#144: Grant Cardone & Gary Brecka Fallout // How to Build Better Business Partnerships // Next Level Pros

Speaker 1 Grant Cardone, Gary Brecca fighting like a couple schoolgirls that didn't get their date to the prom.

Speaker 1 If you haven't been paying attention lately, these guys have been airing all their dirty laundry on social media of how terrible their partnership has ended.

Speaker 1 We're talking lawsuits and all kinds of craziness. In this episode, we're going to dive deep into how you make a partnership work so you don't end up like these two crazy cats.

Speaker 1 Oh, I didn't know this shit.

Speaker 1 So dude, check us out. A hundred million dollar defamation lawsuit was filed by Breca and his wife, Sage, against Grant Cardone.
I guess, dude, this is crazy.

Speaker 1 So his wife, Elena, she shared on to her 688,000 Instagram followers a video of Breca with Sean Diddy Combs.

Speaker 1 Bad timing. Bad timing.
So with Diddy, I guess he was a prior 10x health client. Okay.
But this is crazy. And then in response, Grant filed over a hundred million dollar claim.

Speaker 1 And so now they're like in mediation. This is crazy.
So, Grant on March 18th said, Gary Brecca exposed. This is on his Twitter account or his ex account.

Speaker 1 I was hoping to keep this private, but Gary Brecca has gone from podcast to podcast, crime victim.

Speaker 1 The public will discover fraud, deceit, misappropriation of company resources, manipulation of family members, psychopathic behavior, and tens of millions in hard money loans to fund an excessive lifestyle of cars, plane travel, and houses.

Speaker 1 A story of a guy who went from foreclosures and bankruptcies to having too much too fast.

Speaker 1 So this is pretty nasty.

Speaker 1 Yeah, it is. Pretty nasty.
So we're talking about two guys that like were in the spotlight of the media, right? 10x health.

Speaker 1 In fact, I remember when it first came out, I was like, wait, Grant Cardone is getting into health. Do you remember that? Yeah, yeah, yeah, yeah.
Yeah. So Gary Brecca, obviously well known.

Speaker 1 He's been on podcasts, kind of like the guy when it comes to ice baths and all these different things, had partnered up with Gary or with Grant to form, to really leverage the 10x brand and be able to go and take this thing.

Speaker 1 Now, I think there's like a few lessons to be learned here about partnerships. One

Speaker 1 is proper expectation management up front, right? Like, I mean,

Speaker 1 I think, you know, everybody that's watching the podcast right now, I want you to do a thing. This is a principle that we teach.
We call it the second principle of leadership.

Speaker 1 And what I want you to do is I want to take a finger above your head and I want you to go in clockwise. Do it with me, Daryl.
Come on. We're going to be clockwise above your head.

Speaker 1 And then what you're going to do is slowly bring it down below. Don't change the direction.
Now, which direction is going? Counterclockwise. Counterclockwise.
Do it again. Clockwise.
Counterclockwise.

Speaker 1 So what changed, Daryl? Perspective. So it's interesting in a situation like this, right?

Speaker 1 Is that

Speaker 1 a lot of people are like trying to team up? Like who's right, who's wrong? Yes. Right.
Like, was Gary right? Was Grant right? Frankly, there's a good chance they're both right.

Speaker 1 They're both looking at the same exact situation saying, no, it's clockwise. No, it's counterclockwise.
And so it's really hard

Speaker 1 to not make a quick judgment of like who's the honest one.

Speaker 2 Right.

Speaker 2 I think what's tough too is like when your business transforms or changes a lot, which theirs did, right? It went from like concepts, great brand to like, boom. Right.

Speaker 2 You know, Gary's everywhere, Grant's talking about it. All of a sudden, the partnership has to change too.
Right. And I think they probably just had expectations that were never changed.

Speaker 2 And so now they're just completely misaligned. 100%.

Speaker 1 And so I only bring up like the respect different perspective thing was like. When you look at a story like this, it's really quick to like make judgments, like someone's bad, someone's good.

Speaker 1 But I think the most important thing that we can take from this is like, how do we avoid partnerships that ever get to this point? Right.

Speaker 1 And actually, you know, me and you have been able to work on and off for the last almost 20 years. Right.
Like we're, we're now going on to our 20th year of being in business together or on and off.

Speaker 1 And we've had a couple divorces.

Speaker 2 We've worked about 17 of the 20 years.

Speaker 1 And so like, I go back to the tough times that we've had that we've been able to make it through. And let me just say, having a partner is hard, right?

