In this episode, I’m speaking with Darius Mirshahzadeh. Darius is a high growth CEO, serial entrepreneur, and culture building mad scientist who was ranked #9 on Glassdoor’s list of Top CEOs of Small and Medium Companies in the US. He’s led organizations that have won numerous Stevie awards, been named “#3 Best Place to Work” by San Francisco Business Times, and have landed at #40 on the Inc. 500 list of fastest-growing companies.
He has been recognized in the New York Times and Inc. Magazine for innovation in corporate culture, and his business insights and thought leadership have been published in Huffington Post, Entrepreneur.com, Fast Company, and Forbes.
Darius is also the author of The Core Value Equation: A Framework to Drive Results, Create Limitless Scale and Win the War for Talent.
Today, Darius joins the podcast to share his unique entrepreneurial journey, from building a multi-million dollar mortgage company that came crashing down, to teaching entrepreneurs how to leverage core values so they can create high growth, high impact, highly scalable businesses.
- Advice for new authors who want to leverage their strengths and sell more books.
- What Darius does to help entrepreneurs build 9-figure businesses.
- Learning to scale a company by working on your business versus in your business.
- The importance of trusting your instincts when things don’t feel right.
- The story of building a multi-million dollar business as a subprime mortgage lender – and the most important lessons Darius learned when it all came crashing down.
- Why the success of your company has nothing to do with the product or industry.
- How to create high-growth scale and maximize results for your business by leveraging core values
Tweetables“I don’t care about the product. What I care about is building a high growth, high impact, highly scalable business.” - Darius Mirshahzadeh Click To Tweet
- The Real Darius
- The Core Value Equation by Darius Mirshahzadeh
- The Greatness Machine
- What Got You Here Won’t Get You There by Marshall Goldsmith and Mark Reiter
- Front Row Dads
- Rich Dad, Poor Dad by Robert Kiyosaki
- Cashflow Quadrant by Robert Kiyosaki
- The E-Myth Revisited by Michael E. Gerber
- The Big Short by Michael Lewis
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Connect with Justin Donald
Justin Donald: Alright. Well, Darius, I'm so glad that we could get together and spend some time together. We've actually been hanging a lot here recently. And really, I feel like I'm the lucky recipient of you and your incredible expertise and knowledge. So, thanks for joining us.
Darius Mirshahzadeh: Man, the feeling's mutual, Justin. I'm always like, I'm the cheerleader from behind the stands. I'm like, going on, going on that Amazon. I'm like, man, he's got to be number one, number one. And I'm totally cheering on The Lifestyle Investor, the fact that you guys hit number one. I mean, you were like, number one for the entire nonfiction book on Amazon. Is that correct?
Justin Donald: Yeah, I mean, I was totally blown away and totally pleased, but yeah, for MLK Week, we were number one nonfiction, all books. And then, number eight overall of every book, 50 million books out there, we were number eight there for a certain period of time. We fluctuated anywhere from like eight was the best to like, somewhere in the top 25 each day that week, and I still think we're ranked pretty high right now.
Darius Mirshahzadeh: And you don't have to answer this, but are you guys getting other types of rankings outside of Amazon, like the Wall Street Journal or anything like that? Are you getting there?
Justin Donald: We'll see. I think time will tell. I'm eagerly awaiting. I think that there is a strong likelihood of it, but I don't want to, what is it? Count your chickens before they hatch. Well, I'm just being patient. And you know what? If it doesn't hit, that's all right. And if it does, that would be exciting. I didn't write the book for a best seller, but if it does, it's kind of like, it feels good that the hard work is recognized at scale.
Darius Mirshahzadeh: Yeah, I was on Clubhouse, I was talking to Marshall Goldsmith, who's written a ton of books, wrote What Got You Here Won't Get You There and he's voted number one business coach in the world. His clients are like the CEO of Boeing. And he was talking about the likelihood to even get a person to buy your book, like it's under 1%, like to do it unprovoked, not like family and friends. It's super small, let alone to be number one for nonfiction for the whole Amazon which is insanity.
And this is coming from personal experience. Like we both launch books. I mean, I was like, I think, top 100 in business and I killed myself. So, it's a testament to the content because the book game is interesting, it's the first business I've ever seen that, like, I don't care how hard you work, it's like, it doesn't matter. Like, you could kill yourself. And people were just like, don't care. So, I think a lot of it has to do with, how does it resonate? And my book, I think, actually resonates with a lot of people.
So, typically, I mean, now my book has been out for four months, The Core Value Equation and yes, it's like top 20 in office management on a regular basis which is awesome. It keeps getting bought, I'm actually selling more books every month, but our good friend, John Ruhlin, said, “Darius, everyone gets really caught up in the first week because you're kind of taught to do that and that ether rubs off pretty quick. A month from now, you won't feel the same way about it. Two months from now, it'll just be something you did two months ago, but he's like, it's a five-year event. And he learned that from a friend of yours, who's someone I just recently met, Hal Elrod of The Miracle Morning. So, I got really comfortable with that, which was this is the beginning, like, the awards are great, but impacting lives is way more important.
Justin Donald: For sure.
