As entrepreneurs, its not always about the end game but rather the journey we all must navigate through.
While there will be ups and downs, we must stay on course and ultimately believe in ourselves and our vision enough to see it come to life. Steve Gallion faced the same obstacles after reaching his first million at age 23 before being forced to work for Target after investing most of his capital into his business. His gamble paid off and after four years of long hard hours, Steve’s business got acquired for a large sum money allowing him to retire if he wanted. Being a typical entrepreneur, Steve is already onto the next big idea.
Tell us a little bit about your background and the start of your entrepreneurial journey…
I was born and raised in Redlands, California. I grew up in an upper middle class home with a father who was a dentist and a mother who was a nurse practitioner. We were really always middle class until my father became a dentist at the age of 41. I think it was maybe three or four years later when they began to do better financially. I was an average student who played tennis, skateboarded, snowboarded, and had a natural knack for programming and using computers.
I truly believe that entrepreneurship has to do with a genetic coding within you. I think that you either have it or you don’t, it cannot be taught! For the group of us that do have it, we also have a curse that cannot be cured or remedied which often has an early onset in life.
What type of early businesses were you involved in?
Early memories of organizing neighborhood children to perform ridiculous circus acts for neighbors on rollerblades and unicycles come to mind at the age of six. After convincing other children it was fun I was off to sell tickets door to door throughout the neighborhood to my spectacular show for the price of 1 penny a ticket.
The dollar value at this point was not really a relevant point, however, looking back I learned from an early age how to leverage relationships and utilize other people’s talent to make myself money. This skill is something that I still utilize today and was reinforced by a very sharp man I know who said “Pay attention… there are only two things in this life that will truly make you money; money and other people”.
Flash forward six years to 8th grade. I had taken a keen liking to technology and utilizing technology to my financial benefit. At this time, cellular phones were not a prominent device for an 8th grader to carry so we were stuck to carrying change and using payphones. Utilizing articles I read on the internet and soldering skills, I taught myself how to build red and blue boxes which allowed me to hack payphones for personal gain and make free phone calls. This lasted a couple years until the payphone companies caught on changed the way the payphones operated preventing the use of such items.
Now I enter high school. This is where things really reached a new level. Over the course of freshman year and all the way till my junior year I utilized the internet to make money again.
I hosted servers with software and music which required users to gain access by decoding passwords that were changed every week and based off a random combination of letters that had to be found by clicking on 10 adult website banners.
I also utilized one time pay credit card numbers (this was something created to protect you online, like a prepaid credit card) to open countless Columbian accounts to order thousands of DVDs, 10 at a time for 1 penny; all of which was sold online.
Finally, I figured out that a major website utilizing a fake “coin” currency, where you accumulate them by clicking on banner ads, had a security flaw within their system which I was able to exploit giving me unlimited coins, which I used to buy tons of electronics.
A lot of these ideas were ‘out of the box’ and not necessarily long term. What was the outcome and what did you learn from it all?
All of these things came to a screeching halt when my ISP (I registered my parents house as a business and forced them to run high speed broadband to the house while everyone else had dial up) decided to involve federal law enforcement, which ultimately lead to the end of my internet businesses. Luckily at this early age, such actions and the fact I was a minor, lead to very minor penalties.
Thinking back to my skills of leveraging relationships I teamed up with a classmate who was much smarter than I was to form a legitimate hosting company for websites, and not pirated music and software. We ran this company for about 2 years from the age of 14 to 16 at which point I sold the company to a small competitor. The sales price was very low and I was obviously taken advantage of by the buyer looking back.
However, it allowed me to go out and buy my first car, which was a brand new BMW 3 series. This car was crashed 3 weeks later. The important thing here was I learned life lessons about selling a company and spending all the money I had on a car. Both things which come in handy later in my life.
All things quite impressive considering your age. Fast forward to high school and college, what were you doing and where were at in life?
