The Koerner Office - Business Ideas and Deep Dives with Chris Koerner - How I Built a $10M Business⏐Ep. #114

Episode Date: January 6, 2025

In this episode, I'm talking about my first major business, an iPhone parts business called LCD Cycle, that I ran for seven years. I'll discuss how it started from a small iPhone repair business and grew to a multi-million dollar e-commerce operation. I'll share some key business frameworks I learned along the way, such as the importance of location, recognizing good ideas, and the fact that it's never too late to start a business. I also talk about the importance of product market fit and that businesses don't always fail, sometimes founders just run out of energy. Finally, I discuss my decision to turn down a million dollars in investment.Timestamps below. Enjoy!---Watch this on YouTube instead here: tkopod.co/p-ytAsk me a question on or off the show here: http://tkopod.co/p-askLearn more about me: http://tkopod.co/p-cjkLearn about my company: http://tkopod.co/p-cofFollow me on Twitter here: http://tkopod.co/p-xFree weekly business ideas newsletter: http://tkopod.co/p-nlShare this podcast: http://tkopod.co/p-allScrape small business data: http://tkopod.co/p-os---00:00 Introduction and Overview00:37 The Beginnings: iPhone Repair Business04:18 Launching the iPhone Parts Business07:28 Scaling and Success10:21 Frameworks and Lessons Learned15:46 Navigating Market Saturation16:02 The Rocket Ship Growth of LCD Cycle16:44 Innovative Business Strategies18:38 The Power of Customer Feedback19:10 Strategic Relocation to Dallas20:47 Expanding Distribution Centers21:13 Financial Challenges and Solutions23:11 The Turning Point: Seeking Investment24:39 The Unexpected Answer25:54 Winding Down the Business27:34 Reflecting on the Journey30:22 Final Thoughts and Advice

Okay, after 10 days of wandering the West Coast with my family, I am ready to get back at it and talk some business with you guys. So what you see for me today is launching business after business and partnering with operators and talking about ideas. But I actually launched a business in 2013 that I ran for seven years. And that was one of the biggest, most, quote, sophisticated businesses I ever had. And so I want to talk exactly about what went into starting and running and exiting that business. And what important frameworks I picked up along the way that you could apply to anything you might be. doing in business. I plan to be shortened to the point, packed with high value. I don't want to be more verbose than I have to be so you can get on your merry little way. So I can't talk about this

business without talking about the business that came before it because they kind of played into each other. And once again, if you've heard my every business I ever started videos, you'll hear a little overlap here, but not a lot. So when it was 2010, I was a senior at the University of Alabama. Long story short, I learned about iPhone repairs as a business. And I learned about these guys in Baton Rouge, Louisiana that opened a store called iPhone MD. And they were fixing iPhones making 20 to 30 grand a month from one store on Airport Road in Baton Rouge. And I thought, that's my business. That's the one I'm going to do. And so one of my classmates gave me a broken iPhone for free. Around the same time, I saw a flyer on campus that said, I'll fix your broken iPhone. I remember

he lived in the Houndstooth apartments on 15th Street. I pulled up into the apartments. I remember exactly where he lived. I went in his apartment with my broken iPhone. He had pre-ordered the part from eBay, and I was just fascinated about everything he was doing. What is this part? What's it called? And I wasn't asking him these questions because I had planned to compete with him. I'm just a business nerd. I love learning this stuff. So, wow, what's that? A section cup? Huh? Where did you learn how to do this? Why did you do this? How many of these do you fix a week? Do you like it? Is it hard? Yada, yada, I peppered him with questions. By the time I was out of his apartment, I had paid him 60 bucks. I had a fixed iPhone and I knew that I wanted to start this business. So I did. And I went to the SBDC,

small business development center. I made a formal business plan and I said, I want to start this business. I want to launch it on 15th Street. Coincidentally, the same street that this guy's apartment was on. I found a 2,200 square foot space. It was a four unit strip mall. And it's still there. You can look it up. It was 1505 15th Street. And there was a subway, a batteries plus and then two vacancies. And I wanted to rent the vacancy right next to batteries plus. It was an amazing retail location. and I was fairly convinced that I would do well because I had learned that in retail, it comes down to location, location, location.

