Mind Your Mindset with Michael Hyatt – EP 134

Interview with Michael Hyatt

Mind Your Mindset with Michael Hyatt

In this episode, you’ll learn:

✅ How Michael successfully scaled a $250M/year business that sold for half a billion dollars.

✅ Strategies and principles for building companies that attract world-class talent.

✅ How to rewire the negative stories your brain is telling you and replace them with ones that empower you.

Featured on This Episode: Michael Hyatt

✅ What he does: Michael Hyatt is the founder and chairman of Full Focus. He has scaled multiple companies over the years, including a $250M publishing company with 700+ employees and his own goal-achievement company that has grown over 60% yearly for the past 4 years. Under his leadership, Full Focus has been featured in the Inc. 5000 list of the fastest-growing companies in America for three years in a row, and in 2020 the company was named to Inc.’s Best Work Places list. He is also the author of several New York Times, Wall Street Journal, and USA Today bestselling books, including Platform, Living Forward, Your Best Year Ever, Free to Focus, The Vision Driven Leader, and his newest book (with his daughter Megan) Mind Your Mindset.

💬 Words of wisdom: “I’ve learned more from bad leaders than good leaders.” – Michael Hyatt

🔎 Where to find Michael Hyatt: Facebook | Twitter | Instagram | LinkedIn

Key Takeaways with Michael Hyatt

• How Michael grew his first company to $5 million with only three salespeople.
• Why scaling isn’t always the right call.
• Why building world-class teams is the best scaling strategy.
• Lessons in successful exits from the man who sold a company for half a billion dollars.
• The advantages of going public instead of working with private equity.
• How top CEOs use data-driven insights to improve how they do business.
• Take care of your employees, and they’ll take care of business.
• The overlooked correlation between well-being and business achievements.
• Skillfully handling family successions to ensure the longevity of your business.
• The crucial role mindset plays in your successes – and failures.

Free Strategy Session 

The Lifestyle Investor Insider

Michael Hyatt Tweetables

Resources

• Full Focus
• Michael Hyatt on Facebook | Twitter | Instagram | LinkedIn
• Mind Your Mindset: The Science That Shows Success Starts with Your Thinking by Michael Hyatt and Megan Hyatt Miller
• The Vision Driven Leader: 10 Questions to Focus Your Efforts, Energize Your Team, and Scale Your Business by Michael Hyatt
• Brad Johnson
• Shawn Sparks
• Triad Partners
• Blackberry Farm
• Thomas Nelson Publishers
• James Clear
• Atomic Habits: An Easy & Proven Way to Build Good Habits & Break Bad Ones by James Clear
• Rob Follows
• Carey Nieuwhof

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Read the Full Transcript with Michael Hyatt

Justin Donald: What’s up, Michael? Glad to have you on the call and on the podcast. I’m so excited to connect.

Michael Hyatt: Justin, I’m super excited about this. Thank you for having me on.

Justin Donald: Yeah. So, this has been something that we’ve talked about for a little while and I think it’s going to be cool to really tell your story and kind of all the cool things that I’ve been able to work with you on. And the more I get to know you, the more impressed I am with you. So, this is going to be fun.

Michael Hyatt: Thank you.

Justin Donald: Yeah. For those of you that don’t know, Michael and I met through mutual friends, and I think many people in my community know Brad Johnson. I did an earlier podcast with him. He’s one of my first podcasts, actually. He’s one of the people, Brad I think is the guy that officially pushed me over the edge and convinced me that I really need to do a podcast and get my message out to the world on financial freedom and lifestyle investing. So, kudos to Brad.

Michael Hyatt: I love Brad. I’m a huge Brad fan and he’s been in a mastermind that I had and now he’s a coaching client and just is an amazing human. He’s an extraordinary work.

Justin Donald: He is. And his partner, Shawn Sparks, who I know you also know well. I mean, the three of us really had some fun during the pandemic. We were trying to find fun any way that we could. And so, we started hosting. We’re all into wine, and so we started hosting these virtual happy hours. And it was just Brad and I, and then it was Brad, Shawn, and I, and then it was us for a while and we brainstorm and we talk business and it was just a blast. And then all of a sudden, we started doing deals. We started bringing more people in and this thing blew up. And that was really the beginning of The Lifestyle Investor brand and community. So, I owe a lot to those guys for just the fun collaboration, just ideas, and content. The things that we would talk about were a blast. And it was something that we all looked forward to doing once or twice a week. So, your name came up many times during those conversations, and I’m just glad that we finally got a chance to meet.

Michael Hyatt: Me too. Yeah. He spoke so highly of you. And whatever Brad says, I just go, “Okay.” His word is gold.

Justin Donald: Totally. Same here. If Brad recommends it, I’m in. If Shawn recommends it, I’m in. And as I understand, you have worked closely with those guys. You sit on a board and you’re an advisor to the business that they have created, which has taken off. I mean, this is like a ground-up build that is like a rocket ship. And I’m just so proud of those two.

Michael Hyatt: Well, I am, too. And when they first told me how ambitious they were and what they wanted to accomplish, I’ve seen a lot, I’ve been around a few decades and I thought, “Well, we’ll see. Everybody talks a good game but let’s see what you can do.” And so, I got into an advisory relationship with them and I coached them. I meet with them every two weeks, roughly. And usually, it’s both of them together, sometimes one of them but to watch the progress over the last two years has been extraordinary. I can’t divulge the numbers but it was way beyond my imagination.

