passionate about what you're doing And you want to provide for your family at the end of the day So we had a lot of alignment in terms of our life beliefs and so on and he just wanted someone who can offer street guidance, marketing power, and so on.

18:31And that's what we did. So I'm completely okay, you know, coming alongside another bootstrap founder. And it's actually something I wished I had when in the earlier days when, you know, if I had found someone, I probably would have done that because that would have helped me accelerate my growth a lot. I know how your frameworks work, but you feel free to share whatever you want to share here. But like in terms of, because there's so many companies here, there are certain things that you look at to stay on track or stay on top of things and then you'll proactively reach out if you know in certain situations so how does that framework look if you want to share it yeah I mean so every company is autonomous in that because I'm not a superhuman I have 24 hours in the day just like everybody else have it so the key is to have good fundamentals good rules good out you know good vision good annual planning we use EOS in a lot of our businesses and so you have a VTO which is the vision traction organizer.

19:25So those are like your guiding principles. And when there's alignment with the general manager or the founder that's running those businesses, it continues to grow. Of course, you have to make sure incentives are aligned, which is incentives and insecurities are the two most powerful forces that drive human behavior. So you have to make sure those are aligned. And after that, all what I'm looking at is the P &L. And I will chat with the GM or the founder, depending on how senior they are. Either I will talk to them once a quarter, i'll talk to them once a month um just to kind of be be add my input or offer any advice if they need it but you know if something is wrong in those metrics then i'll hop on a call and say hey uh what's going on here and you're looking at like it's like red light green light yellow light right pretty much you're basically looking at a scorecard yeah 100 yeah that's the only way you know you have it has to be color coded and it's not super fancy it's like a spreadsheet yeah and But all the spreadsheets are kind of all interconnected, right?

20:22Yes, they are. Yeah. You just said a powerful phrase. It's incentives and insecurities that are the most powerful driving forces in, I guess, in humans, right? So what is that? In shaping human behavior. Yeah. If you've ever built a website, you know how tough it can be to keep a strong design while ensuring site performance is fast. That's where Framer comes in, and it totally changes the game. Framer is the design-first, no-code website builder that lets anyone ship a production-ready site in minutes. I recently built a custom landing page in just a few hours. Animations, fast load times, responsive layouts, all without writing a single line of code.

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22:35Go to shopify.com slash marketing school, shopify.com slash marketing school. So most things that we do are driven by an incentive. So for example, if you're working out every morning, like we did today, that's because we want to live healthy. That's an incentive. But what's the real incentive? We want to live longer. We want to have a better quality of life. So those are the incentives. Now, for some people, it might be that their insecurities might be driving it. Maybe they're like, I want to look good. Maybe they don't think that they look great yet. Maybe they're like, hey, I want to fit in better clothes or, you know, shape-fitted clothes or whatever.

23:16So it could be insecurities. It could be incentives. But almost always, those are the two driving forces that are shaping human behavior. And I actually believe there is a thing called an insecurity score. Oh. Okay. and it's invisible just like the frustration coefficient so you will have in your company and you'll find this is you have someone that's a very high performer and at their job and you both agree that they should be promoted because of course you want to reward your team members and you want to help them grow in their careers and they go in the next role and they're crushing it and then they go in the next role they're crushing it and then they go to the next role and all of sudden the performance just hangs and you wonder what happened what really is going on sometimes maybe you hit the ceiling and maybe they're they're not skilled and you know maybe you gave them a little challenge too big at which point you can identify those but what I have learned a lot of times it is around insecurities the you know they feel more nervous the responsibilities are too high the fear of loss gets so much that it takes away their confidence and they're not making those decisions that they were making before at the same fast pace, which is, you know, hurting their output.

24:33So I call that the insecurity line. And then you need to make sure, okay, you make a fair checklist at that point. What are you afraid of? And you write those things down and you figure out how you can eliminate those so they can continue to make those decisions faster like they were doing before, so they can continue to be a productive member of the team. Can you share a story? You don't have to give names, obviously, but share a story about how you did this because it sounds interesting I'd like to hear an example yeah for sure so I mean we at all of my companies I really believe in promoting from within because I believe someone who's been with you for a very long time they should be rewarded they understand your system they should continue to grow with you because what I would like to do is build a generational company I want to work with people who I enjoy working with for the rest of my life and I want to keep doing it till I'm 90 94 generationally is like till you die basically pretty much Generational to me is pretty much that.