So I figured I'm not going to have to do much marketing if I can find a good location. So there's a framework for you. If you're opening a retail business, do not save money on location, period, end of story. And that's coming from a lifetime cheapo. If you want to save on location, you're going to pay more than what you saved in marketing

to get people to hear about you. There was also a McDonald's next door and one good framework for retail is piggyback on McDonald's research. If you're close to McDonald's, it's probably a good location. So I was laughed out of this small business development center by this boomer business owner that said this is a terrible idea. I needed to open in the ghetto, yada, yada, yada, $2,500 a month or $2,200 a month is way too much.

And I just ignored him. And he put a chip on my shoulder and I launched and it was slow. Business was slow. And I'm like, wow, was this guy right? and I remember sitting in my MIS management information systems class one evening on the computer Googling how to declare bankruptcy. How do you know if you know? I didn't even have anything to declare.

It's kind of like Michael Scott in the office. I declare bankruptcy. That was me. I just knew that things were not going well. Until I got the mayor involved, Walt Maddox, and I had a grand opening with a big red ribbon. I got the crimson and white there, the school newspaper. And I just generated some buzz. And so you could say that when I opened, it was kind of a soft opening because no one really knew about it.

And then I had a grand opening a couple months later. And things got a lot better from then on out. We opened a second store. I say we. It was me and my partner, Andrew. We were 50-50 partners. I ended up buying him out. He moved to another state, took another job. And so I ended up owning that business entirely. Long story short, we opened four locations. I opened four locations over the next two years. I had a wandering eye. And one day, I was manning the store. or I got a phone call from someone that said, hey, I want to buy your broken iPhone screens. And that made no sense to me. And I said, well, why?

What do you want for my broken iPhone screens? And he said, well, we can recycle them in China. And then we get them shipped back and then we can sell them as remanufactured units. And it's just, you know, sometimes you hear an idea and just immediately you're like, that is a good idea. And it's also kind of a skill. It's kind of an art and a science. But the more you hear ideas, the more you're able to immediately recognize for whatever

reason, this is a good idea. And I was able to recognize it so immediately because I knew this business so intimately. And I just couldn't sleep. I couldn't stop thinking about this idea. So I started reaching out to manufacturers in China, which sounds a lot more sophisticated than it really is. I went to olibaba.com. I typed in iPhone screen. I got hundreds of results. I typed out a message that said, hey, I own an iPhone store. Also, I want to open an iPhone parts main supplier. Also, I want to start buying back and selling broken iPhone screens. Can you give me quotes for all the above? And I copy and pasted that same message to dozens, if not hundreds of suppliers in Shenzhen and Guangzhou, China, which is in Southeast China.

And those are like the two electronics manufacturing cities. So I sent that to tons of them. A bunch of them responded. I got free samples from a bunch of them. They would send me two to four iPhone screens and some home buttons, if you remember those. earpieces and batteries. Those are the big, the big four. And I was supposed to see how the quality was. And I guess I knew how iPhone parts quality looked because I had been fixing iPhone screens for two years in my business. But I didn't really know. It's like, oh, yeah, this feels kind of solid. This didn't

fall apart in my hands. This must be good. So I found this guy named David, David Sue, for whatever reason, I liked him. And we hit it off. And I had sold my business. And that's another story for another day. It was called phone restore. My iPhone parts stores sold it to a couple guys. And I had like $20,000 in disposable income. But I still owned a third of the iPhone parts business or the iPhone repair business. And I was expecting it to provide me some mailbox money. But that's another story. Well, actually, it's all the same story. So I'll get into that just a little bit. And so I took $17,000 and I wired it to David Sue in China. And that was one of the biggest risks I've ever taken because David, you know, he were a short-term thinker, he could have thought, hmm, 17 grand, free and clear. He'd never find

me. He'd never track me down, but he didn't. He was a long-term thinker. And he thought, if I don't screw this guy, which he probably never even considered it, because I later learned he's a great guy. If I don't steal this guy's money, then he'll pay me millions of dollars over the next few years, and that's exactly what I ended up doing. So, David and I are friends to this day. And it's been 13 years now since I first wired him the money this month, 12 years. And so that was my first initial parts order because my whole thesis was let's get our foot in the door by calling up repair shops and offering to give them money, right? It's much easier sale of here's some money. I want to buy this from you that you were previously throwing away versus let me take your money

