How to Build Your HoldCo with Michael Girdley

Yong-Soo Chung [00:00:00]

Michael Girdley is an unconventional CEO.

Michael Girdley [00:00:03]

And I know everybody's supposed to come in and be like, yeah, I'm the best CEO in history. But actually like I'm much better being on the creative side and the inspirational side. And I really suck on like the management and grind side of like what it takes to be a great CEO for a lot of businesses. And so for me, you know, I knew I wasn't happy. I was starting to learn a lot about myself. I had joined a CEO peer group and I was starting to be more introspective and see patterns and where I was good and weak.

Yong-Soo Chung [00:00:28]

So, while CEO-ing his first business, he decided to start a coding bootcamp called CodeUp.

Michael Girdley [00:00:34]

And we started that in late 2013. So I was actually CEO of two companies at once, which by the way is a huge mistake.

Yong-Soo Chung [00:00:39]

CodeUp was a coding bootcamp that ran for 10 long years until they announced it shut down in December 2023. CodeUp was also how Michael's journey in Personal HoldCos began.

Michael Girdley [00:00:50]

It was just like, oh, I went from one company to two. And then I started a third company the next year. And then I started a fourth, fifth. And then, you know, ended up creating another company that went bought a company like so. So it just kind of snowballed from there, but it wasn't really like a master plan thing.

Yong-Soo Chung [00:01:04]

Over the years, Michael has launched around 11 businesses and grown his personal holding company to nearly $100 million in revenue. And, in the process, he has developed and refined a unique framework which he calls, The "Right People, Right Structure, Right Mission" framework.

Over the next thirty minutes or so, Michael will be my COPILOT on this episode of First Class Founders!


Michael Girdley [00:01:27]

Hi, I'm Michael Girdley. I'm an entrepreneur and investor here in San Antonio. I run a diversified hold co of a dozen companies or so and get to spend my days supporting, coaching and creating new businesses.

Yong-Soo Chung [00:01:41]

Together, Michael and I will be exploring his "Right People, Right Structure, Right Mission" framework in extensive detail. We talk about Michael’s strategies to hire the RIGHT people, his ideas on company STRUCTURE. And, finally, how he combines these two with the right MISSION to supercharge his team.

So, jet-setters, buckle up your seatbelts, put your phones on airplane mode, and get ready for take-off!


Michael Girdley [00:02:08]

Hi, I'm Michael Gridley, let's get down to business.

Yong-Soo Chung [00:02:20]

The next generation of successful founders in this digital age of entrepreneurship will leverage their audience to launch, build, and scale their brands. First Class Founders explores this golden intersection of audience-building & company-building with proven strategies to grow both your audience, which is your distribution, and your brand, which is your product.

Because those who can master both will create a category of one.

Hi, my name is Yong-Soo Chung and I'm a serial entrepreneur who bootstrapped 3 successful businesses from $0 to $20 million over 8 years.

On this podcast, you'll learn timeless lessons from world-class content creators, startup founders, and CEOs. You'll also hear tactical tips & strategies from ME, Yong-Soo Chung!

Are you ready? Then, let’s begin!

Before we begin, we teamed up with HyperPods to bring to you a quick 3-min hyper-visual summary of this episode with Michael Girdley about how he builds  his business within his Personal Holding Company using the “Right People, Right Structure, Right Mission” framework.

You can grab the hyper-visual summary for this week’s episode absolutely free at firstclassfounders.com/hypervisuals. Michael Girdley's "Right People, Right Structure, Right Mission" framework is a three-legged support-system on which all of Michael's businesses are built.

Let's begin with the first leg of this framework - the Right People.

Most businesses begin as idea-first. That is, an entrepreneur has an idea and they look to incubate a business out of it.

Michael Girdley [00:03:57]

Yeah, so a lot of people want to incubate companies. So that's the prospect of being there, you know, at the earliest phase to help develop the idea, put the core team together, create the business model, like go through that exploration phase and at the other end, hopefully comes out a repeatable growing venture, right?

Yong-Soo Chung [00:04:13]

Right, but Michael has a VERY different perspective on this process.

Michael Girdley [00:04:17]

The thing I've learned is something like chemically happens to people when you go through like a customer-discovery process with customers and they all say they have this problem. And like, it's kind of like when a woman has a baby, like she chemically changes, right? Like the hormones change and she becomes a different person and it's beautiful to watch. The same thing to a smaller scale happens when somebody goes to talk to a customer and that customer is like, I have this problem. And I can see when we talk next with, you know, with associate, they'll come back and they'll be like I heard from all these people and this is such an opportunity. We have to do this. And like they just change into these hugely passionate people.

Yong-Soo Chung [00:04:56]

That's right. Michael believes in incubating his businesses people-first rather than idea-first.

Michael Girdley [00:05:02]

I don't do idea-first, which so many people do. They're like, I have this great idea and I wanna hire an operator. It's like, that's totally backwards and it doesn't work because of that human condition that I just tried to describe.

