June 19, 2024 • 44 mins
Today on Givers, Doers, & Thinkers, Jeremy speaks with Permanent Equity CEO Brent Beshore about what's wrong with private equity, what good organizations have in common, and why small private companies matter.
Brent Beshore founded Permanent Equity in 2007 and is the author of The Messy Marketplace: Selling Your Business in a World of Imperfect Buyers. He is originally from Joplin, Missouri, but now lives in Columbia, Missouri, with his wife, Dr. Erica Beshore, and three daughters.
What is private equity, and how does it work? Jeremy and Brent delve into the basics before exploring what sets a business apart. Brent unveils Permanent Equity's distinctive investment approach, placing a strong emphasis on employee well-being, stability, and long-term ownership. They then draw parallels between small to mid-size businesses and nonprofits, humorously remarking that most are "loosely functioning disasters." Lastly, Brent underscores the shared traits of successful businesses (and nonprofits): humility and openness to feedback.
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Episode Transcript
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Speaker 1 (00:00):
Welcome to Givers, Doers and Thinkers.
Today we talk to PermanentEquity founder and CEO, Brent
Bishor about what's wrong withprivate equity, what good
organizations have in common,why small private companies
matter and much more.
Let's go.
Givers, Doers and Thinkersintroduces listeners to the
(00:21):
fascinating people and importantideas at the heart of American
civil society.
We speak with philanthropists,reformers, social entrepreneurs,
nonprofit executives, religiousleaders, scholars, journalists
and anyone else who will help usunderstand contemporary civil
society's achievements andfailures.
My name is Jeremy Beer.
Thank you for joining us.
(00:41):
All right, Thank you forjoining us.
All right.
Thank you for joining us foranother episode of Givers, Doers
and Thinkers.
Today is January 30th 2024.
I'm Jeremy Beer.
I'm here in Phoenix, Arizona,per usual, and my guest today is
(01:01):
Brent Beshore, who comes to usfrom Columbia, Missouri.
Brent is someone you likeimmediately, simply based on how
short his official bio is,Among other things, I should say
you never see bios this short,especially, I feel like, in the
world in which he operates.
So I'll elaborate a little bit,more maybe, than his official
bio does.
Brent is the CEO of PermanentEquity, which he founded in 2007
(01:25):
.
He is the author of the MessyMarketplace Selling your
Business in a World of ImperfectBuyers.
He comes from Joplin, Missouri,and now lives in Columbia with
his wife, Dr Erica Bishore, andthree daughters.
He plays competitive tennis and, as he puts it, bad golf.
So that's something a lot of uscan identify with I certainly
(01:47):
do.
And permanent equity, likeprivate equity firms, invests in
private companies.
But unlike private equity, aswe will hear more about,
permanent equity isn't for thelong haul, with no intention of
selling.
As the firm's website puts it.
There's no 90-day plan, no harmand no assholes, so that's a
(02:09):
pretty good motto.
This podcast centers aroundthemes related to philanthropy
and civil society, of course,but obviously, in truth, private
businesses contribute greatlyto civil society as well, and
exploring how that happens isone reason why we wanted to
speak to Brent.
Also wanted to talk to himbecause major givers are also
typically investors and may wantto become as intentional about
(02:30):
their investing as they areabout their giving.
So, without further ado, BrentBishore, welcome.
Thanks, Jeremy, for having meon.
Am I saying your last namecorrectly?
I guess I should check that.
Absolutely, Be sure, you nailedit.
As soon as I said it the firsttime, I was like that's the one
thing.
I didn't ask him.
So if I'm saying his namecorrectly, Brent.
You're a young guy.
(02:51):
You founded this in 2007, buthow old are you?
I'm almost 41.
Almost 41, the ripe old age of41.
So you were a very young manwhen you founded this company.
How did that come about?
Speaker 2 (03:06):
Tell us about your background and how this firm
came to be.
Yeah, I was getting my lawdegree, my MBA, at Mizzou, here
in Columbia University ofMissouri, and met a beautiful
woman.
I called her the sexy scientistfor a year before I asked her
out who's now my wife, and Iended up dropping out of law
school and MBA to start abusiness that was in the
(03:27):
marketing space.
That went, I would say, okayfor first time founders I mean,
as you know, entrepreneurship Ijoke that it feels like a knife
fight and I got stabbed quite afew times but I survived.
And then I had a mutualacquaintance say hey, you should
meet this guy.
He got left at the altar for thesecond time trying to sell his
(03:47):
business.
I took that to me and I shouldtry to go buy it.
Why else would you tell me that?
And to make a very long storyshort, I ended up getting an SBA
loan, bought that business anddid quite well with it.
I called up a friend of minefrom college and I said, hey,
you're like the smartest financeguy I know.
I just did this thing.
(04:07):
And he's like oh, you did aprivate equity deal and I
literally Googled private equityat that point.
So I did the deal before I kneweven there was an industry
called private equity.
So I joke often that I'm theForrest Gump of private equity,
because I still can't quiteunderstand how I got to where I
am.
Speaker 1 (04:23):
Were you just totally sector agnostic.
You just wanted to own abusiness Like did you have a
particular goal in mind of thekind of business, or businesses
you wanted to own.
Speaker 2 (04:32):
Well, that first business was tangential to my
current business.
The current business, when Ibought the business, was an ad
agency.
It was in the marketing spaceand the way that the person put
it who got us together, theysaid, hey, you should meet this
guy, he's kind of in yourindustry.
So I got together with him andthe specialty that he was
running an agency as well.
The firm we bought as an agencybut they had a specialty in
(04:53):
recruitment marketing,particularly with the military,
and we actually still own thebusiness today.
So long time, you know, later,14 years later, we still own the
business and it got us into akind of a different area of
marketing that I hadn't evenconsidered.
I didn't, you know, you thinkabout the marketing agency
spaces as being mostly you knowbillboards and TV ads and you
(05:15):
know social media and all thisstuff.
There's this whole other worldof recruitment marketing and
specifically military marketingthat we were able to get into
and really love serving thecustomer.
Speaker 1 (05:24):
So how did that become then, this private equity
firm called Permanent Equity?
Speaker 2 (05:35):
Yeah.
So I've always been a fan oflike do more of what works and
less of what doesn't.
And so when it went well, Iimmediately had to step out of
my role as leading either of thebusinesses because I couldn't
really both businesses and I washaving to drive in the early
days.
Probably for the first sixmonths after we bought the
business I drove back and forthto St Louis, so it's about a two
hour drive each way, four daysa week.
I told my wife that I would behome every night and I tried to
(05:59):
stick to it.
So I'd get out of bed, get upearly, be in the office in St
Louis by you know 730 or eightin the morning, and then I try
to be back home by five in theafternoon.
And so I told my wife you knowshe wouldn't notice any
difference, and so anyway, sothat that allowed me to step up
and out, we started building astaff around kind of the two
(06:19):
firms and you know when it wentwell, I said I wonder how many
other businesses there are outthere that need to be
transitioned, that don't have abuyer and can't pass it along to
a son or daughter or relative.
And turns out it's a lot ofthem.
In fact, roughly I mean, basedon the surveys that have been
done about 70% of small tomedium-sized businesses don't
(06:42):
have an exit strategy, and somost of those unfortunately shut
down, and I'm sure we'll talkabout this later in the podcast.
But these small businesses arethe anchors of their communities
.
I mean, they are the people whoemploy a vast majority of the
United States and they're thepeople who you buy from to get
what you need wherever you live.
(07:03):
And so I thought, man, thatdoesn't seem right.
Couldn't we develop maybe abetter model?
And I'd been an operator, so Ididn't come from a finance
background.
I mean, I've taken a financeclass in my life.
I can barely open up Excel.
I've never worked at anotherfirm.
This is basically what I'vedone my entire life.
And so I just came into it andI said, well, shoot, there must
(07:23):
be more people who need what wecan offer and who we could be
good partners with.
And so that's really what kindof set us on the path to create
a brand that owned thesecompanies, create a holding
company, and then eventually wecan talk about that later.
But we eventually raisedoutside capital in a very
unusual structure that allowedus to maintain our integrity.
And now we're on our secondfund and probably leading into
our third fund here soon.
Speaker 1 (07:44):
So yeah, I want to get to that actually pretty
quickly.
But first do tell people Idon't think we should assume the
audience of this podcastnecessarily knows much about
private equity and how ittypically works.
So explain how a real mostprivate equity firms are
structured, what they're lookingto do and then, as a lead-in to
how what you're doing isdifferent.
Speaker 2 (08:07):
Yeah, so maybe we can just kind of start at first
principles.
A private equity firm buysequity, so buys the stock in
private companies, so that'sreally the only requirement to
be private equity is.
You're buying private equitiesNow traditionally.
If you look at who pioneeredthe space, there's a book called
Barbarians at the Gate KKR is awell-known large private equity
(08:31):
firm and they developed a modelcalled a leverage buyout model,
which basically means I'm goingto try to buy your company and
load it up with as much debt asI can at closing, so I'm going
to try to inject as littleequity.
Think about it as like buying ahouse where you know whatever
your down payment in is on thehouse is kind of the equivalent
to the equity the private equityfirm would put into a deal.
(08:52):
And so what they're used todoing is trying to match as
little equity as they can withas much debt as they can.
And that debt, of course, wasnon-recourse, probably unlike
your house.
You know, if you don't pay yourmortgage, not only do you lose
your house, but you probablyhave to repay.
If the bank loses money on thehouse, even more money on top of
that.
Private equity firms were ableto get institutions to lend them
(09:13):
money with no guarantee on it.
So what it allows it to do isif there's a problem with the
company and the company implodes, they can just write their
equity down to zero and kind ofpass the company off and then
the winners all aggregate upright.
So it's kind of a heads I win,tails you lose.
The unfortunate part is thatwhen you put a lot of debt on
(09:35):
something, you're removing allthe margin of safety out of it.
So you know, like you wouldthink about in a house, you know
if you put 5% equity into ahouse and you have 95% debt and
you have a little bit of changein income or you lose your job,
there's a high likelihood you'regoing to have a lot of problems
trying to pay your mortgage.
Conversely, if you maybe buy ahouse that's a little bit less
of a house but you're able toput 20 or 30 or 40% down, you
(09:57):
know there's a lot more marginthere to be able to work with.
Well, it works the same way withbusinesses and in private
equity.
And so we early on, you know,as operators these businesses
said I can't imagine the stress.
It's so stressful to run aprivate business.
