Episode of My First Million with Sam Parr and Shaan Puri.
Transcript
Note: This transcript was auto-generated from YouTube captions. It may contain errors and lacks speaker identification. A full Gemini audio transcript will replace this.
Kind: captions Language: en what’s up everybody Sean here with Sam and special guests for this episode Brent Brent how do you 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’ve been looking to do this myself so after I sold my company I said great I got some cash I can either put this in the stock market I could do sure you know I can go gamble this on a riverboat or I can potentially buy a cash flow and business that’s a good solid stable business and so I started learning about that world stumbled around and saw permanent equity and yeah I’ve been interesting having you on on the podcast since then so why don’t you tell us give us like you know the minute version of who are you and then also what is permanent equity yeah so permed equity is we like schedules of family of companies advise family-owned companies so technically we’re private equity firm now we were just a small collection of my own capital and beginning I was an entrepreneur and I’ve been accidentally bought a business about ten years ago and that’s what leaded to kind of what we do today but raised a business yeah so I had a mutual acquaintance saying hey you should meet this guy he’s in your industry and he just got left at the altar for the second time and I took that to mean I should try to buy his business because why else would you tell me that he had no idea and he was just trying to connect to people that were you know in the same in the same field or similar fields and so I don’t know I look about 2425 now I looked about 13 or 14 then and sat across from this guy and told him I went to buy his business and he laughed at me and said to two grown men try to buy my business how in the heck do you think you’re gonna do it I said I’ll figure it out we negotiated and he told me no thank you and in seven months later called me back up and said all right let’s move forward and get it done so what was your company before so I started a kind of collection of regional marketing companies we started in 2007 kind of really got going in 2008 nine which were as you all know interesting times but it actually allowed us to grow and we adopted some video technology and 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 of work we’re doing media buying we’re doing digital work you know trying to scrap and claw and and sort of make a go of it yeah you for DISA Nate you’re you’re an agency just figuring it out yeah we Meijin see we had some unusual talents kind of under that agency because being in mid-missouri we didn’t have access to a lot of specialty groups so we start building out our own specialty groups so we built that 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 that you typically don’t get animation see and how big 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 her like wait where were they before and so give us the before picture how are you doing how was that business doing financial today was it a big business small business yeah yeah so we saw Lucy or so I’m trying to spend a bit a while since I’ve thought about the numbers so we grew to 26 employees I think at the peak of that kind of before we were so we were doing fine I can make a living doing it I’m making good living doing it it wasn’t the agency business is hard it’s really really hard and I think that’s probably what I’ve learned in my career is I’ve made all the mistakes I’ve tried and tested a lot of business models and sort of taste and try something you’re like up didn’t realize how hard that was gonna be and 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 we bought the the firm that we did called meaty cross you know we were kind of co-equals is how I described you kind of in the marketplace they were much more focused on government contracts that we were we didn’t any government contracts that was we really attracted about the acquisition and the able to combine those organizations gave us a lot more cash flow than having them set for just 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 a larger organization that they had been farming out some stuff so that was uh it 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 it wasn’t its own entity no well I mean it wasn’t me technically it was his own density but it was a hundred percent owned by me and a hundred percent the other firms owned by me so I mean it’s sure responsible so you didn’t have a girl found her 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 a who’s 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 second fund 248 million it’s a 27-year fund which i think is interesting and you can talk about that and you have a ten year investment period and so so the first fund 50 million second fund 250 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 this Amalur mindset you know private equity is kind of the main methodology of how people have bought and sold companies that passed and it’s a very short time clock if you think about it that way you’re really from the time you buy it on time you sell it really needs to be probably no more than four years or five years at most and that’s if you catch it kind of early on in the lifecycle most private equity funds are seven years with three one-year extensions so up to ten years maximum I mean technically you can’t sell the asset you can go longer than that and everyone gets irritated at you 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 horizon for holding the business and when you combine that with a you know most private equity firms are trying to put in as little equity 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 long time you’re sort of hitting them with the needle and that trying to supercharge them to 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 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 want to own businesses like a family would so we buy with no intention of selling the business and we’re typically using no debt as part of their transactions which in the private equity world