Darius Mirshahzadeh: That's where I'm pumped, but I'm pumped for you because you deserve it, man. The resonance is there and I'm rooting for you.
Justin Donald: Well, I appreciate it. And we're going to get into your book here a little bit later on today. And I'm excited about your book for many reasons and on many levels, but one of the things I want to say is, it's really easy to sell yourself short. This is for anyone and everyone, like I've sold myself short, I feel like you've sold yourself short. A lot of people I know sell themselves short on many different things, but when it comes to writing a book, that's a huge undertaking. And no matter how many people buy it, it's a great accomplishment and you're going to have impact.
And so, I heard a stat. So, I became friends with, I don't know if you're familiar with Neil Strauss, he's an author. He's one of my favorite all-time authors. Well, he's good friends with someone I just became friends with, who owns a local like acai bowl and smoothie place here in town called SunLife Organics. His name's Khalil, and he's really good friends with Neil and he edited his book when it came out. And his book is incredible, by the way, also, I'm in the midst of reading his, but before I even share that, one of the things that he said that Neil told him is that the average book, and this is going to blow your mind, the average book sells 200 copies. That's it, the average book.
Darius Mirshahzadeh: I know why.
Justin Donald: So, I can see you sold way more than that.
Darius Mirshahzadeh: Oh, yeah, I know, I sold a ton of that. I probably sold like, 70,000 books now. It's a lot of books, but I did it the old-fashioned way, elbow grease. I went out and just started banging on my network’s doors and got them to buy books, which when I did that, that was pre-sold. I pre-sold a lot of those books, but to your point, you got to leverage your strengths. I didn't have a community, I didn't have a list, I never digital networked, I had literally zero of that, which is the one thing I would tell any good new author that really wants to leverage their book sale is, if you want to do the work to really maximize the impact, you got to have a community to put the work into because without that, it is a heavier lift.
For me, my number one mistake was I didn't have a community beyond me. I have 100 CEOs of my friends and they all bought bulk, they bought a lot of books, and they get them out to their teams, but that doesn't move the needle, if you want to get organic traffic. So, if you want to get that word of mouth type of momentum, you got to have a community to put the book into. So, for me, I'm building that right now which is fun and cool. And I don't know, if I was talking about them like, I'm going to be a sleeper. My book is going to be one of those, where it's just a long ramp up and it's going to sell a ton of books over a long period of time. And I'm like, cool with that.
Justin Donald: Well, I have no doubt because, well, and we could get into all this, now, we can get into it later, but I mean, you've built this incredible coaching practice just out of nowhere which is so cool and you're coaching just high-level executives, you're coaching people on literally reorganizing and recreating the values of their organization and like, just retooling and reframing what people do. And I know this first hand because you're doing this with Front Row Dads and I'm part of that organization, I'm on the board of Front Row International, Front Row Global. And so, I mean, I see this work firsthand and it's incredible what you are doing.
Darius Mirshahzadeh: Thank you. So, my last business I grew from 30 to a thousand employees in three years. It was a nine-figure company and not like a barely nine-figure, like a legit nine-figure company. And it has always been my dream to grow, to hit that 100-million-dollar number and then I hit it and I kept leveling up above it. And this isn't one of those like 100 million, where people buy internet ads and it's 0.1% profit margin, it's a pass throughout. I have friends that own these companies where they’re counting other people's revenue as theirs. This is like a real business. The business now manages $100 billion with mortgages. And I grew up from literally like a puny little company with my partners.
So, I always say I'm like one of the rare CEOs that can take literally out of zero people and grow to a thousand because it takes a different type of CEO at these different levels. And I was just like I had obsessiveness and curiosity about being better at the different levels and I just kept leveling up. And so, now, I feel like I can run a business or help someone run a business, probably up to half a billion dollars in revenue, maybe a little more.
Justin Donald: I think you're underselling yourself because you and I both know, once you have the skill set and half a billion, you can do it at a greater level. So, maybe you haven't, but I wouldn't let that stop you. You have exactly what it takes because I've seen you in action, I know what you can do. And I mean, there's no doubt in my mind that it's just a matter of time until that is going to be your target client, billion plus.
Darius Mirshahzadeh: Yeah. I think once you start playing at that level, I call it multiples of 10. It's how many multiples of 10 can I manage? Because what ends up happening is one manager can generally only manage 10 people consistently without there being breaks in the system. So, a thousand people is just a hundred of tens. So, it's 100 groups of 10. When you start doing that, it's like what the hell is the difference between 100 groups of 10 versus 200 versus 500 groups of 10, it's all kind of the same because the skill set you need to manage 100 groups of 10 is pretty much the same skill set you need to manage 500 groups of 10. That's kind of the way I look at it.
And so, what happens is just people can't get out of their own way for the first three or four groups of 10. Because you got to have an effective manager, my business, we ended up, I had 153 managers at one point.
Justin Donald: Wow. That's massive, Darius.
Darius Mirshahzadeh: Yeah. When you have 153 managers, you get to build systems and infrastructure. So, to your point, I just say 500 million because I'm like, if someone asked me if they're running a billion, could I help them? Depends. I mean, I have clients that are a couple 100 million, I look at their stuff. And I'm like, man, you have a lot of work to do. So, I have a lot of clients right now and their average revenue, like real, real revenue is $68 million. That's my average client.