I mean, you know it is tryingto do everything you can just to
survive right, and layering indebt on top of that really again
(10:18):
takes all the comfort out of itany comfort that you would have
and adds just a tremendouslayer of stress on it.
I couldn't imagine running abusiness that had a bunch of
debt laden on it, and so fromthe early days we said, hey,
that's not something we reallywant to do.
We want to make sure thesecompanies that we get involved
with don't use debt or use itresponsibly to grow the business
(10:39):
, to grow the balance sheet, tomaybe open up a new location or
to buy more inventory to servicethe customer, but not just so
that I can pay off somebody andput a bunch of debt at close.
The other model that traditionalprivate equity uses is to flip
it to somebody else within afairly short period of time.
I mean some private equitydeals will be resold within six
months to a year of thempurchasing it.
I'd say the average durationthe last time I looked was three
(11:03):
and a half or four years.
So if you think about it, fromthe time that you meet them, the
private equity firms, the timethey're going to resell your
business, I mean it's not thatlong.
I have a friend in privateequity and he says, hey, I'm
going to own this business forno more than four years.
You have four board meetings ayear.
That's 16 times to impress me,like, don't screw it up, right?
(11:26):
It's not a high relationalmodel, it's not a long-term
model.
And the way we think about itis it's impossible to make good
long-term decisions withshort-term horizon, right?
Speaker 1 (11:34):
I mean there's just no way In fact, they're not
really set up to make long-termdecisions, right?
I mean, no one's evenincentivized it.
Speaker 2 (11:41):
Yeah, and if you think about it, I mean you go
from having a family that builtthis business and you know,
usually these families have nodebt on the business and they're
thinking about this businessfor generations.
And then private equity comesin and says look, and, by the
way, private equity isincredibly intelligent people,
they are very smart, they knowthings that the average small
business owner does not know.
So can we just call they arevery skilled at what they do.
(12:02):
The challenge is and, by theway and there are lots of great
people who work in privateequity who don't harm, people
who are thoughtful, who are kindbut overall as an industry,
when I think about theincentives, the incentives are
all off.
So I don't want an incentive tobe more short-term oriented.
I don't want an incentive totry to cut as much cost as I can
(12:25):
and sort of lean down thebusiness, like I want.
We actually want to come in andincrease benefits.
We want to increase thehappiness and the livelihood,
like I actually have this visionof potentially and I don't
think we're there yet but whenyou work with permanent equity,
we actually help your marriageand we help your friendships.
We want you to be just a better, higher functioning human out
(12:46):
there in the world.
We want you to be healthier.
So that is the opposite, Ithink, of the mentality that we
call the buy, lever, strip andflip model of traditional
private equity, so permanentequity.
We typically have no timehorizon.
We have really long-datedcapital I think the longest in
private equity history.
So we're buying with nointention of selling the
(13:07):
business, we're not using anydebt, we love to keep the
leadership in place.
Speaker 1 (13:10):
We're not trying to strip the company down and we're
trying to partner for the longterm and treat everyone really
well, was this a concept thatwas around, that you read about
somewhere and became familiarwith and said, yeah, that's what
I would like to help build outas an alternative to the
traditional private equity model?
Or did you make this?
Speaker 2 (13:28):
up, brent.
Yeah, I didn't know what I wasdoing.
I still feel like most days Idon't still know what I'm doing.
But yeah, I mean, you know thewhole imposter syndrome.
I'm like, oh man, that's me,but I'm actually an imposter and
yeah, so I.
It just was first principles,thinking it was just if I was a
(13:48):
seller of a business, if I wasan executive of a business that
was purchased, what would I wantand what I'd want is what
private equity doesn't offer andwhat permanent equity does
offer.
I would want a group of peoplewho I could trust, who did what
they said they were going to do,who provided capital that was
long-term, that was secure, thatthe rug couldn't get pulled out
from underneath us.
(14:09):
I'd want them to take a verylong view and time horizon on
the business I'd love us tobuild together.
I'd love to share in economics,as that business was built on
the way up and we try to be kindand generous.
I don't, I don't.
You know, this is notcomplicated.
I feel like that most peoplejust get it wrong, like you make
more money together if you doit together, and the only way
(14:30):
you can do it together is ifit's a win-win for all the
parties, and so when we thinkabout win-win, we can also talk
about this.
Many people think of win-winbetween a buyer and a seller.
Those are only two of thestakeholders in a transaction.
There are the executives, whichare kind of a different
stakeholder group.
Sometimes there's overlapbetween the ownership and the
executives, but not always.
You have the employees, so notthe people who are leading, but
(14:52):
just the sort of middlemanagement all the way down to
the line workers.
You have the communities inwhich they sit, you have the
suppliers and you have thecustomers.
Maybe you even have a regulatorinvolved, and so you need, in
order for the business to besustainable long term and for
everyone to win, everyone has towin or it's not sustainable.
So we really try to thinkholistically.
(15:12):
It's kind of like sittingaround a poker table and you're
trying to look at everyone'scards and trying to say OK, we
want to make this scenario workfor everyone who's at the table.
Speaker 1 (15:21):
What's the downside of?
I would imagine that manyowners of small and medium-sized
businesses are more attractedto what you're doing than what
the typical private equity firmis doing.
But if you are looking for somekind of exit, that isn't just
like winding down your businessbut actually getting something
for it.
It's a trade-off, a lower sortof valuation or a lower multiple
(15:42):
with your model versus atraditional private equity model
.
Speaker 2 (15:47):
I would say is we're paying in the ballpark of what
other people are paying, or wewouldn't be able to get deals
done.
We're rarely I would say neverbut we're rarely the highest
bidder.
So if your only advantage inhow you're going to win at an
auction is you pay the highestprice, then it comes at a cost
of something else.
So if the model is just we'rejust going to pay the highest
(16:09):
price, then it comes at a costof something else.
So if the model is just we'rejust going to pay the highest
price, that's how we're going towin, then you're probably going
to strip everything else out,you're probably going to be
short-term oriented, you'reprobably going to lever it up as
much as you can.
And so look, I'll be honest,for 85% of businesses out there,
or sellers out there, all theycare about is how is the biggest
check that I can get it closed?
And look, if that's what youwant, there is a whole ocean of
(16:30):
people out there who that'stheir model and they will.
Just, you know they'recompeting in an auction.
It's just straight price andthat's great.
You know, if we say to anybodywho brings us an opportunity, we
always say hey, is money theprimary motivator for the
transaction, do they care at allabout who buys the business?
And so what we like to say iswe buy businesses from people
(16:51):
who care what happens next.
If you don't care what happensnext, we don't want to buy the
business from you almost at anyprice, because you probably ran
the business like you don't careRight.
So we want to create a positiveselection bias after closing
for people who care deeply aboutwho buys the business.
Their employees are highlyengaged and they feel
well-treated.
Their suppliers feelwell-treated.
(17:12):
Their customers love them right, because they methodically and
slowly built the business over along period of time with that
sort of ethos.
And so those are the peoplewe're trying to partner with,
which is a smaller percentage ofthe overall sort of universe of
sellers.
Speaker 1 (17:31):
Seems like it's not micro, though I mean it seems
like that's got to be anon-negligible, at least in my
dealings with owners, oftenfounders, of these smaller
businesses.
In some cases, one reason whythere are smaller businesses is
because they haven't cut everythroat on their way to the top
for growth, right, that theyhave had parameters, that
they've put around theirbusiness practices and what
they're willing to do and whatthey're not willing to do.
So it doesn't seem to me thatthat's got to be a big enough
(17:54):
palm for you to find efficientoh yeah, I mean our business is
doing well.
We love the people we've beenable to partner with the
concepts.
You've been doing this now forsome years.
Have you seen it imitated now?
And absolutely yeah, yeah, yeah, we love it.
Yeah, talk about that.
How is it?
How is that changing what theworld of private equity looks
(18:16):
like?
Speaker 2 (18:16):
Yeah Well, so when we first started talking about
these concepts in kind of 2004,2005, I mean, look, I'm an idiot
.
But a lot of people called mean idiot, you know, and I was
like you're not wrong, I'm.
I mean, compared to what you'redoing, you're right, I didn't.
You know I don't have a degreefrom Penn and you know I haven't
(18:36):
, I don't have 12 years ofexperience in in, you know,
investment, banking and privateequity, and you know I don't
know everything you know right.
All I can tell you is that Isat in the seat of somebody who
operated a business and I cantell you what I would have
wanted.
And so, when we think aboutjust generally, what the market
is and who's out there, we wantto select for those people and
(18:58):
we care deeply about them.
And so, when we think about theways of the industry, I would
love to have the industry bechanged, and I think it is
slowly changing.
So there's probably I don'tknow probably 150 people that
have told me they're going totry to start something similar
to permanent equity, and there'sprobably been five to eight who
(19:21):
have actually done it.
It's really hard, like I alwayssay.
I mean, we put our wholeplaybooks online, like you can
go on our website and you canread exactly how we do what we
do.
It's simple, it's just verydifficult, and so we're open to
um.
We're open to people adoptingour model.
We'd love that.
We think that it would bebetter for the industry.
Is there a?
Speaker 1 (19:40):
plentiful supply of both deals and investors, or is
there a lot of like investoreducation that has to happen
before you have enough potentialinvestors in permanent equity?
Or is it something else, justthe sheer just operating?
You know, 15 companies.
That's the hard part about it.
Speaker 2 (19:59):
Yeah, it's all hard.
I mean, you know, I used tojoke if it weren't for the
employees and the clients, thenthis business would be easy,
right?
I mean like everything's hard,right, you know, people are
messy and difficult and you know, when you put a bunch of messy
people in a room, no matter whatthe situation is, it's going to
be.
Well, it'd be messy.
(20:20):
And so, yeah, I mean, there's aplentiful amount of investors
out there.
There's a plentiful amount ofcompanies out there.
There's a plentiful amount ofinvestors out there.
There's a plentiful amount ofcompanies out there.
There's an incredible lack ofskill in this segment of the
market.
So you'll often see privateequity people from upmarket
trying to come down into thisarea of the market and they're
used to working with consummateprofessionals, executives,
(20:41):
upmarket.
They know what they're doing.
They're coming in and askingvery thoughtful questions and
what about this strategy?
What about that strategy?
That's not how you do well inour segment of the market.
How you do well in our segmentof the market is getting your
hands dirty.
You're dealing with stressedout people who are trying their
hardest.
