#61 - How to Buy, Manage and Grow Cash-Flow Positive Businesses + Corona Virus Impact on the Economy

alright we got a friend of the show here jordan harbinger he's one of the guys who's been advising us on how to build this podcast because his podcast is way more successful than ours has been around he's been doing podcasting for like twelve and half years which jordan that's gotta be as long as podcasting has existed right yeah i think podcasts have been around for like fourteen years and i've or fifteen and i've been around for thirteen of those so yeah when i started there was no way there were no iphones so you couldn't get podcasts on your phone you had to use an ipod to play them yeah straight to cassette that's how that's how long this guy's been doing it so so jordan you know i like i like your show i've been binging it while in quarantine because you know else am i gonna do because i just try to learn something new or improve myself in some way and i gotta say i like it because you do the you know the interview style show where you go deep with a guest i think you know you had i was listening to the one with tony hawk which is pretty awesome and i gotta say i like that you don't do the kind of surface level you know just just pit you know pity padding around with the questions or trying to do you know inspirational fluff where you're just saying go you can do this so with that episode with tony hawk what was that like because tony hawk an icon how is it you know interviewing tony hawk it was great he's a really interesting guy really open and fun and he told some pretty funny stories one which was very apr repo what it's what's going on right now is one day he walked into his agent or some sort of marketing team that he'd hired he walked into their office this is like at the height of video games where he's making i don't know fifty million bucks off these skating games and these brands and he goes in and he says look i got this backpack that was made pretty s and it's got my name and face on it i don't want any more stuff like that and as the agent marketer or whatever is sort of nodding his headed understanding tony goes wait what's that on your shelf and it was a roll of toilet paper with tony hawk name face and logo on it and he goes what the hell is that and the guy goes oh yeah anything we put your name and face on does so well we were joking that we could put your face on toilet paper and we'd still be able to sell it and he fired them on the spot because it was clear that they didn't value his brand which i thought was a funny story and he's got a ton of stuff like that that he talked about on the show that is epic you know i actually met tony hawk we went on a trip to africa a charity trip together and believe it or not we were halfway up up a mountain in ethiopia where you know it's a like this there's a mountain village and somebody saw him there and they were like tony hawk you know that's one of the only english word they said to us all day they identified tony hawk on a and ethiopia that's how famous that guy is so that's an amazing guest to have on the show imagine being that famous that you get recognized in the middle of countries where like nobody speaks your language and they maybe don't even have skateboard yeah we were there trying to give people clean water they didn't even have water but then they knew tony hawk that's how that's our famous guy amazing awesome well if you wanna hear more from jordan we're gonna be having him on more and more he's a friend of the friend of the house and you should listen to the show it's one of the podcast podcasts that i would recommend if you liked tim ferris this stuff if you like like our stuff you're gonna like his stuff and so go check out the jordan harbour show on itunes spotify wherever you get your podcast you'll find them there what's up everybody sean here with sam and special guest for this episode brent brent how do say your last name be sure be sure alright cool i've been trying to get you on for months i think our email thread goes back months the reason why is because i'm interested in the business of buying businesses i i've been looking to do this myself so after i sold by company i said great i got some cash i can either to put this in the stock market i could do you know i can go gamble this on a river boat or i can potentially buy a cash flow in business that a a good solid stable business and so i started learning about that world stumbled around and saw permanent equity and yeah i've been interested in having you on on the podcast then so why don't you tell us give us like you know the the minute version of who are you and then also what is permanent equity yeah so permanent equity is we like schedules a family of companies that buy family owned companies so technically we're a private equity firm now we were just a a small collection was my own capital in the beginning i was entrepreneur and and then accidentally bought a business about ten years ago and that's what led to kinda what we do today but what does that mean you accidentally bought a business yeah i so i had a mutual acquaintance and say hey you should meet this guy he's in your he's in your industry and he just got left at the altar for the second time and i took that to me i try to buy his business because while tell me that he had no idea he was just trying to connect two people that were you know in the same in the same field or similar fields and so i don't know i looked about it with twenty four twenty five now i looked about thirteen or fourteen then and sat across from the sky and told him i went to buy his business and he he he laughed at me and said to two grown men try to buy buy my business how the heck do you think you're gonna do it i said i'll figure it out and we negotiated it and he told me no thank you and then seven months later call me back up and said alright let's move forward and get it done so what was your coming to before so i started a a kind of collection of regional marketing companies we had started in two thousand seven kinda really got going in two thousand eight nine which were as you all know interesting times but it actually allowed us to grow and we adopted some video technology and it becoming standard we think we were probably the first people in the in the world to use it for commercial purposes but what does this mean what's regional marketing you know we were doing look we were doing like ad agency type we're doing media we're doing digital work you know trying to scrap and call and and sort of make it go of it you you're just an you're you're an agency just figuring it out yeah your agency we had some unusual owns kind of under that agency because being mid missouri we didn't have access to a lot of specialty groups so we start building out our own specialty groups so we've built out research we did some mobile and app development as well and and then some film work so those were kind of the three unusual buckets so you took don't get into agency and give us yeah give us a sense of the like level of success i think a lot of people one of the things we hear a lot is from the audience is like they hate when we fast forward and someone's like yeah i did this thing and then all of a sudden these amazing opportunities opened up and they sort of are like wait where were they before and so give us the before picture how were you doing how was that business doing financial did it was it a big business small business you know what what was that business like yeah so we so let's see here so i'm trying to it's been been a while since i've thought about the numbers so we grew to twenty six employees i think at the peak of that kind of what before we were so we're were look we were doing fine i make a living doing it i make a good living doing it it wasn't you know the agency business is hard really really hard