Yong-Soo Chung [00:05:13]

Side-note, Michael also refers to this "human condition" as the "Missionaries vs Mercenaries" idea, which is...

Michael Girdley [00:05:20]

100%. Yeah. Do you want to hire somebody that's in it for the money? And in it for growing their career? Or do you want to hire somebody that's in it to change the world and create something beautiful? And to me, I'd rather work with the missionaries every time. They're much more fun

Yong-Soo Chung [00:05:33]

But, where do you find such missionaries who would be the perfect people to incubate and operate a business with or for you? How do you spot them? How do you hire them?

Michael Girdley [00:05:43]

So, you know, I tried different ways to incubate companies because I knew I didn't want to be an operator. Like I don't want to be the CEO of a business. That's not the right thing for my journey right now. And so I tried different things. Like I would go like try to partner with people that maybe had a job for 20 years and were like trying to become entrepreneurial. I tried partnering with young people who maybe already had ideas. And I discovered all of those really didn't work very well.

Yong-Soo Chung [00:06:10]

Because the older folks thought they WANTED to be CEOs but they actually ended up NEEDING a boss...

Michael Girdley [00:06:16]

And I'm not a good boss. I'm a good leader, but I'm a bad manager. And I don't really like managing.

Yong-Soo Chung [00:06:21]

Then Michael tried a different approach.

Michael Girdley [00:06:24]

I tried folks who were like more senior, like peers to me and stuff like that. And what I really discovered was that there was this interesting inflection points in people's lives to when they should sign up to be CEOs in different types of businesses. And I discovered that there was these people that are typically have grown up wanting to be an entrepreneur, but never really had the opportunity to do it. And a lot of that is because they didn't grow up in entrepreneurial households. Like I got so much from growing up around my parents and we would talk about our family business and like that was just part of the culture that taught me a lot about how to do business was just like being 12 around the dinner table. But a lot of people don't have that and they're not part of those communities.

Yong-Soo Chung [00:07:04]

Armed with this realization, Michael started looking specifically to hire these kinds of highly competent people. People, who he felt, SHOULD be starting companies...

Michael Girdley [00:07:13]

They should be starting companies, but they just haven't gotten all of that stuff either from school or from their environment that I got.

Yong-Soo Chung [00:07:19]

Over time he's managed to nail down the *exact* profile of such candidates...

Michael Girdley [00:07:23]

kind of in their mid to late 20s. And they are people who want to be entrepreneurs, but they just really have some misconceptions about it. Nobody's trained them on how to do it.

Yong-Soo Chung [00:07:32]

And he gives these candidates an offer they find hard to refuse - his associate model.

Michael Girdley [00:07:38]

my associate model is I hire them to come in and it's a no strings attached role where I just pay you and we partnered together for you to find your next thing. And I coach you through that as one of these associates.

Yong-Soo Chung [00:07:49]

The idea is simple: hire the RIGHT people and give them the coaching they need to develop an entrepreneurial spirit.

Michael Girdley [00:07:55]

And ideally at the end of it, we put together an incubator business together. But it's also okay for you to go do a business on your own. Like you can go take a job somewhere, you can give up, or you can go work at one of my companies. Like those are all options, there's no strings attached.

Yong-Soo Chung [00:08:08]

Yeah, I ALSO found that "no strings attached" clause quite mind-blowing!

But, here's something even MORE mind-blowing: these associates are PAID a salary! (pause)

The catch is that the salary is a bit lesser than their previous job because, as Michael explains, this role is supposed to be non-permanent.

Michael Girdley [00:08:25]

And that does two things. One is it creates an incentive for them to get out of this role at some point so they don't stay there permanently, but it also attracts the right people.

Yong-Soo Chung [00:08:34]

The RIGHT people, as he was explaining a few minutes earlier, being those people that have already achieved what they set out to achieve in their career.

Michael Girdley [00:08:41]

They went to Harvard, they went to go work at McKinsey, now they're at an investment bank, or they went to go work, and they're like, I wanna be a CEO founder. And then I talked to them and they're like, okay, well, I need to make what I was making at McKinsey. And I'm like, well, that just doesn't work here. I'm not paying you a quarter million dollars to do this. So a lot of those people, when you tell them, hey, you're gonna take a 25% pay cut or whatever to come work with me, it selects them out because I want to select for people that are going to have long-term thinking and do kind of the marshmallow tests. I've wanted to do that.

Yong-Soo Chung [00:09:13]

So, yeah, this model selects for the RIGHT people. But, it also puts pressure on Michael.

Michael Girdley [00:09:19]

If there's no strings attached, I have to prove myself through that period of our relationship that I'm the right business partner for them.

Yong-Soo Chung [00:09:25]

The good news is that the RIGHT people -- that is the associates that Michael chooses to work with -- have always reciprocated his trust and shown faith in him every single time.

Michael Girdley [00:09:35]

so far, like, when we get to the end, they're like, I want more of what you're offering. Like, let's work together more. Like, you can bring these things, and I want to be your business partner.