You got to climb down into it.
I mean, I always joke thatinvestors come in and they're
(21:01):
like have you ever thought aboutthis grand idea?
And the answer is always, ofcourse, like who's going to do
the work right?
And so what we try to do is wetry to resource them.
And again, it helps because wecame.
You know everyone on our staff.
We don't hire people out ofprivate equity.
No one on our staff comes outof private equity, and so
everyone's an operator on ourstaff.
Literally every single employeethat we have has operated a
(21:22):
business at some point on ourstaff.
It's like a prerequisite forcoming on, because you just
don't know, unless you'veoperated a business, you don't
know what's important, what'snot, what things that seem
important actually aren't andthings that aren't that
important actually are.
And so what we want to do is wewant to pair people who have the
skills to be able to supportthese businesses with people who
(21:42):
desperately need the help.
And you know we think of it aslids.
So there's like an everythingtastes like chicken layer to
these businesses.
You know we own 15 businessesacross manufacturing,
construction, aerospace,business, services.
I mean it's a very wide range.
Right Last year we bought achildren's clothing brand and we
bought the nation's leadingdesigner manufacturer of
amusement park rides right Sameyear.
(22:04):
So I mean really wide variety.
I can tell you that amongst allthose businesses, they need the
same stuff Sales, marketing,technology, accounting, finance,
hr support, recruiting, allthese things.
You know it's the.
Everything tastes like chickenlayer, and so what we're trying
to do is we're trying to helppeople who are incredibly
skilled at their business becomeskilled at the business of
(22:26):
business.
Speaker 1 (22:27):
Very good way of putting it.
There's it certainly.
For me, it absolutely resonateswith what you find in the
nonprofit sector as well, whichare just businesses that have a
different tax status and have avery mission forward way of
going about their business.
But there is a everythingtastes like chicken layer.
I like that way of putting it.
But everything tastes likechicken layer.
(22:48):
I like that way of putting it.
The same the problems across atleast the smaller and
medium-sized entities tend to bevery much the same, which is
useful because you can bringresources to bear in helping
those kinds of businesses.
It's scalable how you can helpthose sorts of entities.
So that does ring a bell.
Let's go to a break.
We'll be right back with BrentBeshore, founder and CEO of
(23:13):
Permanent Equity.
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All right, we are back talkingto Brent B Shore, founder and
(24:25):
CEO of Permanent Equity, alsoauthor of the Messy Marketplace,
which I will ask him about herebefore we go.
We were just talking about theways in which small and medium
sized businesses across avariety of sectors are all alike
.
You have a phrase you are notall alike.
I share certain similarities.
You have a phrase that you usethat I am a hundred percent
(24:46):
going to be stealing from youI'll try to credit you when I
can which is all businesses areloosely functioning disasters.
That's a fantastic phrase thathad to have been born sort of in
the heat of a grinding week, Iwould imagine.
Speaker 2 (25:01):
Yes it was.
Yeah, I, somebody was asking meI think it was probably an
investor was talking to me aboutyou know well these businesses,
this or that, and I was like,hey, can I just stop you there?
I was like these businesses areloosely functioning disasters,
and some happen to make money.
Right, like that's the way Ithink about the small to medium
sized business world and I wouldsay the non-for-profit world is
the exact same thing.
(25:22):
Right, it's just a differentrevenue model.
Speaker 1 (25:26):
And it should make everybody feel better.
Actually, though, to hear that,right, if you're an operator in
a business right now, whether anonprofit or for profit
business like everybody is you,you're not unique in the sort of
dysfunction and challenges, andhow hard it is, it's that's.
That's across the board, so Iwant to say that it's actually a
(25:46):
way of making people feelbetter, not worse, but feel
better about what they're doing.
So, having said all that,though, you touched on this a
little bit, but I'd like you togo, if you don't mind, dive a
little bit deeper.
How do these businesses you'relooking at the ones you haven't
(26:10):
bought as well as the ones youhave how do they contribute
small and medium sizedbusinesses to the health of
society?
Speaker 2 (26:14):
And maybe you can even say how are those
contributions a day-to-day,week-to-week basis to?
Speaker 1 (26:28):
the average.
Speaker 2 (26:28):
American.
You're going to eat at a smallbusiness.
You're going to shop at a smallbusiness.
You're going to request theservices.
Something breaks in your house,the plumbing, the HVAC those are
small businesses that you'regoing to be working with,
everything from the regionalfarmer or maybe the landscaper
that's installing something atyour house, you know, to the
(26:49):
person who makes the drains onthe street, to the person who's
manufacturing the light posts.
I mean, these are all smallcompanies and I think most
people maybe don't realize that.
It's a little bit kind of likethe farming system where you
know we keep the how we reallyget meat and how get meat and
where vegetables are reallygrown, maybe hidden.
(27:10):
Most people maybe don'tunderstand that almost
everything they're coming incontact with, they look around,
was created by a small company.
And let's remember too, allsmall business, all big
businesses, started as smallbusinesses too.
So there's no way to get aroundsmall businesses being the
backbone of this economy and, interms of the communities that
(27:34):
they're in, they are the ones,if you look, that are
contributing back to thecommunity.
So, yes, some corporations arealso contributing, but for the
most part, if you look at thelargest philanthropic givers,
for the most part.
They're going to be small smallto medium-sized business owners
and executives and those arethe people who are deeply
embedded in their communitiesand care deeply about them.
Speaker 1 (27:54):
And part because they're tightly or closely held.
You might say that thedecision-making process around
giving, I'm sure, tends to beless bureaucratic for a small or
medium-sized business.
Has your work at PermanentEquity, have you developed your
own thoughts about givingphilanthropically, not only just
necessarily for these companiesthat you're looking at
investing in or you haveinvested in, but just for
(28:16):
yourself?
How has that evolved for you?
Speaker 2 (28:19):
Yeah.
So the answer is yes.
I feel like that.
I'm not great at how we give,like I think it takes time and,
to be honest, my wife and I arestill on this journey.
We are I haven't talked about alot about this publicly Part of
this like this weird humility.
You know I don't want to, Idon't ever feel like it's
(28:39):
bragging, but you know we are.
So we're believers, we followJesus and you know we believe
we're stewards of the resourceshe's given us, and so, whether
it's in the companies, in theorganization, in the companies
that we manage, or the resourcesthat we are able to be given,
we just want to be good stewardsof those, and so, as we've been
(29:00):
given more, we certainly haveit's been an exciting thing for
us to pursue what we really wantto support.
I mean, there's an ocean ofamazing things out there and I
feel like that we are called, wehave a special kind of mission
to help those in need, sort ofthe poorest of the poor, and so
we focus a lot of our giving onmercy, and so, as we have, one
(29:26):
of the goals that we have as a,as a couple, is to give an
increasing percentage every yearof our of our resources away,
so not sort of in dollar amountbut in in sort of percentage.
We think that's a uh, uh, yeah,as a portion that we give, and
so we're we're pretty close touh, I mean, I think we're.
Our goal is to start giving 50%away on an annual basis and
(29:46):
sort of the maximum allowablethat we can from a tax
perspective.
We're not there yet but we'reon our way and that's really
opened up a lot of doors to seepeople's lives changed and we're
really grateful for the peoplewe get to partner with.
So we have call it nine or 10organizations that we feel great
about.
We know inside and out that wewant to use our time and our
(30:10):
talents to lever against thefinancial resources that we're
giving as well to help grow andshape those organizations and
try to help them help the mostpeople they can.
Speaker 1 (30:20):
Are those organizations savvy enough to be
asking you for more than justyour treasure, but for it to be
having you take a look at theiroperations and leadership and
using what you've learned fromthe permanent equity world to
help them get stronger ascompanies?
Speaker 2 (30:35):
Yeah, I mean I would say some of them you know a lot
of.
That's just a function of trustyou know there's.
You know being wealthy doesn'tmake you smart.
And being wealthy, even if evenif you gain it through a, you
know, through a business somehowdoesn't make you smart.
And being wealthy, even if yougain it through a business,
somehow doesn't mean you shouldspeak into a lot of the
not-for-profit world.
And so I try to say I'm happy totry to be helpful.
(30:55):
However I can.
We always offer up beyondfinancial resources.
I'm happy.
If you think that I've got anability to speak into it, that's
great.
But by no means are we tryingto say, hey, in order to take
our resources financially, thatyou need to bring us on the
board or do something like that.
In fact, there's only one boardof directors that I serve on
and I'm happy to.
(31:17):
I'm not a very good boardmember.
To be honest.
I don't love being on boards.
I'm kind of a chaos monkey, soI tend to disrupt boards that
I'm on, and so I work muchbetter in concert with the
leader of the organization orthe senior executives, and it
sounds like you're a very goodadvisory board member, brad, but
(31:37):
not the governing board,perhaps.
Yeah, I don't do well withadvisory boards either, so
anyway, but no, I try to behelpful as much as I can.
The best companies you'veinvested in.
Speaker 1 (31:47):
what do they have in common, or what is it?
When you see it now, you'relike, yeah, that's what we're
looking for, that's it.
Speaker 2 (31:54):
Yeah, I mean I think the best companies are built by
the most successful people and Iwould say, whether it's in
business or not, in a businesscontext I've seen the people who
I like to bet on are the oneswho take the best feedback.
It takes a lot of humility tohear hard things right.
(32:17):
I mean everyone wants to say,hey, what you're doing is great,
you're doing great, there'snothing I would want to change.
Right, being in most people and, by the way, I suffer from this
too Don't give, don't give offthe vibe that they're really
open to hearing feedback.
And I think, as a colleague, asa friend, it's sometimes hard.
I mean I talked about this witha friend the other day but I
(32:39):
said I've stopped for the mostpart lying through commission,
but I certainly lie a lotthrough omission.
I just don't have the courageoften to tell somebody the truth
, even if it's the truth in love, which I hope it is.
I stopped short of telling themthe full truth.
That would be incrediblybeneficial, I think, to their
lives, largely because I don'twant to go through the battle.
(33:02):
It's not my life to live and Idon't want to go through the
battle of what that would looklike and most people are not
open to hearing feedback.
And so, whether it's for mepersonally or the CEOs in our
companies or whatever, it mightbe that the people I've seen
just make incredible progressand, by the way, incredible
progress personally,professionally, in their
marriages with their kids arepeople who can humble themselves
(33:24):
and say, hey look, I'm secureenough to be able to hear that
maybe I'm not perfect.
