Episode 306 - Brian Shields - ENHANCED VIDEO
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Corey Kupfer: [00:00:00] Brian L. Shields is a business development and acquisitions expert with 15 plus years of experience. Throughout his career, he has owned, operated, and invested in over 15 industries and worked with over $4 billion in various investments. Brian has a lot of experience acquiring businesses from retiring entrepreneurs.
In the last five years, he's led 16 transactions with over 16 million, and put over $16 million to work. His most recent business roll up sold for three X, its original purchase price after significant hands on operational improvements were implemented. Brian, welcome to the deal quest podcast.
Brian Shields: Corey, thank you so much for having me.
I hope that I can live up to that bio.
Corey Kupfer: Yeah, well, I mean, listen, obviously you've got, you know, phenomenal experience and there's so many things we could talk about. I mean, you mentioned doing deals from retiring entrepreneurs. That's a specific kind of deal. You mentioned a roll ups and I love the fact that your bio.
Particularly talks about adding, value in a rollup because I [00:01:00] have a very, clear view on, on, you know, the rollups that have worked and not worked over the years, you know, in the 30, you know, eight years I've been doing this with various rollups. But before we get to all that, I want to take you back to when you were a little kid growing up, maybe 10, 12 years old, what did you want to be?
Cause I'm guessing, you know, an acquirer, investor, operator, whatever, you know, probably wasn't it back then, but you tell me.
Brian Shields: Wow, that's a great question. No, it definitely wasn't. I remember when the investment banks were interviewing at my college, one of my professors suggested I go talk to them and he, but he said like, Hey, the banks are interviewing on campus.
And I was like, well, I don't want to be a teller. So I had no idea about this field is the point of that story. So I think I was 10 or 12. I think I wanted to be, oh man, I think I told my mom I wanted to be a fireman. And then at some point I wanted to be a psychologist, but I think that was in middle school.
So yeah, somewhere between there.
Corey Kupfer: I love it. A psychologist. That's interesting. And one of the questions looking back, [00:02:00] what was your first deal of any type? It could be something smaller when you were younger or early in your career, you know, any deal that comes to mind.
Brian Shields: The very first deal. So let's talk about what a deal is, right? A deal is an agreement. Like, Hey, I have value. You have value. We're going to exchange these things. And the very first deal I made was when I was senior in high school working at Smoothie King, which is a, you know, a smoothie chain, in the southwest.
And I was at the Smoothie King, two doors down was the internet cafe, because for those of you old enough to remember, there were internet cafes where people would go to like set up their video games and get high speed internet. And I was like, hey, I like playing games. You guys are hot. What if we trade?
I'll give you free smoothies. You give me free internet time and One of the greatest partnerships in my life was born from then on it led to many a thing inclusive of placing in competitive Counter strike and Tekken tournaments finding, and I had a stalker, to just like a lot, like [00:03:00] crashing a car, like a Fast and the Furious style car.
A lot of things happened. So it was just the foundation of a lot of great memories my senior year.
Corey Kupfer: I love it. I love it. And I guess, you know, one of the things I often, ask people about is the mindset of a dealmaker. Right. And I did. I've talked about, I won't go into detail because I've talked about it on the podcast in the past.
I have a talk I did in Singapore, for the global leadership conference of entrepreneurial organization. I've done it elsewhere, you know, really talking about how there's a lot of material out there on the difference between the mindset of an employee and an entrepreneur. But there's a lot less out there on the mind, on the mindset, different even between an entrepreneur and a dealmaker, because just because you're an entrepreneur doesn't mean you're a dealmaker.
And I'm not saying that in any kind of judgmental way, but there are many of people who grow with very successful businesses, totally organically, right? And they sales and marketing and bright, great products and services, but they never do a deal. What had you, I mean, even that small example of thinking about doing your smoothie for internet deal, right?
Like what, who, any insights into why you had that early deal maker mindset and [00:04:00] why it's continued, obviously based upon your bio into the very significant deals, from there.
Brian Shields: For anybody listening to this. You need to subscribe to this show because Cory is asking such great questions. I just want to be clear support this show so That's a yeah, I would say that so I'm an only child and That gave me two sides of my personality that are kind of like about counterbalancing one side of it is The natural, like the stereotypical only child mentality of like, well, it's my way.
I want it for me and like very self oriented. The other side of it is loneliness. And, you know, when I applied to go to Harvard and Stanford business school, I got in, I didn't go because I chose to be an entrepreneur. We can come back to that. But the essay question that they ask you in Stanford is what's most important to you and why?
And I wrote about never being lonely. And, so those two things combine in. [00:05:00] Like this psychology thing kind of sprinkled in there and helped me start to practice and drew me towards like Finding ways to get the things that I want the things that I want to manifest in the world but by creating agreements with people to see that like everybody's getting something that they feel good about or at least they have a narrative of like why they've agreed to a thing that helps them sleep at night and so like as I've looked throughout like my journey and I've just continued to do that.
Right? It's like, hey, I bring these people together and like get them to agree and or I have a thing and I want to make a thing happen and I go out there and I like find it and then I, well, I can't just take it from the person somewhere. Right? Let me figure out how to exchange value here with the person and come to an agreement such that, you know, we were both happy and like that can get as sophisticated as you want.
You know, I worked on Wall Street for a bunch of years and you know, I had, you know, hundreds of pages of legal documents that I've like put together and put billions of dollars to work. But at the end of the day, it's me and it's another person sitting across the table from each other trying to find out what [00:06:00] they actually want that I need.
And then what I have that they need and then just like switching those things so that we both get what we want. Yeah,
Corey Kupfer: I love that. It's funny because I know you work on very sophisticated deals as do I, and there's a lot of complications in there and structuring and tax driven, whatever.
