From Blackstone-Sponsored Startup to $7B+ in Loans: Jeff Tennyson's $1B Growth Playbook

Intro & the Lima One growth story

Jeff: I'm honored to be part of CEO for a Day. Andrey is an exceptional entrepreneur, and the prospects of positioning this company are very exciting as to what he has in mind. I'm passionate about this opportunity to use my expertise to hopefully help him bring this deal to a close.

Andrey: Jeff, Andrey — glad to see you.

Jeff: Glad to have you.

Andrey: Hi everyone. I'm super, super excited today because we have such a privilege to interview Jeff Tennyson, a former CEO of Lima One Capital. Jeff has done over $7 billion in real estate loans , and today I'm truly honored to have him as a CEO for a Day. I'm going to be in the hot seat, and I'm looking forward to getting all the great advice from Mr. Tennyson.

Hey Jeff, it's my pleasure to have you. I so much appreciate the opportunity, and I appreciate that you took the time to come in. I really need real advice. There is an old saying: it takes a village to raise a kid — and it takes a lot of advisors to raise a business.

So right now we are at the point where we're stuck at the ceiling. We've been a $100 million company for four years. We had COVID, then we had interest rate corrections, and instead of growing we decided to consolidate, optimize, and invest in our people and technology. Right now I think it will be the right time to grow and raise additional capital. Our business is very capital-intensive — it takes about $50 to $60 million to run one location, and our aspiration is to grow from one location to 10–15 locations within four years.

So what we need to do is find a partner — someone with deep pockets and high risk tolerance. It's November and we're planning to go to market in February. We need real advice on what we can do, how we can position the company to have a higher valuation, and how to find the right partner. And maybe you can share your experience — how you grew Lima One from $200 million to $2.5 billion, what the process was, and at what point you brought a partner into the company.

Jeff: Well, happy to be here. You're someone that we have always appreciated at Lima One Capital. You were one of our early borrowers who recognized the value of the fix-and-flip space and what can happen — and have done a terrific job in your marketplace demonstrating the value of what I would call a sophisticated real estate investor. Because what I've observed you've done is get focused on having good people, having a real process. Your firm has done a really good job with systems and technology — things that, quite frankly, Andrey, most of our real estate investor borrowers don't have in place. It's much more fly-by-night, without those things in place.

So I think the good news about where you are today is you've used that time and the capital you've had to create a really good foundation. It's my pleasure to join you and have some conversations about how to grow.

Lima One Capital is the most recent exit and growth company. This is my fifth mortgage company that I have built and transacted — sold. My largest was a subprime mortgage company back in 1998. We started with 45 employees; at the peak we had 1,400 employees. When I got there we were doing $20 million a month in originations; at the peak we were doing $2 billion a month. The challenge in that growth is how do you not only grow the business — how do you keep the people, the culture, and the other components that make it work?

Most recently: Lima One Capital. When I arrived at Lima One in January of 2018, we were doing right at $20 million a month and had 65 employees, wanting to build it to become a billion-dollar originator as soon as we could get there. Over the next four years we were fortunate to eclipse that billion-dollar mark. Currently we have 325 employees. We're doing $200 million a month. This past year we did $2.5 billion in originations — a 10x growth from when I came in, in 2018, to where we are originating today as one of the largest — probably the largest or second-largest — retail originators in the business-purpose lending space.

Andrey: Perfect. Jeff, that's why I invited you — to learn from you, because over the years you have built a playbook on how to do that. Here's the financial profile of the company: $100 million right now, 45 employees, in three markets, wanting to grow to 20–30 markets and from $100 million to a billion dollars — and we have four years to do that. I think the timing will be right: interest rates will go down and the real estate environment will help us expand.

Jeff: I think you're exactly right. I think this is a great time to be exploring growth and scalability. I was just in Las Vegas at the asset-backed security conference talking to capital partners about this industry and what they're looking for. I was amazed — this was September of this year — at how many of those investors: there is a lot more capital looking for fewer loans and fewer assets than are available. Which gives us a great time and a great opportunity to grow.

Andrey: Awesome. So Jeff, how can I do it faster with less effort? If you were me, what should be my action plan to grow the company?

