David Royce | From Door to Door Sales to 5 Companies Sold for Over $1 Billion

0:00The pest control mogul. This man right here has built and sold five companies for over a billion dollars. Is that correct? Uh, I have an NDA, but yeah, I think that's a safe assumption. That's a safe assumption right here. A lot of people are very focused on, you know, hey, I want to own a restaurant because it's sexy. They have the highest failure rate and the margins aren't that good. Horto potty businesses, they've got great margins and they're scalable. I don't want to just be a pest control company anymore. So I started studying companies like Google and Meta. I started taking ideas. I'm like, you know what?

0:24Nobody else in pest control even thought about this.

0:26David Royce: young, hungry entrepreneurs who can learn a thing or two to level up their sales game. I got to hear it from the master himself. Totally. So, is key. When you're talking to people, your face is telling them, please don't hurt me. Confident people, they let the person know, like, I'm not afraid of you. And there's no reason for you to be afraid of me. Let's just have a conversation. And if you don't want to do it, it's cool. Just go to the next person. Wow. So, second thing, a system I developed called the RAC system. So, resolve, ace, I hadn't heard that last part. Haven't, yeah, I've not heard that one.

0:54That's RACs. That's great. Yeah. So if you really, really want it and you put the time in, I promise you that's, it's a whole different game from then on.

1:05What's going on, everyone? Welcome back to the School of Hard Knocks podcast. I'm James. I'm here with Jack and Josh, and we are sitting down with an incredible guest for you all today out here in Los Angeles, Mr. David Royce, otherwise known as the pest control mogul. This man right here has built and sold five companies for over a billion dollars. Is that correct? I have an NDA, but yeah, I think that's a safe assumption. That's a safe assumption right there. First of all, congratulations on your success. You had an incredible career in a niche that I think is fascinating to learn about because we've never even had somebody on this show that's been in the pest control business.

1:39I want to get you started, David. What was the biggest thing you had to sacrifice to build a billion dollar company? Gosh, I think it's just time and money, right? You hold off. When I got into it, I threw all of my savings into it and it really wasn't profitable for about four years. until I was able to say, okay, I'm actually making, you know, say a six figure income at this point where I paid back what I initially put into it. So yeah, just, you know, in time, right? Like 16 hour days for almost a decade, but that was a personal choice. Like I really wanted to go, go, go because I had this strategy of before I have kids, I want to put all my time and I want to create a lifestyle for myself.

2:17And then during those four years, like what were you telling yourself? Because like you said, it took four years for it to become profitable. You know, I always think about like everybody sees year 20, but they don't want to go through year one. What were those first couple of years like? And like, what were you really telling yourself? The nice thing is I had experience and it's one of the things I tell everybody to go do is go get experience in whatever you think you might want to do and see if you like it, if you're any good at it. And I was really, really good at it. I had no idea. I was a broke college student working a minimum wage job.

2:47And I had a friend pitch me and say, Hey, I made 25 grand last summer doing the sales thing for pest control. And I was like, great, whatever it is I'm in, because I don't want to work anymore during school. It's too hard to get the grades. And so I wouldn't do that. I fell into it. I was really good at it. I was horrible at first. I didn't sell anything for five days. Everybody else around me is selling one to four accounts and little by little, I was able to figure it out. But then I was top rookie by the end of the year. I was writing sales training manuals and overseeing the entire program and hiring a hundred different guys to come out and work for me in the summertime.

3:19time. And then I took all those savings and threw it into it. But I knew what I was doing by the time I went to go start my own company. And so I had taken finance in college. And so I understood financial models. I still almost bankrupt the company in year one. But I at least had that idea of saying, look, this will pay off in time. I've got to stay focused. This is what it's going to take to initially put in the capital. But I knew that the value of the business, although I wasn't pulling out money, I knew that the value of the overall business is worth over a million dollars in year one. And so if I could continue to make it profitable by adding more customers and paying off the sales commissions by year four, I ended up selling that first company for Forbes had 13 million bucks.

4:02And yeah, it was a whole different game from then on.

4:04David Royce: So you started in door-to-door sales earlier in your career and quickly rose up the ranks at that initial company that you worked at. I know we have so many people that watch this show. He's not the only door-to-door salesman at this table. I know. That's right. We got Jay Smith over here. That's right. Hey, that's where he started off right here. 28 today. 28 today for the birthday man right here. Yes, congrats. Thank you. But I know we have a ton of people who watch the show who need to get better at sales. And for you, what were some of those initial sales tactics or just lessons that separated you from the pack that people watching could really take into their companies or I'm sure there's a bunch of young, hungry entrepreneurs or intrapreneurs that are watching this show who can learn a thing or two to level up their sales game.

4:54David Royce: So I got to hear it from the master himself. Totally. So when I had sold zero for five days straight, I went to a bookstore that weekend. You know, I'm just bumming going, okay, I got to figure this out. And I bought half a dozen sales books and I read 90 minutes every day. And there are so many things you can learn. What's cool about commission sales, although you make zero unless you sell something, you have that ability to improve and to make more money. It's not like an hourly job where you just, it's almost like you're trained to work as little as possible and still get paid. So it's complete opposite.

5:27The main thing I realized from day one or when I finally started setting up on sales was that I just wasn't closing correctly. Like I'd go through my couple minute presentation and then go, so what do you think? If you do that, the customer usually mirrors you back. They're like, I don't know. So closing was key. I started out with option closes, I think, when you met me on the street. We talked about that. But it's just like, hey, we're going to be here today and tomorrow, what day would work best for you? And both are moving the customer in the direction of the sale as opposed to, so what do you think?

