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

All right.

We got a friend of the show here, Jordan Harbinger. He's one of the guys who's been advising us on how to build this podcast because his podcast is way more successful than ours and has been around. He's been doing podcasting for like 12 and a half years, which Jordan, that's gotta be as long as podcasting has existed, right?

Yeah. I think podcasts have been around for like 14 years and I've, or 15 and I've been around for 13 of those. So yeah, when I started, there was no way, there were no iPhones. So you couldn't get podcasts on your phone. You had to use an iPod to play them.

Yeah, straight to cassette. That's how long this guy's been doing it. So Jordan, I like your show. I've been binging it while in quarantine because what else am I gonna do besides try to learn something new or improve myself in some way? And I gotta say, I like it because you do the interview style show where you go deep with a guest. I think you had, I was listening to the one with Tony Hawk, which was pretty awesome. And I gotta say, I like that you don't do the kind of surface level, you know, just, just, you know, pitty-patting around with the questions or trying to do, you know, inspirational fluff where you're just saying, go, you can do this. So with that episode with Tony Hawk, what was that like? Because Tony Hawk's an icon. How was it, you know, interviewing Tony Hawk?

It was great. He's a really interesting guy, really open and fun. And he told some pretty funny stories. One which was very apropos of what's going on right now is one day he walked into his agent or some sort of marketing team that he'd hired, he walked into their office. This is like at the height of video games where he's making, I don't know, 50 million bucks off these skating games and these brands. And he goes in and he says, look, I got this backpack that was made pretty shoddily and it's got my name and face on it. I don't want any more stuff like that. And as the agent, marketer, whatever, is sort of nodding his head in understanding, Tony goes, wait, what's that on your shelf? And it was a roll of toilet paper with Tony Hawk's name, face, and logo on it. And he goes, "What the hell is that?" And the guy goes, "Oh yeah, anything we put your name and face on does so well, we were joking that we could put your face on toilet paper and we'd still be able to sell it." And he fired them on the spot because it was clear that they didn't value his brand, which I thought was a funny story. And he's got a ton of stuff like that that he talked about on the show.

That is epic. You know, I actually met Tony Hawk. We went on a trip to Africa, a charity trip together, Believe it or not, we were halfway up a mountain in Ethiopia where it's like, this is a mountain village, and somebody saw him there and they were like, "Tony Hawk!" That's probably the only English word they said to us all day. They identified Tony Hawk on a mountain in Ethiopia. That's how famous that guy is. That's an amazing guest to have on the show.

Imagine being that famous that you get recognized in the middle of countries where nobody speaks your language and they maybe don't even have skateboards.

Yeah, we were there trying to give people clean water. They didn't even have water, but they knew Tony Hawk. That's how, that's how famous that guy is. Amazing. Awesome. Well, if you want to hear more from Jordan, we're gonna be having him on more and more. He's a friend of the, friend of the house, and you should listen to his show. It's one of the podcasts that I would recommend. If you like Tim Ferriss's stuff, if you like our stuff, you're gonna like his stuff. And so go check out the Jordan Harbinger Show on iTunes, Spotify, wherever you get your podcasts, you'll find them there. What's up everybody? Shawn here with Sam and special guest for this episode, Brent. Brent, how do you say your last name? Bishore.

Bishore.

Alright, cool. I've been trying to get you on for months. I think our email thread goes back months. The reason why is because I'm interested in the business of buying businesses. I've been looking to do this myself. So after I sold my company, I said, great, I got some cash. I can either put this in the stock market, I could do, you know, I can go gamble this on a boat, or I can potentially buy a cash-flowing business that's a good, solid, stable business. And so I started learning about that world, stumbled around and saw Permanent Equity. And yeah, I've been interested in having you on, on the podcast since then. So why don't you tell us, give us like, you know, the minute version of who are you, and then also what is Permanent Equity?

Yeah, so Permanent Equity is, we like to describe ourselves as a family of companies that buys family-owned companies. So technically we're a private equity firm now. We were Just a small collection. It was my own capital in the beginning. I was an entrepreneur and then accidentally bought a business about 10 years ago, and that's what led into kind of what we do today.

But what does that mean, you accidentally bought a business?

But, uh, what does this mean? What's regional marketing?

You know, we were doing, look, we were doing like ad agency type work. We were doing media buying, we were doing digital work, you know, trying to scrap and claw and sort of make a go of it, you know.

So you're just an agency, you're an agency just figuring it out.

Yeah, we were an agency. We had some unusual talents kind of under that agency because being in Mid-Missouri, we didn't have access to a lot of specialty groups. So we started building out our own specialty groups. So we built out research, we did some mobile and app development as well. And then some film work. So those were kind of the 3 unusual buckets that you typically don't get into an agency.

