Investing money, time, and strategy in a company are the fundamentals you can apply to any industry. Founder of War Room Mastermind, Roland Frasier, shares how combining these three to equity deals can help build wealth. Taking us back to his younger years, Roland shares the different approaches he saw on how people make money. Later on, he used what he has learned across different industries to make him good fortune. Roland shares those with us along through the equity deals he has made that helped companies scale and build his wealth in the process.
I’m very excited to have Roland Frasier joining us. Roland, welcome.
Thanks, Michael. How are you?
I’m fantastic. It’s great to have you on and I’m excited to have you on here. I want to start by looking at everything that you have going on because you run, advise, invest, and you have involvement in more companies than I could count. Take a minute and tell us what you do.
The summary at the high level is I invest in companies either with money, time, strategy, or some combination of those three. I work to grow and scale them and ultimately exit them and do it again.
Tell us a little bit about the industries that you’re involved in because it’s quite diverse.
It’s everything from medical billing to manufacturing, SaaS, eCommerce, consulting, Masterminds, eLearning, lots of different things. It’s a common set of skills that you can apply to any industry. I’ve had the good fortune to be able to be in quite a few. the last time I made a list, it was about 32 different industries.Keep track of the things that are important to you. Click To Tweet
How do you keep track of all of them with everything you have going on?
The easiest way is through tax returns. I’m very plugged into the things I’m involved in. They’re all top of mind. It’s not as hard as you might think. When you think about can you keep track of 30 to 40 things? You can, if they’re important to you.
In terms of technically managing them, do you use CRM or an online tool to do that?
I don’t manage any of them. I’m not an operator. I am an advisor, a strategist and investor. My involvement is usually very project-oriented. We’ll have a campaign, project, or objective that we want to achieve with the company. I’ll come in and help with the architecture, implementation, and peopling of it, but the actual team goes and executes the plan. That helps tremendously because I’m not in the day-to-day of anything.
Let’s give people a sense of where you got started because from my understanding, you started living on your own at sixteen years of age playing in bands. You’ve got your real estate license or you were involved in real estate. How did you end up growing companies and brands? Take us through a bit of that journey.
I had the benefit of an entrepreneurial father. My father is a tax and business attorney. He had all kinds of interesting clients as I was growing up and they were primarily entrepreneurial. I had exposure to all of the different cool things that people did to make money and I always wanted to do that. I started with a good foundation of getting to see what kinds of things they were doing and how he was advising them from a structure, tax, and business standpoint. I remember reading, and this was recommended to me by him, a book by a guy named Robert Allen, who wrote a book called Nothing Down. I was absolutely fascinated with the ability to acquire real estate and build assets without having to invest any money. I got hooked from there and it kept on spiraling up from there.
You had that knowledge by reading that book. What happened next?
I was able to get my real estate license when I was eighteen. That was the first thing I did as soon as I was legal to have a real estate license. I went to sell real estate. I’m always looking for centers of influence and abilities to leverage. Without systematically thinking about it, I’ve been doing that for a long time. I found it was very tedious to go out and try to get people to list their houses with you, so I approached real estate developers because they sold lots of houses and kept selling new ones. I worked to represent them initially and learned how they did their business and found that they raise money for these things called syndication. I started doing syndication. I started being a key manager. I got licensed for insurance and securities and that got me into doing development. I took some money that I had saved from one of my only two jobs I’ve ever had in my life and invested with one of those developers. I was able to more than triple it and was pretty hooked from that point on.
This is not a real estate show but there are some important lessons here for all consultants and entrepreneurs. What I’m interested in though is you were eighteen at the time when you got your license and then you went to developers directly and won their business and confidence. How did you do that? What was going on in your mind that allowed you or gave you the confidence to approach them directly?
I have the benefit of being fearless with that. I have nothing to lose. It doesn’t occur to me that I shouldn’t do it. I’ve always been that way and I still am. One of my business partners, Kent Clothier, has a good saying about fear for the people that aren’t as insane as I am to go and do it. He said that when he comes to a place that he’s afraid to go forward because of fear, he thinks “This is where my competitors stop. This is where mediocre begins and excellence is on the other side of my fear.” He uses that to push past it. That’s a good strategy for doing that.
