My Favourite Failure: "We signed a deal with the devil" Glenn Poulos

0:00As a founder, if I could click my fingers and solve one thing, it would be people. All the people things solved forever. Can you imagine that? This is why I'm delighted to tell you about Personio. Personio takes away the pain of HR processes for small and medium-sized companies. You still, of course, need to do some people's stuff, like managing them, but Personio takes away as much admin as possible. Personio includes an applicant tracking system for when you're hiring, which I highly recommend, and tools for managing stuff like employee holidays, reviews, payroll, and offboarding. With Personio, you get one HR system you can use end-to-end, saving you masses of time, and they're used by thousands of companies like Lush, Spendesk and Mindful Chef, so you know you're in good hands.

0:47So if you're leading a small or medium-sized business and want to spend less time and effort on HR admin, then book a demo at personio.com forward slash secret leaders. That's personio.com forward slash secret leaders. There's a link in the show notes. I just had this rush of dread that came over me. I started to ask myself, you know, what have I done? And, you know, what did we do? And we started to realize rapidly that there were all sorts of skeletons in the closet and that we had signed a deal with the devil. Glenn Poulos is a successful founder who exited from his company in 2022. But that was his second exit.

1:29His first 15 years before was a very different story. He thought he achieved the entrepreneur's dream, an eight-figure exit. He was going to be a multi-millionaire. Instead, he was left with hardly anything and no job after having to fire a hundred people.

1:54Glenn started his company, which distributed hardware to wireless and mobile networks with two co-founders in 1991. They built it for years and were happy when they were approached by a public company that wanted to buy them in 2004. It all looked good on paper, but the day it became official, it was clear they'd made a huge mistake. Finished the signing, got in my car. Before we'd even gotten home, they had taken our line of credit to, I believe,$2 million and maxed it out within the first hour of owning the business. When we were transferring over the business, it was a debt-free transaction.

2:31So they just reached in, they grabbed the$2 million, and then he also pulled out all the cash in the business as well, right? I think it was around$2.75 million they pulled out on that one day in that afternoon when we sold the business. Everything was different from that point on. We became one of those customers that never paid their bills, right? Everything was stretched, stretched, stretched. And I'm kind of thinking, like, what have we done, right? Glenn tried to get the C-suite to change course. We raised sort of bloody murder. They paid token mine to our complaints and what have you, and at first started listening.

3:07But ultimately, the voices for them to pull cash were much louder than the ones to provide funding and liquidity in order for us to pay the bill. So it really fell on deaf ears. The CEO was quite unavailable for comment. We eventually got some better representation at that level. But at that point, the sort of power base within that public company was well established. And it was very hard to right the course of the ship at that point. It was just on a path that we didn't understand when we did the deal. I live near Niagara Falls, right? And I mean, up the river, Niagara River, you can go water skiing and it's really calm and smooth.

3:45And all of a sudden you look up at one point and you realize, what's that sound, right? What's all that mist? And then you realize it's a 200-foot drop straight down. You can't get to shore. You can't get anywhere from here. Not to say earlier on I could have paddled to shore because I couldn't have sold the shares. So I was stuck. Because of the deal Glenn had made, he hadn't been able to leave the business. It wasn't like I got a bunch of cash and left and went off into the sunset. that it was 95 % plus of the transaction or more was even tied up in these shares, which made me an insider in the business.

4:21And I don't remember exactly the laws of how much you can sell, but you can sell for at least 90 days. And then you can only sell a very small fraction to satisfy insider trading rules of these kinds of transactions that went on. In simplest terms, I really couldn't sell any shares in the beginning, right? For the first year or so. And so I was really just doing everything I normally did, trying to sell to every customer, trying to add customers, add vendors, go and get deals. And we were a sales company doing our thing. And in the background, they were moving the pieces around and for these other mistakes that I was never really that aware of.

5:02Then one Monday, Glenn came into work and received some shocking news. They told me that we were insolvent and we had to lay off 100 people. We literally had to let everyone go. They just couldn't make payroll, including myself. And I was like, how did I go from Friday to Monday and had a company and shares who were worth millions of dollars and now I don't have a company, I don't have a paycheck, I don't have anything and I have to tell everyone they're fired. How did Glenn get himself into the situation? It all started when he met the CEO of the company.