5:58And they're like, yeah. The second thing was a system I developed called the rack system. So resolve, ace, close. versus if somebody has an objection, you got to make sure you have a rebuttal ready to go. But not just one rebuttal. This is where a lot of people make mistakes. You got to have at least two or three ready to go because it may not be enough information for them to go, yeah, okay, that's good.

6:21David Royce: They might object your rebuttal to their objection. Yeah. They might still say, no, but what about this or this? But it's really the same objection. So what I would do is I would resolve the rebuttal or at least give my rebuttal. The second thing was I would have an ace. I had, it usually had four aces, like I got a deck of a cards. I had laid down something new that they hadn't heard yet to get their mind off, you know, of the, of the objection that they had. And then I would close in a different way. So I'd usually have four different closes and I would try one, a different one, you know, each time as I went through.

6:53So if they still said, I still don't. And they come back to that same objection, then I just, you know, have a different rebuttal, have a different, But, you know, a second lay down and then a different close.

7:03David Royce: Do you remember what those closes were? Obviously, the option close was one that you've highlighted in our previous interview. Do you know what some of those other ones were? You know, another one might be, you know, when I come out here tomorrow, I'm taking care of your neighbor, John, and we're going to get all these spider webs and wastes off of the eaves. Would you like me to go ahead and take care of that for you as well? Just nod my head. My favorite part about this is when I'm doing the neighbor, you know, he's doing the hand motions and everything. That's muscle memory, right? Yeah, yeah.

7:33That's actually my third thing I was going to bring up is body language is key. For a lot of the sales reps, I wrote a script, and it's about two minutes, and I would tell them the script, it's not the script that is messing you up. It's that when you're talking to people, your face is telling them, please don't hurt me. You're like, hey, how are you doing? They're kind of deer in the headlights. Don't reject me. Yeah, it's just timidity, right? Because you show up at a door, and they're all straight cold calls. And a lot of the times the person does not want you at the door or they're in the middle of dinner or they're doing something and they're trying to get you off the doorstep and they don't even know what you're selling.

8:05Right. Yeah. And so you're trying to find a way to just calm the situation, you know, build some trust very, very quickly. And then he explained. What you're describing right here is what we call delivery. Whether you're creating content, whether you're selling, right? Like successful people, people that want to buy, they want to buy from somebody that is clearly confident. They know what they're talking about. Absolutely. Do you have any tips, though, on how somebody can enhance their delivery skills to where, you know, the body language is optimized for them to, you know, get to the sale and get to yes faster?

8:34David Royce: Come off more confident, those sort of things. Yeah. So confidence is body language and it's also paraveral communication. So the way you say things, right, it's a lot of people think of stereotypical salespeople. They speak really fast. You know, they speak really loud because they're trying to control the situation. and confident people, they don't have to do that. Like they're slow there. They speak like a friend, the other person, you know, they smile and the head nod as they talk and they let the person know, like, I'm not afraid of you. And there's no reason for you to be afraid of me. Let's just have a conversation and you don't want to do it.

9:06It's cool. Just, you know, go to the next person. So, uh, smiles and head nods are my two favorite things. You know, obviously a smile makes you very confident, but there's also a lot of psychology behind it, right? So when you smile, you actually release dopamine and you feel good. But when you watch somebody else smile, you feel dopamine as well. And customers are trained to mirror you. That's just what humans do. So if you smile, I'll smile back and we start having this back and forth thing where we both feel good. And as I explain the product, you actually feel good. And then you associate, I feel comfortable with this person.

9:38I like the product, but really there's this whole thing going on behind the scenes in terms of how we feel about it. The same thing with the head nod. Head nods are small little yeses all along the way. So if I say something, hey, my name's Dave, and I'll nod my head, you nodded your head right back to me, right? And so now I already can tell that you're okay with me to a certain degree. And I might look out and say, you know, we're taking care of this neighbor and this neighbor. And it's mainly been the spiders and the ants. I'll nod my head along with it. every single head nod gets you closer to a yes by the end of your presentation uh we just feel like we're in agreement agreement so one of the things we were talking about before the podcast is my background is also in door-to-door sales yep and i said that a lot of companies do a terrible job of recruiting new sales reps canvassers for door-to-door sales and my theory is is because the opportunity isn't big enough, but you've created sales organizations built around pest control that make millions upon millions of dollars.

10:44What is different about your organization and why people want to sell for a company like yours versus the rest?

10:51David Royce: Basically, before we started this, we even said the pest control mogul, but you even said really a lot of it comes down to the sales team. It started all with the sales program. That was our unique niche. We could grow seven to 10 times as fast as the traditional pest control company that didn't have a door-to-door sales model, that maybe it was just doing digital or just, you know, getting referrals or whatever else. I think the number one thing is training. If you don't train your people, you can't expect them to do well. And this is a major fault for most corporations in our country is they have this wet rag mentality.

11:24They say, let's hire a bunch of potential salespeople. We'll throw them against the wall. We'll see who sticks. and you know if they can't if they don't stick then they just leave and we've got who we've got the problem with that is that you get horrible employee reviews as a result two your sales people don't sell as well so how do you expect to be like number one if they are the number one sales trained team um and then three would be hiring when you're hiring you really got to be able to kind of sift through everybody and ask them like show me something you've done that was really hard in the past.

11:56And either they have experience in sales or they have experience in something like leadership that shows that they at least, you know, have the basic, if they're not just total, like you can mold them into a great salesperson. They got the fire in the belly. Yeah. They got to be hungry. That's for sure. Do you think if a company is hiring for door-to-door closers, should it be primarily commission only? Or are you a fan of base plus commission? Commission only. Why? Because if... You eat what you kill. You eat what you kill, right? You have to do it. Otherwise, it's kind of like, well, you can just go through the motions.