A lot of people know you and your work through your connection to Traffic and Conversion and the Digital Marketer and all that stuff. How do you go from real estate into that world of digital and marketing?
It’s all the same. It’s all opportunity and they’re all different channels. If you think about marketing, there are different channels to market. There’s radio, TV, print, and online. Online, you’ve got search, organic search, paid search, and search display. You’ve got Amazon and all the different versions of that and all the different social platforms like Instagram, Facebook, Snapchat, and all those different things, they’re all just channels. Businesses are simply channels as well for us to achieve our objectives. I look at any business opportunity as another channel to achieve monetary success I need, to have the freedom I want to do the things that I want to do.For us to achieve our objectives, look at any opportunity as just another channel to achieve success. Click To Tweet
Going from real estate was where I started and because of my securities thing, I got into buying and selling companies. I found them to be infinitely more interesting than real estate, although I still invest in real estate. I started buying and selling companies and applying the same Nothing Down strategies that I used for real estate. That was cool and exciting, so then it was opportunistically what deal flow came across my hands. If it looked like something that I could do and the skill set that I was learning how to develop too, if I could apply it, then I would do it. It didn’t make a difference to me if it was organic biscuits, medical billing, or a software subscription service. The core principles of growing, scaling, and exiting businesses apply across the board.
You’ve seen a lot of businesses. You’ve analyzed, invested, had your mind wrapped around a lot of different companies with Traffic and Conversion, Digital Marketer at the cutting edge of a lot of what’s happening in the digital marketing space. For a professional service provider or a consultant who has real expertise but isn’t clear on how to grow their business, what advice would you offer them from everything that you’ve seen and what you consistently see to work well?
With the exception of the Boston Consulting Group and McKinseys of the world, it’s hard to grow a consultancy past a lifestyle business. The very first thing I would think about is do I want to have my consulting skills be used in a consulting business? Do I want to apply my consulting skills to being a business owner in other types of business? That’s an important distinction. I have lots of people that asked me to consult and I don’t consult. I tell people, “I will give you free advice, which is worth every penny that you pay me for it, until I get to a point where I believe that my time would best be spent either doing something else, in which case I’ll tell you I don’t have time to continue or I say there’s an opportunity to go deeper in the relationship. The way that I do that, I only consult with companies that I have an ownership interest in.”
It’s a cool positioning thing too because you can’t hire me. The only thing you can do is have me become a co-owner of the company with you to go and do things. Some people might be thinking, “Bill Gates isn’t going to let you be a co-owner of Microsoft,” but actually he will. Every company that’s public or private can, without you being a controlling owner. All of those public companies have shares that they can compensate you with, which makes you a type of owner and gives you a stake that has unlimited upside based on the upside potential of the company.
Private companies can do the same thing with the stock or other ownership interest that they’ve got. My whole philosophy is that I will help almost anybody who has a real business, who has a real desire to improve, and listens to and implements what I say. I will help them within the full range of the bandwidth of time that I’ve got available that’s not dedicated to things I have an ownership interest in. I do that freely and with no restraint or expectation of anything in return because I know that what I have to offer is valuable as does everyone. If you know what you have to offer is valuable and you give somebody the ability to experience it with no risk, then they’re going to get excited about it and want to bring you in to have you be part of the company.
If you choose to be on a dollar-for-hour basis on a consulting thing, then that’s okay. You can do well and I still like the model of giving away freely with your free time until you don’t have any left. That will attract the maximum number of clients for you. If you do that on a dollar-per-hour basis, you’re limited to a lifestyle business or a business that’s very difficult to scale because it takes so much effort. Every time you get more customers, you need more staff to help fulfill them. You have to be training people who have the same skills that you do underneath because the clients want to have access to you because you’re the person that sold them. It becomes hard and expensive to scale. You don’t have to do that when you have ownership interests in businesses. My ownership interests in the businesses that I’m involved in don’t require me to have a whole bunch of people that work for me. I stick to what I’m good at and I have ownership interests so my upside is not limited.