Speaker 1 Like there's there's nothing easy about it but at the same time there's nothing more rewarding than an incredible partnership in fact i think a fantastic partnership a yin and yang kind of like me and you right can accomplish way more together than we ever would individually as a sum of parts and so hey guys it's chris if you're finding value in what you're hearing go ahead and like and subscribe that way people just like you can find this content for free here on youtube now let's dive back in the show.

Speaker 1 You know like going through there, I'd love to just talk about like what has made our partnership work and how we've been able to avoid situations like a Gary Brecca and a Grant Cardone where it's just this public blow-up

Speaker 1 and we're just suing the crap out of each other for 100 million bucks.

Speaker 2 You know, I think we had like a lucky fortune at the very beginning of our working relationship because we worked together, we were like jiving, everything was going really well, we brainstormed really well, we were excited, we were ambitious, and then we split.

Speaker 2 Yep. Right.
And then that split, we didn't talk to each other for almost two years. Yep.

Speaker 2 And then we came back together, formed an idea, started another business, led to another business.

Speaker 2 And so I think like us realizing how childish it was to just not have the level of communication to resolve the issue taught us like, all right, we just need to start resolving issues faster.

Speaker 1 Yep. You know, the thing like any partnership, any relationship, whether it's your spouse or whatnot, it's like clear lines of communication, clear expectations,

Speaker 1 and understand how you're going to navigate through disagreements.

Speaker 1 Because,

Speaker 1 you know,

Speaker 1 it's hard. Like there's no such thing in business as like a fair relationship, right? Like you're never going to be equal.

Speaker 1 You can do everything possible to balance the scale, especially in a two-person relationship.

Speaker 1 But, you know, one thing I learned a lot or a a long time ago about like a relationship with my spouse is like, I can never try to win the 50-50 battle, right? Equal 100, like I give 50, you give 50.

Speaker 1 I'm 51, you're 49. I can't make that.
It's like you got to be committed to bring in 100%

Speaker 1 of the way and be okay with whatever else the partner brings to the table.

Speaker 2 You know, you bring that up. I think commitment is really important.
And I think the way that I sit is I'm 100% committed in our relationship working together.

Speaker 2 The minute you're not, I'm a hundred percent willing to let our partnership split. Yep.
Because like we have to be a hundred percent in or not. And I think what happens a lot of times is

Speaker 2 people will be, will start to waver and then they feel like they're stuck or whatever. And then it just creates like a sour situation.
Right.

Speaker 1 And I think just any good partnership has one, clear expectations, two,

Speaker 1 the ability to exit, right? Like, because you're talking about like the ability to walk away. A lot of times we entangle ourselves in these relationships that are impossible to exit.

Speaker 1 There's no, and so, you know, some of the best advice that we've ever been given in partnerships is like, have a clear exit plan day one.

Speaker 1 That doesn't mean that you're necessarily signing a prenup or, you know,

Speaker 1 looking for plan B, but it's clear understanding upfront. Like if there comes a time that I want to walk away, you want to walk away.

Speaker 1 How do we value the business and our assets to be able to do it accordingly?

Speaker 2 The value of that is it gives you the opportunity to have the honest conversation at any time. Right.
Right. So instead of like, oh man, we don't, this, this could go sour, this could be really tough.

Speaker 2 It's like, no, we already know what we'll do if it gets that point. Right.
Let's have the conversation and just not get to that point or resolve it so we can we can move on.

Speaker 1 And it's important that you have these conversations up front before you enter into an engagement because up front, you're going through this honeymoon stage, right?

Speaker 1 Like when we started out in business together or we've done different different things with other people, initially everybody has good intentions.

Speaker 1 Everybody wants the same goals, is motivated, excited to move forward, and what I call the honeymoon stage.

Speaker 1 And the honeymoon stage is always going to last up to six months whenever you engage in a new relationship.

Speaker 1 And why I say up to, like it literally could last two days, three days, three months, six months. Rarely does it last longer than six months, right?

Speaker 1 But at the end of six months, you're typically going to know exactly how that person is, their their modus apparatus or whatever it is called

Speaker 1 and the way that they're going to act and so having the hard conversations before you make it through the honeymoon stage is so so important because if you don't it becomes increasingly difficult the first time that you encounter that difficult conversation and so there's there's a few things that i would recommend to any partnership when you're going in one

Speaker 1 have an exit strategy clearly define what you're what how you're going going to address the dissolution of assets, right? Don't just say, hey, we're going to split it 50-50.

Speaker 1 No, hey, how are you going to value it? Are you going to put a 3x multiple times your profitability? Are you going to add in all hard assets on top of that?