Yong-Soo Chung [00:09:43]

But, no system is perfect. And Michael admits that there have been some failures along the way...

Michael Girdley [00:09:48]

I've tried to experiment with hiring older folks. So far it's kind of not been really good. If you make it to 40 and you haven't figured out how to start a company on your own by now, you're not gonna be a great partner for me to start a company with. That's the one thing I've learned. You know, I think there's other folks that have come through and after six months we've realized they would be better and happier having a job.

Yong-Soo Chung [00:10:08]

In fact, some of them ended up working at Michael's companies!

Michael Girdley [00:10:11]

But by and large, the hit rate's pretty high. It's like over 80%, I would say, of folks that tend to be the right kind of folks for this stuff.

Yong-Soo Chung [00:10:17]

Of course, the big question here is: how does Michael find these associates? Where does he go looking for them? Well, let's just say he takes advantage of… himself


Michael Girdley [00:10:27]

The last time I did this to hire last fall, we got over 400 applicants.

Yong-Soo Chung [00:10:33]

And we'll hear from Michael himself what that means in a little while but I want to quickly take a moment to give a shout out to my sponsors, Riverside.

All right, listen up creators. You know that I'm super picky about which sponsors I work with. Well, I'm super happy to have Riverside as our sponsor for this episode. Why? Because I love using Riverside to record all my guest interviews on this show. Yup, that's right. My producer and I use Riverside as part of our podcast production process.

My favorite part about Riverside is how seamless the recording process is whenever I record an episode with a guest. Riverside records everything locally so the audio quality is the best that it can be. Plus, it even records backup audio just in case something happens, which has come in pretty handy in the past.

But hold on. We don't just use Riverside for recording. We use it to analyze transcripts within the video recordings to pull out the best parts of my conversations with guests. They even added AI to make it even easier for you to create even more high quality content.

Riverside is completely free to sign-up and get started for your first 2 hours. Then, use code "FIRSTCLASS" to get 20% off any paid plan. Trust me, you'll love using Riverside as much as I do. Just look for the link in the show notes and don't forget to use code "FIRSTCLASS" to save some extra cash.

Huge thanks to Riverside for sponsoring this episode!

Alright, let's get back to our conversation with Michael Girdley. Michael was just explaining how he sources candidates for his associates model. And his answer shouldn't surprise you...

Michael Girdley [00:12:31]

I take advantage of my personal advantages. So audience on Twitter, if I put out a compelling written job description with a compelling offer, I'll get hundreds of applicants. The last time I did this to hire last fall, we got over 400 applicants.

Yong-Soo Chung [00:12:46]

Yeah, 400 applicants is definitely impressive. But, that also means you need a way to quickly evaluate all of them to find the cream of the crop.

Michael Girdley [00:12:54]

I use the standard hiring process that I use for everything, which is a combination of different systems that I've accumulated over the years. One's called top grading, a set of off-the-shelf personality and aptitude assessments, and then we run people through those, and then we do full-on top grading style interviews on those people, structural, behavioral. And then I'll do a number of reference calls. So we may call four, five or six references for those people to really get to know them. And then at the bottom squirts out, one or two awesome people out of the four hundred.

Yong-Soo Chung [00:13:25]

Once the right associate is found and hired, Michael begins building a relationship with them, right away.


Michael Girdleys [00:13:30]

What I have learned is that for those relationships to be really good, it has to be a real relationship and for it to be a real relationship, we have to spend facetime together. So what I'll typically do is when they get started, we'll either come here to San Antonio, we'll spend a week together. I have this whole co-working space where they can office with me and we'll just do a bunch of stuff to both have fun, but then also to start to explore stuff. And then after that is a lot of opportunities for us to have one-on-one meetings and I'll set up one-on-ones with them, usually once or early on twice a week and we sit and talk for stuff for 30 minutes to an hour

Yong-Soo Chung [00:14:06]

Every associate he hires is expected to immediately start working on ideas and exploring possibilities.

Michael Girdley  [00:14:12]

And there's a whole methodology that indirectly I coach them through and then they go, chase what they're passionate about and go from there.

Yong-Soo Chung [00:14:19]

A part of this methodology is a strategy called "Effectuation". Effectuation is a way of thinking and decision-making based on the idea that entrepreneurs, essentially, make things happen.


Michael Girdley [00:14:29]

And the shorthand I think about is you start with what the changes that you can affect on the world, and then you go and explore that and you grow things over time based on that insight. And you don't start with a vision, and you don't start with a customer problem. You start with what you could actually do, and meld that to a bigger vision and a customer problem over time.