and i think that's probably what i've learned in my career is i've made all the mistakes and i've tried and tested a lot of business models and sort of taste and try something and you're like up i didn't realize how hard that was gonna be and you sort of you know move around and so you know i would say you know moderately successful regional marketing firm nothing special i mean i would say you know when yeah when when we bought the the firm that we did called media cross you know we were kinda c equals how i described kind of the marketplace they were much more focused on government contracts than we were we didn't have any government contracts since i was really attractive about the acquisition and being able to combine those organizations gave us a lot more cash flow than than having them set purchase based on cross selling different products that we had and being able to fulfill a lot more of the a lot more of the gross profit through sort of the larger organization that they've been farming out some stuff so that was was kind of a nice combination so did you buy that first company under the umbrella of your of your marketing business yeah yeah correct got it and so so it wasn't its own entity no well i mean it i mean if it was be technically it was his own density but it was a hundred percent owned by me and a hundred percent the other firm owned by me so i mean it's shared resource so you didn't have a founder or any outside investors or anything yeah so i bought it with an sba loan thank god for the sba and so no it was it was just it was sba loan and rolled the dice and so just to give people a sense of where you're at now i think permanent equity you guys raised a a second fund two hundred forty eight million it's a a twenty seven year fund which i think is interesting and you could talk about that and you have a ten year investment period and so so the first fund fifty million second fund two hundred fifty million roughly so what are you guys up to explain what the model is here and why that should be interesting for people yeah well so if you think kind of from first principles families got wealthy by getting involved in a business and holding it for a very long time and then over time using those cash flows to either fund new investments or opportunities and so we just have very much same mindset you know private equity is kind of the main methodology of how people have bought and sold companies the past and it's a very short time clock if you think about it that way you're really from the time you buy time you sell it really needs to be probably know more than four years or five years at most and that's if you catch it kind of early on a life cycle most private equity funds are seven years or three one year extensions so up to ten years maximum i mean technically if you can't sell the asset you can go longer than that and everyone gets irritated at but you're expecting to sort of have the capital return and so what that forces is is you know you just can't think longer than your time pricing for holding the business and so when you combine that with a you know most private equity firms are trying to put in as little equities as they possibly can and maximize the debt and so what you end up doing is you take these great family businesses have been around for a a long time you're sort of hit them with a needle and trying to super charge into grow them and get a higher multiple when you sell and you're making just very short term decisions by necessity and you're opening yourself up which is pertinent now it wasn't as pertinent three or four weeks ago but now you're opening yourself up to a lot of downside risk that you just can't withstand nearly as much shock as as you could if you didn't have any debt so we've just really taken the opposite approach and said we wanna own businesses like a family would so we buy with no intention selling the business and we're typically using no debt part of our transactions which in the private equity world means that we're the weirdest doc in the world so how much what should total what's the total revenue of the collection of companies then we'll see so how total revenue gosh i mean hundred and oh gosh hundred and eighty hundred and eighty million something like and i imagine you guys try to run this like super profit so then if you have a hundred and eighty million in revenue i bet you have forty million in cash flow let's see here so hold i i i you literally put me on the spot here i've not done our calculations recently yeah i mean we're we're we're highly profitable i mean the organization does real well i don't know if we're at forty million because we have some lower margin businesses we're lower than that but yeah we do real well and and look i i don't know all of that anymore right so just from a like i don't want this to to come across differently than this we've got investors the first fund owns five of those investments and and then i own four outside the first fund that we're the the the group that we put together forward rates that first fund and then the second one to deployed any of that capital and yes so we've got a bunch of dry powder i mean obviously it's been extremely fort for us to raise at the time that we raised and i've been having lots of conversations with our investors and there should be should be lots of opportunity lots of pain out there which is unfortunate we gotta try to tow that line we could talk about it between being a white knight and lone shark and that's on easy one to tow right and so so let's just if we just take a look at the the portfolio as is what types of companies are you trying to buy so you're trying to buy is it a certain price point is it a certain business model is it a certain type of owner what are you trying to buy yeah so we first wanna buy something that yeah we think it's gonna be durable and around for a really long time so you know if you look at our current portfolio we are in the swimming pool business like digging holes in the ground student of concrete we also manufacturing in that space as well another company that's unrelated in the backyard product space so bunch of skus that sell through mass retail we are we've military recruitment firm that was the first firm that i acquired bd cross we've got a a military recruitment firm so is that like lead gen for military yeah so we actually so we work i mean we have a a number of different clients but one of our main clients is civilian branch of the navy that res resupply the ships that never come into port it's called military seal of command and we're responsible for finding and onboarding all of their staff on a yearly basis so it's like a staffing firm for a ship yeah well for a whole branch of military so it's there's they're they're staffing i mean there's a lot of you know fourteen fifteen seventeen hundred civilian mariner a year into that division so it's a it's a pretty a large operation but it's a digital some of it's digital yeah yeah we have you know online application products but not mostly i mean there's a lot of physical activities as well we there's is recruiters and it's you know online offline it's the it's the not sexy where the rubber meets the road real deal business alright everybody if you wanna make your first million with a mobile app you have to prioritize app performance first and that's where our sponsor heads spin is here to help you can get a custom heads spin benchmark report that will give you deep insights into your performance from cold and warm starts to errors crashes responsiveness times including audio and video quality and biometric responsiveness that's right art there they have a state of the art global device cloud that provides unique carrier network device os and app level insights and these are all happening on real same enabled mobile devices that are in hundreds of locations all