Justin Donald: Yeah. So, they told me. So, I remember hanging out with them and we had just a meeting of the minds, so to say. We just spent this weekend. We brought out our spouses and we spent this weekend at Blackberry Farm and I know you love Blackberry. I know you host events, right? I mean, it’s literally one of the coolest properties and experiences just that exists on the planet. I mean, this place is gorgeous. The food is delicious. The scenery is breathtaking. And so, I know you host like some of your corporate events there and some of your staff meetings. And so, we went there because Brad said, “Oh, yeah, Michael uses this place. We should do it.” And so, we just had the best time, hiking in the Smoky Mountains and just enjoying unbelievable food, unbelievable wine. And that’s when the conversation started about this business that they were going to build and where I first learned about you.

Michael Hyatt: Well, just a final word on Blackberry. It will forever ruin you because for us, every meal we have, every resort we go to, we always measured against Blackberry and we have yet to find it. There probably is someplace better than Blackberry on the planet but we have yet to find it. Everything’s, you know, it can get close but not exceed it. But I’m glad you’re in their lives and I’m glad you were in those formative stages when they were putting together their idea.

Justin Donald: Well, and it was funny because they were talking these big numbers and when you’re talking about billions of dollars of volume, assets under management, and everything, you don’t have to make a big percent to have a huge profit, right? So, these guys make just a small sliver and like any, you know, RIAs in general and any of these groups, whether you’re working in the annuity space or whether you’re in the wealth management space, as a whole, maybe like many different options under your roof. It’s just a small percentage when you have a lot of assets under management and we started looking at many different investments. One of my friends has a fund that buys up RIAs and is rolling them up for a bigger acquisition, which I think is brilliant because there’s cash flow right now but then there’s also the upside growth. And so, these guys were talking just monster numbers and I remember thinking, “Okay. Over how long of a time is it going to take to get there?” And they have done it so fast. It is so incredible.

Michael Hyatt: Well, the one part I can say is they’ve gone from zero to about 55 employees since they started two years ago. And they’re still probably a little bit short-staffed. I mean, they’re really investing for the growth because the thing that they do that is so good as a business model is they said, “Let’s take the top end of the market.” So, they’re what’s called an FMO, a field marketing office, for all these big annuity companies and insurance companies and so forth. And so, they serve like the top 1% of wealth advisors in the world. And I think there’s a lesson for all of us to learn about super-serving the clients that have got the means to pay for it because I’ve served those lower parts of the market and even the bottom of the market, and there’s money to be made there too but, honestly, it’s not as fun for me.

Justin Donald: Yeah. Yeah, I can see that. I mean, like you and like Brad and Shawn, I do like to appeal to the higher tier or the higher echelon, which I think is great. Remind me the name of their company again. I’m drawing a blank.

Michael Hyatt: Triad Partners.

Justin Donald: Triad. That’s right. So, check them out. If any of you are in that space, they are revolutionizing the FMO space. Their value add is unique and different than anyone else in the space. So, big shout out to them and to those guys for connecting us. And for my audience who doesn’t know, every year I think it’s really important, in various areas in my life, I think it’s important that I hire a coach. I always talk about how important your peer group is and how important your mentors are and that you’re intentional about where you spend your time and who you spend your time learning from. And so, every year or most every year, I have a coach that coaches me in some area and often I’ll have a fitness coach and I’ll have a business coach. And so, over the last number of years, I’ve engaged in many different coaching relationships with who I think are best in class in areas of their specialization and areas that I feel like I need to grow in. And so, this year is my first year coaching with you and I’m thrilled about it. We’ve had so much fun. I’ve learned a ton. You’ve got a wealth of knowledge because you have expertise on the private business side. You have expertise on the public business side. And so, we’re going to talk about some of that today but it’s fun being able to hear from afar how impressive someone is, see a little bit of what that’s like because you’re advising companies that my friends own, and then getting a chance to work with you one-on-one. And I want to share some of the magic that you’ve helped us create in Lifestyle Investor and just for me and my own life on our show today. So, thanks.

Michael Hyatt: Fantastic. Well, thank you. And thanks for having me on.

Justin Donald: Yeah. So, how did it begin for you? Let’s talk about the evolution of you becoming an entrepreneur or you becoming like maybe a corporate because at first, I think it was more on the corporate side, right? And then you transitioned to your own thing, your own business. And I’d love to hear the evolution of what your professional life looked like and how you embarked on running your own business.

Michael Hyatt: Well, when I was a senior in college at Baylor University in Waco, Texas, I started working at a small book publishing company in Waco. And I love, love, love books. And I thought, “Wow. If I could be a part of disseminating ideas through books, that would be like the ultimate.” I majored in philosophy. Frankly, I thought I was going to go to the ministry but when I got into book publishing, I thought, “This is it.” So, I went immediately from college to work for that company full time, first in sales, that is the marketing director. And then I moved to Nashville, Tennessee, where I live now, where I became the Vice President of Marketing for Thomas Nelson Publishers, which was at the time the seventh largest book publisher in the U.S. and publicly held traded on the New York Stock Exchange. So, I did that for two years, and then I decided I was smarter than the people I was working for and kind of full of myself. And so I said, “I’m going to start my own publishing company.” So, along with a partner, we started a publishing company. We went out and raised the capital for it. We had a small group of private investors and we took off like a bottle rocket. But after about five years, we had grown the business to about $5 million, which back in the day, this was back in the 80s, that was a significant amount and we’ve grown into about $5 million and we only had three salespeople. So, we thought if we got into a distribution relationship with a bigger publisher, that could take us to the next level.

