I welcome back to the leaders podcast. I'm your host Ken aesthetic. And I'm glad you're here and I'm delighted for you to meet our guests today Mr. Chris younger. Chris is the CEO and co founder of class six partners out of Denver, Colorado. They focused on investment banking, Exit Planning and wealth management. Chris co founded class six in 2005, with a mission to empower the entrepreneurial spirit, sharing a passion for what entrepreneurs mean to our community. Chris felt class six could do a better job for business owners by integrating personal and business planning and by taking a holistic view of the entrepreneurs journey. Today we're going to talk about the business of deal making prior to class six, Chris spent more than 20 years gaining experience in executive management, marketing, sales, law and mergers and acquisitions. He's the co author of harvest the definitive guide to selling your company. Chris was a co founder and president of exponet, the nation's largest provider of converged communication solutions. During his tenure there Chris led the acquisition and integration of 27 companies ranging in size from 2 million to just over a billion in annual revenue, and they were ultimately bought by a Vega in late 2003. Prior to that, Chris was an associate with a law firm and even clerked for a judge on the US Court of Appeals. He was a graduate of Miami University and Harvard Law School and has also studied at the London School of Economics. While at Harvard, he was the managing editor of the Harvard Law Review. Please join me in welcoming my esteemed guest, Mr. Chris younger.
Welcome to the leaders lab, Chris.
Thanks so much. Appreciate it, Ken.
Yeah, great to have you here. Chris and I are just talking about he's got a remodel coming up. We've got one just finishing. So talking about that
much rather be on your end. Yeah.
I know. Luckily, my wife handled all of it. And she's fantastic with details. And I kind of got to stay away except for the big stuff when she had to bring me in, you know, but yeah, welcome to the leaders lab. So good to have you here. You've got such an esteemed and deep background. Can Can you walk us through your career? I know that's a big question without a lot of guardrails, but maybe maybe started out for us. Where did you start? And how did you get to where you are now?
Yeah, sure, no problem. I started out as an attorney, I worked for a clerked for a federal judge on the Seventh Circuit Court of Appeals, right out of law school. And then I went to work as a lawyer in Silicon Valley for a couple years, decided that I didn't really enjoy being an attorney. And so I talked to my boss who up whom I adored, just said, I don't think this is for me, and was gonna actually do a search fund with a law school classmate of mine. And we ended up getting hired, the two of us got hired by a group to basically help them invest capital. And so went from being a lawyer to then deal guy. And through that, we started a company called extra nets, which was it was going to be a consolidation or roll up in the communication space. Can I? So?
Yes, for one second. So what do you think so what were you guys like mid 20s, late 20s? When they were like, hey, like, they saw something in you guys that you didn't even see in yourself? Like, what was your age? What did they see?
Yeah, I'm not sure they had very good judgment, can you know, they, we, obviously, we had already made the decision, hey, we'd like to go out and, and, you know, look for businesses to buy. And I think they looked at it and said, Hey, why don't you come work for us and help us identify companies to buy and they definitely took a chance on us. And that's been true at different points in my career. And I'm always grateful for that. And but it was, I mean, we were definitely way out over the tips of our skis to use a Colorado metaphor. And during that we did, I was the lead deal person, and we did 27 acquisitions over about 2425 months, which was we had a lot and I always joke that, you know, about a third of those deals. You know, we looked a lot smarter than we were about a third of those deals went about as planned. And the third of those deals I absolutely should have been fired for recommending let alone closing so
sure. I'm sure the good outweigh the bad. I mean, because you guys got purchased and when when you're going after those deals, were you the point guy, did you I mean, I'm assuming you had a deal team that was bringing stuff to you and you were either stamping it yes or no kind of.