But at the core of every deal, no matter how, you know, no matter whether it's smoothies for internet or it's, you know, multi billion dollar roll up is that fundamental principle. It doesn't, you know, it doesn't change, based upon sophistication of the deal. The underlying thing is, Hey, you have value, I have value.
How do we exchange those things? And does it work for us to exchange those on, you know, on a one term? So, yeah,
Brian Shields: I think that's right, man. And, you know, it's interesting. I find that you probably read into this too, in the world of deal making, people take themselves super seriously, right? And it's like, they have like this, the suit or whatever, the button up, and it feels like a suit of armor to a certain extent, and they're just like, I'm going to be the cool, calm, collected, very serious guy.
I'm going to negotiate. I'm [00:07:00] gonna use terms of art and language that sounds very sophisticated. But I will tell you, like, I remember I had this, counterparty at a legal firm, when I was still working in private equity. Worked at Latham Watkins. And we're working on this deal. We've been working on this deal all summer, man.
And it was just like, I just want to go home. And I called him one time and I was like, Hey, man, let's just have a real talk for a second. What is happening here? It's like, why are we stuck? Like, I want to get this deal done. You want to get this deal done. We're both trying to go home tonight. How can I help you do that?
And like, once I lowered my own defenses, he lowered his. And I will tell you, we backchanneled a deal so that the partners could step into the room two days later. And it was just like clockwork. We got compliments of like, man, you guys like really set this up. This felt like one of the smoothest negotiations we've ever had.
And I thought the deal was going to die. And me and the guy, we looked at each other and we're like, yeah, no, thanks for that. But it really comes down to a human approach and human connection. Like you can sound cool and position cool and. But at the end of the day, like, especially in the world we're [00:08:00] operating in, like, I'm sitting across the table from someone who has poured their heart, their soul, and all their sweat and tears into a business, into a thing, in a lot of cases spent more time with it than they've spent with their own kids.
So yeah, I could come in and be like, Hey man, like you didn't run this well. You didn't do this well, whatever. Like, you know, I'm going to put on all these reps and warranties and I'm going to protect myself and like, you know, be the shark sharp elbow negotiator, but that's a, not how you win a deal with people like that.
And B that's just not right. Like this is not humans get things done. So I, like, I want to continue to get things done throughout my life. And I just really focus on that.
Corey Kupfer: So what I want to do is I want to jump to what you're doing now. So we bookend it, but then I want to go back and talk about the journey from your smoothie internet deal.
You know, you mentioned a few things, you know, you mentioned turning down, you know, high link schools, you mentioned, PE time, whatever, but let's give people an idea of, okay, where are you at now? And then I want to go back and talk about how you got there. So. Tell people a little bit more about, I mean, obviously your bio says you're doing all these deals and whatever, you know, what capacity, you [00:09:00] know, tell us a little bit more about your current situation.
Brian Shields: Sure. Yeah. I mean, so as you mentioned in my bio, I had done a roll up and sold a business a few years back, that afforded me some time to reflect and think about what I was going to do next. And one of the things that I've been called to do is consult with businesses repositioning or turnaround.
So I spend some of my time. I just working with CEOs that are burned out or that have businesses that have, you know, struggling capital structures or if they really want to turn it around to a place where they're not in the day to the day and can actually like work on the business instead of in the business.
So I like help people with that. And that dovetails with what the other thing that I'm doing, which I'm a partner in a firm that, acquires. small businesses from retiring entrepreneurs, and stewards them into the next generation of entrepreneurs. So we acquire businesses, we take control positions.
We place talent that is from our network that has demonstrated to us that they have the experience and the value system that we believe will jet, like [00:10:00] shoot, steward the business into the next generation. And we ensure that the sellers can play a role in that, right? Like we want to see those people who are now our elders.
Business wise, pour back into us, into these new operators so that we all become better entrepreneurs and leaders through that relationship. So that's kind of what I do now is like, you know, work with business owners to figure out like, you know, how do I get this business in a place that makes sense?
And then also, buy those businesses, take them over and shepherd them into the future.
Corey Kupfer: Yeah. So one of the real problems I have, when I have folks like you on is that I've got, you know, 10 hours of content in a 45 minute show, right? There's so many, so many places we can go.
There's so much value you can break. But let's, let's talk a little bit about, the retiring entrepreneur thing. Before we go back, cause I want to hit just a couple of questions on what you're doing now and then I want to go back. Because obviously listen, every, you know, one of the things I often talk to my clients about is okay.
You know, if you're going to do a deal let's say you're a company that's. I'm looking to do acquisitions, right? First of all, unlike most lawyers, I, my first question is why? [00:11:00] Like, you know, right? Not just like, okay, let's structure, let's go. Like, why? And there's a why for two reasons. First of all, because frankly I can't really do my job well unless I understand what you're really trying to achieve and what your why is.
Right? Like, otherwise I'm structuring in a vacuum, I don't know what. But also frankly, because I have too many times and I, you know, I also like the whole burnout experience you've had, I, we won't have a lot of time for it, but I will definitely don't want to miss touching on it. I've seen so many entrepreneurs who think that, you know, this is the direction they want to go in and they actually get there and achieve it.
And then they're like, okay, like, why did I do this? Right. So I want to make sure that they're doing it for the right reasons. But so my point is that different, whether you're on the acquisition side of the sell side, different motivators drive different objectives and different outcomes, which then if you're smart should lead to different models and structures and business deals.
Right. Cause hopefully your model and structure follows the objectives that you want to achieve. So talk to me a little bit more specifically about, you know, the retiring advisor. You know, [00:12:00] approach and, you know, how, what are the specific things within those kinds of deals? Because obviously that's a very different deal than buying somebody who's got a long, you know, decades, one of the career wants to be an active partner forever, and, you know, maybe he wants an equity class to, for another exit.