So, we got into a relationship with a publishing company that had 12 salespeople, so four times what we had. So, we’re thinking simple math, four times our volume, surely, like even if it only doubled it, that would be amazing. Well, it wasn’t so amazing because we were doing about $400,000 a month in cash flow, and the first month they delivered $40,000. And so, they did like 10% of what we did, which was frankly catastrophic. So, we got on the phone with the CEO and we said, “What the heck?” You know, he said, “Look, I know, but our guys are just getting up to speed on your stuff. Given they had 30 days, everything will be fine. In the meantime, we’ll loan you the difference. We have to secure that but we’re going to loan the difference to you so that you can meet payroll, pay the printers, do all the things.” So, we said, “Okay.” We didn’t like it but we said okay. So, the next month they got up to about double that. They got to about 80,000, and that was the most they ever did. So, it was a fraction of what we were selling. So, a few months later, a few months into this, we had racked up about 1,000,002 in debt with them and their parent company. They were owned by ABC, the ABC in New York. And we got a call from their CFO and said, “Hey, we’re trying to clean up the balance sheet because we want to sell this company. And so, you need to pay back this $1.2 million and we’re giving you 30 days to do it.” Well, there was nowhere we could come up with the cash.

Long story short, they shut us down. They took all of our assets. We were so broke, Justin, that there was nothing to liquidate. We couldn’t go bankrupt. So, we just closed up shop. So, then my partner and I, we had a great relationship and still do to this day. We started a literary agency representing some of the biggest authors in the country, and that did really well. But I really wanted to get back into the corporate world. So, after about six years of that, I sold my half of the business to him. I went back to Thomas Nelson, where I eventually became the Chairman and CEO of the company. So, at the time I was running it, 2011 was the last year that I was running it before we sold it to HarperCollins, we did like $250 million a year, $42 million worth of EBITDA. We had 750 employees. We sold the company for half a billion. And I led that sale and got quite the education in the process, had bought and sold a few companies since then. But yeah, that’s kind of the backstory then I started Full Focus, the company that I own today here in Nashville, actually, Franklin, Tennessee, and we’ve got about 35 employees. We publish the Full Focus planner and a significant part of our business is business coaching. So, that’s kind of the business side of it. I give you the personal too if you’re interested.

Justin Donald: Yeah, I certainly am. And this is fun hearing about kind of where you are today because I’m flying out to see you. We’re going to spend some time together tomorrow, and I am thrilled about that. I’m excited to see your corporate headquarters and kind of see where all the magic happens because you guys create some amazing content and some amazing publications where you’re the author of many books, double digits of books, I think, right?

Michael Hyatt: Yeah. I’ve written 15 books now. About six of those are self-published we did primarily for our clients but the others have had two New York Times bestsellers. I’ve had every other book has hit the Wall Street Journal bestseller list. My most recent book, Mind Your Mindset, which I co-wrote with my daughter, Megan, who’s now the CEO of our company, that hit number two on the Wall Street Journal list back in January. We couldn’t beat James Clear. He was holding the number one spot with Atomic Habits, but we felt still pretty good about getting number two. So, yeah, I read a lot of books. I’m kind of on pace now and under contract to do about a book every 18 months or so, but I love writing, publishing, speaking, coaching, all those things.

Justin Donald: Oh, that’s incredible. By the way, the story with Atomic Habits and James Clear is pretty interesting because from what I understand is that they did well right out of the gates and then the book kind of trailed off. And not that it didn’t do a lot of sales but I just think that there is a big drop off. And then I think that not a lot happened for even the course of a year or so. And then it just exploded again.

Michael Hyatt: I didn’t know that.

Justin Donald: Yeah. So, my understanding from people that are more in the know is that there is this reemergence of his book and then it just like caught fire and really took off. So, really a fascinating story for those that are in the publishing space, for those that are authors that even though your book may trail off, there could be a time in the future where it kind of comes back around.

Michael Hyatt: Yeah. All it takes is really one big publicity event or something that happens in the news that suddenly makes the topic relevant again. But I don’t know what that was. But I can tell you, when the first week of sales for our book, he was selling 30,000 books a week which is astonishing.

Justin Donald: That’s unheard of. Yeah, very few authors… I mean, the reality is very few authors ever even sell 30,000 books, period.

Michael Hyatt: That’s right.

Justin Donald: To do that the first week is just astronomical. And to do that consistently for weeks is astronomical.

Michael Hyatt: Well, I can tell you from my time with the book publishing industry, probably 95% of all authors don’t sell 5,000 copies.

Justin Donald: Wow.

Michael Hyatt: So, it’s a crazy business because what publishers do is take a lot of bets on a lot of products. It’s like a portfolio. And they just have to have a certain number of them hit and do big to cover their losses on the other ones. That’s the game.

Justin Donald: Got you. So, I’m curious what some of the lessons you learned from being at a publicly traded company, having a big exit, being part of I would assume the equity team in this exit. Like, what are some walk-away lessons that you had from that experience that have helped you with Full Focus?

Michael Hyatt: Well, I think one of the things and one of the reasons why I believe in coaching so much is I think surrounding yourself with people that are smarter than you are that have different skills and different experience is critically important. That kind of diversity for the talent pool is critically important. I think you’ve got to hire a rock-star executive team. You can’t do it all. And I think if you really want to scale and if you really want to grow, you’ve got to be willing as an entrepreneur to invest in the kind of human capital that it will take to get you there. Especially if you intend to go out and raise money or even if the executive team is going to stay on and operate the business, what investors are looking for is a team they can invest in. Yeah. They’re going to review the balance sheet. They’re going to look at the cash flows. They’re going to look at the EBITDA. They’re going to look at the growth rate there. They’re going to look at all those kinds of metrics. But at the end of the day, a big part of it is subjective and it’s their assessment of the capability of the executive team to really move the ball forward. They believe they’re going to add value to it, obviously, but they really want a team that they can invest in and feel confident in. So, it’s worth making that investment. Plus, experienced people will help you avoid the mistakes that are so easy to make.