We had Add to folks that were in the industry, right? We call that business of our value added reseller. So we were serving small to midsize businesses with telephone systems and data networks. And so we had three folks that were from the industry that were that had a lot of connections that we were able to get introduced to these entrepreneurs. And then we, you know, we had an accounting diligence team, we had a legal team. And then those industry folks helped us with some of the industry diligence. And it was a really, I mean, it was a, as a young, you know, newly emerged from law school and just haven't been a young lawyer, it was a lot of fun, right to go out and do transactions. at that pace. It was it was pretty stressful. Lots of travel lots of time away, just had a our first son was born. And so that was, you know, not necessarily the best timing to be on the road, pretty much nonstop, but very patient wife, and we. And then I ended up when we hired the second CEO of the business, he lived in Colorado, and we ended up moving the headquarters to Colorado. And that guy's name was Jim Walker. And I told my bosses that I really wanted to go work for Jim, because he was, I just thought he would be an unbelievable mentor and and coach. And that turned out to be exactly right. I literally can't tell you how many different life lessons I've taken from Jim, throughout the years. And he is a just a gem of an individual but an unbelievable leader. He, prior to our business he had run about I think it's about 20,000 person, Division of Lucent and AT and T. And so he took me under his wing, I started out as a head of marketing strategy. And then I became the chief operating officer and then became the president of that business. And we have built it to a little over 1,000,000,002. And revenues dealt with some pretty challenging times, we were trying to implement a new technology system for the acquired companies. And you can't see how tall I am. But I used to be a lot taller before going through that before going through that experience. But that 911 Hit the obviously the.com bust happened. And so it's a pretty challenging time. But we're kind of worked our way through that. And I ended up selling it to a via which was one of our major vendors. And
Worldcom was the whole Worldcom thing going on during that time, like early 2000s, if I remember right,
exactly. So as we were doing those acquisitions, Worldcom was really in its heyday. And then as WorldCom, disintegrated, you know, as the as the bandwidth requirements dried up, and, you know, they were over leveraged. You know, that was when we were selling our business. Now, we were on the enterprise side equipment side. So we weren't on the carrier side where, you know, we had lots of unused capacity, fortunately, now that the market, you know, definitely deteriorated for, you know, equipment purchases, so we had to deal with that. But it was, mean an unbelievable learning experience across a number of different facets. And as stressful as those four or five years were at the operating level. I wouldn't trade those for anything. And then, after we sold the business, I helped. I consulted with Avaya for I don't know, three or four months. And then I tried to retire, which didn't work out too well. My team has heard this joke several times. But as I was reorganizing my wife, Mary Beth spice to her and I won't use exactly the language that she used with me, but she said you need to go find a hobby. Sure, preferably out of the house. And so and I had an event, I met David Tolson, who's my business partner, and we started class six partners as a as an investment bank, mostly, we were going to do one or two deals a year and as a hobby. And then it's obviously grown since then we have about 3540 people now,
what year did that start?
2005. And when we officially kicked it off, and then in 2010, we started a piece of our business that provides advice to companies a year to three years before they're gonna go to market. We call that Pathfinder. And then about seven years ago, we started an investment management wealth advisory practice. We call it our family office for entrepreneurs who had exited with us. And we have about 80 families, we have about a billion dollars of liquid assets under management and we advise on another billion and a half of assets for those individuals. And you know, as Warren Buffett says, I get to tap dance into work every day because I I work with entrepreneurs, and then we have just an outstanding internal team of just highly qualified really aligned hardworking people
when I can best understand and just tell me if I've got it right or what I can best understand by listening to you on another podcast and by researching your company a little bit. Is that It, like a lot of entrepreneurs will have a coach or an advisor or you know, a team of those people. And then separately, you've got Oh, and here's what's going on in my personal life, you know, I've got my investment account, I've got my house, I've got whatever. And it sounds like you guys are really trying to blend that and put it under one roof. Is that correct?
Yeah, I just haven't done this process. So many times, what we've learned is a company that has prepared over a longer timeframe is going to be better off. And when you can integrate the personal and the business planning and execution, you get much better results. Obviously, what most individuals care about is at least from a proceeds from a sales standpoint is what's available after tax. And there are just lots of opportunities prior to a transaction to optimize for both income and estate taxes. And what we were seeing is, our clients who were wealthy, they just weren't liquid, weren't necessarily getting great financial advice, because they didn't have a lot of liquid assets for some of the bigger firms to really pay attention to them. And obviously, after they sold, and all these firms were all over them. And what we've learned is, you know, it's just much better to build that relationship ahead of time, and give them really good advice that is going to maximize the post tax proceeds and help them plan for this major change in their life.