There’s a lot to peel back and I want to go deeper into that for everyone’s benefit and my own. The consultants we work with, we certainly guide and suggest and encourage them to move away from hourly fees for the exact reasons that you’re mentioning. Instead to look at how they can connect their fees to ROI, to value and to things that allow them to receive significantly higher compensation. They should connect that to the value and ROI that they’re creating. In terms of the model and approach that you’re using where you’re giving away lots of free advice and if it makes sense, then you and the owner of that business would decide some arrangements to move forward together where you have ownership in that business. At what stage in your career did you start doing that? Is there a sign that develops when you already had comfort or success in the marketplace? Was there a sign that you were doing even early on when you are hungry for clients?
I’ve done it all my life. To me, it makes the most sense. From that very first time that I was able to get a developer to allow me to come in and invest with them, I was also consulting. In that case, I had money. I’ve had lots of deals that I have money to put in, but I’ve had lots of deals that I do without money and I was trying to think. Probably the first one that I will talk about was when I was practicing law. I had a client that came to me and had a direct mail business. I saw some opportunities to improve that business and I said, “Why don’t you not pay me a fee to do this? Why don’t you let me come in on the upside? I can make changes in the business. You keep what you’re making now and we’ll split the upside that I create for the business.” We did that and nine months later we split up $1,800,000. I had an extra $900,000 that I wouldn’t have had before. If I had done the work as a consultant, I would have probably at the most gotten paid $200,000 for it.
Some people might look at and say, “I understand conceptually what you’re talking about, but I need cash now. I need to generate revenue. If I give away a lot of free advice, aren’t people going to take advantage of that?” How do you respond?
It depends on how fast is the ROI on your advice. For that particular person, the ROI on the advice was within probably about fourteen days. I saw the money start to come after about fourteen days. The things that I was going to make changes to the cycle of the generation of money was sent out a piece of mail. It takes a couple of days for it to get to the client. It takes a day or two for them to reply. They send it back and it takes a couple of days to get it back. You generally start seeing things back within about ten days on direct-mail type campaigns. I said, “Let’s make these changes.” The changes were tracked with new pieces. We knew the new pieces that were coming in. We knew the profit margins and the cost so we were able to split along the way. There wasn’t a lot of waiting.
There are a million ways to do this. You simply say, “I’m going to do a hybrid deal. Normally I would do a 50/50 profit split on this, but I want to be sure that you have skin in the game too. There’s a $2,500 a month payment that you make to me in addition to the costs and we’ll split profits 70/30 your way.” It’s simply a negotiation at that point. You can say, “I want a fee up front before I get involved,” and then it’s equity after that. “I want to do a baseline profit deals so you have no risk and we split the upside. I want to do a hybrid where you pay me monthly and then based on performance, I get some kicker.” You’re only limited by your creativity.
We could probably write down the twenty different ways that you could do that. You could select from that menu how much cash do you need up front. You can say, “On a scale to the left, your need for cash is very high and on the scale to the right, your need for cash is very low.” There’s an inverse relationship between your ability to participate in the upside performance of the deal and receive cash up front. You pick where you are on the scale and say, “This is what I want.” That’s the combination of stuff that you put together in the deal.If what you give creates value, then you will receive benefit in return. Click To Tweet
Have you ever gotten involved in a deal where you’re giving advice, you’re putting in your work, and providing value, the results are to come down the road a little bit, and something doesn’t work out in the deal? You’ve done the work per se but you don’t get the compensation because you haven’t received anything upfront.
I can think of two situations like that and they weren’t anybody’s fault. One of them was with a very popular nutrition drink that everybody’s probably heard of. I had a 20% ownership in the deal in exchange for my advice. I helped the company to get out of some contracts that were holding it back. I helped them get some funding and I helped them with some marketing advice. They blew the company up. They’ll do $50 to $60 million and this was only a few years ago. Part of what I did had a lot to do with them being able to take off, but they’re also brilliant and good at what they do. Despite having done these three things that were significant for them, about maybe six months into the relationship, one of my other business partners came to me and said, “These guys are saying that they’re not sure if that was a good deal for them.”