And give us, yeah, give us a sense of the level of success. I think a lot of people, one of the things we hear a lot is from the audience is like, they hate when we fast forward and someone's like, "Yeah, I did this thing," and then all of a sudden these amazing opportunities opened up and they sort of are like, "Wait, where were they before?" And so give us the before picture. How were you doing? How was that business doing financially? Was it a big business, small business? What was that business like?

Yeah, so we, so let's see here. So I'm trying to, it's been a while since I've thought about the numbers. So we grew to 26 employees, I think at the peak of that, kind of before we were, so we were doing fine. I could make a living doing it, make a good living doing it. It wasn't, the agency business is hard. It's really, really hard. And I think that's probably what I've learned in my career is I've made all the mistakes, I've tried and tested a lot of business models and sort of, taste and try something, and you're like, oh, didn't realize how hard that was going to be, and you sort of, you know, move around. And so, yeah, I would say, you know, moderately successful regional marketing firm, nothing special. I mean, I would say, you know, when, yeah, when we bought the firm that we did called Mediakross, you know, we were kind of co-equals is how I describe it, kind of in the marketplace. They were much more focused on government contracts than we were. We didn't have any government contracts, so that was really attractive about the acquisition. Being able to combine those organizations gave us a lot more cash flow than having them separate, just based on cross-selling different products that we had and being able to fulfill a lot more of the gross profit through sort of the larger organization that they've been farming out some stuff. So that was kind of a nice combination.

Wait, so did you buy that first company under the umbrella of your marketing business?

Yeah. Yeah, correct.

Got it. And so it wasn't its own entity?

No. Well, I mean, it was. I mean, if you want to speak technically, it was its own entity, but it was 100% owned by me, and 100% of the other firm was owned by me. So I mean, it's shared resources.

So you didn't have a co-founder or any outside investors or anything?

Yeah, so I bought it with an SBA loan. Um, thank God for the SBA. Um, and so, um, no, it was, it was just, uh, it was an SBA loan and, uh, rolled the dice.

And so just to give people a sense of where you're at now, uh, I think Permanent Equity, you guys raised a second fund, uh, $248 million. It's a 27-year fund, which I think is interesting, and you could talk about that. And you have a 10-year investment period. And so, um, so the first fund, $50 million. Second fund, $250 million roughly. Um, so what are you guys up to? Explain what the model is here and why that should be interesting for people.

So how much, what's your total, what's the total revenue of the collection of companies then?

Well, see, so total revenue, gosh, I mean, Oh gosh, 180 million, something like that.

And then I imagine you guys try to run this like super profitably, so then if you have $180 million in revenue, I bet you have $40 million in cash flow.

Uh, let's see here. So hold on, I— you literally put me on the spot here. I've not done our calculations recently. Um, yeah, I mean, we're highly profitable. I mean, the organization does real well. Um, I don't know if we're at $40 million, because we have some lower-margin businesses. We're lower than that, but yeah, we do real well. And look, I don't own all that anymore, right? So just from a— like, I don't want this to come across differently than this. We've got investors. The first fund owns 5 of those investments, and then I own 4 outside the first fund that were the group that we put together before we raised that first fund. And then the second fund, we haven't deployed any of that capital. And yes, we've got a bunch of dry powder. I mean, obviously, it's been extremely fortuitous for us to raise the time that we raised. And I've been having lots of conversations with our investors, and there should be lots of opportunity, lots of pain out there, which is unfortunate. We've got to try to toe that line. We can talk about it between being a white knight and a loan shark, and that's not an easy one to toe.

Right. And so if we just take a look at the portfolio as is, What types of companies are you trying to buy? So you're trying to buy— is it a certain price point? Is it a certain business model? Is it a certain type of owner? What are you trying to buy?

Yeah, so we first want to buy something that we think is gonna be durable and around for a really long time. So, you know, if you look at our current portfolio, we are in the swimming pool business, like digging holes in the ground, shooting concrete. We're also manufacturing in that space as well. Another company that's unrelated in the backyard product space, so a bunch of different SKUs that sell through mass retail. We are, we have a military recruitment firm. That was the first firm that I acquired, BD Cross. We've got a real— A what? A military recruitment firm.

So is that like lead gen for military?

Yeah, so we actually, so we work, I mean, we have a number of different clients, but one of our main clients is a civilian branch of the Navy that resupplies the ships that never come into port. So it's called Military Seal of Command. And we're responsible for finding and onboarding all of their staff on a yearly basis.

So it's like a staffing firm for a ship?

Yeah, well, for a whole branch of the military. So it's, uh, um, there's, there's staffing. I mean, there's a lot, uh, you know, 14, 15, 1,700 civilian mariners a year into that division. Um, so it's a, it's a pretty large operation.