I mean, like that's totally different deals. Yeah. So,
Brian Shields: with the firm that we're building, which is called handoff partners. I neglected to mention that handoff partners is focused on working with these retiring entrepreneurs, to facilitate, to basically the way we put it is to give them fruit for their hard labor, right?
Like the reward them so they can write off into the sunset. Like that's kind of the mission. The broader vision is to build an ecosystem in which those entrepreneurs who have, you You know, gray hairs who have experience, who've tripped over bodies buried in places can support the new generation of entrepreneurs who maybe had corporate experience, but you made a great distinction between employees versus entrepreneurs.
And ensure that that transition goes smoothly, right? Like I've had that experience. My business partners had that experience. [00:13:00] And we are creating a system here where the LPs in the fund can pour into the entire portfolio and ensure that things go well. And so that's kind of like the purpose is to ensure that that ecosystem is flowing so that the old guard can ride off into the sunset, the new guard can step in and ensure to fill those shoes that are being left behind.
But that influences deal structures in a bunch of different ways because whereas like, you Like our priority with this is to own these businesses for the long term. So we want to be able to pick up distributions forever, make it a portfolio of mailbox money businesses. To do that, you need to do a couple of things, right?
You need to be able to pay a reasonable price. And that's reasonable for both sides of the table and also have a capital structure that's flexible. So we do all equity deals. So if the business is a 2 million acquisition, we'll write you a check for 2 million. But we're also flexible, right? We don't have quote unquote institutional LPs, and we have some flexibility in our fund [00:14:00] structure.
So that allows us to, you know, create contingencies if needed, whether that's an earn out or performance incentives or whatever. That allows us to have people roll over or co invest. That allows us to restructure how a seller note might work that allows us to do a bunch of different things and think of, be creative about how the entities and the assets are structured such that we get the deal done for the seller.
And that's really helpful because one of the things that we think a lot about, you know, just like from a nuts and bolts perspective is, tax management, right? We could buy a business, but if it's, let's say domiciled in California, not ideal for, you know, from a tax perspective. So how do we.
Solve the per like the sellers need of, you know, their desire to minimize their tax burden and our need to want to have to minimize the tax burden going forward and relocate some of those assets. Maybe. Give some of the consideration in forms from the business over time that can equate to the total value, [00:15:00] like maybe charitable donations that we commit to for a certain number of years or whatever.
But that allows us a lot of creativity and flexibility in it and that ultimately allows us to sit across the table from somebody and say, This is what we think the business is worth, but what do you need? What's important to you? What keeps you up at night? Like, what are the things that we can solve by a creative conversation here that we can then put down on paper and in the numbers to make sure that you get what you want, and then we're still getting the value that we're looking for?
Corey Kupfer: Yeah. Love that. And what are, you know, it's interesting cause especially, I mean, I think it comes, in all deals, but certainly we're trying entrepreneurs. A lot of times the money is not the only thing that drives them. I'm not saying it's not a factor, right? Whatever. But you know. Legacy, their employees being taken care of freedom, you know, whatever, like talk to me a little bit more about like those drivers that come up more in that situation that are not just about top dollar.
Brian Shields: Oh yeah I'll answer that through an anecdote. We were talking to one business, this guy had started it [00:16:00] 15 years ago. He's experienced a lot of family loss lately and kind of like checked himself out of the business, but one of the business to endure. One of my first questions to him, and I ask this to pretty much everybody we talk to is, Why did you start this business?
Like, what was it that you wanted to see and accomplish with this business? For some people, it's paying for their kid's college and, you know, supporting their family. For other people, they're like, I want to have this like, you know, big exit at some point, or at least that was my aspiration. And in a lot of cases, people have this like, mission that they're like, to build a thing that will sustain themselves and their community, right?
And they've had this family of people that they feel like they've recruited and that they're accountable to, right? And I definitely get it. I've been in charge. I've signed people's paychecks. Like, there is a Responsibility you feel as the business owner to those people and you want to protect them and take care of them.
So a lot of things that come up might be like, I want to keep the name because the name is important to people. Or let's protect these [00:17:00] employees, right? Or, I want to fund my retirement and so I want this deal to fund my retirement. And those are three very different things and they can be addressed in three very different ways.
And so. If you have the flexibility to just like create a structure that works for people, you can do that. But I think a lot, it's funny, man, because like, I think a lot about when I wanted to be a psychologist. And, I spent so much time in high school you can't see me if you're listening, but like, air quotes, self training myself to be a psychologist.
I have a good friend whose mom was a psychologist. I read all of her books. And then, I would interview, like, all the people in my classes and try to, like, diagnose them while we were talking, like, in the middle of computer lab. And so, but what that led to was just, like, a really complex understanding of people and a deep amount of empathy for myself.
So, I then, when I'm sitting across the table from somebody, I get where they're coming from. And so, I can say, hey, Look, I understand you want this in this situation. Maybe we don't get exactly that, but if I gave you these three [00:18:00] things, I think that's still hits on the thing that's most important to you, which is whatever.
And that's been, very valuable. And like that seller in particular, I was mentioning earlier, he was like, I've had seven of these management meetings and not one person has asked me why I built this business and wanted to know any of the backstory about it. And I was like, well, we think about ourselves a different kind of fun, man.
Corey Kupfer: And, in terms of the last question on this, and then I do want to go back, in terms of the fund, are you still raising in the fund? Is the fund set? Talk to us a little bit about what you do on the fund side. Yeah.
Brian Shields: Based on your release schedule, we will have done our first close. So at this point, whenever you're listening to this, we will have done our first close.
And we'll be raising through the end of the year. Got it.
Corey Kupfer: And what, and who, what type of investors are, are coming into the fund?
Brian Shields: Yeah we have, primarily, successful entrepreneurs and high net worth folks. So people who respect and appreciate the, you know, the ecosystem we're trying to build.
