In this clarifying episode, Eric Wiklendt, Managing Director of Speyside Equity, shares how to succeed as an investor when someone else is driving and you can no longer grab the wheel. If you’re moving into true ownership or private equity and struggle to let go of hands-on control, you won’t want to miss it.
You will discover:
– What makes strong investors accept 80-90% results and focus on removing impediments
– Why managing through people, processes, and systems is the essential skill at Level 6
– How to use scorecards and exception-based reviews so you lead without micromanaging
Episode Transcript
Scott Ritzheimer
Hello, hello, and welcome, welcome once again to the Start, Scale, and Succeed podcast-the only podcast that grows with you through all seven levels of your journey as a founder. I’m your host Scott Ritzheimer, and I want to talk to those of you out there who are either getting close to or have already made the move from being an entrepreneur or even an executive to becoming the investor, especially those of you who are at the true owner level of your journey. And here’s what I think makes this level so disorienting, and that is that so many of the things that worked that got you here start to become a little bit more problematic. For example, if we were to use a just a quick metaphor, you win through levels one through five by putting your hands on the wheel at the right time. But here in level six, it’s still your money. You know, it’s still your name and reputation on the line. It’s still a race to be won. But now, chances are somebody else is driving it, and you don’t get to steer, which means that a lot of the tools that you would have gone to choose from, especially when things get tough, are no longer at your disposal.
So how is it that we win here in level six? Well, you don’t need to take it from me. We’ve got a much better expert available for us here today, and that is Eric Wiklendt, who is a managing director at Spaceside Equity, where he’s responsible for sourcing, executing, managing, and exiting investments. Before joining Spaceydequity, Eric was president and CEO of Keylux Heat Transfer Systems. Prior to that, he held leadership roles at Eaton and Hilti Corporation, where he oversaw M and A activities, established a manufacturing plant in Mexico, managed a large marketing team, and directed industrial sales operations. He’s a graduate of University of Notre Dame and obtained his MBA from Wharton School at the University of Pennsylvania. And he’s here with us today, Eric. I’m excited to have you on. It can be tough to get guests who are great at level six of this journey because we’re talking to founders all the time, and so having had my own kind of dabbling in this and watching several others go through the process, success in level five, like as a CEO, as a business owner, is no guarantee of success in level six as an investor. What are some of the biggest mistakes that you see founders and other executive type leaders make after the sale when they jump into this investor game?
Eric Wiklendt
Yeah, I’d say in a sentence, being able to manage through people, processes, and systems. So you know. Said differently, scalability and repeatability relative to managing the investment and creating returns. So, to your point, I liked your analogy about hands on the wheel. It’s it’s a really good one. And when when you get to I guess what you would call level six, it’s more like you’re in the back seat telling somebody who’s got their hands on the wheel what to do, but without without trying to be like the annoying little kid who’s asking, “Are we there yet? Right, which is is hard to do. Honestly, that’s so you know you ask, “Okay, what’s hard about it? That’s probably the hardest part because you know how you would do it, and you need to like understand that you’re going to manage through people, processes, and and systems, and they’re not going to do it exactly the way that you would do it. So you’re going to need to you know accept 80 to 90% of how you would do it result, right? And by the way, sometimes it goes way better, but it’s it’s a little bit uncomfortable because you don’t have your hands on the wheel, and you know you’ve probably steered out of some ditches in the past or breaked in some heavy snow in the past, and know how that goes. And watching somebody else can do it is a little bit terrifying. It’s like teaching your 15 year old kid to drive in sitting in the driver’s seat.
Scott Ritzheimer
I’m sitting here like having hot flashes because that’s exactly what’s going on in life right now. I’m teaching my 15 year old how to drive, and I can tell you, no matter how hard I push, my brake pedal on the right side has not worked yet. Like I don’t, I don’t know what’s wrong with that. And and you saying sitting in the back seat’s a whole whole nother level because at least in the front seat I can reach for the wheel and avoid the curb, but in the back seat, you just don’t have the options. Here, I see a lot of folks, and this isn’t just true of you know level five to level six, but any one of these transitions forward, we kind of romanticize the next level. We have a tendency to think about what happens when it works, but lack the skill to deal with it when it doesn’t, and so I like that you brought up that it’s not going to be done the way that you do. Having done this for some time now, having you know been around successful endeavors, you’ve probably seen some that weren’t as successful and needed turning around. What are. Skills that allow investors to to recognize those problems and and see their solutions without being able to just grab the wheel themselves.
Eric Wiklendt
So, in my my opinion, it’s having appropriate feedback mechanisms in the business and being able to like read those feedback mechanisms. So in our businesses, we do a couple. You know, we do board meetings every month. But part of what those board meetings entail is the team, the management team, reporting on a couple key, well, few key items. The first thing we have is a deal thesis scorecard, which is a scorecard that lays out how the business is creating equity value, and then the next thing is an operational scorecard. So the first one is a results scorecard. Then the second one is what I would call a diagnostics and activity scorecard. So like one is okay, what results are you getting? And then the next one is, are you getting the results the right way? That’s kind of diagnostic part. And then there’s there’s two other things, which are it’s basically key projects for the year that we’ll review. Usually, we’ll pick somewhere between one and seven key projects for a business, depending on what’s going on and what’s important and how big you know the a project may or may not be, and then there’s a there’s a fourth thing which I guess is always a key project. So if there are no other key projects and initiatives, we’re always doing continuous and process improvement.