12:32But those people who make the very most, they're on commission only. And they want it. They're like, no, I don't want this. I'll make less if you pay me a salary plus a commission or a base post commission.

12:42David Royce: So, David, obviously building great sales programs and sales organizations was a big key to your success as an entrepreneur. But I want to get to more on the operation side of things because you've had multiple exits in the pest control space. And so what else for you outside of just like building that great sales team was so key for you to be able to run this play multiple times and do it bigger and better every time? I think even a better question would be is like, what's something at each stage for each of the companies that you founded and exited that you took away from that experience that led to the success of you getting to that next level?

13:21Yeah. So the first thing was the model that I structured and the deals. So it all goes back to my first year in business. I almost bankrupt it. So I thought we were going to maybe put on 4 ,000 or 5 ,000 customers. We ended up putting on 7 ,500 customers. and you have to have a certain amount of cash built up ready to go to pay your sales reps because what you're doing is you're paying them a percentage of the whole year, but you're paying it up front or you're paying it in portions, but you're paying out more up front than you're actually taking in. So kind of like the pest control guy said in your video, right?

13:55You got to bring in more money than you actually spend. So yeah, I almost overspent. So I had to go to a few of my salespeople and say, hey, can I pay you later? I'll give you 10 % interest, but give me a couple more months to pay. We just did way better. Because they had such a great experience, and I had trained with every single salesperson on my own as well, they were happy to do it, and they were all coming back the next summer. So I realized really quick that, hey, I might have a problem. They say revenues are vanity, profits are sanity, but cash flow is reality. And so I'm glad I learned that lesson early on.

14:27I hadn't heard that last part. Cash flow is reality. I had not heard that last. That's great. Or cash is king, right? I wanted to ask you, because I wish that we talked a little bit more about this in our last interview, but recruiting revenue was very important in the pest control business. Can you talk about how essential that was to having a longer lifetime value for your customers and generating that revenue? Talk about that. Yeah. So we literally, like, think of it like a gardening service, right? If you have a gardener come out and they treat your yard, get rid of your weeds for you, do you just go, okay, great, I'll call you back in the future whenever I need you?

14:58I mean, you don't. you have them come out probably once a week, right, to maintain the yard because the weeds are going to come back and pests are the exact same way you can treat, but they're probably going to come back in a month, two or three months. And you could set people up on different programs to make sure it's preventive. What's ironic is, you know, the customers who had the least problems with us, they were our best customers. They stayed with us the longest because they didn't want bugs, you know, and that was the idea. It's like, it's kind of like an insurance policy. And if you see something, hey, call us, we'll come out for free in between services if you have our recurring service.

15:32And so that's key for money, right? Think of it like a SaaS business for software, right? If you're paying a monthly subscription or quarterly or whatever it might be - It's the most beautiful business. Oh, it makes it so great. And then you get paid a lot more when you sell business, right? Because you're getting paid a multiple on that stream of cashflow. So I would imagine that you only want to be in businesses that have recurring revenue. I mean, I prefer that. If I was just trying to find a business that I could do and make a lot of money, that's what I would do. I think today I'll probably be more focused on passion and philanthropy and other things, just since I've kind of made my money.

16:07But yeah, I definitely look for something recurring. Yeah. I wanted to talk a little bit more about, because Jack had brought up how one of your superpowers was bringing in great sales reps. But when we go back to the door-to-door days, David, whether it's you advising people or you going through it, one of the most common things people are going to face is a ton of rejection. And I think that it's easy enough to see you now, right? And the success that you've had, the companies that you've sold, but I'm sure that you've faced so much rejection. You have to advise people going through that. So I remember when we interviewed Kurt Lenington, who's a Dallas entrepreneur, he sold a roofing company for hundreds of millions of dollars.

16:40And his saying about rejection is that anytime you're rejected, they're not rejecting you, they're rejecting your offer. Do you have any mantras or things that you live by when it comes to rejection to be able to persist through the hundreds of rejections a day that I'm sure that you were getting at some points. Yeah. So our average is we knock about 150 doors in a day and maybe a third of those homeowners even open the door, you know, for whatever reason, they're just not home or they see you and they're like, nope, not this time. But, but, but, but I'm sure. Don't take it personally. But I'm sure though, out of that two thirds though, you got some people like Josh starting to get the gun and pull it out on you.

17:14You get some wild stuff out there. It's not as common as you think. Like most people are pretty polite, but every once in a while you get something. But when it does happen, though, I'm sure that you're questioning, man, what am I doing, man? Like, did that ever cross your mind? Yeah, when you first start out, you know, and you're new to it. But there's a lot of things that we did. So, like, we used to actually keep track of every door we knocked. In fact, it was kind of like, think of a pen on every single home on Google Maps. And we would literally mark the home. We'd write what the objection was.

17:42You know, we'd keep track of all this data. So smart. Yeah, and the nice thing is it would count how many homes you had. And we just said, look, this is a numbers game. If you knock 150 in a day, statistically on average, you're going to close about two and a half customers. Like that's what it'll pan out to. And then of the two and a half, two customers are going to get serviced, you know, maybe the following day. And just get a, you know, keep in it, keep your head in it. So if you don't sell anything and you've gone for 74 doors, more than likely on the 75th door you're going to get it. And sometimes it doesn't happen or sometimes you get way more sales, you know, in a day than you should on the next day.