But is it digital?

Uh, some of it's digital. Yeah, yeah, we have, uh, you know, online, uh, application products, uh, but not mostly. Uh, I mean, there's a lot of physical activities as well. We have physical recruiters and, uh, it's, you know, online, offline. It's the, it's the not sexy, uh, where the rubber meets the road, real deal business.

All right, everybody. If you wanna make your first million with a mobile app, you have to prioritize app performance first. And that's where our sponsor Headspin is here to help. You can get a custom Headspin benchmark report that will give you deep insights into your app's performance from cold and warm starts to errors, crashes, responsiveness times, including audio and video quality and biometric responsiveness.

Minutes.

That's right.

Art—

they have a state-of-the-art global device cloud that provides unique carrier network device OS and app level insights. And these are all happening on real SIM-enabled mobile devices that are in hundreds of locations all around the world. No SDK required. I like to think of it as having my own fleet of testers all around the world with the push of a button. And you can get a custom Headspin benchmark report. At headspin.io/myfirstmillion. Again, if you have a mobile app and you want to see a benchmark report of your performance, it's headspin.io/myfirstmillion.

Can that be huge?

Yeah, I mean, so we want to find a leadership team that we can partner with. There's so many, you know, it's so hard to grow a business, right? And so a lot of the businesses we're looking at, we either call it has been right before the line of professionalization or maybe has just crossed it. And there's this, this real interesting, you know, sort of in-between gap where a lot of these firms, um, they're, they're too big to be small and too small to be big, and the leadership team's kind of capped out. They're just brute forcing as much as they possibly can, but they don't have the, the systems, the talent on staff to be able to grow larger. And so a lot of the times we're trying to figure out from them, you know, do they want to get bigger? There's some, there's some firms we talk to and, and they say, well, even though I want to get bigger, but the, you know, the CEO's answering 60 calls a day on a cell phone, and I mean, there's just no way, right? Um, And so we're looking for a leadership team that I think has the base skills, is really, really excellent at what they do, and we're looking for the company to have a position in the marketplace that is protected somehow, right? So I mean, we're not looking to get into just commodity-type businesses. We want them to have something unusual about them that we can really build on and help them grow. And then, you know, this is gonna sound like a maybe a no-brainer, obvious one, but we gotta get to a price in terms that are acceptable to both parties. Right. And there's roughly 400 decisions decisions that have to be made during the acquisition process. I mean, it's 400 opportunities to not agree, and it's very difficult and time-consuming, and so a lot of it is just trying to make sure that we think that a deal could be done as well.

And so when you say the leadership team, you want them to scale, so why are they selling if you want them to stay in place, so they're not looking to go do something else or retire or whatever. You want them to continue to operate. And are they just looking for liquidity? What is the kind of core motivation to sell? And then do you have a problem where once they've sold, or do you structure the deal so that they're still incentivized to stay on and do a good job?

Yeah, it's a good question. So part of it is, so the leadership team and the ownership is not always the same thing. So some of the organizations that we get involved in, the owner is very much part-time and hasn't been directly involved in the business for a long time. And so For us, it's actually, that's a decently good situation because we love to just, you know, continuity of it, keep the leadership team, treat them well, and try to augment the talents kind of as we go along. Some of the owners that we got involved in have stayed on and it's worked out great. Second bite of the apple they get down the road would be much larger than even their first payment, despite them selling a majority of the company. So it really is situation-specific. I mean, I would say, yeah, for the most part, Some are wanting to take chips off the table, some, you know, realize that they need help in scaling and growing. So it's, you know, it's a variety of different reasons. I would say that all of them have an exit somehow in their minds. I mean, if you're in your, call it, 30s or 40s and you want to work for the next, you know, 30, 40 years, you know, I don't think many people like that are selling their business, at least in the size range and the style of businesses that we buy.

Hey, earlier you said that one of the one of the best ways that families have created wealth was by having a business and owning it for a very long time. So something tells me that you study like the wealth creation process. I'm not talking about like just building a business that makes money, but like, like creating like a true wealth. And so I guess what I'm wondering is with these people who are building these companies, like I'm looking at, I'm looking at like things that maybe won't ever be like massive, massive, but can create great wealth. So I'm looking at Game Group, I'm looking at Selective Search, which is executive search meets personal matchmaking. That actually probably could be big. Anyway, um, when you're doing this, like, what, what are some of the paths? I mean, like, because in Silicon Valley where Sean and I live, the path for most people, or the sole Silicon Valley stuff, which is sometimes bullshit, sometimes not, is creating something and raising loads of money and owning a very small percentage and not truly getting wealthy until after you sell it, or not getting liquidity at least. And their salaries will be $100,000 to $150,000 a year, so you can't like— and you're living in San Francisco, so you're not building it there. But I have a feeling that you guys look at this differently. Is that true?