Now, in that transaction, that was the first time I had really used big-league investment bankers and brokers and all that kind of stuff. And so, there was definitely a learning curve. You know, part of the learning curve was that I didn’t realize how much they were going to leverage the purchase. So, the thing that was fascinating because I was on the operating side of the other side of the sale. So, they bought it for half a billion dollars. It was the most. We had a 13-and-a-half times EBITDA multiple.

Justin Donald: That’s incredible.

Michael Hyatt: And so, it was the most anybody had ever paid for a publishing company ever, which I feel great about it until I realized and I don’t know this just my own experience at the time, what I didn’t realize is that the private equity was putting in 50 million and they were expecting me to go out as the show pony to raise 450 million.

Justin Donald: Whoa.

Michael Hyatt: Which I did. And in fact, we were oversubscribed on the debt side by about 2X. So, we had phenomenal margins, best margins in our industry. We had steady increase in our stock price for seven years. And so, we had a phenomenal story. The company had been in business since 1798, and I wasn’t there that long, but it was an oil company with a venerable heritage and a lot of bestsellers. And so, I was getting bankers that were emailing me and saying, “Hey, how about if we go golf down in Jacksonville for the weekend? And how about if I take $10 million worth of that debt?” So, I mean, I was really being courted and it felt good. All that was awesome until we hit the Great Recession. So, we closed down the deal in 2005. And then we hit the Great Recession in 2008, and we were really over-leveraged for that. I think the takeaway was that you really got to, if you do a deal like that, I’m not sure I would do that kind of deal again but if you do a deal like that, you’ve got to really pay attention to the covenants because our cash flow is positive all through the Great Recession. We didn’t lose money a single quarter but our covenants got upside down because the ratios were screwed up.

And unfortunately, when you’ve got private equity involved and you’ve got institutional debt involved, if you get upside down on your covenants, then you have a lot of people to try to tell you what to do. And I really, really value my freedom. And so, I did enjoy that very much. That was a really rough ride but I will say that I probably learned some of the most important lessons I ever learned taking a company that size through the Great Recession.

Justin Donald: Yeah. That is a great kind of depiction of all that went into it or a lot of what went into it but you bring up a really good point, Michael, and that is with covenants. And I think that this is something most people don’t think about when you’re raising money, when you’re trying to scale, and this can be inside of debt, this can be inside of equity. The terms that you agreed to are everything, and you need to know those terms because you could be running an amazing business but you could also be set up to fail based on the way some of the covenants read where the business is profitable. You’ve got positive EBITDA like all is well, except, “Oh, this covenant didn’t work because you didn’t provide financials in a timely fashion or you held too much of this type of debt.” Whatever the covenant is, and that one covenant can sink you. That one covenant can hold you in default on a note or on an agreement where you could lose part of the company or you can lose in this case, in your case, some of your rights and thus the freedom.

Michael Hyatt: Yeah, absolutely. And this is, you know, we’ve often heard the term deal heat. Deal heat can be a good thing when you’re a seller because all the people that are competing to buy the company, there’s a deal heat that raises the temperature in the room, and everybody kind of gets irrational and they start overpaying for stuff. And a lot of people, frankly, thought that the private equity company overpaid for us at half a billion dollars. But I tell you this, the thing I learned is that deal heat affects you if you’re leading that sale, too, because you tend to get kind of swept up in the whole thing. And if you’re not careful, you end up minimizing the risk factors and magnifying or being too optimistic on the growth potential. And then you enter into a deal that, yeah, we could deliver these numbers if all the stars align. But if they don’t, we could be in trouble. And so, you talk yourself out of that. And so, when you’re building your executive team and I like to have this in the CFO, I want somebody that is looking at it with not really pessimism but with a healthy dose of realism that they can identify the risk factors and say, “If this goes wrong or this goes wrong or this goes wrong, what are we going to do?” And you got to be able to survive that worst-case scenario and come out whole on the other end. And so, a lot of people don’t like to do this but I think you’ve got to project. I like to do forecasts on a three-tier system. So, what’s the best case? What’s the most likely case sort of a middle-of-road thing? And then what’s the worst case? And I really want all of those to work before I’m going to get into the deal.

Justin Donald: Yeah. And this brings us to another point. And by the way, in a previous episode, I had Rob Follows on and he’s done over a thousand M&A transactions. And his big thing is you sell your company to a strategic. You don’t just sell it to VC or private equity. You don’t just sell it to, you know, you don’t necessarily just go public. Like, all those are options but if you sell to a strategic, you are truly maximizing the value because you will likely get more than the company’s worth because they don’t need it for the value that they’re paying for it. They don’t need it for the profit or income. They need it often as just like an add-on, and whether it’s profitable or not, it creates so much value for their customer base or for their internal team or whatever it is. But another interesting thing with selling a company or going public and I guess there are several different paths that we could go down, most people like as there’s an exit and let’s go down the path of just a strategic private equity VC, someone buying your company. A lot of people get thrown into what’s called an earnout, and that earnout keeps them locked up for a period of time with certain performance metrics that they have to hit in order to earn the rest of the compensation for the sale. Yours is a little different because you guys went public, right?

Michael Hyatt: Well, no, the company was already public by the time I became the CEO and had been public since 1965 or something like that. So, we went the other direction.