Yong-Soo Chung [00:14:46]

I actually got Michael to talk in quite a bit of detail about Effectuation and how he -quite literally- started practicing it without even knowing what it was called. And you can hear all of that in the raw interview, available as a bonus episode in the private feed. It starts with this wonderful quote from Michael:


Michael Girdleys [00:15:03]

I Like every other entrepreneur, I'm a shameless thief of ideas and techniques that I see from other people

Yong-Soo Chung [00:15:11]

And then, later in the raw interview, Michael utters this BRILLIANT quote:

Michael Girdley [00:15:15]

Yeah, I have trouble quitting. That's a strength and a weakness. I have trouble quitting.

Yong-Soo Chung [00:15:19]

All I'm gonna say is that the story narrated by Michael between these two wonderful quotes is incredibly and utterly fascinating! So, do check out the bonus raw interview in the private feed!
(exaggerated) "Hold on Yong-soo, what is this 'private feed' you are talking about?"

Well, I am glad you asked. The private feed I am referring to is only accessible if you are a premium member of First Class Founders. Which, if you are listening to me say THESE WORDS, you are clearly not.

Because premium members get a private feed with ad-free episodes that are released a week early. That means they don't get to hear any of this self-promotion. Or any of the ads and sponsor messages. In fact, at this very moment, premium members have skipped a few seconds ahead of you and they are already listening to Michael talk about the "Right Structure" part of the "Right People, Right Structure, Right Mission" framework!

Wanna become a premium member? Go to firstclassfounders.com/join - I'll leave a link in the show notes.

Anyway, getting back on track, Michael uses the effectuation principle to build and incubate the RIGHT structures for his company. And he does this by starting small, making little bets instead of big ones right at the start...


Michael Girdley [00:16:23]

For example, when we started Scale Path, which is the CEO-peer network that we started last year, it's got a hundred members in it. Like it had some insights on it. Um, but we went through and we did full rounds of, um, customer interviews and then solution interviews like we did some lean startup style stuff with all the people that were potential customers to understand did actually anybody give a crap about us building this thing before even really talked about specifics on equity or salary or any of that kind of stuff.

Yong-Soo Chung [00:16:50]

Michael sat down with the co-founder and CEO of ScalePath, Sam Trumps, with all this data they had gathered from these interviews.


Michael Girdley [00:16:58]
We sat down and had a real discussion about what our long-term view was. We both want to build something really big. So we had that kind of a level of alignment around vision and dream. And then, we had a discussion around, okay, well, what kind of salary do you need to get now? What should you be getting? How do we get you to a market salary at some point in the future? And then how do we like decide to sell the company and get divorced and all that kind of stuff? We wrote it all up in an MOU before we even put anything down.

Yong-Soo Chung [00:17:24]

Amazing! The structure of the company was shaped and hammered out literally MONTHS before it was anywhere close to being a reality!

Michael Girdley [00:17:31]

We don't know if it's really gonna work. So it's dumb to spend $20,000 on legal fees at that point to spend everything up and file for LLCs and stuff like that. And then we just do all that a few months later. So we did all that actually during the summer. So it was like three months in before we actually formalized everything.

Yong-Soo Chung [00:17:46]

Basically, in true entrepreneurial fashion, Michael figures out the structure of the company as he works with his associates over time.

Michael Girdley [00:17:54]

it's just a discussion that you have early on in practice to talk about like a direction, hey, this is where I wanna end up. Hey, there's some stuff we don't know. Let's talk about that when we figure it out. And then once we figure it out, then you have the real specific discussion. You write it down on a piece of paper and then, you know, a few months later when you know it's time to really go incorporate everything and pay lawyers and all that kind of stuff, you give them the MOU and say, this is our agreement, like, go do this thing and it goes from there.

Yong-Soo Chung [00:18:19]

Once you have clarity about the direction and destination, you need to start thinking about how to propel the business into gear. That is, how to seed the business with funds. And it turns out, this can be quite a tricky business - pun unintended.

Michael Girdley [00:18:32]

You know, the Dura business that we started in 2017, it's a hold co on itself, it's acquired 15 businesses. You know, when we did the first acquisition, my partner, Paul, who's the CEO and myself, we funded the first couple of acquisitions out of our own money and then we ran out of money. Turns out when you buy software companies, for millions of dollars, like eventually run out of money. So, that was how that structure worked. And we knew from the beginning, and for it to get big was going to require a lot of capital. That business is very capital intensive when you're buying software businesses or buying other companies. And they've done that 15 times now over the past four years since we started the company.

Yong-Soo Chung [00:19:11]

For Dura, in particular, Michael opted to structure it as a C-Corp because of one important reason: outside investors.

Michael Girdley [00:19:18]

There are times where each individual company will be an LLC. And like in the case of Scale Path, we've optimized it to be one that's cashflow positive from month two. And so it's paying its own bills and it's growing that way. Our business, Near, it's the same thing. It is still to be determined if that's a pass-through entity or if that will be a C Corp. And a lot of that ties back to what your also what your eventual goal is with the company. So you can have things in your HoldCo that you will plan to sell at some point and there's reasons to be a C Corp in the United States if you plan to sell a business and not distribute a lot of cash over time.