I mean, there's obviously a capital, a capitalism opportunity here. We think outsized cash on [00:19:00] cash returns. You know, we're focused on current income and distributing to the investors while still being able to achieve some growth with the business. I've done it. My partner's doing it right now with the business.
So doable. We have a couple of family offices that are also in, and like how we're evaluating it is in addition to being able to write the check, which is great. Like we love getting checks, but everybody's money's green. Right. So if we can have somebody that I can pick up the phone and say, Hey, You know, Corey, Scott, whoever, Hey, I got a thing I'm thinking through or I'm stuck on.
Let's banter this around a little bit to get to the right answer. Or Hey, you know, like our team's having a challenge with something I know that you dealt with in your business. Can you just talk to them for 30 minutes and help them work through this? Or, you know, in a need to a necessary case, maybe like work on a project with them for a little bit.
Like that's the win, right? And I think that just as a, you know, 10, 000 foot perspective. You know, we just, if you want to go far, you got to go together. Right. And so we want to go together as a group. So, you know, [00:20:00] down the road, maybe we'll get like big institutional checks, like, I don't know, man.
But, right now we're prioritizing that community so that we can build this the right way. Love it. Love it.
Corey Kupfer: All right. So I want to take you back. So, how did you get here? Right. So, you know, we have a smoothie for internet, deal and, you mentioned turning down Ivy league. You mentioned, you know, venture, private equity, just take us through the journey.
Right. How did you go from, from the, from those early, early days, you know, what was the progression? Sure, man. I
Brian Shields: love the smoothie for internet deal. So I'm originally from Houston, born and raised there, went to Lamar High School, graduated, and then went to college in Atlanta at Morehouse College.
Morehouse, for those of you who don't know, is a historically black college for exclusively male students. And that was good for me. Like, it's funny, cause I wouldn't have gone there. Except for a guidance counselor at my school pulled me aside. Her daughter was going to Spelman, which is the sister school right next door.
And she was like, Brian, you need to apply to Morehouse. I don't know, man, I want to go to Michigan, blah, blah, blah, blah, blah. She's like, you need to go to [00:21:00] Morehouse. So I applied. I got pulled over because I was late submitting the application to the mail. And like, I got pulled over on the way and I was like, officer.
I got this application to the school Morehouse. I just need to go. And the officer happened to be a black guy. And he's like, all right, man, I'm gonna let you go for this one. So true story. And like this hand of God and a Providence component, like this is going to be a theme. So like, I don't take all the credit for the things that I do in my life.
Yeah, sure. But, So I went to Morehouse. I mentioned earlier that I had a professor who was like, Hey man, the banks are interviewing on campus. And I thought they were, he was talking about teller stuff. Whatever. But he was like, no, no, no, the investment banks. And he kind of explained it to me. I didn't totally get it.
But the thing that he did say to me was that these are the most competitive internships he could possibly get. And I was like, well, sir, you obviously haven't met Brian Shields. So, I went there. At this time, this was in 2008. No, that's, I'm sorry, 2005. [00:22:00] Yeah. So, oh, is this 2004? Yes. Goodness.
I'm sold. So 2004 had this interview. There was only one other person who had ever had an internship as a sophomore on Wall Street. And so I went and I was just like, I'm. I'm out here. I'm the most awesome person in this interview crowd. You're at this job fair. You're gonna remember me. So I got lucky in that I met a really awesome recruiter from a place called Lehman Brothers, which you may have heard of.
And they,
Corey Kupfer: by the way, 2004 versus 2008, a very It was very
Brian Shields: important that I get that year right. That's why I was trying to be very, very accurate with my statements. There's, there's a progression here. So, yeah, so I got an internship as a sophomore. I experienced my first taste of real life adulthood, you know, of a 10 week internship.
I think I had two days off, I slept under my desk three times and, made some really great friends that I'm still friends with today. And ended up doing another summer internship [00:23:00] there and then going full time in 2006 into the private equity group at Lehman Brothers. And then that from there I went to go work at one of our client's firms, which is like right across the street.
I got there in August of 2008. Wow. And then September of 2008, Lehman Brothers didn't exist anymore. And I'm went to a bar right across the street from that office. And I was like, look, I put my car down, just come down and drink your pain away, guys. And so that set me down a path of understanding and being, or being exposed to, and then understanding the power of not just finance and dealmaking, but of active ownership.
The private equity firm I was at was very much a hands on ownership business. So they would acquire businesses. They had a five year plan that they would spend all this time and money developing, and then they staffed a bunch of resources around it to support it, and you know, they're one of the early firms to do that.
Like, KKR and Blackstone started that wave, and they were like right behind it. Because that has a meaningful impact on the [00:24:00] outcome of the business, is having all these people to talk to, you know, see what you're not seeing, and to add perspective from their experience. And so that taught me a lot. But I didn't get there by myself, right?
Like I had a guidance counselor who got me to college. I had a professor at college who was like, go interview. And then, you know, I had a recruiter that took pity on this ridiculous sophomore who was like out here throwing resumes at everybody and was like, all right, come work at Lehman Brothers. So I did that.
And it was super dope. I, while I was there, I did a bunch of transactions, because for 2008 to 2010, there were like no deals done in private equity and definitely not at our firm, except the ones I worked on, apparently. Wow. So of the whole firm, I was the only one that got deal experience during that time.
And it was great. Like I learned a ton. We worked on hard deals. I mentioned one of them earlier and, I, you know, a diversity of industry. I was working on third party logistics businesses, payment processing businesses, diagnostic lab businesses. We looked at oil refinery businesses. We looked at a couple of soft, other software businesses.
And I just like. Started to see the [00:25:00] commonality between all the businesses that we really liked and that were, high return generators and, you know, all the stuff that we know, recurring revenue, this, that and the third, but there was also a layer of the, Management teams that we would have conversations internally about, like, do we think this guy's good?