Yeah, it's funny, because I would say, we've done that pretty well ourselves with the leaders lab in the last couple of years, there used to really be a separation, it was sort of like, Oh, here's what we're doing, personally, here's what we're doing professionally, you know, to different people, until we got with kind of a tax strategist who really helped to surround that now we're not doing investments through that vehicle or whatever. But yeah, they're all tied together, right? Especially when you start getting into trust, and estate planning and things like that. And it's so much more cohesive now, actually, to not have the separate, you know, the separate silos, I always thought like, separate silos were smart, right? Like, oh, keep it separate, right? For like receipts and tax purposes, and whatever it is, like, it never really is separate, if you're an entrepreneur, right? Like, it's always somehow looped in there. And if you don't start realizing how to take advantage of the integration, you're gonna pay too much in tax, you're gonna, you're gonna set yourself up for failure, I think,
for sure. And, again, for most of our clients, they're moving from having a great business to having substantial liquid wealth, right. And that comes with a lot of complications, you know, their potential liabilities now different, their relationship, their kids relationship with money is going to be different, how they think about investing is going to be different, how they think about risk, tolerance is going to be different. And so having those conversations ahead of time, so that the client is really well prepared, and has thought through that versus getting caught on your heels after a transaction closes and missing some opportunities, or, you know, we've certainly seen, you know, some of the bad movies around when, you know, kids and money don't mix well. And so there's a lot of education that we try to provide to clients just to help them think differently about wealth transfer, and hey, how do you implement that successfully with kids? How do you think about charitable giving are one of the stats that we are most proud of and aligned with our mission as an organization is we've did a recent calculation and our our clients that have what we know, have given over $200 million back to charity. And I think it just it's great evidence of how generous and charitable entrepreneurs are. And I don't know that they get enough credit for that, you know, most people see the 20 year overnight success and don't understand all that it took to get there. Right, and a lot of what they're doing, you know, the other thing that we've seen time and time, again, is just how generous our clients are with their employees. When a sale happens, it's it's pretty fun to watch.
When you guys get involved with companies, is it typically, you know, like someone that owns their own company, and then says, Look, I'm not clear on an exit strategy. You know, I want to get involved with you guys. But that I'm assuming that exit is kind of part of the conversation from day one. The variable would be kind of when right like, is it somebody looking to move forward kind of fast within the next six or 12 months? Or is it somebody that, you know, do you guys get engaged with companies where it's five years out 10 years out? Or what does that look like for you guys?
There's really three ways that we typically get engaged or involved with a client. One is they've been approached by somebody and given that this is a big asset, and likely their first time going through a process like a sale. They're just looking for expertise and help and so We'll help them navigate that transaction. We call those one off deals, right? Somebody's, you get a phone call, and for whatever reason, hey, maybe that one's interesting. And they just need help navigating that and making sure that the deal gets closed, mid market deals, have an extraordinarily high failure rate, you know, if they're not managed well,
but do you guys get involved then in the negotiation with the buyer? And then do you guys just take a commission from the seller in that instant is because reason I'm asking so specifically, is, when I was in corporate America, I did a lot on the mergers and acquisitions side, I had come to corporate America from selling my own business. And so when I came on board, they were like, hey, you know, both sides now, right? You work for us, but you were the little guy that got bought. And so go buy more guys like you. So the reason I'm going so deep again, on that is I got involved in these acquisitions, and we rolled a lot of them up. And I always wondered, like, when when I left the corporate world, I always felt like having the knowledge of someone who's been through that process. And whenever that feed is going to be an adult, you know, want to get into your feet, and I'm sure they're different based on business size, but there's so much value there, right? Because little tweaks in someone's business, like changing their gross margin by three percentage points, or, you know, I hate to say, right, sizing their headcount, but kind of right, like, if they're bloated on staff, or, or sometimes understaffed, right, hey, we're buying this asset, but it's supposed to produce at a certain level, and you don't have enough salespeople, and they're gonna ding you for all that stuff. And so I think bringing on someone's knowledge, like you guys that has that could be really valuable. And I was looking at doing that myself at one point. So when you guys come on, and someone does come to you for these one offs, is that something that you guys that are you're doing it as a one off, but you're fully walking them through the transaction that it sounds like, yeah,
yeah, absolutely. So will, will basically take over the negotiations, get our client ready for due diligence, potentially reach out to some other bidders just to keep the you know, the first bit are honest, right, and then really manage that whole process through closing, right, the due diligence process, then negotiations on the purchase agreement. And so we'll do that on those one off deals. So that's really, that's one is probably a third of our business, or folks that for whatever reason, hay, this particular deal caught their fancy, and they want to go execute it, we have another third where the business owner has just gotten to the point where I, they want to go to market, they want to go sell their business. And so they hire us to run a process, where you put a book together, you reach out to multiple bidders, your Manage managing that process, and then obviously managing their management meetings with these investors, and then the letters of intent. And then finally, the, you know, the through the due diligence and closing. And then we have another third of our business that's growing, which is these are business owners that have said, I'd like to transition in a year, two years, five years, whatever that time period is. And I just want to put my plan together, I want to do what I can today to optimize the results. And to your point before Ken, there's a lot of leverage that you can get on the value of a business. If you have enough time and enough runway to go execute, we think about the value of a business is really, what are the future cash flows of that business? At one level? How fast is the business going to grow and generate more cash? And how risky are those cash flows? How much risk is there in the business? And so what we do for those businesses is really just focus on how do we strip perceived risk out of the business? And how do we make their growth plans just a lot more credible, so that investors will give them credit for it. One of the things that we've learned in that second scenario, when we run a normal process, right, somebody just come to us, the top bid is usually maybe a 20% premium to the median bid, which is usually around fair market value. So the process works at generating good premiums, the businesses that choose the third path where they're actually preparing, managing risks, building a more credible growth plan, and then going to market. Those premiums are about a 40% premium.