And I ride shotgun with the CEOs, I go in there and I'm like, I need to get you to nine figures. And I just look at it, like, literally, Justin, I'm like, hmm, if I was CEO, what would I do right now? And I forget that they're even there because a lot of times, CEOs, like, I had one guy and so, that's something made a reference towards he'd be my boss. And I laughed because I think you got it backwards, man.
CEOs are used to that. And I'm like, I'm your coach, like, you're listening to me. And if you're not, it’s cool, we don't work together because I don't care if you get to 100 million, you care if you get to 100 million. So, I mean, I've been there, I've done that. Like, for me, this is like, I do this because I'm really interested in it and it's fun. It's not because I have to do it. And that's it, it's cool, it's liberating to be in that place. And that's a big part of your book, the whole lifestyle investors do it because you want to do it, not because the other stuff’s taken care of for me now.
I've made money. So, the money part, it's a game now for me, and the winnings say that I'm creating value. So, a big part for me is getting in there, ripping open the hood and saying, All right, what's broken? All right, who's the problem here? All right, are we set up to scale and then digging in deep and figuring that stuff out? So, I love it. I mean, I just got off a call right now and what ends up happening at that level, you just have a different set of problems. Like, their big boy problems, like, hey, should I buy 10 more percent interest from my co-partner? And it's, I got to go get an eight-figure loan to go do it. And should I buy this big asset? Or should I acquire this company? Or should I go and get venture capital? Or should I do a licensing deal with a fortune 100 company?
Those are all problems I've actually dealt with, like, those are all things that appeared in my entrepreneurial life. Every story I just said I did, some of it was raising nine figures. You're trying to raise nine figures and should we go public? And should we consider becoming a stack, like, these are all these things that when you start playing at those levels, you do. And when you're playing at the eight-figure level, you're not, because you're not quite big enough yet. So, for me, I like digging in and looking at that. And then what I've done now is where you and I have really connected is I'm like, well, I don't have to be the CEO of the company to apply these skill sets, maybe I want to just be the investor, maybe I want to build a fund and start buying these companies and really help them in a different way.
So, that's my new chapter, I'm playing even with the coaching. I was telling a good friend of mine and said, I'm pretty sure this is going to turn into private equity, like I really love looking at it, I don't want to operate the company. I did that for 20 years and I loved it, I learned a lot, but I think I'm at a new stage.
Justin Donald: Totally. Yeah, it's great having the operating experience because that's why you can do it, you can do. So, it's necessary, it's most likely mandatory. Most people really need that to be able to be in a position to coach and help, but once you've done it, you realize all the responsibility, the weight, the pressure, everything falls on you. And it really is fun when you can switch that around and you can either (a) do what you and I've done a lot of, which is advising and consulting companies, business owners, entrepreneurs, which I think is great because then you get the part of what you like which is solving problems and creating value, but you're not stuck in the day to day, you're purely working on the business, not in the business, which is ultimately the way that you should have been doing it originally when you were running a company, but sometimes you're too busy to even know that that is an option. It's an afterthought. It's like 10 years later, you're like that's what I should have been doing, but I didn't even think that that was something to do back then.
Darius Mirshahzadeh: You know what's funny is I had such an aversion towards the actual doing of work that I was really good at pulling myself out of the business. And this started literally, I mean, my first company I built was number 40 in Inc. 500. I was 28 when we were awarded that. I was 25 when I started the company.
Justin Donald: So, talk a little more about that.
Darius Mirshahzadeh: Yeah. So, I started off as an entrepreneur, like my dad was an entrepreneur, he owned gas stations, and he was kind of a victim of the whole Persian revolution. So, I was born here with my brother, but my mom is American, my dad is Persian. And so, I grew up around an entrepreneur, I grew up around a guy who was in the business operating gas stations, and frankly, he did not enjoy that business. Like he was a really smart guy. And I'll say, gas station owners aren't smart guys, but like, that's a grind of a business.
I worked at a gas station from the age 10 to 18. So, I grew up watching someone be an entrepreneur. And it was just like, that was the norm. My dad did entrepreneurial things, he owned real estate and bought and sold gas stations. And his whole thing was you don't make money selling gas, you make money selling gas stations. So, I remember learning that lesson when I was 16.
So, I was lucky to have that learning at a very young age. What it ended up doing was making me not very employable because I always just looked at things as a business owner, like naturally I would do it because I was brought up in that environment. So, I was 20 years old, when I had my first big business failure at a nightclub business that I had started and failed. It was my first six-figure loss, just got killed, made some really bad strategic decisions and didn't do my homework and lost that business. I'm 22 or 21 pivoting. Well, that's kind of a funny idea but pivoted and pivoted and started a magazine and started another nightclub business and ended up in the mortgage industry as a day job because it paid commission only and I can make a lot of money.
Justin Donald: I love it. Real quick, if you're going to lose money, lose it as early in life as you can. I mean, I love that you lost money at 22, what a great time because you can make that back, you have so much life in front of you, like it's just such an ample learning ground when that's the case. This is so cool. Keep going, I love your story. And by the way, getting into the lending space, I feel like this was maybe one of the defining moments, one of the huge moments in the trajectory of your professional life.