and sell you parts. But then once we had their trust, then we would turn around and sell them parts. That was the thesis. And so I put a spreadsheet together in Google Sheets. I probably still have that original one. And I was just kind of guesstimating my starting. inventory. And I knew what market prices were because I had been buying prices. Man, what were they called? Like I cheap. I think it was called I cheap. And it was like this ugly Shopify store that sold iPhone parts wholesale out of Phoenix. And they were pretty garbage. Their customer services crap and there just were not a lot of iPhone parts suppliers out there. So I knew that there was a big hole in that market as well. And it's funny because this is a framework. Like if you're in an industry, let's say you own a house

painting business, you look at that industry a thousand percent differently than anyone else because you're so biased. It's called proximity biased. You're biased to what you're seeing and hearing all day every day. And so it would have been really easy for me to say, oh, I'm not launching another business that sells iPhone parts to iPhone repair shops because there's so many of those. I get hit up all the time. Or I could have thought, I'm too late.

I'm too late. The iPhone came out in 2007. It's 2013 now. been six years. We're oversaturated at this point. This is the peak, yada, yada, yada. And that is a framework that I love. Okay. And that is the fact that basically nothing is oversaturated. And it's basically never too late to do or start anything. We're always early, right? You heard the phrase in crypto or investing or whatever. It's like, we're so early. We're so early. And it's kind of like a meme at this point. But if you expand your time horizon, which I'm always a fan of doing, zooming out

even further, which I love doing, we're still early. We're early for e-commerce. Amazon has been around since 1995, 30 years, which is crazy. And e-commerce still accounts for like 15 cents out of every dollar we spend. E-commerce is still early. Crypto, been around for 17 years, 15 years, depending on you count it from the white paper or from whatever, it's still early. AI. Oh my gosh. We're a newborn infant with AI. The internet.

We're still early with the internet. It's been 40 years. I don't care. We're early. We're always early. So if you really think you're late at starting something, just be sure that's not a defense mechanism against being scared to start something because we're probably early. There are, of course, of course there are exceptions.

Are we early with selling laser disks? No, we're late. And there are other examples. But there's always a way to put a twist on something that seems oversaturated on the surface. So don't sell yourself short by saying, ah, this is oversaturated or, ah, I'm too late. I missed the boat. Bitcoin's $100,000. I miss the boat.

Stop. We're early on all these things. Okay. Life is really long. There's always time and life is long. Okay. So I get this first batch of iPhone parts from David. I put them up on an ugly shop if I saw.

You can go to the web archive, type in LCDCycle, one word.com, look at the web archive from 2013, and you'll see what my site looked like. And then I used, what was that software called? I don't think it's around, but it was the only software I could find that would scrape Google Maps. And I scraped every single iPhone repair shop in the United States by every MSA, metropolitan statistical area from New York City to Carson City, Nevada. There was like 242 of them at the time. And it took days, and I put them all.

on the spreadsheet. I had like 242 different spreadsheets because I had to export them one at a time. And then I had to combine them all with a macro and it was just a little hairy. But long before AI, there was Google and YouTube and you could figure anything out that you needed to figure out. So I put all these in the spreadsheet, 20,000 iPhone repair shops. And I went to odesk.com, which is now Upwork and I hired three virtual assistants for 555 a piece because Odesk took a 10% fee and they wanted to net $5 an hour and they were experienced telemarketers and I opened Microsoft Word and I typed out an ugly script and then I went to Zoho which was like a CRM still is and I uploaded all 20,000 leads and then I said okay I want you to call these repair shops and say I'll pay

you $3 a unit for your broken iPhone screens and we'll send a prepaid shipping label and we'll pay you via check or PayPal and so they did and guess what? These ugly cardboard boxes started showing up at my house in Harvest Alabama. And there were these boxes that always look beat to heck and they had never packaged them well. And so you would just pick it up and shake it and it just sounded like broken glass because that's exactly what was in it. Broken glass. Sometimes the glass shards would literally be falling out of the corners of the cardboard boxes. And we later learned to educate them on packaging them better. And I would set them down on my kitchen table. I'd stack them high. I still have pictures of all these. And we would