What did so and so say about them? They used to work with them here. How are they managing this team? How do they approach like some of the complicated, you know, service delivery thought process and stuff like that? How do they allocate work? And that saw me a lot. Yeah. About one thing that I was very clear at that time.
I did not know. And it was, how do we actually make the money that I'm putting into the Excel and running a bunch of numbers on what is Eva dot? I don't know. So I went a little off track, relatively speaking, because most people would just be like, are you going to do your time in a private equity firm, go to business school, come back, make partner.
Yeah. And, I started to have this intuition that has turned into something I can articulate now that the. Best investors going [00:26:00] forward, we're going to be people that understood how to operate businesses. So I needed to get some of that for myself. So I did a rotation with those, the resources group people, the folks who worked with the portfolio companies.
And I did sales projects. I did inventory management projects, procurement projects, HR projects, and started to understand the functions of the business almost like, Like a G E general manager rotational program, right? Yeah, I learned that. And then I was like, cool, let me go do this thing. So I parachuted into one of the portfolio companies.
It's actually a diagnostic lab that I had played a role in rolling up. So I knew the team really well. I knew the business really well. And I had been it's very funny because like I was in a board meeting and I was talking to them about like, Hey, why? Why are we talking about acquisitions all the time?
Like there's a lot of free money in organic growth. Like, why are we not chasing that? That is high margin. And they're like, well, do you want to do it? So, all right, I guess I do. I parachuted in, I started a new division of the business. And, it was successful. You know, we got on [00:27:00] like 12 months. We got to 3 million initial run rate of revenue, which is awesome.
But that was then like the experience that kind of hooked me. And I was like, Oh, I like this thing. It's like entrepreneurial, but operational. And, you know, this is making me, like, I can see the deal discussions that we were having better. I can understand some of the things that we actually missed in some of the deal discussions we had over the last few years that I should, we could have asked because I understand this now.
And then that set me on a journey and eventually, I ended up at a venture backed property management company in the Bay Area. I was running growth there. And, one of the motions we were doing was acquiring other property management businesses. We looked at maybe 50 businesses that we did 12 deals in two years there.
And I had this, like one really big takeaway for you, which was that, these are really good businesses. I was like, half the time I'd be like, why are you selling this business? And then I'd be like, is there any way I can buy this business instead of my company? Like, that would be the thought [00:28:00] running through my head.
And, and so eventually I decided to act on that. And so I left, I bought Hill Company, which is an HOA management business, so it wasn't competitive. And then, you know, kind of just ran from there. And I was able to put to work all of the soft skills and the hard experiences that I had from, whatever that 15 year time period to into this business.
And it didn't all go right. Like I made a bunch of mistakes, like a bunch. But, but ultimately, like we turned this business around into a place where it went from negative 50 NPS to positive NPS. We started getting clients actually referring us business and growing revenue. Did another acquisition. We got on all the like top property manager lists in the bay area and like the things that signal you're running the business well, in addition to the P and L and and that's ultimately what led us to a successful exit.
Corey Kupfer: I love it. Okay. So I want to talk about both sides of that. You mentioned all the mistakes and things, you know, whatever. And then you mentioned successful as it let's go to the, cause I [00:29:00] believe, and I think actually you and I, in our pre call, like this specifically came up, where we both said, you know, you learn way more from the mistakes, right.
Then you do from the successes. So, all right. So, and also there is no. Successful entrepreneur and certainly successful deal maker. I wasn't, you know, like if you're not willing to make mistakes, right. You're not really in the game. Obviously you want to minimize it, but you know, so talk to us about some of the key lessons you learned and maybe if there's any stories, obviously without any confidential information you can share about, you know, the ones that didn't go well, or the, you know, the ones that went wrong, the way you had a pivot or whatever it was.
Brian Shields: Yeah.
Okay. So one broad lesson I will say is really important is the value and the criticality of culture alignment when you're doing these acquisitions. It's both from like, if you are the sponsor acquiring this organization, or if you're, you know, a company acquiring another organization and merging them together, like all those.
So like the venture backed property management company I mentioned, we did 12 acquisitions during my run there. Okay. [00:30:00] And, you know, you had 12 different flavors of people coming into the company, right? And different ways of doing things, different mindsets around how to manage, like, the pennies and the dollars and cents.
And so getting those aligned were really important. And where we would stumble is if we would try to whiplash people from doing it their way into doing it a new way. Cause all kinds of rancor, discourse, and discontent, within the teams that were acquired. And so, that taught me, like, hey, if you're gonna do this, like, you have to put more effort into the soft side, the qualitative part of the diligence, and then the transition.
Because change management is just really important. So that, that would be number one. And you can, and like, just for the people who are like, oh, I don't know if I value the soft side stuff. That costs you money because if the, in this case, right, like the service being provided that is being paid for is done by these people, like the people really are the product.
If they're disgruntled and then they leave, then that, like, it's the same thing as [00:31:00] like if you were had your money being managed by a wealth manager and then like half of the wealth management company left, you would feel that's a negative signal and protect your assets and go somewhere else. So it can cost you real money.
So you got to get that right. The second thing I would say, which is still people related, is, have a rubric for diligencing the people that you think are going to be key leaders going forward. And, you know, it's one thing to like sit and have a conversation with them, but, It's another thing to have a mental checklist of things you're assessing for in the discussions and like different tools that you can use to assess them.
So as an example, with the company that we acquired Hill Company, we had an accounting leader who was really, really loyal, but not great. But our perception was that she was great. And that perception was somewhat overwhelmed by the niceness. And like we met them in diligence and then we would talk to them a bunch [00:32:00] and then we worked with them obviously after close and we're like, okay, you get a lot of grace.
But if we had been looking at the other side of this coin, which is the quality, the quantitative proof of whether or not they're doing things right, like, especially in an accounting role, we could have said, Hey, we need to make sure that their error rate is low, that they're getting things out on time.