Darius Mirshahzadeh: Yeah, for sure, it was. So, we were in lending from high school, my brother got a job, an after-school job, at a mortgage brokerage, got me that job. So, I worked at a mortgage company in high school. My brother was not a very good student. He’s really a good salesman, though, like, top 0.1%. So, he wasn't a very great athlete growing up and he wasn't a good student because he has like this attention deficit disorder and just wasn't a naturally gifted athlete, that when you're young, even if you're a hard worker, it's not necessarily going to overcome athletic ability when you're like 10.
And we grew up in the suburbs of Orange County which was super competitive for that stuff. So, he kind of got in with the bad crowd, but he got this job at a mortgage company, always a super hard worker and he ended up, he was like a savant, like there was a call center, there's 20, telemarketers, let's say you had to get an average of two interested people per day, the whole group, the whole place would get caught 40, 20 would be him and 20 would be the other 19 people. It was amazing.
And so, he stuck with that. And when I was in college, he was doing that. So, when I got out, it was like, well, I have a degree in Business Economics and Accounting from UC Santa Barbara. I’m like, well, I could get a job working at a big five accounting firm or I could go to sell loans. And my brother was making six figures at the age of 22. So. I was like, well, this is kind of a no-brainer, if you ask me.
So, I went and started working commissioned only, while doing the entrepreneurial stuff. And then, as we started making a lot of money in mortgage, I just followed the money because for me, at that point, I was very, very, very, very, very, very, very, very, very money motivated. Like, I wanted to make a lot of money. That's all I cared about. I was 21, 22, I had never had money for 22 years. My parents did well, but that was their money and it was made crystal clear to us that you got to go earn your own money.
So, I paid my way through college for the last two years. I was broke. And I was like, I want to make money. So, that's all I cared about. And the mortgage is from what I could see was the path of least resistance to get there. So, I did it and then I started working. I got fired from my first job in mortgage, funny enough, because they didn't have a training program. My brother was like the top dog. They called me a college boy and fired me basically, because I was smart, but I just didn't know the business and they didn't really have any systems to train anyone.
So, I ended up leaving that, got into stock trading, got back in a mortgage because it was 9/11 and not a great environment to be a stock trader in and started working at a small mortgage company in San Rafael, California, Marin, California. And I quickly grew that thing from a one-person shop to a 10-person shop and I was doing everything. I was basically building someone else's company for them.
And at one point, I'm like, why am I doing this? Like, I don't get paid anything to build this guy's company for him. He's a nice guy, but he's not like paying me anything. And I'm literally building someone else's company and I'm getting paid commission only. And I said, Well, I don't need to do this, I'll just do this for myself. So, at 25, I left, I started my own shop, me and an assistant, but like I said earlier, I was always like, I don't want to do actual work, I just want to build an awesome company. And I didn't know what that meant then, I just knew it meant like, I'm like Richard Branson and Steve Jobs. And I'm thinking of these like, I literally had these huge aspirations.
Now, I'll say this and you'll appreciate this. When I had my first failure at 22 with the nightclub business, well, before I got back in the mortgage, when I failed, I got fired from my job in that business, I lost a six-figure business, I lost six figures in this business. It wasn't like, literally I lost 100 grand and I tapped out. That happened the same week. And so, I was super depressed and I locked myself in my bedroom and I read every single Robert Kiyosaki book I could get my hands on, Rich Dad, Poor Dad, Cashflow Quadrant, I mean, E-Myth. Any book I get my hands on to read, I read for the next four months.
Justin Donald: That's awesome.
Darius Mirshahzadeh: That was like my cure for my entrepreneurial blues.
Justin Donald: Well, think about it this way, most people, when they get dealt the hand that you got dealt, they fold. And you double down and said, no, I'm just going to read and I'm going to become smarter and I'm going to become better and I'm going to learn from these mistakes, but I'm most certainly not giving up because I have huge aspirations, and I love that you share that. You and I dug into all that. We've talked about this at length, all the Robert Kiyosaki books, those are huge for me, too. I mean, I wouldn't be who I am today without those books and without his influence.
Darius Mirshahzadeh: The Cashflow Quadrant totally changed my life. It was funny as I didn't start applying it until probably till much, much, much later. So, you were smart and applied it much earlier than I did. I really am just now starting to apply the investor mentality. What I did and part of it was, I got on this really crazy entrepreneurial ride, where I started my company after I left, All Bay Mortgage was the name of the company I built and left. I started my own business, Twin Capital Mortgage, but it was just me and an assistant. And I made a bet with my brother.
So, my brother's down in Southern California, mind you at this point, we're 25. He's making 30 grand a month, like killing it. And I was probably making 15 grand a month and to me, which was a lot of money then because like that’s 180,000 bucks a year. And I said, “Hey, why don't you come up to San Francisco, be my business partner?” And he's like, why would I do that? I'm making more money than you are. And I said and it was funny, he was engaged to be married at the time and I didn't like his fiancée.
So, I said, “Hey, I got an idea.” This is like June-ish, July of ‘03. I said, “The month I make more money than you do, you have to break up with your fiancée and you have to move to San Francisco and be my business partner.”