Justin Donald: So, then you privatized.

Michael Hyatt: Right. And I can tell you, the public markets, frankly, I loved running a public company. And even though we had sort of the burden of Sarbanes-Oxley and all the compliance stuff and we had to have quarterly calls with the analysts and with the investors but I loved the face time with investors. I love telling our story. I love performing in a way that made them happy. But the great thing about being a public company is that you’ve got a lot of smaller investors. Nobody has a huge tranche of stock typically. If they do, they have to file for it but if they got a little bit of stock, if they get upset with you or they don’t like the direction of the company, they just sell their stock and move on, generally speaking, right? I mean, we weren’t big enough where they were going to do a hostile takeover or whatever. But when you go to private equity, all of a sudden, you’ve got people that are heavily invested in the business. And so, they’re like, some can be. And I’ve had positive experience with private equity but if you’re not careful, you can get private equity people, they get really nervous at every little thing that happens. And because they’re not a strategic partner that understands your industry, they don’t understand a lot of things about your business and they probably have a portfolio of companies where they forget what goes with what company, and you feel like you’re reeducating them every quarter.

But I remember the pitch to me when private equity came knocking and saying, “We want to take the company private. We think it’d be good for you.” They said, “You won’t have to do the quarterly reporting. All the quarterly reporting that you have to do as a public company is onerous and your time would better be spent running the company.” And they were right. My reporting went from quarterly to weekly.

Justin Donald: Oh, man.

Michael Hyatt: And so, I mean, we had a weekly call. And a lot of times, especially during the recession, something would happen and they would just hair on fire and it was challenging. And a lot of times they would think if they could get something to work on a spreadsheet, they didn’t understand why you just couldn’t make it work in the real world but those are two different things.

Justin Donald: Yeah. And there’s also private equity is coming in. Generally, earlier stage, you have the VCs coming in and then private equity is a little bit later. They generally buy cash-flow-positive, EBITDA-positive companies. But there’s an expectation of what the returns are going to be, right? So, it’s not even just that they’ve got money on the line. If they’re not hitting their expectations for how big of a return they thought it should be, then this is an utter failure. And I’ve seen experiences. I’ve been part of this. I’ve been invested in companies that have had this going on. I’ve had private equity buy out friends and where they’ve stayed on in an earn-out capacity. And what ends up happening is even though there’s an opportunity to exit for a profit, like a good healthy profit, if it’s lower than the expectation of where they wanted to be, it’s often like a nonstarter, even though everyone else would say this is the biggest win in the world but they’re like, “No, we have to get 20% or we have to get 30% or we have to, whatever it is.” It is a fascinating world.

Michael Hyatt: Well, what I learned in that world, too, is that the guys that are the investors in private equity, the principals that are running those companies, they have to account to their investors and they’re oftentimes on the hot seat and under a lot of pressure themselves. And that just kind of cascades down into the business. So, yeah, I think I don’t. I wouldn’t avoid private equity but I would go in with my eyes wide open and make sure that I understood it and get a lot of counsel.

Justin Donald: Now, because of your experience here being on the public side and I forgot actually that you went back to the private side, which is great and then you went and you started your own company. And I’m curious, please tell us here in a moment that transition from staying in the privatized version and then splitting off and starting Full Focus but I’ve got to imagine that there are some important lessons that you learned in governance, in how your company is now governed compared to what that looked like through that whole privatization.

Michael Hyatt: Yeah. Well, one of the things that we had to do like when I was at Thomas Nelson, we had like, I don’t know, 75 or 80 people in our accounting department, just the accounting department. And so, we had to make all the conversion to be Sarbanes-Oxley compliant after Enron and all that kind of stuff. And so, we had squeaky clean financials. And I think the thing that I learned in the corporate world is that, and this is something we all know but you can’t improve what you don’t measure. And so, I think that most entrepreneurs that are starting a business don’t get their heads in the numbers on a regular enough basis that they can make meaningful change to the business. Just a side note and it’s kind of an analogy for this but I recently bought a continuous glucose monitor that I wear 24/7, and I did that because I know that my blood sugar is everything in terms of my metabolism and everything else, health-related inflammation, all that kind of stuff. Well, when I look at that glucose monitor, I can see immediately if I ate something that spikes my blood sugar and it forces me to correct. Well, if you have good financial reporting, just knowing what the facts are will force you to make the right decisions. So, one of the things I did before I actually became the CEO, I was a divisional manager at Thomas Nelson and kind of even in that public company, we weren’t having divisional meetings, financial review meetings on a regular basis. It wasn’t required of us but I started having one every month for all my employees.

And so, I would get my head in the numbers. I would block out a morning to just pore over the financials. And I wrote a variance report for myself every month where I tried to account for the significant variances in both revenue and expenses. And then I would go to the team, all my employees, and I would explain exactly what transpired the last month and give them a chance to ask questions. I really treated them like owners. And by the way, when I took over that division, we had 14 divisions at Thomas Nelson. It was the worst-performing division in the company. It hadn’t grown in years. It had terrible margins and it lost money the year before I took over. So, the CEO asked me how long it’s going to take to turn that division around. I had no idea, Justin. I picked the number out of the year and I said three years. And he said…

Justin Donald: That’s an uphill battle.