means that we’re the weirdest duck in the world so how much what should total what’s the total revenue of the collection of companies then we’ll see so total revenue gosh I mean and then I imagine you guys try to run this like super profitably so then if you have a hundred and eighty million in revenue I bet you have a forty million in cash flow oh let’s see here so hold on I you literally put me on the spot here I have not done our calculations recently yeah I mean 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 were lower than that but yeah we do real well and and look I don’t know all that anymore right so just from a like I don’t want this to come across differently than this we’ve got investors the first fund owns five of those investments and then I own four outside the first fund that were the the group that we put together raised that first funded then the second one we haven’t deployed any of that capital and yeah so we’ve got a bunch of dry powder I mean obviously it’s been extremely fortuitous for us to raise 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’ve got to try to tow that line we can talk about it between being a white knight and a loan shark and that’s not an 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 want to buy something that we thinks 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 shootin concrete we also manufacturing in that space as well another company that’s unrelated in the backyard product space it’s a bunch of confused and sell through mass retail we are we military recruitment firm that was the first firm that I acquired me t cross we’ve got a military recruitment firm so it’s not like Legion for military yeah so we actually work I mean we have number of different clients but one of our main clients is a civilian branch of the Navy that resupplies the ships that never came into port so it’s called Military Sealift 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 their staffing there’s a lot fourteen fifteen seventeen hundred civilian Mariners a year into that division so it’s a it’s a pretty large operation digital digital yeah yeah we have you know online application products but not mostly I think there’s a lot of physical activities as well we have physic Reuters it’s not sexy where the rubber meets the road real-deal business so we were talking about some of the differences you guys owned so me across which is a military recruitment firm swimming pool business back here at the base so you have a couple of there so you were saying you’re looking for durable businesses that’s like we say attribute one what are the other sort of key attributes are you looking at yeah I mean so we want to find a leadership team that we can partner with there’s so many you know it’s so hard to grow a business right and so a lot of the businesses were looking at we we either called has been right before the line of professionalization or maybe has just crossed it and there’s this this real interesting you know sort of in-between gap or a lot of these firms they’re they’re too big to be small and too small to be big and the leadership teams kind of capped out they’re just brute forcing and as much as they possibly can but they don’t have the the system’s the talent on staff to be able to grow larger and so a lot of the times we’re trying to figure out from them you know do they want to get bigger there’s some there’s some firms we talked to and and they say well even though say I want to get bigger but the you know the CEOs answering 60 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 at what they do and we’re looking for 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 gonna sound like a like a maybe 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 400 decisions that have to be made to sort of dream that acquisition process I mean that’s 400 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 have you structure the deal so that they’re still incentivized to just to stay on it do a good job yeah it’s a good question so part of it so the leadership team in the the ownership is not always the same thing so some of the organizations that we get involved in the owner is is very much part-time and it 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 well and and try to augment the talents kind as we go along some of the owners 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 even their first payment despite them selling a majority of the company so it really is a situation that’s you know specific I mean I would say yeah for the most part some were wanting to 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 30s or 40s and you want to work for the next you know 30 40 years you know I don’t think many people like that are selling their business at least in the size range in 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 looking at like things that maybe won’t ever be like massive massive but can create great wealth so I’m looking at game group I’m looking at selective search which is an executive search nice personal matchmaking 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 where Sean and I live the path for most people or the SOL Silicon Valley stuff which is sometimes [ ] sometimes not is creating something and raising loads of money and only 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 two hundred fifty thousand dollars a year so you can’t like and you’re living in San Francisco so you’re not building 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 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 there 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 they’re getting wealthy from cash flow yeah yeah these things make money I mean you know the you know we’re typically I mean if we’re getting involved now the company is making more than 3 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 two maybe three or four people at most and so you know usually the one to three people that are that are owning the company are doing very well they’ve taken 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’ve done well for themselves and they’re successful in you know separately an outside of the transaction itself and so the the