And it doesn't mean you justtake wholesale whatever somebody
says to you and say, oh well,now I'm going to change and go
in this direction, or that Imean that's madness.
But what it does mean is thatyou're going to genuinely hear
what they have to say, maybe asksome clarifying questions, not
(33:44):
be defensive, no matter howharsh the criticism is, no
matter how unfair or how offbase you think it is.
I mean it's great for somebodyto say, hey, I hear you, I, this
is what I'm hearing you say.
You know, can I ask you acouple of clarifying questions?
Okay, I still don't, I stilldon't agree with you, but I'll
think on it.
Right, but that's rarely how ithappens.
Oftentimes, feedback is givenand the person gets their
(34:06):
feelings hurt or they startshoving back Right and and
immediately.
As soon as you do that, the thewalls up on both sides.
You're not going to hear whatthey have to say.
The other person's defensive Umand so I've just seen it
repeatedly through my career.
I mean most careers die bysuicide, not by homicide, like
most people would be with.
(34:28):
Their careers would be triple,if not 10 X, what they are, if
they would just genuinely humblethemselves and and listen to
what the world's telling them.
What people are telling them ishow they could view themselves.
You found any?
Speaker 1 (34:42):
way to get the walls to go down so that feedback can
be heard a little bit better.
Speaker 2 (34:47):
Yeah, yeah, I mean, the only way I know to do is to
to make sure the person knowsthat you're for them and with
them, and you know if you haveany hint that somebody is not
for you, that they're not happywhen you're happy, that they're
not excited about your successes, that they're not willing to
mourn with you when you'remourning.
It's really hard to hearfeedback from them.
(35:08):
Now, I think that's still askill that somebody should
cultivate, is to hear meaningfulfeedback from somebody who you
don't like and don't think likesyou, because I think that's
still a kernel of truth usuallyin that feedback.
But for the most part, the wayI found it is telling somebody
hey, if I'm going to deliverhard feedback, I'm going to say,
hey, I care about you, I careabout you being the best version
(35:30):
of you.
I want you to know this becauseit's for your good.
I'm not doing it to make myselffeel better.
I'm not doing it because I'msomehow superior, to make sure
there's no elevation that'sgoing on with the person who's
giving feedback, becauseoftentimes feedback is really
just condescension and disguise,and that is not the way to give
(35:52):
feedback.
So I often try to say, hey, I'monly giving this feedback,
because I too have this issue orI've suffered this way and
people were kind enough to giveme the feedback.
You can take it or leave it.
It's your life to live.
That seems to go over better.
Speaker 1 (36:08):
Let me shift a little bit here as we sort of steer,
of steer this thing toward,toward a close.
But what would you say?
What are the questions, theright questions, or especially
the questions that people don'ttend to think about?
If you're a business owner or afamily and you're starting to
look around for a partner,either either for a full sale or
(36:28):
for a growth sort of situation,what are the questions people
don't ask often that they should?
Speaker 2 (36:36):
Yeah, I mean, I think you first have to know what you
want.
I think the most frustratingthing for us is when we talk to
a seller and we say, hey, look,we're very flexible, we do this
for a living.
We've got people who are allover the spectrum in terms of
what they want for the future.
You tell us what you want,we'll tell you if we can get
there Right.
And they say, well, I don'tknow.
(36:57):
You tell me what you can giveme.
I'm like we can give you almostanything within you know,
within reason.
If you tell us you want toleave the day after closing,
okay, we'll work with you onthat.
If you want to tell us you wantto work with us for the next 10
years, great, we'll work withyou on that.
Like you tell us, you know, thequestion we ask is if you could
wave the magic wand, what wouldwhat would the situation look
(37:19):
like, what would the transactionlook like?
What would life look like afterthe transaction?
And most sellers can't answerthat question.
And so if they can't answerthat question, then we can't be
as helpful as because what we'retrying to do is we're trying to
put together this incrediblejigsaw puzzle, right, if you
think about a deal, there'sroughly 400 things you have to
agree on, broadly speaking,between a buyer and a seller 400
(37:47):
things.
I can't tell you what 400 ofthose 400 things are really
important to you, and I can tellyou which ones are important to
us, depending on the context,but it's going to take forever
to work through those questions,and we're not going to design a
very good deal if you don'tknow what you want.
So the first question I wouldask if I was a seller is what do
I want?
And make sure I can articulateit very clearly and have sort of
substantial logic behind eachone of the key points.
(38:08):
So you know hypothetically,let's say, you know you own a
business, that's you know makingthree or four million dollars a
year, and you say okay, look, Iwant all cash up front.
I don't care about earninganything, I don't want a seller
note, I don't want any deferred,you know compensation at all.
I want all my cash up front.
I want to walk out day one.
(38:29):
Okay, that's fine.
What that's going tocommunicate to a buyer, though,
is that you somehow see risksthat they probably don't.
If you're not willing to riskshare at all, then you're going
to see risks that they'reprobably not aware of.
And if you say, oh no, thebusiness is in great shape, I
think it's going to make tons ofmoney for the next 50 years,
Buyers can be very skeptical ofthat.
But we have people who sort ofengage in that and they say I
(38:52):
want all cash up front, I wantto leave the day of closing
right.
And then we find out down theroad that it was coached, that
some advisor or intermediarysaid oh, this is what you tell
people, this is what you want,because no buyer can be trusted.
And then we say to them butwait a minute, like what?
If you could be trusted, wouldyou want to continue your career
?
Would you want to?
You know, would you want to bethe chairman of the board, would
(39:12):
you?
And they're like yeah, ofcourse I love these people,
these are my people, I wouldlove to be involved.
And yeah, I mean and we alwaystell people, by the way, you
will make more money if youdon't sell your business than if
you do.
That's very counterintuitive.
You will always make more moneynot selling your business,
because it requires you to takethe risk, it requires you to
work in the business.
So what we try to counselpeople is you know, make sure
(39:35):
you know what you want, and thenlet's talk about what that
means.
Speaker 1 (39:38):
That's really good, brent, thank you.
Tell us about.
There's two events you'reinvolved with that I've heard
about through the grapevine.
I don't even know therelationship with these events
to permanent equity.
Maybe you can clarify that here.
But one's called main streetsummit.
I believe one's called CapitalCamp.
Tell people about those and ifthey can be involved, how they
could, if wanted to, how theycould get involved.
Speaker 2 (39:55):
Yeah, well, thanks for asking.
So I founded both those events.
You know, I had this idea thatcontent is the only way to scale
conversation.
So what we're doing right nowyou and I are chatting, and
hopefully lots of people aregoing to listen to this right,
events are the only way to scalea relationship.
So, if you think about how toget a lot of people together and
(40:16):
form meaningful relationships,the design of the event is
really important, and events arean amazing way to meet a lot of
people and develop thoserelationships.
So I had been asked to go as wealready got notoriety in the
industry to a number of financeevents and they were terrible.
I mean, I don't know how elseto say it.
They were just absolutely awfulRubber chicken lunches, bad
(40:39):
coffee.
Everyone's in blue blazersslinging business cards, panel
discussions.
Up there, it's a snooze fest.
It's awful.
No one was enjoying themselves.
I wasn't enjoying myself and Icalled up a partner of mine.
This is in 2018.
And I said there has to be abetter way.
I mean, this is theentrepreneurial spirit, right?
Like I don't consider myself afinance guy.
I'm not a private equity guy.
I mean probably not even aninvestor.
(41:00):
Like I'm an entrepreneur, like,I love creating things that you
know, permanent equity is justan expression of the creation in
the area that I love.
And so I called him and I said,hey, there's gotta be a better
way.
What if we designed the eventthat we would want to attend?
And he said I'm in, and sothat's Capital Camp.
That's how we created CapitalCamp.
So we're on our fifth iterationnow of Capital Camp and it's
roughly 400 investors, allprofessional investors from
(41:22):
around the world.
We had 16 or 17 countriesrepresent this last year
Tremendously successful, lots ofcapital in the room.
And I get to be the Willy Wonkaof that event for, you know, a
three-day period, all the thingsthat I would ever want to be a
part of.
So we've got, you know, crazyhot air balloons and helicopters
and incredible chefs.
The joke is I'm running a foodand wine festival and my
(41:43):
partner's running an investingconference.
You know SEAL Team 6 does allthe security for it there's.
You know you get to choose yourown adventure.
You get to, you know, go trailrunning with one of the top
runners in the world, or you canlearn shooting from, like I
said, a Navy SEAL.
Or you can learn how to filleta halibut with one of the top
(42:04):
chefs in the country.
So it's just kind of thisincredible blowout event.
If you're a professionalinvestor and you're listening to
this, go through the website.
There's a wait list, but wouldlove to have you get on there.
Main Street Summit is kind ofthe opposite end, so it is
business owners, operators andinvestors.
We wanted to create a big 10event, so Capital Camp's roughly
(42:24):
400 people.
First year of Main StreetSummit was this last year and it
was 1,000 people.
This this year we're hopingit's close to 2000 people.
This next year it's a festival,so we're running seven, eight
stages at the same time.
Think of it as like a moviefestival, but instead of sitting
down and watching a movie,you're doing something, some
conversation or listening tosome presentation on something
business related Acrossindustries.
(42:46):
We had oil and gas, we hadaerospace, we had construction,
manufacturing, everything anddifferent levels of content.
So are you sort of a newbie tothe industry?
Are you trying to just kind ofget your feet wet or are you
deep in the industry?
So we have kind of 101, 201,301 level content and then just
a huge party.
I mean it's just so much fun.
There's all kinds of activitiesto do we take over downtown
(43:06):
Columbia, missouri.
Yeah, I love it.
I mean my aspirations forCapital Camp's kind of topped
out in what it is.
My aspirations for Main StreetSummit are that it becomes
eventually like the South bySouthwest of the business world.
That's fantastic.
Speaker 1 (43:20):
Well, sounds great.
I'll have to go sometime andI'm sure people would love to
have you there, we'd love to goas well.
Where can people go to learnmore about permanent equities?
At permanentequ equitycom.
That's easy.
Main street summit.
Main street summitcom Capital,campcom Capital campcom, good
URLs, excellent, and you can buyBrent's book the messy
(43:41):
marketplace, selling yourbusiness in a world of imperfect
buyers Amazon, barnes and Nobleeverywhere else, I believe.
Speaker 2 (43:52):
And are you on X?
I am on.
Are we calling it X these days?
I'm on Twitter.
Yeah, I'm on the Twitter.