The four questions to ask before you scale

Jeff: Well, when I think about when I land at a new company that I know wants to scale, that I know wants to grow — what I really try to do is break it into four questions that I need to ask myself as the CEO, and I need to make sure I've got it.

Those four questions are: what do I want — what is the goal, what is the vision for where we're trying to go? You said you're at $100 million today, you want to go to a billion, you need outside capital. Those things seem to be pretty clear with the vision of where you want to take the company.

The second question is: what do you have to do? What are the things today — and I think that's what you're asking me today, being CEO for a Day — what do you have to do to get there? In almost any business, to me it starts with: what are the resources you need to be able to get that, and is the market capable of providing those? I categorize the resources into two things: money and people. And I think, as we just chatted, the timing for capital — the New York institutional groups, the private-equity firms, the mortgage REITs — they're all very interested in this asset class, both on the loan side and on the actual real estate asset class. We saw the growth and explosion of Invitation Homes and others. This is now becoming a much more institutional asset — not some creative entrepreneurial dream that may or may not work. The institutions know it works. Now they're looking for assets, and they're looking for the right assets to put into.

The third question is: what could get in the way? If the capital is there, what can get in the way of it not coming to your business versus going to somebody else's? I think the critical question is: why would the capital partners give the funds to Homestead Road instead of all the other options they have? What's the value proposition that you can give them that's unique?

So as I looked around, when we were doing the same concept with needing capital — the first question was: do we have the infrastructure that would impress institutional money? What they don't want is a fly-by-night, chaotic, fly-by-the-seat-of-your-pants structure. Because once you move to a larger capital source, they have much bigger constituencies they have to be responsible for, other than you. And the biggest challenge I see with entrepreneurs trying to sell their business is they still want to run it as if they own it and have all the responsibilities. That's not the truth anymore.

So the question they look for is: okay, how hard is it to build that infrastructure, or is it already existing? If they have to come in and build it, that's going to take away from your valuation. If you already have those key infrastructural pieces, it makes a big difference.

I think one of the things you've done really well is create that infrastructure. You've got systems for people to acquire properties, sell properties, do the renovation of properties. You have very good processes. You have created a system that they will be impressed to see — so it's not just "I've got to rely on Andrey to know the answer to all these questions." No — it's replicable over and over and over again. That's a real value. You'll need to put together your presentation to show these investors that that is a value prop uniquely yours that other people wouldn't have.

Andrey: Yeah. I like the Stephen Covey quote — he said "start with the end in mind" — and we started building everything as if we were expanding to 30 markets. We built our own proprietary real estate platform with different modules: acquisition, disposition, construction, finance, lifetime KPIs — and we can just add smaller companies to our platform. It takes about three to five years to go into a market and build a brand, and we don't have that time because real estate is cyclical.

So right now we're planning to grow both organically and through acquisitions. We also invested heavily in our ERP. We haven't had a paper invoice in five years — everything is electronic. An invoice is submitted to the ERP, the manager approves it, it goes to the accountant, his manager can send it back — everything is fast. Because when we were in three markets, we understood we cannot have invoices going back and forth. We need controls and processes in place. That's why we invested probably $300,000 to $400,000 just in our accounting system. And we wanted to make sure we were bankable — we have five years of audited financial statements, we're preparing the company for a quality-of-earnings report, we have job descriptions and KPIs for every single person. We also give management options and a profit center: if we get capital, they will get extra cash for performing. We invested heavily in people, infrastructure, and compensation — brought in consultants to structure base compensation, performance-based KPIs, short-term and long-term incentives vested over four years.

So we've taken a lot of resources, and now we're ready. We believe there are a lot of fix-and-flip operators in the industry who still run their business on a yellow pad, or maybe one CRM used only for marketing — and their business is not sellable. What we can offer them is to come in, participate in our real estate platform, and potentially sell to us. What we're buying is time — because we've learned it takes a lot of time to get contractors in place, understand a market, understand the different pockets. If they're not ready to sell yet, we can give them a license or turn them into a franchise. We give them our infrastructure for a small fee, we have a footprint in the new market and an understanding of it — with the offer to sell to us anytime they want to join.

The infrastructure capital partners want to see

Jeff: And I think those are the things — I talk to my team a lot about: an opportunity of a lifetime must be seized in the lifetime of the opportunity. As the window opens for capital, as the window opens for lower interest rates, I think today we're getting ready to go into a lower-rate environment, which should increase the supply of opportunities for houses.