That there are, like there, because they were in a people management role too, like, there are people there are minimal, like, there's minimal discord between the, the staff. And those three buckets were not being done well, and that was causing us a lot of frustration, and it took us maybe a little too long to say, Hey, this is actually a problem, and the problem starts from the top here, and we need to do something about it.
So, like, That was really key. And we could have caught that earlier in diligence and made a plan around it. But we didn't, so shame on us, but please don't make that mistake. Now that you've listened to the story. And then the third thing I would say is, just like being incredibly sober about the risk [00:33:00] profile that you're taking on in doing some of these deals.
So before we bought this company, this, before you bought Hill and company, I had been like at the five yard line with a dental lab. And. So like, you know, a company, it's like you get them a crown or a replacement tooth. This is the company that makes it. It was great. It was in the Bay Area. It was biking distance from my house.
I was like, it's perfect. I can ride my bike every day. It's awesome. And it was like a reasonable price, at least multiple wise. However, as I was having a discussion with him, I was like poking around at all the things, the customer contracts look good. The P and L's look good. Q of E started looking good.
Cool. Cool. But one really big thing rang an alarm bell in my head, and it was the staff. And I asked the seller where he gets his technicians from. And this came from, like, diligence, right? I was, like, talking to a bunch of other dentists and other people who had dental labs, and they were like, yeah, you know, one of the things is, like, there's a lack of, [00:34:00] staff availability, and, like, trained staff in the industry.
I was like, alright, cool. This guy seems to not have a problem with it. Let me figure it out. So he was like, yeah, we, I have a relationship with this dental school in Korea where I'm from. And so they train them, then I sponsor their visa and they come over here and work, and so I'm sure they would continue that with you.
And I was like, okay. So then I went home and I really like thought about it and I just kind of like mentally modeled out how that would play out. I was like, man, there is a huge risk here that. this guy, like that relationship goes away and then the business immediately becomes 25 percent less profitable, which makes my multiple look crazy.
And you know, we were considering doing an SBA loan for that one. Then it was like, that might put us in risk of like, you know, not being able to cover the P and I payments for this thing and like being in some real trouble. So that's like a huge risk. And, you know, again, it came from, being very intentional about the diligence and the support around us that we put to make [00:35:00] a good decision around this.
And though those people were really excited, they were like, man, we'll write you a check. We're here. We're going to call all of our dentist friends to use this lab. I had to say no and told them why I said no and everybody got it, but it was because there was this minuscule or minuscule is the wrong word.
It was an obscure, but a very material risk that was here that I needed to face and just be real with. And, you know, as an entrepreneur, you're like, I can handle risk, but like, you shouldn't have to handle all risk is the point.
Corey Kupfer: Great examples. Love it. And then so Hill Company was the one that became the roll up that you exited?
Okay. That's what I thought. So, when you acquired it, were you thinking roll up from the beginning, or if not, when did that come into your mind? And, you know, one of the things that I often talk to clients about is, You know, it's very different if you plan on doing one acquisition versus multiple, right?
You don't want acquisition. You could just figure out the best deal between you and that, you know, the counterparty. Right. But if you are planning and I'm going to, whether it's a rollup or whether it's just, you know, [00:36:00] a number of acquisitions, you know, I'm always a big advocate of creating a model.
Business structure within that model, having a consistent way, not getting your cap table, being crazy, having to manage different deals. It's just that, I mean, it's like anything else you want to scale, you want to systemize it. Right. So sometimes folks come out with backing, whatever, and they know they're going to do a rollup and they, you know, have the resources and systems to get that kind of stuff in place.
And others are, you know, three deals in an entrepreneurial journey and then figure out, Oh, maybe I have something here and then you've got a retrofit, right, if you're smart. So I'm curious as to where you are at in that journey.
Brian Shields: Yeah. So because of the previous experience I'd had, I came away understanding that for property management businesses, there is a lot of value in doing add on acquisitions in your footprint, the density increases the profitability dramatically.
So my partner and I, in this business, we're like, Okay, we're not going to entertain any other acquisitions unless they like literally just Lego piece fit right on top of where we are. So we turned down a bunch. And then we ended up in a sit. Oh, sorry. There's [00:37:00] one other, criteria for that, which you kind of hit on.
We were like, if we don't have to raise money outside money for this acquisition, then we'll consider it. So had to be in the footprint and it had to be one where we could figure out a way to not raise outside money. And so because we'd run the business well, over the, that first year. We were then able to recapitalize the business with a new line of debt and acquire the second business.
So we actually didn't come out of pocket for any more equity. And it was literally like right on top of our footprint. Like I could not, like, if you looked at the map, it's like wherever we were kind of thin, they were thick and vice versa. And it just went right on top. Wow. So that was like, we went in with a plan and like have thought about it, but we weren't like running hard after it, like, Priority one was make sure we're running a good business team straight.
We have all the infrastructure in place that it, as we grow, we're ready to grow. And then, you know, opportunity presented itself. And I'll just say one other thing on that too, like this, that specific opportunity presented itself because the seller of the first business was able to vouch for us to another seller.
[00:38:00] Who that hauled us, I was like someone said that you guys are cool. So I'll talk to you.
Corey Kupfer: Love it. Love it. And listen, we're, there's so much, like I said, there's so much else I want to cover. But I do want to say I stood up just because I alluded it up front. And I want to close the loop for just for listeners who There's not a threat out there.
You know, I've been involved with a lot of rollups, over, over time. And one of the things that I mentioned when we talked about his bio was that, you know, it specifically talked about adding value and you heard him just say with this other, you know, talking acquisition, right. It was like, they had things that, you know, we didn't have and it was right.
The strategic value, because there is a, you know, the roll ups that got the bad, and still do, but certainly like in the eighties, when the role of the first role of craze, you know, came around and the ones that blew up were law, you know, there's a roll up, approach where it's just rolling up the size.