owner let’s walk through a typical one so i’m you know hypothetical owner of a business that manufactures wheelchairs we’re based in Oklahoma and I’m the owner I’m the sole owner and I pull in let’s call it three million dollars a year owner earnings yeah and owner earnings would be different than sort of EBIT at in this case rights here yeah I would say even - uh operating interest any sort of necessary capital expenditures to keep the business on current trajectory and a normalized compensation structure for the owner if they’re in leadership of the company so it’s like kind of if you hired somebody to run the company for you and you made all the necessary investments how much would be left over at your discretion where you can either try to inject it back into the company and grow it further or buy a boat so fill in the blanks for me so if I’m making 3 million a year what’s a typical a better than for that company if the owners pulling in 3 million did you look at yeah I mean probably even odd would be three and a half to four something like that they like say it again so that was on three million in owner earnings would be four million in Nevada roughly yeah roughly I mean three three and a half to four I mean depends on the type of company we looked at an aerospace company couple years ago and they were doing 70 but done owner earnings was like three and a half or four Y depends on because it’s because he doesn’t so just they had they just they needed a large cash buffer no no they’re having to reinvest in equipment to just keep their market share and sort of stay 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 sucked into and how are they getting the money out of the business I mean are they is it are they typically LLC’s yeah typically I mean it’s a mixture I mean I would say probably ninety ten maybe eighty five fifteen is LLC’s but either way I mean if there are C Corp kills typically C owners you know paying themselves a lot to avoid that double taxation so they’re just paying themselves big ol salaries and just having to pay 50 percent tax yeah I mean if you look in California if you live in California so let’s keep going for a second so let’s say you’re at three three and a half to four million eita 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 of range is it 1 X 2 X 3 X 4 X is that lit is that the sweet spot of kind of the bulk of your deals yeah I would say kind of three and a half to five and a half would kind of be the be a normal range I mean we maybe would 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 owner 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 so well you used to see as a three weeks ago this is again I got to read orientate myself to the new reality but yeah I would say three and a 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 so we’re typically paying to to kind of 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 at 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 got years or no debt or you use less debt than a part a typical private equity firm yes so so the SBA was on the first transaction I did not you don’t do sp my own money that we have no we have no involvement with banks or the SBA or anything like that now I’m 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 that’s one way to take a good company make it a fragile company you know 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 a you know it’s a good example of why we think that not levering 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 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 is all included so the net worth of the company will be you know fairly robust going into the transaction and then force as we overtime as we build cash into these companies then we can decide what to do with it but working capital bucket is kind of like them you got to fill up the bucket first right the owners can get anything out right you got to keep the machinery lubricated 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 an operating partner who does that how do you guys make sure that you and you buy an asset you know a destabilize it and be you actually start to grow it which is I assume why you bought it in the first place yeah so so our philosophy there’s a lot of private equity firms out there that have these like you know 30-day 90 day 120 day plans right we don’t do that what we try to do is is take a humble attitude towards it and say look we we know some things we have some talents but what we want to 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 of 16 of us so so it’s not certainly if I don’t get the impression this is just me there’s people far talented more talented than I am on staff and there we have a dual hook in structure post close so our financial team hooks into their fine Angell team and creates feedback loops and then we have a we calls portfolio partner there 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 different types of calls and meetings throughout the year and how many companies are there there’s nine that you guys own yeah got it that seems manageable yeah I mean it’s so for every kind of three to five companies we we acquire we got a higher 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 want to think about it that way down into the organization so that it scales as certain linearly in that way so Andrew from tiny Charlie might have friends with him and we I just shoot the [ ] with him every once in a while and he emailed me he’s like tweeted this thing and he sent me the tweet of how he met a guy who had a cool furniture store and he goes oh this is neat you need to put that on Shopify and okay 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 in Victoria where he just like seems like he’s spinning up stuff so fast I’m like Andrew I don’t know how you track all this this is crazy they’re not tracking 9 is easier then tracking the 9 is hard but it’s a little simpler because it appears from the outside as though he has got 40 different things how does how does that compare do you think with what’s up in like tiny and this this is keeping it on top of all this I mean and that seems really hard to focus on where to put your focus yeah I mean