What a new capital partner is going to look for when they come into this: what they typically don't want to do is micromanage you and the team — but they want you and the team to be micromanaged, if that makes sense. What they want to see is: can we look at Homestead Road and see that they have processes and procedures that will consistently make the ultimate asset decisions — time and time and time again — in a very replicable fashion?

If it's dependent on one or two people or one or two things going right every time, they're going to walk away and find someone who doesn't have that dependency. Speaking from the perspective of an originator who was closing 700 loans a month from all different fix-and-flip real estate investors — you absolutely do not see very often that they have audited financial statements. You do not see very often that they've invested their time, energy, and efforts in technology and systems. So you really have an upper hand that will be very attractive.

Because what these capital partners worry about — with anything that isn't creating $100 million a year in earnings for a Wall Street firm — is the risk of mistakes that could harm them, more than the returns that could help them. Does that make sense? So that's what they're looking for: what do we have to worry about with Andrey and Homestead Road that could cause embarrassment, risk, or market problems? The fact that you have those systems, the fact that you have those processes — really good.

The fourth question we hadn't gotten to is: how do you measure and hold yourself accountable to reach those goals? And that's what I look for when I come into a company — I try to understand: okay, they've got a good vision, they've found the resources they need, they've committed to get to a billion dollars or whatever the commitment is. But do we have the right people and do we have the right measurements?

So probably the next thing to talk about is people. If you're going to get from $100 million to a billion dollars — a 10x multiplier — do you have the right people, and do you have the right people now? That's typically the mistake I see. People say, "Once we get to a point where we have this much capital, then we're going to hire the right people to do it." And because we don't have the capital yet, we wait. What we did early on at Lima One was go out and find the best people we could find for the roles we needed — knowing it was a little more expensive than we would have wished — but we knew we would need those people as we scaled. And to ramp people up takes a long time. Often times the mistake I see entrepreneurs make is they won't invest in the right people in the right seats until further down the path — and they miss that opportunity to scale and grow the processes.

Andrey: So would you suggest — because our number-one objective within 12 months is to get additional capital and bring a partner in — should we wait for a smart partner who will help us bring people like a CMO, a CFO, a business development officer? Or should we hire them right now, and not wait until we get the capital?

Right people, right now

Jeff: The answer is yes to both. And I think that's the balance the CEO has to make. You can't hire all those people right now because you're not there yet. So you have to identify: what are the key components?

For example, one thing is: if we put all of our money with Andrey — what happens if, God forbid, something happens and he can't continue to do what he's doing? Is there a number-two person? Is there someone else we can see who could carry it on if something happened to Andrey? That person needs to be on board now, so they see there's redundancy in leadership outside of one individual.

Two — what are the key components of your business that are critical and maybe aren't performing well today? Often times the struggle I see with entrepreneurs is the loyalty factor. They have people who have brought them so far in this process, and what got you here can't get you there. But they wait too long — holding on to that person who can't get them to where they're wanting to go, out of loyalty, which is human nature and appropriate. But you've got to make sure you've got the right people for the critical functions that capital partners are going to be looking for.

In this example, you've got to go out and find: do you have the right person who has the ability to buy the properties that need to be bought to get you to a billion dollars in annual revenue? If not, that person needs to be on board today. You can always hire someone for the financial side of the business once you get further along — you don't have to have that today if you have other controls in place. Probably don't have to have a chief human resources officer today. You don't need all of them.

So you've got to have a portion of those people now, and you've got to be prepared — as the vision takes shape and you bring in more capital — to articulate to the capital partner: "These are the spots that we're working on that we will hire with this money, and here's how we will do it — here are the people we will look for."

Andrey: Yeah — we hired a chief construction officer from Lennar, a chief marketing officer from Anderson Windows, which is a $3 billion company, and a capital markets director from Citibank. And we got so much overhead. When the market slowed down, we could just not carry those overheads. My estimation was, "Well, when we go to five markets, we can easily support them." We were simply undercapitalized. And now, the second time, I don't want to make the same mistake. We need to make sure we have enough capital — because we were at one point a couple of times short by a couple of million dollars, and we didn't really know how to service the debt and make payroll. And when you grow to a certain point, you can't call your friends and say, "Hey, do you have a couple million dollars?"

