Mastering Business Growth, M&A, and Financial Strategy

Creating something out of whole cloth, overcoming, you know, seemingly insurmountable obstacles, you know, that's what actually gets my blood flowing. I see some amazing opportunities, but I don't lead with, I could profit from that. I need to be the independent, transparent advisor. Anybody can solve the problem if the hammer's big enough. But what I really get excited about is when I see clever, elegant Solutions.

Welcome to The Deal Table. I'm Ryan Harper.

I'm Lane Carrick.

And on this episode, we spoke with John Terry of Churchill Terry. He's also a professor at SMU and just a profound entrepreneur.

Yeah, great guy, good friend. John covers a lot of bases for The Deal Table because he's invested in deals, he's run businesses, he's consulted business owners. So he, he covers a lot of territory.

A lot of lessons to be learned, especially as a business owner myself. I really appreciated him being here. I'm excited to share with you. Check it out.

You are on every side of a potential transaction. What's your favorite side? What's your favorite spot in the, in the M&A world?

That's a great question, Lane. I'm a little concerned that we essentially have launched into this and it sounds like that basically you've never been able to hold a job is what this boils down to.

You know, you're so talented, you have so many talents that you have to pick one.

So where do I land? It's a great question and I've thought a lot about it over the years, Lane. And certainly in my world as an educator, what I often see is that students, they want to be the money person. They want to be the investor, this kind of stuff. And there's a lot of appeal to that. I enjoy that part of it. But at the end of the day, I'm always going to come down on the entrepreneur side of the table. I just, you know, as we were talking before we got started, Ryan, creating something out of whole cloth, overcoming seemingly insurmountable obstacles, that's what actually gets my blood flowing is watching entrepreneurs do stuff. I mean, there's a phenomenon, one of my all-time favorite stories. Are we allowed to tell stories?

Absolutely.

We're just kind of figuring this. Colonel Harlan Sanders in Kentucky, and I had the privilege actually some years ago of actually meeting his business partner who was an attorney in Kentucky. Sanders failed at pretty much everything he did in his life. He was a railroad conductor at one point in time. I think he had a restaurant and all this kind of stuff. So, key takeaway, age has nothing to do with being an entrepreneur. Sanders, as the story has been told to me, got his first Social Security check when he was 62, and it pissed him off because he felt like the government was saying, Harlan, it's over. It's over. You tried. Here we are. And he took that and took his recipe and his pressure cooker and got in his red and white station wagon and started driving around to these diners in the afternoon between lunch and the dinner crowd and said, let me fry you some chicken, and if you like it, then you can pay me a nickel a piece or something.

Nickel per piece of chicken.

Per piece of chicken. And that's how he started that. And, you know, I could, I could take the entire podcast because from his partner I learned a lot more beyond the story. But, um, so yeah, that's, that's why I tend to just always, if I have to choose, Lane, you know, I'm always going to go with the entrepreneur side of the table.

Real quick, let's define entrepreneur because obviously you can go down the road of an entrepreneur just being, I'm a business owner, versus the route of entrepreneur means you're creating something. Because so many people will say, like in the single-family world, I'm an entrepreneur. It's like, are you? You're just taking somebody else's roadmap and, and, and just instituting that roadmap. Where do you land on the definition of entrepreneur?

So, that's a great question. And again, we're going to have to have multiple podcasts, right? Clearly. I tend to, in my mind, have this image of entrepreneurs that create some innovation, something clever, something they've created. What I don't want to do is take away from, you know, people that— I mean, like, is a franchisee an entrepreneur. Yes, there are, you know, but the ones that land in that bucket to me are the ones that just don't simply start with this little, it's like, I'm going to do this, I'm going to work with this. It's like, what can I do with this? How can I grow this? You know, that sort of thing. Somebody asked me one time, and I've always enjoyed repeating this, What's the difference between an entrepreneur and a manager? And you're in school, so I mean, you see— we were talking about this earlier about what you see from people who come from corporate America who want to be in corporate. And by the way, it's a wonderful life. Corporate warriors, corner office, that's absolutely phenomenal. They employ a whole lot of people. But the difference is managers look at the problem or opportunity through the lens of available resources. So it's, I have this factory, I have this many employees, I have the shift, I have these raw materials, therefore I can do X and I need to be most efficient with that. Entrepreneurs look at the opportunity with the confidence that I can get those resources. I'll figure it out. To maximize that opportunity. So they are unlimited by this constraint of, This is what I have to work with.