18:17And it all just kind of averages out. So you have to go, hey, this is a numbers game. Don't worry about it. The best thing about what we did is you can go to the next door. If somebody doesn't want it, just like, cool, go to the next one. I start all over, all fresh and new.

18:30David Royce: The outcome of that door doesn't necessarily impact this one. Yeah, it's not like you just have like one girl you're dating or something. You're like, all my eggs are in this one basket. It's like, just go to the next door. And to be very fair, it's also like pest control is something that people need. You know what I mean? Like in that case, I feel like it's, you know, like a relatively thing. It's not like you're selling bullshit to people. Yeah, it's an essential service, right? So like when we had the pandemic, like we could still go out. You know, we had to stand 10 feet away from the doors when we were talking to people.

18:57But surprisingly, people actually really liked having someone stop by their door because they hadn't talked to people for sometimes days or weeks, you know, in person. So, yeah, it's an essential service. The good news is that, you know, the bugs don't read the Wall Street Journal, right? So they don't know when there's a recession. So it's very recession resilient. That's great. One of the things that I just thought about is the fact that pest control is probably primarily a seasonal business. So how do you manage that cash flow in maybe the winter when you're maybe not fully operational? Do you have a different service or product that you sell to those customers, or what does that look like?

19:30We actually do. So it depends on what place you're in, right? Like some places like Florida, it's like year-round, crazy buggy. But some places have winters, and we might shift from insects more to rodent control because that's when it's really bad, or spiders. You just have more bugs at certain times of the year. But the spring, the summer, and the fall are usually pretty tough just in general for everywhere across the United States. But yeah, the wintertime, we still do stuff. We'll still treat inside walls. We'll do different things in the wintertime.

20:00David Royce: You had mentioned that the cash flow was a big thing for you that you learned from that first business. Yeah. About kind of structuring the deal with your reps to make sure, hey, you're not going to go bankrupt, trying to make sure that they get paid and setting up a good structure that way. looking at more of the companies that you had recently, like the bigger ones, what was different about those? Obviously, you talked about the cash flow thing, but what do you think was the differentiator between those and maybe some of the earlier companies that weren't as big? I'll go back to your question before too.

20:31So what I realized was I needed money in order to grow, and I could grow one location a year, maybe, you know, if I did what I did with the money that I had, or I could sell it. And I had seen my mentor originally sell his business. And when you're a small business, the big guys like Terminex, two thirds of their growth are M &A. They have to grow. Wow, two thirds. Yeah. Every quarter, right. They've got to hit certain numbers as a public company in order to look good. And so I realized that when you're small, you don't have a big brand. And so the big companies, They don't want the brand. They don't want, you know, the majority of the business.

21:08They really just want the book of business, like the customer base and the technicians to go with it. And so what I did is I structured something very similar to what my mentor had originally done, where I just said, hey, I'll sell you the customer base and the technicians, but that's it. I'm going to keep the sales force. I'm going to keep my executive team. I'm going to keep my key operator in each location. And then we'll, you know, we'll go to other places and expand, but we use that money to continue to grow the next one. And then maybe we'll sell to you. Maybe we won't. We'll just see how it goes.

21:34And so I did that three times of three different businesses. Each time we did it, we had more money. So the second time we grew, we started with EcoFirst. We expanded into four different states and then eventually nine. And we're just trying to figure out how do you scale the original model. The first company was very much like working in a lab and trying to figure out what worked, what didn't. I hadn't been an operator before. I was trying to figure that out. Opened up a second location. I was trying to figure out how do you manage from afar if you're not there all the time. writing down training manuals, putting all your best practices in there.

22:06And then sold the second one. On the third one, we were like, okay, I want to be different. I don't want to just be a pest control company anymore. So I started studying companies like Google and Meta and Zappos, and I toured their headquarters. I started taking ideas. I'm like, you know what? We can have an NCAA basketball court. What about a golf simulator? You know, what about, you know, we can have like events with DJs, or we could bring in bands or do things. So I just started getting all these ideas, kind of taking a page out of Silicon Valley and had like a killer headquarters, right? We went and got a MBA suite.

22:41We started having really cool annual retreats to initially start out in places like Hawaii, but then eventually it was like Thailand and Africa and Egypt and all this. And the idea was to brain share with all the top 5 % of salespeople or all the branch managers, location managers together. and so each time we had more and more money to be able to do things bigger better and that kind of snowballed that helped the companies get bigger and bigger did you feel that there was like a

23:06David Royce: massive return on doing those kind of like silicon valley-esque perks and trips and things for the team uh i mean because we're starting to get into that we're doing like our first company off-site in a few few weeks for one of our departments and uh it's just cool to kind of see what kind of goes into it and planning things like that uh and so i'm curious to see like what kind of return did you see on doing those bigger things at the bigger company and bigger level for people? So when everybody else is not doing it and you're the only group doing it, it's pretty easy to stand out. And nobody else in pest control even thought about this.

23:40They thought it was so weird that we were doing this. Like, how do you guys have money to do it? And it's like, well, we're growing really fast and we sold a company. So we have all this money that all these other companies don't have. And so I think it just created a super unique culture. For me, I realized, especially by the third business, hey, we're, we're growing and we're growing thousands of people. Now we have got to maintain, uh, the caliber of recruits that we need. So we need to be the best. We need to treat these people like gold. And then also for me, I was feeling, um, like I couldn't be there in every spot.