Michael Hyatt: And so, the first thing I did was I went off, I got my head in the numbers but then I came up with a series of bullets that now I call a vision script. I wrote an entire book on this called The Vision Driven Leader but I came back with just this ten-point vision of where I thought we could be in three years. I shared it with the team. I shared exactly where we were with the financial results and they were shocked. But they rolled up their sleeves, they got to work, and we turned that division around in 18 months. In fact, we went from number 14 to be number one in 18 months. We were the number one in revenue growth of the 14 divisions, and we were the most profitable division in the company and it had stayed that way for ten years. So, again, investing and paying attention to the metrics is so critically important. You’ve got to have KPIs, you’ve got to have a dashboard, you’ve got to have financial metrics. Make time to get your head around those.

Justin Donald: Yeah. We always used to say what you can measure, you can grow, right? When you’re aware of it, you can grow it, you can optimize it, you can maximize it. And so, I love that. I hope more people get into the metrics-driven analytics of running a business because that’s how you can gamify it, that’s how you can cut out just, I mean, that’s a hack. A lot of people are like trying to eke out revenue wherever you can get it, and I think that’s great too. Sometimes the answer is drive revenue. You want to solve your problems? Just get more revenue. And sometimes that is true. Other times it’s figuring out Pareto’s Principle of that 80/20, like, what’s the 80% of results that comes from 20% of the activity? Let’s measure and figure out what those metrics are that we need to move and let’s invest time and energy and resources into those things.

Michael Hyatt: Well, another practical example, one of the things I did in that division, and this was counterintuitive to me, but we were publishing about 120 books a year, which is a lot. And the whole company was publishing hundreds of books a year but our division was publishing 120. So, I did sort of the Pareto analysis and I said, “You know, as you would expect, 20% of these books are driving 80% of the results,” but there are some markers, you know, there are some clues. So, we cut the list from 120 down to 48. Now, what that allowed us to do is we didn’t need as much staff. The staff that did remain, they had a more manageable workload which allowed them to focus on quality. And so, by cutting the list by that much, the list of books or the portfolio by that much, it actually allows us to achieve more by doing less. In the Great Recession, we had a similar situation. We were calling on 6,000 retail bookstores and we discovered to our shock that 120 of them were driving 90% of the profit. So, we were able to let go a lot of the sales staff. We got out of a trade show where we were out there with all of our competitors and all the noise and spending a half million dollars a year trying to get attention. We said, “Forget that. Let’s bring these 120 people into Nashville. We’ll pay their way. Treat them to an amazing experience for 24 hours, have our best authors speak to them, and have their undivided attention.” So, a fraction of what it was costing us to go to that trade show.

Justin Donald: That’s fantastic. And that’s the power of knowing the numbers. That’s great. Having a dashboard where at a glance you can know what’s going on with pretty regular updates like daily, weekly, monthly and month-over-month, day-over-day, year-over-year. I love that. Now, you recently had a bit of a life scare, and I’ve got to imagine that has opened your eyes to maybe some new realities. You’re a very fit guy. You take your fitness, your health very seriously, and sometimes what is out of your control can happen. And you could be doing all the right things and in total great shape and great weight, go into the gym, great cardiovascular ability, great weight training ability, like all the things. And then genetically, there’s something going on that can have major impact on your whole world and I’d love to talk a little bit about that and takeaways from it.

Michael Hyatt: Well, one of the things that we believe at Full Focus and one of the things that we really promote, it’s core to who we are, is something we call the double win, winning at work and succeeding at life. And there’s this symbiotic relationship between your professional life and your personal life, so that if you’re stressed at work that’s going to bleed into your health, it’s going to bleed into your most important relationships, and vice versa. If you’ve got trouble at home or you’ve got a health problem that can impact your business as well. So, it’s important to pay attention to both. And as you mentioned, I’ve really paid a lot of attention to my health over the last couple of decades. I’ve run multiple half-marathons. I’ve had a personal trainer, I’ve had a nutritionist, kind of a health team. I’ve had amazing, amazing doctors. But I kept having this high calcium score. And it didn’t really affect me other than knowing that numbers scared me to death. And it was so high that like if you have a calcium score that’s greater than 500 and, by the way, everybody ought to be getting a calcium score every year. But if it’s greater than 500, you’re in the danger zone. So, mine got up to almost 3,000, which is not good. But it also depends on what kind of plaque is building up. And we couldn’t figure out why is this continuing to go up. I finally got a doctor that did figure it out, but it was a little bit too late.

So, in July, I’m hiking in the Andes in Peru, so we’re at 8,000, 9,000, 10,000 feet. I mean, it was very demanding spiritually and I find myself really out of breath a lot, which kind of surprised me. And in fact, I had two of my daughters on my trip. I had on the trip with my wife and my daughters said to my wife, they said, “Why is dad struggling so much? We thought he was in better shape than this.” I didn’t think anything about it. I just had COVID, by the way. And so, I thought, “You know, it’s probably a COVID leftover. No big deal.” So, I got home, didn’t think anything about it. But then in September, I was out for my morning walk. I usually walk two miles in the morning, and about a quarter of a mile from my house, I started getting really bad vertigo, like just super dizzy. I’m thinking, “What is going on here?” And then I got nauseous and then I threw up. And so, I called my wife and I said, “Honey, I think you’ve got to come pick me up. I don’t think I can walk home.” She said, It’s only a quarter of a mile.” I said, “I know, but I don’t think I can. I just threw up, whatever.” Well, then I threw up again. She came and got me. Long story short, we called an ambulance. I went in. They ended up doing an angiogram on me and found out that I had what they thought were three blockages, ended up being four, but one of them was 90% blocked.