They're getting wealthy from cash flow.

Yeah, yeah, yeah. These things make money. I mean, you know, we're typically I mean, if we're getting involved now, the company's making more than $3 million a year of real owner earnings, what sticks to the owner. So look, anybody— and these are closely held, so typically the owner will be 1 to maybe 3 or 4 people at most. And so usually the 1, 2, 3 people that are owning the company are doing very well. They've taken a lot of risk, which maybe sometimes is hard for people to see, and they built it over a long time. But I mean, yeah, they've done well for themselves. They're successful in, you know, separately and outside of the transaction itself.

And so the owner— let's just walk through a typical one. So I'm, you know, hypothetical owner of a business that manufactures wheelchairs. We're based in Oklahoma, and I'm the owner, I'm the sole owner, and I pull in, let's call it, $3 million a year owner earnings. And owner earnings would be different than sort of EBITDA in this case, right? So you're—

So fill in the blanks for me. So if I'm making $3 million a year, what's a typical EBITDA then for that company if the owner's pulling in $3 million on the types of companies you look at?

Yeah, I mean, probably EBITDA would be 3.5 to 4, something like that, probably.

And then say it again. So that was on 3 million in owner earnings would be 4 million in EBITDA, roughly?

Yeah, roughly. I mean, 3, 3.5 to 4. I mean, depends on the type of company. We looked at an aerospace company a couple years ago and they were doing 7 in EBITDA and owner earnings was like 3.5 or 4.

Why?

Depends on— because of all the investment.

So they needed a large cash buffer?

No, no. They're having to reinvest in equipment to just keep their market share and sort of stay steady in place. It just, you know, all that cash flow would be rolled back into buying new equipment, buying more inventory, you know, all the type of things that the cash would be sucked into.

And how are they getting the money out of the business? I mean, are they typically LLCs or—

Yeah, typically. I mean, it's a mixture. I mean, I would say probably 90/10, maybe 85/15 is LLCs. But either way, I mean, if they're a C-corp, you'll typically see owners, you know, paying themselves a lot to avoid that double taxation.

So they're just paying themselves big old salaries and just having to pay 50% tax.

Yeah. I mean, if you live in California.

And so, so let's, let's keep going for a second. So let's say you're at $3.5 to $4 million EBITDA. And when you guys go to buy these businesses, what type of multiple Of course, it depends on industry and it's very dependent, but what's a range? Is it 1x, 2x, 3x, 4x? Is that the sweet spot of kind of the bulk of your deals?

So you might have a, let's say, $10 million price tag for the cash at close and then plus maybe $4 million, $3 million bucks that's earned out. So now you go to SBA, and what you were saying is that you guys don't do debt. You guys do no debt, or you use less debt than a typical private equity firm?

Yes. So, so the SBA was on the first transaction I did. You don't do SBA? My own money. That we have no— we have no involvement with banks or the SBA or anything like that now.

So you guys just do cash deals? You say, here's $10 million, we're done. And why don't you use debt?

And when you buy a company, what is the first 3 months, 6 months? Are you hands-on with that? Is it— do you have an operating partner who does that? How do you guys make sure that you, when you buy an asset, you don't A, destabilize it, and B, you actually start to grow it, which is, I assume, why you bought it in the first place?

Yeah, so our philosophy— there's a lot of private equity firms out there that have these like, you know, 30-day, 90-day, 120-day plans, right? We don't do that. What we try to do is take a humble attitude towards and say, look, we know some things, we have some talents, but we wanna learn and come alongside them. They're the experts, they've been doing it for a long time. So there's a team of 16 of us. So it's not certainly, I don't get the impression this is just me. There's people far talented, more talented than I am on staff. And there, we have a dual hook-in structure post-close. So our financial team hooks into their financial team and creates feedback loops. And then we have a, we call it portfolio partner. They're kind of a board of directors in a box that is overseeing kind the executive leadership helping make very high-level decisions. I mean, these are autonomous operating units. I mean, so there's— these are, these are not— we're not injecting these people into the companies to run them, but they're in touch with the leadership teams all the time, doing, you know, a variety of different types of calls and meetings throughout the year.

And how many companies are there? There's 9 that you guys own. Yeah, got it. So that seems manageable.

Yeah, I mean, it's— so for every kind of 3 to 5 companies we acquire, we got to hire one high-level financial person and one portfolio partner. And that's kind of their grouping of companies that they're kind of running. So we're almost creating like a fractal, if you want to think about it that way, down into the organization so that it scales as sort of linearly in that way.

