So I'm delighted to welcome today to the show Chris. Chris is the co founder of class six partners, and their financial advisors for founders. They've advised over two and a half billion dollars worth of deals, but the single biggest being half a billion. Welcome, Chris.
Thanks so much, James. Appreciate it.
So you built a very, very big and successful business with class six. But we're going back to a moment in my coaching time machine when things weren't quite so rosy when it when are we going back to?
Let's go back to 2007. That's when my partner David Tolson, and I took on a client, we probably shouldn't have,
wow, this is going to be an interesting, interesting moment to go back to. Okay, so you set the scene for listeners, we're back to 2007. How important was this client to at this time,
just to put in a little context, we had started our business in 2005. We were, we started it as an investment bank. So we were helping trying to help business owners, at some point exit their business. And as you might expect, we hadn't done any deals, I had done a lot of transactions before, but never as an advisor. And so it took a long time for us to really start to build the business and to get business owners willing to trust us and put their faith in us. And a guy was introduced to us by our attorney who he wasn't running a business, he was trying to raise a real estate fund, and asked if we could help him raise money for the Real Estate Fund, which not having a lot of clients at the time, we, we said, you know, here's, we've never done this before, we think the process is pretty similar to the process that we use for companies, and we think we can help you. And so his name was Jay, Jay, paid us a retainer. And we got to work and really kind of failed miserably. We, I think we had maybe one or two investors, and those could have been family members. So you know, we we worked on this for probably six months, and, again, didn't deliver very good results. So we went I went to David and I said, I look where we've got 25,000 in the in the bank, we need to refund 40,000 of his retainer, because we just we haven't delivered our end of the bargain. And without hesitating, David said, Yep, he said, Um, here's my check for 7500, I wrote my check for 7500. And we refunded the money. So it was a, you know, somewhat humiliating day at one level, but also, it was great confirmation number one that I had picked the right business partner, and I think it really set the stage for us as a firm, which is, you're just never gonna go wrong, doing the right thing, even though it may cost you money in the short term. And, you know, we've had lots and lots of opportunity, when you're in the transaction business, lots of things come up and misunderstandings happened. And, you know, we've I think, from that experience, you know, we learned that, you know, take a long view of relationships and take a long view of doing the right thing. And he usually ends up working out pretty well. For for a period of time there. Jay was a reference for us, you know, basically telling people what good guys we were. So it definitely helped us although it hurt in the in the short term.
Yes, I mean, it's a leading up to that moment, then when you you've had this realization that it wasn't quite working and the first, first big deal, you've been going for a couple of years, you're still trying to build reputation. Looking back on it, it makes it go oh, well, it was it was obviously the right thing to do because your business. But how did that feel and kind of lead up to that that moment, just kind of realization that it wasn't, it wasn't working. And this might be what needed to happen?
Well, I don't know how many phone calls we had made to different family offices and high net worth investors, but you know, hundreds. And when you're just not having success, right, when we're not generating the level of interest or people that were willing to write checks for the fund. After two or three months, four months of doing that, you start to figure out, hey, we're either not talking to the right people, or we are just not very good at convincing them about the merits of the fund. The fund was a really good fund and it did really well and perform very well. So it was it was a it was a great opportunity for investors. But we, again, just we we were not very effective at being able to market it.
Going into that meeting with your business partner. Did you have any inclination as to how he might respond?
You know, I had known David for at that point, probably three years. And so I had, I had a pretty good sense for how he was going to respond. And he responded exactly the way that I expected, which is a, we're going to do the right thing. And even though it hurts, and, you know, David always had a phrase of, you know, if you take care of your clients, they're going to take care of you. But yeah, it was significant confirmation for me that I was definitely partnering with the right guy,
once you think you would have done if the response have been different. So let's say he got into that room and the response been, I'm not sure. Or, or no, we don't have the money in the bank. But we'll either give him part of it back, or we just can't afford to do this.
I think I mean, in terms from my perspective, I, and again, I would have been very surprised if that had happened. But if that had happened, or if it were a different person, and that was the reaction, I think I probably would have just said, Hey, I'll loan the extra 7500, to the business and the business can pay me back down the road. But this is something we need to do. And fortunately, I didn't have to make that decision. And quite frankly, I've never had to make that decision. It's always been, you know, you, we get to watch a lot of business partnerships in our work. And I can say, certainly without hesitation, you know, the partnership that David and I've had over the last 20 years has been as good or better than any of the ones that I've ever witnessed. And we've seen a lot.
