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Welcome to the 'Lead Smarter. Not Harder' Podcast by David Kent, your window into the minds of visionary leaders, trailblazing innovators, and savvy business owners.
Get ready to immerse yourself in the captivating stories and invaluable lessons from the best and brightest minds in the business.
00:00:04:06 - 00:00:25:17
David
Welcome to Lead Smarter, the podcast, where you'll hear powerful, no nonsense conversations about leadership with today's top experts and real world leaders like yourself. Get the inside strategies, insights, and secrets they've learned on the journey to lead smarter. Let's dive in.
00:00:25:19 - 00:00:50:11
David
Today's guest is Ben Mimmack, founder of Sulis Investment Capital, where he works closely with founders to acquire and grow lower middle market businesses. Ben brings over 15 years of experience across private equity, M&A and senior finance roles, including time with companies like American Airlines and Sarcos Robotics. What makes his approach interesting is the relationship. First position he takes inside those environments.
00:00:50:12 - 00:01:12:02
David
He opens up about the challenging realities leaders face when they bring in an outside investor and open up the business. They poured years and often decades of their lives into building in this conversation. We talk about what it really takes a partner with founders after an acquisition, how to build trust in high stakes environments, and why relationships and communication often matter more than strategy.
00:01:12:03 - 00:01:44:01
David
We also get into how to create alignment across multiple stakeholders, from founders to investors to teams, and how to influence without becoming heavy handed in the process. This one's meaty, so buckle up. Hey, Ben, thank you for joining me again on a call here so that we could get a chance to learn more about your business, about how you approach leadership, and about really kind of the area where leadership meets, really, I'd say like transformative change when a business is going from just being ran to a point where they're actually looking to be sold.
00:01:44:02 - 00:02:01:15
David
And that's, I think, a really interesting area for most business owners that are excited about the idea of having one day get, get getting their business to a point where they could actually sell it. But anyways, I just want to say thank you again for joining us. I'm really looking forward to talking to you. And right before this call, I fumbled around talking to you about your name.
00:02:01:15 - 00:02:09:12
David
I would love for you to tell me what is the name of your business, and can you tell me about a little bit about how you you came to that name?
00:02:09:14 - 00:02:19:04
Ben
Sure. It's Sulis Investment Capital, Sulis Capital for short because that's a bit of a mouthful And it's named after the Celtic goddess of health and healing, whose name is Sulis
00:02:19:06 - 00:02:39:04
Ben
It's a bit of a less well known deity, I guess, but her name is used in the name of the town where I grew up, called bath, in the southwest of England. It was known by the Romans as Sulis as natural hot springs, and they made it off to Sulis because that's what I guess the local population were calling it.
00:02:39:04 - 00:02:59:09
Ben
And so, yeah, it's just a link to the place I grew up. And then, you know, the, the web domain suliscap.com was available, that's the most important thing is starting a business right now is being able to secure the website you want. So when I, when I was able to get suliscap.com and and link it to to where I grew up, it seemed like a natural selection.
00:02:59:11 - 00:03:15:08
David
So that's great. I love that you tied it to your roots and that you took that forward into your future. And I wanted to actually talk to you about how you help other businesses go into their future, the selling and the transforming into becoming either part of a bigger book of business, which I understand is kind of what you do.
00:03:15:09 - 00:03:36:19
David
Could you tell me a little bit? We talked about leading without taking over and trying to be able to influence businesses that you help that you acquire to be more successful without really stepping on. Obviously, it's their baby. It's their business that they've built up. What do you believe? Going in with a my way or the highway mindset is often the fastest way to destroy value.
00:03:36:21 - 00:03:38:06
David
Why do you believe? Sorry,
00:03:38:10 - 00:04:13:10
Ben
for those who are not aware of the business model that sues capital pursues where? What's called an independence box. So we are a form of private equity, but we don't have a fund. What we what we do is we find businesses that are for sale, business owners who want to sell, and then we buy those companies and we we run them as part of a portfolio of, of businesses that we think have the opportunity to grow and could be, could be good investments and the model of the users and that I've used in previous firms that I worked for in past years, one where we we like founders who are
00:04:13:10 - 00:04:45:08
Ben
selling their businesses to retain a fairly significant minority, stake 20 to 30% and to remain involved in the business because the size of businesses whereby what's called the lower middle market, anywhere from sort of their profits of 2 million to to $10 million, these businesses are generally nicely managed, nicely run, profitable businesses that have been grown from, from generally from from nothing by their founders, but they have a real opportunity to achieve significant growth.
00:04:45:14 - 00:05:14:23
David
It's relatively, relatively easier to grow from $2 billion to $4 million in earnings than it is from $40 million to $80 million, and yet both of those are doubling its size of business. So at the level that we buy, we see significant opportunity to achieve meaningful growth in its businesses. But by requiring or asking the founder to stay involved, you are asking someone to work with you under your your management, essentially.
00:05:14:23 - 00:05:37:22
David
Well, they've been a founder for offering 20, 30 years of run the business that grow their own business. And now you're asking them to to take on a boss who's probably going to have advice and recommendations and, you know, things that they want to change because, you know, that's that's my job as a private equity executive is to is to find ways to grow businesses.
00:05:37:22 - 00:05:52:06
David
And I think the worst thing you can do in that particular dynamic as to walk in and say, okay, you've been doing this for 30 years, but let me tell you how you done up to now is wrong and how you need to start doing it my way, because I think that person still owns a significant portion of business.