So it's a mindset.

It's a mindset, absolutely. Yeah, I think that, uh, that's about.

Two people doing the same thing but one has a different mindset. They can be— it's an entrepreneurial spirit.

Yeah, absolutely.

One of the things I've, I've, you know, have the mindset when it comes to corporate versus entrepreneur is, you know, I know I'm eating poo poo for now, and then the corporate guys, you know, they're going to make really good money. And, and, but at the same time they're going to have a ceiling. Now, that ceiling may be an amazing lifestyle, and my floor is really not good, but I don't have a ceiling. So I'm gambling on myself that I will be able to— if, if everything plays out in the, in the company that I'm building, in the processes and everything I'm going, potentially I could far surpass their ceiling. And could that be 6 months, 6 years, 60 years? I don't know. But to your point about, uh, you know, Colonel Sanders, you know, he started at 62 and all of a sudden, you know, I mean, the legacy he's laid for his family. Oh yeah, you know, so it's, it's, it's that world. Where do you see— because you're in academia but you're also in the real world— where do you see the differences and, and what can you learn from each other that you can apply to business?

So it's a great question. One of the things, and I may not have a very good answer for this because a big part of my— this is my 25th year teaching in the grad school at SMU, you know, and I'm very proud of that. There's, you know, over 2,000 former students that I see have gone on to various success and places and things like that. But You know, I think part of why I have— they continue to ask me to teach there is because what I teach is the real world. It is not academia, which is, by the way, a big push in academia is sort of the hands-on, real-world experience. You know, we don't want the students to graduate and it's like, oh, we can do a discounted cash flow. It's like, well, yes, but what do you do with that? How do you make a decision around that? So that's what we see, whether it's corporate America or anywhere else, that's what they want. That's something I've been doing for 25 years is I tell my students, it's like, look, I want you to understand it. I want you to be able to do the math. But the reality is I want you to be able to apply it. The application of this is really important to me that when they get out, that they can answer the questions about whether it's investment decisions, entrepreneurial choices, things like that.

And then going down the same theme of this versus that, entrepreneur versus corporate.

I can speak to my own experience with that. Early on in my career, I was very entrepreneurial. I certainly mowed lawns and sold things door to door when I was young. I mentioned earlier, I'm a lifelong musician. One of the things I learned over the years is, you know, back in the day before clubs had PAs, somebody had to own the PA system. And I learned whoever owned the PA system controls the band, you know, because the guitarist can leave, we can find another guitarist. But if the guy with the PA system leaves, the band's over. So I made it my point to save my pennies and to own the PA system so I had some control. Well, again, this is mindset lane.

Yeah.

You know, I'm sitting there, I'm 15 years old, and I'm going, you know, we practice with this, but I mean, we get a gig a month or something. And meanwhile, I've got all this equipment I've paid for sitting there. So I could make a case that I was one of the very first professional mobile DJs because I'm like, you know, if I hook up a couple of turntables to this 'Cause back then everybody brought their stereo for the house party, right? And I'm like, no, I can bring like a PA system. And so that was one of my very early entrepreneurial experiences. I was like, okay, I love doing this and I can make decent money kind of doing that. So fast forward, a couple of early stage companies, and I finally got to a point where it can be a tough road, as you mentioned. I was like, man, I'm tired of being the last guy to cash my paycheck. You know, I need some stability. I'm married. And so I joined corporate America, went and got my MBA from SMU. Great experience. I did that for about 9 years. And at the end of that, hung out a shingle and started Churchill Terry, which is now 30 years old at this point in time. And really, for me, it came down to I couldn't turn the ship, no matter what I did. I had a very successful career within the corporation and I enjoyed the people, I enjoyed the customers, I always enjoyed the clients, I enjoyed my peers, this kind of stuff, but nothing I did— I mean, this was a big public company. Nothing I did was going to really influence an outcome. And I miss that. I miss that from earlier in my career, you know, when I had that opportunity, Lane. And I think that's what— I'll share this with you. I believe that entrepreneurs start the business to get the job they couldn't find. I do. You know, all my career, I was like, you know, I'm hardworking, I'm loyal, and, you know, had some good opportunities along the way. And I kept looking for sort of that mentor leader opportunity and I never really found it. And ultimately at Churchill Terry was just like, well, John, I guess you're just going to have to do this yourself. And you know, this is 3 decades later and it's worked out really, really well. I enjoy it.