What do you think makes that so strong so quickly, like shared values, is that strong part of this because I work as a coach for quite a few co founder pairings. And as often communication needs need some work on to really bring it to life, what do you think makes you guys such a strong
part of it is values alignment, we were always in lockstep. I also think it's kind of like in a marriage, we both have a pretty good sense of humor. And so, you know, even when things are not going well, which, you know, we, it's a business, so you always have those periods, you know, we were able to, you know, laugh about it laugh at ourselves. I think, you know, the three core values in our firm are hustle, humility, and relationships. And so, in particular, that the humility and the relationships piece, I think, played a big piece in our ability to not just get along, but you know, we just we have, it has been such a great relationship in the sense that when things aren't going well, for one of us, you know, the other one's there to, you know, to provide support to provide, you know, encouragement, but also just to be able to laugh about what's going on. You know, I think we, even when we had significant challenges, we I think we all both recognize, you know, let's, let's put this all in perspective. And and so I think there's, I think there was a lot, just the fact that, you know, we never took ourselves or the business too seriously. And, and we always were we, you know, we were in it, because this is what we liked doing it, we wanted to have fun with it. And, you know, we both said, and fortunately, this has not turned out to be the case, hey, when this stops being fun, we're gonna stop doing it. But we're still having a lot of fun. And it's that your observation about communication is really, really important. And, you know, it's interesting. I would say we we've definitely had disagreements wide or different perspectives. But we've never really had an argument in the sense of, hey, one of us walking away feeling like, boy, he just doesn't hear me or I feel like we've got to do something different. And it's, like I said, Ben, it's a huge asset, when you have a business partner who, because we do look at things differently. And we do. I think we view the world differently, we solve problems differently, we manage deals differently. And I think that's been a huge asset to both the two of us, as well as to our firm because they get to see different examples of what can work. And, you know, we've just from our temperament to our skill sets to the way we approach problems. I think we complement each other really well. And we recognize and value that. I think sometimes, you see partners get into a problem where somebody doesn't doesn't value what the other partner brings. So that's a big problem. Because that's always going to get manifested in a lack of respect or lack of regard. And we've just, we've never had that it's been like I said, we're, I count myself, and I hope David does as well. Just really, really lucky.
We'll get him on next week and find out. So, but it was It wasn't like this from the very beginning. It's interesting that you said that you start the business together, but you didn't know each other before you started it. Is that Is that right?
Yeah, we I was in my prior life, I was running a communications company. And I was a chair of an industry organization in DC. And David's aunt was the executive director of that organization and said, Hey, you really need to meet my nephew, he lives literally two miles from you, and Colorado. At the time, we were really busy trying to turn this communications company around. So I, I said, that's great, Mary, maybe later. And then once we sold the company, she said, Hey, you really need to meet David. And so we met. And we just we really hit it off. And we both share a similarly twisted sense of humor, and, and we had fun working together. And when you have all of that together, it's probably rare. And it's also just a lot of fun.
Did you identify that because it felt I mean, you're going into a relationship with someone that you've only just met, you're going into a period of like, three years, by the sound of things, when things took off the ground, you hit your first like, you hit your first sort of big success point. turned out not not to be that way. And yet, you still like you always you hit these, these hard as hard beginning, with no light sort of relationship kept in the bank, you hadn't known each other for three years, you haven't been friends. And yet you stay together. So I think I'd be curious, like, what was it that gave you that sense of strength? Almost from the beginning? Do you think?
It's a great question. And I, as I reflect on it, I think a lot of it had to do with, you know, we're both willing to work hard. Again, when things were challenging. You know, neither one of us took a day off or backed away, we were always there to support one another. And, and I do think, you know, when you are trying to grow a business, and particularly a services business like this, where the revenue streams are elongated significantly, you're right, there's a lot of patience that's required. And I think, and I always tell our clients this as well, you know, if you've been in business a long time, you generally are going to have a pretty good sense of people, you're going to have a pretty good gut instinct about good person, bad person aligned or not aligned. And I just think that through all the work that we had done together, I think both of us just felt, hey, we were really, really well aligned. And, and I do think when you have those challenges, and then you get to see how people react to those challenges, you know, some people can react really, really negatively, or point fingers or blame or, and we just never had that it was always Yep, we're in this together. And we're going to we're going to fight our way through this. And, hey, here's some other ideas about how we might be able to, to attack this. And, and I think that's been true for the, you know, the last 20 years is when we've had an issue when it when it's clearly been my fault. I've made a poor decision. You know, David's never come and said, Oh, my God, it was just a horrible decision. Why did you do that? It was, hey, here's where we are. And we've made this decision together. And here's how we're going to go, here's how we're going to go try to resolve it. You know, there's a phrase, it's amazing how much can get done, if no one cares, who gets the credit. I also think it's amazing how much can get done when when no one cares to, you know, to cast blame? And like I said, I've made some horrible decisions in the course of our business and to his credit, right? He's never he's never called me to the carpet or, at least in my face call me stupid, I'm sure behind my back maybe. But
I think was really nice, because it sounds like at each at each crisis moment, or each sort of moment difficulty. You have positively surprised each other.