around the world no sd sdk required i like to think of it as having my own fleet of testers all around the world with a push of a button and you can get a custom heads benchmark report at heads spin dot io o slash my first million again if you have a mobile app and you wanna see a benchmark report of your performance it's heads spin dot io o slash my first million can that be huge yeah i mean so we wanna find a leadership team that we can partner with there's so many you know it's so hard to grow business right and so a lot of the businesses we're looking at we we we either call it has been right before the line of professional customization or maybe it's just crossed and there's this this real interesting you know sort of in between gap where a lot of these firms they're they're too big to be small and too small to be big and the leadership teams kinda capped out they're just brute forcing as much as they possibly can but they don't have the the systems the talent on staff to be able to to grow larger and so a lot of the times we're we're trying to figure out from them you know do they wanna get bigger there's some there's some firms that we talk to and and they say well even though they'll say i wanna get bigger but the you know the ceo's answering sixty calls a day on a cell phone and i mean there's just no way right and so we're looking for a leadership team that i think has the base skills it's really really excellent what they do and we're looking for the the company to have a position in the marketplace that is protected somehow right so i mean we're not looking to get into just commodity type businesses we want them to have something unusual about them that we can really build on and help them grow and then you know this is does sound like a like a maybe a a no brainer obvious one but we gotta get to a price in terms that that that are acceptable to both parties right and there's roughly four hundred decisions that have to be made sort of during the acquisition process i mean it's four hundred opportunities to not agree and and it's very difficult and time consuming and so a lot of is just trying to make sure that we think that a deal could be done as well and and so when you say the leadership team can you know what you want them you want them to scale so why are they selling if if you want them to stay in place so they're not looking to kind of like go do something else or retire or whatever you you want them to continue to operate and are they just looking for liquidity what is the kind of core motivation to sell and then do you have a problem where once they've sold or do you structure the deal so that they're still incentivized to to to stay on and do a good job yeah it's a good question so part of is so the leadership team and the the ownership is is not always the same thing so some of the the organizations that we get involved in the owner is is very much part time and hasn't been directly involved in the business for a long time and so for us it's actually that's a that's a decently good situation because we'd love to just you know continuity of it keep the leadership team tree them well and and try to augment the talents kind as we go along some of the owners that that that we got involved in have stayed on and and it's worked out great second body the apple they get down the road be much larger than than even their first payment despite them selling a majority of the company so it really a situation is you know specific i mean i would say yeah for the most part some we're waiting take chips off the table some you know realize that they need help in scaling and growing so it's you know it's a variety of different reasons i would say that all of them have an exit somehow in their minds i mean if you're in your call it thirties or forties and you wanna work for the next you know thirty four years you know i i i don't think many people like that are are selling their business at least in the size range and the style of businesses that we buy hey earlier you said that one of the best ways that families have created wealth was by having a business and owning it for a very long time so something tells me that you study like the wealth creation process i'm not talking about like just building a business that makes money but like like creating like a true wealth and so i guess what i'm wondering is with these people who are building these companies like i'm looking at i'm i'm looking at like things that maybe we'll ever be like massive massive but can create great well so i'm looking at gain group i'm looking at selective search which is an executive search beast personal match making that actually probably could be big anyway when you're doing this like what what are some of the paths i mean like because in silicon valley we're sean and i live the path for most people or the soul silicon valley stuff which just sometimes bullshit sometimes not is creating something and raising loads of money and owning a very small percentage and not truly getting wealthy until after you sell it or not getting liquidity at least and their salaries will be a hundred to a hundred fifty thousand dollars a year so you can't like and you're living in san francisco so you're not filling it there but i have a feeling that you guys look at this differently is that true yeah well i mean certainly the types of businesses i mean it you know we we have a rule we don't buy from somebody who's not already wealthy because if they didn't get wealthy doing it we're not going to so they're already they're already doing well i mean these people are the chairman of the country club they're they're in in the geographies they're in they're probably the people that you know the chamber of commerce would point to and say they're a really vibrant good local business or they're a bigger business national business that's based in that geography and so yeah i mean the the the getting wealthy from cash flow yeah yeah that yeah these things make money i mean you know the you know we're we're typically i mean if we're getting involved now the company making more than three million dollars a year of real you know real owner earnings what it sticks to the owner so look anybody and these are closely held so typically the owner will be one to maybe three or four people at most and so you know usually the the one two three people that are that are owning the company are doing very well they take a lot of risk which maybe sometimes it's hard for people to see and they built it over a long time but i mean yeah they they've done well for themselves and they're successful in you know separately and outside of the transaction itself and so the the owner let's just walk through a typical one so i'm you know hypothetical owner of a business that manufacturers wheelchairs were based in oklahoma and i'm the owner i'm the sole owner and i i pull in let's call it three million dollars of your owner earnings and own earnings would be different than sort of eb in this case right so you're yeah i would say eb minus a operating interest any sort of necessary capital expenditures to keep the business on current trajectory and a a normalized compensation structure for the owner if they're in leadership of the company so it's like kind if you hired somebody to run the company for you and you made all the necessary reinvestment how much would be left for at your discretion where you can either try to inject it back into the company and grow it further or buy a boat so so fill in the blanks for me so if i'm making three million a year what's a typical eb then for that company if the owners pulling in three million i'm the types of companies you look at yeah i mean probably eb would be three and a half to four something like that probably doing fair so that was on three million and and owner earnings would be four million in eb roughly yeah roughly i