24:14Everybody couldn't know me. And so the culture had to be bigger than just what would Dave do? It was like, what would the company do? Right. The company was bigger than just me. And it was fun. It's something you can be proud of, right? You're never going to regret giving your best at something or just creating really cool, memorable experiences for people. Some of my favorite memories are all these wild things we did, whether we're jumping off cliffs in Hawaii or skydiving or swimming with sharks or driving Ferraris on a racetrack together or dune buggies. It just goes on and on and on. I would imagine one of the things as you were expanding the company, going into different states, you probably faced a bit of going into markets or areas where there were other pest control companies that had already been there.

24:55How did you kind of monitor or overcome that aspect? Because I'm sure that that was very common, especially when there's what, like you were the second or third largest in the country. Yeah, third largest residential. It's incredible. But like when you're maybe some of those bigger companies at the time that were in those states that you weren't in already, how did you kind of mitigate the challenge of going into markets where your competitors already were? And if so, would you try and flank them? Would you try and compete with them? What would you do? So there's a few key things. So one, if somebody in sales had come to us, you know, there weren't very many companies that even did door to door back then.

25:26In fact, even today, there might only be 60 or 70 that even do out of 20 ,000 companies. And so if you had come over from another company as a sales rep, you sold 70 % more with us than you did with your previous company that first year with us. And so our sales training was hands down the best. it didn't really matter where you went, you were going to do on average better statistically. The second thing was when I sold, I knocked 60 ,000 doors myself for over four summers in college. And I basically got a PhD in what customers didn't like about our industry. Right. So I knew, and I thought, okay, well, you know, they're not really sweeping the eaves or taking the spider webs down off the eaves.

26:07And it's a visual thing. It's so great for a salesperson standing on a doorstep. If you can see it and you can point to it, the potential customer looks up and goes, oh yeah, I do have that. Even if they have another service. The yard, a lot of companies have just like a structural license around the base. They'll treat the inside of the home or around the base of the home. The reality is most people don't want a pest control person inside their home treating. That's if you have a major infestation on the inside. And what you can do is treat around the outside of the home primarily to, you know, it's preventive, right, to keep bugs out.

26:40But then people still had problems in the yard. They might have fire ants out in the yard. You guys know about those. You might have, you know, wasp nests or spiders along the fence line or whatever else. So we said, well, this is crazy. The other companies, they don't have the license to treat the yard. And so these customers, they're going to Home Depot and still getting product to treat. Like that's one of the benefits of pest control is to not have to store chemicals inside your home if you've got young kids or pets and you don't want them to get into it, or you just don't want to have to go treat yourself out in the sun, like in the middle of the summer.

27:10Like, who wants to do that? So our idea is, like, let's get the extra licenses. Let's take care of everything. And so we kept adding more and more things. And it was additional pests, you know. It was like they weren't treating for snails or slugs, you know, in California. Anyways, the list goes on and on. I hope it could bore you forever with all the different pest names.

27:28David Royce: Oh, yeah, definitely not boring. It was what else can you do, right? Because we were a sales organization. and we wanted to sell more. And so if we did more, then we had more things to sell. Yeah. So yeah, we just kept finding new ways to go around them. In the beginning of your company, you said that the hardest thing for you to manage and to really just get a hold of was just cash flow to be able to pay people and to continue to grow the company. Yeah. But once you get past that stage, as you're growing, what was the hardest part about building the business that you're in? And was there ever a moment that was like, hey, I got my back against the wall and I just don't know what I'm going to do here.

28:03So best practices, getting them all into training manuals and then the actual training programs are the hardest thing. I was unique because I had such a bad experience my first five days that I saw the power in training and the need for it. And although people had been knocking door to door in pest control for maybe a decade, there were only like really three companies that were doing it and there may be only 500 sales reps total in the entire industry. And today, I don't know if there's 10 ,000 or however many there might be. But I realized there was a hole in the training. And so I got to write a training manual for the company.

28:41I got to go out and recruit people and train them. And I developed the program. I started videotaping or video recording sales reps. Back then, we actually had camcorders to record people. And we would watch their body language and teach them how to sell better. uh then from that i transitioned into operations you know it's like how do we have great training on the operations the problem is that most business owners like the small mom and pops they never get to owning two locations because they don't know how to uh get all their recipe down in a training manuals and it's it's critical um i worked at a pizza parlor when i was 14 It was a mom and pop place.

29:25Good people, but zero systems. And then I worked at McDonald's when I was 15 when I got fired from my pizza parlor. So I'm down on my luck. I go, you know what? There's one place I know that'll hire anybody. I'm going to go to McDonald's. And I worked there for two years, believe it or not. You got good at cooking fries? Yeah. Fries, like everything, right? Cashier. I realized, I did not know at the time how much I would learn from McDonald's. because they had a best practice for everything. And they had training videos and they had checkoff lists for everything each day. And they always had you busy.

30:00They were very, very efficient. And so surprisingly, I learned so much from working there. Like they probably made me hundreds of billions of dollars. I probably owe them a lot, right? Especially to a job that I thought was embarrassing when I was in high school. But I was just trying to make some extra money at that time. It's so interesting that every single business has a different constraint. Like one of our businesses is an agency. And we've realized that the constraint of that business is a labor constraint. And it's like how can you turn someone who isn't as familiar with content or video, whatever it may be, and turn them into an absolute expert?

30:33And it's creating that Chick-fil-A manual, that McDonald's manual of training to turn someone from not knowing very much to turning them into an absolute expert. And so I just think there's so much – it's so interesting to hear that it's not only just a content business. There's also a pest control. and there's so many different businesses around the world that have these different constraints or whatever. Yeah. And then training, right? Like, uh, the Nathan from founder magazine was interviewing me and he said, so it sounds like you were just really good at creating, um, you know, training manuals, you know, and best practices and systems and process and all that kind of thing.