Oh, for sure. For sure. i It's funny, I tell my kids. They're older now and starting to date seriously. And all that said, Hey, go on a backpacking trip with your girlfriend or boyfriend. Because you know, when you backpack. There are lots of unexpected turns and twists and things that you didn't plan for and a lot of stuff doesn't go right. And that'll give you a really, really good window into Hey, how are you going to be together when things aren't going well, either with the marriage itself or something externally? You're going to get a sense for, Hey, is that person are they there to support you? And are they there to lift you up and be your biggest fan? Or are they blaming pointing fingers complaining? And and I think, you know, start Getting a business is no different. And like I said, with David, it's been, you know, just hey, when something needs to get done, we're both there to, to pull the ore, which has been awesome.
And do you think it's purely been about these positive surprises? It's like building trust in terms of each time it goes wrong going out. Now this this guy's really got my back? Or has that do you think has been stuff you've been actively doing to build the relationship as? Well?
We? That's a great question. I mean, we, we did a lot of stuff socially together, we're both big mountain bikers. Someday I can tell you the story about him teaching me to mountain bike. He's not a great teacher, by the way. I have the scars to prove it. But I do think it was just this, Hey, we both had this vision for what we wanted the business to be, we had this vision for who we want it to be with our clients. And, and we built that kind of shared value system over time. We are I remember, we were doing this deal down in New Mexico, middle of nowhere. And so we we had to fly into I think it was El Paso and then drive about three hours. And that's when we really hashed out kind of our mission. You know, we were asking ourselves, Hey, why are we doing this? What what is attractive about this, and, you know, one level working on deals is, it's fun, you know, you're working on transaction and get the transaction closers. You know, there's a really nice high that you get when you when you do that. But what we concluded was, we were really hear, because we just loved entrepreneurs, that was our why we loved entrepreneurs, and what they do for our communities, and what they mean to our economy. And they're just fun people to hang out with. And but it was that that road trip, when we kind of came up with that mission and said, Yeah, this is why we're doing what we're doing. And that's been true to this day. And if you talk to our team, you know, we're always telling good y stories, hey, here's what this client of ours just did with the money that we helped them, you know, harvest out of their business, and we calculate it. So stat we're really, really proud of, we calculated that, across our entire client base, they've donated over $250 million, which is back into the community, which is really, that's just incredible.
That's amazing. And also, I really liked that work. It's actually quite similar to my wife, like in terms of Yeah, I do agree like entrepreneurs, they give out so much. And they get so little support, like, as a con, it is awesome. Being a founder, but you're constantly giving her energy, and there are not many people that give energy back to founders.
I, I think people number one, I think it's very difficult to appreciate the, you know, the 20 year overnight success that entrepreneurs or founders go through the, when you're the last person to get paid, when you're writing checks into the business, when you've got to deal with the stress of feeding, you know, 3050 100 200 families. Most people see the end result, hey, when somebody has been successful, a lot of people don't see when a founder hasn't been successful. And obviously, a lot of them aren't. And so their willingness to take risks, their willingness to put literally everything on the line. You know, it's, you know, I live in Colorado, and, you know, probably 60, or 70% of our economy is driven by those entrepreneurs. And if they're not willing to do that, then you know, we don't, we don't have an economy. So it's, to your point, I think it's it's important for us as a community and as a society to support them in any way we can. And so we feel in our small way, we're hopefully helping them.
And honestly, also, it's the sometimes people see the sort of financials success, but don't see the personal cost. I know definitely a trend to come like we're so we're so brainwashed thing that you had to like, have to throw everything at it. And like, there's a lot of family cost, personnel costs, health costs, mental health costs, because it doesn't always necessarily need to come with it. It's not it's not necessary to have that to have the financial success.