mean three three and a half to four i mean it depends on the the the type of company mean we looked at an aerospace company couple years ago and they were doing seven in eb and owner earnings was like three and a half or four why it depends on because of investment so just they had they just they needed a a a large cash buffer no no they they're having to reinvest in equipment to just keep their market share and and sort of stay steady in place it just you know all that cash flow would be rolled back into buying new equipment buying more inventory you know all the all the type of things that the cash be sucked into and how are they getting the money out of the business i mean are they is it are they typically l llc or yeah typically i mean it it's a mixture i mean i would say probably ninety ten maybe eighty five fifteen is llc but either way i mean if if if they're a c corp skills typically see owners you know paying themselves a lot so to to avoid that double taxation so they're just paying themselves big old salaries and just having to pay fifty percent tax sure yeah i mean if you live in california and so so let's let's keep going for a second so let's say you're that three three and a half four million eb and when you guys go to buy these businesses what type of multiple of course it depends on industry and it's very dependent but what's a range is it 1x x two x three x four x is that lit is that the sweet spot of kind of the bulk of your deals yeah i would say kind three and a half to five and a half would kinda be the be a normal range i mean we maybe we go higher for a really high quality asset but i would say that's a pretty normal range in our segment which is you know kind of our strike zone is three to eight million dollars of bonus earnings so in that range i mean on the upper end you can get into more traditional private equity territory and and you can see some some well you used to see as a three weeks ago this is again i gotta re orient myself to the new reality but yeah i would say three and half to five and a half times and then there's usually a component of that that's held back earned out or downside protected in some way right so we're typically paying two to kinda two to three and a half times cash and close and then the rest kind of on on the upside depending on what happens gotcha so you might have a let's say ten million dollar price tag for the cash it close and then plus maybe four million three million bucks that's that's earned out so now you go to sba and what you were saying is that you guys don't do debt you go you guys are no debt or you use less debt than a per a typical private equity firm yeah so so the sba was on the first transaction i did you don't do sba my own money that we have no we have no involvement with banks or the sba or anything like that now so you guys just do cash deals you say here's ten million bucks we're done now why don't you use debt yeah well so debts one way to take a good company make it fragile company you know the the more debt you're layering on and the sort of the wider the variation of outcomes that you expect to happen and obviously pandemic risk is something that was not a lot of people's radars us included until recently but it's you know it's a good example of why we think that not lever these companies especially in the beginning when you're starting to get to know them i mean until you own these companies you just don't know what you're getting really until you get you know underneath the hood and there's always more risk there than you think there will be right so okay you know our our mentality has been going with with all equity no debt try to keep them very very robust on the balance sheet and make sure and we're buying these with full balance sheets attached to them right so working capital all included so the net worth of the company will be you know fairly robust going into the transaction and then of course as we over time as we build cash into these companies then we can decide what to do with it but working capital bucket is kind of like the you gotta fill up the bucket first for the owners can get anything out right because you gotta keep the the the the machinery lu and when you buy a company what is the first three months six months are you hands on with that is it do you have you have a operating partner who does that how do you guys make sure that you when you buy an asset you don't a destabilize it and b you guys actually start to grow it which is i i assume lot you bought it in the first place yeah so so our our philosophy there's a lot of private equity firms out there that have these you know thirty day ninety day a hundred and twenty day plans right we don't do that what we try to do is take a humble attitude towards it and say look we we we know some things we have some talents but but we wanna learn and and and come alongside them they're the experts they've been doing it for a long time so there's a team sixteen of us so so it's not certainly i don't give the impression this is just me that there's people far talented more talented than i am on staff and there we we have a dual hook and structure post close so our financial team hooks into their financial team and creates feedback loops and then we have a we call portfolio partner they're kind of a board of directors in a box that is overseeing kind of the executive leadership helping make very high level decisions i mean these are autonomous operating units i mean so there's these are these are not we're not injecting these people into the companies to run them but they're in touch with the leadership teams all the time doing you know a variety of different types of calls and meetings throughout the year and how many companies are there there's nine that you guys own that got it so that seems manageable yeah i mean it it it's so for every kind of three to five companies we we acquire we got hire one high level financial person in one portfolio partner and that's kind of their their grouping of companies that they're kind of running so we're almost creating like a fractal if you wanna think about it that way down into the organization so that it scales as sort linearly in that way so andrew from tiny johnny and my friends with him and we i just shoot the shit with him once a while and he emailed me he like tweeted this thing and he sent me the tweet of how he sought met guy who had a cool furniture store and he goes oh this is neat need to put that on shopify okay you i'll partner with you let's do it now i own part of it and he also did the same thing with like a local news outlet victoria where he just like seems like he's spinning up stuff so fast on my can't i don't know how you track all this this is crazy tracking nine is easier than tracking nine is hard but it's a little simpler because it appears from the outside as though he has got forty different things how does how does that compare do you think with what's something like tiny and does does this keeping on top of all this i mean i that seems really hard to focus on where to put your focus yeah i i mean i i know andrew a little bit i i don't know i'm super well i mean it seems like he's been successful i think they're getting involved in in in for the most part more internet based software based type companies so it's just a very different model so i would say i have no idea how they're organized internally i can tell you on our end is it a lot of work is it difficult of course it is right anything worthwhile to be hard you know internally how we've created that structure though it's it it it creates a very manageable focus group right so you can you can allow a small group of people be highly focused on on certain out comes as opposed to being all over the place i mean i if it was just me and a partner of mine like that we're were trying to ham egg this thing like i'd go nuts