31:07And I was like, no, I don't think I was. I just, that's what, how I initially kind of got into the industry. And I saw the difference it made in people's lives. And I'm like, this is key, right? Like if I had had this, oh, my experience would have been so much better. And how much more money would I have made and how much more money would the company have made if they had really good training programs? So yeah, most mom and pops, they're so focused on the day to day that they don't think about this. By the end of the day, they're just tired. And I tell people that, you know, your time is, it's critical.

31:38You divide everything into A's, B's, and C's. A's are things that are the most important, but they're not urgent. uh b's are somewhat important somewhat urgent and then you know c's are uh they're urgent but they're not important so c might be paying your bills right you like have to pay your bills right they're urgent you don't want to be late but you should set those up on auto pay you don't have to pay them yourself or you can have somebody else pay them for you delegate yeah delegate like if you don't have to do it yourself like if i don't have to do it i i don't do it like absolutely not and you learn this in time um b's might be hiring people right like you have to hire great people but you can you know train other people to do that and you can create you know a training manual you know a checkoff list for what is it that you're looking for the a's are things like how do you increase revenue you know how do you add another product or service line how do you become more efficient you know how do you increase profitability how do you cut costs it's all those key things to the business yes that's exactly what it is it's the signal yeah yeah we interviewed

32:40David Royce: Kevin O 'Leary and Robert Urchavec from Shark Tank. And Kevin O 'Leary, of course, used to work for Steve Jobs. And he always said that there's the signal to noise ratio. Signal are one of the three things, the most important things that are the most important in the business today. And a lot of people get those wrong. They don't realize, hey, that is strictly what's going to push the business forward, especially from a monetary standpoint. Everything else is the noise. And I love how you broke that down. For anybody who wants to look deeper into that, it's actually call it like i think it's called the eisenhower matrix uh and you can find it in uh stephen covey's book yeah seven habits of highly effective people um i want to stay on the signal because what's interesting to me is like in your career journey you stayed pest control and ran the play over and over again you talked a little bit about it earlier how you learned from a mentor he had an exit he had more money so now he can make it even bigger pest control play uh and so was there ever a time where you kind of wanted to like maybe do something else or kind of get off the path because one of the biggest things that we've learned is like when we've tried to like do something that's not super vertically integrated with our business we start we start we don't do it as well yep uh and uh it's almost kind of like you lose the signal in a way it's a little bit of a different signal than the day-to-day it's more of a macro signal uh and so i'd love to hear from you like was there ever a time where you kind of got a little shiny object syndrome you're like hey maybe i go do this uh it's just so impressive to me that you stayed pest control through all these different companies?

34:09Yeah, it's 20 years. I finally got to a point where I'm like, okay, I don't think I'm going to learn anything new. I made a lot of money. And I'm probably at that point, like the business has to be bigger than you as an individual. And so, and it needs to be in the hands of somebody who's truly passionate about it and excited to continue pushing it along. And so for us, like we needed to find a good steward, you know, private equity group that could take that on and keep moving it along. As far as other things, so we i started a solar business i don't talk about it that much but we got our butts handed to us a few different times and there's things that you can do really well so we were really great at the sales the door door sales right and so we went out and we said okay the first year we're gonna just take 15 20 guys and we'll go sell but the operations that we've done by somebody else well we did it we killed it we did amazing we're like awesome this is like another business we can do.

35:01So we go, we say, okay, let's put 150, 200 salespeople on it. Uh, we sell great, but then throughout the year, the operations people, we had different operations companies doing it and they, um, they started going out of business or they, they weren't keeping up with everything. And it started really affecting how we did things. Uh, it costs us a lot of money. It was a really expensive mistake. Yeah. And then, uh, the next year we said, okay, well, we got to do our own operations because these other ones are going out of business. We try to do operations on our own. And the first time you do anything, you're going to make a lot of mistakes.

35:36We had somebody we'd hired as a COO. He bailed initially. We brought somebody else in that was less qualified, paid a lot of dumb tax as a result. And then the next year, we got that individual back. And amazingly, suddenly everything got fixed. Wow. So what you learn is if you're going to do something different, you have to hire the right people who know exactly what they're doing. You hire the best person that you know in that. pay them super, super well, give them a piece of the business if necessary, and have them run it. And they can teach you. Hey, I'm ready to talk about The Signal. In our first interview that we did together on the street, you shared a statistic with me.

36:11And I'm going to have you share it again because I don't want to butcher it. Is it what, 40 or 50 % of people in today's world that make over$2 million a year on boring, unsexy businesses? What is this statistic? So Wall Street Journal, they did an article, it was called The Stealthy Wealthy. And there's a professor out of Princeton that researches people like, that's the boring, blue collar jobs, 43 % of people in the top 0.1 % of income earners. So not top 1%, top 0.1%. So $2.3 million or more per year are boring blue collar businesses. Yeah. And it's growing. And I want you to talk about that because you mentioned it in our interview that we did prior to this was that a lot of people are very focused on, hey, I want to own a restaurant because it's sexy, but they have the highest failure rate and the margins aren't that good.

36:58But portal potty businesses, they've got great margins and they're scalable. So what are some of these boring businesses that, obviously, pest control is kind of in your domain that you think that there's an opportunity for people to really make a killing in today's world? Yeah. So if you look at what's happening right now, you have this older generation, boomers that are retiring. Like they call it the silver tsunami. Yeah, they call it the silver tsunami, right? And many of them, the businesses are smaller and they don't have anybody to sell to because their kids don't want it because it's not sexy, you know, and they're having a hard time trying to find other people to buy it.