And you've become, from where I sit and the people I interact with that intersect with you, you've become the trusted problem solver for wealthy individuals, particularly those who own and operate businesses or maybe own and have someone operate the business. But typically, is it fair to say there's an operating business somewhere in the mix or?

Yes.

Okay.

Yes, there almost always is.

So you've had years of experience dealing with people who have created wealth, who, who have operating businesses. Um, you teach on the academic side, private equity, venture capital, um, and.

Um.

So, what have you observed as a problem solver? Where do you find you add the most value? What is the service that people really want from you where you can move the needle in terms of improving their financial position or life?

Lane, as I think about that, and I'm sort of internally smiling because we're kind of back to the, you know, you've never held a job, John. You can't. And I do. I enjoy diversity, I enjoy the challenges, all this kind of stuff. But as I think back on our most successful engagements, oftentimes it is the owner, the founder will come to us and I mean, things are going well, as is often the case, but they want to accomplish something. You know, it's like they may be now we want to contemplate a transaction, which is, of course, you know, my interest and involvement in Optima. And truthfully, Lane, it is, and I think this may be a little bit unusual, it is the ability to have those conversations through a financial lens. So, there are lots of advisors out there, you know, and I have tremendous amount of respect for all of them. You know, and there's certainly lots of financial people out there. What I have found that people seem to look to me or lean on me is that ability to have these strategic conversations or, you know, life-changing transaction decisions or truly in the case of family businesses, generations.

Sure.

You know, what do I do with my— I don't trust my grandson. You know, this kind of stuff. But the ability not only to sort of coach and counsel and advise and guide and provide legitimate alternatives or choices along the way, but to do that with an understanding of the financial ramifications of what we're talking about.

So in terms of deliverables, I know from our interactions you do business valuations, you keep books and records for businesses, you'll do financial financial reporting. And so you have a lot of different— you have a big toolkit that you can use to help people. And so where do you see business people need the most help? Where do you see the biggest problems arising in the management of their wealth and their businesses?

So, gosh, there's actually probably several answers to that question, Lane. For example, I have been fortunate. In some cases, I've dealt with high-profile athletes, and one of the things that I see in that world is their advisors will tell them what they want to hear, and I could cite a specific case, and that's just not who I— it's not how I was raised. That's not who I am. You know, I appreciate that you're famous. I don't care. You know, that doesn't really change how I'm going to talk to you. I had one in particular, we actually worked on this big project for him. You know, it was quite successful. And at the very end, the last meeting, I had a few of my team members there. I said, you know, gosh, would it be okay if we got an autograph? And I remember what he said to me was, he goes, why? I, you know, we've been working together for 6 months and no one's ever mentioned my athletic career at all. You know, I was thinking you guys didn't know who I was. And I said, no, no, we're huge fans. So we have some photographs and autographs from that. So I think a little bit of it, Lane, is that ability to be that sort of arm's length independent. You know, I don't look at, I see some amazing opportunities,, but I don't lead with, gosh, I could profit from that, or I could benefit from that, anything else like, no, I need to be the independent, transparent advisor. I see this, I see that. So one is providing people with unbiased advice. The second thing is an ability to look at things holistically. You know, here's kind of the decision that's in front of you. We, if we choose, you know, A and B seem obvious, C and D are possibilities, then let's look at the ramifications of all these things. I had one that a woman came to me just recently and, you know, it's a company, there's a software product. I mean, she's been sort of the key driver behind it, but it's like a question of like ownership. Everybody sort of wants the outcome, but then the question is, what's it worth? And all this kind of stuff. And so part of it in just, you know, a very short conversation, I'm like, well, gosh, I appreciate what you're trying to solve here, and I'm happy to try to help you solve that in a way that everybody feels validated, heard, you know, compensated, you know, for what they've contributed to this. But you guys are in a situation where it's actually not worth anything without this individual. And so I was like, okay, so that is something we need to be aware of. You know, it's like, we can just, it can just be worth zero. But then that doesn't fulfill either one of you. So the question is, we go from that to how do we then sort of maximize the value for all the parties involved, Lane?

Right.

So in terms of value, as you know, at Optima, we work with businesses that have values typically $10 to $50 million. That's cute.

Cute?

I'm just— it's an inside joke. We had lunch with somebody earlier.

I overheard when you were saying that. I was going, okay, that's pretty funny.

I just wanted to jump in.