Speaker 1 Are you going to bring in a third party that's going to come in and do a valuation on the assets? And how are you going to split that?

Speaker 1 Are you going to have a first right to be able to buy the other person out? Can they sell it to just anybody?

Speaker 1 Do you have to sign off if they sell it to somebody else? Or is there potentially a buyout clause where if they exercise that 3X, that has to be paid at a, you know,

Speaker 1 half an X out front and

Speaker 1 the other five, half of X is paid over the next five years or whatnot. And so like.

Speaker 1 Just detailing that alone will save so many partnerships so that you can have those hard conversations. When you get into it, it's like, okay, look, hey, we can go our separate ways.

Speaker 1 this is how we go our separate ways but even but on top of that would be a few other things like like bylaws of the business right I think a lot of partnerships fall apart when people don't understand like what are the things you can and can't do inside of a business right like Me and you, we operate completely different than most business owners or partners do now because we've just been together for so long.

Speaker 1 But like when starting out,

Speaker 1 having things put in place, like hey anytime there's over a thousand dollar purchase we need to both sign off on it right and what do you do in the event that somebody does spend a thousand dollars without the other person yeah you know and just again detailing out those really hard conversations the cool thing is is right now when me and you started out we didn't have chat gbt yeah that's true right like now you can go to chat gbt and be like yo i'm entering this new partnership like what are some things that i should think about that i should put into my partnership agreement what bylaws should we consider what are some negative pitfalls of a relationship what are some hard conversations or or things that we should agree upon before we enter this relationship you know stuff like that so the truth is we've had partnerships that have not worked yep right who's we've struggled from the beginning they just weren't a good fit and we acknowledged it and parted ways.

Speaker 2 We've had relationships that were our partnerships that started off really good and then we got to the point where we parted ways.

Speaker 2 And then we have people we still work with to this day,

Speaker 2 including each other. And I think one of the things, the mentality of a partnership should be one where you're willing to give way more than the other person.

Speaker 2 It's basically like going to war, where it's like, if my guy's injured, whether that's physically, mentally, emotionally, like... I got to hold down the fort.
I got to take care of everything.

Speaker 2 I got to like, it's my responsibility with no, no,

Speaker 2 no, no regard. Like you're, it's, it's on you.
And I think that's something that served us well, where it's like, we are not trying to play equal. We're not trying to play fair.

Speaker 2 It's like, I'm going to give you more. And then you're like, well, I'm giving you way more.
And so it's like this competition of who can give more to the business or to the relationship and

Speaker 2 removing our ego of like, I deserve this or I deserve that.

Speaker 1 Yep. And I think a healthy relationship, a healthy team atmosphere, a healthy, any type of group that functions well together, one, you have to have trust.

Speaker 1 And then two, you got to be able to conflict, conflict right like to be able to take opposing sides i think most people never get there because they don't establish that good relationship of trust um but like having the hard conversations like dude me and you over the years have had like so many times where it's like we have to sit down and like call each other on our crap right like and like dude this isn't working and but then we establish i i think like our common language is like hey look

Speaker 1 we're established we both want the same thing right like we were both trying to achieve this goal, this mission, this vision of this business. And that's what we want.

Speaker 1 And we both trust that we both want this. Yes, okay.
I'm going to share with you.

Speaker 1 I'm going to conflict with you a little bit that some things that we need to twist in the dials a little bit to like get on the same page.

Speaker 1 And then we share whatever feedback or things that need to be said to be able to reestablish. alignment and creativity.

Speaker 2 Typically, it goes back to what you're talking about. I share my perspective, you share your perspective.

Speaker 2 We figure out if we're talking about the same thing from a different perspective or sometimes just two things completely different that we thought were the same thing.

Speaker 1 And, you know, this is one of our leadership pillars because, you know, in the next level community, we teach the eight pillars for growth. The leadership pillar is having those hard conversations.

Speaker 1 This goes for partners, goes for teams, goes for leadership management or whatnot. But like...

Speaker 1 The faster you can address these hard things, the better, because so often we'll create, especially in partnerships, we'll create this monster like freaking daryl he just is like not wanting to pull his weight or he's just like he doesn't even want what's best for me or the company whatever right like like there's stories that we imagine and so and the further we put that out the more it festers and the more we look for confirmation bias right like that's one of the worst things that will kill any partnership or any relationship is confirmation bias right like i think something about you like for example i'm just going to use like just a random one like Daryl's lazy, right?