there's no way especially right now i mean with all the turmoil that's happening there's just no way you can keep everything separate and you know watch legislation that's coming out and watch legal and accounting and meet deadlines for audits and i mean it's it takes a full team and so yeah i mean we're we're obviously blessed to have that earlier you talked about the one of the things that you buy a company i you you okay so you said that there's the your sweet spot is in between like it working out like it it working and it being professional right yeah and i think that when i so i started the company that i have i started it when i was twenty four it's it's a good business now but what i learned the hard way was that actually to make something more valuable you need to take yourself out of the equation as opposed to like you know this mark zuckerberg thing where you're just gonna super superman this thing into like existence it's actually far more valuable even if that means you have a lower revenue number to have it where it's like a machine where people can be where you have put people in place and it's not just on the shoulders of one person sure can you and and i learned this from david h shawn david h i don't okay this guy named david h he's one of our little he's we we raised a little bit of money he's one of our investors he started grasshopper which it was like yeah you know grasshopper okay he's started that okay so it it helps entrepreneurs it it gives small businesses a phone so it's like google voice on steroids and he sold it for i think the three hundred million dollar really successful and he wasn't even the ceo he started it and owned the company and hired a ceo to run it and he taught me how to do that and i think that's fascinating can you talk but but that's different than one of our a lot of our listeners probably think about they think about it they're gonna start they gotta be like running show can you talk about where you've learned this process and and why and and i guess the companies who you've bought how they successfully navigated that to where the owner is no longer like the person yeah yeah so i mean for for us i mean well one i i knew my own limitations i knew that there was no way that i did just brute forces this thing on my own and i mean i think always subscribe at the bring bring people that are far smarter and more driven around you so that's how we build the organization i i hope in three to five years i'm completely useless and they just give me my ball yarn and let me play with it so but in in the organizations that we look at we we call this founder remote so this is probably the biggest danger of of acquisitions as you buy a company that is that largely all all of the goodwill tied up in the relationships expertise drive of the founder and there's just no really way to transition those separate from maybe coming alongside them in in over a very long period of time making that transition happen so for us we try to select against that we wanna see repeatable processes wanna see a a healthy layer of non owner management we wanna be able to see that we always call it you know hit by a bus risk so if anybody in the organization can get by a bus and destroy the value of the business best just a no go for us but tell me what you've learned on these people so how do i wanna make my company like that how have you what what of who how they done it best yeah so i mean i think the the methodology that we've seen work the best is take the things that either you aren't good at or you don't wanna do and start giving them to other people and then at over time as you sort of continue to offload and offload and offload you just kinda move up until eventually there's nothing much for you to really be working on i mean you have a lot of free time and you have a lot of flexibility we always talk about it if you have the opportunity to get involved or we're not a get involved a lot of these owners you be a good example that could probably add a lot of value if you chose to get involved but you also know that the things gonna work out fine if you don't get involved and so that's all these ultimately the test now we also have a lot of owners that we talked to and they say oh i'm not needed in the office at all you know this thing runs itself and we say to them oh that's great when was last time you to get vacation they're like oh i think three years ago i went on a weekend get away with my wife and yeah you know and they're like really so there's that balancing act self awareness as well is there any resources that you turn to or have turned to to learn this or that you can tell me and our audience to turn to in order to learn how to do this successfully gosh i i don't it's more just you know getting hit in the face over and over again the hard knocks and brent where are you finding these companies so are are you is it a broker network are you are there websites you use is it inbound because you do a lot of content or you know what is the explain how you find the companies that you end up looking into in potentially buying yeah yeah so we're fortunate now we do a lot of content out there actually podcast podcasts is one of the things that that's been helpful for us so thank you guys for avi on but we have it's all inbound at this point so we're not going outbound to anybody other the way what site oh there you go i got your book i if if you're listening into the audio version which you almost certainly are i'm holding up the messy marketplace which is brent book i bought this like i don't know six months ago i bought it right after we sold our business so it wasn't really applicable i was kinda like oh what did i do wrong type of thing but yeah it turns out just timing was good you know getting in before the whole world they send into chaos was was a good idea good time to sell but i didn't know that but you put out this book and it seems like you do more content than than i would say the typical kind of buyer or private equity firm yeah i mean i so so you know i owe most of my career to just ripping off venture capital is is in in reality so you just look at how did all the you know fred wilson brad phelps shu and injuries and all those guys how do they break into the world and it was basically by pulling back the curtain and at helping educate people and so i mean that's what we've we've taken that that to heart and we've mean started very early on so we've been producing like producing content talking to people for probably seven or eight years now it's gone back a long time and so over time that compounds right in the beginning you're just shouting into the darkness and no one cares and over time you know you sort of get people's attention our goal is just to be the first stop for anybody who wants to sell their business and we also try to be helpful on the back end so all its inbound we had a scout network which is common in silicon valley but very uncommon in in private equity so we've have about seven hundred people now that that scout opportunities for us which is fantastic and we obviously pay them when when we are able to cons the transaction and you have capital camp right yeah yeah so patrick and i yeah so we we we were complaining one night about how all the events and finance were terrible and to be fun to get like a cross section of people together there's typically you know vc events or private equity events there's very few events that get sort of a broad cross section of people doing interesting things together and so we complained about it enough i i i i said to patrick said well don't we just do something about it and so so and i partnered up and we hosted the first one last year was fantastic about two hundred and fifty people from eleven countries five continents came in and yeah that was great we we a wonderful time hosted in columbia missouri my