Jeff: So yeah — I would just identify the two or three critically strategic positions you don't have today that you would need to show to your capital partners. It doesn't need to be ten. You obviously need yourself as a major part of this. You need someone who can be seen as your number-two person. And then there are probably one or two other key roles that they need to see. All right — this company can run well with Andrey, his team, and the people that go with that.

Andrey: Yeah. The company right now can run without me or without my partner. We have a chief underwriter, we have a marketing team, we have an operational team — and they do really, really good work. I'm so thankful to them. And I don't know what my next position should be — probably an opportunity to hire a director of operations, someone who can streamline our processes. We certified our team in Six Sigma lean operation tools to speed up processes. We have an HR leader, but it's a fractional position. We have a CMO, which is also fractional — so we don't need to pay $250,000. Maybe when we have three locations of additional capital, then we can start filling those positions, because running the business for 17 years through ups and downs — when you don't have lean overhead and don't have enough capital, that's very, very dangerous.

Jeff: Yeah. I would encourage you to think through an exercise with your executive team: what is the organization of the future? Almost put an org chart together — what does this look like today, and then with different-color boxes, what do we think we need at your huge-outrageous-target in four years of a billion? And then start thinking very tangibly about: which of those do we really need now? No, we don't need that — we can do that fractionally. That's a great idea, in fact. Where I found my chief marketing officer was as a fractional CMO for me, because we couldn't support a full-time CMO. But by interacting with the fractional CMO, who we liked a lot and who knew our company, it was a very easy recruit to bring that individual on as the full-time CMO. It's a great way to do it.

So I would think about: what does the organization of the future look like? Back it up to today, and make sure you know the people you're putting in those boxes as you grow and build.

OKRs, the Big Five, and the cadence behind them

Jeff: The third piece is your measurement system. And what always frustrated me about strategy sessions — whether you call them off-sites or whatever — is you would have a whiteboard full of ideas, and then everybody would go back to their day jobs and didn't have time to think anymore until you got back to the next strategy session, and you hadn't looked at anything.

We use a system at Lima One Capital called OKRs. There's a book called Measure What Matters by a guy named John Doerr. And Gino Wickman has Traction, which is the EOS system. There are several different systems — what matters is what you're comfortable with, what works for you. But you've got to have some kind of standardized process across your organization that has initiatives and key results, and you need to measure it on a quarterly basis, not an annual basis. Annual is too long. Quarterly may even be too long for certain things — but you've got to have some key rhythm to look at it.

So we had what we called a Big Five. Every year we would do our annual off-site and whiteboard all the different initiatives that we felt would get us to our huge-outrageous target for the next year. Those were anywhere from 40 to 70 different initiatives that people came up with. Well, we can't deal with 50 to 70 initiatives. So we said, "Let's vote — we'll come up with five." We converted 50 to 70 initiatives to the Big Five. Five big things we had to do to get to our huge-outrageous targets at the end of the year.

Then you say: okay, what do you do with the other 45 items you didn't get to? We converted those to OKRs and delegated them to six, seven, eight people. You take 40 things, delegate them to eight people — you're looking at five and a half things each person has to work on. And we were consistently getting through 40 to 50 initiatives on top of everybody's day job, per quarter. It was just a matter of a system to hold people accountable — show red, yellow, green, how are you doing — and those are the things I think of as a CEO when coming in and trying to reach a growth goal: make sure we've got the right systems, the right people, the right capital, and ultimately the right plan to execute.

Andrey: Yeah, that's a great point — and a great book. I love that book. We started using Traction about ten years ago. Traction is very popular in Minneapolis. And then we started using Scaling Up and the OKR system as well. So every person in the company has three to five key numbers, and I rewrote every single job description. Instead of having a long description, they have a role — requirements, expectations — and it clearly states what numbers we're shooting for, why it's important. I want to keep them accountable. So we do use green, yellow, and red, and we have a Monday morning huddle. We decided to be 100% transparent, especially when we were going through tough times, because people were concerned about how the company is doing.