25:25Generation, I guess, is defined like 25 years. Okay. Right? That's like the definition of generation. So I want to build a generational, so multi-generations. Who knows? Maybe our team members' kids are also working at one of the many companies that who knows how many we own at that point, how many I own at that point. So as we're promoting, you know, one of the people, real rock star, let's say in marketing, real, real rock star. And we say, okay, hey, now you should lead a team. Instead of going from an individual contributor to a team. There's some roadblocks there. Oh, well, should I, like, you know, they're great at individual tasks, but not okay with giving feedback.

26:06So you need to, you know, provide them with training and so on on those things. But then there's insecurity, like, hey, this was my peer before. And now the dynamics have changed. And I feel that if I give this, you know, feedback to that, my relationship might be, you know, broken. and that's insecurities. Yeah. Because you're negotiating with yourself at that point. Yeah. You should never do that. And... So is this something, by the way, like it sounds like this is the insecurity score. It feels like it's helpful to refresh for everyone in the company every quarter or something like that. Yeah, especially if you're a manager and you have teams, you need to be on the lookout for that, you know.

26:45And this is one of the things that EOS helps with. If you have the L10 scorecards, which is a level 10 meeting, if you read the book, Traction by Gina Wickman, talks about that but um if you have those scorecards in the accountability pieces you will know when someone is a high performer they drop usually when when the performance drops for a high performer it's because something external has happened um maybe something's going on there in their life maybe maybe something you know is impacting maybe the role changed this environment changed uh and you need to be aware of that and when you you know double tap on that double click on that and so is Is that you doing it?

27:24Because us as entrepreneurs, we're not the most empathetic people. But I have your personality score. I have mine too. I don't know how empathetic we are. But we build frameworks. So who does this for you? So I have to work myself to do this. I'm a very straight shooter, right? I like to say I'm a busy wig. What you see is what you get. And I have to work on that and make sure that when I'm presenting the feedback or giving someone feedback, I'm conscious of the feelings of the other person as well. Well, but what's the most important part is that my goals are aligned with the other person. I care for the other person deeply.

27:59And I want them to succeed because if they succeed, that's how we succeed. So one of the things that I believe is that I believe people should win. I believe people deserve more. I believe they should win and they should win more often. and you know those are my personal values and that's what are defining everything that we're doing and i think these are universal truths actually these are not even values these are universal truths that are going to be that were true 50 years from now 50 years ago they're true now they'll be true 100 years from now dude that's very presidential of you you weren't born in the us right yeah president governor though one powerful thing that you said was the phrase you use is people people should see acquisitions as paid media what do you mean by that oh that was a private conversation that we were having earlier yeah I was talking about there was a big shift that happened in my career so i'm a blogger um which means you're you know your founder you're entrepreneur you're running a media company and as much more than a blogger as they call it these days you're a content creator you have a media company winner at the end of the day you're blogger um so so i was an entrepreneur i built one software company um and there was a shift in my mental mindset was going from an entrepreneur to a capital allocator.

29:26And I learned this from Warren Buffett, right? And one of the things he said is that I am a better investor because I'm a businessman and I'm a better businessman because I'm an investor. So at the end of the day, all you're doing as a CEO is you're allocating capital, whether you're allocating it towards hiring, whether you're allocating towards marketing and whatnot, right? So when you start thinking about um cac and you're spending paid buying paid ads um some of the companies are spending like forward revenue on cac right four or five cac and um at which point i think buying an adjacent company is far more lucrative because um most businesses don't trade at super duper high multiples that you might read on tech crunch or whatever right most businesses trade at normal valuations um And when you do the math, the capital allocation towards acquisition of adjacent businesses work out to be better than PPC.

30:26Go on. It does. So example, example, you know, let's do simple math. Let's say you're spending$100 to acquire a business, okay, and acquire a customer, but you're, you know, but you're making$50. so you're spending two years because you know the customer is going to expand in value or whatever you can buy a business at two times revenue that might not be growing but they already have all the customers that you have because there's only three ways to grow a business if you're especially if you're in a subscription business there's only three ways to grow it you can get new customers you can expand your existing customers or you can reduce churn like there is no other growth levers everything else falls in between these buckets uh and when you say okay well new customers how can you do it you can make youtube videos you can um buy ads you can do content marketing means there's a zillion ways but probably the best way is you can just acquire another business you buy a company and then you can expand those customers too if you have adjacent services and products the the the math works out to be much better yeah