Over the course of the next few years from age 16 through 19 my life was uneventful. I was in community college with no direction in life. I had started several new companies which all failed.These companies ranged from auto detailing companies, to ecommerce drop ship sites to real estate ventures. The issue with all these companies was I did not have the experience nor did I apply the proper time commitment to make them successful. At this time in my life I am confident I could make any of those companies work had I tried them again; as a matter of fact I still have a ecommerce presence that does fairly well. At age 19, I got interested in trading stocks. I started trading for income at that time and did so for about a year. The big problem with day trading was I fell into the common saying statistic: “99% of day traders lose 99% of their money 99% of the time”. Once again I was back to square one.
I ventured into the commodity trading world for a bit which proved to be extremely profitable for me between the ages of 20 and 22. It allowed me to make a high 6 figure income, have multiple cars, a new house and live a fairly lavish lifestyle. But just like all good things, this came to an end right around the time I was graduating from college (UC Riverside).
However, I had already started a new company that was a tech based company with a focus on encryption and user rights management, which ended up failing as well. I would not say it was a complete failure because it did allow me to meet my current business partner; he was not part of that company however he was friends with one of my partners from that company. Working with business partners is a large challenge and not for everyone. I learned the hard way that you need to find the right partner as this person becomes a sort of professional spouse; you have combined assets, finances, liabilities, etc, and you need to be able to trust that person and rely on them to execute on tasks that require a skillset that you may not possess. In my opinion, if you decide to take on a partner make sure they are opposite of you or have different capabilities than you. Otherwise I have found the partnerships do not work very well (this is different for everyone).
From the day I met my current business partner, we built and sold a business in 4 weeks’ time and at the age of 23 I made my first million dollars. The business was involved in private and government contracting.
Now with a small cushion of cash and no direction it took about 2 years to get to the next big thing in my career. In the mean time, I took a job working for Target. I worked in corporate and enjoyed the experience however I was not cut out to take direction from other people and corporate America would only last so long.
There’s a lot to talk about in that short time frame. Why did your other ventures fail when you found success earlier on?
Protecht, this was a contract manufacturing firm that I started specifically to build a protective sleeve product for remote controllers by Sonos. The reason this failed is in my early career, is because I didn’t realize how crucial it was to have diversified revenue verticals and focused on one product with zero regard to the fact that the remotes would soon be replaced by smart phones. Twice during the time we actively ran this company we were asked by two national big box retailers to contract manufactur some select products for them and we declined to take the business due to the complexity of the deals. Had we taken those deals I do think this company would have actually turned a profit (at least for a year or two) The website is still up and can be seen at ptecht.com.
Lesson here: “Don’t put all your eggs in one basket, product and service diversity is key to a successful startup.” Additionally, if you are in any business and are offered to be paid for a job that you are able to accomplish but does not fit your current business model, take the work. You never know how your company might evolve or progress from such opportunities.
Another company was an encryption company that I had a minority partnership share in. The company was/is called MSR Security. MSR was a sister company to MSK Security. Both companies built encryption based security platforms similar to RSA Secure ID technology only with our own encryption algorithm. The company could have been a success as the encryption technology was good, however, we had one fatal flaw; the alternative, which is a standard encryption protocol called AES is free and although it may be inferior in our minds, it still takes millions of years to crack the highest level of security; I apologize to any encryption professionals out there that may challenge that statement now, as it was years ago and technology has probably made attacks on those algorithms more likely and probable in today’s date.
Lesson here: “It’s very hard to compete against a free product with a ‘me too’ product if your product is not free unless you have a serious advantage to utilizing your product or service” Additionally, the partnership here was extremely weak and we had overall lack of leadership. Other partners included people who made it big during the mortgage boom but really had bad overall business experience and poor management skills. The MSK security company website is probably still up too but I am not part of that company.
Tell us about your first million and how you were able to achieve that so quickly?
Sometimes in business we find little opportunistic pockets to make a large amount of profit in a short amount of time. Within my group of business associates we have nicknamed this a “well” opportunity. This term was derived by the saying: “the well runs dry”. Any opportunist knows that the well always runs dry but when the well is full, DRINK!
Based on some relationships my business partner and I had we were offered a job at a major healthcare organization doing the removal of unpermitted storage tanks directly beneath a hospital. We explored the opportunity and found the same problem with a few different organizations including other hospitals and hotels. So we created a company specifically to bid on these jobs, licensed it, insured it, won the bids then sold the company to a competitor who was really more capable of completing the actual work. Not including the time we spent licensing and insuring the company, we were in and out in 4 weeks. It was a great feeling.