So the advice I want to ask you: let's say the team doesn't achieve the goal — we're in red. How do I present it? I just show: hey, we haven't achieved the goal. And I get feedback from some people that they worked so hard and did everything they could and they didn't achieve it. I'm telling them the quarter was not good, but in their mind it was good — because we didn't hit our target. So I'm a little bit careful about how I say it, especially when we have a lot of people in multiple locations. I want clear communication. So how do you deal with that — when the team didn't achieve the goal, but in their mind they had a great quarter?

Jeff: Yeah. We're in the red zone — that's for us when we're below 80% of the goal. So first of all, compliments to you for the transparency, because I think that's so important. In a high-growth company the volatility is big, particularly in a transactional business like you're in and I've been in. The grind is every month — people are having to get what they either didn't do last month. You don't get any credit for overachieving last month, because you'll need it later. And if you underachieve, you've got to catch up. So there's this constant pressure. Compliments to you and your team for the transparency and communication, because the best time to communicate is when things aren't going great. It's easy to communicate when everything is going great. But when people really know and have transparency — that makes a real difference.

We purposely asked people to stretch with their OKRs every quarter, and we actually wanted to see a portion of those not get done. Because if you have everything in the green every quarter, people aren't stretching hard enough. So it's that constant balance.

We didn't tie our OKR system to compensation — because, again, that avoids people sandbagging and doing things they shouldn't do. So how did we look at it? The best way is to have an ongoing rhythm and cadence of at least weekly — if not weekly, monthly — review of your OKRs. How are you doing on these OKRs? So every week my direct reports would come to me with a template we used where their OKRs were graded red, yellow, green. We would not spend time on anything that was on track to be done by end of quarter. We wouldn't spend a lot of time on yellows that were on track. All we really spent time on was reds — what do we need to do, what are the things to keep those on track? And it's the cadence itself that created the discipline to know what was happening.

What you couldn't do then is get to the end of the quarter and tell me everything was green when it's actually red. That was a problem — and it gave me the authority to appropriately address whether it impacted compensation or whatever. But if they weren't telling the truth along the way — if you wait until the end of the quarter to see how they did — that's a problem. You're constantly in a cadence with them on how to deal with it.

Andrey: Yeah, we do the same thing. And if something's in red, I ask people to report: what is the root cause of the problem, what contributed to it, and what is your solution? But sometimes it's not their fault. Like, people stopped buying homes for a week — we projected we would sell a certain number of homes and the market didn't support our projection. So my challenge is how to communicate when they're in red. Every Monday we have a Monday huddle — it's 10 minutes. We quickly go over KPIs, on-track/off-track, highlights, wins, challenges for the week. So people know what's happening. But if it's in red — last quarter I said, "We're in red here, we're in red here, we're in yellow here, and there is no green." And people saw that as a pessimistic approach. But I want to be realistic and I need to keep people accountable. Everyone likes when things are good, but how do I keep them accountable?

Controllable vs. non-controllable when you miss your goal

Jeff: I mean, to me — to me it boils down to controllable and non-controllable. People shouldn't be held accountable for truly non-controllable things. But my opinion is: there is something controllable within your sphere of influence for everything that's non-controllable.

So in that example — okay, there weren't enough houses in the quarter, so we missed our goals. Okay. Did we double our activity? How many calls did we make? What are the controllable things that you can impact that will potentially affect this non-controllable item? You can't just throw up your hands and say, "Well, we just didn't do it this month." Did you do everything — did you leave everything on the field?

I love the sports analogy: when you had a great game and you lost, but you left everything on the field. We did everything right. To me, it's hard to be critical of the team and critical of the process if we truly left everything on the field. And if we did — you know, we had a year where we missed our budget, but everyone did everything right. 2020 is a great example.

2020 was the perfect example of a year that had non-controllable events in our path. We did $1.1 billion in originations in 2019 and were going to try to hit $2 billion in 2020 — and you know, halfway through the year, everything shuts down. Well — it was important to me that everybody got 100% of their bonus in 2020. People said, "Well, we didn't hit our goals." Yeah, but we did every single thing right. And because of that, our market cap — the value of our company at the end of 2020 — was double the value it was at the end of 2019, because we did all the right things. We kept the people in place. We did every single thing perfectly right that we could control, so that the non-controllable didn't destroy us.