00:05:52:06 - 00:06:10:14
David
They're still very important to the business that, you know, they have all the relationships you have none of the relationships. You probably don't know any of the people who work there. You don't have any of the customers, you know, any of the vendors. And if you alienate that person on day, what you can take, you know, a business you just spent several million dollars acquiring and destroy all this value overnight.
00:06:10:14 - 00:06:14:23
David
So you've got to be very careful about how you manage that dynamic, how you manage that relationship.
00:06:15:00 - 00:06:29:15
Ben
So the the role you play is effectively like a almost like an empowered advisor. You're trying to carefully tread, to not be heavy handed. It sounds like while trying to get your leader of leaders, I guess is kind of a way to put it.
00:06:29:16 - 00:07:00:01
David
You have it correct. I think I would love to be seen as an advisor, as as a partner in all the businesses I work with. That being said, sometimes you do have to be the one who says, okay, this decision needs to be taken and I normally needs to take it. So, you know, if you are completely passive, if you just hand off all responsibility to the person who can run a business and say, hey, go back and keep doing exactly what you were doing before, I'm just going to be here and send me a monthly report on what you're doing, and that'd be great.
00:07:00:01 - 00:07:19:11
David
Then you're not adding any value. There's no there's no rationale for you. Having acquired that business. And one thing you're you're letting the the owner down, the seller down. In many ways, he's he's partner with you because he thinks you're going to be able to bring added value to the business. If you do get involved and roll your sleeves up, you're not you're not helping him up.
00:07:19:13 - 00:07:28:20
David
And equally, if you don't, you know, take initiative, take decisions. You're you're not you're not working in the best interests of your limited partners who invest alongside you to buy that.
00:07:28:22 - 00:07:47:24
Ben
I think what's interesting about what you're describing for, for my sake and for even in environments that I'm in, usually we're trying to figure out how to create an environment where our teams can be successful like. And as a leader, your job typically is like to manage that environment, not to do the work exactly, but to create the environment where they can be successful.
00:07:47:24 - 00:08:09:12
Ben
And it seems to be even like more sensitive around more critical a players. You're trying to be more aware of what's going to cause them to be engaged. And in your situation is it's all the way to the top. So it sounds like you're basically exclusively dealing with the a player's highest stake impact to the business in those environments.
00:08:09:12 - 00:08:14:24
Ben
How do you create alignment with the founders who are really emotionally attached to the businesses they've built?
00:08:15:00 - 00:08:40:05
David
You know, it sounds a little trite, but but a lot of it is building that relationship. I think trust is very important. If they think you have their best interests and the and the best interest of the company at heart, I think they will give you more rope than they would otherwise. If they think you're in there to destroy, you know, relationships often, you know, they've been working with the same group for 20 years, and I think you're going to go in and start firing people from underneath them.
00:08:40:07 - 00:08:59:04
David
Then you can destroy trust there, even if that person needs to leave a business, if they're if they're, you know, not a not a good fit in the business, you need to be able to manage that sensitively and get the founder to agree with the decision of just going in and saying, okay, so and so, it's not good here and not good.
00:08:59:06 - 00:09:27:17
David
Maybe they need to leave the company. So building that trust, building that relationship I think is fundamental. And I think one very good way of doing it is to prove that you can assist the founder of the seller with improving their their quality of life and the way they were the business. And I think a lot of times when when I'm looking at a business, when Suze is looking in the business, we've got a business in front of us where the CEO of the founder has taken it as far as they can.
00:09:27:18 - 00:09:45:09
David
They have grown this business. It's probably grown a little bit more than they ever thought it would. And they're now working seven days a week and they're doing everything. They never delegated a thing in their life. They run the books, they do sales, you know, they have they have people under them who are carrying out their direction, but they're micromanaging almost everything in the business.
00:09:45:10 - 00:10:00:06
David
One of the best things I found to go in is, is day one, after you bought a business and say, okay, what do you like doing? Why did you start this business in the first place? What do you enjoy it 50% of the time it's, oh, I love, I love sales, I love selling products. I love going to customers.
00:10:00:08 - 00:10:27:20
David
You know, finding new business. And at 50% of the time, it's I hate sales. I want nothing to do with it. I want to stay in a stay in my office and, you know, run the operations and what other people died. And so you take that and say, okay, well, let's just take that off your plate. If you hate sales, let's put in a VP of Business development and give that entire function that if they if they love sales, you say, great, you know, you can run all the marketing and all the, you know, the business development side and we'll get a CEO underneath you.
00:10:27:20 - 00:10:49:16
David
And they can do all the grind work that you make of it and freeing them up finally where they're strong, giving them the opportunity to do more of that, you know, can can early on be a really, really great source of building trust, building connection and then persuading them that you are going to be a good partner and a good source of assistance for for the business as it grows in the future.
00:10:49:19 - 00:11:16:18
Ben
The way you describe, I guess, just maybe partnership and how to manage like carefully manage intentionally a healthy, positive like supportive relationship. It could literally you could just take the context of I'm talking to a founder out and have it literally overlay the same intentionality with managing a team. And it's the same thing. It's just what's unique, though, is I almost never hear people talking about managing their relationship with founders.