I I know Andrew a little bit I don’t know him super well I mean it seems like he’s been successful I think they’re getting involved 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 four on our end is it a lot of work is it difficult of course it is write anything worthwhile is gonna be hard you know internally how we’ve created that structure though it’s 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 outcomes as opposed to being all over the place I mean I if it was just me and a partner of mine like that we were trying to ham and 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 obviously blessed to have that earlier you talked about the one of the things you buy a company I said that there’s the your sweet spot is in between like it working out like it working and it being professionalized right yeah and I think that when I so I start the company that I have I started when I was 24 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 were you 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 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 Houser shawnee no David Houser I don’t okay this guy named David Houser he’s one of our little we waste a little bit of money he’s one of our investors he started grasshopper which it was like yeah you know grasshopper okay okay so it helps entrepreneurs it gives small businesses a phone so it’s like Google Voice on steroids and he sold it per I think 300 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 abut but that’s different than one of our a lot of our listeners probably think about they think about if they’re gonna start it they gotta be like running the show can you talk about where you’ve learned this process and and why and I guess the companies who you’ve bought how big successfully navigated that to where the owner is no longer like the person yeah yeah so I mean for for us I’m equal one I I knew my own limitations I knew that there was no way that I could just brute force this thing on my own and I mean I think always subscribe to 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 of yarn and let me play with it so but in the organizations that we look at we call this found remote so this is probably the biggest danger of acquisitions as you buy a company that is that largely all of the goodwill is tied up in the relationships expertise drive of the founder and there’s no really way to transition those separate from maybe coming alongside them and over a very long period of time making that transition happen so I for us we try to select against that we want to see repeatable processes we see a healthy layer of non-owner management we want to be able to see that we always call it you know hit by a bus risk so if anybody in the organization can get my bus and destroy the value of the business that’s just a no-go for us but tell me what you’ve learned on these people so how do I want to make my company like that how have you what one of how they’ve done it best yeah so I mean I think that the methodology that we’ve seen work the best is take the things that either you aren’t good at or you don’t want to do and start giving them to other people and then over time as you sort of continue to offload and offload and offload you just kind of move up until eventually there’s nothing much for you to really be working on I mean if you have a lot of free time and you have a lot of flexibility we always talk about if you have the option ality to get involved or not to get involved a lot of these owners you being 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 always ultimately the test now we also have a lot of owners that we talk to and they say oh I’m not needed in the office at all I you know this thing runs itself and we say to them oh that’s great when was the last time you to get vacation they’re like oh I think three years ago I went on a weekend getaway with my wife and yeah you know you’re like really so there’s that balancing act of self-awareness as well is there any resources that you turn - or have turned - 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 don’t it’s more just you know getting hit in the face over and over again hard knocks Brett where you finding these companies so are you is it 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 and potentially buying yeah yeah so we’re fortunate now we do a lot of content out there actually podcast is one of the things that it’s been helpful for us so thank you guys for having me on but we it’s all inbound at this point so we’re not going outbound to anybody other way website oh there you go I got your book if you’re listening to the audio version which you almost certainly are I’m holding up the messy marketplace which is Brinks book I bought this like six months ago I bought it right after we sold our business so it wasn’t really applicable I was kind of like Oh what did I do wrong - everything fine I think it turns out just timing was good you know getting in before the whole world descended into chaos was it was a good idea a good time to sell but I didn’t know that you put out this book and it seems like you do more content than and I would say the typical kind a buyer or private equity firm yeah I mean I so so you know I own most of my career to just ripping off venture capital is in reality so you just look at how did all the you know Fred Wilson’s Brad Feld Schuster’s and Greece and all those guys how did they break into the world and it was basically by pulling back the curtain and helping educate people and so I mean that’s what we’ve we’ve taken that to heart and we started very early on so we’ve been producing boy cruising content talking to people for probably have seven or eight years now it’s going back a long time and so yeah over time that compounds right in the beginning you’re just shouting into the darkness and no one cares and then 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 backend so all of its inbound we have a scout network which is common in Silicon Valley but very uncommon in in private equity so we’ve about 700 people now that that Scout opportunities for us which is fantastic and we obviously pay them when we are able to consummate the transaction