How do you go from a million dollars in the bank to working at Target?
I had to be doing something while I was building Waste Stream Solutions. However, this job with Target was not really about the money as much as it was about the experience and management training. If there is one thing I took away from there it was how to manage people and employees.
There was a time where my direct team was 300 people under me and learning how to deal with 300 people and lead 300 people who are all older than you (some by 30 years) is a very difficult task to do. Additionally, at this point in my life it was a great humbling experience.
Experiencing corporate America, having a boss, learning corporate management skills as well as knowing that if I was in a Target store and walked by a customer I would still have on red and khaki and still ask customers if there was anything I could do to help them. This culture has stuck with me and still exists within my companies today. If anyone is tired of their job at target in management and I have an open position at one of my companies I would hire them over the MBA from Harvard. That’s how much I like their management training.
Finally, after working at Target and simultaneously working on my new project, Waste Stream Solutions, which was a healthcare waste disposal company I dropped Target to go fulltime with Waste Stream Solutions. For a period of 8 months I worked at both Target from 2:30 AM till 1PM and at Waste Stream from 2PM till 8PM. The 8 months I did of this almost killed me but made me stronger in the long run.
What is Waste Stream Solutions. Why didn’t you just work on it fulltime instead of working for Target?
I used all the capital I had to start Waste Stream Solutions, which took years to get going but I ended up back at square one financially. I had to sell all my cars, lost my house to a short sale, and moved in with my fiancé’s mom for a period of time.
But just like all things, if you work hard at something and see the vision you can achieve whatever you put your mind to. When it came to the decision to stop paying my house payment it was because I could either pay my mortgage or the lease payment on my office space. At the end of the day your house is not going to make you money (at least not in the short term when it is 50% upside down). So I focused on the business.
I didn’t have enough work to make Waste Stream Solutions a full time job yet. Waste Stream Solutions was a healthcare waste disposal company. We owned and operated treatment facilities and transfer stations to pick up, transfer and treat medical waste (needles, red bag biohazard waste, amputated body parts, etc). Due to the nature of the business there is a tremendous amount of regulation and permitting that is required which creates a large barrier to entry for the business.
Many of the permitting processes were “hurry up and wait” type scenarios where we file for a permit and had to wait 6-12 months to have the permit issued. Although we were technically in business 3.5 years we actually started the permitting process about 2 years prior to our launch.
Three and a half years later I grew that company with the help of my business partner to become one of the largest healthcare waste companies on the west coast and within the top 10 independents in the country. I ended up selling the company for an amount large enough to not work again if I wanted but not large enough to retire and maintain the lifestyle I really wanted to live.
I told myself I would take three months off but four days into that thought process I was planning my next business, MedTrainer, which is scheduled to launch on July 1st 2014.
Tell us the feeling of getting acquired and how that impacts your life.
Although deal details are ones I will not disclose it is public information that Waste Stream Solutions was acquired by Stericycle in 2nd quarter of 2013. The feeling of success was great as it was the largest sale I had done to date, however, it was quickly diminished when one day you are on vacation laying on the beach drinking a beer and think “Holy Shit! I have greatly reduced my cash flow.” Cash flow is one of the most important things you can possibly have. It gives you security, marketability to banks, and potentials to do your own acquisitions. Other businesses I still currently have a stake in include a network of ecommerce websites which still provided some cash flow but nothing like I was used to.
At the end of the day I am happy with the decision to sell the company and would do it again in a heartbeat. You never know what the economic situation of any industry will be in the next few years and sometimes you need to make decisions to take your money and run. Even a squirrel knows to gather nuts BEFORE winter!
What is MedTrainer and how will that revolutionize the industry?
MedTrainer is my latest venture. MedTrainer is a cloud based learning management system for healthcare. This company is new and is in beta and our hard launch date is July 1st 2014. I have been working on this project for the past 2 years even prior to the sale of Waste Stream Solutions. I am very excited about it and think it has the potential to be a 9 figure sale someday or possibly even take to an IPO.