It's gotta be huge, because I mean, there's a number of factors, not only is their own business, more sound, but you guys have eyes and ears to the ground longer, right? They're getting better. There's a longer relationship. And even if they're not looking right now, it's like you're gonna have that peripheral vision all the time, because you've got this client that even if it's a year out, it's like, oh, wait a minute. I think I have something that might be good. So yeah, it's just more exposure. I think to the right people.
You get a chance to really learn the market get to talk to potential bidders. The other thing that it does, we've estimated that between our team Then our clients team, there's about 1500 to 2000 hours of work that's required to get a business ready to go to market. So putting the story together, getting the diligence materials put together scrubbing the diligence materials, identifying the bidders figuring out who to reach out to all that. And in that second scenario, right, where somebody's just going to market, you're, you're getting that work done in a pretty compressed period of time two to three months. In the situation where somebody's doing that preparation, well in advance, you can spread that same 1500 to 2000 hours out over maybe a year or two years. And that just, it's a lot less distracting. And it's a lot easier to manage. And it's a lot smoother process than trying to cram all that work in because, Ken, a lot of times what can happen is, if you think about when the business owner is going to get distracted, it's, you know, at the start of that process, and as they're going through getting all these materials ready? Well, in most businesses, if the leader is distracted, you don't necessarily see the impact right away. But in about three or four months, you're likely to see the business degradation. And that usually is happening right? When you're in due diligence with the buyer, there's nothing that will kill or degrade the value of a deal faster than declining performance of the business during due diligence. And so there's just a lot of, yeah, there's just a lot of benefits to starting early, being thoughtful, addressing those risks that show up, really honing your growth plan, I think most entrepreneurs have good intuition around where growth is going to come from. But if you were asked them to prove to a professional investor, that their growth plan is credible, most of them would have a really, really hard time doing that. And that's, you know, part of our job is to translate what they know, intuitively into something that's going to be believable to the investment community.
Yeah, the other thing that I've noticed is we were pretty lenient with forward looking projections, if there was proof that it could sustain, like, kind of, to your point it so in other words, if someone said, we've got this great idea around adding XYZ service to our business, we'll be like, that sounds really good. What have you done in that so far? You know, oh, well, nothing. But we know it's there. You know, they'll always be like, we know it's there. You know, we know our customer base, once that we've surveyed X amount of people, and it's like, you have it, there's no revenue, right. And if there was even six months of revenue, we could get a run rate out of that and go Well, yeah, we can see it, you know, you did 80,000 In the first month, and 100 grand in the second month and 110 in the third month. And we can now start to analyze that. And right now, we might be able to call that a $1.5 million a year stream of revenue. But you don't get to do that, if you just walk in to sell your business you I just went out, you don't you don't get to talk about all your great ideas, no happened yet, you know?