backyard but it was you know i think i there was one other guy from missouri there so it's was very not not a regional crowd if you if you know what i'm saying and unfortunately this year we to postpone it due to the virus so we're pushing into september hopefully that we were able to flatten enough by then that we can we can have it hosting them you give us some predictions about the virus and the the way the sort of what's happening to businesses right now you know on one hand you said your timing was was good in the sense that you raised your big fund before all this and now a bunch of businesses are gonna need liquidity they're gonna need you know somebody who's who's a stable capital partner to to come in and buy them what are you guys seeing what's your prediction on on how this gonna play out both for for you and for the economy i would say yeah well so so for what let me think is a broader i think what what we're predicting and of course no one has any idea we're i mean trying to do this best we can to triangulate information we think it's gonna be a pretty long if you wanna think about it a good analogy i heard was a is a blizzard a winter and ice age right it's kind of about the three stages probably you know i think the blizzard is gonna last for another at least six day weeks probably longer than that and then i think we're going through a period of it's gonna be hard to restart a lot of these businesses so there's in in theory it sounds oh there's economic problems there's no big deal you just kinda go into hi nation and come back out of it and everything's fine right in practice there's a lot of start stop problems i mean you guys have run businesses you know if you had to moth ball everything and try to restart it i mean you're you're not able to do it earliest least be very difficult to do it and so my guess is there's be a lot of pain and suffering so at our portfolio you know because we don't use debt we have good balance sheets and obviously we have a financial firm to back it up you know wouldn't be fine i mean a lot of the businesses we're involved in and been doing better than we expected probably two weeks ago with that said just have no idea where demand is gonna go and i mean we're racing and we have plans for you know depending on what level of pain and suffering you know happens what you know what the plan is and you know we're gonna try to get the things back and running as fast as we possibly can you know the government intervention that just came out is interesting in how it's structured so the care act just got passed i don't know twenty thirty minutes ago and you know it is it's better than nothing it it's going through the spa and the spa is to be generous like the dmv of the finance world and so it's not gonna be an easy thing to get all that money deployed also the the sba lenders that we're talking to that are at these banks and we're not using the sba but obviously if it's for loans then they'd be insane for us not to to participate in that and they don't even know what the rules are right and so they're trying to get triangulate on on what things are so i think there's gonna get a lot of confusion i think it's gonna take a lot of time to get the the money into people's hands i'm not sure it's gonna actually stem the tide as much as they think it will on unemployment and so i fear that unemployment could go to twenty twenty maybe even thirty percent which is you think that's realistic yeah yeah fucking a man that's crazy yeah to put perspective put to put that in perspective the great to the that a great depression was what eight eighteen or twenty it i think it it touched high twenties okay so so i mean at a peak and and like i said i mean i look i hope i'm wrong right let's just say what it i mean i i hope that that's on but this is not a good environment for us actually i mean this is an interesting we could talk about as being you know a firm that has a lot of cash right now i i don't think this is a good environment for us at all i would much prefer a two thousand eight which is much more shallow downturn recession this the violence of this is is basically rendering all information available like a non issue you just can't there's nothing predictive about what's happened in the past and what how it goes in the future and demand curves i mean we don't well no one knows no one knows what the demand curve looks like are you for a twenty percent or thirty percent unemployment rate well i'm not betting on it that's why things gonna happen but i i think that you think that's gonna happen i think i think we'll probably touch twenty percent i think we could touch thirty percent yeah and i think we'll see it in the next six weeks will be will be when it it really comes down my guess is i i called jobs the the jobs number that the unemployment number that came out i had said previously i thought it was gonna be about three point five and ended up being about three point three which was wildly higher than what the sort of consensus was a million and if like if you're involved in small businesses and you said there was a million people following fund unemployment like i said that's a good joke of course it was gonna be way higher than that there's no way it couldn't be way higher than that and i mean what we're seeing is i mean i'd i had a buddy this week who laid off four thousand five thousand employees this week had another friend who laid off five and eighty five of six hundred i mean and this just that's just me i mean were they in the hotel industry or what was it just an industry that yeah food service is one and construction was the other so it's just it's it's it's a tough i mean and why do you say this is this is not a good time versus two thousand and eight what's what is the core difference there yeah so the the core difference is the violence at which this had has has downturn is is basically you could see it in two thousand eight a nice trend right line like you could see it it's kind of like a soft you know in private businesses right i'm not gonna talk about stock market stock market and private businesses are totally different right but in in the stock market it was know sure it had a violence to it and then you know kinda peer down and had another violence to it mean it's happened in in fucking eight days right right i mean obviously lean and and all that stuff come compression no i'm talking about right now oh yeah right now that's what i'm saying is right now in in private businesses it it is worse in private businesses than it's reflected in the stock market right now right i mean it's hard to know what's priced in and and what do you do with monetary policy when you basically an unlimited bid i i don't know right but i mean when you look at it from the businesses that we interact with it's carnage everywhere i mean you maybe have i would say ninety percent of businesses have been adversely affected five percent are probably you know sort of unaffected and then maybe five percent have some sort of tailwind that's weird because of this but ninety percent are just it is suffering i mean i is unbelievable what's happening right now mh and i i mean sean like four weeks no wow only two weeks whenever you sent me that link sean you go the nba canceled yeah i like a few hours before that i booked a flight to germany and because i was going to a conference so they paid for it but i like gave him my information i was they're like yeah the conferences is on and then sean sent me this link on at seven or maybe five o'clock at night and he goes the nba is cancel i was oh you mean like they're just pausing it for like five days it's like no no like it's done for the year the whole and then and then the next the next day it was like oh my flights canceled everyone's flights like it was like right and that was only two weeks ago sean yeah that's insane i