So Andrew from Tiny— Sean and I are friends with him, and I just shoot the shit with him every once in a while, and he emailed me He like tweeted this thing and he sent me the tweet of how he met a guy who had a cool furniture store and he goes, oh, this is neat. You need to put that on Shopify. And okay, I'll partner with you. Let's do it. Now I own part of it. And he also did the same thing with like a local news outlet in Victoria where he just like, seems like he's spinning up stuff so fast. I'm like, Andrew, I don't know how you track all this. This is crazy. Tracking 9 is easier than tracking 9 is hard, but it's a little simpler because it appears from the outside as though he has got 40 different things. How does, how does that compare, do you think, with, with something like Tiny? And does, does, does keeping it on top of all this— I mean, that seems really hard to focus on where to put your focus.

Yeah, I, I mean, I, I know Andrew a little bit. I don't know him super well. I mean, it seems like he's been successful. Um, I think they're getting involved in, in, in, for the most part, more internet-based, uh, software-based type companies. Um, so it's just a very different model. Um, uh, so I would say, um I have no idea how they're organized internally. I can tell you on our end, is it a lot of work? Is it difficult? Of course it is, right? Anything worthwhile is gonna be hard. You know, internally, how we've created that structure though, it creates a very manageable focus group, right? So you can, you can allow a small group of people to be highly focused on, on certain outcomes as opposed to being all over the place. I mean, I— if it was just me and a partner of mine like that, we were trying to ham and egg this thing, like, I'd go nuts. There's no way, especially right now. I mean, with all the turmoil that's happening, there's just no way you can keep everything separate and, you know, watch legislation that's coming out and watch legal and accounting and meet deadlines for audits. And I mean, it takes a full team. And so, yeah, I mean, we're obviously blessed to have that.

Earlier you talked about one of the things you buy a company— okay, so you said that there's— your sweet spot is in between being like it working out, like it working and it being professionalized, right? Yeah. And I think that when I— so I started the company that I have, I started when I was 24. It's a good business now. But what I learned the hard way was that actually to make something more valuable, you need to take yourself out of the equation as opposed to like, you know, this Mark Zuckerberg thing where you're just going to super Superman this thing into like existence. It's actually far more valuable, even if that means you have a lower revenue number, to have it where it's like a machine where people can be, uh, where you put people in place and it's not just on the shoulders of one person. Sure. Um, can you— and, and I learned this from David Hauser. Sean, you know David Hauser?

I don't.

Okay, this guy named David Hauser, he's one of our little— he's— we've raised a little bit of money. He's one of our investors. He started Grasshopper, which it was like, uh, Yeah. You know Grasshopper? Okay, he started that. Okay, so it helps entrepreneurs, it gives small businesses a phone. So it's like Google Voice on steroids. And he sold it for, I think, $300 million. Really successful. And he wasn't even the CEO. He started it and owned the company and hired a CEO to run it. And he taught me how to do that. And I think that's fascinating. Can you talk, but that's different than what a lot of our listeners probably think about. They think about if they're gonna start it, they gotta be like running the show. Can you talk about where you've learned this process and why? And I guess the companies that you've bought, how have they successfully navigated that to where the owner is no longer like the person?

But tell me what you've learned on these people. So how do I want to make my company like that? How have you— what have they done best?

Is there any resources that you turn to or have turned to to learn this or that you can tell me and our audience? To turn to in order to learn how to do this successfully?

Gosh, I don't. It's more just, you know, getting hit in the face over and over again, the hard knocks.

And Brent, where are you finding these companies? So are you— is it broker network? Are you— are there websites you use? Is it inbound because you do a lot of content? Or, you know, what is the— explain how you find the companies that you end up looking into and potentially buying.

Yeah, yeah. So we're fortunate now, we do a lot of content out there. Actually, I've podcast is one of the things that's been helpful for us, so thank you guys for having me on. But we have it— it's all inbound at this point, so we're not going outbound to anybody. By the way, website—

oh, there you go, I got your book. If you're listening to the audio version, which you almost certainly are, I'm holding up The Messy Marketplace, which is Brent's book. I bought this like, I don't know, 6 months ago. I bought it right after we sold our business, so it wasn't really applicable. I was kind of like, oh, what did I do wrong, type of thing. But yeah, it turns out just timing was good. Uh, you know, getting in before the whole world descended into chaos was, it was a good idea, a good time to sell. But I didn't know that. But you put out this book, and, um, it seems like you do more content than, than I would say the typical kind of buyer or private equity firm.

And you have a copy Capital Camp, right?