I set a meeting and I said, “I understand that you guys were saying that you don’t think this was that great of a deal.” They were nice about it. They said, “We have this stuff we’re going to do and it’s going to be worth all this money.” I said, “That’s fine. Let’s unwind it.” I didn’t ask for anything. They didn’t offer me anything, which was disappointing. First of all, they will say nothing but good things about me in the market because I was way on the side of generous in how we exited our relationship. We’re still friends. I haven’t created an enemy. I didn’t have to sue anybody. I don’t get a reputation as a litigious person. I get to spend my time doing productive pleasant things in new deals instead of chasing money that I should have maybe gotten from another old deal.
My philosophy is very much if what I give creates value, then I will receive value in return even if it’s in a form that’s different than I originally intended or expected it to be. In this case, I get referrals from these people. I get good Juju. They come and speak at my events and stuff and they say good things about me. That’s the way to look at it. The other one was an astrology company that was only advertising through AdWords. We partnered up and they gave 50% of the business that I got in that case. They blew it up into a $60 million business. It’s the same thing. In this case, I went to them and I said, “Everything that you’re doing that’s creating the crazy growth that you’ve got is because of you. It’s not because of me. Even though the strategies that we’ve talked about implementing, you are implementing, but I didn’t feel right about having 50% of that company that way.” I said, “Why don’t we unwind it? I’ll give you back your 50% and you can go on.” They’ve sent me business. They’ve become clients in a different business that I’ve got. I hate chasing money. I hate lawyers even though I’m a recovering attorney. I hate litigation and I hate fighting about stuff. You can always make more money, get more business, and get more value by not chasing things that you didn’t create such value that somebody is willing to give it to you.
That’s a great message. How do you decide the equity share that you will receive in a company? How do you go about figuring that out? The percentage range is significantly in terms of what you mentioned but how do you decide that?
The answer is very dependent on how busy you are and what opportunities you’ve got. It has to be a significant enough interest of what I expect the company to do. It will make it worth for me saying no to the other opportunities that I have coming. I know that sounds vague but it’s the best way for everyone to be able to apply it in their businesses. If somebody comes to me and says, “Here’s my company. I’d love to have you come on as an advisor,” what is the amount of time that you’re going to need for me to get this to where it needs to go? If it’s very minimal and I’m just making some connections, I refer them to people and as I go along, and they want me to be thinking about them, I’ll probably take an advisory role. I’ll come in and have 2% to 5% interest in the company and I’ll advise them, I’ll connect them, but I’m not spending a tremendous amount of time with them.
I don’t care if no money comes. If they weren’t doing anything and there was no value being built for some period of time, I’d probably resign and give them back the shares. I had a smart guy who’s created an amazing thing. He offered me the ability to come in on taking his company, national and global from the regional thing that it is. It will take a fair amount of my time up front to make it happen. I know how to do it and I have the resources to put together, but they’re pretty significant. He’s going to go much slower. He will get there no matter what because he’s a very determined smart guy, but he will definitely get there much faster and much more assuredly if I’m able to help.
In that case, I am going to want to have a way more significant ownership interest. It’s probably going to go up into the 50% range on a deal like that. I look at the amount of time and the reward that’s going to come and I see that as a nine-figure plus business. It would be a good idea to do that. That’s how I look at that and then everything in between, I don’t ever say no. I say, “Not now. I’m fully committed right now.” I find it painful to say no to people. I find that people are very understanding when you say, “Not now because I couldn’t give it the time that it’s going to need. I wouldn’t want to take it on if I couldn’t do that.” The reward has made a difference to me.
They’ll say, “I’m going to give you 10% of the company.” I look at it and I say, “It’s a $5 million company. Five years from now, my 10% is only going to be worth $500,000. That’s not exciting to me. Over five years, that’s $100,000 a year. That sounds like a job.” I’m going to say no. It’s a $10 million company and they want to give you 2%. I’m going to get $200,000 from it. It’s the same thing. It has to move the needle. I don’t want to take my opportunity finding being in the flow bandwidth and turn it into being in a deal with obligations bandwidth without a significant upside that will move the needle for me personally.