Well, to the point that you just made, a lot of entrepreneurs, they do, they have a lot of really, really good ideas. And also to your point, if they haven't demonstrated that they can be successful executing on those ideas, they're gonna get zero credit for it, right? Versus, hey, if they've had the chance to go start executing on those and demonstrated that market exists and demonstrate that they can be successful selling that product or service, it much easier to your point of giving them credit for that. And that's, again, what we see over and over and over again, is that for a lot of these entrepreneurs, again, if they had to present their growth plan on their own, they just I think they would lose a lot of value with a buyer because it's just not believable, yet. They haven't gone through the steps of shoring up all the de of different key assumptions. And that's, you know, that's a lot of work that we do with those clients ahead of time is how do we make sure that, hey, when when you're presenting this growth plan, people are going to believe it, and it's going to be easy for them to believe it right? They're not having to make any leaps of logic.
Do you guys focus on particular industries? Or do you just focus on the candidate or not candidates, but the clients themselves that come to you? Or do you guys look at so yes, there's a lot of consolidation in the plumbing services world, like let's go after plumbers or whatever. And I mean, like, what, how do you guys approach the market?
I mean, almost all of our business comes to go through referrals. And being in Colorado, we ended up with a fair amount of consumer products, food and beverage, hard goods. We also ended up with a fair amount of SAS business businesses to represent and then we do business all around the country. We have a we've closed probably 40% of our deals outside of Colorado. And so your standard mid market manufacturing distribution services, those businesses we do you know for us, to be honest, it's a lot more about the entrepreneur. and whether we're going to enjoy working with them than it is about the business, we've certainly left some big deals on the table because we thought the entrepreneur would be really difficult to work with and not much fun. And we've taken some smaller deals where we just thought I really liked that person. And we'd love to spend the next year working with them. Once it's served us really well.
I'm sorry, what's my 10 to 15? million? Yeah, okay. Yeah.
So on the small end, probably 10 to 15 million. We closed the deal a little while ago for 475 million, which is a pretty good book, and and our average deal size is about 75 million.
Are you guys dealing mostly with private equity? Are you dealing sometimes with the publicly traded corporations? Or what does that look like for
our buyers, it's about 5050, between what we call financial buyers or private equity firms and strategic buyers, that would be somebody in or around the actual industry, that's an operating company that's buying the business. And so that ratio has started to equalize more recently, as interest rates have gone up, because private equity firms can't bid as aggressively with lower amounts of leverage and higher interest rates. And so whereas before me two years ago, I would say private equity firms, we're winning three quarters of the deals that we took to market that start to again, get to 5050. Again,
just because they're tightening on the money they can put out there for sure. Yeah, for sure. Is there a difference in well, I guess the market just dictates that then like you're saying, I mean, right now private equity is having to back off when private equity was stronger, are the multiples with a multiples higher at that time are they generally stayed similar?
What we have seen with this environment, as well as when the last recession, the financial crisis, as well as in the.com. Era, there's a generally a flight to quality. So if your business has a high quality business, right, great management team predictable cash flows, your valuation is not likely to have taken much of a hit at all. If your business is less than stellar, you're likely to take a hit. And we've certainly seen that in this market, I would say valuations for maybe less attractive businesses have come down 20 or 30%. valuations for high quality business have actually stayed pretty robust.
That's funny that you said I feel like that's playing out in the stock market. I mean, if you look at it, right, for sure. If you've got a hole if you got a leaky bucket, like nobody's forgiving about that right now. You know, and, and just the appearance of seeming like you've got your expenses under control, look at Facebook, for example, that I think bottomed at 90 bucks a share. And they're probably around 230 Now or something while laying people off, you know, which is kind of a weird mixed message. But I think it was just a street going okay, well, maybe there's value here again, right. And yeah, nobody wants to be holding the bag on unprofitable companies right now. But it's been one of the strangest I mean, you probably see it big time from your chair. It's one of the strangest economic times that I've ever seen the whole COVID to post COVID. Because I'm no expert to call something a recession or not a recession. They're certainly in my mind, parts of the economy that you can't say are not in a recession, right, like they've had to retract. Sure, right. But then there's other parts that have grown through. It's such a industry specific. When you look at things like consumer goods, when you look at things like hospitality, when you look at things like business services, these businesses are thriving. And when you look at Tech and, and some other industries, and obviously they are in full blown recession, and have been for I think well over 12 months now, are you seeing that from from where you're at?