Speaker 1 And so then I'm looking for anything that confirms my bias, right?

Speaker 2 He didn't show up before me or he didn't do that. Right.

Speaker 1 Man, I showed up at 8.56 and he showed up at 9.05. I knew he was lazy, right? Like

Speaker 1 when the reality is, is like that, that's not the case. And so, but yeah, confirmation bias will kill a relationship faster than anything.

Speaker 2 And so the second that you see something festering that you're starting to build confirmation bias around like that is the time that you've got to address it and I think we've just done a fantastic job over the years of being able to do that I think the other superpower that we have as a partnership is we can make decisions quickly and there's always times multiple times where like we disagree with each other and then we look at it like okay who is who has the ultimate decision who's ultimately responsible for the outcome of that decision and then it's usually okay I disagree with it but you're responsible if you really believe in this heart like if you really believe in this, then I'll let you make the decision, the ultimate decision.

Speaker 2 And then if it doesn't work out, I'm never going to say, I told you so. I'm never going to come at you again

Speaker 2 because,

Speaker 2 no, because like I've, once I give you that opportunity to make the decision, I give you that power, like I have to 100% back you up.

Speaker 1 Which which is the power of conflicting, right? Like

Speaker 1 you've got to conflict. You got to have your voices heard, but then whoever has the higher decision making in that particular subject matter, you've got to back them.

Speaker 2 Like, to your point, but I think that's a superpower because think of how many times we're like, I disagree, I think it should be that. And then it's like, okay, who's ultimately responsible?

Speaker 2 All right, go for it, move. And then you make decisions.
And the nice thing about that is the faster you make those decisions, the quicker you get to the right solution.

Speaker 1 Absolutely. Absolutely.
Hey guys, it's Chris. Hey, a lot of you leave comments asking for help.
Do me a real quick favor. Shoot me a text at 509-374-7554.
That's 509-374-7554.

Speaker 1 Shoot me a text. I'll answer and help you with whatever you need.
Don't worry, I got you back. Let's go back to the show, babe, baby.

Speaker 2 So, Chris, I know something that's been really valuable is a framework we laid out. And I know it was at a time when we were trying to figure out how to create a partnership with other people.

Speaker 2 How do you create a partnership where it could fall apart within a short period of time?

Speaker 1 Yeah, so when we launched SoulGen, we actually came up with this method.

Speaker 1 It was based off of just like failed partnerships in the past right so i had had some terrible failed partnerships luckily you hadn't had nearly as bad as mine right like one of my previous partners like ended up running a ponzi scheme and going to prison like what the freak like that's that's crazy yeah i saw that and i also saw some uh partnership that was going on with my brother and like just like with other people i'm like dude i want to avoid that so we came up with this methodology which we call the 618 three-year method and we applied it when we first started our business and so it was me and you and there was a couple other guys that were, that were going to be involved in it.

Speaker 1 And what we decided is like, look, we have 100% of the pie. I don't want to just go 25, 25, 25, 25, right?

Speaker 1 Because

Speaker 1 we really need to make sure that we're even going to do, we're going to fit well together in this relationship. So what we decided

Speaker 1 was that we were going to start running this method and then we were going to do the six month honeymoon period. And at the end of six months, we would decide where

Speaker 1 the additional equity was going to lie. And so initially, we broke up and we said, hey, each of us are going to get 10%.

Speaker 1 And then there's going to be a 60% pool that we're going to be able to allocate. And look, and after six months, you've earned your 10%.

Speaker 1 And then at that point, we'll decide like how the rest of this is going to be earned out.

Speaker 1 And so typically, so now we've gone and we've used this with other partnerships, other people that we brought into their business. We teach this from stage.
We teach it in the next level community.

Speaker 1 And is anytime you bring somebody into a partner make sure that you're not giving anything away in those first six months okay like that that is your first period in which that person can earn or have their uh equity vest right so that first six months we call it the honeymoon period right And then typically the way we structure it, we go 50% at six months, 50% at 18 months.

Speaker 1 And then if they back out or leave the partnership in the first three years, there is an actual full clawback of all equity.

Speaker 1 And so essentially what that does is it binds people that are in the partnership for three years to participate to be able to fully earn their equity.

Speaker 1 Now they can participate in distributions and everything else as those periods vest,

Speaker 1 but if they were to leave at any time, they are surrendering their equity. And so what that does is like, you're building a strong foundation for those three years.

Speaker 1 And then if at that point they decide to leave, you've probably gotten as much much as you need from that at least.

Speaker 1 But most people are going to be hooked in because they built something for three years. They want to continue to participate in that distribution.

