The Secret Behind Why Every Entrepreneur Has Two Companies

Shannon Waller: Hi, Shannon Waller here, and welcome to Inside Strategic Coach with Dan Sullivan. Dan, you have been coaching on a very exciting and brilliant new concept called your Second Company Secret. And it's got everyone kind of like, ooh, wide eyed and kind of thinking big about things. And I'm excited that you wanted to talk about it today. And this is something you've been launching at the Free Zone Summit, and other conversations you've been having in some of our connection calls. So I'm really curious, because I haven't had a chance to see it yet. What exactly is your second company secret?
 
Dan Sullivan: Well, it's just an observation. So this year represents my 51st year that I've been coaching entrepreneurs. I started in August of 1974. All along, I've noticed a tension that entrepreneurs have between the company they actually have, which is making money, and the company they wish they had. So they have two companies in their brain. Their brain is taken up. There's almost like an adversarial relationship between the way they have these two companies. So the one that's real, that actually makes money, is seen as inferior to the one that they imagine, which is not real, and that's not making any money.
 
Shannon Waller: That's really interesting, Dan. So the one that's real is like frustrating for them, probably because of all the realities of just complexity of the business. And the second one, the imaginary one, looks perfect because it actually isn't real.
 
Dan Sullivan: Yeah. And they have some indications of the second one, and it has to do with certain situations they get in with customers or clients, clientele. There's an hour, there's a day when they're performing at a very high level in terms of their best capabilities, what we call Unique Ability in the Program, kind of the appreciation that they're getting from the interaction with the clientele, sort of problem solving. Generally, it's a situation where they make quite a bit more money. In other words, it's based on results. It's not based on time and effort. They're not being rewarded because they're putting in a lot of hours and they have this sense and then they get a glimpse of it, but then it's back to the real world.
 
They're very creative. They associate their creativity with the imaginary company. It's imaginary because it really doesn't have traction yet. It doesn't have, you know, as Gino Wickman and EOS would call, traction. It's not where the money has been made. They have to go back to the money-making thing. And you know me, I always get puzzled by contradictions that people set up in their mind because to a certain extent they've made up this tension, they've made it up. But I've seen it often enough and I've tested long enough and quite frankly, I've done it myself, you know, I've had this thought.
 
So I began to think that they're not seeing it in the proper perspective. And, you know, I do the opposite. I said, well, if there wasn't the tension, what would be the unique role that the first company makes and what's the unique role of the second company? And it wasn't triggered until I was asked a question by a terrific entrepreneur that we have in our Free Zone program, Lior Weinstein, who's just good at everything. You know, Lior is super bright, super insightful. He said, you're always talking about 10x, but he said, where you are with Strategic Coach right now, how do you go 10x with the workshop program? You know, he asked where we are numbers-wise, and I gave him the numbers. And he says, how do you take it 10x? I was speechless, which is an infrequent experience on my part.
 
Shannon Waller: I was going to say that. That does not happen very often.
 
Dan Sullivan: For about a minute. And I said, well, actually, we're not taking the workshop program 10x. I said, it'll go 10x. We're 250x since the end of our first year. I use that as a model. And I said, you know, how much money we made in the first year and how much money we made in the 35th year. You know, it's easily 250x. So I said, it'll grow. But I said, I don't have 10 times as my goal for that company, because that company is my R&D company. And he got interested in the conversation, and he asked me more. And I says, because we create that tool with thinking tools, and we've created, I think the number's 250 or so, over 35, 36 years, we've created 250 thinking tools.
 
And in the last two or three years, we've discovered that the Patent Bureau in Washington thinks that our tools make really good patents. Gone from four patents that we had in our first 34 years to, you know, we're, you know, into the 58, I think, today. So in the last year and a half, we've gotten about 54 patents. And they have a value. They've been appraised. They have a value. And I said, easily, that's our 10 times company is the thinking tools that we've created for the Strategic Coach workshop. We're only able to have coaches because of the tools. I gave an example, which I had figured out that in 1994, you were there. You remember 1994, we did 144 workshop days in that year, so that's 36 all-day workshops per quarter, and we had one coach, and that was me.
 