37:34So there's a lot of ways to do this where you can, you know, find somebody who want, they'd rather make something than nothing. And so why not, you know, self-finance it or figure out something with them to take over the business. It's nice because it gives you training wheels on a potential business for you to do. It's even nicer if you have experience in that industry and then you find somebody else to kind of say, yeah, I'll mentor you. It's almost like you're the son they didn't have that they wanted to train and give this to. But this is a personal question for the three of us, because obviously he mentioned that whenever we kind of go into, you know, different businesses, like, like keep the main thing, the main thing essentially, right?

38:09Like if you've got a media company, build the vertical, grow it right. And the different things that are working well,

38:13David Royce: but it's like, we haven't done that too many times, like veering off the path. And I think, I think just as we keep getting bigger, we have more and more opportunity to do more things. Some of these things are hard to say no to. We have a great saying that concentration builds wealth, diversification keeps it. And so I feel like we've been very concentrated. And so we're starting to get to that point where it's like, hey, we're still going to keep the main thing the main thing and keep vertically integrating with that. But when we think about diversifying into other plays, just because we have more capital, we have more resources, connections, it's always an interesting thing to think about.

38:45David Royce: It's just like, do we just pour it all back in or do we go to this other play over here? Yeah. Yeah. I mean, the question was, is there a reality in which you've seen people successfully maybe go out there and buy one of these boring businesses and then they just place a successful operator in that company, but then they own that company and then they just maybe help facilitate the hiring. Is that like a reality? Yeah, but I've seen the wealthiest people, they'll buy a business and they'll find a great... Well, ideally, they just want to buy a great business that already has a great operator and then they lock that operator up.

39:16So my brother-in-law has an orthodontics practice, and he worked at one of these private equity-owned orthodontics practices that are rolling up practices. And what they do is they actually sign up the orthodontists for five years to have to stay with them, right, because they want that talent, and they know that the customer base is going to stay with them longer if they have the same orthodontist there. So similar, right, if you could buy a business, you really want to lock up the people who are there, or you may have a business that's not doing as well, and you bring in the right team, right?

39:46You bring in the right operator to oversee it and to run it well. And you pay them really well, give them a piece of the business and things go great. Trying to figure it all out on your own, it's tough. It takes years to get really good at something, right?

39:58David Royce: Oh, yeah. Yeah. Yeah, James, it looks like we got to dive in and learn how to be the best at the car wash industry. I'm just kidding. Car wash is great. Great business, but you're not going to see any of the three of us here be the operator of that business. So, you know, there's so many things that you would just never think of, right? Like I have a friend that does medical waste services. I mean, that's pretty unsexy. Oh, yeah. 100%. That sounds terrible. It's gross, right? But yeah, like 35 % margins, like incredible how much money the thing makes. Because nobody really wants to do it. But, you know, we talk about buying businesses, but when we move a little bit more into like wealth preservation, and I asked you kind of what you're investing in right now, you mentioned that, you know, I think it was the day of that you wrote a multimillion-dollar check into Anthropic.

40:45Yep. It was the third time, too. The third time, too.

40:48David Royce: So I want to ask how you get that deal flow. Yeah. You know what I mean? That's a personal question, but yeah. Yeah, if you want to talk about maybe is it how you're assessing some of these deals where you're putting a lot of capital into, and then maybe a little bit more about the deal flow as well. Yeah, so that was probably one of the number one questions. I went through and read the comments that were in there, and I tried to post to a few people. But the number one question was, you can't invest in Anthropic. It's not public. But the thing is, you can if you have enough money, right? So the way you do it is you either have to be with the right investment firm, you know, Goldman Sachs, Morgan Stanley, Iconic.

41:23I'm with Iconic. And they get you special access, you know, but you have to have at least$100 million just to even be with Iconic. That's the trick. You've got to be in the big league. The first step is to have$100 million. Yeah, yeah, yeah. So you're just playing a different league right now. Well, that's the thing, right? It's frustrating, right? Because the rich get richer, you know, that saying. But it is because they have so much money. It's the same thing. A lot of times they're going out to the endowments, you know, the colleges, whoever has these massive amounts of money because they don't – it's almost like the same legal paperwork, right?

41:54Like they don't want to have to, you know, have so much – you know, they don't want like$5 from somebody or$20.

42:00David Royce: They want a few great investors who can bring a lot. Yeah. It's like if we can go to like even 100 people, you know, we can get 5 million each from all of them and we're done. That's great. Yeah. Yeah. For someone who's made a lot of money, you know, I'm sure it's kind of hard to trust, you know, this wealth manager who's maybe out of college or maybe doesn't have that same amount of money themselves. how can someone go about really vetting someone to see they are who they say they are? And how did you go about ultimately selecting, Hey, I want to work with this person to manage my money? Yeah.

42:36Um, I looked at three dozen different groups before I really said, okay, this is one I'm going to go with and probably stick with them longterm. For me, what I wanted was access and you can go to a lot of these big banks, but they may not get you access into these unique special deals. And that was one of the cool things that Iconic had. Initially, the founder, Devesh, he worked with Mark Zuckerberg when Mark wasn't worth that much. And then Mark obviously did really well, but they had this idea of why don't we combine like Mark with maybe like Reid Hoffman or Jack Dorsey or all these other tech entrepreneurs, because they kind of, many of them knew each other.