any of a capital camp right yeah yeah so Patrick and I yeah so we we were complaining one night about how all the events and finance were terrible and how it’d be fun to get like a cross-section of people together specifically the you know BC events private equity events very few events to get sort of a broad cross-section of people doing interesting things together and so we complained about it enough III said the battery said well we just do something about it and so he and I partnered up and we hosted the first one last year is fantastic about 250 people from 11 countries five continents came in and that was great we have we did wonderful time hosted in Columbia Missouri in my backyard but it was you know I think there was one other guy from Missouri there so it was very not not a regional crowd if you if you know what I’m saying and unfortunately this year we had 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 give us some predictions about the virus in 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’ve 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 a stable capital partner to come in and buy them what do you guys think what’s your prediction on how this gonna play out well for you and for the economy I would say yeah well so so for let me believe broader I think what what we’re predicting and of course no one has an idea right we’re I’m trying to do this we can’t triangulate information we think it’s gonna be a pretty long if you want to think about it a good analogy I heard was a blizzard a winter or an ice age right it’s kind of about the three stages probably you know I think the blizzards gonna last for another at least six to eight weeks probably longer than that and then I think we’re going through a period of its to be hard to restart a lot of these businesses so there’s in in theory it sounds oh there’s economic problems as nobody’ll you just kind of go into hibernation and come back out 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 mothball everything and try to restart it I mean you’re not be able to do it it looks to be very difficult to do it and so my guess is there’s me a lot of pain and suffering so in 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 Ward me fine I mean a lot of the businesses were involved in have been doing better than we expected probably two weeks ago with that said you have no idea where demands gonna go and I mean we’re racing and we have plans for you know depend on what level of pain and suffering you know happens well you know what the plan is and you know we’re gonna try to get the things back up and running as fast as we possibly can you know the government intervention that just came out is interesting and how its structured so the Care Act just got past 20-30 minutes ago and you know it is it’s better than nothing it’s going through the SBA and the SBA 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 forgivable loans then be insane for us not to participate in that and they don’t even know what the rules are right and so they’re trying to get triangulated 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 2025 maybe even 30 percent which is you think that’s realistic yeah yeah fuckin’-a man that’s crazy yeah the perspective but to put that in perspective the great the the Great Depression was what eight eighteen or twenty I think it touched high 20s so so I mean it’s a peak and like I said I mean I look I hope I’m wrong right let’s just say what it is I mean I hope that that’s on but this is not a good environment for us actually I mean this isn’t interesting we could talk about as being a you know a firm that has a lot of cash right now I don’t think this is a good environment for us at all I would much prefer a 2008 which is much more shallow downturn recession this the violence of this 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 know no snow knows what the demand curve looks what are you betting for a 20% or 30% unemployment rate well I’m not betting on it that’s why I think’s gonna happen but I think they do you think that’s gonna happen I think I think we’ll probably touch 20% I think we could touch 30% yeah and I think we’ll see it in the next six weeks will be will be when it really comes down my guess and I call jobs the jobs number the unemployment number that came out I had said previously I thought it was gonna be about 3.5 and it being about 3.3 which was wildly higher than what the sort of consensus was a million and it’s look if you’re involved in small businesses and you said there was million people that finally found employment like I said that’s a good joke of course it was mean way higher than that there’s no it couldn’t be way higher than that I mean what we’re seeing is I mean I had a buddy this week who laid off 4,000 5,000 employees this week had another friend who laid off 585 of 600 I mean and this just that’s just me I mean what I know they in the hotel industry or what was it just worried that yeah food services one and construction was the other so it’s just it’s it’s it’s a tough I mean why do you say this is this is not a good time versus 2008 what what is the core difference there yeah so the core difference is the violence at which this had has has downturned is basically you could see in 2008 a nice trend right line like you could see it’s kind of like a soft you know hidden private businesses right I’m not gonna talk about the stock market stock market in private business which are totally different right but in in the stock market it was you know sure he had a violence to it and then you know kind of petered out and another violence to it I mean this happened it in [ ] eight days right right I mean obviously Lehman and all that stuff compression know I’m talking about right now oh yeah right now that’s why I’m saying is right now in in private businesses it is worse in private businesses than its reflected in the stock market right now it’s hard to know what’s priced in and and what do you do with monetary policy when you’re 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 was saying 90% of businesses have been adversely affected 5% are probably you know sort of unaffected and then maybe 5% have some