I'm on Twitter.
I'm on LinkedIn yeah, I'm easyto find.
Speaker 1 (43:59):
I'm not on it At Brent Beshore on Twitter slash X
, that's B-E-S-H-O-R-E.
All right.
Well, thank you so much, brent,for being with us, sharing your
wisdom and insights.
Really appreciate it Reallyappreciate you having me on from
Send your requests to ourproducer, katie Janus, at
kjanusatamphilcom, that'sK-J-A-N-U-S at amphilcom.
Welcome to Givers, Doers and Thinkers.
Today we talk to PermanentEquity founder and CEO, Brent
Bishor about what's wrong withprivate equity, what good
organizations have in common,why small private companies
matter and much more.
Let's go.
Givers, Doers and Thinkersintroduces listeners to the
(00:21):
fascinating people and importantideas at the heart of American
civil society.
We speak with philanthropists,reformers, social entrepreneurs,
nonprofit executives, religiousleaders, scholars, journalists
and anyone else who will help usunderstand contemporary civil
society's achievements andfailures.
My name is Jeremy Beer.
Thank you for joining us.
(00:41):
All right, Thank you forjoining us.
All right.
Thank you for joining us foranother episode of Givers, Doers
and Thinkers.
Today is January 30th 2024.
I'm Jeremy Beer.
I'm here in Phoenix, Arizona,per usual, and my guest today is
(01:01):
Brent Beshore, who comes to usfrom Columbia, Missouri.
Brent is someone you likeimmediately, simply based on how
short his official bio is,Among other things, I should say
you never see bios this short,especially, I feel like, in the
world in which he operates.
So I'll elaborate a little bit,more maybe, than his official
bio does.
Brent is the CEO of PermanentEquity, which he founded in 2007
(01:25):
.
He is the author of the MessyMarketplace Selling your
Business in a World of ImperfectBuyers.
He comes from Joplin, Missouri,and now lives in Columbia with
his wife, Dr Erica Bishore, andthree daughters.
He plays competitive tennis and, as he puts it, bad golf.
So that's something a lot of uscan identify with I certainly
(01:47):
do.
And permanent equity, likeprivate equity firms, invests in
private companies.
But unlike private equity, aswe will hear more about,
permanent equity isn't for thelong haul, with no intention of
selling.
As the firm's website puts it.
There's no 90-day plan, no harmand no assholes, so that's a
(02:09):
pretty good motto.
This podcast centers aroundthemes related to philanthropy
and civil society, of course,but obviously, in truth, private
businesses contribute greatlyto civil society as well, and
exploring how that happens isone reason why we wanted to
speak to Brent.
Also wanted to talk to himbecause major givers are also
typically investors and may wantto become as intentional about
(02:30):
their investing as they areabout their giving.
So, without further ado, BrentBishore, welcome.
Thanks, Jeremy, for having meon.
Am I saying your last namecorrectly?
I guess I should check that.
Absolutely, Be sure, you nailedit.
As soon as I said it the firsttime, I was like that's the one
thing.
I didn't ask him.
So if I'm saying his namecorrectly, Brent.
You're a young guy.
(02:51):
You founded this in 2007, buthow old are you?
I'm almost 41.
Almost 41, the ripe old age of41.
So you were a very young manwhen you founded this company.
How did that come about?
Speaker 2 (03:06):
Tell us about your background and how this firm
came to be.
Yeah, I was getting my lawdegree, my MBA, at Mizzou, here
in Columbia University ofMissouri, and met a beautiful
woman.
I called her the sexy scientistfor a year before I asked her
out who's now my wife, and Iended up dropping out of law
school and MBA to start abusiness that was in the
(03:27):
marketing space.
That went, I would say, okayfor first time founders I mean,
as you know, entrepreneurship Ijoke that it feels like a knife
fight and I got stabbed quite afew times but I survived.
And then I had a mutualacquaintance say hey, you should
meet this guy.
He got left at the altar for thesecond time trying to sell his
(03:47):
business.
I took that to me and I shouldtry to go buy it.
Why else would you tell me that?
And to make a very long storyshort, I ended up getting an SBA
loan, bought that business anddid quite well with it.
I called up a friend of minefrom college and I said, hey,
you're like the smartest financeguy I know.
I just did this thing.
(04:07):
And he's like oh, you did aprivate equity deal and I
literally Googled private equityat that point.
So I did the deal before I kneweven there was an industry
called private equity.
So I joke often that I'm theForrest Gump of private equity,
because I still can't quiteunderstand how I got to where I
am.
Speaker 1 (04:23):
Were you just totally sector agnostic.
You just wanted to own abusiness Like did you have a
particular goal in mind of thekind of business, or businesses
you wanted to own.
Speaker 2 (04:32):
Well, that first business was tangential to my
current business.
The current business, when Ibought the business, was an ad
agency.
It was in the marketing spaceand the way that the person put
it who got us together, theysaid, hey, you should meet this
guy, he's kind of in yourindustry.
So I got together with him andthe specialty that he was
running an agency as well.
The firm we bought as an agencybut they had a specialty in
(04:53):
recruitment marketing,particularly with the military,
and we actually still own thebusiness today.
So long time, you know, later,14 years later, we still own the
business and it got us into akind of a different area of
marketing that I hadn't evenconsidered.
I didn't, you know, you thinkabout the marketing agency
spaces as being mostly you knowbillboards and TV ads and you
(05:15):
know social media and all thisstuff.
There's this whole other worldof recruitment marketing and
specifically military marketingthat we were able to get into
and really love serving thecustomer.
Speaker 1 (05:24):
So how did that become then, this private equity
firm called Permanent Equity?
Speaker 2 (05:35):
Yeah.
So I've always been a fan oflike do more of what works and
less of what doesn't.
And so when it went well, Iimmediately had to step out of
my role as leading either of thebusinesses because I couldn't
really both businesses and I washaving to drive in the early
days.
Probably for the first sixmonths after we bought the
business I drove back and forthto St Louis, so it's about a two
hour drive each way, four daysa week.
I told my wife that I would behome every night and I tried to
(05:59):
stick to it.
So I'd get out of bed, get upearly, be in the office in St
Louis by you know 730 or eightin the morning, and then I try
to be back home by five in theafternoon.
And so I told my wife you knowshe wouldn't notice any
difference, and so anyway, sothat that allowed me to step up
and out, we started building astaff around kind of the two
(06:19):
firms and you know when it wentwell, I said I wonder how many
other businesses there are outthere that need to be
transitioned, that don't have abuyer and can't pass it along to
a son or daughter or relative.
And turns out it's a lot ofthem.
In fact, roughly I mean, basedon the surveys that have been
done about 70% of small tomedium-sized businesses don't
(06:42):
have an exit strategy, and somost of those unfortunately shut
down, and I'm sure we'll talkabout this later in the podcast.
But these small businesses arethe anchors of their communities
.
I mean, they are the people whoemploy a vast majority of the
United States and they're thepeople who you buy from to get
what you need wherever you live.
(07:03):
And so I thought, man, thatdoesn't seem right.
Couldn't we develop maybe abetter model?
And I'd been an operator, so Ididn't come from a finance
background.
I mean, I've taken a financeclass in my life.
I can barely open up Excel.
I've never worked at anotherfirm.
This is basically what I'vedone my entire life.
And so I just came into it andI said, well, shoot, there must
(07:23):
be more people who need what wecan offer and who we could be
good partners with.
And so that's really what kindof set us on the path to create
a brand that owned thesecompanies, create a holding
company, and then eventually wecan talk about that later.
But we eventually raisedoutside capital in a very
unusual structure that allowedus to maintain our integrity.
And now we're on our secondfund and probably leading into
our third fund here soon.
Speaker 1 (07:44):
So yeah, I want to get to that actually pretty
quickly.
But first do tell people Idon't think we should assume the
audience of this podcastnecessarily knows much about
private equity and how ittypically works.
So explain how a real mostprivate equity firms are
structured, what they're lookingto do and then, as a lead-in to
how what you're doing isdifferent.
Speaker 2 (08:07):
Yeah, so maybe we can just kind of start at first
principles.
A private equity firm buysequity, so buys the stock in
private companies, so that'sreally the only requirement to
be private equity is.
You're buying private equitiesNow traditionally.
If you look at who pioneeredthe space, there's a book called
Barbarians at the Gate KKR is awell-known large private equity
(08:31):
firm and they developed a modelcalled a leverage buyout model,
which basically means I'm goingto try to buy your company and
load it up with as much debt asI can at closing, so I'm going
to try to inject as littleequity.
Think about it as like buying ahouse where you know whatever
your down payment in is on thehouse is kind of the equivalent
to the equity the private equityfirm would put into a deal.
(08:52):
And so what they're used todoing is trying to match as
little equity as they can withas much debt as they can.
And that debt, of course, wasnon-recourse, probably unlike
your house.
You know, if you don't pay yourmortgage, not only do you lose
your house, but you probablyhave to repay.
If the bank loses money on thehouse, even more money on top of
that.
Private equity firms were ableto get institutions to lend them
(09:13):
money with no guarantee on it.
So what it allows it to do isif there's a problem with the
company and the company implodes, they can just write their
equity down to zero and kind ofpass the company off and then
the winners all aggregate upright.
So it's kind of a heads I win,tails you lose.
The unfortunate part is thatwhen you put a lot of debt on
(09:35):
something, you're removing allthe margin of safety out of it.
So you know, like you wouldthink about in a house, you know
if you put 5% equity into ahouse and you have 95% debt and
you have a little bit of changein income or you lose your job,
there's a high likelihood you'regoing to have a lot of problems
trying to pay your mortgage.
Conversely, if you maybe buy ahouse that's a little bit less
of a house but you're able toput 20 or 30 or 40% down, you
(09:57):
know there's a lot more marginthere to be able to work with.
Well, it works the same way withbusinesses and in private
equity.
And so we early on, you know,as operators these businesses
said I can't imagine the stress.
It's so stressful to run aprivate business.
I mean, you know it is tryingto do everything you can just to
survive right, and layering indebt on top of that really again
(10:18):
takes all the comfort out of itany comfort that you would have
and adds just a tremendouslayer of stress on it.
I couldn't imagine running abusiness that had a bunch of
debt laden on it, and so fromthe early days we said, hey,
that's not something we reallywant to do.
We want to make sure thesecompanies that we get involved
with don't use debt or use itresponsibly to grow the business
(10:39):
, to grow the balance sheet, tomaybe open up a new location or
to buy more inventory to servicethe customer, but not just so
that I can pay off somebody andput a bunch of debt at close.