I appreciate that. Most of the business owners I deal with, they really don't know what drives the value of their business. They arrive and say, "I need to sell. I want to sell. I've got too much gray hair. I'm tired of running the business." They haven't thought about a plan. They haven't thought about, "Okay, well, I'm 62. I want to retire when I'm 65. I need to go get some resources to help me think about how do I increase the value of the.

Business.".

And so, it's great that there are financial planners, advisors like you. How often do you find yourself playing that role where you feel comfortable when you're looking at somebody's business, talking to them about the deficiencies, about things they can and should do proactively to position their business?

Yeah. So, actually, Lane, that's one of the reasons that I enjoy the Optima partnership so much is because I know, I know where you're from. I know, you know, Andy Schwartz and what his background is. And so, you know, Optima's ability to engage with the owner that's looking at an exit, that's looking at a transaction, you know, I know it's going to be accurate. I know there's going to be preliminary due diligence. I know it's going to be, you know, positioned well and things like that. And that's great. I think that's huge value that Optima is bringing to this. Where I sort of would fit into that is actually a step back from that. It's like, I'm thinking about this, this is what it looks like, or even, I mean, we've had conversations like this, Lane, we've said, well, look, I see some problems here, and so a lot of times we'll get involved with things like that. And a little bit, and, you know, personality, or I think probably being an educator. I like— I want people to understand, Lane, you know, I'm a huge believer in education, obviously, and at least have some modest track record of being pretty good at distilling and making things make sense. That's often actually where I think we add value is because obviously, as you know, these things can become extraordinarily complex. And not just in an exit transaction, but acquisitions and all this other stuff. It's the ability for us to kind of absorb all this and distill it down and say, okay, what it comes down to is this and this. And then if somebody's like, well, John, but— I'm like, it's okay, we can blow this out. I mean, we can go as deep as we want to, but that's an important thing for us is to actually really understand this at a microscopic— is probably too far down, but at a fundamental level and have the ability in that trusted role to provide that education, provide that explanation as part of this so that it can help get them comfortable with the transaction. Even things that— that's not what I— that's not what I wanted to hear, right? I'm like, I understand that, but let me tell you why this is.

So just to jump in, because, you know, Lane, saying that you're a problem solver, and then you spoke about solving problems, and, and most of the time it's just being authentic and telling what they don't want to hear. But what are specific problems that you find most, most the time because, you know, instead of speaking theoretical, like being a little bit more myopic and be like— because as a business owner, that's, that's how I learn, is like if you see somebody else driving off a cliff, it's like, okay, maybe, maybe I don't want to drive off that cliff, you know. So what are some of the problems that you specifically have seen that you're like, hey, this is— solve them before they happen?

Oh, so, okay, so let me put just a temporary pin on that, pin in that, because I want to give you an illustration of of this ability to explain things. Earlier stage, before we get to exits, as companies are starting out— and I teach this at school— is what we'll have is I have entrepreneurs come to me and go, oh, God, these venture capitalists, they're just trying to steal my company from me. They want 60% of this company, x, dot, dot, dot, dot. And I'm like, well, you need to understand how venture capital works. You know, and there's a great Harvard— I think that's actually the title. It's old now, but it's How Venture Capital Works, Harvard Business Review article. But there's a mechanic to this. Remember, they have other people's money. And the challenge, if you're a pure venture capitalist, is like, okay, you know, you've got 10 years, you know, maybe a 1 or 2-year extension on that. I need you to produce 10x my money. And you're not in the marketplace. There's no hedge. There's no calls. There's no options. I need you to pick and deploy this capital. And oh, by the way, we know that by the time you deploy 60% of it, you'll only have what you started with for the capital. So the last 40% is what's got to produce the returns. So once I can explain that, You know, in a very dispassionate sort of way, hey, look, they're not trying to take your company, but in order for this to work mathematically, they do need 60% of your company because they know what doesn't. And you know what, if you're wildly successful, you're all going to make more money than you can say grace over.

Well, real quick though, I think that it's education because I would I would argue that most people don't even know the private equity venture capital world, and out of the ones that do are familiar with that world, probably don't even know the differences between private equity and venture capital. Because the way I would understand it is it's all about risk. So private equity is, is, hey, the sure thing, which is no such thing, but in comparison to venture capital is, right, I'm gambling.

Yeah.

And, and I think most people just don't even know those differences. Obviously, in the world that y'all live in, people are very familiar with that world, but I'm just talking about the everyday American.