So that that project’s always there. That’s why it’s not zero to seven; it’s it’s one to seven, because that’s that’s that, and it really comes that that methodology comes from the strategy deployment process. That’s kind of well known. Some people know it as like the X matrix that’s used, and it’s about breaking down things into smaller tasks and monitoring them, and that’s the way we choose to monitor them, and it works pretty well. And then that way you can kind of take a step back, and you know, for me personally, like all the portfolio companies I’m responsible for, you know, every month, you know, I get those reports, and I can tell in about probably 10 minutes how that business did for the month, and how they’re doing for the year, and it becomes like I kind of then like know like okay what do I what do I really need to focus on here and how do I manage by exception right because then that way if you’re just managing by exception you you’re not that annoying little kid in the back the car you know being a micromanager, asking if you’re there yet, and you you really just focus on the things where the management team may need help. And what I kind of explain as the chairman of the board, my job is kind of the chief impediment removal guy.
Scott Ritzheimer
Yeah, I love that. So, founders in particular, which is a lot of folks on who listen to the show, tend to be visionary in nature, right? They they see opportunities, and especially later in in their time inside of an organization, being able to see those opportunities and kind of hand them off to a team that executes them tends to be a skill that they start to develop. Is that the same game in in the investor space? Are you looking for opportunities in in the same way, or is there a better approach?
Eric Wiklendt
Yeah, great question. So, in the way that we do private equity at Spayside, 100% yes. And the reason why is that we tend to be looking for things that we can improve, and in one of two ways: either operationally, in which case we’ll improve the EBITDA margins or the profitability of the business, or growth, like grow the top line of the business, either through acquisitive bolt-on acquisitions or organically. And so we tend to have a very you know structured approach to how we do that, and it it ends up in what’s called a three to five year value creation plan, which to your point is kind of the vision for the business, and then we’ll we’ll think about how to execute that in the business with the human resources, the human capital that we have, and a lot of that is about very strong and appropriate delegation. The challenge that a lot of people have, right, with those sorts of things is that they’re not great delegators, frankly. Number one, because either a they don’t have a vision, or b they don’t really know how to get from point A to point B, and or C, they don’t have the skill set to delegate. They just outsource it, kind of like they just like pitch it over the fence and like hope somebody else like gets it done. And the reality, I don’t know. In my my view, the world is business is like 1% strategy and 99% execution.
Like strategy is actually pretty easy. The hardest part about strategy and vision is deciding what not to do, more so than deciding what to do. But like once you decide what to do, you should be able to lay that all out on pretty much one piece of paper, right, to explain what the three to five year vision is, and then to execute it. You know, the 99% execution should be a big project plan, which you break break down into yearly chunks and monthly, quarterly chunks and monthly chunks, and then appropriately delegate. And I feel like most people in the world, you find very very few people that can do both vision and execution, strategy and execution, so strategy and tactics. It’s it’s extremely rare, right? Most people are good at one or the other, not both. But when you find somebody who can be good at both, they tend to be the people that you know build unicorns or have you know really strong return on investment and things like that, and it’s not easy. Sometimes, sometimes one comes naturally and the other doesn’t. You got to learn the other. For some people, they both come naturally, but that’s pretty rare.
Scott Ritzheimer
Yeah, one of the advantages of operating inside of a company, at least a mature one, is that your team is relatively well defined-not perfectly, but but you kind of have an idea, and and hopefully by level five you have people who will challenge you when you have a harebrained idea. It’s not always a given, but hopefully that’s the case. Well, when you let’s say you leave that team behind to a successor, or you sell that business outright, and and you’re you know you’re on your own, if you will, how do you how how do you keep from making those harebrained decisions by yourself? What does what does making investing a team sport look like?
Eric Wiklendt
Yeah, so I I did not know this. I was entertainingly enough. I was watching a a TikTok about this the other day, but apparently metacognition is a rare thing, which is where you think about how you think. So that, though, I think is a good skill to learn, and because it it makes you like take a step back and be like, okay, this is how I’m thinking about something. Am I thinking about it right? And the other thing too is like I don’t know, like the way I think about most things or like have experienced things is like I’ll come up with a framework or a model in in my head, or sometimes I’ll even write it down, and then I’ll push as much data through the or data or data points through the model or the framework as possible, with the idea that hey, I’m going to be willing to change the output of you know the the model right. If you think about it as an equation, you know y equals you know alpha plus mx blah blah blah whatever, right? Well, as you push more data through the right side of the equation, your y may change.