sort of tailwind that’s weird because of this but 90% are just it is suffering I mean I is unbelievable what’s happening right now and I mean Sean like for week only two weeks it whenever you sent me that link Sean there you go the NBA’s canceled yeah like a few hours before that I booked a flight to Germany and because I was go to a conference so they paid for it but I like gave him my information I was like yeah the conference 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 cancelled I was like oh you mean like they’re just pausing it for like five days it’s like no no no like it’s done for the year well whole content and then the next the next day it was like oh my flights cancelled everyone’s flights like it was like like that was only two weeks ago Sean yeah that’s insane I remember people thought I was crazy I started working from home the week before everybody did cuz I was like hey I think there’s like there’s once on 100-year virus out there I’m just gonna start working home we did one podcast together and I was like yeah I’m not doing any more in-person stuff I’m not coming 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 outpacing the fear even at this point I think that I think that the situation is worse that people realize even now because it’s growing exponentially and so so I totally hear you Britney - my my sister own schools my brother-in-law owns gyms my brother owned a Christian films my brother owns a concert promotion business nobody prepares for zero revenue overnight for two months you can’t plan for that yeah we were talking on our revenue I mean I you know again calculating my head may bring me a 160 this year let’s say under normal I think we may be 110 or 120 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 military business is very robust and obviously we want to keep people you know employed in that but if you look in construction there’s a longer lead time the the sales cycle is longer right so you’ll have a longer tail to it but that’s still if you’re shut down on its construction site we were working one of our companies was working on the Wynn casino they just shut everything down I mean there’s like nothing new and so you have all the materials you bought you have all the labor that’s right there you everything you’re coordinating it and what do you do I mean it’s like I said it was like prohibition except for everything so where’s the opportunity here well I mean the 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 don’t have easily gotten through 2008 which everyone would consider to be you know a detonation prior to this that are gonna need help and they’re gonna need capital to get through this they’re going to need capital to restart the businesses if that’s what it takes and as well as just taking some chips off the table I mean you know if you’re there’s a lot of people we’ve talked to that or they’re holding on for sort of last couple good years and then they want to 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 70s I certainly can’t go through another 2008 but man business is really good right now like I’m just gonna hold on for another couple years I changed you know it’s tough and by the way I’m not saying it was the right thing for him to sell then even 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 you know most of people were talking to is a there’s nothing on the horizon there’s no contagion that could cause things to go down I mean I would hear people say is 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 oh that’s gonna be contained you know gosh we had no idea what was getting ready to come down right I think that’s what Marc Andreessen or maybe as Peter teal was talking about once which is that when everybody keeps asking you think X is a bubble that’s not the bubble right now when we’re all aware of it 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 Jenga blocks here this thing is about to tip and this wasn’t a bubble driven thing I mean I you know as a war it literally is a work like that I mean I think that’s the best analogy for I think where I think this is closer to Pearl Harbor than it is to 2008 yeah oh I would I mean I would absolutely agree and 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 know home soil I think this is the thing is everyone’s fighting a war in their back door and I don’t think that’s ever I mean look 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 rates gonna be you know I certainly don’t want to 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 economic side of it is just absolutely unprecedented in every way right now and anybody who thinks this is gonna be a short like V recovery where it’s gonna just pop right back out of this thing it has never been in a business and those are most the people that I hear that are investors saying stuff like that they’ve never operated a business I mean you guys well if this makes you feel any better Brett I I feel horrible right now I called the hospital to get I call I try to get 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 for a 30-year old it stinks but it doesn’t stick I I describe it it just yesterday cross 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 pretty pretty sure he has it I mean like like breathing sucks but it’s more annoying than it is scary and yeah I am so sorry man I had no idea why no it’s not look 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 that’s that’s great I mean look I I hope that’s the case I hope we can get back to some semblance of 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 that’s 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 it’s tough as demand dries up and you gotta think about the supply chain all the way back I mean people aren’t ordering stuff from factories right because their demands 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 need to sell you right right because everyone’s preparing for winter and so yeah the stop start problems are just gonna be tremendous wait Sean and Brent you guys are both I mean we are I have no idea where people are but we all are people who probably aren’t poor have you guys cut your spending oh yeah for sure I I did the first thing I did