remember people that i was crazy i started working from home the week before everybody did because i was like hey i think there's just like this once on a hundred your virus out there i'm just gonna start working home we did one podcast together that and i was like yeah i'm not doing any anymore in person stuff i'm not coming in into the city i'm not doing any of this and then it just felt like day after day it's like escalation escalation and now i think the the sort of the data is out pacing the the fear even at this point i think that the i think that the situation is worse that people realize even now and because it's growing exponentially and so i totally hear you brent you know my my sister owns schools my brother owns gyms my father my father long holmes nursing homes my my brother owns a concert promotion business right and nobody prepares for zero in overnight for two months you can't you can't plan for that yeah we were talking about our revenue i mean i you know i again calculated in my head maybe i maybe we're gonna be one sixty this year let's say under normal i mean we may be one ten or one twenty i mean we have no idea i mean it depends on how things go off the cliff right i mean it's it's literally no one has any idea what's gonna happen what we know is that it's not good if you look across our business i mean our our military business is very robust and obviously we wanna keep people you know employed in that but i mean if you look in construction there's a longer time the the the sales cycles longer right so you'll have a longer tail to it but that's still if you're shutdown down on construction site we were working one of our companies was working on the wind casino they just shut everything down i mean there's like nothing to new and so you have all the materials you buy you have all the labor that's right there everything you're coordinating it and what do you do i mean it's like i i i said it was like prohibition except for everything so where's the opportunity here well i mean opportunity is there's gonna be a lot of these family businesses that are very durable you know business under any sort of normal ish circumstances we know don't would have easily gotten through a two thousand eight which everyone would consider to be you know a d destination prior to this that are gonna need help and they're gonna need capital to get through this they're gonna need capital to restart the businesses if that's what it takes and as well as just taking some chips off the table i you know if you're there's a lot of people we've talked to that are they're holding on for sort of you know last couple good years and then they wanna sell and you know we had these conversations two or three months ago with an owner who he's like look i'm in my seventies i certainly can't go through another two thousand and eight but man business is really good right now like i'm just gonna hold on for another couple years that changed you know it's tough and by the way i'm not saying there was the right thing for him to sell then either right i'm just saying is like it's always a bet and you know one of the things that is maybe nice it's not you know if there's any silver lining in this is i think people had gotten certainly not immune but had had gotten a pretty good resistance built up to risk in general and i don't think most people were seeing it i mean i i you know most of people are talking to is hey there's nothing on the horizon there's no contagion in the cause things to go down i mean i would hear people say it's all the time i mean what could it be could it be student loan debt maybe that's gonna be contained could it be you know the bubble and private equity a that's gonna be contained you gosh we had no idea what was getting ready to come down the right i think that's what mark andre jason or or maybe peter taylor is talking about once which is that when everybody keeps asking if thing x as a bubble that's not the bubble when when we're all aware of it and we're all talking about it that's usually not the actual bubble it's something that a very few you know a small set of people are sort of saying wait a minute we've removed too many of the jen blocks here this thing's is about to tip and you know the a sort of ignored minority yeah isn't but this wasn't a bubble driven thing i mean i you know it's a war it it literally is a war like at that i think that's the best analogy for i think we're i think this is closer to pearl harbor than it is to two thousand eight yeah oh i i would i mean i would absolutely agree the issue is that you know for pearl harbor obviously a lot of people went over and fought but it never come on to you home soil i think this is the thing is everyone's fighting a war in their back at door and i don't think that's ever i mean look you you don't know you don't know what the death rates are actually gonna turn out to be you don't know what the infection rate's gonna be you know i i certainly don't wanna be comparing it to things that are horrible traumatic events that affect generations and generations maybe and god help us if it turns into that but at the very least i mean the the economic side of it is just absolutely unprecedented in every way right now and anybody who thinks this is gonna be a short like the recovery where it's gonna just pop right back out on this thing has never been in a business and and those are most of the people that i hear that are investors saying stuff like that they never operated in a business i mean you guys know well if this makes me feel i know you've have any better brent i i feel horrible right now i i i called the hospital to get i called i try to get a a test and they're like like don't waste it on yourself but it sounds like you have it and and so they think i have it but it's not confirmed it sucks it doesn't suck that bad but after a thirty year old it stinks but it doesn't it i the way i describe it it just yesterday crossed the threshold the where i would stay home from work and not exercise really so you think you have it yeah well me and the doctors but it's not confirm pretty sure he has it yeah i i mean like but like breathing sucks but it's more annoying than it is scary and yeah i am so sorry man i had i had no idea i mean i'm well i know it's not look my no my point is not to get sympathy my point is to let you know for most people it's not the worst yeah yeah well that's that's great i mean and look i i hope that's the case i hope we can get back to some symbols into normal life i think that the unfortunately the economic damage even if you wave the magic wand and brought everyone back to these businesses right away i i think there's a lot of damage has been done depending on how long your lead cycles are and all that stuff but i mean it's just it's tough i mean is tough as demand dries up i mean you gotta think about the supply chain all the way back i mean people aren't ordering stuff from factories right because their demand dropping off on the other side it's the fact if the store said no no we want you know all of your inventory now they say we don't mean to sell you right right because everyone's preparing for winter and so it yeah the stops star are just gonna be tremendous wait sean and brent you guys are both i mean we are all i have no idea where people are but we all are people who probably aren't poor have you guys cut your spending yeah yeah for sure i i do the the first thing i did was i cut the i kept my exposure to the stock market which i think is gonna drop like a rock now and so that was the first that was the first thing i did because that's more than spending is we're just wealth destruction so i wanted to avoid wealth destruction first and then the second thing on your monthly subscriptions i didn't i didn't go through that yet but we have sort of like me and my wife now before we do something