So, Ryan, you have— you've actually hit on something that's really important.

Do I get an A?

You get an A. You get an A relative to— well, for this portion of the podcast, there'll be a final exam.

Got it.

And all this, but, you know, relative to Optima, here's one of the things that people overlook. I'm a successful entrepreneur. I built a good business. I'm I make really good money off this and all this. That's great, and obviously you're smart and good at what you do, but you need to understand the people who are buying the business do this every day of every week, 52 weeks a year. They've just got more reps. They've got more experience. And so if you roll into this without somebody like Optima at your side, There's just no way that it's really— well, first of all, it's probably not going to get done, you know, because you're going to get frustrated along the way. And it's not going to be an optimum outcome with that. So, I think that's an important takeaway is just understand that— and by the way, there is more money out there looking for transactions than there has been in the history of mankind. So, it's a great time. It's a great time to start a business, grow a business, exit a business. I want to go back to what— I don't want to forget your question, Ryan, about some problems, specific illustrations. And a lot of this, I'm going to go back to our tagline at Churchill Terry, which is the value of a great marketing firm, has been for 30 years, business insight financial foresight. And where that came from was I actually was working with the marketing firm that did this. He said, I've never had a conversation with you that I didn't walk away with a fresh perspective, you know. And I, I was very proud of that. That was meaningful to me. And so that's where he came up with the business insight financial foresight. I have a long-time client we work with, very successful. They actually They built a portfolio of businesses, they exited, and now they're building another portfolio of businesses. You know, entrepreneurs tend to— they just want to keep doing this, right? So we had a, you know, oftentimes we have a monthly financial review. We're doing the financial work for them, which is great. At a monthly financial review, we're looking at, you know, how they've done, and they've gotten off to a great start. A couple years into this, they're looking at the third year, they're really hitting their stride, very profitable, it's growing very, very well, and all this kind of stuff. But we bring a level of thought and analysis to this that you normally would sort of see at a very large company. And we haven't done anything with this yet, but we're walking away, I'm kind of going, you know what, there are some serious disparities in certain clients and their characteristics and their profitability and others. And so, haven't done the analysis, not suggesting they do anything with this or anything else, but what I'm going is we need to show them if you actually stripped out probably half the revenue you'd have 3 times the profit. And so we can, we help with that. We'll help with the, you know, this insight, this observation, and then we can decide what to do. And quite frankly, I wouldn't actually advise them to get rid of half of their revenue, but I would advise them, let's take a look. What do we do to protect these highly profitable segments And what do we do to move the rest of them closer to that? So that's just one sort of specific example that I can think of. Another one that I can give you, if you want more, Ryan, family office. Texas family office, 3 generations. They have been very successful, like many— they have a portfolio of related businesses. And they had a third generation who wanted to— they'd moved away and they said, we want to come back and we want to run the business. Well, and that made great sense. So there was the first generation that was still present, they had professional managers who were sort of not the second generation, but the second generation of management there, you know, and then we have the children or the grandchildren of the original founders. And they said, how can we prepare them to run this business? And through executive development we've done and a lot of work we did with attorneys and things on this, we're kind of like, well, actually what we should really do is create a baseline and a common language so that this third generation, they're all speaking the same language. Well, to the family's credit, what they said was, well, you know, if you're going to come out here and teach this, implement this program, we want the second generation to learn as well. And we want the peers for the third generation to come along with this. So I'm like, great, I think that's fantastic. Well, long story short, what the outcome of that was, they came up with a whole new a whole new level of analysis and mechanics and reporting and responsibility that both the second and third generation absolutely embraced. And I saw even, you know, and this has been a number of years now, even ups and downs, you know, they are more profitable, they're more knowledgeable, they make better decisions. And it's not me making better decisions, but it's the education, it's the path, it's the information. It's saying, you know, you thought about doing this, doing these things.

Yeah, you empowered the family with information to make good decisions. And that analogy, that example kind of goes back to your earlier comments today about working on the business as as opposed to working in the business, right? If you can have an opportunity to step back from the business and look at it and say, half our revenue is producing this very low margin, the other half is producing this high margin, maybe we should reconfigure that, that's a lot of value to add to the business. I was thinking about your question about private equity versus venture capital versus other things and your comment about that the business owner or maybe this person that's dealing with the venture capitalist that wants all their business, right? There's these two different lenses through which they see the world. And that's something that I deal with at Optima where I feel like a lot of the business owners that come to me and want to sell their business, they have no concept of how a buyer views their.