00:11:16:18 - 00:11:40:03
Ben
And the reason I even mentioned that is because once people are a founder, once they're like at the head of the business entirely, they almost have no peers and partners to work with. They're kind of making, like you said, making all the calls. And then it's probably why they end up being micro managers, because they don't see how to step back and to bring other people into their circle of influence, or to fully delegate and trust.
00:11:40:03 - 00:12:00:16
Ben
And what you were saying is like the trust level that you have to develop with them. You've got to develop it with them before they bring you're brought into the business and helping them make decisions. Like you've got the idea that a founder has a trust to be a common minority partner in their own business. Like that decision all by itself sounds pretty complex, like a very trust heavy requirement in that space.
00:12:00:21 - 00:12:04:11
Ben
How do you develop that trust in the before that even happens?
00:12:04:11 - 00:12:25:01
David
That's fundamental to to buying a business. And it's I think one of the under less understood parts of private equity is persuading people to sell you their business. I think a lot of people go into it by saying, okay, well, you know, this business is worth this. If I'm the highest bidder, that person is going to go with me, and then we'll buy the business and we'll all get rich.
00:12:25:02 - 00:12:44:17
David
More than once, I've been the highest bidder for a company. Oh, sorry. Sorry. I want to be for a company, not be the highest bidder, because people are looking for someone they can work with in the future. And so you, when you're trying to buy a company, you're a full sales mode. You're persuading people that you are a credible acquirer of their business.
00:12:44:17 - 00:13:01:08
David
You have the skills they need, but you're also persuading them that they want to work with you, that you're a morally good person, and then someone they want to spend a lot of time with. And so you're, you know, projecting the best. I don't want to give the impression I'm misleading people, but you're putting your best stuff out there like you were in any other job interview, right?
00:13:01:09 - 00:13:26:01
David
You're just saying, yeah, this is all the good things I can do, and this is how it'll be working with me. And you hope that's enough. And a lot of times, people will not go with the highest bid on when they sell the business. Some people will, you know, they're very transactional, but especially in the in the former format I use with the more structured deals where people are retaining a minority stake, they need to know they can work with you, and that is often one of the biggest questions they have going in.
00:13:26:01 - 00:13:44:13
David
So you'll have a lot of conversations doing due diligence before you get to an lie of giving them a good introduction to how it could be to work with you and what you could do for them. And then as you go through the due diligence process after lie, you get very close to people. You spend a lot of time asking them questions about their business.
00:13:44:14 - 00:14:00:21
David
You need to be able to do that in a way that doesn't come across as adversarial and to burdensome. By the end, you know, you go through an M&A process. It can be it can be, you know, a little for sometimes there's always areas of contention. It's always an area of negotiation. Everyone's exhausted by the end of it.
00:14:00:21 - 00:14:26:22
David
Then you close the deal and then the next day is okay let's get cracking. So being able to build that relationship through that whole process is fundamental to the future success of the transaction. And just making sure that you are at all times being a good partner and being good, you know, a good co conspirator if you like, in growing this business and running this business and finishing the M&A is kind of fundamental.
00:14:26:22 - 00:14:46:00
David
And that's that's the kind of thing that I've learned throughout my entire professional career. I was always in private equity. I've done. Yeah, I've worked for big corporate companies. I worked for smaller startup businesses. And everything boils down to building relationships and trust and and making sure people feel that you are the kind of person they want to work.
00:14:46:01 - 00:15:11:02
Ben
When you're in the space where you're in conversations or any like, for example, I've been in spaces where I've interacted with private equity both to support their clients or, I'm sorry, their book of business where I'm trying to support their their individual businesses as well as interacting in an M&A space. And, you know, just from other businesses I talk to, there's not always like a positive, warm, fuzzy feeling about private equity companies.
00:15:11:02 - 00:15:33:05
Ben
And that was one of the reasons I was so excited to talk to you and hear about, like, how how people oriented you were, because it just wasn't my experience tracking to any of my direct experience when dealing with private equity that there was such a focus on, like the people and the relationships. Do you find that to be like something you end up navigating, like people are coming to you as a private equity company with a certain taste in their mouth about what that's like.
00:15:33:06 - 00:15:36:22
Ben
And you have to not only deal with building trust, but also deal with that impression.
00:15:36:23 - 00:15:54:08
David
Yeah, absolutely. I think almost every time when you're trying to buy a company, even if you have an agreement with a with a founder or seller, and you think you're about to proceed down the path of lie due diligence and getting it done, you know, most of the time they'll come back to you and say, oh, you know, my friend.
00:15:54:10 - 00:16:11:17
David
So and so. I was talking to him last night and he said he he knew someone who sold a private equity. And, you know, they didn't pay him what they said they would or they traded the deal at the end. And you can't trust them. And, you know, unfortunately, we we operate in the industry that doesn't have the best reputation.
00:16:11:17 - 00:16:36:07
David
And often there are people around who do not have the best interests of their sellers at heart, I would say. And so you do need to overcome that impression of the negativity. It is true for all, I guess, all industries that have a bad reputation, right? I mean, HR has has a negative reputation amongst a lot of people who work in big companies because they feel like it's not their best interest at heart.
00:16:36:07 - 00:16:55:11
David
So persuading people that you really do, you want them to be successful, I think is very important when you work in private equity. And for me, I think it helps the heart of what I do that I enjoy is working with founders after the acquisition, helping them grow their company, doing those weekly meetings, and you're working with them to to grow the business.