we're like yeah do we really need to and so we're you know it's starting but we haven't gone an audited and said hey unnecessary unnecessary unnecessary unnecessary but yeah you know probably should and probably will even though like i have plenty of money to last for a very long time i'm like i don't i've i'm on up by the generic brand of this food we we we're still spinning on food but i mean if you look at our our bills in the past has been a lot around travel and yeah yeah we're not doing that i mean we did we did spring by the way the best investment i've ever i've got three girls under six and we just bought a bounce house and having the backyard and by the way that's the best the best three hundred dollars have i've ever spent my life there's there's a business you should buy that sounds not sexy but interesting enough exactly bounce houses for viruses yeah yeah okay my last call for brent is this you're you're twenty five thirty thirty five and currently like let's just imagine you are i've no hold you are thirty seven but let's say you're young enough to like start deep okay well let's say you're you're you're starting your career you're in the middle early part of your career now knowing what you know about what makes valuable companies and what builds wealth what are are some businesses that you'd wanna start right now and what would you optimize for and what metrics would you try to optimize for and how yeah i mean i i think it depends on what you're what you're trying to optimize for you're just trying to i'm asking you well i'm asking you for for me personally i mean i i i i really find value in in balancing home life and work right so family is super important to me so my answer answer's probably a little bit different for me and i wanna live not in a big city so that's great day i wanna hear what you would do yeah yeah so if i was starting over today i would probably start something in the construction space or home services space i mean office services i wanna get in something that's that's you know i i like competing in areas where there's not a natural selection of people into that right so you don't wanna be in the winery business because everyone in silicon valley that exits a business goes and by winery right and pumps bunch money into it like i don't i don't wanna be in the the film business because everybody who you know every son of a billionaire you know makes movies you know we're owning restaurants is really difficult i mean separate from all the stuff we're going through now because everyone you know that makes me money thinks as be easy and wants they're own their a so i like the things that sort of have a natural selection bias against them like nobody drives by somebody building a swimming pool in arizona and in the summer and says you know what i really wanna quit my job in there air conditioning and go dig a hole in the ground right so we wanna go get involved in things like that i would try to take something probably that that is small and partner with them that they already have the infrastructure in place the the sort of the the technical side and the systems there and then i would really try to spend some time you know how can we use you know latest technology to make us more efficient try to build something that's scalable sort of beyond a geography and get a model down a billing model a sales model down that we thought was replica and it really had some sort of moat around it and then i would try to scale it over time and i wanted specifically yeah anything specifically well i i think it would depend on largely on on what i could find in the geography i mean here here in columbia i mean there's there's a fantastic hvac service company that's still fairly small but they've got great systems they actually develop their own software something like that that i don't wanna partner with and say okay look look you know i wanna get my hands dirty i wanna get involved in i i'm a i'm not an investor by heart like by i mean i'm an entrepreneur that's what i love to do and that's how we think about our business as as being operators and entrepreneurs and so i i wouldn't necessarily get involved in finance i mean finance to me is a mechanism that allows and enables entrepreneurship and and you know running real companies it's not trading paper back and forth so i would probably get far more involved in in sort of non tech entrepreneurship which i know you guys are from silicon valley and this can fall in deaf ears no i i i i like i like what you're saying but you you so you said hvac you that's hvac yeah pool lawn service i think i you know i like lawn service yeah like lawn like lawn and garden care type stuff i mean have you ever tried to get somebody to call you back it's yeah i you wanna hear something cool we had well so brian you know who brian sc is oh just got more one eight hundred got junk oh here yeah yeah okay so the guy owned his the guy who owns it his name brian he's canadian he's friends with me and sean i shoot the shit with him every once in a while it's like what is that sean like a five hundred million dollar year company he owns all of it and he we either me or so someone of us asked him where opportunity is he goes man if i to do the same thing i would do a money eight hundred got junk but i would do it from lawn care or for irrigation yep yep that type of stuff what i'm talking about yeah money there's there's there's all these like strange i mean niche niches that you can get into what i would do is probably take my time and go and talk to a lot of people who are already in business and say what is your biggest problem like who's the supplier that you're most annoyed with you know what's the customer that you have that's just killing it that type of thing and i'd probably go try to snake my way into one of those one of those businesses and then just it's really just about getting a foothold right i mean that's what you need is you need a foothold and then you can start building on it from there but i mean the problem is if you've got a if you've got a boat that you're trying to row that's rick and and it may look pretty on the outside but it's just not gonna go anywhere it doesn't matter how hard you grow it and i think that's in you know early in my career when i was involved in you know more of the agency business that's how it i fell like i i just wrote that thing as hard as i could and i maybe get an inch further and that's why i just wanna get out of businesses that were like that right alright well we should wrap it up brent thanks for coming man if if you're listening to this you wanna get a hold of you what's the best way able to follow you you know keep keep keep tabs to become a scout whatever you want yeah yeah yeah so so permanent equity dot com is the is the website and i'm on twitter at print be sure on linkedin i mean just hit me wherever try to be very available and then find me helpful let us know yeah it's been wonderful to have you guys on man i man i hope you get hope you feel better that that that doesn't sound like any fun i'm not now you're terrifying me so i'm well no look i i my point was the opposite was not terrifying look do i seem stick you i mean i i well i i i'm sleeping in so i got i didn't get up the bed i i didn't wake up until about nine thirty or ten am this morning because i i was like i'm just gonna sleep as much as possible i'm drinking a lot of water i would not exercise today that's how bad i feel i would not go to work today but i definitely would not even consider going to a a hospital i and normally i wouldn't you i'm going to a doctor oh alright well so this is how i'm trying to paint this as as in a positive way as alright as best as i can well sean don't don't you get sick alright you can't get it through zoom so we're good alright guys hey take it easy really appreciate it thanks take care bye