buy these testing units for like $15 from China. That was like a little electronic box. And you would attach the iPhone screen to the unit. And it would basically mimic what it would look like if it were plugged into an iPhone. And you would make sure that there were no dead pixels. And if there were dead pixels, then it was worth significantly less, maybe 25 or 50 cents, still worth shipping. And if there were no dead pixels, it was worth about six or seven dollars. And we were paying two to three dollars for them. So we would just make a margin. We test them all and we'd notate in a spreadsheet how many were dead pixels, how many had a dead digitizer, how many were perfect, great ABC. And then we'd get a bubble wrap and we'd get a long strip of bubble wrap and we'd lay them all out and we'd roll them all up with

bubble wrap in between each broken iPhone screen. And then we'd get these massive phone boxes. And I had to figure out how to work customs and we would ship these 40 pound boxes of broken iPhone screens to Shenzhen China. And I kid you not, we would actually ship them to Hong Kong because the tariffs were crazy if you ship directly into China mainland. We'd ship them to Hong Kong. And someone told me this once, I don't know that it was true, but I believe it. And some dude would put these boxes, these foam boxes covered in cardboard, covered in yellow tape and put them on like a literal rowboat and row them across the Hong Kong Bay. And that was like the most cost efficient way of them getting across. I don't know if it was shady. I don't know if that was business as usual over there.

I don't know. But someone told me that once and it blew my mind. And then I went to China and I saw how things operated. And that actually sounds quite believable from what I witnessed over there. So this business just was gangbusters. And it was the perfect example of product market fit. starting in business usually feels like pushing a boulder up a hill and you make progress. But if you rest, the boulder rolls back down on you. But sometimes when you have product market fit, if you should be so lucky, the boulder is chasing you and you're sprinting down the hill. And you can't even sleep because you're just cash and checks and breaking eggs, baby.

And people are beating down your doors to buy whatever product or service that you might be selling. And that's what I had here. And I don't normally get product market fit. And you don't have to have it to launch. but sometimes you do. Sometimes you get it, even though it was six years, quote, too late, even though it, quote, seemed too oversaturated. So that is the framework of all frameworks for today's podcast, is don't be sold into

thinking that something's oversaturated. And if you really think that, then at least get the research to back it up. For instance, in our tree trimming business, we know that the baseline is one tree trimming business in any given city for 10,000 residents. So if we want to open in a city and it's one in 5,000, then we know it's twice as saturated as what we're used to as what the baseline is. So we might be hesitant to open in that city. We might be able to go one city over and see it's one in 20,000.

All right. If you were watching this clip right now, you are watching this on YouTube. And if you are a fan of podcasts, please check on my podcast while you're at it because sometimes I have podcasts that aren't on YouTube and sometimes I have YouTube that aren't on podcasts. So check out the Kernner Office on any podcast platform or you can go to tkopod.com. Also, my newsletter will throw that in there. There are no ads. It's weekly.

It's different content than my podcast and YouTube. Newsletter.com. You'll see the link and we'll see you there. So things can be oversaturated in relation to something else, a different market. But generally speaking, even if we open in the market where it's one in 5,000, those guys are probably sucking in a lot of things. And we can probably do things a little more uniquely or a little better and win over there. So this business, LCD cycle, it took off like a rocket ship.

And we did 28,000 month one, 56,000 month two, and 150,000 month three, which would have been March of 2013. And e-commerce is hard. And in one sense, this was import, export. And in another sense, it was e-commerce because most of our money was made from selling parts. That's what we did. We would send someone money for their broken screens. And then we would come back and say, hey, we also sell parts on our website, LCDCycle.com.

And it was a beautiful business because it was a beautiful business because it was a was 93-ish percent recurring. If an iPhone part store bought from us, they were likely to buy from us every single month. And we kind of changed the industry in a couple ways. We were the first company to institute a lifetime return policy, which no one had ever done before. And that's another framework for you.