00:16:55:11 - 00:17:17:23
David
That's what I love doing. But part about buying a company and finding a company is, you know, it's great. It's exciting. It's interesting getting a business waters. Every salesman feels that, you know, that rush when you get something successfully acquired or bought or sold. There's obviously parts there that I really enjoy, but a lot of that is a means to an end, sort of like, can I can work with founders to, to grow a company.
00:17:17:23 - 00:17:19:10
David
So that's what I really enjoyed it.
00:17:19:11 - 00:17:34:14
Ben
Would you say that the impressions of private equity are valid and that if that's the case, that kind of your focus on the relationships and the like, continued investment in trust and partnership is kind of a differentiation for you. Like what gives you a bit of an edge in that space?
00:17:34:14 - 00:17:51:19
David
I think those elements of truth in all stereotypes. Right. And I think there are more private equity firms out there that do have a very rigid playbook. You know, we buy companies, we do this to them, then we sell them. And, you know, the human factor is kind of an annoyance and something we have to navigate in order to implement the playbook.
00:17:51:20 - 00:18:16:20
David
I like to be more organic with with how I grow my company. So maybe that is a differentiator. I don't have a 100 day or 30 day playbook, which sets out everything that needs to be done immediately after companies board. But, you know, I'm trying to get to the same end. There's many ways to skin a cat, as I say, and I think we're all trying to get to the same finishing line, which is a bigger company than the one that you bought.
00:18:17:01 - 00:18:37:23
David
That looks like something the market wants to buy. And so yeah, I'm hoping my approach is is a differentiating factor, but I'm not making any claims to be, you know, a different type of private equity firm or, you know, doing anything completely innovative here. Every everyone does things in the right way. You all have the same desired endpoint.
00:18:38:04 - 00:18:44:16
David
There's just different ways of doing it. I'm hoping mine comes across is at least somewhat genuine. And some people watch.
00:18:44:18 - 00:19:04:12
Ben
Well, I love how low you set the bar of somewhat genuine. My experience with you in conversations has been very genuine, so I don't want you to sell yourself short there. But I did want to also ask because of the position that you're in, you actually can have a pretty wide scope of stakeholders that you're having an influence on, or you're trying to build relationship and trust with.
00:19:04:12 - 00:19:30:13
Ben
What are some ways that you try to build trust simultaneously with, like the founders, employers or employees? Like the customers, lenders, investors, you have so many stakeholders that you end up playing a role with and kind of almost like an in-between role, like you're kind of between the lenders and investors and the founders, and you're trying to manage maybe alignment and expectations on all sides, like what's how do you do that with all the stakeholders at the same time?
00:19:30:15 - 00:19:51:02
David
Sure. Yeah. I mean, in a strange way, become a sort of glorified project manager, I guess, because you do your interface between the business and then all of your capital providers, all of your advisors, and you need to manage all of those interactions. And I think it sounds a little bit trite, but it really boils down to communication.
00:19:51:02 - 00:20:10:09
David
So if you have a business that is having a problem for whatever reason, and that is going to cause you to come up against your lending covenants, for example, what are the worst things you can do is pretend it's not happening until it happens. And so she will lender. By the way, we're going to breach covenants this month and give them one days notice and let them deal with it much better.
00:20:10:09 - 00:20:27:14
David
If you say a month before, look, we're working on problem, we're developing a solution. We're going to bring you in as much access as you want or need, and we can work with you to find a solution. People are immeasurably happier with that situation than if you just drop things on them and say, okay, well, we've got this issue.
00:20:27:16 - 00:20:42:18
David
It's not looking great and equal with your LPs, your equity investors. The last thing they want is to give you, for a lot of them, a fairly large sum of money and then have zero communication for five years. And then you come to the end of the five years and go, oh, by the way, that investment didn't go great.
00:20:42:19 - 00:20:59:24
David
Here's a small bit of money back. Sorry, I couldn't have done but didn't have done better bringing them in, telling them what's going on, informing them of how the business is doing very, very positive for the continuing relationship with that limited partner. And also these are successful people by large are investing with you. And often when you tell them what's going on.
00:21:00:00 - 00:21:18:19
David
They'll they'll have ideas. They'll have solutions that potentially you could try often the things you already know about. But that conversation might be a spur something in your mind to to change a proposed new solution. So just talking to people constantly about what's going on. Causes more negative, you know, equally things are great. People want to hear about that.
00:21:18:19 - 00:21:36:06
David
They don't want you to just say, okay, I've only I've only going to come to you with bad news. But if you don't hear from me, see what's good news. They want to know how their investments performing. They want to know how their loans performing. And then equally on the company side, they have often no idea what is involved in selling the private equity.
00:21:36:07 - 00:21:52:13
David
You know, often you buy a company and then you say, okay, so we had two lenders and we have equity investors, and here's your new board and we need to do a quarterly board meeting, something that probably never done before. We need to do monthly reporting to the lenders and the reports needs to look like this. And you need to include these factors.
00:21:52:13 - 00:22:13:12
David
And you can never say this and blah blah, blah. And so telling them why that's what you need and telling them why that's important often will lead them to propose good ideas and bring the interesting information that you might not have thought of. Because, you know, I might have five company that might know I'm not involved in those in any way at dates day basis.
00:22:13:12 - 00:22:33:18
David
And so when I'm talking through the business with them, I don't know what I don't know. And so encouraging them to think about what information I can pass up the chain to my, my lenders, my LPs, they might come up with some really interesting ideas, some interesting information that my LPs and my equity providers might be interested in hearing about.