The other model that traditionalprivate equity uses is to flip
it to somebody else within afairly short period of time.
I mean some private equitydeals will be resold within six
months to a year of thempurchasing it.
I'd say the average durationthe last time I looked was three
(11:03):
and a half or four years.
So if you think about it, fromthe time that you meet them, the
private equity firms, the timethey're going to resell your
business, I mean it's not thatlong.
I have a friend in privateequity and he says, hey, I'm
going to own this business forno more than four years.
You have four board meetings ayear.
That's 16 times to impress me,like, don't screw it up, right?
(11:26):
It's not a high relationalmodel, it's not a long-term
model.
And the way we think about itis it's impossible to make good
long-term decisions withshort-term horizon, right?
Speaker 1 (11:34):
I mean there's just no way In fact, they're not
really set up to make long-termdecisions, right?
I mean, no one's evenincentivized it.
Speaker 2 (11:41):
Yeah, and if you think about it, I mean you go
from having a family that builtthis business and you know,
usually these families have nodebt on the business and they're
thinking about this businessfor generations.
And then private equity comesin and says look, and, by the
way, private equity isincredibly intelligent people,
they are very smart, they knowthings that the average small
business owner does not know.
So can we just call they arevery skilled at what they do.
(12:02):
The challenge is and, by theway and there are lots of great
people who work in privateequity who don't harm, people
who are thoughtful, who are kindbut overall as an industry,
when I think about theincentives, the incentives are
all off.
So I don't want an incentive tobe more short-term oriented.
I don't want an incentive totry to cut as much cost as I can
(12:25):
and sort of lean down thebusiness, like I want.
We actually want to come in andincrease benefits.
We want to increase thehappiness and the livelihood,
like I actually have this visionof potentially and I don't
think we're there yet but whenyou work with permanent equity,
we actually help your marriageand we help your friendships.
We want you to be just a better, higher functioning human out
(12:46):
there in the world.
We want you to be healthier.
So that is the opposite, Ithink, of the mentality that we
call the buy, lever, strip andflip model of traditional
private equity, so permanentequity.
We typically have no timehorizon.
We have really long-datedcapital I think the longest in
private equity history.
So we're buying with nointention of selling the
(13:07):
business, we're not using anydebt, we love to keep the
leadership in place.
Speaker 1 (13:10):
We're not trying to strip the company down and we're
trying to partner for the longterm and treat everyone really
well, was this a concept thatwas around, that you read about
somewhere and became familiarwith and said, yeah, that's what
I would like to help build outas an alternative to the
traditional private equity model?
Or did you make this?
Speaker 2 (13:28):
up, brent.
Yeah, I didn't know what I wasdoing.
I still feel like most days Idon't still know what I'm doing.
But yeah, I mean, you know thewhole imposter syndrome.
I'm like, oh man, that's me,but I'm actually an imposter and
yeah, so I.
It just was first principles,thinking it was just if I was a
(13:48):
seller of a business, if I wasan executive of a business that
was purchased, what would I wantand what I'd want is what
private equity doesn't offer andwhat permanent equity does
offer.
I would want a group of peoplewho I could trust, who did what
they said they were going to do,who provided capital that was
long-term, that was secure, thatthe rug couldn't get pulled out
from underneath us.
(14:09):
I'd want them to take a verylong view and time horizon on
the business I'd love us tobuild together.
I'd love to share in economics,as that business was built on
the way up and we try to be kindand generous.
I don't, I don't.
You know, this is notcomplicated.
I feel like that most peoplejust get it wrong, like you make
more money together if you doit together, and the only way
(14:30):
you can do it together is ifit's a win-win for all the
parties, and so when we thinkabout win-win, we can also talk
about this.
Many people think of win-winbetween a buyer and a seller.
Those are only two of thestakeholders in a transaction.
There are the executives, whichare kind of a different
stakeholder group.
Sometimes there's overlapbetween the ownership and the
executives, but not always.
You have the employees, so notthe people who are leading, but
(14:52):
just the sort of middlemanagement all the way down to
the line workers.
You have the communities inwhich they sit, you have the
suppliers and you have thecustomers.
Maybe you even have a regulatorinvolved, and so you need, in
order for the business to besustainable long term and for
everyone to win, everyone has towin or it's not sustainable.
So we really try to thinkholistically.
(15:12):
It's kind of like sittingaround a poker table and you're
trying to look at everyone'scards and trying to say OK, we
want to make this scenario workfor everyone who's at the table.
Speaker 1 (15:21):
What's the downside of?
I would imagine that manyowners of small and medium-sized
businesses are more attractedto what you're doing than what
the typical private equity firmis doing.
But if you are looking for somekind of exit, that isn't just
like winding down your businessbut actually getting something
for it.
It's a trade-off, a lower sortof valuation or a lower multiple
(15:42):
with your model versus atraditional private equity model
.
Speaker 2 (15:47):
I would say is we're paying in the ballpark of what
other people are paying, or wewouldn't be able to get deals
done.
We're rarely I would say neverbut we're rarely the highest
bidder.
So if your only advantage inhow you're going to win at an
auction is you pay the highestprice, then it comes at a cost
of something else.
So if the model is just we'rejust going to pay the highest
(16:09):
price, then it comes at a costof something else.
So if the model is just we'rejust going to pay the highest
price, that's how we're going towin, then you're probably going
to strip everything else out,you're probably going to be
short-term oriented, you'reprobably going to lever it up as
much as you can.
And so look, I'll be honest,for 85% of businesses out there,
or sellers out there, all theycare about is how is the biggest
check that I can get it closed?
And look, if that's what youwant, there is a whole ocean of
(16:30):
people out there who that'stheir model and they will.
Just, you know they'recompeting in an auction.
It's just straight price andthat's great.
You know, if we say to anybodywho brings us an opportunity, we
always say hey, is money theprimary motivator for the
transaction, do they care at allabout who buys the business?
And so what we like to say iswe buy businesses from people
(16:51):
who care what happens next.
If you don't care what happensnext, we don't want to buy the
business from you almost at anyprice, because you probably ran
the business like you don't careRight.
So we want to create a positiveselection bias after closing
for people who care deeply aboutwho buys the business.
Their employees are highlyengaged and they feel
well-treated.
Their suppliers feelwell-treated.
(17:12):
Their customers love them right, because they methodically and
slowly built the business over along period of time with that
sort of ethos.
And so those are the peoplewe're trying to partner with,
which is a smaller percentage ofthe overall sort of universe of
sellers.
Speaker 1 (17:31):
Seems like it's not micro, though I mean it seems
like that's got to be anon-negligible, at least in my
dealings with owners, oftenfounders, of these smaller
businesses.
In some cases, one reason whythere are smaller businesses is
because they haven't cut everythroat on their way to the top
for growth, right, that theyhave had parameters, that
they've put around theirbusiness practices and what
they're willing to do and whatthey're not willing to do.
So it doesn't seem to me thatthat's got to be a big enough
(17:54):
palm for you to find efficientoh yeah, I mean our business is
doing well.
We love the people we've beenable to partner with the
concepts.
You've been doing this now forsome years.
Have you seen it imitated now?
And absolutely yeah, yeah, yeah, we love it.
Yeah, talk about that.
How is it?
How is that changing what theworld of private equity looks
(18:16):
like?
Speaker 2 (18:16):
Yeah Well, so when we first started talking about
these concepts in kind of 2004,2005, I mean, look, I'm an idiot
.
But a lot of people called mean idiot, you know, and I was
like you're not wrong, I'm.
I mean, compared to what you'redoing, you're right, I didn't.
You know I don't have a degreefrom Penn and you know I haven't
(18:36):
, I don't have 12 years ofexperience in in, you know,
investment, banking and privateequity, and you know I don't
know everything you know right.
All I can tell you is that Isat in the seat of somebody who
operated a business and I cantell you what I would have
wanted.
And so, when we think aboutjust generally, what the market
is and who's out there, we wantto select for those people and
(18:58):
we care deeply about them.
And so, when we think about theways of the industry, I would
love to have the industry bechanged, and I think it is
slowly changing.
So there's probably I don'tknow probably 150 people that
have told me they're going totry to start something similar
to permanent equity, and there'sprobably been five to eight who
(19:21):
have actually done it.
It's really hard, like I alwayssay.
I mean, we put our wholeplaybooks online, like you can
go on our website and you canread exactly how we do what we
do.
It's simple, it's just verydifficult, and so we're open to
um.
We're open to people adoptingour model.
We'd love that.
We think that it would bebetter for the industry.
Is there a?
Speaker 1 (19:40):
plentiful supply of both deals and investors, or is
there a lot of like investoreducation that has to happen
before you have enough potentialinvestors in permanent equity?
Or is it something else, justthe sheer just operating?
You know, 15 companies.
That's the hard part about it.
Speaker 2 (19:59):
Yeah, it's all hard.
I mean, you know, I used tojoke if it weren't for the
employees and the clients, thenthis business would be easy,
right?
I mean like everything's hard,right, you know, people are
messy and difficult and you know, when you put a bunch of messy
people in a room, no matter whatthe situation is, it's going to
be.
Well, it'd be messy.
(20:20):
And so, yeah, I mean, there's aplentiful amount of investors
out there.
There's a plentiful amount ofcompanies out there.
There's a plentiful amount ofinvestors out there.
There's a plentiful amount ofcompanies out there.
There's an incredible lack ofskill in this segment of the
market.
So you'll often see privateequity people from upmarket
trying to come down into thisarea of the market and they're
used to working with consummateprofessionals, executives,
(20:41):
upmarket.
They know what they're doing.
They're coming in and askingvery thoughtful questions and
what about this strategy?
What about that strategy?
That's not how you do well inour segment of the market.
How you do well in our segmentof the market is getting your
hands dirty.
You're dealing with stressedout people who are trying their
hardest.
You got to climb down into it.
I mean, I always joke thatinvestors come in and they're
(21:01):
like have you ever thought aboutthis grand idea?
And the answer is always, ofcourse, like who's going to do
the work right?
And so what we try to do is wetry to resource them.
And again, it helps because wecame.
You know everyone on our staff.
We don't hire people out ofprivate equity.
No one on our staff comes outof private equity, and so
everyone's an operator on ourstaff.
Literally every single employeethat we have has operated a
(21:22):
business at some point on ourstaff.