Yong-Soo Chung [00:19:53]

But what I found really fascinating about the structure of Michael's holding company is that he prefers to DECENTRALIZE most of his operations

Michael Girdley [00:20:01]

Yeah, the only stuff that is really centralized is incubation. So if I'm incubating new businesses, I will do those at the HoldCo level. Rarely, if never, do the individual companies incubate new businesses. Never say never, but that just usually doesn't happen. I'm a big believer in the church of decentralization, which is, I think, pushing entrepreneurship and decentralizing things tends to almost always be the most effective and efficient way to go about it. So beyond kind of innovation and then secondarily, the prospect of doing basic stuff like annual employee reviews and coaching, nothing else is centralized, not even finance or HR or accounting. Everybody does their own stuff.

Yong-Soo Chung [00:20:48]

According to Michael, centralization only works if you have - and these are his words - "very homogenous style assets."


Michael Girdley [00:20:54]

Like if you're like Red Zeller, right, and you have all non-ferrous foundries across the United States in out of the way geographies and small towns, like I totally understand that. Like you should have a lot of centralization there. That makes sense to build that type of hold co. But for me and for most other folks, I think unless your type of assets are very consistent, it makes very little sense to try to centralize that stuff.

Yong-Soo Chung [00:21:24]

He further described how centralization can actually become a hindrance if the companies in your HoldCo are varied and uniquely distinct from each other.

Michael Girdley [00:21:34]

For example, let's say you're going to centralize purchasing, for your HoldCo and be like, oh, I have this one purchasing guy who's going to be really good at purchasing for everybody. Well, if you have like a bunch of different assets, how's that purchasing guy supposed to be good at all of those and how's he supposed to prioritize which ones to work on? Essentially, Centralization sounds really great, in theory, but in practice becomes a huge mess. Because you have to figure out well, what am I going to centralize? What am I going to decentralize? And then secondarily, like, it does this also thing where it's like, okay, well, like, when is when is the when is it the GM or CEOs problem for something going wrong? Or when is it the centralization problem? There's this diffusion of responsibility.

Yong-Soo Chung [00:22:12]

Of course, Michael is quick to admit that some of his dislike for centralization might stem from his personal issues about not wanting to manage. Or, as he not-so-subtly puts it...


Michael Girdley [00:22:21]

maybe that is just because I suck as an operator and I don't like to manage things and I don't like details and I don't like repetition, I don't like grind, but like, you know, that's just how it's proven to me over and over again. I see it when people centralize stuff and I'm like, I don't think you should do that. And then they do it and it's like, oh, they didn't save any money or get more efficient. It ended up just being a pain in the ass.

Yong-Soo Chung [00:22:40]

But, the main advantages of centralization is that it allows for easier and quicker value-propagation within all companies in a HoldCo. That is, you can centralize a certain value system for your brand and enforce it throughout your entire company. To which, Michael points out that (a) his holding company is technically quite small.

Michael Girdley [00:22:58]

So I'm still at a size where you can do old school value propagation, which is I need to live the values and I have one-on-ones and spend time with the leaders of those companies. So I can do that old school value propagation

Yong-Soo Chung [00:23:11]

and (b) he actually  prefers it when each individual company develops a culture of their own

Michael Girdley [00:23:17]

So I encourage them to run processes to do that and to create the core values and all that stuff that's right for them and their market. And I think it's a mistake to assume that in a HoldCo situation, one corporate culture can be universal. One ring to rule them all does not work. And you have to give people the ability to do that.

Yong-Soo Chung [00:23:36]

And he gave several examples of how different companies in his HoldCo have cultures that are diametrically opposite to each other.

Michael Girdley [00:23:43]

for example, one of my companies is in like a market that requires them to be very progressive and sometimes speak up politically. And, um, do I fight up against that? No. Like I let them do it because that's what they think is right for the staff and the business. Another one has, you know, is exactly the opposite. They should not talk about politics at all. Like don't even get into it. And they just ignore it. Uh, another one is embraced hybrid and that's their culture and philosophy. And another one has said everybody in the office. It's like, okay, well, that's your culture like you do it. So I support that because ultimately like, I want the values and the culture to support the mission and everybody has a different mission. So just totally makes sense to me.

Yong-Soo Chung [00:24:21]

That said, Michael does acknowledge that this might not continue to be the case as his HoldCo grows bigger...


Michael Girdley [00:24:27]

At some point in the future, like as my organization scales and I have to bring on other me's, you can see a situation in which we're going to have to get more intentional about spreading kind of the basic culture that we want to have and that sort of thing across my whole world. But for now, I just do it. I get it for free because I'm doing coaching and spending time with the CEOs.

Yong-Soo Chung [00:24:45]

Yeah, that definitely makes sense. And it ties in neatly with the effectuation philosophy too - solve your problems using the resources that are available to you. Speaking of problems, I was curious how Michael deals with crisis situations arising at the businesses within his HoldCo. Does he step in himself? Does he consider it to be a litmus test for evaluating the "rightness" of his chosen operators?