00:22:33:18 - 00:22:44:18
David
So keeping that communication open, explaining why you're asking for things, explaining why things are the way they are, just builds trust. And it makes for a much, much better relationship with that.
00:22:44:21 - 00:23:09:22
Ben
You had mentioned that lots of times you're dealing with like a founder, you bought a company, they do a lot of the micromanaging. And what you just described to me almost sounded like you were talking about like a cultural standard that you would like to have in situations that you're in, like proactive communication and bringing people into the fold so that they have as much advanced understanding, transparency, and stake in the outcomes as possible.
00:23:09:23 - 00:23:31:05
Ben
Which kind of sounds like a great I would say that's great for any relationship. I don't know if that's great for any relationship. I assume it is because that's what I want. I don't know if there's a situation like you mentioned, there's maybe some investors you like never say this, maybe 100% transparency all the time isn't always good, because you're trying to work through things and get through a process and not just throw off alarms while you're working through things.
00:23:31:06 - 00:24:01:03
David
Well, no, I mean, look, I'm sort of giving you the sunshine and roses will view of an investment, but there's always times when, for example, these are smaller companies. There's probably a member of the management team who is not very good at the job. It was not who you would have put in that position. But they're not someone you would necessarily want to fire because that's going to cause either, you know, institutional issues or you just don't think you could find someone who could replace them and be that much from an improvement.
00:24:01:03 - 00:24:29:00
David
And it's just going to be very disruptive. So sure, working around those limitations is an interesting challenge because sometimes you'll say, just take a completely arbitrary Zabul. If you've got a coup in the business, he's great at running crews, running, you know, certain administrative parts of the business. And his job title would kind of suggest that he's the number two in the company, but you would never put him in front of the board, or you'd never put it in front of the lenders because he would come across terribly.
00:24:29:01 - 00:24:34:05
David
Or you would if you're selling a business, he's the last question you put it in a room with with potential acquirers.
00:24:34:06 - 00:24:37:08
Ben
He's a great director of operations, maybe not a good coach, does.
00:24:37:08 - 00:24:53:09
David
What he does great. And so you're you've got to work around that. And what happens is the situation where he goes, I want to meet with buyers. And you know I think I have great ideas. And you're thinking, I know your ideas are horrible and double cross really badly. Well, that's a situation where I'm not going to be open and honest with him.
00:24:53:09 - 00:25:11:20
David
I'm not going to say to him, you are, you know, the horrible face of this company and I'm going to keep you in the back. I've probably locked the door on you. And when people come around, but, you know, managing his expectations and managing his needs and wants is just another challenge. Businesses always have cooks and treat and kinks, so you kind of need to work around.
00:25:11:20 - 00:25:17:00
David
And that's kind of one where perhaps open communication is not the.
00:25:17:02 - 00:25:44:14
Ben
Right well. And you're so as you're looking to buy a business, I can see like maybe two different approaches you might have. I'm curious, what's the biggest indicator of a business you'd be interested in buying? Is it that they have the elements of communication and relationship that you value kind of already in place. So it's going to be an easy transition to move them to be more effective by implementing some of the maybe resources and talents and access that your private equity would be able to provide.
00:25:44:14 - 00:26:07:06
Ben
Or is it like, look, their numbers look generally pretty great. There's kind of good infrastructure there. But like the things that's missing is really the people part that you bring. And therefore you see the opportunity of you being able to help them in that space. But that also means obviously the challenge is that's missing, right? Like the people element becomes the pain point, which is a space that you're like most interested in.
00:26:07:07 - 00:26:26:16
David
You know, I think any business where I can see an opportunity for me to improve, it doesn't have to be particularly one or the other. But the worst thing, from my perspective, is when you open up a book that a bank has put together about a business and you look through and you can't see anything wrong with it, you know, the earnings have consistently gone up 10 to 20% a year.
00:26:26:17 - 00:26:44:14
David
They've got a really well built out management team. Everything looks absolutely fantastic. There's no customer concentration. There's no, you know, no Fender concentration. And you just go through. This is the perfect business because it's going to be expensive. It's going to be one of those ones that everyone wants to buy. And so that the bids are going to come in really expensive.
00:26:44:14 - 00:26:45:11
Ben
And sure.
00:26:45:12 - 00:26:49:03
David
You know, I don't want to buy a business like that because I know I can go, well, what do I do now?
00:26:49:04 - 00:26:50:09
Ben
Keep going guys.
00:26:50:11 - 00:26:51:15
David
Keep doing it.
00:26:51:17 - 00:26:52:09
Ben
That's true.
00:26:52:11 - 00:27:08:12
David
Yeah. It's hard for me to to see that and say, this is I mean, let's not say I would never buy this like that, that that would be, you know, there would be a normal business. My but in my experience, they go for a lot of money, but I don't want to pay. And so, you know, it's harder for me to buy this.
00:27:08:12 - 00:27:29:06
David
But when I look at a business and they go, you know, they've had some volatility in earnings, they've had not fear in a down year for us. And when you talk to them you know they go buy. You know we had it. They had a guy and he was a great guy. And he sort of didn't pull his way or you know he was siphoning business off or you know, we appointed a sales guy and he just didn't work out.