It's like a prerequisite forcoming on, because you just
don't know, unless you'veoperated a business, you don't
know what's important, what'snot, what things that seem
important actually aren't andthings that aren't that
important actually are.
And so what we want to do is wewant to pair people who have the
skills to be able to supportthese businesses with people who
(21:42):
desperately need the help.
And you know we think of it aslids.
So there's like an everythingtastes like chicken layer to
these businesses.
You know we own 15 businessesacross manufacturing,
construction, aerospace,business, services.
I mean it's a very wide range.
Right Last year we bought achildren's clothing brand and we
bought the nation's leadingdesigner manufacturer of
amusement park rides right Sameyear.
(22:04):
So I mean really wide variety.
I can tell you that amongst allthose businesses, they need the
same stuff Sales, marketing,technology, accounting, finance,
hr support, recruiting, allthese things.
You know it's the.
Everything tastes like chickenlayer, and so what we're trying
to do is we're trying to helppeople who are incredibly
skilled at their business becomeskilled at the business of
(22:26):
business.
Speaker 1 (22:27):
Very good way of putting it.
There's it certainly.
For me, it absolutely resonateswith what you find in the
nonprofit sector as well, whichare just businesses that have a
different tax status and have avery mission forward way of
going about their business.
But there is a everythingtastes like chicken layer.
I like that way of putting it.
But everything tastes likechicken layer.
(22:48):
I like that way of putting it.
The same the problems across atleast the smaller and
medium-sized entities tend to bevery much the same, which is
useful because you can bringresources to bear in helping
those kinds of businesses.
It's scalable how you can helpthose sorts of entities.
So that does ring a bell.
Let's go to a break.
We'll be right back with BrentBeshore, founder and CEO of
(23:13):
Permanent Equity.
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All right, we are back talkingto Brent B Shore, founder and
(24:25):
CEO of Permanent Equity, alsoauthor of the Messy Marketplace,
which I will ask him about herebefore we go.
We were just talking about theways in which small and medium
sized businesses across avariety of sectors are all alike
.
You have a phrase you are notall alike.
I share certain similarities.
You have a phrase that you usethat I am a hundred percent
(24:46):
going to be stealing from youI'll try to credit you when I
can which is all businesses areloosely functioning disasters.
That's a fantastic phrase thathad to have been born sort of in
the heat of a grinding week, Iwould imagine.
Speaker 2 (25:01):
Yes it was.
Yeah, I, somebody was asking meI think it was probably an
investor was talking to me aboutyou know well these businesses,
this or that, and I was like,hey, can I just stop you there?
I was like these businesses areloosely functioning disasters,
and some happen to make money.
Right, like that's the way Ithink about the small to medium
sized business world and I wouldsay the non-for-profit world is
the exact same thing.
(25:22):
Right, it's just a differentrevenue model.
Speaker 1 (25:26):
And it should make everybody feel better.
Actually, though, to hear that,right, if you're an operator in
a business right now, whether anonprofit or for profit
business like everybody is you,you're not unique in the sort of
dysfunction and challenges, andhow hard it is, it's that's.
That's across the board, so Iwant to say that it's actually a
(25:46):
way of making people feelbetter, not worse, but feel
better about what they're doing.
So, having said all that,though, you touched on this a
little bit, but I'd like you togo, if you don't mind, dive a
little bit deeper.
How do these businesses you'relooking at the ones you haven't
(26:10):
bought as well as the ones youhave how do they contribute
small and medium sizedbusinesses to the health of
society?
Speaker 2 (26:14):
And maybe you can even say how are those
contributions a day-to-day,week-to-week basis to?
Speaker 1 (26:28):
the average.
Speaker 2 (26:28):
American.
You're going to eat at a smallbusiness.
You're going to shop at a smallbusiness.
You're going to request theservices.
Something breaks in your house,the plumbing, the HVAC those are
small businesses that you'regoing to be working with,
everything from the regionalfarmer or maybe the landscaper
that's installing something atyour house, you know, to the
(26:49):
person who makes the drains onthe street, to the person who's
manufacturing the light posts.
I mean, these are all smallcompanies and I think most
people maybe don't realize that.
It's a little bit kind of likethe farming system where you
know we keep the how we reallyget meat and how get meat and
where vegetables are reallygrown, maybe hidden.
(27:10):
Most people maybe don'tunderstand that almost
everything they're coming incontact with, they look around,
was created by a small company.
And let's remember too, allsmall business, all big
businesses, started as smallbusinesses too.
So there's no way to get aroundsmall businesses being the
backbone of this economy and, interms of the communities that
(27:34):
they're in, they are the ones,if you look, that are
contributing back to thecommunity.
So, yes, some corporations arealso contributing, but for the
most part, if you look at thelargest philanthropic givers,
for the most part.
They're going to be small smallto medium-sized business owners
and executives and those arethe people who are deeply
embedded in their communitiesand care deeply about them.
Speaker 1 (27:54):
And part because they're tightly or closely held.
You might say that thedecision-making process around
giving, I'm sure, tends to beless bureaucratic for a small or
medium-sized business.
Has your work at PermanentEquity, have you developed your
own thoughts about givingphilanthropically, not only just
necessarily for these companiesthat you're looking at
investing in or you haveinvested in, but just for
(28:16):
yourself?
How has that evolved for you?
Speaker 2 (28:19):
Yeah.
So the answer is yes.
I feel like that.
I'm not great at how we give,like I think it takes time and,
to be honest, my wife and I arestill on this journey.
We are I haven't talked about alot about this publicly Part of
this like this weird humility.
You know I don't want to, Idon't ever feel like it's
(28:39):
bragging, but you know we are.
So we're believers, we followJesus and you know we believe
we're stewards of the resourceshe's given us, and so, whether
it's in the companies, in theorganization, in the companies
that we manage, or the resourcesthat we are able to be given,
we just want to be good stewardsof those, and so, as we've been
(29:00):
given more, we certainly haveit's been an exciting thing for
us to pursue what we really wantto support.
I mean, there's an ocean ofamazing things out there and I
feel like that we are called, wehave a special kind of mission
to help those in need, sort ofthe poorest of the poor, and so
we focus a lot of our giving onmercy, and so, as we have, one
(29:26):
of the goals that we have as a,as a couple, is to give an
increasing percentage every yearof our of our resources away,
so not sort of in dollar amountbut in in sort of percentage.
We think that's a uh, uh, yeah,as a portion that we give, and
so we're we're pretty close touh, I mean, I think we're.
Our goal is to start giving 50%away on an annual basis and
(29:46):
sort of the maximum allowablethat we can from a tax
perspective.
We're not there yet but we'reon our way and that's really
opened up a lot of doors to seepeople's lives changed and we're
really grateful for the peoplewe get to partner with.
So we have call it nine or 10organizations that we feel great
about.
We know inside and out that wewant to use our time and our
(30:10):
talents to lever against thefinancial resources that we're
giving as well to help grow andshape those organizations and
try to help them help the mostpeople they can.
Speaker 1 (30:20):
Are those organizations savvy enough to be
asking you for more than justyour treasure, but for it to be
having you take a look at theiroperations and leadership and
using what you've learned fromthe permanent equity world to
help them get stronger ascompanies?
Speaker 2 (30:35):
Yeah, I mean I would say some of them you know a lot
of.
That's just a function of trustyou know there's.
You know being wealthy doesn'tmake you smart.
And being wealthy, even if evenif you gain it through a, you
know, through a business somehowdoesn't make you smart.
And being wealthy, even if yougain it through a business,
somehow doesn't mean you shouldspeak into a lot of the
not-for-profit world.
And so I try to say I'm happy totry to be helpful.
(30:55):
However I can.
We always offer up beyondfinancial resources.
I'm happy.
If you think that I've got anability to speak into it, that's
great.
But by no means are we tryingto say, hey, in order to take
our resources financially, thatyou need to bring us on the
board or do something like that.
In fact, there's only one boardof directors that I serve on
and I'm happy to.
(31:17):
I'm not a very good boardmember.
To be honest.
I don't love being on boards.
I'm kind of a chaos monkey, soI tend to disrupt boards that
I'm on, and so I work muchbetter in concert with the
leader of the organization orthe senior executives, and it
sounds like you're a very goodadvisory board member, brad, but
(31:37):
not the governing board,perhaps.
Yeah, I don't do well withadvisory boards either, so
anyway, but no, I try to behelpful as much as I can.
The best companies you'veinvested in.
Speaker 1 (31:47):
what do they have in common, or what is it?
When you see it now, you'relike, yeah, that's what we're
looking for, that's it.
Speaker 2 (31:54):
Yeah, I mean I think the best companies are built by
the most successful people and Iwould say, whether it's in
business or not, in a businesscontext I've seen the people who
I like to bet on are the oneswho take the best feedback.
It takes a lot of humility tohear hard things right.
(32:17):
I mean everyone wants to say,hey, what you're doing is great,
you're doing great, there'snothing I would want to change.
Right, being in most people and, by the way, I suffer from this
too Don't give, don't give offthe vibe that they're really
open to hearing feedback.
And I think, as a colleague, asa friend, it's sometimes hard.
I mean I talked about this witha friend the other day but I
(32:39):
said I've stopped for the mostpart lying through commission,
but I certainly lie a lotthrough omission.
I just don't have the courageoften to tell somebody the truth
, even if it's the truth in love, which I hope it is.
I stopped short of telling themthe full truth.
That would be incrediblybeneficial, I think, to their
lives, largely because I don'twant to go through the battle.
(33:02):
It's not my life to live and Idon't want to go through the
battle of what that would looklike and most people are not
open to hearing feedback.
And so, whether it's for mepersonally or the CEOs in our
companies or whatever, it mightbe that the people I've seen
just make incredible progressand, by the way, incredible
progress personally,professionally, in their
marriages with their kids arepeople who can humble themselves
(33:24):
and say, hey look, I'm secureenough to be able to hear that
maybe I'm not perfect.
And it doesn't mean you justtake wholesale whatever somebody
says to you and say, oh well,now I'm going to change and go
in this direction, or that Imean that's madness.
But what it does mean is thatyou're going to genuinely hear
what they have to say, maybe asksome clarifying questions, not
(33:44):
be defensive, no matter howharsh the criticism is, no
matter how unfair or how offbase you think it is.
I mean it's great for somebodyto say, hey, I hear you, I, this
is what I'm hearing you say.
You know, can I ask you acouple of clarifying questions?