43:12And then we can act like an endowment. If we pool our money, we're like a bigger thing and we can invest into all these unique companies. And so that, that was kind of my strategy. I heard it. I'm like, I totally get it. It's all about access. Cause initially I tried to go out and invest on my own. I mean, you could literally have a whole other jobs calling up different, you know, private equity firms or venture capital firms and trying to invest in different things or do direct investments. And I just realized that's not what I want to do. It's not really my preference to have a whole other career in this.

43:41Yeah. And early on in the podcast, you mentioned that, you know, when you were first really starting to get savvy about sales and when you were kind of in that midst of like, you know, getting a lot of rejection, you went to a bookstore and you started to read 90 minutes a day. How many books have you read? Hundreds and hundreds of books. How many books have you read? Well, let's see, I read about two books a month. Uh, if you do that over 20 years times, you know, so you've said to say probably over 500 books. Oh yeah, for sure. Really? Yeah. Could you give us some of those, you know, some of the most essential books to your personal development that you'd recommend to people?

44:14Maybe we can split this into two categories, people that are starting a business and people that are looking to really scale and become that expert entrepreneur. What are the most essential books to your personal development? There's so many. So initially, it was all sales book. So Zig Ziglar, Tom Hopkins, Brian Tracy, like all the old sales guys. And then also later I got into body language. So like Joe Navarro, What Everybody's Saying, Love It, The Definitive Book of Body Language, incredible. And then in trying to understand wealth, I said Rich Dad, Poor Dad. I read The Cash Flow Quadrant, like all those books.

44:53Read Napoleon Hill, Think and Grow Rich. Dale Carnegie. There's so much you can learn, but from a scaling standpoint, there's two books that I loved. So if you're like a small business owner or want to know how to go from small to medium, read Tony Hsieh's Delivering Happiness. And there was a second one I just read recently about a year ago. It's by Will Gadara. Shoot, I'm forgetting the name of it right now. Unreasonable Hospitality. It feels like Delivering Happiness 2.0. But Delivering Happiness is all about Tony's first. He built a company and sold it for like$250 million, but he's miserable.

45:30And what he realized is when the company was growing really fast, they didn't have core values set up. They didn't really have a culture. they were trying to create. And so they were just hiring anybody for the resume, but they weren't hiring, you know, you can actually hire not just for the resume, but also for the people, you know, and make it a really, really fun culture. So when he started to do Zappos, that was a commitment he had. So they created these core values. They had a hiring process to make sure they brought on the right people. But then Tony, they had so much success in doing it and they had such great employee retention and customer retention.

46:01Then they started letting you tour their facilities. And so that was one of the headquarters I went and toured. And it's just so fun. There's so many different things. They just thought outside the box, and I loved it. I'm like, they initially started as a shoe sales, or a shoe company. Like, what's sexy about that, right?

46:17David Royce: Oh, yeah. 100%. Well, David, we like to end these podcasts off with two questions for our guests. I'm going to start, and Jack will finish this up here. So, David, 49 years old today. Yep. 49. And, you know, if we were to die tomorrow and you could leave one last message, one last guiding principle with the younger generation, with your children, what would that be? Don't worry how well you do at school. Try, you know, try to get great grades, you know, push hard. But the information age and with AI coming, you're going to do great later on. If you're just willing to put your butt in a chair and study and you can be passionate and obsessive about something, that's what you're going to do great at.

46:59Everything is about time. Persistence is genius in disguise. Talent is directly proportional to desire. So if you really, really want it and you put the time in, I promise you there's a way to learn on the internet, partially from you guys. The podcast, all the master class, there's so many things that you can utilize today. And AI is my new best friend. It's my business mentor. I just constantly am talking to it, brainstorming new ideas, and it's so much fun.

47:26David Royce: Yes, sir. And David, with the life and career that you've led, how do you want to be remembered? Oh, God. I don't know. I don't really think about that too much. I'd say that the funnest thing for me was always training people and helping them develop a skill set for success. And when you're a broke college student and somebody says, here's a way to make tens of thousands of dollars every summertime or hundreds of thousands of dollars or even a million dollars for a few freaks of nature out there, it's life-changing. And I know for me personally, I was never going to starve again. I knew I had a way to make very good money.

48:10And I love that. I hope that I remember maybe for developing leaders. um gandhi said that uh you know it's the sign of a good leader is not how many followers one has but how many leaders one creates and i've loved seeing so many people join our organization you know in a entry-level role and work their way up into a management position or an executive level position it's just it's always been inspiring to me to see people take the opportunity and run with it i love that david this was an amazing conversation thank you so much for your time today and we really appreciate you coming on the Hard Knocks podcast.

48:43And for everybody that's watching right now, be sure to like and subscribe for amazing content, amazing episodes coming every week with the most fascinating business owners in the entire world, just like Mr. David Royce right here. We're going to put the link down in the description to David, all of his social channels that way you can follow him, reach out to him. Maybe he'll sneak in a piece of advice to some of the people out there. And if you're looking for sales, you can go to activerecruiting.com. I guess that's my pitch. If someone felt motivated by it. Yeah, no, definitely. We're going to put the link down in the description to add to it as well.

49:11That way they can check that out, follow along with you as well. And we're going to put the link down in the description to get access to the number one entrepreneur community in the entire world called the School of Mentors, where every week we host live calls with eight, nine, and 10-figure entrepreneurs, just like Mr. Royce right here. He's done a call in the community. You came in, you mentored some people. How was that? That's awesome. Yeah, I love that you just get peppered with questions for an hour and 45 minutes or whatever. 100%, 100%. But you changed some lives in that process as well.

49:34I hope so. You definitely did, man. The people loved it and we're super happy to have you on. So we can't wait to see you on the inside on the next live call inside the School of Mentors. With that being said, we'll see in the next episode.