Like, it was just marketing. Like, if someone three years after buying a screen wanted to return it, yeah, we would take it back. But guess what? They didn't. That didn't happen. That's just not how the industry were. So when you offer a lifetime return policy or a no-brainer offer, as Alex Hormozzi likes to say,

sometimes it's much better on the surface. It's a better sales pitch than it is an amazing offer because it's just framed in a different way. I know, mathematically speaking, that most people will never take me up in the lifetime return policy. And the ones that do, I just work that into the price. And so it took us a couple of years to institute that, but that was a game changer. But the biggest thing we did was free shipping over $200 because our average order value was about $170. And so we knew that if shipping was $15, then we could encourage them to increase their average order value, aka buy more from us, and they could get free shipping.

And then the biggest unlock ever of this whole business was, I just looked at a map one day. And we were in Huntsville, Alabama, and I said, okay, where are all my customers? Chattanooga, where are my big customers? Chattanooga, Tennessee, Nashville, Tennessee, Birmingham, Alabama, Atlanta, Atlanta. We were all over the southeast in this little pocket. It's like, okay, in a way this makes sense because I'm in Alabama, but in a way it doesn't make sense because most humans in America live in the northeast, right? There's 30 million people in Florida.

There's 35, 40 in California. There's 30 million in Florida's actually more like 20, I think. There's 30-something million in Texas. And then in the northeast, there's 30 million. there's, like along the West Coast, there's 150 million people, or East Coast. And we're calling all of them. My VAs don't care who they call on. So I started asking my customers, and that's another good framework. Talk to your freaking customers. Get them on the phone regularly. Block out spots on your calendar. They will tell you things that you never knew. Oh yeah, I don't buy from you because your

lifetime return policy. I buy from you because your shipping's free. And I'm within a one-day shipping radius. So that means I get it the day after ordering, which means it's like paying $50 for overnight FedEx when I'm just getting it next day because I'm close to you. That's what I was learning. And it was a game changer. So I immediately, I remember where I was at the time. And I thought, why are we in Huntsville, Alabama again? Oh, because I happened to live here when I launched this business. Okay, well, this is blowing up. We're going to do five million bucks our second year. We did 2.1 our first year. We were profitable. Why am I still in Huntsville? So I went to my wife and I said, hey, what do you think about moving? She's like, I'm down. So where? Well, I opened up FedEx.com.

I went to their FedEx ground map and I went to UPS.com, looked at their ground map. They have a little calculator. You can put in a zip code and it will show you the, you know, the overnight shipping radius map. So I looked at L.A., Chicago, hit a bunch of big cities, New York. I'm not moving in New York. Okay, Orlando. I grew up there. We could ship to all of Florida and most of Georgia and Orlando, but that's only a small pocket of people. I don't want to live there. And then I looked at Dallas. And it's like Dallas, seven million people, San Antonio, six million people, Houston, six million people, Austin, two million people, greater, you know, greater Austin, greater Houston, Little Rock, Shreveport, Oklahoma City, all of these cities, all of Texas

were within a one-day shipping radius. It was a no-brainer to me. It's like, oh, oh, I need to move to Dallas. Okay. I need to leave Huntsville open, keep someone here to manage the shop, and I need to move my family to Dallas because you know what, I wouldn't mind moving there anyway. And so 10 years ago, almost 11 now, 10 and a half years ago, we moved to Dallas and we bought a house and we've been here ever since. And that was the thesis. I can acquire more customers in Texas because I'll be able to ship ground, but they'll be able to receive overnight. And that thesis worked. So, So that caused us to open a third distribution center in Orlando where one of my business partners ended up living, or one of my friends who ended up becoming my business partner was already

living. And then we opened up in Michigan because Michigan hit a bunch of those northeastern cities within one or two days. So we had four distribution centers around the country. And we were cranking out close to $10 million a year profitably. Now, e-commerce slash wholesale is a hard, hard business because if you're growing, let's say your net margins in a high growth phase are 10%, but you're growing 20% a month. That means you are profitable, but your cash flow negative. Cash flow and

profit are not the same thing. Cash flow is what's left over in your bank account at the end of the day. Profit is, are you able to sell something for $2 that you bought for $1? Hopefully, you have both profitability and cash flow. Sometimes you don't, especially if you're growing fast. So we were profitable, but cash flow negative. And so thank you, John Nolan. He was a guy that I went to church with. He had started and sold very successful consulting business. And he was a great guy. And he wanted to support young entrepreneurs. And so I went to him and said, hey, John, do you invest in businesses? And he said, well, I own a small percentage of a bank. And what I like to do is I will co-sign on a line of credit with you. And then you can use that line of credit to grow your business.