Michael Girdley [00:25:06]

Yeah, I mean, ultimately there's a core judgment of, is this person the right person for what the company and the mission and the team and the customers all need right now? And that's always a calculus, right? Is this the right person to play first base for us if we're the New York Yankees? So that's always there. There are times where crises happen and my deference is always to try to let the CEO, CEO. There are times where I have to jump in and be part of the team and help in a crisis, but that tends to be very rare. And then the second thing that I've learned to do structurally is you never want you as the HoldCo CEO to be the hot backup for the CEO leaving.

Yong-Soo Chung [00:25:50]

And, I want you to pay close attention to what Michael is about to say here. If you can, stop doing whatever you are doing for the next minute or so, and listen carefully to what Michael is about to say.

Ready? Here's Michael.


Michael Girdleys [00:26:02]

So all my companies actually have a rule that, past a certain size, they have somebody on the team whose job it is to be number two and take over for the CEO if something happens to the CEO. They get hit by a bus, it should not be Michael steps in because Michael can only do one CEO job at a time and that's running the HoldCo. And everybody else, you know, each individual company needs to be, you know, have somebody in that seat that is full-time all-in CEO and that can't be Michael unless something goes really, really wrong. So generally I've tried to structure everything that I'm not the person to step in, but also like there's times where I gotta get my hands dirty and help people.

Yong-Soo Chung [00:26:36]

And Michael even has a clear rule of thumb for WHEN this person needs to be added to the roster.

Michael Girdley [00:26:41]

Yeah, usually above like a million in revenue, there should be at least another person on the staff that could hold the wheels on the bus for at least a few months until we find another person. So yeah, that's the general rule of thumb. So, you know, that's usually depending upon the business somewhere around eight to 12 person team size.

Yong-Soo Chung [00:26:57]

In simple words, once you hit a million dollars in revenue, you MUST have at least one employee who can take over operations in case your CEO is unavailable for some reason.

Michael also pays close attention to the overall financial health of the businesses within his HoldCo.
Michael Girdley [00:27:13]

Yeah, so I create basically just an interaction model for each individual company. And we do just standard kind of board member board-supervision ownership-level reporting. So you know, it depends upon the company. So there'll be financial reporting, which is backwards-looking. So that happens on a regular basis. It could be monthly, quarterly, semi-annually or annually. Generally, you know, their monthly is the typical cadence there where we're seeing closed-out financial statements and going from there. So that's the backward looking stuff. KPIs, each company under the EOS framework needs to have forward-looking KPIs. So we tend to look at those. And those show up during the board-meetings, which will have a customized board-meeting calendar, depending upon the state of the company. So those can be quarterly, monthly, sometimes they're weekly at the earliest stage, where we're digging into those KPIs as well. And yeah, so those things combined with the board meetings and the one-on-ones with the CEOs, like I keep a pretty strong pulse on the companies.

Yong-Soo Chung [00:28:14]

In fact, he points out that HoldCo owners who shirk on these responsibilities are actually committing a huge mistake...

Michael Girdley [00:28:21]

There are people who have holdcos where they never meet with the CEOs and they never do one-on-ones with the CEOs and they never do board meetings. And it's just like, hey, send me financials and let me know how it goes. And my opinion is that is a huge mistake. That doesn't work. Nobody here is Warren Buffett at our small scale. Once you get bigger, you can start to do that stuff. But when your companies are small, you need to be much closer to help them, you know, achieve their maximum outcome.

Yong-Soo Chung [00:28:41]

Next up, we'll look at the last leg of Michael's "Right People, Right Structure, Right Mission" framework - that is, the "Right Mission" part. 

Michael Girdley [00:28:49]

I've heard, and don't quote me on this, but I've heard I will die someday. I think that's all gonna happen. (laughter)

Yong-Soo Chung [00:28:57]

But first, I want to give a huge shoutout to my favorite french bulldog in the entire world (pause) Humphrey!

Humphrey is an adorable French bulldog. And guess what? He has quite a following on social media. Over a 150,000 followers if you're counting across Instagram and TikTok @spotted byhumphrey.

Every time we post Humphrey in a new harness or with a new dog toy, people keep asking us. 

Hey! Where can I buy that? So what did my wife and I do? We decided to launch a dog boutique named after him called Spotted By Humphrey.

Spotted by Humphrey is a destination for all your furbabies needs. Treats, Leashes, dog toys, and even an award winning dog poop bag holder called Poopsie Daisy, which my wife designed all on her own. 

Oh. So Check out Humphrey's shop at spottedbyhumphrey.com and use code FIRSTCLASS15 for 15% off your next order. That's spottedbyhumphrey.com. I'll leave a link in the show notes.

Alright, let's get back to our discussion of the "Right People, Right Structure, Right Mission" framework with entrepreneur and Holdco owner, Michael Girdley. Earlier in the episode, Michael mentioned that the associate model he uses to employ his operators comes with a no-strings-attached clause. That is...