00:27:29:06 - 00:27:48:19
David
And he suck a lot of money into him. And so you can get through some of the issues and you could say, look, this is a sound business here. There's some stuff we need to change from, you know, probably a personal standpoint or from a back office standpoint or if there's something they just and I not doing, you know, I've talked to businesses and you say okay what do you do for our marketing stuff?
00:27:48:21 - 00:27:55:02
David
And they go, oh, we don't do anything. We just wait for the phone to work. Where you go, well, you know, I think we could you could.
00:27:55:04 - 00:27:56:12
Ben
Maybe you're. Calling some.
00:27:56:12 - 00:27:57:23
David
People, you know. Yeah.
00:27:58:04 - 00:28:00:08
Ben
Yeah. That phone goes two directions.
00:28:00:13 - 00:28:21:00
David
So we'll get some of those two way phone lines and we'll see what how that works out. So yeah, you know, if you can go through and you feel the opportunities, I think that's where I get more excited. And that's why I start thinking, this is this is where we have a real opportunity to drive some growth. But it doesn't have to be one thing or the other, as long as I as long as I think I can, I can help add what's missing.
00:28:21:02 - 00:28:22:15
Ben
That's interesting. I've never thought.
00:28:22:15 - 00:28:23:22
David
Of my skill set. Yeah.
00:28:23:23 - 00:28:42:23
Ben
I've never thought about what the impression that would be like for the buyer side. So like I've talked to my own clients, we've talked with people in the private equity and like M&A space even about our business and like, just what is the landscape? What does it look like? Oh, it looks great. I've never thought looks great as a problem.
00:28:42:24 - 00:28:56:05
Ben
And till you mentioned it just now and I'm like, oh, it does make sense. Like you're the best, most updated house in a bad neighborhood, so you're not going to be looked at. I didn't even think about the dynamics of what that would be like from a buyer's perspective.
00:28:56:06 - 00:29:10:24
David
I mean, that's where I want to get to what I'm selling. Obviously, this that's the end at the end. But if that's where you are today, there's less potentially less upside. So that's that's probably what I'm just saying. I don't want to buy a good company. I mean I just I just see less upside. Maybe I should put it that way.
00:29:11:00 - 00:29:24:11
Ben
Yeah. No. And you're saying correctly you're kind of in the, you aim at like the lower middle market, if I understand correctly, what really attracts you to the lower middle market rather than like competing in that large cap private equity space.
00:29:24:12 - 00:29:46:08
David
You know that those big a bigger firms just have deeper pockets. If you're allocating a fund, you're just willing to pay more. I think I may have the numbers slightly wrong, but I think Blackstone issued some data that said they pay on average something like 18 times EBITDA for for the companies they buy, which is just a lot of money and not something that I would ever consider doing.
00:29:46:10 - 00:30:12:16
David
Obviously, some companies are worth a lot of money. I just, you know, would rather by companies in the lower middle market where valuations tend to be lower, the competition from the funds is much less. I mean, that's not to say we don't compete with funds, but to buy a company that might have an enterprise value of 10 to $15 million, if you've got a $300 million fund, you have to buy a lot of companies that that valuation to, to allocate your entire fund so that there's less competition from the funds.
00:30:12:17 - 00:30:42:02
David
There's a lot of competition from its search funds, independent sponsors, myself and individual acquirers. Entrepreneurship through acquisition is becoming more and more of a popular avenue. So there's still a lot of competition, but there's less competition from people who don't really care so much about how much they're paying. So that's one reason I like it. The other reason I like it is, as I sort of alluded to before, it's a lot easier to double the size of a company from 2 million with a formula to be with it than it is from 20 to 40 or 42, 80.
00:30:42:03 - 00:31:05:00
David
So, you know, these companies does not to say, you know, it's a trivial task to do it. There's often a lot of work that's required to do it. But but it's it's achievable. And it's been done by me and other people on a fairly frequent basis. So that gives you a lot of opportunity. And then the third is companies at that size you can really feel like you're making an impact.
00:31:05:05 - 00:31:29:20
David
Often they have one location so you can meet everyone in the company when you go to that one location. If you go down on a monthly visit, you get to know people, bigger companies just it's just hard to do that, so harder to feel like you're making a pact, making a difference on those bigger companies. Like I said earlier, one of the reasons I do this is because I just love helping companies grow and help businesses get better, and it's just fun to do it.
00:31:29:22 - 00:31:45:19
Ben
Yeah. And you also mentioned like being able to visit everybody at a single location, those kinds of companies. That's kind of you mentioned to me in a previous conversation you like to really focus on, like the value added industrial or the physical businesses, and you find that more attractive than like tech and AI. I mean, can you tell me a little bit about that?
00:31:45:19 - 00:31:54:05
Ben
Obviously, so much out there right now is being published about AI and tech and there's so much buzz around it. So you're obviously swinging a little bit in the opposite direction. It sounds like.
00:31:54:06 - 00:32:10:12
David
Yeah, well, it's mainly a fear sort of reason. You know, I don't know what's going to happen with AI. I don't know what's going to happen with large language models. You know, I feel like businesses like mine, finance jobs like mine, finance jobs are probably under a lot of threat. My wife is an attorney. She feels like, you know, her job.
00:32:10:12 - 00:32:32:15
David
It might be under threat. I have two boys, eight and ten, in sort of elementary school right now. But what do I suggest to them? Go to college and get finance degree or a law degree, you know, is that going to be a job in ten years time? Which is hard to know. So by focusing on businesses that do things, handle things, manage things directly, it feels like a nice place to be in right now.