Andrey: So if you were in my shoes — I like your point about: if we didn't achieve the goal, did we double the number of calls? I probably didn't ask that question, so I'm going to adapt it right away. Because we were in red on sales for this month, and I want to ask: what can you control? — that which is not controllable, I agree with. But what can you control to impact the non-controllable? That's a really good point.

The question I want to ask you: if you were me — how would you determine who should be my next hire? Because I don't want to do everything myself; I want to bring in experts. It's not how to do something — it's who knows how. In my business, what should be my next hire? My objective for the next 12 months is to bring in a capital partner. I brought in a chief exit advisor, an investment banker who's in YPO. I attended Harvard TPM, so we have a really good network there. I brought in advisors like yourself. But who should I hire right now on a permanent, full-time basis to help me? What would be the framework — how would you process that information, what questions would you ask?

Jeff: So first, I think you ought to look at your calendar and ask: where am I spending time on things I should be delegating? Think about the CEO's role at this current stage as you move towards scale. You're responsible for vision — what is the vision I want to get to at the end of this period? You need to be spending your time on strategy, making sure the pieces are in place and working towards it. And then the tactical part of your role today: what are the pieces — do I need to hire a banker, do I need to hire another consultant? Those are the things that need to be taking your mind-space and think-space.

So if you're dealing with other things you can delegate, that's issue number one — I need to either delegate it to somebody in my organization, or if they're full, find someone. Could that be a chief of staff? Could that be someone who can really free up your activities so you can focus on the three things that matter: keeping the main thing the main thing — vision, strategy, and the tactics to make sure those strategies are being delegated across the organization?

And then I think the other question you should ask yourself is: where am I annoyed by our performance? What areas of the company do I get annoyed at — at the end of every month, every week, or whatever the time frame is? Those annoyances are probably gaps in either people or processes. Either someone's not doing it and you need to shore up the process, or they don't have the right people or the right capacity to handle the issues coming through. That was always what I would use: what's annoying me every day, every week, every month? If I had those annoyances, I needed to fix them — and often times, that pointed me to the people I needed.

Andrey: Yeah, that's a really good point. I'm thinking — what I'm annoyed by is when we have a clear goal on acquisition and disposition, and we're on track, on track, on track, and then two weeks before the quarter ends we're off track. And I don't ask the question: "Hey, did we make a lot of calls? What did we do to make it happen?" I think that starts with me — I should keep myself accountable to keeping people accountable, asking those same questions, so everyone is clear.

Jeff: Well, it also gets to measurement. Are you measuring with leading-edge indicators or lagging measurements? We had the same kind of process in the mortgage origination business — you've got all these applications that need to convert to approvals, and those approvals need to get closed, and those closings have all these issues that pop up along the way. It always frustrated me — exactly what you just said — that we'd get all the way up to the last week. And the mortgage — the last week is always the bottleneck if you're not careful.

So we implemented leading-edge indicators: by the first week of the month we should have this much of our total closed, or we're going to be off track by the middle of the month. By the middle of the month I had a pretty good idea of what this would look like if it stayed on the current path.

Hire a coach. Due-diligence your capital partner.

Andrey: Another question — I read that you were chosen as CEO of the Year. Tell me: what have you done, what can I do, to become a better leader, a better CEO who inspires people? What have you done to be chosen as the best CEO of the year?

Jeff: So thank you — that was kind of you to mention that. That was the National Private Lenders Association naming me last year's CEO of the Year. And I think it was identified by really two things — with some sub-points underneath each.

One is being actively involved in doing more than just your own industry. That was a trade association — and I'm also the chairman this year of the National Private Lenders Association. The fact that I was taking my time and energy to devote to something that maybe is not as tangibly valuable to my shareholders as it is to the entire industry — I believe by giving some things away, you get so much more for your company, your career, your relationships, and so many other components. So don't be afraid as a CEO to give some of your time to worthy causes — whether that's philanthropy, trade associations, or other things.

In the NPLA situation, what was so important to me — I'll go back to a little bit of PTSD I had from the subprime mortgage space. We built a top-five mortgage origination company in the US and it imploded — the whole industry imploded — because the industry did not do a good job of building professionalism, best practices, and ethics. The private lending industry that I had been a part of came out of hard-money lending, which doesn't have a great reputation. I really felt strongly that as an industry we needed to have disciplines and controls and the stuff we just talked about. And so I gave a lot of that away.