Michael Girdley [00:30:31]

they can always just pull the ripcord and go pursue their cannabis business or strip club or whatever they want to do. Me, I have zero interest in pursuing businesses I would be ashamed to put on my resume, so I just don't do it. So that's the ultimate answer there.

Yong-Soo Chung [00:30:42]

And in that little bit lies the entire crux of the "RIGHT" structure bit of Michael's "Right People, Right Structure, Right Mission" framework. Allow me to explain. Remember that Michael’s approach to incubating businesses is people-first rather than IDEA-first. What that means is, he finds the right associates first and then sends them on a customer-discovery process to figure out WHAT business they can incubate together.

Michael Girdley [00:31:06]

It also ties into the way effectuation works well to craft new businesses. And the thing we'll start with when we go explore space is we'll go find trends that are going on in the marketplace. So, and those are trends in the world, right? And they can be technology, they could be societal, they could be government, they could be er, legal and they could be environmental, right? Those are the things that can change. And if you see those trends happening, you can start to say, okay, well, what are the second order effects of those things? And how's the future gonna be different in- in- coming at us based on those trends? And so what ends up happening to some extent is pretty interesting. We'll agree on what our interesting trends are and we'll go explore those trends and see types of things that are happening.

Yong-Soo Chung [00:31:53]

An example of this in action is a business called Near, which he incubated with co-founders Franco Pereyra and Hayden Cohen.

Michael Girdley [00:32:01]

When we incubated the Near business, we saw a couple of trends happening. One is COVID had normalized remote work for small businesses. It had not been a normalized thing for anybody except for big corps. So we saw that happening. We saw that the labor market was getting even tighter in the US and even harder to hire people here. And then we saw that there was a rise of just kind of talent in the Lat-Am space. So you combine all those things together and it creates trends that you can go dig into. We say, well, what's going to happen because of those trends? Well, clearly American companies are going to start looking at hiring overseas if they can't hire accountants in the US. There's just not enough of them to go around. And so that was the idea.

Yong-Soo Chung [00:32:39]

A COMBINED second-order effect of TWO different trends. Can you guess what business can be incubated based on this information? If you said job-board, well, you aren't too far off...


Michael Girdley [00:32:49]

We started to do a job board, because I was like, hey, do you guys wanna explore looking at a job board? And they're like, yeah, let's look at doing a job board. And then they dug into it and they're like, job boards are really hard and they're tough to scale.

Yong-Soo Chung [00:32:59]

So, the two founders decided to pivot and ended up building a NEAR-shoring business instead. That is, a recruitment agency for US companies looking to hire Latin American employees.

Michael Girdley [00:33:08]

And I just backed them up when we had a board meeting. They were like, we think we should pivot to this other model, which is more staffing and recruiting, and it's totally scalable. And I said, great, let's do it. But we were in a cool space because we had picked trends that we all really agreed upon as being interesting ones to pursue.

Yong-Soo Chung [00:33:23]

According to Michael, this ability to pivot is key - especially when it becomes obvious that a business is not working out.

Michael Girdley [00:33:29]

Like everybody agrees like we're evolving one of our businesses that will be named later based on like some feedback we're seeing in the market and like I look at the data I'm like yeah you're totally right like we should totally pivot this to do based on what we learn and we don't get mad about what we've learned we just like take it as like a blessing like oh like we understand this thing.

Yong-Soo Chung [00:33:49]

It is also one of the primary reasons why NONE of Michael's associates has given up, pulled the rip-cord, and gone off to start their own business.

Michael Girdley [00:33:56]

.I have not had that happen. So my sample size is small, but also, I mean, the way these businesses work in terms of incubation, it's very much an asymmetric model, right? I'm potentially investing 50 to 500,000 in businesses that should hopefully return 10 to 100 times X that. Some of those will return that per year if we do it right. So, you know, they're built into the models. There will be some failures. So far I've been lucky not to have any.

Yong-Soo Chung [00:34:23]

But, earlier, Michael did mention something about signing an MoU with everything plotted on paper - including, as he himself put it, the divorce agreement. Which indicated to me that he probably did have *some* exit plans, some theoretical end-date in mind before starting any project...

Michael Girdley [00:34:40]

I've heard, and don't quote me on this, but I've heard I will die someday. I think that's all gonna happen. (laughter)

Yong-Soo Chung [00:34:47]

Okay, yes, that IS funny. But, jokes aside, Michael explained that any exit-plans were more vague guidelines than explicit conditions.

Michael Girdley [00:34:55]

In terms of the individual businesses, we have a discussion about what our aims are. And then I think by choosing the right people, you end up in a place where you're gonna be okay if you decide to change that based on the data. So, you know, I'll have a discussion with people about, hey, our interests are in growing something really big, but I'm also realistic that people change, right? And we could look up five years from now, 10 years from now, and they're like, it's time to sell, or we didn't get there and it's a nice cushy business, so let's get out of it.