Last year, 30 years later, we did 600 workshop days, and I did 12 of them. So I went from 144 coaching workshops to 12, but the company went from 144 workshop days to 600 workshop days. And the reason was the coaches and the reason the coaches can coach it is because of the thinking tools. Okay, so we have these tools which other coaches can coach just as well as I can coach them. Okay, and that's the structure. And we're creating new tools all the time, you know. So I said, that's the real 10 times company. I said, that's the multiplier company. And that requires, besides just creating the tools for the first company, the other company is just a matter of getting it to our IP. firm, Caldwell Partners in Boston, and their relationship with the Patent Bureau in Washington.
 
So it's a collaboration. It's a three-way collaboration. We create the tools. The IP firm translates the tools into patent applications, and the Patent Bureau turns the applications into patents. So it's a tremendous multiplier. Besides the time I'm already spending, there's no additional time to go 10 times. So I began to see that there are these two companies that we have. We have an R&D company, which is Strategic Coach, three levels, Signature, 10x, and Free Zone. And then we have the additional programs, all the Team Programs that you've created, The Strategic Assistant Program, The Team Leader Program.
 
Shannon Waller: And Team Tools.
 
Dan Sullivan: We have the EDGE Program and everything else, but these are all based on the tools. So that was my thought that kind of put me off and running. And I think I've got a real tool here that there's a second company that everybody has. And this second company is only because of the first company, but the second company allows you to see the value of the first company. So I call it The Second Company Secret. It's copyrighted, it's trademarked, and it's on the way to being a patent.
 
Shannon Waller: I love it. So Dan, I love Lior's question and how you responded to it. And you've been coaching this for a little bit now. So what has been the response? Because I think you really have tapped into something, people's current experience and the future desired experience that they want to have. And has it reconciled some of that tension that you talked about at the beginning?
 
Dan Sullivan: Yeah. Now, it was different the way I introduced this tool, because usually I have a next quarter coming up. But this one I had sort of a, it's just a matter of how 2025 is organized. So I completed a lot of workshops in January, but I don't have any workshops in February. So there's like a six or seven week break between workshops, but what I do have there is I have our annual big summit. This is the Free Zone Summit where we had about 70 of our Free Zone clients plus a guest list that added up to an additional 170. And I had six speakers, great speakers. And I said, you know, I'm gonna test this out and I'm gonna have the speakers talk about how they've progressed in their entrepreneurial career. But they have to do this tool called The Second Company Secret to prepare for their talk.
 
And so I wrote it up real quick and I got it and I showed it how it applied to me and I sent it out to each speaker and I said, now here's what I want you to do. They all did it. They followed my example and they did it. And then I had a Zoom call with each of them just to clarify anything. And it went just very different. All six of them totally different businesses. And then at the beginning of the speech program at Free Zone, I said to everybody, now there's a particular structure that we're going to use for all the speakers today, and they've all thought about their company and what they're going to tell you.
 
Each of them is going to speak for 20 minutes, and we'll do three of them in the morning, three of them in the afternoon, and then we have a worksheet for you to say what you got from each speaker, and then you can go into breakout group, and then we'll have Q&A for the three speakers in the morning. We repeated it in the afternoon. And it went really well. But what we did is we had the speakers fill in their worksheet, the one that's in front of you that you're asking all the questions that I'm doing here. And we printed them.
 
And so all the people in the audience had the six worksheets. So they could see and then they talked, you know, at breaks and that they would talk to the speakers, but they had this wonderful worksheet that they could rely on to ask and I said, bingo, this really worked. And now I have my two-hour sessions, I have connector calls, two-hour connector calls, I'm not doing my 144 workshop days anymore, but I have these wonderful two-hour Zoom calls, two with the 10x Program, those who want to attend, and Free Zone.
 
So this, here in February and March, I'm taking everybody through this, and it's just gangbusters. It's just working so well, and such interesting conversations, you know. I've had a lot of great tools, but I never had one that seemed to go so deep into how they looked at their company. You know, I said I've observed that entrepreneurs have this adversarial relationship going on in their head between one company that actually makes the money and another one which is quasi-real. I mean, you may be making money there, but you wish you could be spending all your time on that company. Meanwhile, you're having to do this company. And I'm sorry. I mean, I don't get people thinking about things that I haven't thought of myself, you know, so I test out.
 