So: one is giving back to an industry to make it better. And second: creating a company that people enjoy working for, that people are proud of — the environment they work in, the culture they see, giving them events and activities and things that celebrate the victories when they come along. I think by doing that — particularly in the risk-decision business that you and I run — happy people make much better risk decisions than unhappy people. So it's very valuable to do that.

And I think if you give yourself to an industry and a company in a way that you create something you're really proud of and they're really proud of — the awards and the recognition kind of follow.

Andrey: And another question: how do you find stars? Because you're only as good as your people. What's your process — do you use recruiters, what's your interview process, what's your playbook to hire the best?

Jeff: Well, first of all, as a CEO you have to always be recruiting — even for positions you don't even need today. How do you do that? Particularly at conferences. I was just in Austin, Texas last week at the NPLA conference. I'm not even leading a company today — I think I'm retired, I don't know what that means — but I'm constantly in meetings throughout the whole two days with people I wanted to build relationships with, people I wanted to get to know better that I think are impressive and involved in our industry. And I can do that because I've got an avenue to get to know people, and they'll want to connect.

So if you're looking, you should be going to lunch with somebody you want to get to know in your city every week. It could be a salesperson for a bank — just building relationships for what you need now, or what you'll need later. You're always recruiting, always thinking: what's annoying me, what could I have to replace, do I have a succession plan for all the key people in my organization? If the answer is no — don't rely on that leader to be creating that succession plan. You need to have a network.

So that's one: always be recruiting. Two — absolutely, for key positions, I'm almost always going to use a recruiter. If I don't have someone in my rolodex I can call on, I'd start there. But I'd also probably even simultaneously — depending on how urgent the recruit is — get with a recruiter as well.

Then I needed a good infrastructure internally to capture a process. We would always run some type of personality test on every candidate, particularly if they got senior in the organization. Does the person fit with our values, our mission? Does the person fit the profile of the job description we're trying to fill?

I've also had a coach for 20 years — a CEO coach. It's shocking to me. If you think of any professional athlete in the world, how many of them do not have a coach? Zero. So why is it that CEOs — who should be at the pinnacle of their profession — think we don't need anybody around us to hold us accountable, challenge us, kick us in the butt when we don't do the things a coach should be doing?

I've had a coach for 20 years. I use a group called CEO Coaching International for the last six years. My coach, Sheldon Harris — I talked to him today, and he and I are still really close. It's a great way to bounce ideas off someone.

So typically when I was going to hire someone, I'd run the personality profile by my coach. Sometimes even someone internally — and Sheldon would say, "Jeff, this person doesn't fit. What are you doing?" And it's like — "Ah, yeah, you're right." We kind of fall into some laziness at times if we're not careful. Having someone there holding us accountable, making us do it — and then having a good internal process for the interview. Typically, for any manager or above, I would always interview them myself. Often times it was 30 minutes or whatever, but I wanted to make sure face-to-face — or virtually now, which we can do — that they fit our culture, fit what we were trying to do.

And then there was enough of a group talking to this person that at the end of the day — or within 24 hours of all the interviews — I would call a 30-minute meeting with everyone who interviewed that person. Everybody would go around the room. If I'm the hiring manager, or whoever the hiring manager is, they don't have a vote — they have to sit there and listen to what everybody else said. And it was amazing how often you would piece together inconsistencies in the candidate's story that different people had heard that you would have never caught if only one person had interviewed them.

Andrey: Yeah, amazing. We also do Myers-Briggs. I also do the Kolbe Index to make sure the person fits. And I made a decision early on that I'm going to interview every single person who comes in, for culture — because I want to set the right expectations, the right accountability. We have a positive mental attitude culture here, and if a person is a naysayer, it's just not the right place for them — they won't like this culture.

The challenge we have: let's say we're a $100 million company. Before, I thought — if you want to be a billion-dollar company, you need to bring people who used to work at a billion-dollar company. But how do you attract those people when you're still a small company? Part of it is options, profit centers, setting the vision and expectations. But in Minneapolis, for example — we have a lot of Fortune 500 companies: Target, Best Buy. It's hard to compete because I'm a small company with an industry reputation that's mixed. Fix-and-flip has a negative reputation, even though we have an NPS of 87, great Google reviews, an A+ Better Business Bureau rating, and referrals. People are still a little cautious about the industry. That's my biggest challenge — being a smaller company competing for talent.