Right. And you know, you're playing, you're just playing a straight multiple arbitrage game, right. I can buy at four X, right. If the company's worth four X to another buyer, I could pay six or seven X. Cause I'm going to exit at 12th. Right. Okay. And the [00:39:00] problem with that is that if, by the way, sometimes that works and listen, sometimes also people at the lottery, right?
And I'm not saying maybe it's a little, you know, I'm not saying it's those odds, but the point is if you time it right and everything goes well and whatever, you could potentially make that, you know, that multiple arbitrage game work. But if anything goes wrong, the economy turns, a competitor comes in, like there's a million reasons why that could blow up.
And then you screwed because now you've overpaid for a bunch of businesses that you have added no operational value efficiencies, additional profitability, capability, whatever it is. And what, you know, the contrast here is really what, Ryan obviously didn't, you know, with this rollup, like if you, you know, I'm assuming it would be accurate to say, and you can tell me if I'm wrong, that if you didn't exit that business, Right.
And you had to hold it for another year or two or five or ten. All right. You could have done it because it's, you know, it's running profitably, efficiently, whatever. And you're not just banking on a multiple arbitrage where if things go wrong, you're in
Brian Shields: trouble. Yeah. The intention with that business was to hold it forever.
And what I [00:40:00] learned from that experience was that if you run a business well, then you get options. And you know, you have time, you can wait and then maybe somebody will make you that six times offer because they're like, Oh, we have a different plan. And then you got to say to yourself, well, maybe I'll think about not owning this one forever because it's like, you know, offers you can't refuse.
But yeah, I 100 percent agree with that. And like my operating thesis broadly is finding the most efficient way to deliver more than what the customer expects, right? Like, that's really like how I start my thinking. And anytime I'm talking to. Like we're like new industries and new businesses. I'm like always thinking about how the customer's thinking.
And then if you start with that and work backwards, then you can design an efficient organization that does the thing and does it better than they want and expect and all that. And, you know, for a reasonable price, that's great. But if you just like I had to get out of private equity. I was around too many financial engineers, which is kind of like another way to say what you were saying.
You know, people who are like, I got all the deal structures and like the [00:41:00] finance like strategy around this. And I'm not blind to that. I'm very much aware of and think about multiple arbitrage, working capital management, thinking about like how to do cost of capital in ways that are efficient for the business.
Like that's in my lexicon, but that's not my guiding principle. And ultimately, I believe that if you keep. Customer satisfaction and service delivery in an efficient manner as like your North Star in whatever business you're in. You will be in a position where you can then say, all right, well, I could sell it for a reasonable return.
I could keep it forever. And like, you know, everybody's happy. So, that's the lane that we're steering handoff, handoff partners to be in. And that's the kind of like way, that's the flavor of operating and investing that I like. I love it.
Corey Kupfer: All right. So this, before we go to my final two questions, one other area I want to cover, and I'm going to combine three things in either a brilliant attempt to draw connections between three different things you mentioned.
Or a desperate attempt to cover stuff that we could spend two more hours [00:42:00] talking about the next five or 10 minutes. Okay. So I'll let the listeners, you can show how desperate I am here, but let me give it a shot. So, the other thing that you talked about that you do now is work, you know, in addition to the, the fund and the investing in retiring, you know, acquiring, retiring entrepreneurs, business, all that stuff, right.
Is this sort of consulting coaching, you know, working with entrepreneurs around creating value and having the business run without them and things like that. You also mentioned at various times this, you know, interest in desire and just interest in topically in, being a psychologist. Right?
And then I also know that you have a personal experience around burnout that is very powerful. That's influenced you as well. So. Like I said, we can spend hours on this topic, but I'm sitting there thinking about, Hmm, I am sure that, you know, the joke around a lot of coaches, even lawyers, what we do when you, speak or whatever is that we're, you know, unlicensed and, you know, psychologists, right?
Because a lot of times [00:43:00] when you're dealing with entrepreneurs, that's what you're doing. And then also, you know, you obviously have this personal experience with burnout, which I'm so plays in. So, like I said, I'd love you to talk about that whole area, and you know, whether my desperate attempt to a thesis or brilliant thesis, depending on how you look at it of there being a relationship between those three things, you know, may or may not have any accuracy.
Brian Shields: Yeah, no, I mean, I think it's a, I think you've elegantly woven together several topics that have a common thread. So well done. So. in one of my previous vignettes, I'm a highly competitive person and I think a lot about how to be at my ultimate performance peak, right? How do I get the most out of myself and perform and compete?
Like most of my books are like sports books. I think I'm just being honestly, I read like every coach's book, and that used to serve me. Completely on the output side, right? And so it's like work a bunch of hours, get things done, push, push, [00:44:00] push. But as I got older and more importantly, as I got into levels of more and more responsibility, I started to need, but I hadn't recognized, but I started to need offsetting things.
And you and I were talking earlier about like, you know, traveling less for the summer and giving yourself a time to recuperate ahead of what you know will be a sprint season in the fall. So like I wasn't that person. I was like, optimize, maximize boom, boom, And that led me to be so emotionally and physically drained that even though I had sold a company and like, you know, put a check in our account for more than I've ever gotten in my life, like, I just couldn't be happy about it.
And then I, and I couldn't withstand. real life stuff that happened after that, inclusive of me losing my father. And so I make that point to say now, as I'm coming back to it I've done a bunch of study around burnout and stress management, how to manage peak performance and stress and rest and from a mental perspective and all this other stuff.
What I find is that I held a lot of unhealthy, [00:45:00] unproductive beliefs and perspectives about work, about output. That I find a lot of other entrepreneurs share, and other entrepreneurs also have a really hard time hearing, like, you need to take a break, or you need to, you know, treat yourself or have self care, unless it comes from another entrepreneur, especially somebody who's dealt with something like this.