Shannon Waller: Which I love.
 
Dan Sullivan: Yeah.
 
Shannon Waller: Yeah.
 
Dan Sullivan: Which I do, you know.
 
Shannon Waller: So this is fascinating, Dan, and it's great because it also strikes me, I wrote this down as you were talking, it's a little bit like the second company is their Unique Ability company, right? It's where they get to do what they do best and they most love to do that has the biggest impact, where they're a hero. And when you're doing your Unique Ability with a Unique Ability Team, there's just so much less friction, less drag, more impact, more money, all the good things. Now, my question is, because we used to have an exercise a long time ago called your present company and your future company. And that turned out to be a little, I'm going to say the word dangerous, because people were like, oh, I just want my future company. And they trashed or ignored their present company, their staff. And then they ran out of cash.
 
This was not a good strategy. And the second company actually has a different context around it, which I think is brilliant. So what are you noticing or what are people starting to do? Are they starting to move towards their second company? I mean, you've been very, very clear. It's the first company that actually produces the cashflow. So you don't wanna get rid of that necessarily. You wanna use it, but how can people make steps towards that? Or how does it shift their thinking or how they build their teams or how they organize things once they're starting to reconcile that tension between the two?
 
Dan Sullivan: Yeah, I would say there's three things that I've noticed so far that I wouldn't have noticed if I hadn't tested it out. Number one, they begin to realize that all the creativity starts in their first company.
 
Shannon Waller: Oh, so that's a real appreciation for that then.
 
Dan Sullivan: Yeah, they have enormous appreciation for their first company.
 
Shannon Waller: Nice.
 
Dan Sullivan: And they don't want to get away from it anymore. As a matter of fact, they want to increase the depth and the quality of the first company because they realize that it's creating all the unique solutions, which become processes that they can package as IP. So it's the well, you know, it's sort of the spring where all the creativity is coming from. So all of a sudden, their whole attitude for their first company switches.
 
Shannon Waller: Yay. That's phenomenal.
 
Dan Sullivan: The other thing is, the second company is a matter of collaboration with other people, and they don't have to spend a lot of time in there. So it's a huge multiplier in the sense that they're getting the value of the IP, the intellectual property that they're creating in the first company. It's actually finding networks. Dean Jackson has the great model, which is called VCR, and other people who have systems for expanding and taking their creativity packaged and protected as intellectual property, they're taking it and they're getting it out to the world in ways that the entrepreneur really doesn't have to spend much time. They have to get a good structure in place, and they have to have a really good collaborative partners to do this. For example, in my case, once I've created the tool, there's no work on my part that's required before it becomes a patent that has a very significant asset value, because that's the collaboration with Caldwell Partners and the Patent Bureau.
 
Shannon Waller: Well, it's great. And to go back to Dean's formula, it's Vision, Capability, and Reach. So you might have the vision, you're producing the capabilities, and then your collaborative partners are often the part that really help you get the reach out there.
 
Dan Sullivan: I would say the vision is the two companies.
 
Shannon Waller: Oh, okay.
 
Dan Sullivan: Yeah. The vision is the two companies that I have, the one company that creates and packages solutions as intellectual property. And that's the capability. So the vision is that I'm going to have these two companies. So everybody has the same vision, the company that creates and produces intellectual property solutions. And that's the capability then that makes the relationship with the company that has the reach.
 
Shannon Waller: Yes.
 
Dan Sullivan: Or the system. It varies. It's really different. For example, we already had the second company the moment we got another coach. 1995, Russell Schmidt was our first coach. And now we have 15 others. I would be 16. Well, I don't do any of the work to select the coaches or anything. They just appear. But every time we get another coach, that's another six or seven workshop groups that we get that go into the schedule. They're all managed by someone else. And the other thing is the growth of our back stage company that makes all that possible, which I'm not responsible for at all. How is this striking you as you see this? Because you've been with the company basically forever.
 