Yeah, yeah. So Patrick and I, yeah, so we, we were complaining one night about how all the events in finance were terrible and how it'd be fun to get like a cross-section of people together. So there's typically, you know, VC events, private equity events, very few events that get sort of a broad cross-section of people doing interesting things together. And so we complained about it enough, I said to Patrick, I said, why don't we just do something about it? And so he and I partnered up and we host The first one last year was fantastic, about 250 people from 11 countries, 5 continents came in, and that was great. We had a wonderful time hosted in Columbia, Missouri, in my backyard. But it was, you know, I think there was one other guy from Missouri there, so it was very not, not a regional crowd, if you, if you know what I'm saying. And unfortunately this year we had to postpone it due to the virus, so we're pushing into September. Hopefully that we are able to flatten enough by then that we can have it hosted then.

Give us some predictions about the virus and the way the sort of what's happening to businesses right now. You know, on one hand, you said your timing was good in the sense that you raised your big fund before all this, and now a bunch of businesses are gonna need liquidity. They're gonna need, you know, somebody who's a stable capital partner to come in and buy them. What are you guys seeing? What's your prediction on how this is gonna play out? Both for you and for the economy, I would say.

You think that's realistic?

Yeah.

Yeah. Fucking A, man. That's crazy.

Yeah.

To put that in perspective, the Great Depression was what, 18% or 20%?

I think it touched high 20s. Okay. So, I mean, at the peak. And like I said, I mean, I— look, I hope I'm wrong, right? Let's just say it for what it is. I mean, I hope that that's not— This is not a good environment for us, actually. I mean, this is an interesting— we could talk about it as being a firm that has a lot of cash right now. I don't think this is a good environment for us at all. I would much prefer a 2008, which was a much more shallow downturn, recession. The violence of this is basically rendering all information available like a non-issue. There's nothing predictive about what's happened in the past and how it goes in the future., and demand curves, I mean, we don't— no one knows. No one knows what the demand curve looks like.

Are you betting for a 20% or 30% unemployment rate?

Well, I'm not betting on it. That's what I think is going to happen.

But I think that you think that's going to happen.

I think, I think we'll probably touch 20%. I think we could touch 30%. Yeah. And I think we'll see it in the next 6 weeks will be, will be when it really comes down. My guess is I called jobs, the jobs number, the unemployment number that came out I had said previously, I thought it was going to be about 3.5, it ended up being about 3.3, which was wildly higher than what the sort of consensus was, a million. And if you're involved in small businesses and you said there was a million people filing for unemployment, I guess that's like a joke. Of course, it was going to be way higher than that. There's no way it couldn't be way higher than that. I mean, what we're seeing is, I mean, I had a buddy this week who laid off 4,000 to 5,000 employees this week. Had another friend who laid off 585 of 600. I mean, and that's just me. I mean—

Were they in the hotel industry or was it just an industry that—

Yeah, food service is one and construction was the other. So it's just, it's a tough, I mean—

And why do you say this is not a good time versus 2008? What is the core difference there?

Yeah, so the core difference is the violence at which this has downturned. Is basically, you could see in 2008, a nice trend line, like you could see it's kind of like a soft, you know, in private businesses, right? I'm not gonna talk about the stock market. Stock market and private businesses are totally different. But in the stock market, it was, you know, sort of had a violence to it and then, you know, kind of petered out and then had another violence to it.

I mean, this happened in fucking 8 days.

Right, right. I mean, obviously Lehman and all that stuff come crashing down.

Oh no, I'm talking about right now.

And I mean, Sean, like 4 weeks— no, wow, only 2 weeks. Whenever you sent me that link, Sean, where you go, the NBA's canceled. Yeah. I, like, a few hours before that, I booked a flight to Germany. And because I was going to a conference, so they paid for it, but I like gave them my information. I was there like, yeah, the conference Conference is on and then Sean sent me this link on at 7 or maybe 5 o'clock at night and he goes the NBA is canceled. I was like, oh, you mean like they're just pausing it for like 5 days? It's like no, no, no, like it's done for the year. The whole thing. And then the next day it was like, oh, my flight's canceled. Everyone's flights like it was like that was only 2 weeks ago, Sean.

Yeah, that's insane. I remember people thought I was crazy. I started working from home the week before before everybody did, because I was like, hey, I think there's like this once in a hundred year virus out there. I'm just gonna start working from home. We did one podcast together and I was like, yeah, I'm not doing any more in-person stuff. I'm not coming into the city. I'm not doing any of this. And then it just felt like day after day, it's like escalation, escalation. And now I think the, the sort of the data is outpacing the fear even at this point. I think that, I think that the situation is worse than people realize. Even now, and because it's growing exponentially. And so, so I totally hear you, Brent. You know, my, my sister owns schools, my brother-in-law owns gyms, my father, my father-in-law owns nursing homes.

