Two months later, on a Friday night in Berkely, Bernstein bought a copy of Lotus 1-2-3 and booted it up on a PC atop Dychtwald's dining-room table. "I took him through the standard Business 101 exercise -- what are your products, who would buy them, who would sell them." By the end of the weekend, after working through two nights in a row, they'd realized that "Bismarck Inc." was just a start. "We created a five-year pro forma with the columns set at 9. But we had to move them to 15 because the numbers were so big."
For Dychtwald, who had never even seen Lotus 1-2-3, the exercise was a revelation, "like first walking up to the edge of the Grand Canyon."
Dychtwald thought he had found a new mentor, a teacher who "instantly saw the big picture." But Bernstein was a reluctant participant. He'd enjoyed showing Dychtwald "the wonders of business," he admitted, and he'd be glad to manufacture products for Bismarck Inc. But he couldn't see himself doing more.
Yet within a year, Dychtwald's magnetism had attracted Bernstein to sit on a newly formed board of directors, taking an equity position for the investment of his time. "The amount of energy I've committed is way beyond what I expected, to Ken's credit," he says now. "He had the skill to rope me into the cause."
Fred Rubenstein, the second plank of the Age Wave board, had never heard of Dychtwald before the gerontologist was invited to deliver the keynote address at the Institutional Investor conference in 1985. He'd wondered at the time why the subject of aging was on the program at all, but by the end of the speech Rubenstein, too, had been convinced. With his own father 82 years old, fast approaching the end of life, Rubenstein's thoughts on growing old had been bleak, a vision of obligation and decline. Dychtwald's optimistic perspective lifted his spirits.
In Rubenstein, Dychtwald thought he had found a second mentor, a teacher with marketing skills that would complement Bernstein's strengths in organization and finance. But Rubenstein, also, initially insisted he was too busy to get involved in a second business; Institutional Investor Inc. was being positioned for sale at the time. While he agreed to help out with advice over the phone, he refused a more formal position. But before a year had passed, he too was on the board.
For both men, it was hard to separate Dychtwald's crusade from his personal charisma. Energetic and open, he was a striking California contrast to the Type-A men Rubenstein and Bernstein usually saw back East. What struck both men most forceably, however, was his eagerness to learn. "He's a good listener and a very fast study; he doesn't have a know-it-all attitude," Rubenstein explains. "We didn't have to beat him over the head to get him to do something," Bernstein adds.
For Dychtwald, taking the advice he is given was one part of his side of the bargain, a practice he has always followed with his teachers. "If you're going to choose these people you've got to defer," he insists. "You still need a maniacal will to build a business this way, but you've got to be willing to relax your ego and listen, too." Still, Dychtwald had his own contribution to make. He would be teacher as well as student, with no false modesty to get in the way.
"I'll show you the keys to the safe," Rubenstein told him.
"I'll show you the keys to life," Dychtwald replied.
When the Age Wave board held its first meeting at a spa near Tijuana, Mexico, in July 1986, Dychtwald brought a clear vision of what his company could become, based on the model of his Bay Area neighbor, Tom Peters. He'd continue to turn out articles and books, work the platform speaker's circuit, and perhaps add audiotapes or consulting services. "I thought, wow, we can make $4 million a year."
But the board wasn't interested. What would happen if he got sick, Rubenstein asked. Or if, after five or six years with a business on his shoulders, he decided he wanted to do something else, Bernstein added. If the company revolved around Dychtwald's personality, there wouldn't be an asset of value to sell, and asset building was the name of the game they planned to play.
Over the next five days Rubenstein and Bernstein gave their young CEO a lesson in strategic planning. Forget $4 million in sales; that wouldn't be worth their time. Their goal was more ambitious, an asset convertible to $100-million cash five years out. That would require building a company with $40 million in sales and 25% pretax profits, a company that could fetch 15-times multiple, at least. Age Wave would need more than Dychtwald's knowledge, access, and presence to reach the target; the company would have to create products that would yield a passive revenue stream for an acquirer, and build a team of managers trained to keep the products coming.
Bernstein insisted everything be established as if they were already shopping the company. Potential acquirers would look for steady earnings, so Age Wave would have to be profitable its first year. He'd seen too many start-ups chase sales growth, "but growth is not the issue," he maintained. "The bottom line is." There would be no debt: with limited concrete assets beyond expertise, the company couldn't borrow from a bank. But there would be no diluting equity for cash, either -- "that's just asking investors to subsidize your problems." Dychtwald would be expected to live on his cash flow, and to keep "everything totally visible and in order on the balance sheet with a financial structure that could stay in place to the $50-million range, with a good set of books and a strong controller, plus 12-month rolling cash flows -- "all the things you expect to find in a five-year-old business."