00:32:32:16 - 00:32:48:15
David
We've just signed an alloy with a roofing company. People are going to need houses. Even in a situation where life is ruled by robots, they're still going to have houses. They're still going to have rooms. That's right. They're still going to need that conditioning. And so I just like being in that space as a kind of, I guess, a little bit of a safe harbor.
00:32:48:15 - 00:33:16:06
David
But but equally, those are you know, I've been in the industrial sector most of my working life. I left business school and went to work for American Airlines, and I work for a robotics company. And so the industrial sector working with with product things that do things is where I'm more comfortable. I know nothing about software, I know very little about tech, and I certainly don't think I could go to a software company and start telling them, you know, giving them the benefit of my zero expertise and telling them what to do.
00:33:16:06 - 00:33:31:01
David
So it just so happens that's probably an area that no one wants to be in right now with the the impact of AI. So I guess I was I like to say I was ahead of the curve because it's just just dumb luck really just to a lot of my success.
00:33:31:03 - 00:33:59:08
Ben
And that's I mean, I'd rather be lucky than smart, I guess is what I think. So I'd be really interested. I am not a parent, but I have siblings that have several kids, and I'm just thinking to myself, man, I don't know what kind of advice I'd give. And from your perspective, you just mentioned, like, obviously you and your wife have very historically just ideal careers, like they would knowledge based careers that like, if you don't mind me asking, like, what kind of advice would you give to your kids if they were to come to you?
00:33:59:09 - 00:34:16:02
Ben
Like, I have no idea what to tell my family, my sisters who have multiple kids, and I'm kind of in a different space. I'm focused on business development and things like that, and they kind of ask me questions because I'm involved with businesses and I'm involved with tech, but I don't know what I would recommend if I had to start 15 years ago.
00:34:16:03 - 00:34:22:24
Ben
I don't know what kind of advice I'd give myself because I don't know where this is going. So what do you do in that space for your own children, if you don't mind me asking? No.
00:34:23:03 - 00:34:42:03
David
You're welcome to ask. And I wish I had a nice answer for for you to say, you know, I know exactly what I do because I don't I think I I'm lucky in the sense that they, they're not going to college or university right now. So, you know, I don't have to say to them, you know, are you sure this major is actually may not even exist in four years time?
00:34:42:03 - 00:35:00:12
David
But I certainly we talk to them all the time about how important being a good person and building relationships is. And I think that is the key to success. I hate to come across as a card philosopher, but I mean, it's the key to success in everything being a good person. That's not to say bad people are not successful.
00:35:00:13 - 00:35:18:07
David
Bad people are successful all the time. And if you can be good. But yeah, if you can be a good person, you can be the person that people want to work with. They'll stand you and grace to be successful both in business and relationships. And so that's kind of what we focus on. It's just trying to build good humans, and then we'll see how it plays out.
00:35:18:08 - 00:35:39:15
David
Now I think, you know, the doomsayers are probably wrong. I think there's been many, many instances where people have said, oh, you know, all jobs are going to go away through automation from the Luddites in the 18th century through to, you know, the computer age and the in the 80s and 90s. And we still all have jobs and, you know, apparently are still all working harder than we ever have before.
00:35:39:15 - 00:35:57:03
David
So I'm sure it'll normalize out. And the every career will have its, its own nuances that involve AI, but they still require human interaction. And hopefully it calms down enough that my boys can have a good lead on what careers they want to do, but we'll see how plays out. We're wearing an era of being disruption button.
00:35:57:04 - 00:36:09:03
Ben
This is off topic, but I realize you're we're talking about careers for your children when they get older. Obviously you're in the business of buying businesses. Would you ever have your kids work for a business you own? I don't see why.
00:36:09:03 - 00:36:31:08
David
Would I let me let me put it this. The caveat I would put in is, I think one of the things that I have experienced in the past that I didn't like is, you know, nepotism and favoritism for, for family members. And I think it's a good way to destroy relationships and to have someone come in and say, hey, you know, my son is going to be, you know, your boss now.
00:36:31:12 - 00:36:51:07
David
He does, and he's going to be, you know, calling the shots. But hey, make sure, you know, make sure you don't bring any criticism of him to me, but also make sure he's hugely successful. Oh, that's that's the last thing I want to do. But equally, if I thought that they could contribute to a business and they were willing to be sensitive to the situation, I would absolutely.
00:36:51:08 - 00:37:10:11
David
Especially, you know, if they if they were at college or whatever, and they needed a summer job and they weren't doing an internship, something, and they could go and work in a warehouse somewhere lugging heavy stuff around, that's that's what I did, you know, before during college and shortly after. And, you know, not to come across as a, you know, things were better in my day.
00:37:10:11 - 00:37:20:13
David
But when you do those jobs that are hard work and physically demanding, it concentrates your mind a little bit on what kind of job you have to do long term. So I don't think there's any harm in that.
00:37:20:15 - 00:37:31:11
Ben
Yeah. No, I think that was a that was a diplomatic way of saying you'd have them hit the streets and get get the, get the lessons elsewhere so that they can earn those spots. Yeah.
00:37:31:13 - 00:37:37:20
David
And I but I could be a soft power to go. Well, you know, I'm sure we can find something for you.