Jeff: Two things come to mind. One: there's no one who can sell the vision and culture of the company better than the CEO. Your people have to get you involved at the right time, in a way that will make a difference. Two: you've got to make sure you're selling exactly what the company really is. I wouldn't talk about being a fix-and-flipper — you're a real estate investor. So many people want to be part of a real estate investment company, whether that's right out of college or otherwise.

And we found, especially earlier on, as we got larger and larger, we had the ability to recruit. People would come to us more because they knew of us, they wanted to be part of our culture. But at the same time, we had to make sure we had a really good training and development program for entry-level people — particularly in most of the functions. You're in a larger city than we were. We were in Greenville, South Carolina — a metro area of probably 750,000 people. Minneapolis is much larger, but you've got a lot more people vying for your talent too.

So you need a really good training and development program — people can come in, learn your business, grow. But that also takes more ramp-up time. And we ultimately found: for critical managers or critical executives, you need what I'd call "Miss Right Now" — someone who fits today, who doesn't take time to ramp up and learn. They've got to bring their skills to Homestead Road, not wait and let you teach them. You can train and develop "Miss Right" over time for other roles — but for that critical executive hire, you need them ready on day one.

Andrey: Jeff — I took a lot of notes and I need to process the information, go back, debrief, and come up with a list of options. Is there anything else — now that you know my story and the business — that you'd like to add, so I can take immediate action in the next 30 to 60 days?

Jeff: I'm not sure there's anything we haven't talked about as far as the business being prepared for what you're trying to do. But I would encourage you: don't forget to do due diligence on your capital partner. They're going to do due diligence on you — but do they fit the culture, do they fit the environment? Are they allowing you to do the things post-deal that you want to do as the leader and the entrepreneur?

There are so many companies I see where capital comes in, takes control, and it's a miserable experience — people look back and say they wish they had done it differently. So do due diligence on them, because you have options. Take advantage of the quality company you've built, and make sure you do that due diligence on them as well.

Andrey: Jeff, I appreciate your advice so much. And we are hungry — so we're going to dinner. We have a reservation in five minutes.

Jeff: Great. Thanks a lot. It's been great.

Andrey: Yeah. Thanks.

Andrey: I just had an amazing session with Jeff Tennyson, the former CEO of Lima One Capital. Under his leadership they originated over $7 billion of real estate loans for real estate investors. Here are my five biggest takeaways.

Number one: if you want to grow your organization, you need to make sure you have the right people — and the question you need to ask yourself is, "Do I have the right people in place, and do I have the right people right now?" Start with the end in mind and act as if — build an infrastructure that will help you execute your vision.

Number two: you need to attract rockstars. This is the biggest challenge for a lot of medium-sized businesses. Our business is $100 million. But how do we attract the best people? As a CEO, it's my job to sell the vision, culture, and our core values.

Number three: if you don't get the results, you have to identify what key components of the business aren't performing well — and you need to have a system to keep people accountable. When you don't get the results, decide for yourself: was it a controllable event or non-controllable? If it was controllable and you didn't meet the goals — did you at least double down on the specific activity? A clear example: we didn't sign the targeted number of purchase agreements. Is it controllable? Yes. Did we do everything we could? Probably not — we could have made more calls, doubled down on leads. It's very important to keep people accountable and have a system in place.

Number four: always be hiring. As a CEO, my job is to promote the company and promote the culture. The reason Jeff was going to conferences was to build relationships with people who could potentially join the company. It's very important to show up and be involved in trade organizations.

And number five: you always need to find a coach — an executive coach. There is an organization called CEO Coaching International, and Jeff said he's going to make an introduction. I'm looking forward to meeting his coach, who he's had for 20+ years. I think it's very important for any executive to get honest and brutal feedback — to understand your strengths and your weaknesses, figure out how to work on those weaknesses, hire a coach, and double down on your unique ability: the thing that no one but you can do.

That is it for today. Stay tuned for a new show.