Absolutely. There's pockets of the economy that are doing really well. I think COVID been introduced a lot of variables that I don't think anybody could have accounted for. And the businesses that had done exceedingly well during COVID, I think are starting to see that that growth slowed down or reverse. And likewise, the businesses that got hammered during COVID seem to be picking up much better. It wasn't that long ago, when any business that we took to market, you had to have your COVID story figured out you had to tell the story of why if the business did poorly, why the business performance was going to improve after COVID Or if the business did exceedingly well. Is that performance gonna continue or was that spike?
Do you deserve the devaluation? I noticed something during COVID And just like a small level, but I thought it was really cool. And I think I talked about it like, like a year ago on here. But you know, we moved to New York. We're the only idiots that moved into New York City at the beginning of June of 2020. We moved here. And you know, of course things were it was a ghost town, it was really weird. And then New York City like a lot of other cities started saying, hey, restaurants you can have outdoor dining and and so in New York, they just took full advantage and started, like building patios on the sidewalk and taken up half the street. And it really kind of cool though it had a vibe, like when you're in Europe or something like that. But for some people and the government sanction this, right, like not only did they say it was okay, but they also of course, there were PPE loans and different grants you could get and all kinds of things. So I remember being here just a short period of time, and it was just getting to the point where like you could eat but only outside at a restaurant, but we just, you remember that timeframe where it was like, I don't care about it, we gotta go do something like we gotta get out of the house. So we're in the East Village of New York, and walking around and, and it's kind of cool in a way. It's kind of quaint, these these things are opening up and people are starting to get out and everyone's got face masks on, but they're waving us up and you'd see like shuttered store, shuttered store, and then a guy with like a four table restaurant that now has a 25 table restaurant, and he's not paying rent on the other 21 tables, you know what I mean? And I, right, right. To me, it was just a reminder, I remember walking there that night with my wife, because we were going through some stuff with our business. And it was just a reminder to me that like, you know, there's an old Tony at Tony Robbins saying where he says, you know, it's never a lack of resources. It's a lack of resourcefulness. And I was just thinking that as you're going around here, and I'm like, there are guys and girls making a mint off of this. And I don't mean it in a sleazy way. I mean, in a, Hey, these are the cards, I'm dealt with, what can I do, right? And I thought it was just such a good lesson, because I was thinking about, there were certain people that hunger, I'm close thing. Before the rules of the new game were even announced, you know what I mean? They were just like, I'm out. I'm out. Yeah, I can't compete. And then right next to him guys got 25 tables, and he's taken your customers, you know, it's crazy.
No, I think the I mean, we saw just countless examples of what I would call true entrepreneurship, where, hey, you got a bad deal, you got a bad hand, you deal with it, and you go figure out something new and you go to innovate, we had one of our clients, that was in the, basically, their business was making chemicals to help clean meat processing plants, they I don't know if you remember back in the day, but you couldn't get hand sanitizer. And it was couldn't find it anywhere. And so they just started making these gallon gallon buckets of of jars of, of hand sanitizer and selling them. And we had another client that was the they had done a lot of importing, and were able to get their hands on about 3 million masks. I mean, it was just everywhere we turned, we saw examples of what you were just describing can about how these entrepreneurs, they figured out a way. Yeah, and it's interesting of all the clients that we had, we didn't have anybody go out of business. You know, I do think the loan program and just their resilience and perseverance gotten through that. And some of those businesses just did exceedingly well. One of our clients that sold right after COVID was in the real estate training. So for real estate agents training and development and continuing education company called the C E shop. And they just crushed it during COVID, as you might expect, because it was all online training, and the they ended up selling and did phenomenally well. So it's you know, obviously no one can predict the future. I think what COVID taught us was, number one, just how fragile life can be. And fragile business can be, you know, things can turn on a dime. But that importance of what you just described of being resourceful and I understanding and identifying, hey, we've got to pivot, we've got to do something different here. So that we can keep people employed and keep our business going. When during COVID. I had a project I was interviewing, I wanted to interview 100 Plus business owners that we had exited. I got through about 30 before business started to pick back up and I ran out of time. But what was interesting when I go back through those notes, there were two or three really common themes across all those entrepreneurs. One of them was, you know, I just couldn't fail. I couldn't fail, whether they had friends and family money or whether they had all of their money sometimes both tied up in this business that just wasn't an option that they weren't going to be successful. And the second one was just how perseverant they were in the face of long odds are big problems. They figured it out. And and there were a lot of dark days for a lot of those entrepreneurs mean several near death experiences for their company, but they grounded way through it. And I like I said, I just give them such credit. And, again, I don't know that a lot of people get a chance to see that right? They don't get a chance to see just how, how hard it is to be an entrepreneur at times.