Shannon Waller: Since 1991. It's interesting, Dan, as you're talking, I can see my own creation of intellectual capital with what I've done with the Team Programs. And actually today I had a meeting with this brilliant company, Paul VanDuyne's company, because they want to design an entrepreneurial leadership program in collaboration with me. And I'm like, it's just a playground. It is so much fun. So I'm like, okay, I'm experiencing exactly what you're talking about. And it's complete and total Unique Ability. It's utilizing all of my many decades of experience. And it's a playground. It's super fun.
 
And it's going to happen because of the collaboration and the reach that they have, which is a lot. They have 100 small companies as part of their bigger corporate entity. So it's kind of amazing. I get to see my own experience reflected in exactly what you're talking about, which I wouldn't have looked at it that way unless you were sharing this model. So Dan, you were saying that there were three things. People begin to realize that their creativity is actually in the first company, which is kind of a big insight. They no longer want to ditch it, which is good. And that the second company is a matter of collaboration. What's the third kind of …
 
Dan Sullivan: The third one is, just because you now have the second company is now producing money, it influences and encourages your creativity in the first company. There's a feedback loop. For example, I'm creating far, far more thinking tools now, and I've seen the flow of patents that are coming as a result of it, that encourages me just to create a lot more thinking tools. So I'm being motivated by the fact that this second company is a company that multiplies value very, very quickly. The only expense is the expense that the patent applications cost and that, but the valuations that come back are multiples of what you're paying for the patents. But plus, all your creativity is being protected. Everything you create, that's a fourth thing, that it's being protected by the copyright trademark patent laws.
 
Shannon Waller: A couple of insights I have from what you're saying, Dan, and one of them is that you are essentially doubling down on your ability to create tools. Because not only it's patentable, it's something that the patent office says, yes, we would like to do that this way. And it also, as you said, positively impacts Strategic Coach and the current company that we have, the first company. So you actually just have to keep doing more of what you've been doing.
 
Dan Sullivan: I just keep doing what I love doing.
 
Shannon Waller: Yeah, so it's not more complicated. It's, in fact, simpler. It's 100% a Unique Ability activity for you, especially because you're in front of your right-fit audience. So it's not more complicated. It's actually simpler.
 
Dan Sullivan: It simplifies things enormously. And this is permanent. There's permanently we have two companies, an R&D company and a multiplier company. One of the entrepreneurs on a Zoom call this morning, she's an engineering manufacturing company. And she said, I don't really understand any of this. So she said, I'm a manufacturing company. Mine aren't ideas. I'm producing stuff. And I said, we're all manufacturing companies. The question is, are you manufacturing tangibles or are you manufacturing intangibles?
 
You're manufacturing tangibles, but you're also manufacturing intangibles because how you create the manufactured products is actually IP. And I said, you do have trademarks and patents. And she said, yes, I do. And I said, well, you're manufacturing, you're a double manufacturing company, you manufacture stuff, and you also have ways of manufacturing that's intellectual property. And she said, but I'm not really maximizing that. And I said, yes, that explains your presence on the Zoom call.
 
Shannon Waller: Well, Dan, I actually wrote this down when you said it, IP solutions. I mean, if there's something I'm walking away with, it's like, yeah, recognize that your solutions are in fact intellectual property, and then take steps to protect them and make really good use of them. Don't take them for granted. In fact, to hazard a guess, I would say the number one obstacle to people seeing this is not appreciating, to your point with our client, that their unique solutions are in fact IP. Would you agree with that?
 
Dan Sullivan: Yeah, and the reason why they don't see them as valuable is because they're not protected.
 
Shannon Waller: Oh, right.
 
Dan Sullivan: So they've got all this creativity, and I got an insight into entrepreneurs getting discouraged, getting bored, and retiring, and that they've always been paid for their creativity, but only as one-off solutions. But meanwhile, they were creating solutions that could be repeated a hundred times. Okay. But they're bored with doing that. Well, I don't want to do the same solution over again. And I said, well, you don't have to be the person doing the same solution over, but somebody else would like to do the solution many times, maybe forever. And you would get paid every time they did that.
 