How do you typically structure the payments or the way for you to get compensated? Is it done with distributions on a monthly, quarterly, or annual basis? Is it typically when the company reaches a certain milestone or is acquired, sold, so forth?
It depends on the deal. Many of the companies to grow were going to be putting 100% of their profits back into the company. There might not be distributions that you would even ever expect to receive. You’re always going to be reinvesting and always going to be capital-hungry. If it’s a business like that, then you’re growing for the exit because the reward is on the exit. I like to have a fixed monthly fee that I will receive four my time so that there’s some realization of value during the time that I’m putting the work in. I get to participate on the exit and I’ll also negotiate a put agreement or a put option, meaning that within usually two to three years, I can say, “You have to buy my stock out at a predetermined value that we agree on.”
The put option is critical because there are a few things that you have to have in the contract. Number one, you don’t want equity if the company has value now and the equity you’re receiving has actual value that would be based on valuation where somebody else’s funded at a valuation. If you take that as equity, you pay taxes on it. If that’s the case, then I want my equity either as phantom equity, meaning that it’s treated as equity, even though it’s just an option, or a warrant or something like that. I don’t want a taxable event to me based on my receipt of the potential or actuality of having equity in a company. After that I say, “How can I be sure that I’m not a minority partner?” Let’s say it’s an LLC, a partnership, or a limited partnership that’s a pass-through entity.Where fear stops you is the place your competitors stopped. Excellence is on the other side. Click To Tweet
I don’t want to be an owner in a company that is going to be earning profits and putting all of them back in the company. They are not distributing them, but there’s still going to be taxes on those profits to the owners in proportion to their ownership. In that case, I want a provision in the contract that says that in the event profits are reinvested in the company, the company will make a distribution equal to my tax liability on the profits that were reinvested. Last but not least, if I’m a minority owner of the company that is going to sell, I’m going to realize my value when it sells. I want to be sure that if there isn’t a liquidity event, if they do decide not to sell, then I can compel the liquidity event. I can say, “I’m going to put my shares to you now so that you buy me out because you’ve decided it’s going to be a family business for next six generations and I’ll just be a minority shareholder, never able to realize my value.”
That’s some very valuable insights for people. Many consultants are able to earn a great income. They’re making high six, seven figures without a big team. They’re quite profitable, but that doesn’t mean that they’re creating much wealth. What have you found, because I know that this is an area that you’ve talked a lot about and then clearly done a lot of work on? What are some of the best practices that you’ve found that work to build wealth and not just a high income?
There’s a conversation that my old client, Tony Robbins, had with my friend Dean Graziosi. Tony said, “We’re dancing bears. As long as the music’s playing and we’re dancing, people are going to throw money, but we’re not going to be able to dance forever. Even if we decide we want to stop dancing for a while, the money stops.” He decided that he wanted to create actual wealth. He did that by deciding to write a book called Money: Master the Game, which would funnel money from people who read it into a fund that he created. He hired a fund manager and I heard he had a couple of billion dollars under management. His goal was a billion. He said, “I’ll be set when I get a billion under management.” He doubled that relatively quickly and he’s probably gone on quite a bit from there. That to me is the perfect example of that. You want to balance income for lifestyle with wealth for the future. You want not to be a dancing bear all the time. The way that you escaped that as a consultant is you insist that some percentage of the work that you do is work done for equity. That’s the only way I know to make that happen.
What are your thoughts about taking some of the income that you’re generating, investing that into whether it be the stock market, into real estate, or into other businesses? That’s maybe a bit of a direct connection to what you’re saying, where you’re taking ownership, but funneling some of the profits that your business is creating and putting that into other income producing assets.
That’s a different issue as a consultant. Everything I was speaking to was what do you do in your actual consulting practice? Outside of that, with the money that you get, I do not care for the stock market because I have been on the inside of it. I have seen that it’s very difficult to invest on fundamentals like Warren Buffett does unless you have the capital to acquire a controlling interest in companies and you have the team to do the analysis as he does. A lot of the stock market for me and even for the people that I’ve seen who have “systems” is a bit of gambling. I don’t like it because I don’t have control over it.