Yeah, I mean, everything's, everything's out there everything to lose, like you said, I mean, sometimes they're working 20 years to all of a sudden be an overnight success, right? What people don't see is, is that someone putting payroll on a credit card to get through for right timeframe, or whatever it might be? What do you see, because I feel like you have such a unique perspective, not only because your background prior to what you're doing, but in what you're doing, you get to see so many different industries, and you're seeing private equity, and you're, you know, paying attention to the markets. Do you have not trying to put you to on the spot? But I mean, I guess just what are your thoughts about this economy? Like, where does it go next? In your opinion? Do you think we're approaching out of the woods? Or do you think there's more pain to come?
I suspect there's probably some more pain to come, particularly any anything kind of around commercial real estate, my guess is that there are there still forms few more shoes to drop there. But it has been, and I think this has been predicted by a lot of the economists fairly mild for most businesses, the folks that we deal with, we're not really hearing the same type of concern or revenue compression that we've seen in other recessions. And so, hey, hopefully, we kind of get our way through this. I'm a little concerned about the US consumer. Because, you know, we, the government, I think rightly, you know, subsidized a lot of spending. And obviously, the economy needed at that point, and businesses needed at that point, that cash savings is now working its way down, you're starting to see more credit card defaults. And so in the United States, and elsewhere, the US consumer is what drives the economy. And if that starts to get more stressed, then I think we could be in for some more challenges. Although I just did see a stat this morning, we subscribed to a lot of research. And they had done, they have a way that they can measure the level of stress on the consumer, and that stress was coming down just in terms of inflation. And so you know, hopefully, that's a that helps the Fed get more comfortable with holding rates, and hopefully at decreasing them. At some point, I think I had read that the consensus expectation was that they probably will start to reduce rates in six to nine months, which, you know, hopefully that allows us to, you know, have what the proverbial soft landing, but it's, I mean, again, and maybe this is part of the lessons of COVID. You know, I just don't see a lot of businesses rolling over, I see him all just Yep, here's whatever the environment we're in. And this is the environment that we're in, and we're going to go execute, and we're going to make this work.
Yeah, I think I'm with you on that. I think the ones that sometimes we're gonna fail have failed, right? The guy that wanted to hang the sign on the pizza shop, hung it already, right, so to speak. And, exactly, and I think I'm with you, I do feel like there's still pent up demand when it comes to investing. In a way I think there's a lot of money on the sidelines. Because I know, I'm not the only one that feels that way. Like I have a toe in the markets, but certainly not the whole foot. And part of that is, you know, very industry specific or seeing battered regional banks or something and going okay, maybe that's a good area to be in or, you know, tech, when it completely got slaughtered might be a good, good entry point. So I'm kind of picking my spots, but I guess, you know, the markets always try to react in advance to what they think is coming. So my feel, I want to say the poor fed because everybody seems to hate the Fed, such, you know, it's such a tight, they gotta walk. I mean, just in the little tiniest thing that Jerome Powell could say, can affect everything, right. So it's like, you could say something like, Okay, well, we're gonna pause interest rates. And I don't see them going up for the foreseeable future. And maybe they come down at the end of the year, boom, stock market goes up. 800 points, right. But if he says something like, we're gonna stop now, but there might be more tightening by the end of the summer. It's like you send everything back out down into a spiral. So it's crazy. But like, Yeah, I do feel like if we can kind of get out where we are. It's almost like, as an economy, we kind of dodged a pretty close bullet there. I mean, and listen, if someone's in tech, and they're sitting at home laid off, I'm not saying that didn't hurt, but I'm just saying holistically has it impacted as deeply as it could have.