And so, I had to go in for bypass surgery, which, by the way, when they rolled me in for the angiogram, so that’s the full-blown medical procedure. It’s in the big operating room, the whole thing. They rolled me in there and one of the doctors put his hand on my shoulder. He said, “Hey, don’t worry.” He said, “You’re in great shape. We never see anybody in here that looks like you. Everything will be fine. Worst case scenario, we have to put a stint in and we’ll do that when we do the angiogram but you should be good to go.” We come out of it. I come out of it. Wake up and I said, “So, how am I doing?” And they said, “Yeah, you’re going to need bypass surgery.” And so, they told me the thing. But, Justin, I had amazing peace and I thought it’s going to be okay. You know, and I think sometimes we don’t factor, we think about these things and they’re big and scary but we can’t envision the grace that we’re given in the moment. And so, in that moment, I just felt so protected and so good and had an amazing cardiac surgeon. He came in. He was very reassuring. So, the next morning I went in for cardiac surgery. So, I went on medical leave all fall of 2022. So, I didn’t come back to work really until after the first of the year. A little bit of time in December, but after the first of the year, had a tremendous time to read and journal and reflect but here’s what was really good and this is a lesson for everybody to take away.

You never know when life’s going to hit you. You never know when something is going to happen and you’ve got to set yourself up for it while you can. I was talking to a bunch of coaching clients today and I said, “You know, the time to get a line of credit is when you don’t need it.” So, you got to set it up when you don’t need it. The time to work out, the time to eat better, the time to do all that is when you don’t need it. And fortunately, I had done that but here’s the thing I did from a business perspective, and I’m 67 years old. So, about five years ago, my daughter, Megan, had been working in the business for quite a while. She’s super smart. She’s a great leader. And I said to her, “I think I want you to succeed me.” And she said, “Well, okay, great.” So, we announced to the team five years ago that this was the succession plan and it was going to be a two-year plan. Actually, we said three years. It ended up being two. But I said, “Here’s what’s going to happen over the next couple of years,” and this is a lesson too. Whenever you’re telling people about big change in your company, start with what’s not going to change. Because if you start with what’s changing and as entrepreneurs, we kind of love change, but not everybody loves change and it makes them feel very uncertain and very unstable. So, we said, “Here’s what’s not going to change, our vision, our mission, our corporate culture.

You know, none of that’s going to change, our values. None of that’s going to change. But here’s what’s going to change. Megan is going to be the CEO in three years, and here’s how it’s going to be stepped out.” So, we had made that transition a year and a half ago. I felt like Megan was ready. And so, I said, “Let’s just bump this up by a year. There’s no reason to wait.” And so, because of that, because she had been running the company for more than, I guess, 18 months herself, when I took medical leave, the company didn’t miss a beat. You know, I could be out of the business and the business kept functioning without me. In fact, if I’m honest, it did better without me. So, there’s a lesson, I think, for all entrepreneurs is to think about succession and to do it well so that you set your successor up for success and then get out of the way. You know, don’t gunk up the leadership and confuse people by who’s in charge.

Justin Donald: Yeah. That’s a great way to set it up and we do need to start thinking about it early because companies that are built to scale the best and are built to have the best value are the ones that are system-oriented and succession oriented, right? So, it’s built no matter who owns it, no matter who’s running it, that the business can scale because the processes are already laid out and you might have to revamp them. You might have to re-draw them at certain levels of scale because there’ll be different bottlenecks. But at the same point in time, most people don’t think about succession planning. And I think you want to start that earlier than later. Now, I don’t know if you have watched the hit HBO series, Succession.

Michael Hyatt: A few episodes only.

Justin Donald: So, I’ve got to imagine you don’t run your business and family the way Logan Roy does. I’m curious how have you navigated the complications because it seems like you’ve done this well of having family and business collide because it can be really challenging.

Michael Hyatt: It can be. And Meg and I get invited on a lot of shows to explain how we made succession work. We just did a podcast last week with Carey Nieuwhof, and he was asking, “How in the world does this work? Because we don’t see it very often.” Well, first of all, start with having a really bad experience. So, when I became the CEO of Thomas Nelson Publishers, my predecessor had been the CEO for 50 years. He was in his late seventies and he was my biggest fan. He was my mentor. He nominated me to the board for my role as CEO. The board voted unanimously and he was totally on board, handed the gavel to me at the shareholders meeting, the whole thing. The next day, he walks into my CFO’s office and he says to the CFO, he says, “Joe, if I’m not the CEO, who am I?” Well, he had a crisis of identity and he hadn’t given any thought to what he was going to do after he became the CEO. He didn’t have a life other than being the CEO, so he panicked. So, from that day forward, he spent the next two years trying to unseat me. So, he was calling other CEOs in my industry and again, we’re a publicly held company. This was probably borderline illegal but he was not an agent of the board. He was just the Lone Ranger and he was out there trying to hire other people to replace me.

And so, I’m trying to fend him off. He was in the office every day. He was starting rumors, gossip, all this stuff. So, I’ve seen it done really badly. And, in fact, the reason that we sold the business and so I would have done a secondary offering if I had to do it over again but he didn’t want that. You know, he wanted everybody to benefit, and then he would be out of the business. So, we did that and got him out of the business. So, I’ve seen it done poorly. That was hugely helpful. I’ve learned more from bad leaders than good leaders. Side note. So, I thought, you know, I want this to go well but in a family succession, it’s only going to be as good as your relationship is healthy. So, if you don’t have a healthy relationship, being in business together is not going to help the relationship and it’s not going to help the business. I’ve been married to my wife, Gail, for almost 45 years. We have five granddaughters. All of them live within 20 minutes of us. Three of them, the three with the grandkids live within 5 minutes. And all ten of my grandkids live within 5 minutes. So, we have a very, very healthy family. And Megan and I are both I think we share this. She’s a little better at it than I am but we have empathy on the one hand, but we’re both very direct and we’re committed to not let the sun set on our anger. So, we confront things very early on, so we’re not collecting them and cashing in later. But we can talk about anything. We have just a very healthy relationship.