My brother owns a concert promotion business, right?

And nobody prepares for zero revenue overnight for 2 months. You can't, you can't plan for that.

Yeah, we were talking about our revenue. I mean, I, you know, I again calculated my head, maybe we're gonna be at $160 million this year, let's say, under normal. I mean, we may be $110 or $120 I mean, we have no idea. I mean, it depends on how things go off the cliff, right? I mean, it's literally no one has any idea what's going to happen. What we know is that it's not good. If you look across our business, I mean, our military business is very robust and obviously, we want to keep people employed in that. But I mean, if you look in construction, there's a longer lead time, the sales cycle is longer, right? So you'll have a longer tail to it. But that's still, if you're shut down on a construction site, we were working, one of our companies was working on the Wynn Casino. They just shut everything down. I mean, there's like nothing to do. And so, you have all the materials you bought, you have all the labor that's right there, everything, you're coordinating it, and what do you do? I mean, it's like I said, it was like Prohibition except for everything.

So, where's the opportunity here?

Well, I mean, the opportunity is there's going to be a lot of these family businesses that are very durable, you know, business under any sort of normal-ish circumstances, you know, would have easily gotten through 2008, which everyone would consider to be, you know, a detonation prior prior to this, that are gonna need help and they're gonna need capital to get through this. They're gonna need capital to restart the businesses if that's what it takes. And as well as just taking some chips off the table. I mean, you know, if you're— there's a lot of people we've talked to that are holding on for sort of last couple of good years and then they wanna sell. And, you know, we had these conversations 2 or 3 months ago with an owner who he's like, "Look, I'm in my 70s. I certainly can't go through another 2008." Man, business is really good right now. Like, I'm just going to hold on for another couple years.

That changed.

You know, um, it's tough. And by the way, I'm not saying it was the right thing for him to sell then either, right? I'm just saying it's like, it's always a bet. And you know, one of the things that is maybe nice— it's not, you know, if there's any silver lining in this— is I think people had gotten certainly not immune, but had, had gotten a pretty good resistance built up to risk in general., and I don't think most people were seeing it. I mean, I, you know, most of the people were talking to us, hey, there's nothing on the horizon, there's no contagion that could cause things to go down. I mean, I would hear people say this all the time. I mean, what could it be? Could it be student loan debt? Maybe that's gonna be contained. Could it be, you know, the bubble in private equity? Ah, that's gonna be contained. You know, gosh, we had no idea what was getting ready to come down the pike.

I think that's what Marc Andreessen, or maybe Peter Thiel, was talking about once, which is that when everybody keeps asking if thing X is a bubble, that's not the bubble. Uh, when we're all aware of it, we're all talking about it, that's usually not the actual bubble. It's something that a very few, you know, a small set of people are sort of saying, wait a minute, we've removed too many of the Jenga blocks here, this thing's about to tip. And, um, you know, it's a sort of ignored minority.

Yeah, this wasn't a bubble-driven thing.

I mean, I, you know, it's a war.

It literally is a war. Like that, I mean, I think that's the best analogy for it.

I think this is closer to Pearl Harbor than it is to 2008. Yeah.

Well, if this makes you feel any better, Brent, I feel horrible right now. I called the hospital to get— I tried to get a test and they're like, "Eh, like, don't waste it on yourself, but it sounds like you have it." And so they think I have it, but it's not confirmed. It sucks. It doesn't suck that bad, but for a 30-year-old, it stinks, but it doesn't stink— the way I describe it, it just yesterday crossed the threshold to where I would stay home from work. And not exercise.

Really? So you think you have it?

Yeah, well, me and the doctors, but it's not confirmed.

Pretty, pretty sure he has it.

Yeah, I mean, like, like, breathing sucks, but it's more annoying than it is scary. And yeah, I am so sorry, man.

I had no idea.

I mean, I'm— well, I know it's not— look, no, my point is not to get sympathy. My point is to let you know, maybe for most people it's not the worst.

Yeah, yeah, that's, that's great. I mean, and look, I hope that's the case. I hope we can get back to some semblance of normal life. I think that the— unfortunately, the economic damage, even if you wave the magic wand and brought everyone back to these businesses right away, I think there's a lot of damage that's been done depending on how long your lead cycles are and all that stuff. But I mean, it's just, it's tough. I mean, it's tough as demand dries up. I mean, you got to think about the supply chain all the way back. I mean, people aren't ordering stuff from factories, right, because their demand's dropping off on the other side.

If the fact—

if the store said, no, no, we want, you know, all of your inventory now, they'd say, we don't need anything to sell you, right? Because everyone's preparing for winter. And so yeah, the stop-start problems are just gonna be tremendous.