was I cut the I cut 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 wealth destruction and so I wanted to avoid wealth destruction first but it’s like good 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 to creep in but we haven’t gone and audited and said hey necessary unnecessary necessary unnecessary but yeah you know probably should and probably will even though like I have plenty of money to last from a long very long time I’m like I don’t I’m gonna buy the generic brand of this food we’re still spinning on food but we I mean if you look at our bills in the past it’s been a lot of round travel and yeah we’re not doing that I mean we did we did spring by the way the best investment I’ve ever made I’ve got three girls under six and we just bought a bounce house and have in the backyard and by the way that’s the best it’s the best $300 I’ve ever spent my life there’s a business you should buy that sounds not sexy but interesting enough exactly bounce houses for yeah okay my last question for Brent is this your your 25 30 35 and currently like let’s just imagine you are I’ve no idea how old you but let’s say you’re young enough to like sorry okay well let’s say 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 some businesses that you’d want to start right now and what would you optimize for and what metrics would you try to optimize for and how yeah I mean I think it depends on what you’re what you’re trying to optimize for if you’re just trying to I’m asking you well I’m asking you for me personally I mean I I really find value in balancing home life and work right so family is super important to me so my answers probably a little bit different for me and I want to live not a big city and so that’s great I want to 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 office services I want to get in something that’s it’s 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 who exits a business goes and buys a winery right and pumps a bunch of money into it like I don’t I don’t want to be in the the film business because everybody who you know every son of a billionaire you know makes movies you know 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 is be easy and once they own their own restaurant so I like two things that sort of have a natural selection biased against them like nobody drives by somebody building a swimming pool in Arizona in the summer and says you know what I really want to quit my job in the air conditioning and go dig a hole in the ground right so we want to 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 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 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 replicatable and that really had some sort of moat around it and then I would try to scale it over time and I yeah anything specifically I think it would depend on largely on what I could find in the geography I mean 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 be something like that that I’d want to partner with and say okay look look you know I wanna get my hands dirty and get involved in I mean I’m uh I’m not an investor by heart like my I mean I’m an entrepreneur that’s what I love to do and that’s how we think about our business is 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 in Silicon Valley and this can fall on deaf ears no III like I like what you’re saying but you so you said HVAC you said each bag was yeah pools lawn service I think I service yeah like lot like lawn and garden care type stuff I mean have you ever tried to get somebody call you back it’s yeah you want to hear something cool we had a so Brian you know who Brian’s Scudamore is just got a more 1-800 GOT JUNK oh yeah yeah okay so the guy own is the guy who owns a his name’s Brian he’s Canadian he’s friends with me and Sean I shoot the [ ] with him every once in a while it’s like a what is that Sean like a 500 million dollar a year company he owns all of it and he we either me or show someone of us asked him where opportunity is it he goes man if I do the same thing I would do money hunter got junk but I would do it from lawn care or for irrigation yeah yeah that’s type stuff I’m talking about yeah I mean there’s there’s all these like strange I mean 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 kill 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 and that’s what you need is you need a foothold and then you can start building on it from there but yeah I mean that the problem is if you’ve got a if you’ve got a boat that you’re trying to row that’s rickety and and it may look pretty on the outside but it’s just not gonna go anywhere it doesn’t matter how hard you row it and I think that’s a you know early my career when I was involved in you know more the agency business that’s how I felt felt like I mean I could just row that thing as hard as I could I maybe get an inch further and that’s why I just want to get out of businesses there like that right all right well we should wrap it up right thanks for coming man if you’re listening to this you want to get a hold of you what’s the best way for people to follow you you know yeah keep tabs become a scout whatever you want yeah yeah so permanent equity calm is that is the website and i’m on twitter apperent be sure on LinkedIn I mean just hit me wherever trying to be very available and if I can be helpful let us know yeah it’s been wonderful to have you guys on man and I hope you get hope you feel better that doesn’t sound like any fun I mean I know you’re terrifying me so well no look I my point was the opposite was to not terrified look do I seem secure I mean I I am well I’m sleeping in so I got it in get up bed I didn’t wake up until about 9:30 or 10:00 a.m. this morning because I I was like I’m just gonna sleep as much as possible I’m drinking a lot of water I 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 hospital I normally I wouldn’t even gone to a doctor oh all right well though this is how I’m trying to paint this as in a positive way as as best as I can well Shawn don’t don’t you get sick all right you can’t get it through zoom so we’re good all right guys hey take it easy really appreciate it take care [Music]