Because then it, like, the risk here is, you know, So if you have a, you know, a team of 50 people working for you, that's 50 people that could be affected negatively by your poor decision making or, you know, missteps or whatever that if you had taken breaks, you wouldn't have done. And that can lead to financial issues that obviously can lead to personnel issues.
And so, like, there's just a different level of fraternity that exists. Business owner to business owner, entrepreneur to entrepreneur. And if I can just be like, Hey man, look like I've been there and this is what it costs me and I don't want it to cost you. And like, here's some easy things you can do. And by the way, you're the boss.
You [00:46:00] can do it like , right? Right. Go do it. , right? It just lands differently. So, I talk about that when I consult and advise some of these businesses and it helps drive, you know, an appreciation for, okay, maybe I don't need to do. all of these tasks. You know, maybe I don't need 15 people reporting to me.
Maybe I only need like these five key people reporting to me. Maybe I don't need, maybe I should take a two week vacation so that the business will be forced to develop policies and operations without me. Okay, let's do that. Like, let me get over myself. They start to open up to these possibilities and you know, that leads to, in a very soft sense, You know, just a better work life balance and lifestyle, but in a very hard sense that can lead to better value for the business because now you've created something that's transferable because it's like, look, like I've been gone for a month and the business has been growing.
So like new owner can take it over and be great. And then you can maximize your own nest egg. So there's just a lot of different reasons why I think it's really important to focus on that stuff. And I like to speak about it from personal experience because. You know, entrepreneurs like us are going to be like, well, you know, whatever.
[00:47:00] I'm not listening to that guy from JP Morgan. He's got a good W2.
Corey Kupfer: Yeah, and I love that you raise the fact because that's the interesting dichotomy like, you know, when you're in that mentality, it's not like, you know, no, I got to grind. I got, you know, there's this hustle culture, grind culture, whatever. And then listen to this value in that at various stages, I'm not saying it does take something, but when you're in that mindset you know, you equate.
Your grind and your hustle and your particular efforts to the success of the business. And the truth is not only is that not true and is it unhealthy to you, but there is that opposite effect. Like when you step out and give room for your people to grow and step up or figure out who you need to have that in place, your company does become more valuable and was successful and whatever.
And I remember. And I'll just say quickly, personally, and, you know, before we wrap up here, but, like very early on, I even just taking vacations, right? You know, I went through that stage where I didn't take any vacations. I couldn't leave the business, blah, blah, blah. Then I would take vacations, but being in contact every minute.
And then I'd be like, you know. And I created a mantra for myself. [00:48:00] Like it, it might be most of my mantras are positive, but this one like needed to be phrased this way. My mantra to myself was, you're not that important, Corey. Not that important. Like you. And at that time I wasn't leaving for a month.
I was, I mean, if I was taking a week, it was a lot. Right. You know, like, you're not that important. The world's not gonna fall apart. Your business is not gonna fall apart if you're, you know, if you're away for week. You know, so I get that. I love the fact that, you know, and it's interesting 'cause.
Entrepreneurs understand this concept, like this concept of having a business that runs without you, you know, whether it's from Michael Gerber's e myth or, you know, all these other things, you know, coaches, Bibles, whatever, like intellectually people understand that, but they still, a lot of entrepreneurs can't, you know, have that apply to their own, you know, situations.
It's phenomenal that you're, that you're working with, you know, with folks on that. And the truth is that we all, I mean, the last thing I'll share is we had an event many years ago at entrepreneurs organization, They called it the Night of the Living Dead, and it was really Archimedes sharing their worst, darkest, you know, toughest personal [00:49:00] situations, and it was fulfilling in a way where it really opened up the space, and what we, you know, what we learned was, and, you know, it's becoming a little more open to talk about it now, back then it was much less so, is that we've all been through stuff, like, and I'm not talking, I'm talking about stuff, Like not, Oh, wow, cash flows down this way or I go, all right, I'm in trouble hiring somebody I'm talking about, like, you know, emotional depression, you know,
Brian Shields: I got divorced or might've gotten divorced, like having real issues, like there's people have gone through real stuff, man.
Corey Kupfer: Yeah. So I love that you're working with entrepreneurs and bringing that in and the tie into actually like there's actually an alignment between taking care of yourself and self care and business success. Not, they're not actually at odds with each other. Absolutely. Absolutely. Right. Absolutely. All right.
Well, like I said, we can talk forever, but final two questions, where can people find out more about. All the things you're involved in, whether it's, you know, this kind of [00:50:00] coaching consultant services or the fund or, you know, or maybe they're interested in selling the company, whatever it is.
Brian Shields: Yeah.
I'm, I'm always active on LinkedIn. So find me there. It's Brian Lee Shields and then, my website, brianleeshields. com. And, yeah, most of my stuff will be around there.
Corey Kupfer: Awesome. And then my final question on the podcast is always about my highest value, my asset, the own life, which is freedom. And for me, that means everything from freedom from oppression from all people around the world to why I've been an entrepreneur for decades and haven't had a boss.
What does freedom mean to you and how does it impact your life and business?
Brian Shields: Yeah, freedom means to me. Never having to decide if I'm going to sacrifice spending time with my family for something else. That is my biggest priority is ensuring that my family is shepherded and stewarded in the way that, you know, I feel like they'll be good.
And so yeah, you know, that just affects some of the decisions I make now. I try not to let it, I try not to have a microwave mentality about like doing things so that I have [00:51:00] like quick money and then I can be free. But also recognizing it takes a balance. And so, you know, if I can be 100 percent present with my daughter or my son for 10 minutes a day, and that's all I got cool, you're going to get 100 percent of me.
And then hopefully I can grow that to 15 minutes in a couple of weeks and keep going. But yeah, freedom to not have to choose between my family and other stuff is how I think about freedom. Love that, right. podcast. Oh, it's been an absolute pleasure. Thank you.