Business.

And they'll think, well, I'm making— I'll ask them, what do you think your business is worth? And they'll come up with a number. And that number may be 5, 10, 15, 20 times their cash flow. And to your point about counseling families, I'll say, well, here's the thing. The buyer of your business, depending on its size, they're either going to go to the bank and borrow the money. Because of that, they can't afford to pay more than X because they've got to service the debt, they've got to do this and that. There's also the capital asset pricing model where you say, I need to get paid. So if I'm buying venture— if I'm investing in venture capital, and it's high risk, and I've been a venture capital investor, not a very good one, what I have discovered is that maybe I'm not very good at it. And the funny thing about my investments in venture capital is the things I think are going to be the home runs aren't, and the things that I'm kind of not excited about and do end up being— have proven to be the 10-baggers that bail you out for all the other decisions. But as a wealth manager for 20-plus years, I really bought into the pricing model of risk, where you start with the risk-free rate of return, and you start adding returns on top for the different risks that you face. Venture capital would— you'd have the highest required return. Well, if you're going to buy an operating business that's privately held, there's no public market for it, it's illiquid, you've got all the concentration risk of that single business, and maybe even in a niche segment, then what return do you require? If stocks have generated a 12% compound annual rate of return, are you going to pay somebody 10x for their operating private small operating business? Well, no, because you can go get that in the public capital markets.

Do you think it's because most sellers have an exaggerated viewpoint of their goodwill? Because obviously, if they're coming up with that, the 10x, the 20x of their revenue, they're not coming up with that number because of the revenue. They're coming up with, well, look what I've built.

Yeah, I just think it's a— I don't think they're looking through the right lens. I think that the way they perceive value value in their business, a lot of times it's frankly driven by need. And I mentioned that earlier today. I'll have a client, I'll ask, well, how much do you think your business is worth? Or what are you seeking to get from your business? And they'll say, well, I need $5 million. Well, that need doesn't translate into a value for a buyer. I had a gentleman one time who ran a residential services business. I think it was HVAC. And I said, how, you know, what do you think your business is worth? And he said, I think it's worth x millions of dollars. And I said, how did you come up with that? He said, well, I know a guy over here that sold his business. They're a competitor of mine. And they sold theirs for this x million. And I have twice as many trucks as he has. So I should be 2x.

And I was like, okay, well— Truck factor. You don't often see that applied.

No.

And that's what I told him. I said, I don't know that I've.

Ever— You should write a book.

It's called The Truck Factor. Right. I got twice as many trucks. Well, what if if your trucks do half the revenue, you know, I mean, who knows? But, you know, unfortunately, by the time people get to me, they see me as somebody who wants to take their business to market, right? And so there is a new world of certified exit planners, people that are really starting to help people think about, you know, here's where my business is, what's it worth? And then they tell them, you know, it's worth $1 million. Well, I need to get I've got $2 million for it. Okay, well, here are the levers you can pull. We don't do that at Optima. We're not in the business of consulting them and saying, here's how you get from here to here. But frankly, my job would be easier and better, and we'd see a higher success— well, not we, but business owners would have a higher success rate in exiting if they had the ability to get to a trusted advisor who could help guide them and tell them, no, it doesn't matter how many trucks you have. Here are the things that matter and here are the levers you can pull. So I want to pivot a little bit to venture capital.

Before we do that, Lane, I don't want you to lose that thought, but I sort of wanted just to tag on to that. I think you've really struck something here with looking at it through the wrong lens. So what you and I both have seen oftentimes is that we have business owners that hear my competitor sold and I have twice as many trucks or all this. And so they learn things like, you know, a cash flow multiple, or I should get this, or they just Google things, right? Now, this with no real understanding whatsoever as to, but why is that the metric? Why does that matter to the purchaser or to the investor, right? One of the things that I've done, which sometimes is very eye-opening, is I'll look at this business that, to your point, it's like I built this. It's— I, you know, and there's— this is a whole separate conversation. And don't lose your venture capital. No, I got it. I underlined it. This is a whole separate conversation. But yeah, people get emotionally wrapped up in this kind of stuff. But what I'll do is I'll actually just do the math and say, okay, so based on, you know, the free cash flow from your business, it's worth X. You could take that same amount of money and invest it in these 20 things. And get a better return. Why are you doing this? And a lot of times, Lane, that is a very— it's like, well, no, I do this and I make really good money and I'm in control and all this kind of stuff. And I'm like, we could talk to a wealth manager and you could diversify your risk and do all this kind of stuff. And yet they throw, well, but I have to get X. It's like, you can't get X anywhere else. So anyway, sorry, back to your note.