6:03And so when I went out to the dinner with him that first night about the buyout, I was just like, I had stars in my eyes and I thought he was this mega millionaire guy that, you know, and of course he pulled up in a Maserati and he'd say, oh, you can drive my Maserati as long as you can pay the$12 ,000 deductible on the insurance. Right. And lived in a huge house up in, we call it King City. It's an enclave of giant homes. So he really lived this posh lifestyle that wasn't part of the way I grew up or that I was living even, you know, as a result of the income I was making at my business. Right.

6:37And so I had stars in my eyes. You know, after that dinner with him, I never got to spend much time with him after that. He was very elusive and hard to get a hold of and hard to tie down for any any reason. and he did show up the odd time but when he did he would kind of come in floating on this level that was kind of above everyone in the sense that you couldn't get out you couldn't get a word in edgewise or when you did it felt like you were talking kind of at him but it was it was kind of deflecting off of him and he wasn't really hearing what you were saying I realized I really kind of got sold a bill of goods and I was you know and I was in my 40s at the time and so I feel kind of a little embarrassed about it all.

7:17But some of the ways he behaved was so foreign to my upbringing that I was just naive. And I thought he was so rich and we were going to get rich and get all these shares. And of course I did, but ultimately the shares became worthless. The problem was that this CEO wasn't just a brag. He was a crook. he fell in with a lady and this was not his first time doing this either which ultimately came out but you know he'd fallen with a lady that was of of means if you will and her family used someone with a business and then he would you know he would use his knowledge who you know convinced these family businesses to allow him to control the businesses well anyways he he took over this other company and he ended up defrauding that family and he wiped out like two or three generations worth of the of wealth in this business in this family business he ended up getting sentenced to eight years in federal prison and he also was ordered to pay 2.8 million dollars in restitution to the family i ended up karmically i think where i belonged and he ended up karmically where he belonged, right?

8:31And what did Glenn do? First of all, I never had the millions of dollars, right? I mean, I always had a good income from the business. So I always, you know, had a good lifestyle. But it was, you know, we call it in Canada, we call it T4 money, you know, like it's on your tax form, right? But I mean, the big payoffs, the liquidity events, you know, that was a first for me, but it came in the form of shares that I couldn't sell. So all I did was see these number of shares and the share price, multiply it through and say, oh, wow, I'm a multimillionaire, right? And then of course, on Tuesday, I realized that they were going to zero.

9:03I realized, well, no, you're not a multimillionaire. I just basically, I was focusing on my next win. And it wasn't anything like some sort of a skill or anything like that, you know, that I'd honed over the years. It was just sort of the way I was. And so it was a blessing that I didn't really lament, oh, I had all these years and millions of dollars. And, you know, and then the guy screwed me over and whatever. I really never did any of that. And when it happened and I went from millionaire to broke, if you will, within a matter of like a week or two, I already had a new business incorporated with a name, a business plan and whatever.

9:42And I was off to the races. My self-preservation kicked in. I thought I just have to get something going or I got to go get a job. And I'd learned so much from some of the things they'd done to customers and vendors, plus my original concept of the business. And I thought I have a new way I want to do this the second time and it ended up working out well. Glenn sold that business in 2022 for an undisclosed amount, but Glenn says it was for more money than the deal in 2004. And the big lesson he learned from his first exit helped him get there. If you have your own business, spend a lot of time on your core values and you should be hiring, firing, motivating and training and rewarding and everything along your core values.

10:23Have core value call outs, have posters everywhere, reward people like we have a software system kind of like a facebook where we go in every day and we can motivate give people two bucks for a core value call out and things like that then you need to check the core values of the company that you're joining and find out do they align right and and then also to the extent you're capable during due diligence to figure out do they live up do they live according to their core values do they call out core values do they hire and fire motivate, etc. We have a saying which we use to run the business.

10:56Most of your problems begin and end with your accountability chart and your core values.

11:07Glenn Poulos, who got knocked down, but got up again. Thanks for listening to this episode. I've been your host, Dan Murray-Surter. If you like this episode, please subscribe or follow us and leave a review. We love hearing what you think. See you next time. you