00:37:37:22 - 00:37:53:04
Ben
That's right, that's right. Well, I mean, now that as we're getting towards the end of the episode, there's a couple of things I still wanted to ask you and kind of is in line with, you know, children and advice. And my question is really kind of hypothetical. If you could go back and give yourself a piece of advice, really.
00:37:53:04 - 00:38:03:03
Ben
Let's talk about your late teens, early 20s. You have 60s, and you can only give yourself one piece of advice from all of your life's experiences right now. What would that one piece of advice be? I think it would.
00:38:03:03 - 00:38:26:23
David
Be take more chances. As a young, young man. I mean, I left university and then I, you know, I had a lot of fun, but I didn't really do anything to advance my, my career. I, I worked in, in various sort of non-career jobs. I did a lot of traveling. I enjoyed myself that I woke up in my 30s and said, oh, you know, you don't have any money, you don't have any prospects.
00:38:26:24 - 00:38:36:09
David
You better start getting serious. I would say to myself in my 20s, doing that for a couple of years is great. Maybe don't do it for ten years. So get serious. Earlier was probably what I would tell myself.
00:38:36:11 - 00:38:41:12
Ben
You said get serious earlier, but you also said take more. Chances. Are those conflicting are the same.
00:38:41:18 - 00:38:42:04
David
Well.
00:38:42:05 - 00:38:42:07
Ben
You.
00:38:42:07 - 00:39:01:07
David
Know, I think there's a there's an easy path of passivity, right? You take a, you take a job that doesn't demand of yourself and then, you know, you enjoy yourself at weekends. You do traveling. It's an easy it's an easy route because it doesn't. You're not you're not challenging yourself. You're not saying, I want to do this and I'm going to take a chance to do it.
00:39:01:08 - 00:39:19:16
David
You're saying, you know, I'm going to work in a bookshop and and then sell books and no one's going to sell me? I can't do that because I'm not good enough because it's, you know, it's not that difficult. So that's I think what I'm saying by challenging myself is actually try and do things that are hard and, you know, could make them more successful.
00:39:19:18 - 00:39:30:11
Ben
Well, and speaking of challenging yourself and of books, can you tell me anything about what are some books that you're reading right now that you find valuable and that are challenging, or that are just interesting and keep you entertained? Yeah.
00:39:30:16 - 00:39:53:21
David
I'm actually I'm a big reader of fiction, which I think, you know, I look a lot of products. I feel like no one ever reads fiction anymore. So maybe I'm a bit of a anomaly, but I did read. I just finished a book by a guy called Machu Picchu who's a pretty famous physicist in my you, and he wrote a book about two years ago about it called Quantum Supremacy, about quantum computing.
00:39:54:01 - 00:40:14:06
David
And it's interesting to read now because I think he was reading it before AI and large language models really took off. And he was saying, basically, quantum computing is the it's the next horizon. It's going to transform everything we do. It's interesting because large language models are one element of one piece of AI that have been very successful.
00:40:14:06 - 00:40:39:03
David
And when you look at what the potential for quantum computing is, it's magnitudes more potentially more impactful than that. You know, it could transform AI, do not just large language models, but machine learning and agenda guy could enable all of that. It could enable cold fusion. It could enable the theory of everything. It would just be such a transformative development in our society and our culture if we could have true quantum computing.
00:40:39:03 - 00:41:02:03
David
But it's kind of interesting to think about how excited people are today about larger angles models and just say, okay, well, how about we do that and we increase again a hundred fold and see what happens to society and culture after that. And it's it's both exciting and scary at the same time. So, you know, if you want to be terrified, read quantum supremacy and and think about what your back.
00:41:02:05 - 00:41:19:10
Ben
That is. That's super informative. It actually informs a lot of the answers to other questions that we've talked about today. So you mentioned like how you're really not into AI and tech in your own businesses. I know now it's because you know enough about it to be afraid because you're studying, you're reading this book about how it could go really bad.
00:41:19:11 - 00:41:21:18
Ben
So as that's that's really it.
00:41:21:19 - 00:41:28:15
David
Could be it could be good to just, you know, you just never know. So I guess be cognizant of it and, and be aware.
00:41:28:17 - 00:41:33:15
Ben
And look forward to what we will be seeing from quantum computing in the future is what I'm hearing.
00:41:33:15 - 00:41:34:00
David
I guess.
00:41:34:04 - 00:41:50:23
Ben
Yeah. Yeah. But well anyways, thank you, Ben, thank you so much for your time today, for all the answers that you gave and for giving us the ability to learn a little bit more about you and about how to be a good person in a private equity business relationship, where leadership is having to figure out how to play nice with each other.
00:41:51:03 - 00:41:54:14
Ben
And this has really been informative. I really appreciate your time today. Ten.
00:41:54:16 - 00:41:56:10
David
Thanks, David. Where the.
00:41:56:12 - 00:42:01:01
Ben
Thanks.
00:42:01:03 - 00:42:19:17
David
Hey, thanks for listening to this episode of Lead Smarter, and thank you to the partners and sponsors who believe in our mission to evolve ourselves, to elevate others. Speaking of elevating others, if you liked this episode, please be sure to like, follow, subscribe and share. It would mean a lot to me and the team that works so hard behind the scenes, so we can all learn together.
00:42:19:21 - 00:42:26:08
David
And of course, thank you to the expert guests who kindly join us as generous guides on our journey to lead smarter.