Wait, Sean and Brent, you guys are both— I mean, we are all— I have no idea where people are, but we all are people who probably aren't poor. Have you guys cut your spending?

Oh yeah, for sure.

I I did the first thing I did was I cut the— I cut my exposure to the stock market, which I think is gonna drop like a rock now. And so that was the first— that was the first thing I did, because that's more than spending, is just wealth destruction. And so I wanted to avoid wealth destruction first. And then the second thing, on your monthly subscriptions, I didn't— I didn't go through that yet, but we have sort of like me and my wife now. Before we do something, we're like, "Yeah, do we really need to?" And so, it's starting to creep in, but we haven't gone and audited and said, "Hey, necessary, unnecessary, necessary, unnecessary." But yeah, probably should and probably will.

Even though I have plenty of money to last for a very long time, I'm like, "I'm gonna buy the generic brand of this food." We're still spending on food, but if you look at our bills in the past, there's been a lot around travel.

And yeah, we're not doing that. I mean, we did spring, by the way, the best investment I've ever made. I've got 3 girls under 6 and we just bought a bounce house and have it in the backyard. And by the way, that's the best, it's the best $300 I've ever spent in my life.

There's a business you should buy. That sounds not sexy, but interesting enough.

Exactly. Bounce houses for viruses. Yeah.

Okay. My last question for Brent is this. You're 25, 30, 35, and currently, like, let's just imagine you are— I have no idea how old you are.

I'm 37.

But let's say you're young enough to like start— okay, well, let's say you're starting your career, you're in the middle, early part of your career now. Knowing what you know about what makes valuable companies and what builds wealth, what are some businesses that you'd want to start right now, and what would you optimize for, and what metrics would you try to optimize for? And how?

Yeah, I mean, I think it depends on what you're trying to optimize for. If you're just trying to build—

I'm asking you. Well, I'm asking you.

For me personally, I mean, I really find value in balancing home life and work, right? So family is super important to me. So my answer would probably be a little bit different for me, and I want to live not in a big city.

And so— That's okay. I want to hear what you would do.

And I think it's possible. Yeah, anything specifically?

I think it would depend largely on what I could find in the geography. I mean, here in Colombia, I mean, there's, There's a fantastic HVAC service company that's still fairly small, but they've got great systems. They actually developed their own software. It'd be something like that that I'd want to partner with and say, "Okay, look, I want to get my hands dirty. I want to get involved in it." I mean, I'm not an investor by heart. I mean, I'm an entrepreneur. That's what I love to do and that's how we think about our business is being operators and entrepreneurs. And so, I wouldn't necessarily get involved in finance. I mean, finance to me is a mechanism that allows and enables entrepreneurship and, you know, running real companies. It's not trading paper back and forth. So, I would probably get far more involved in sort of non-tech entrepreneurship, which I know you guys are in Silicon Valley and this can fall on deaf ears.

No, I like what you're saying. But you said HVAC, you said—

Yeah, I'd say HVAC, pools, lawn service. I think, you know, I like—

Lawn service?

Yeah, like lawn and garden care type stuff. I mean, have you ever tried to get somebody to call you back It's—

yeah, you want to hear something cool? We had, uh, so Brian— you know who Brian Scudamore is? Uh, 1-800-GOT-JUNK?

Oh yeah, yeah, yeah.

Right.

All right.

Well, we should wrap it up. Brent, thanks for coming, man. If you're listening to this, you want to get a hold of you, what's the best way for people to follow you? You know, keep tabs, become a scout, whatever you want. Yeah, yeah.

So, so, permanentequity.com is the website. And I'm on Twitter @brentbeshore, on LinkedIn. I mean, just hit me wherever. Try to be very available. And if I can be helpful, let us know. Yeah, it's been wonderful to have you guys on. Man, I hope you get— I hope you feel better. That doesn't sound like any fun. Now you're terrifying me.

So, um, well, no, look, I, I— my point was the opposite, was to not terrify. Look, do I seem sick to you? I mean, I, I, I, I'm sleeping in, so I got— I didn't get out of bed. I, I didn't wake up until about 9:30 or 10 AM this morning because I, I was like, I'm just gonna sleep as much as possible. I'm drinking a lot of water. Uh, I would not exercise today. That's how bad I feel. I would not go to work today, and I definitely would not even consider going to a hospital. I— and normally I wouldn't even gone to a doctor Oh, all right. Well, so this is how I'm trying to paint this as in a positive way as best as I can.

Well, Sean, don't, don't you get sick.

All right, you can't get it through Zoom, so we're good.

All right, guys, hey, take it easy. Really appreciate it.

Thanks.

Take care.

Bye.