Yong-Soo Chung [00:35:25]

Now, this is where my respect for Michael grew tenfold. Because, at this point, a different investor or HoldCo owner might feel that the business could easily grow for another few years. And they might push for the operators to continue with the status quo. Not Michael, though.

Michael Girdley [00:35:39]

I'm involved in a dozen businesses and they're involved in one. And if we're gonna have a tie about what we should do with the business as long as the EV of it, the expected value of whatever that path is, is pretty good, like I should be agreeable to that. Because ultimately I need to support them living their best life, not optimizing for me living my best life. If one of my companies decides to sell early or whatever, it's no skin off my back relative to the whole portfolio of things. For them, that's their only thing and I should totally respect that.

Yong-Soo Chung [00:36:09]

And that’s why MY respect for Michael grew tenfold after this conversation! Before wrapping up my conversation, I asked Michael if he had any advice for first-time entrepreneurs, especially the ones who were hoping to establish their own personal holding company.

Michael Girdley [00:36:23]

I think one that is probably a unique perspective that I would love to share is I think people build companies and they do that backwards. A lot of times I think about the company that they wanna build, or they think about the career that they wanna have, or the job title that they wanna have. And I think that's actually the opposite thing. I think what people should be doing is thinking about the life they wanna live and the things they wanna be doing and then build companies around that. And so I think that same logic applies to everything else in terms of how you design your professional career, which is, you know, joy comes from getting to do things that you really love. So build your business around things that give you joy that you get to do. If you like leading and you don't like managing, like build a career out of that. If you like selling and dealing with people, like go build a business around that. And I think that's the greatest way to end up in the perfect place, which is with a business or a hold co or whatever it is that inspires and adds to your life and has you tap-dancing to work and doesn't feel like work, but you start with those things that are going to give you passion and build a great life before you think about what business you want it to be and make sure that business is something that's going to be an enabler for you to live your best life and not for you to build your best business.

Yong-Soo Chung [00:37:31]

He ALSO pointed out that there was a distinct difference between being an owner-operator of a small business and an owner of a HoldCo, which a lot of entrepreneurs don't realize. By the way, if you want to learn more of these insightful lessons from Michael, he now has a course out on his website.

Michael Girdley [00:37:46]

.last year we spent six months putting everything I know about how to build your own hold co of multiple businesses that you're doing this kind of parallel entrepreneurship all into a course that's a master class of everything I know about Holdcos. The original script was over 400 pages and it's available for sale currently and would love to help people out who want to do similar lifestyles and professional careers to what I'm doing. You can find it at holdco.girdley.com and that's H-O-L-D-C-O dot my last name girdley dot com. I was checking it out yesterday and it's got a lot of stuff in there. I'm gonna check it out. So, yeah, I'm excited to dig in. Please, I need the money.

Yong-Soo Chung [00:38:30]

You can connect with Michael Girdley through many touch-points.

Michael Girdley [00:38:34]

You can go to anywhere on the internet with my last name, Girdley, G-I-R-D-L-E-Y. You can go to girdley.com. I'm on Twitter, at Girdley, and I would love to connect with folks there. I try to treat them all as interaction platforms and not as publishing platforms. So come find me and I'll either respond or block you. Those are your two options. So we'll go from there.

Yong-Soo Chung [00:38:55]

And if you loved listening to Michael talk about HoldCos and building businesses using the "Right People, Right Structure, Right Mission" framework, you should definitely check out episode 67 in which I have detailed out MY ideas on how you can hire the best operators for your personal holding company. The episode is titled, "How to Hire the Best Operators for Your Personal HoldCo" and it describes the delicate balance of looking for someone who's fiercely independent, but at the same time, unwaveringly loyal to you. Do tell me what you thought of the episode on X or your favorite social platform. I'm on X as @yongsoochung and my DMs are always open! That's it for this episode, My name is Yong-Soo Chung and I'll see you next time on First Class Founders!

Michael Girdley [00:39:45 - 00:40:00]

my largest toe is actually much shorter than my second toe. So it's called Morton's toe. It's perfectly normal, but I just have a very small big toe on both feet.



E75: Summary here.

***
TOPICS: 

***
LINKS:

CEO resigns as Codeup prepares to wind down operations
https://sanantonioreport.org/codeup-layoffs-closure-ceo-resigns/

How To Find Great Business Ideas Using Effectuation
https://foundersjournalpod.morningbrew.com/how-to-find-great-business-ideas-using-effectuation/

What is Effectuation? Effectuation 101
https://effectuation.org/effectuation-101

Scalepath FAQs - CEO Peer Groups for Small Business Owners
https://www.joinscalepath.com/faqs

Our Software Acquistions | Dura Software
https://www.dura.software/our-software

About us
https://www.hirewithnear.com/about-us

How to Hire the Best Operators for Your Personal HoldCo
https://www.firstclassfounders.com/how-to-hire-the-best-operators-for-your-personal-holdco/