And if you ever go belly up, then I've got to come out of pocket to pay that off to the bank. But if you don't, then it's kind of nice because I don't have to come out of pocket to make this investment. And he just preferred that structure. And so we did that. I took out a quarter million dollar line of credit with this bank in Alabama. And it was a great partnership. I used them for a few years.

I kept the line of credit as low as possible. And that enabled us to run and grow the business. And he didn't want any equity. The only thing he asked for was for me to donate to his nonprofit. which was a nonprofit that helped like single moms mostly, people that were down on their luck, help them earn an education or a skill so they could be self-sufficient. And so I did. It was just a handshake.

There were no papers signed. I donated a percentage of our revenue every single month to his nonprofit. And then when I sold the business, I donated a percentage of that as well. And it was a great, beautiful partnership that I'm very grateful for. But there was also a time that came when I needed more money. I thought I needed a million dollars. And this is kind of an interesting turning point in my life. I was living in Allen, Texas at the time, and we were growing really, really fast.

And the line of credit just wasn't enough. And we could keep going without any more money, but I wanted to grow faster. I wanted to grow more. And I just started cold emailing venture capital firms in Utah and Alabama. Alabama, because that's where our company was headquartered, even though I was living in Texas at the time and in Utah, because I have ties there through the church that I'm a member of the Church of Jesus Christ, the Latter-day Saints. I thought it might be easier to raise money there. So I flew out to Utah. I had some meetings with Peterson Partners, Peak Ventures, a few different companies.

And it went okay, but nothing really ever came of it. And then I found this company in Birmingham. And they were great. And I drove out there. And I met with them. And they loved me. I love them. And we had talked about them investing a million dollars for 25% equity.

And we shook hands on that. I met the team. We verbally agreed to it. And then they just dug their feet or they drugged their feet forever and ever and ever. And it took like six months from to actually produce a term sheet, which is basically a letter of intent with the terms of the deal on it. And so maybe it wasn't six months. Maybe it was three.

I don't know, but it seemed to take forever. And it was a no-brainer. We were still growing fast. We still needed the money. But as a member of my church, I wanted to pray about this. And so I prayed about this with my wife. and something weird happened. I started to pray and I forgot what I was praying about entirely.

And that was very abnormal for me. That never happened. And in our church, we teach that if you're praying about something and the answer is a no, you're going to have what we call a stupor of thought, which means like you have a stupor of thought. How else do you explain it? But if the answer is a yes, then you're going to feel good about it. Right?

You're just going to feel good. It's going to feel right. I had never experienced. I had experienced a lot of, you know, no answers to prayers, but I had gotten some yeses and I'd never gotten a no. I'd never gotten a clear stupor of thought until this moment. And so the answer was no. And that made no sense to me because in my head it was a yes. This was a no brainer. And so I went back to them and I said, no. I don't know why it's no. I just, this doesn't feel right. I think I can get by without it.

I'm not going to go raise it from someone else. I'm just going to try to make it work. And so I did. I made it work. We kept growing. We did five million. We did 10 million. But three, four, five years in, we've been very profitable. I built this awesome house. I made more money than I'd ever made in my life in my 20s, and I didn't have any debt. You know, the line of credit, I kept at zero after that second year or so. And it was just a cash flowing machine. But then we started shrinking. And I couldn't really turn it around.

And there was a lot of competition. The market had kind of changed a little bit. And a lot of times in business, you get this, you know, you get to the 10 million mark. And it's really hard to break through. From a revenue perspective, from a people perspective, and I was managing 23 people across four different states, not doing a super great job at it, not visiting them enough. Of course, I was distracted. I was testing other businesses and concepts. If you listen to my every business I ever started episodes, let's see, 14, 21, 88, and then I forget which the last one is. Anyway, the 75

businesses I talk about happened during these seven years of running LCD cycle. And so the business started shrinking every year. We got to 10 million and then it was and then it was six. And then I had a falling out with a business partner and a friend. And that was terrible. This was 2017, 2018, 2019. And then finally I ended up just selling off the customer list for pennies on a dollar, so to speak, based on what it used to be worth.