As a leader of people and ultimately of your own companies, what advice do you have for leadership as an entrepreneur?
The best thing I learned from Target was how to manage and work WITH people. Your employees need to respect you and they need to also understand that if they don’t do their job they will be let go. Show people you can do their job, show them you’re not afraid to do their job and they will respect you more.
I remember when I would attempt to earn the respect of a team at a Target store it was very important to jump in and show them you’re not afraid to work. I would unload trucks, stock shelves, do cashier duty, and wear red and khaki. I am not too good to help you find what you’re looking for and I am not too good to stock the freezer isle (if anyone reading this works at Target they will get that joke).
Respect yourself, respect your team, and don’t hide behind your computer or office desk. Try to keep people motivated with team building and go above and beyond. Buying two beers at Dave and Busters is bullshit and you are a bad company owner if that’s all you do for your people. You CANNOT show up to work with your new $150,000 car or $50,000 watch and expect them to respect you when holidays come and you give $100 bonuses.
Employees 1st, customers 2nd, and management 3rd. Make your employees happy and get their back at all costs. Other companies are out there waiting to steal them so make them happy enough to never want to leave. Your competitors are out there, they are hungry and they will poach employees and clients, which directly takes food off your plate! Don’t make that an easy task.
You went from opportunity to the next very quickly it seems. How do you identify good opportunities?
Due to the nature of what I do for a living I look for the following:
1. The product or service is currently being offered and is successful. Without competition it is a gloomy road that usually ends poorly. Just because someone else is doing it doesn’t mean you can’t do it different, better or both.
2. I plan an exit. All companies I look to build, I also look to sell. The company MUST have an acquisition potential. I am not looking to build and keep anything, just looking for large exits.
3. The multiplier for acquisition must be proven to be large. I will let the manufacturing industry keep their 2.5 X EBITA. I want 10 X Revenue!!
4. I want MONEY, not employees. Just because you have 200 employees doesn’t mean anything to me. That’s 200 mouths to feed. If I can make the same or more with less people that’s what I want so I look towards companies that can be heavily outsourced.
5. Finally, I don’t do companies that will require so much time at the office that it hurts my home life or eliminates me from traveling. Having a sound mind and good home life can make you RICH and not in a bullshit metaphorical sort of way. If you have problems at home it will affect your performance. All that “I’ll sleep when I die” and “I go to bed later than you and wake up earlier than you because I work so much” is for people who get paid overtime and need extra hours.
Give me a good idea, lucrative marketplace, and the right people and I will make a million dollar company using only 40 hours a week or less. DONT BELIEVE THE HYPE, with the right drive, focus and passion almost any real entrepreneur can turn an idea into a profitable business.” I am NOT saying there are not times when you may have to work more than 40 hours but making it a point to stay late at the office while focusing on busy work and not what’s important will not get you there any faster.
When do you know to give up on an idea or business after it doesn’t get traction?
When you feel like you made a bad decision trust your gut you probably did. Cut losses early and double down. Similar to chasing your bet in roulette, I try to double my investment on the next project to double speed / results. I start with 3-4 companies and drill it down to 1 over the course of 6 months.
Don’t get emotionally committed to anything. Sometimes a loser is a loser and you need to let it go. If you take on partners or are on the funding side of a business make sure you have control and final veto rights because you may need to tell your partner his idea is not Facebook and never will be in order to protect your investment. Additionally, if revenues are not meeting your expectation, change your model. If the change doesn’t work, close the doors. Don’t put too much good money after bad.
What are specific areas of businesses you focus on to scale quickly?
In my business everything is about SPEED. We have to figure out the fastest way to grow to the revenue because we need to sell. In order to scale, make sure that you are reinvesting into your company. Marketing drives growth. Make sure you don’t skimp on the marketing efforts and dollars. Make outside marketing companies WORK for their money so they only get paid off results not off of promises.
As you scale, everything is negotiable so never pay list price for anything. There is always something out there that is similar and cheaper with hungrier owners who WANT your business. Don’t set your company operations up like IBM when you’re NOT FUCKING IBM. You scale when you have money and put in money only when you prove your model.