Okay, I still don't, I stilldon't agree with you, but I'll
think on it.
Right, but that's rarely how ithappens.
Oftentimes, feedback is givenand the person gets their
(34:06):
feelings hurt or they startshoving back Right and and
immediately.
As soon as you do that, the thewalls up on both sides.
You're not going to hear whatthey have to say.
The other person's defensive Umand so I've just seen it
repeatedly through my career.
I mean most careers die bysuicide, not by homicide, like
most people would be with.
(34:28):
Their careers would be triple,if not 10 X, what they are, if
they would just genuinely humblethemselves and and listen to
what the world's telling them.
What people are telling them ishow they could view themselves.
You found any?
Speaker 1 (34:42):
way to get the walls to go down so that feedback can
be heard a little bit better.
Speaker 2 (34:47):
Yeah, yeah, I mean, the only way I know to do is to
to make sure the person knowsthat you're for them and with
them, and you know if you haveany hint that somebody is not
for you, that they're not happywhen you're happy, that they're
not excited about your successes, that they're not willing to
mourn with you when you'remourning.
It's really hard to hearfeedback from them.
(35:08):
Now, I think that's still askill that somebody should
cultivate, is to hear meaningfulfeedback from somebody who you
don't like and don't think likesyou, because I think that's
still a kernel of truth usuallyin that feedback.
But for the most part, the wayI found it is telling somebody
hey, if I'm going to deliverhard feedback, I'm going to say,
hey, I care about you, I careabout you being the best version
(35:30):
of you.
I want you to know this becauseit's for your good.
I'm not doing it to make myselffeel better.
I'm not doing it because I'msomehow superior, to make sure
there's no elevation that'sgoing on with the person who's
giving feedback, becauseoftentimes feedback is really
just condescension and disguise,and that is not the way to give
(35:52):
feedback.
So I often try to say, hey, I'monly giving this feedback,
because I too have this issue orI've suffered this way and
people were kind enough to giveme the feedback.
You can take it or leave it.
It's your life to live.
That seems to go over better.
Speaker 1 (36:08):
Let me shift a little bit here as we sort of steer,
of steer this thing toward,toward a close.
But what would you say?
What are the questions, theright questions, or especially
the questions that people don'ttend to think about?
If you're a business owner or afamily and you're starting to
look around for a partner,either either for a full sale or
(36:28):
for a growth sort of situation,what are the questions people
don't ask often that they should?
Speaker 2 (36:36):
Yeah, I mean, I think you first have to know what you
want.
I think the most frustratingthing for us is when we talk to
a seller and we say, hey, look,we're very flexible, we do this
for a living.
We've got people who are allover the spectrum in terms of
what they want for the future.
You tell us what you want,we'll tell you if we can get
there Right.
And they say, well, I don'tknow.
(36:57):
You tell me what you can giveme.
I'm like we can give you almostanything within you know,
within reason.
If you tell us you want toleave the day after closing,
okay, we'll work with you onthat.
If you want to tell us you wantto work with us for the next 10
years, great, we'll work withyou on that.
Like you tell us, you know, thequestion we ask is if you could
wave the magic wand, what wouldwhat would the situation look
(37:19):
like, what would the transactionlook like?
What would life look like afterthe transaction?
And most sellers can't answerthat question.
And so if they can't answerthat question, then we can't be
as helpful as because what we'retrying to do is we're trying to
put together this incrediblejigsaw puzzle, right, if you
think about a deal, there'sroughly 400 things you have to
agree on, broadly speaking,between a buyer and a seller 400
(37:47):
things.
I can't tell you what 400 ofthose 400 things are really
important to you, and I can tellyou which ones are important to
us, depending on the context,but it's going to take forever
to work through those questions,and we're not going to design a
very good deal if you don'tknow what you want.
So the first question I wouldask if I was a seller is what do
I want?
And make sure I can articulateit very clearly and have sort of
substantial logic behind eachone of the key points.
(38:08):
So you know hypothetically,let's say, you know you own a
business, that's you know makingthree or four million dollars a
year, and you say okay, look, Iwant all cash up front.
I don't care about earninganything, I don't want a seller
note, I don't want any deferred,you know compensation at all.
I want all my cash up front.
I want to walk out day one.
(38:29):
Okay, that's fine.
What that's going tocommunicate to a buyer, though,
is that you somehow see risksthat they probably don't.
If you're not willing to riskshare at all, then you're going
to see risks that they'reprobably not aware of.
And if you say, oh no, thebusiness is in great shape, I
think it's going to make tons ofmoney for the next 50 years,
Buyers can be very skeptical ofthat.
But we have people who sort ofengage in that and they say I
(38:52):
want all cash up front, I wantto leave the day of closing
right.
And then we find out down theroad that it was coached, that
some advisor or intermediarysaid oh, this is what you tell
people, this is what you want,because no buyer can be trusted.
And then we say to them butwait a minute, like what?
If you could be trusted, wouldyou want to continue your career
?
Would you want to?
You know, would you want to bethe chairman of the board, would
(39:12):
you?
And they're like yeah, ofcourse I love these people,
these are my people, I wouldlove to be involved.
And yeah, I mean and we alwaystell people, by the way, you
will make more money if youdon't sell your business than if
you do.
That's very counterintuitive.
You will always make more moneynot selling your business,
because it requires you to takethe risk, it requires you to
work in the business.
So what we try to counselpeople is you know, make sure
(39:35):
you know what you want, and thenlet's talk about what that
means.
Speaker 1 (39:38):
That's really good, brent, thank you.
Tell us about.
There's two events you'reinvolved with that I've heard
about through the grapevine.
I don't even know therelationship with these events
to permanent equity.
Maybe you can clarify that here.
But one's called main streetsummit.
I believe one's called CapitalCamp.
Tell people about those and ifthey can be involved, how they
could, if wanted to, how theycould get involved.
Speaker 2 (39:55):
Yeah, well, thanks for asking.
So I founded both those events.
You know, I had this idea thatcontent is the only way to scale
conversation.
So what we're doing right nowyou and I are chatting, and
hopefully lots of people aregoing to listen to this right,
events are the only way to scalea relationship.
So, if you think about how toget a lot of people together and
(40:16):
form meaningful relationships,the design of the event is
really important, and events arean amazing way to meet a lot of
people and develop thoserelationships.
So I had been asked to go as wealready got notoriety in the
industry to a number of financeevents and they were terrible.
I mean, I don't know how elseto say it.
They were just absolutely awfulRubber chicken lunches, bad
(40:39):
coffee.
Everyone's in blue blazersslinging business cards, panel
discussions.
Up there, it's a snooze fest.
It's awful.
No one was enjoying themselves.
I wasn't enjoying myself and Icalled up a partner of mine.
This is in 2018.
And I said there has to be abetter way.
I mean, this is theentrepreneurial spirit, right?
Like I don't consider myself afinance guy.
I'm not a private equity guy.
I mean probably not even aninvestor.
(41:00):
Like I'm an entrepreneur, like,I love creating things that you
know, permanent equity is justan expression of the creation in
the area that I love.
And so I called him and I said,hey, there's gotta be a better
way.
What if we designed the eventthat we would want to attend?
And he said I'm in, and sothat's Capital Camp.
That's how we created CapitalCamp.
So we're on our fifth iterationnow of Capital Camp and it's
roughly 400 investors, allprofessional investors from
(41:22):
around the world.
We had 16 or 17 countriesrepresent this last year
Tremendously successful, lots ofcapital in the room.
And I get to be the Willy Wonkaof that event for, you know, a
three-day period, all the thingsthat I would ever want to be a
part of.
So we've got, you know, crazyhot air balloons and helicopters
and incredible chefs.
The joke is I'm running a foodand wine festival and my
(41:43):
partner's running an investingconference.
You know SEAL Team 6 does allthe security for it there's.
You know you get to choose yourown adventure.
You get to, you know, go trailrunning with one of the top
runners in the world, or you canlearn shooting from, like I
said, a Navy SEAL.
Or you can learn how to filleta halibut with one of the top
(42:04):
chefs in the country.
So it's just kind of thisincredible blowout event.
If you're a professionalinvestor and you're listening to
this, go through the website.
There's a wait list, but wouldlove to have you get on there.
Main Street Summit is kind ofthe opposite end, so it is
business owners, operators andinvestors.
We wanted to create a big 10event, so Capital Camp's roughly
(42:24):
400 people.
First year of Main StreetSummit was this last year and it
was 1,000 people.
This this year we're hopingit's close to 2000 people.
This next year it's a festival,so we're running seven, eight
stages at the same time.
Think of it as like a moviefestival, but instead of sitting
down and watching a movie,you're doing something, some
conversation or listening tosome presentation on something
business related Acrossindustries.
(42:46):
We had oil and gas, we hadaerospace, we had construction,
manufacturing, everything anddifferent levels of content.
So are you sort of a newbie tothe industry?
Are you trying to just kind ofget your feet wet or are you
deep in the industry?
So we have kind of 101, 201,301 level content and then just
a huge party.
I mean it's just so much fun.
There's all kinds of activitiesto do we take over downtown
(43:06):
Columbia, missouri.
Yeah, I love it.
I mean my aspirations forCapital Camp's kind of topped
out in what it is.
My aspirations for Main StreetSummit are that it becomes
eventually like the South bySouthwest of the business world.
That's fantastic.
Speaker 1 (43:20):
Well, sounds great.
I'll have to go sometime andI'm sure people would love to
have you there, we'd love to goas well.
Where can people go to learnmore about permanent equities?
At permanentequ equitycom.
That's easy.
Main street summit.
Main street summitcom Capital,campcom Capital campcom, good
URLs, excellent, and you can buyBrent's book the messy
(43:41):
marketplace, selling yourbusiness in a world of imperfect
buyers Amazon, barnes and Nobleeverywhere else, I believe.
Speaker 2 (43:52):
And are you on X?
I am on.
Are we calling it X these days?
I'm on Twitter.
Yeah, I'm on the Twitter.
I'm on Twitter.
I'm on LinkedIn yeah, I'm easyto find.
Speaker 1 (43:59):
I'm not on it At Brent Beshore on Twitter slash X
, that's B-E-S-H-O-R-E.
All right.
Well, thank you so much, brent,for being with us, sharing your
wisdom and insights.
Really appreciate it Reallyappreciate you having me on from
Send your requests to ourproducer, katie Janus, at
kjanusatamphilcom, that'sK-J-A-N-U-S at amphilcom.
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