I totally agree with that. I think the you know, when you the very best founders, I think, do they, they're they're much more balanced. And they're, I think as a result are much more willing to hire a team and build the business the right way. But we've we've absolutely seen the opposite where the founders, basically trying to do everything. And, you know, it'll kill them over time, because it's just that's a lot of stress to carry and a lot of work to carry. And if your life is that out of balance, so I think that's right. And I think the what's fascinating, at least for the clients that we've chosen to work with, what's fascinating is just how generous they are. So they've worked all these years to build this business. We have one client, Mike Hester, who he sold his business and did very well. And then he and his wife gifi, sat down one day, and basically wrote checks to almost every employee in their business that had been with them for longer than a year, to thank them for all the work that they had done to, to help support the business over those years. And we've seen this, that movie or that story over and over and over again, of how I think the best entrepreneurs recognize that it's, it wasn't just them. And they're, they're willing to share and willing to give back, which is, it's just, it's back to your why. And when you have stories like that, that you can tell, it's pretty easy to get people motivated to help them.
Did you expect that to be the case, when you very first started.
In my prior life, I had acquired 27 companies doing a roll up. And so I had, I had seen some of that, I wouldn't say all 27 of those founders was that generous, but a lot of them were. And, and it's, I do think that you tend to attract people that do share similar values. And so I know as a firm, you know, that we value that we value. You know, when again, one of our core values is humility, and part of humility is understanding that, hey, you're you're job as a leader is not for all those folks to serve you. Your job as a leader is to serve all those folks. You have a heavy responsibility as a leader to make sure you take care of the team, and to make the very best decisions you can on their behalf. And so I think I had seen it. And again, maybe it's just because of the clients that we select, but we I just see it in almost every deal. Just how generous and humble these founders are, when you know, again, after they've cashed a big check, and you know, supposedly one, you know, they're, they're just so willing to give back, which is it's just, it's great to see.
I agree that for it push, we're like, like attracts like, like, if you're if your values for values are humility, hustle and relationship, it is likely that Mr is going to attract a certain type of founder.
I think it's absolutely true. And I think we've learned over time, the types of questions to ask to make sure right that, hey, this is going to be a good fit. There's nothing worse than entering into a business relationship where you don't have shared values, because especially in the transaction, business, it's very stressful. There's a lot of work that goes into it. And that work is just so much easier. And it's so much less stressful, if you've got great alignment with your clients. We love it when we hear, hey, somebody's had an outside adviser for a long period of time, you know, that indicates to us that they value that collaboration, that they value that relationship we love when the entrepreneur, you know, one of their very first questions to us is, hey, how do I take care of my team in all of this? And what's the right strategy to take care of them, whether financially or otherwise? And so from that perspective, it's a, we probably do self select clients. I know we've turned away clients where we felt this isn't going to be a great fit. And so, you know, that's one of the reasons why again, we're we've got to have this love affair with all of our clients, which is awesome.
Yeah, how you feel? reasonableness on track, like is a really underrated trait, like, company before itself. It's like, the one thing that we're attracted to, to the person that I bought was actually during the negotiation. It was a really reasonable negotiation. I found that play out in many discussions with like partners or things it's very underrated. But if you can, if you have those discussions and people are reasonable, and they let don't hold to like, dogmatic points of view, and they're willing to move, life is just so much he's, you've you've seen,
yeah, it I think that and I think there's two pieces to Right, I think there's we've definitely had clients that I would not put quote in the reasonable category, meaning they were so committed to what they were trying to accomplish that nothing was going to get in their way. And those are definitely harder transactions to do just because, hey, they're just they're going to be unyielding. I would say the transactions that are easier, right, as somebody who's much more practical and understands the other are, it's like any disagreement, there are two sides, right? And the truth is probably somewhere in the middle. And that's definitely true in the transaction game as well, in terms of, you know, kind of, what is the fair position here? And it's likely something in between?
When you're buying and selling a business, like what what are you actually buying and selling? It's not like you're selling as a can of Coke, it can move?