I only like to invest in things I have control over. I like real estate of all forms, commercial and residential for that. What I like more than anything is investing in deals that I have competence and control over. I take the money that I have that’s excess from all of that other stuff and I use it to acquire companies. I would take the money that I had to invest and always invest it in myself. By that, I would take up a fund that I would create to not just be able to do deals based on my services, but to invest cash as well. The quality of the deals that you’ll be able to get yourself into as a consultant and strategist, if you can bring dollars in addition to your advice is dramatically higher than what you can get if all you can bring is advice.
It’s simply a function of all of the companies that you can help are probably going to need some more capital to make that happen. The owners feel good about having you come in at a valuation that you agree on and put dollars into the company because they feel you’re shoulder to shoulder with them as opposed to simply being a hired gun that you have skin in the game yourself. That’s what I would do. I like owning companies because the returns that I can make are exponentially higher by buying and selling companies than would be by being in the stock market and receiving an average of 12% over the last million years of the stock market.
It’s the same thing with real estate. I don’t like passive real estate where you invest and you have renters and all that stuff. I find it to be a pain in the butt. When you bring in property management, you’re dinging your returns down. I like owning real estate, I like developing real estate, I like finding and flipping real estate, but I don’t like having people living in my real estate. I find it to be annoyingly cumbersome with the time commitment.
Do you get involved with real estate syndication?
Yes, we have a real estate fund. We’re investing in real estate where my wife and I will buy luxury homes and rehab them. That’s what’s cool about that. You can go in and buy a house that’s $3 million and put $500,000 or $1 million into it and sell it for $7 million or $8 million. You make $2 million to $3 million on a house and you can leverage that. We just bought a house for $3.2 million that’s worth about $4 million. We have to put money into it and it will be worth about $6 million or $7 million once we’re done. We bought it with $1.2 million down and the owner carried $2 million at 3.5% interest only for ten years. It’s crazy. I like those deals better and we get to have fun along the way because we get to do all the decorating and fixing it up as we go. I don’t like not being in control of my money. I’m addicted to much higher returns than you can get from a lot of those other kinds of investments. There’s nothing wrong with them. A lot of great wealth has been built doing that. I just like these other deals.
You could play the piano, listen to music, and drink fine wine all day, but you still create content. You work with clients, you run events, and you invest in companies. What drives you to keep doing what you’re doing? Where do your energy and your motivation come from?
I love it. I would do it for free. If I couldn’t get paid doing it, I would find something to do so that I could do this as a hobby. It’s absolutely enjoyable for me to do. I’m passionate about building things. I’m passionate about creating value for customers, for shareholders, and for employees. I love all the people that are employed by the companies that I get involved in. It’s just fun.
A final quick question for you. What’s your go-to wine?
Roland, thank you so much for coming on and sharing some of your journey and wisdom with us. I do appreciate it. I also want to make sure that you can learn more about everything that you have going on which is clearly a lot. You put out a great podcast. You have lots of good contents and resources for people on your website. Where’s the best place for them to go to learn more?
Thank you for having me, first off. My podcast is Business Lunch. It is on iTunes and all the other places that podcasts find themselves. I have a site, RolandFrasier.com that has lots of information about all the things I’m doing. Our big event that we do all over the world is called Traffic and Conversion Summit, the TrafficAndConversionSummit.com. One of the companies I spend a lot of my time in is Digital Marketer at DigitalMarketer.com where we train people on all kinds of ways to do all things digital marketing. I’m everywhere on LinkedIn, Facebook, Instagram, and all those places as well.
Roland, thanks so much.
- Roland Frasier
- Nothing Down
- Traffic and Conversion
- Digital Marketer
- Money: Master the Game
- Hundred Acre
- Business Lunch
- Business Lunch on iTunes
- Roland Frasier on LinkedIn
- Roland Frasier on Facebook
- Roland Frasier on Instagram