But it was interesting because a lot of times people think of a business failing and they think of everyone losing or declaring bankruptcy. But it doesn't always go like that. Sometimes you just wind stuff down and you're profitable the entire way. From start to finish, you're profitable the whole time. And that's how I was. We were banking profits every month up until near the end. And I just saw the writing on the wall.

So we had to keep laying off people and shrinking and getting more lean, more agile, more nimble. And then we just kind of sold it to a competitor. And we locked the doors and walked away, so to speak. But I don't really know what I would have done differently. You know, they say businesses don't really ever fail. The founders just run out of energy. And I can definitely see that happening here. I could have made it work. I could have raised the money and gotten over that hump. So in retrospective,

in looking back on that, why did I turn down that million dollars? I thought I had the answer. Then a couple of years ago, I got the real answer. And so I thought the answer was, well, because, you know, I was going to, those investors would have lost money. Or I could have said, you know, if I would have raised the money, then I could have used it to grow the business and gotten over that hump. And we could have been a $50 million business. I don't really think I could have done that even with a million dollars. And so I used to think the answer that I said no was because investors would have lost money. And I would have felt terrible about that. But then years later, I went back to those same investors to raise money for my third party logistics company, Send Eats. He flew out to Dallas

from Birmingham. He met with me. We had lunch. He loved the business. He gave me a term sheet again. And I looked at the term sheet and I looked at it more closely. And then I went back to the old term sheet and I looked at that one and they were about the exact same. And then I did more research. and I learned that their term sheet looked about like every other VC's term sheet. And it has what's called liquidation preferences, which means if they invest a million dollars for 25% equity and we exit for, let's say, $10 million, they need to get their million dollars back first off the top. And then we split everything else pro rata, right?

That also means if they invest in million dollars at a $5 million valuation for 20% equity, and then we sell for $100,000, which is a tariff. terrible outcome, we just sell for pennies on the dollar, then they're going to get all of that 100,000. Or if we sell for a million, they're going to get all of that million because they have liquidation preferences. They get their million back first. And that's not like a vulture clause. That's not unethical. That is standard. That's very standard. Sometimes they have two act liquidation clauses where they need to get two million dollars back first and then we split at 80, 20 or 75, 25. And so I realized at that moment, oh, that's why the answer was to say no to that money, because had I said yes, then the winding down of that business, I truly don't believe the million dollars were to fix this.

I couldn't have just put it in my personal checking account and lived on it. That would have been unethical. But had I wound down the business with their million dollars, with that term sheet signed or with the contract signed, I wouldn't have to just live off the profits as I wound it down. I wouldn't have been able to build and buy this house that we've lived in for eight and a half years. I wouldn't have been able to have the life that I've had. I'm sure my life still would have been fine, but it would have been different. And I don't know what it would have been. And I think the life that I have is a life that I'm supposed to have.

And so I'm grateful that I got that no answer because I wasn't supposed to raise it. So there's another framework for you. Seek out experts when making these big decisions. Maybe that expert is your dad, a friend. Maybe it's God, as it was in this case. But that is the story of LCD cycle. It made me millions of dollars. It provided a launch pad for me to do other things.

And it's interesting because I preach all the time, you know, chase all the shiny objects, chase all the things, do all the things, say yes to everything. But you kind of have to get to that point, right? I also preach that you should follow your passion. But not in the beginning. iPhone parts was not my passion. It still isn't. iPhone repairs were not my passion.

the vast majority of the 75 businesses I've started have not been my passion. But my passion is business. So in a way, all of those things are my passion. But not following your passion is not scalable nor sustainable. But we should also do hard things. We should also be willing to eat crap for years at a time. So do things that are hard and that suck until we have the luxury of being able to chase our passion and to chase all the shiny objects.

But if you're still working in 95, that's fine. You could still chase shiny objects in the nights and we, weekends, launch a bunch of small things, see what really takes off, and see which thing reaches product market fit, which thing keeps you up at night because you have so much demand. That's when you really know you have something special. You don't have to have product market fit, but it really helps to have it. Hope you enjoy this story. Thank you so much for listening.

I would love it if you shared this with a friend. Give me a five-star review. I don't have very many of those. But I'm looking forward to an awesome 2025 with you all on the Kerner office.