Justin Donald: Wow. Follow order. And he took it, he took the bat?
Darius Mirshahzadeh: Yeah, because he was like on the ropes with his ex-fiancée.
Justin Donald: Okay. All right.
Darius Mirshahzadeh: It was going in the wrong direction. So, he was looking for an out, I think, and I gave him one. So, fast forward, I opened the business, July 5th, something like that, ’03. July, August, September, the business makes $100,000 in revenue, like it came out swinging.
Justin Donald: That feels so good.
Darius Mirshahzadeh: It was awesome.
Justin Donald: After working so hard and then, all of a sudden, you see the fruits to your labor.
Darius Mirshahzadeh: Yeah. So, within a week, he quit his job and moved to San Francisco and became my business partner. And that day was the day I took myself off, I started working on the business and I wasn't working in the business anymore, that day, like literally, I was like, all right, I don't want to be the salesperson. My brother's like a savant for sales. I'm just going to start building the company. And so, a lot of entrepreneurs like you were saying and I work in the business and I was really quick to work. I'm a strategic influencer.
So, for me, it's strategies, like I love being in the strategy brain, I love being in the influence brain. And doing the execution works, I just don't like it, it makes me tired. The other stuff gives me energy. And so, I started working on building the business. And I'll tell you, that business grew like crazy. It grew from 100, I don’t know, 320,000 and for a half a year in 2003 to 2006, we had 8.4 million.
Justin Donald: Wow, incredible growth.
Darius Mirshahzadeh: Yeah, and I didn't know, Justin, I had no idea what I was doing, literally, like trial by fire. And it grew to about 150 employees. And most of my employees were older than me, I was just this young kid who was just getting after it. Now, the mistake I made, which was a great lesson and it was a painful lesson was the business was a subprime mortgage lender. And listen, I was in the company of a lot of great people, like Lehman Brothers and Bear Stearns. And there were a lot of smart people in the room that were in the same bed I was in, but it gave me some perspective around trusting my instincts when things don't feel right.
And so, when I started looking at the type of product we were selling and I remember asking my head a couple of markets, and we went from being a broker to turning into a bank, mortgage bank, maybe a small retail shop, I remember asking, I said, what would happen if stated income loans go away? And mind you, two thirds of my business were state income loans.
Justin Donald: That was real quick. I need to interject real quick because I want you to elaborate on subprime mortgages because I would imagine not all of our listeners are fully aware of what that is. And then, stated income, this is the craziest thing in the world and I know this because I had a stated income loan back in 2005, where basically I got to say how much I made and I didn't have to prove anything. I wrote it down on a piece of paper, got a mortgage. It was so fast. And by the way, I was honest, I wrote down what I made, but I had started my own business and so, there was nothing to prove what I was making, like it just started.
Darius Mirshahzadeh: No documentation, yeah.
Justin Donald: It was unbelievable.
Darius Mirshahzadeh: Yeah, so right now, if you look at the mortgage market, and I have 20 years domain expertise on mortgage and I've done everything from telemarketing as I mentioned, all the way to managing what's the business I left and just exited, now manages $100 billion with the mortgage asset. So, like literally I know, there's probably four people on earth that have this experience and I'm one of them. The other is my brother and two business partners. Very few people have actually done all those things because it's very rare that someone is starting as a telemarketer and working their way all the way to managing assets, but now, if you look at mortgage market, probably 80% of the market is going to be dominated by the agencies, Fannie Mae, Freddie Mac, Ginnie Mae, 20% is going to be 10% to 15%, 20%, it's going to be private securitization, that's going to be basically the private secondary market. Wall Street's buying those loans directly. It's done through the bond market.
If you go back to 2003, 2004, 2005, 2006, that marketplace grew from about 15% market share to, I want to say, 45% or 50% market share, it was a really high market share. And the agencies had to open their credit box. What that meant was, I could go and I say, Hey, Justin, you want to create a mortgage? We could create our own rules for the mortgage. There's not these federal agencies that have their really strict rules around debt to income ratio or loan to value, these mortgage terminologies. So, right now, if you want to do a Fannie or Freddie loan, you can only take on debt that equals about 40% to 43% of your total gross income. That includes taxes, insurance, that also includes your outs, other debts, credit card debt, minimum payments, auto loans, stuff like that, taxes, interest in the mortgage, that could be no more than 43% of your income.
For Ginnie Mae, they'll go up to 56% of your income. That's going to be FHA, VA, and USDA. These are all government sponsored, the United States government taxes, and it's probably 90% of the market now. Rewind all the way to 2006, when I said the thing I just said out loud, it was 50% to 60% of the market. And the other 40% was competing against that, so they had these programs where they wouldn't verify income and stuff, like Fannie Mae, they had a program where they didn't verify your income.
So, there were these loans that were like essentially, they open the door for what was called liar loans, liar, L-I-A-R. And so, on private securitization, you could do what was called a ninja loan, no income, no job, no assets, like literally act just like write on a piece of paper anything I wanted and you're supposed to, like be honest, but no one verified it. So, that opened up Pandora's box and listen, if you ever want to see craziness, go on Wall Street and CMO, CLO, CDOs, they create these crazy, like, basically virtual instruments, derivatives to then go resell so that you can basically place that same one loan what became 50 loans and you get 50 bets on the same loan. And then, they cut it in tranches and then get really tactical, where first loss, second loss, and they kind of assign credit risk to these different tranches in the bond.