Yep, yeah, it's, no, the best thing that we can do is to try to make what is a really, really inefficient market, you know, the private capital markets more efficient for our clients? Hey, how do we find those folks that are going to share the same enthusiasm and outlook for your for your business as you do. And if you do that, they're likely going to be the highest bidder because they see the same things. A lot of times, you know, we'll talk to business owners and they'll say, Well, I don't necessarily need the highest bid, I want the best fit. What we've learned over time is actually, when you have a really, really good fit between buyer and seller, those valuations tend to be the highest. And it makes sense, because if you and I value the same things, I'm going to perceive less risk in your business, then if you and I had radically different value systems, or looked at the world differently. And so a lot of times you don't necessarily need to sacrifice, dollar value for fit, because a lot of times they go hand in hand,
is a really nice insight. Because it sounds like you have you have built your business, fundamentally around an amazing values alignment with your co founder, you're selecting clients based on value fit with the values that you've set up for each other. And then you help them select acquisition partners based on values fit. So it flows through incredibly nicely.
There's been a lot of study on happiness and life. And one of the most significant determinants of whether you're going to be happy in your life or not, is just the quality of the relationships that you have. And so what I've always told our team is, look, if we do a great job of picking people for our firm, where our values are going to be aligned, and we're going to really enjoy working with one another. And we're going to build quality relationships. And we pick clients where that same alignment and kind of relationship satisfaction exists, hey, we're going to fill a big chunk of our waking hours with great relationships. And hopefully, that leads to more satisfaction and happiness for all of us. And it's definitely been true. We do a big client event every year up in Beaver Creek, Colorado, where we invite all of our prior clients and all of our existing clients and it, it's our favorite weekend of the year. Because you get to go in here, you see all these people that you've built these great relationships with, and you get to introduce them to one another. And it's a you know, we call it the classics love fest. I mean, it's just a it's a it's just a really, really fun weekend of good feelings and good people and I accept hard to describe just how how much satisfaction we get out of that weekend.
I just think I could imagine it. I mean, I can like, give you a building everything around values. It field values, alignment, plus lots of positive outcomes. Yeah, yeah, exactly. You've got people, you've got people ready to mingle.
Yeah, lots of open bars too. So that helps.
With the power of values alignment, I think it's really come through saying like partner values like the client and even values alignment with the purchases. Having taken like this, look back at this moment and talked about your co founder so positively. Is there anything that's come up for you today?
It's a great, it's a great question. I think probably the biggest thing for me and is just how lucky I've been lucky to make that connection with David lucky that our values were in close alignment. Lucky that At, we've been able to attract the type of talent we have to our firm that shares those same values, lucky that we've been able to attract the clients that we have. And so hey, do I do I think we do a good job at what we do? I do, I think we're, I think we we have a lot of care for our clients and a lot of care and to make sure that they get what they deserve. But also, I think, like a lot of founders is recognize the role of fortuity. And, you know, if you kind of rewind through all of that, obviously, there are lots of things that could have gone a different direction. And, you know, we've, we've certainly made bad decisions. But you know, overall, it's, like I said, I count ourselves just incredibly, incredibly fortunate. So that's, today's been a good reminder of that, for me.
So nice. I think just, again, just reinforced message that if you want to build something great, it's going to take longer than you think but stick to it. And it will build, it'll build over time, if you try and chase success, you might get a bit of growth, but fall off that actually have you hold true to your values, especially when financially might be harder, harder than not, over time, you get rewards,
for sure, yeah, they I'm trying to remember where I read this, I'm gonna have to find this. But it talks about, you know, a tree in the forest that grows underneath its mother tree will grow much more slowly, it'll take more time for it to get the light that it needs than a tree that's sitting by itself, you know, out in the middle of a field, that tree will grow a lot faster, the tree that grows a lot faster, will actually be a lot weaker tree, because it hasn't had time to really kind of build that strength of wood will be softer, will be more susceptible to disease and pests versus the tree that grows in the forest. It grows much more slowly and obviously more deliberately. And I think that's true for a lot of companies as well. Where, to your point, being thoughtful being being disciplined about around your values and living accordance in accordance with those. Yeah, you're gonna sacrifice some opportunities to potentially speed forward. But I think ultimately you're going to have a much, much stronger business and you'll be happier with it
is a really nice takeaway builder around your values might take a bit longer, you'll enjoy the journey more, you'll be happier. And ultimately, there'll be a greater reward.
For sure, for sure.
Amazing, Chris, thank you so much for today. That was brilliant.
Well, thank you, James, for what you're doing for founders out there. As we talked about, it's it's really, really important that we give those folks as much support and love and care and advice as we can. And again, thanks for doing what you're doing for him.
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