You know your your output, and that’s fine. Then the question is like metacognition helps you with should you actually change like the model or the framework, right? Is the stuff to the right actually the right part of the equation, and can you know do you change that as you go? And I think you really got to force yourself to do that, based on like being honest with yourself. Like, what are you trying to achieve, and then also like being honest with yourself, like, what don’t you really know, right? So, what part of the like equations or the equation set, like, are you like, I think it’s like this, but maybe I should go ask an expert if I’m really getting that part of the framework right. I do that a lot, and so you said like, how do you do it by yourself? And the answer is partially like, hey, go go find some new people to bounce ideas off, and then also just be critical of your own, you know, your own your own framework and your own output, and be willing to change with new information. Don’t get, don’t don’t don’t become a victim of your own biases. That’s hard to say. Like we’re all humans, right? Like so, we’re going to have some biases, and and that’s okay. But try to realize what they may be, and then try to think about that as you think through the the problem, and try to avoid them.
Scott Ritzheimer
Yeah, it’s it’s one of those things that’s easy to say on a podcast, can be challenging to do in the real world. So yeah, I love this idea of of really having the humility to bring in experts. I I think that’s so important for this stage, Eric. There’s this question that I have for you. It’s a question I ask all my guests. I’m interested to see what you have to say, and the question is this: What is the biggest secret you wish wasn’t a secret at all? What’s that one thing you wish every founder watching or listening today knew?
Eric Wiklendt
Hmm. I I guess I would say, well, as it relates to me personally, as a guy that buys and sells businesses, and some of those businesses I would like to buy, is basically be realistic about what a selling process looks like. You know, I wish everybody knew it takes. It’s a little harder. It takes a little bit longer. Your baby’s not as beautiful as you think it is to the outside world. That that would be one thing that like sometimes in private equity world is a little bit frustrating when you’re you know buying a business from somebody who’s never sold a business before, first time exit, you know, person. If I were to go back though, in like, you know, 20 years or something, and like give myself some advice and probably some things that I would give like newer founders or younger folks advice on would be like be a little bit patient and try to be a little more patient than you think you have the ability to be, and then like also like maybe don’t don’t be so self critical. Like not everything is going to go perfectly. It it just never does. It’s you know that’s life. God oftentimes, or karma, whatever you want it, or the universe, however you want to think about it, laughs at your plans and gives you a new path, and that’s okay. That’s how things go. Don’t don’t get so worked up about it if it happens. It’s it’s just it’s just how it is. So yeah, those those would be the two two big things, I think.
Scott Ritzheimer
Fantastic, fantastic, Eric. If someone is either wanting to sell their business or or succeed in this this investor stage, or if they just want to know more about you, the work that you and your team do, where can they learn more about you? Where can they find out more?
Eric Wiklendt
Yeah, they can find me on LinkedIn. It’s just my. If you just look at my name, I think I’m the only guy in the world that has it because my last name is spelled somewhat uniquely. And so I’m on LinkedIn. You can you can get my cell phone number and email there, or if you go onto our spaceside equity.com website, you can find my information there. Happy to yeah chat with anybody that wants some help thinking about you know investing in businesses or selling businesses or whatnot. I was happy to do that. And if you got any folks out there that have any really good Industry 4.0 businesses that are looking for customers in the manufacturing space definitely hit me up on that as well. We’re looking for good partners in that space to fuel our LBO investments and make them better.
Scott Ritzheimer
Excellent, it’s a lot going on. A lot of exciting opportunity. Highly recommend checking them out. Eric, thank you so much for being on the show. Really was a privilege and honor having you here today. And for those of you watching and listening, you know your time and attention mean the world to us. I hope you got as much out of this conversation as I know I did, and I cannot wait to see you next time. Take care.
Scott Ritzheimer
Hey everyone, Scott Ritzheimer here. Thank you so much for listening to the Start Scale and Succeed podcast. I hope this episode gave you exactly what you need for the level you’re in right now. If you want to discover what level you’re in, take our 10 question Founders Evolution Quiz for free at foundersquiz.com. That’s foundersquiz.com. It’ll pinpoint exactly where you are, and give you tailored tips to move forward and reach that next level in your journey as a founder. If you got something out of today’s episode, don’t forget to subscribe, rate, or review. It helps us reach more founders like you, and let’s be honest, it means a ton to me, my team, and all our incredible guests. So keep starting, scaling, and succeeding, and I’ll see you in the next episode.
Contact Eric Wiklendt
Eric Wiklendt is a Managing Director at Speyside Equity, where he is responsible for sourcing, executing, managing, and exiting investments. Before joining Speyside Equity, Eric was President & CEO of Kelix Heat Transfer Systems. Prior to that, he held leadership roles at Eaton and Hilti Corporation, where he oversaw M&A activities, established a manufacturing plant in Mexico, managed a large marketing team, and directed industrial sales operations. A graduate of the University of Notre Dame, Eric obtained his MBA from the Wharton School at the University of Pennsylvania.
Want to learn more about Eric Wiklendt’s work at Speyside Equity? Check out his website at https://speysideequity.com/
Connect with Eric through his LinkedIn at https://www.linkedin.com/in/ericwiklendt/