And so, what ended up happening, you can watch The Big Short by Michael Lewis, that movie kind of gives you a more interesting entertaining version of what I'm talking about right now. I was a little puny, little mortgage broker, barely a banker who was doing $30 million a month of this business and I got crushed. Literally, my $8.4 million a year business had a run rate of $10 million at that point, went from a million dollars a month of revenue to about $150,000 of revenue, literally overnight.
Justin Donald: Wow. That is intense.
Darius Mirshahzadeh: Like overnight, Justin, as in, it may have gone from $1 million to like $80,000 and I figured a way to get it back to $150. And so, what most people don't realize when they're building their businesses is that your expenses accrue in arrears, I learned that the hard way, which means when I'm building my pipeline, my expenses that hit in September actually happened in July. So, that's fine and dandy, unless your revenue doesn't show up in September the way it's supposed to, but a lot of people are experiencing this with COVID right now.
So, when your revenue drops from a million to $80,000, but you have a million dollars of expenses, which by the way, at that point, I started like my margins were getting eroded. So, I was out like I wasn't making it, I started breaking even for the first time ever. Like literally, I had probably had about $2 million retained earnings in the company that I'd saved up over the years, they went to $200,000 in 60 days.
Justin Donald: Oh, my goodness’ sakes. It should be the most nerve-wracking thing.
Darius Mirshahzadeh: It was a life-changing experience. What got worse though from it was actually not going bankrupt. Going bankrupt would have been God being nice to me, but instead God let me live. And then, I stayed in that puny, they call it the Walking Dead company, I was a walking dead company for almost seven, although eight, although nine. And then, finally, we got pummeled so badly with lawsuits from everything, from our landlord to borrowers, that we ended up shutting the company down in the beginning of 2010. And then, at that point, I was still dealing with legacy issues, but all of ‘10 and ‘11 were me trying to figure out my next deal and I ended up getting into a successful joint venture by ’11 that profited in ’12, but I had five years, where I showed up to work and I cut checks to go to work. It costs me $2 million to go to work between 2007 and 2011.
Justin Donald: It costs you money. Most people show up, they get a paycheck, you showed up with a paycheck to pay.
Darius Mirshahzadeh: Yep. I didn't take a paycheck for five years. It lessened pretty deep scars. And that was probably one of the reasons why I didn't start investing because when I started making money again, I just hoarded cash. I was like, I'm going to stockpile cash. I was like a depressed person with money under my mattress.
Justin Donald: Oh, my goodness.
Darius Mirshahzadeh: Yeah. So, now, I saved a lot. That's the reason I never really invested very much. I was like, I need cash in case I ever have my business melt down again, but what ended up happening was by ‘12, I had a successful exit of a joint venture I did with a company that ended up selling to a publicly traded company. I parlayed that into my next business which was the money source. And I learned a lot about how do you scale a business, I mean, I scaled up and then scaled down and then, my next one I scaled up, but at TMS, we scaled from 30 to a thousand employees in three years. And that was a new experience for me, but I had learned so much by just being down in the dumps for such a long period of time. I mean, what I did is I use that experience. It was a painful experience for five years, long time. Like, five years, a lot can happen or not happen. And for me, it was just getting the crap beat out of me for five years straight.
Justin Donald: Yeah, I can't believe you weathered that five years. You have to be like the 0.0001%, it's probably even more lopsided. I mean, that is unbelievable that you could weather it for five years basically paying to have a job that I know you worked a lot of hours in. So, it's not like you showed up and clocked in and clocked out and had like a 40-hour-a-week job, I know it was way crazier than that.
Darius Mirshahzadeh: No, I was flying all over the country trying to build a business and it wasn't working. I always hear people go, I wouldn't do it any different. And when people ask me, I'm like, I would never do that to myself again. Ever. I don't care what I learned from it. There's better ways of learning, like that experience, it was a really emotional and very traumatizing experience. And it took me a long time to get over it. Like, when you do a business like that, I learned a lot about that, which was you really have to be cognizant of the value you're creating in the world. And what I learned, I was just young and naive, I wasn't trying to do bad loans and the subprime lending, like I said, I was in good company, you had tons of…
Justin Donald: That was normal. It's not like people, like you could look at it today, and there's a negative connotation and there's history. There wasn't a history then, this is what everyone did.
Darius Mirshahzadeh: Yeah, it was unprecedented. And I mean, you know it is because almost every major bank in the United States went down. So, why is that? Because they were all in on it, everyone. If you wanted to be in real estate or real estate finance, you were a part of that machine at that time and if anyone that says different is lying. So, I again, was young and naive, I wasn't too focused on the product. I was like, Oh, yeah, this is just normal. And it totally was.
Justin Donald: Why do you even question it, anyway? You have no reason to question it. I mean, there's so many examples of that we could use on this, where there's no reason that you're going to buck the system because you have no idea that there's anything wrong with the system. Not yet.