And so, before you think about this, if you’re listening to this and you’re thinking about, “Man, I would love to hand off my business to my son or to my daughter.” Then the most important thing you can do before that point is invest in the relationship. Make sure that the communication’s wide open that you have a way, a healthy way of resolving conflicts so that you don’t engage in passive-aggressive behavior or other kinds of unhealthy behaviors. And if you need to, pull in a coach or pull in a counselor or somebody that can help that relationship be good. So, Megan and I totally have each other’s backs. And there are meetings I don’t even go to because I don’t want anybody to wonder who’s in charge. I want her to be the skipper and I think of myself as working for her.

Justin Donald: That is so good. There is so much gold in what you just said there and I know that there are people that are listening to this and watching this that do work with their family and do desire to have their children take over the family business or that they desire for their children to be able to allow their kids to do the same. So, powerful stuff. Now, you have a new book coming out and I’d love for you to be able to talk about that a little bit as we wrap things up here. And then I’d love to make sure people know where to reach you and find out more about what’s going on in your world.

Michael Hyatt: Yeah, absolutely. So, we actually have a new book that came out in January. Meg and I wrote it together. We’ve written two books now together. And this is the second one. It’s called Mind Your Mindset: The Science That Shows Success Starts with Your Thinking. So, we did a deep dive on neuroscience and we wanted to understand how the brain works. And so, what we have in the book is a three-part process, and we said this book is really the prequel to everything else because my professional opinion is that mindset is about 85% of everything. If you’ve got the right mindset, you can be resilient. If you’ve got the right mindset, you will find the solution to the problem. If you’ve got the right mindset, you’ll just make it work. But if you don’t, even your successes can sabotage you. So, what we started noticing, and this was a couple of decades ago, one of the things I started noticing is that there is a difference between facts and then the story or the meaning that you assign to the facts. So, for example, with my heart attack story, you know, I was sitting in cardiac rehab and this is pretty interesting. I was sitting in cardiac rehab and after the exercise part of the program, we had an instruction part where one of the nurses came and talked about some aspect of healthy lifestyle and rebounding from your heart attack.

So, the first thing she asks us is, “What does your heart attack mean to you?” So, we have the event in common but what were the stories? The guy right across the table from me teared up and he was the first to go, and he said, “Well, here’s what it means for me. I’ve peaked. My life’s basically over, at least as I knew it, and it’s going to be a downhill slide until I die.” I thought, “Wow.” So, I had the good porters in the world when it comes to precision medicine. He calls me when I was in the ICU and he said, “Look, I know it’s going to be easy for you to dwell on the past and ask yourself, what could you have done differently? How could you? The thing is you basically just rebooted your life. You got more blood flow to your brain and your body than you’ve had in the last two decades.” And he said, “I can’t imagine what you’re going to create now. If you look at what you’ve created without that and now you’ve got all these assets, this is going to be amazing.” So, he set my mindset that this was not a negative thing, but this was a gift. Now, I didn’t want to hear that right away but all came from mindset. But step one comes when you’re thinking about your mindset.

This is step one in the book is you’ve got to identify the story, separate the facts from the story because most of us think the story is true but the story is not true or false. It’s the facts that are true and then the story is going to approximate some degree of truthfulness. So, get this, up to 20% of our memories are false, on average. 70% of our memories are distorted in some significant aspect. So, we need to be constantly self-aware of our thinking. And then we get into the part, we don’t have time to go into this, but to interrogate that story and ask, “Well, is that really true or is there another way or another meaning that I can assign to this that would be more enabling, more powerful?” And then finally, to imagine a bigger, better story, how could we take those same set of facts and use those to create a bigger, more powerful story that will really serve what it is we’re trying to create in the world? So, that’s the book in 2 minutes.

Justin Donald: I love it. Where can our audience learn more about you and get plugged into what you’re up to?

Michael Hyatt: Well, first of all, go to FullFocus.co. That has links to our podcast, to our coaching program, to our Full Focus planner, and everything else. If you’re interested in the book, Mind Your Mindset, go to MindYourMindsetBook.com, buy the book, and then come back to that website and turn in the receipt, then they’re going to get an audiobook version of the book. They’re going to get a discount on something by getting the results you want. You can use this tool to work through your thinking and after a while, you’ll develop the facility to do it on the fly without the tool. But we give you a 50% discount on the tool. And then there’s something else that we give you too. Oh, a reading guide for the book, too, so that you can really go deep in and make sure that you apply it.

Justin Donald: I love it. Well, I hope that people dive in what you’re talking about. This mindset shift is everything. I would say that the vast majority of the success that I’ve had in the way that I guess I measure success is because of just a small little shift in mindset. Not a huge one, just a small one. And so, I think this is powerful and I hope more people read your work. Once they get into one of your books, I think they’re going to start getting into a whole bunch more. I don’t think I have all 15 of your books, but I think I’ve got at least half of them on my bookshelf behind me. So, yeah, thanks for what you do. And I love ending every episode with one question that I ask my audience, and that’s this: What’s one step that you can take today to move towards financial freedom and move towards a life that you truly desire, one that’s on your terms, a life not by default, but by design? So, think about that. Take some form of action. And we’ll catch you next week. Michael, thank you so much for joining us. And tune in for our next episode.