And they said, yeah, but I don't want to train. I said, it's not the training, it’s that you haven't put it into a usable tool that's protected. And I said, you're afraid of exposing your creativity to the marketplace because it can be stolen. It's not protected. And so here you are, you're 10, you're 20, you're 30, and you've made a very good living. You may have gone 10x just out of cash flow. But you know, there's this buildup of incredibly useful stuff. And if you went to sell your company, do you know what all that buildup creativity that you didn't package and didn't protect is? You know what it's worth?
 
Shannon Waller: Zero. Zero.
 
Dan Sullivan: And after a while, it's like you got shopping bags and shopping carts filled with ideas. And every time you make a move, you gotta pull all of them, but they're not worth anything, but you can't give them up because they're yours.
 
Shannon Waller: Right. That's a great description of how stuck some people feel.
 
Dan Sullivan: Yeah, and then they retire and they die three years later.
 
Shannon Waller: This is so insightful, Dan. Thank you. Because I think the whole idea of the second company, that in fact, one of the by-products when you really grasp this, is it makes your first company even more valuable and your role in it. And it really will fine tune exactly what you should be doing. But again, to your point, is if people aren't protecting it, they're just lugging this stuff around and they don't want to share it with the marketplace because it could be stolen.
 
Dan Sullivan: It could be stolen.
 
Shannon Waller: And you've made this point in numerous conversations about intellectual property. It's property. It can be protected. And it's valuable, same as your real estate holding is. So I think once people make that mindset shift, whole new possibilities open up.
 
Dan Sullivan: And the other thing I said to them, and I said, look, I'm giving you an insight. You had a two-hour insight this morning. And because you had this insight this morning, you're 10 years ahead of the world. Okay, and I said, we all have our schedules, you know, and our sense of timing about when we want to do something. But I said, the mere fact that you've gone through this thinking this morning is a huge asset for you. So my question is, when you want to take action, but I said the first step that I would take is use our tool, The Impact Filter, and anything that you think is a unique process, set it up as an Impact Filter. Here's the project, here's the purpose, here's the ideal outcome, best result, worst result, eight criteria, but do it from the standpoint of the person who's using your solution, not from your standpoint.
 
Shannon Waller: Ooh, good one. Yes, and everyone can download The Impact Filter.
 
Dan Sullivan: Yeah, and Kary Oberbrunner, a great Free Zone client, he's got a wonderful instant IP tool that you just go on the internet, first one is free, and you take a picture of what you've just created, the idea. If you do an impact filter, just take a picture of it, and it date stamps it, and it's instant IP. It's automatically intellectual property when you get it. So I said, you can all start that right now. You can start doing that. Not everything, but I said, if you look at it from how valuable it's been to customers, you know, what difference it made, how they felt about the experience, you can easily see that 10 of them are more valuable than another 90 that you've done, and just go for the 10.
 
Shannon Waller: I love it, Dan. You've taken something that could seem so big and complex and made it very accessible with a starting point with The Impact Filter, use easy IP to do it, and all of a sudden, then you can really start. You've already started to make the mindset shift, but then it will start to become real, and your first company won't be in juxtaposition anymore. I love it. Dan, thank you.
 
Dan Sullivan: I mean, it's your choice when you want to start this process, but documenting your creativity, you can do right away.
 
Shannon Waller: It goes back to your point to, like, take your own thinking seriously.
 
Dan Sullivan: Yeah.
 
Shannon Waller: Dan, what'd you get?
 
Dan Sullivan: What'd you get?
 
Shannon Waller: Oh, I love it. Well, it's great because I finally got a chance to see it and hear it, which is lovely. It's a much more advanced version of something, conversations we've had before, but it does, it really eliminates that tension between the two. And that's, I think, what is expanding my mind the most. And the whole idea of, Dan, I'm calling it the R&D company and then the multiplier company, it's huge, right? And so, it lends to appreciation for both of them. They don't have to be fighting with each other. But again, the simple requirement is that you take your thinking and what you've created so far seriously. Package it. So, yes, I love it. As always, thank you, Dan.
 
Dan Sullivan: Thank you, Shannon.