Darius Mirshahzadeh: Yeah, it was just one of those things, where ignorance was bliss, but I got really hardcore about core values coming out of that because I felt like I got punished for doing the opposite. I was selling a product that had issues. And I didn't have a mindfulness around stakeholder value, I didn't have a mindfulness around creating value in the world. I felt like we were creating value in the world, but I was naïve and I was young. And what came out of that was, you really do need to be aware of stakeholders, you do really need to be aware of what value you’re putting into the world. And if something doesn't feel right, then don't just do it.
And I was already stuck in the machine. I had a $10 million business. And what was I going to do? Oh, let's just shut it down, I don't like the products we’re selling. Like, by the time I recognized it, it was too late. And I paid the price hard. I got sued by borrowers, like corporate veil doesn't mean anything. I got personally sued. I shut the company down in 2010, I was being personally sued till 2013. Every single person who took a loan they didn't like, named me in a lawsuit. And I didn't have anything, there wasn't anything to go after, but yeah, a lot of attorneys don't care, they'll see what they can get.
And so, it really turned me off. And I said, I'll never put myself in that position again. And so, I ended up getting really interested in how do you build scale? And how do you build a core value driven organization, because I saw that business didn't? There were issues around the values in the business, like, lots of businesses have value issues, not necessarily their bad values, but there was a misalignment around values. We weren't all doing the same thing the same way, coming from the same place, values wise. And so, for me, I got really obsessed with core values right around this time this thing happened and I think it really stung me hard because I was dealing with the repercussions of being in the wrong business and making some choices around product, again, following the herd mentality and not saying, well, okay, maybe I should question whether we're proving income or not. I didn't even question it, nor did many people, but I paid the price for it in a pretty dear way.
And I'll go into work for five years, half a decade, day in and day out and not reaping the rewards of the benefits and being punished by lawsuits and just a bunch of problems that leaves an indelible mark on you as a human being. And I changed, I said I'll never ever have integrity be an issue on my business again. I'll never ever question a product we're selling. I'll never have someone question it five years later. By the way, no one questions that when you're doing it, that question in retrospect. And then, you're like, what do you mean? That was fine when we did it. And they're like, that's bad now.
Justin Donald: And these people knew the whole time.
Darius Mirshahzadeh: Yeah.
Justin Donald: And what's great though is you are able to parlay all this horrible experience. And by the way, we can call it horrible, but at the same time, we can also call it amazing because it allowed you to pivot, it allowed you to shift, it allowed you to create and scale a company that was based on core values, it allowed you to have a massive exit which is exciting. In fact, this is a great segue into the next topic, I won't give away numbers, but you and I, we talk a ton about investing. Now, we're part of the same investing group which is really fun. So, I know some of these details. I know you had a killer exit, I know you don't have to work, I know that you have a killer lifestyle and you could have an even better one if you wanted without doing any work.
So, you helped build and scale this company, you exited. You are set now for life, but now, instead of just kicking your feet up and going to the tropics and doing piña coladas every day, you're not doing that, you decided, Hey, why don't I write a book on all these things that I've done and let me help entrepreneurs do great things that I have learned? They can learn vicariously through all my mistakes. And I'd love to know why you decided to do that when you could take the easy road.
Darius Mirshahzadeh: So, I started writing the book, actually, before I even thought of exiting. And then, when I exited, that was where I kind of leaned into because it was something that was important for me and it was all around how I leveraged this tool of core values to create high-growth scale. I call it the invisible scale in my book and it's my go-to tool. It's like, if I'm a carpenter, that's my hammer because I believe core values are the language of accountability. And for me, how do you build the most high-level accountability is by creating high-utility core values that can be viral in the organization and then it becomes a tool for strategy and execution.
And for me, I have a very, like, almost engineering mindset around it, how do I take this thing and then weave it around everything we do to create more productivity or engagement, more profit, more impact, a better place to work, and those all become like flywheel that creates more value and gets faster. And so, when I exited, I got asked by someone if they'd help a friend of theirs scale their business. And I said, I'm not interested in that. I told myself, I was going to take all 2020 off.
And then COVID hit, I got focused on the book. And then, when the book is launched, I got asked to do this project. And I said, ah, taking the rest of your off, man, like, I wasn't even planning on working at all this year. I was supposed to be in Spain, I was going to take my family and move to Spain for a year.
Justin Donald: I remember you telling me that.
Darius Mirshahzadeh: Yeah, that was what was supposed to happen. I should be in Spain, literally right now, but with COVID, that got derailed. And that's not happening anymore.
Justin Donald: I think your clients are really fired up that that didn't happen because you've had some raving fans.
Darius Mirshahzadeh: It's true. I think they're very stoked I'm not drinking sangria right now, but yeah, so I got in there, I started working with these guys, they have eight-figure company and they're really trying to scale, like, their goal is to basically 10 extra business in the next three years which is totally doable for them, but it was getting my hands dirty. And it was coming in from a different perspective. And I started with them in October, but I say, hey, September, send me a bunch of stuff I want to start digging in.
And again, having this perspective, though, I talked about before, which is I go and I'm like, if I was the CEO, what would I do? I don't care what they say, I'm like, I need information from you, but like, literally, I've got blinders on and then, I come up with a plan and we start working on it.