Speaker 1 And so the way we saw this play out, which was really unique, so we had these four guys, there are four of us. And within,

Speaker 1 you know, we said six months is the honeymoon period. Within three months, we saw a guy that literally just stopped showing up.
Yeah. Right.
He wasn't traveling. He wasn't committed.

Speaker 1 He wasn't willing to relocate to Washington state and so within the first six months we negotiated a way for him to completely give up his initial 10

Speaker 1 and even though we legally didn't have to because of our agreement we still made a trade that made it fair

Speaker 1 but he walked away from equity in the business at that point Then after six months, we decided, okay, this is what it's going to look like long term. Me and you took the majority of the equity.

Speaker 1 Our third partner took a little bit less than than what we had. And then we went and we scaled.
And then we went and applied the six, 18, three-year method to nine other people, 10 other people

Speaker 1 that were involved in the program. And the cool thing is, is like all of those people, they were hooked in the same exact way.

Speaker 1 And one of those guys, one of the, actually there was 11 of them.

Speaker 1 One of the 11. It ended up not working out.
We were able to exercise the clawback period. We still gave him some money, even though we didn't owe him any money for that clawback

Speaker 1 and took care of him in that way. But the other 10 people, they earned their way.
They worked the three years, they participated in the exit.

Speaker 1 And like that for me has just been one of the most powerful tools in building partnerships and like just learning how to work with other people.

Speaker 2 Well, I think one key piece you're missing out is that we were part of other organizations before that that were promising equity and delivering nothing. Right.

Speaker 2 And so we were like, all right, we're going to enter into our business in a way that we can deliver. So we had to come up with our framework so that we didn't put ourselves in a bad situation.

Speaker 2 Absolutely. But then we could deliver.

Speaker 1 And everybody knows exactly what you're talking about. You've been a part of some company that's like, oh, there's going to be stock options or whatever, and then just like nothing, right?

Speaker 1 And so like for us, it was super important to make sure that we delivered on that, especially with our key players that existed with us from the beginning.

Speaker 1 But yeah, man, like when you're talking about partnerships, there is just such a yin and yang approach, right?

Speaker 1 Like you've got to be able to bring the positive energy when the other person's being negative and vice versa. But there is so much power in getting there.
And I promise you,

Speaker 1 you won't have to end up like Gary Brecca and Grant Cardone airing your dirty laundry if one, you have proper expectations up front.

Speaker 1 Two, have an exit strategy that makes sense regardless of the situation.

Speaker 1 You're not going to be out and freaking hitting each other with $100 million lawsuits based off of a picture with Diddy Combs, right?

Speaker 1 And then three, have the hard conversations as they arise.

Speaker 1 If you can dial in those three things, it's going to make for an incredible partnership that just will ultimately make sense and make it happen.

Speaker 2 I think one hard conversation you need to have as partners is having equity in a company does not give you a job in the company.

Speaker 2 Equity only gives you your portion of distributions, but it does not guarantee a job.

Speaker 2 And a lot of times people think, oh, because I have equity, I have to have a job in the company that has to pay me. When in reality, that could be one of the worst things for the business.

Speaker 1 And I think along those same lines, because you're an owner doesn't guarantee you the top position in the company, right?

Speaker 1 Like you can have somebody that doesn't have equity that is you actually answer to in a proper execution chart because they are better at their job an owner is somebody that distributes the stock right the same way that if you own stock in apple or stock in google you need to treat your equity in your business your main desire and job as an equity holder is to get the profits Everything else, being an operator in the business, isn't necessarily your right, your responsibility.

Speaker 1 This is something that we actually call God mode, right?

Speaker 1 Like God mode is the way that you need to be functioning as an owner, designing from the the top the actual execution player one npc that are going out and doing it like yeah you might have a role in the the uh the business but ultimately you want to be over here playing in the sandbox participating in the distributions giving a little bit of uh you know input or whatnot yeah yeah yeah so i think there's uh there's a lot of things that partnerships can do the conversations have to be constant especially if your business is growing you have to constantly revisit understand perspectives perspectives.

Speaker 2 And then sometimes our conversations are, hey, bro, what's going on? Like, I can tell you're frustrated.

Speaker 2 You know, we've had that many times where I've come to you or you've come to me, and it's like, what's going on?

Speaker 1 Yeah, absolutely. Absolutely.
Appreciate you guys jumping on. If you haven't taken a look at the next level community, go ahead and give us a text.
I think we have the phone number down in the notes.

Speaker 1 Until next time.