I would agree with that. And I think the issues at the tech companies that had to do the layoffs probably had less to do with the economy that over hiring. Totally, it was crazy in terms of how much hiring they were doing. And I think they all figured out hey, we definitely overstaffed. But yeah, look, I think You know, the Feds business, it's not just the interest rate management. It's the expectations management that they have to do. And so to your point, people are dissecting pals language, and he's had a tough job to figure out, how do I start to get this inflation, right? More under control without completely tore previewing the economy. And so far, I think they've done a reasonably good job it's going to be I do think that they should let some time elapse to let these rates kind of mature in terms of their impact on the economy. And my guess is that we'll see inflation come down. And we'll, I don't know that we'll get down to 2%. Again, but
I agree. I mean, everything is such a lagging indicator, when it comes to you know, inflation itself is a lagging indicator, right? I mean, it's what we're seeing now is not in to me, we might already be at 3% inflation, but we don't know it because that will come out until like the July or August or September report, you know, so and by that if you Institute another rate hike or two, maybe you really torpedo the economy by the fall. And I think that's what people are worried about. At the same time. If they don't do it enough, you know, you're gonna rise it back up to seven or 8%. Pretty quick, it's going to whipsaw very quickly. But yeah, I love talking with people like you with a background and, and again, you've got this seat where you're, you're able to see multiple industries at the same time, you know, and we have a little bit of that our main businesses, talent acquisition, so I knew people during post COVID that were, you know, $150,000 a year people getting 250,000, or your offers, and are now being told to report to an office two states away from where you live, because they're saying that instead of we're going to lay you off, right? Return to Work really means like, we're gonna, we're gonna go through some natural attrition. You know, I mean, to me, that's the big return to work statement. Usually, you know,
yeah, it's interesting. I was just at lunch with a guy who's very active here in Denver in real estate, and we were debating work from home and what's going to happen? And how's that going to relate to the office market here in Colorado, at least? And you are seeing the big tech companies calling people back, right? Hey, we want you to be in the office at least three days or four days. And my guess is, as they do that, more and more companies will follow. And I do think for a lot of downtown's made Denver certainly this way. I mean, they got decimated when people were working from home, all those businesses, retail, restaurants, everything else. And so having people come back to work, I think it'll be very helpful for those downtown's hopefully recover a little bit. And I know for at least for our business, we've got a really, really tight culture that thrives on that collaboration and being together. And so we've been very fortunate that most people want to come back and participate. And I've got kids that are in New York and California that are working. And my advice to them is always be in the office, because that's where you're going to learn. That's where you're going to get the the informal conversations and the feedback and the interesting projects and everything else. I mean, I can't imagine trying to develop as a young person today. You know, without having that mentorship that's readily available, you're not going to get that on Zoom.
No, you're not gonna get mentored from your living room, at least not to the same degree and also proximity as power to your point, you know, the ability to see the look on someone's face and or body language and how they're carrying themselves and everything else is a big thing. So I'm a big fan actually, of, of being together more, but at the same time, I do think if COVID proved nothing else, it was that people, most people not all most can also be productive sometimes at home, right? So I think there's this ability to, to me have the both the best of both worlds in many cases where it's like, okay, hey, we're gonna have an office, but also like, Hey, you got a kids baseball game at Forscher on a Friday and you want to avoid traffic, just go work the afternoon at your home office? Like who cares? You know, and, and I think where that was taboo with a lot of companies before, it doesn't need to be anymore. You know,
I totally agree. I think it's allowed us. I mean, certainly our firm, right, just to be a lot more flexible. And I've always been, I learned this from my dad, which is, hey, it doesn't matter me what hours you work, I just want to make sure that you get done what you need to get done. Right. And we've always been pretty flexible. And this has allowed us to be flexible as well. I just think that that especially if you're leading organization, and you want to make sure that you are in a building and enhancing culture, very, very difficult to do that right to folks are together having that interaction and that idea generation and exchange and learning and everything else.
Yeah, trust me because my whole team is remote and it's mainly because I got people overseas, and it's a challenge that we have to do If they were here, I would definitely get everybody together. But I just took a trip to South Africa just because I've got to be in a room with people sometimes, you know, and I've got certain team members down there. So, hey, I really liked it. So good to meet you, Chris, and impressive background. And I'm glad we got to spend a few minutes because I wanted to pick your brain on the economy and kind of what's going on there. So thanks so much for that. I know, it was a little bit off topic, but I loved it. Thanks again. And we're gonna put all the ways to reach you in the show notes. And if you'd like to add that we didn't get to talk about today.
No, really. Thanks for having me on Ken. And thanks for doing what you're doing and, and, and to help and to educate all those entrepreneurs out there. We all need them to be successful.
Absolutely, sir. Thank you so much, Chris. Take care, you bet. Take care.
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