For example, if you put $10,000 a month into magazine ads and $10,000 into email campaigns and your return is better in magazine ads, pull money from email budget and put into magazine ads. Go with what works not what the world tells you is going to work. People tend to think “Oh I have to have everything on social media and do SEO and drive traffic to my website.” This is true but not for everything.
For instance, you are not likely to get a major hospital system as a client that found you on Twitter. It sounds good in theory but is very difficult to make happen. Little blue tweeting birds and apps ending with “gram” do not and cannot replace meeting a decision maker and shaking his hand.
You’ve obviously been at the very top then to the very bottom and now back on top. Tell us about the roller coaster ride you’ve been through on your journey…
Throughout all of this time I had major ups and major down. People like to see flash and hear success stories but it is not as easy people think. Along the way I had enough success to maintain a good lifestyle the majority of the time. I have owned watches worth more than some people’s cars and cars worth more than some people’s houses. For many people, it is hard to have exposure to that lifestyle and lose it then rebound back. I think many people have struggles during their business that their outside appearance does not reveal.
There was a time when I had to put all my reserves into a piece of equipment and had less than $50,000 in the bank, but simultaneously had a Yellow Lamborghini Murcielago Roadster, Range Rover, BMW 7 Series, and Blue Lamborghini Gallardo and would pay for my dinners with my American Express Black Card. Little did anyone other than my wife know we were on very thin ice and risked everything on the new piece of equipment for the business. Luckily it paid off.
Success for me means being able to live life at your own pace and experience things from a different point of view. Success creates safety, confidence, flexibility and often eliminates fear and worry. It is much easier to have children when you know you can send them to good schools and afford to give them opportunities you may not have had or to not have to worry about a mortgage payment because you don’t have one. These things are derived from money but the impact that they create on your life and your family’s lives cannot be measured by the pure costs of items you purchase; you must look at the opportunities and freedoms that are available in order to truly appreciate what you have done. My purpose for success is to ensure the lifestyle of my family and make sure my children have the ability to do what they want in their life without being enslaved to the system or prisoner to a paycheck.
If my daughter wants to be an artist or pursue a career as a teacher I want her to do those things that she is passionate about and not worry how she will be able to afford a home in a good neighborhood, a safe car, further education or have to be dependent on another person. That is what’s important to me.
More immediately success has allowed for me to provide things that make me feel good and create a layer of safety for my family. For example it is nice to know if you are car shopping for a safe car it doesn’t matter if the car is expensive because you can afford it. It sounds bad to say but if my family is going to get into a car accident I want them in a Range Rover, not a Toyota RAV-4 and success has allowed me to do that. I do know many people shake their heads at that statement but I find it very true, don’t you want the best for your family? Don’t you want to feel good about the fact they are safe? I think we all do…
At the end of the day, just because you end up on the bottom does not mean you need to stay there. Most wealthy people I know have been on both sides of the fence. Put on a suit, feel good about who you are, get into the gym, motivate yourself, start over and get back to the top.
We know your a car guy and a Lamborghini guy at heart. Tell us about your line up and what’s in the works…
I think it is very common and natural that most men develop a love for cars at a young age. Who didn’t want a Lamborghini as a kid? My first Lamborghini was a 2004 Gallardo that I bought for $75k with 30k miles on it. I loved that car and it really meant a lot to me because it was like crossing a goal off my list (even though it was used and old; I still loved it). I have since had quite a few Lamborghini’s and currently I have a Lamborghini Gallardo, a Bentley Continental GT, a Maserati Quatroporte, a Ducati 848, A Range Rover and have a Lamborghini Huracan and New Range Rover arriving before end of the year that are on order.
I love the dealers that I get cars from and have made a lot of good friends from the dealers. Desert European in Palm Desert and Lamborghini of Newport Beach have been amazing to me and I greatly respect the people at each dealer. As I am writing this interview I am currently in Palm Springs for a weekend away with my wife and Desert Euro was nice enough to let me have a Rolls Royce Wraith for the weekend. This is a great example of how they can grow their business too. It costs them nothing to let someone like me have a demo car for a bit but will probably lead to the next few car purchases from them. Great customer service does not go unrecognized and I only hope to keep providing it to my clients in my own businesses for many years to come.