Justin Donald: And you have no bias either. That's what's nice. You can walk in and it's not like you're saying, Well, we've always done it this way. So, let's just keep doing it this way. In fact, we should change something else. You actually come in and you say, Well, let me just look at everything, every option on the table, it's a total clean slate.
Darius Mirshahzadeh: Well, yeah, and there's all these best practices I learned over the years, that it doesn't matter what kind of business you are. So, one of my clients is literally a cannabis company in California, another one is a BPO in India, another one is a poultry company in Canada and with them, it's more of a specialized project, but a lot of them, they are in the mortgage space because that's where I came from, but they're all over the place. And one of them is a marketing education company in Florida. So, I don't care. Every company has the same issues, strategy, people, process, cash, accountability, it's all the same.
And most businesses, they know their business. I'm not going to tell them how to run their business better from the perspective of domain expertise. How I'm going to look at it and say, are you set up to scale quickly, efficiently and profitably, regardless of the product? Product doesn't matter. Product is a widget. Widget is a widget. I could care less about widgets, though, that's what got me into trouble with subprime because I just saw it as a widget. I didn't really dig into what the product was, but with a mortgage, I used to tell my staff, I'm like, I don't care about the product. I'm happy we put people in homes, but it's just a widget. What I care about is building a high-growth, high-impact, highly scalable business, and I was the expert on scale.
So, when I go into my clients, I just say about the CEO, how to scale this business and it's always the same. All right, let's look, do you have this? Nope. You have this? Yep. You have that? No. You have this? Yep. And I have a 50-question checklist, I go through it. And it's out of a score of 100, I think, my highest client scores 50 at this point out of 100. The lowest is 19. And I'm like, All right, I'll get you to 90. It'll take me time. And they're all these best practices for running a company. It has nothing to do with the product or the industry. It doesn't matter, it's human beings. You want people to show up, do their job properly, care about the business, watch dollars and cents, and execute on the strategy and make sure there is a strategy. It's the same.
Justin Donald: Well, I can tell you, so here's the deal, I've got your book. In fact, let me reach behind me. I have your book on my bookshelf. And you know I'm an avid reader, I read a ton of books. In fact, it's really weird when you write a book because you end up reading less books than what you're used to. So, this last season of writing was a lower consumption year of books. And this year, with the book launch and everything this month, I've only read three books which is very small for me.
And so, I'm only part of the way through your book, I have not finished your book, but it is great, it is riveting, it is interesting. And I'm really excited for this to be, I don't know if I'm going to have it done by this month, this will probably get done first or second week in February, but I'm just thrilled with what you've been able to create and then, that you can put that into practice with people that I know. I mean, I know the people that are utilizing what you're doing.
Darius Mirshahzadeh: Yeah, it's a new technology. My book is, everyone misunderstands values and I'm like, it unlocks maximum value in your business, if you can operationalize values in a way that are sticky and viral and authentic to the soul of the company and so, Core Value Equation does that. And when I look at any business, like if you really want to level up, like you got to do it. So, I appreciate all your kind words and having me here today. And yeah, man, I'm glad that we've met over books.
Justin Donald: Yeah, no kidding. This is awesome. And it's so funny because I originally thought on our episode today, we get into all types of investing because you and I have dissected some deals, we've gone back and forth on some stuff. I've liked some stuff, you haven't. You've liked some stuff, I haven't. We've liked funniest stuff together, but it's always fun. I like having smart people that think differently that can say, Hey, did you ever consider this? It just makes all of us smarter and better investors.
And so, I'm so appreciative to have you in my life and in my world, and someone that I can do life with, families and us, personally, but then also be able to do investments together. And I think that's so cool. It's so unique.
Darius Mirshahzadeh: Yeah. I know we're still talking about investing. And we talked about my trauma, my first business that blew up, but yes, to learn.
Justin Donald: But it’s great though, it worked out perfect because this is what set the stage and now, you're at a great point where you are investing. And you said before, you didn't have the ability to do it then, there was so much going on that you were just pumping everything into your business. And by the way, if your business goes really well, then that's a great strategy. Most of the time, businesses don't go really well. Less than 10% of the time, a business makes it beyond what? Five or 10 years. So, most of the time, people invest all the profits back into their business, it doesn't go well. So, where can our listeners find you because I have enjoyed having you on and I know people have loved listening to what you've been saying?
Darius Mirshahzadeh: Yeah, therealdarius.com is kind of my hub and you could go on there and connect with me on all the social networks, social media stuff. So, yeah, therealdarius.com, books on Amazon, where all major books are sold. And yeah, those are the places to find me and see what I'm up to. I'm doing The Greatness Machine, which you've been a part of and which is my show, and we're interviewing some cool people like Justin, but yeah, The Real Darius is where everything happens. So, go there, check it out, sign up for my mailing list, and I promise not to spam, I only get to send value. That's what I'm all about.
Justin Donald: I love it. Well, you've added tremendous value here today. Thank you for your wisdom. Thank you for your friendship. And to all of our listeners, I encourage you to take one step towards financial freedom. Take action in some way, shape, or form to live life intentionally by design, not by default.
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