Well, before we move on to venture capital, I do want to bookend a little bit because You know, when I started my company, there's no— I mean, there may be roadmaps, there may be lessons, but I would— I just started, right? I didn't get any advice. I didn't— there was nobody there to tell me how to do it, how to fail. You just go. And, and, and one of the things that I— with General Williams, uh, going back to him, was the epiphany I had there was like the mindset of starting with the exit. And I think if there's— and hopefully through the— this project with the Deal Table, hopefully we can reach some of these the newer entrepreneurs who are in the business of starting a business and realize that, hey, there are specific things, even if you never intend to sell your business, right, if you start with the, start with the exit, possibly you'll run your business better. Because like I was, I was sharing with Lane maybe about a month ago, I have a friend of mine who, I don't know though, I think he's doing $2 to $3 million in revenue a year. And I was just sharing with him one of the lessons I got from Lane, which is Hey, do you do accrual or cash accounting? He's like, huh, what do you— I don't know what you're talking about. And I was like, well, if you ever did intend to exit, you have to switch to accrual. Yeah. He's like, well, I don't know what that is. All my accounting's in a Google Sheet, you know. And this is a guy doing, you know, $2-3 million of revenue, right, you know, with a very, very high margin of, uh, of profit.

And that's not uncommon.

Yeah, yeah.

To see very simple, uh, books and records. There are some good literature out there. Michael Gerber's E-Myth, I think, is well written from the standpoint of people recognizing that if their business does not have systems and processes and is owner-dependent and doesn't keep good books and records, that it's going to be very difficult to recognize that value or to scale it and grow. An author named Dave Finkel has a book called Build a Business, Not a Job. A lot of the small businesses, I think there are 20 million small businesses with $1 million or less of revenue in the United States. That's a job for the most part. These are people that have a business, but it really is a job. And if they go on vacation or they get sick, that business is at risk of going out of business. But, you know, it's probably good, Ryan, that you didn't have somebody counsel you and you didn't read the literature before you started a business, because you probably would have been scared to death.

Well, that's, that's one of the things that, that, you know, like being at SMU, you hear a bunch of young people like, I'm going to be an entrepreneur, and I'm like, why?

Don't do it.

Like, do you understand the level of pain and anguish, right? And like, and, and, and, and not to, not to be jokey too much, but there's literally days where— and again, I, I don't need a therapist. Well, I probably need a therapist, but I, I don't have a problem. But there's days you're like, I would be better off dead. And then literally within 24 hours you're like, oh, I'm just like one or two tweaks away from making $10 million. Yeah. And that's like a daily occurrence. And I don't think that's a— I don't think that's a rare thing. I think it's a very common entrepreneurial mindset.

It's adrenaline, it's exciting. Uh, and there are people that would die, uh, being in that corporate world even with that, the corner office, by not having, um, you know, sort of that being on the edge of the—.

But it's that roller coaster of highs and lows.

Yeah. When I— one of the things I tell my students is 80% of all businesses are started by people who are fired or laid off. I was part of the 20% that was not smart enough to get fired or laid off. Remember, I was in entrepreneurial businesses. And then I decided to get in corporate America. So I got my MBA. I was in there for about 9 years. And then I just like— I can't influence the, the ship. I can't influence the outcome. That's important to me. I need to go do this, right? So I had a global business development job. I could travel. I had a budget, you know, all this. And I resigned. I left on good terms, but then was just like, okay, I'm gonna see if I can make a living doing this, right? Part of my thinking at the time was, you know, if I'm going to work this hard for my employers, I should be doing that for myself. You know, thinking that I was working really hard. And then one day early on, probably in the first 6 months, I found myself, Lane, with a pad like this. And I don't know if this is that way, but it looks like it is. There are 24 lines, which lines up with 24 hours in the day. So I'm literally writing down If I do this for 3 hours and that for 2 hours and this for an hour and then this for 6 hours and then I do this, it's like in 24 hours I can do this. When you find yourself making that list, then you're working as hard as you can. Yeah. Because you've accounted for all the hours.

I, uh, was born and raised in Memphis, as you know, and my father was an early Holiday Inn franchisee. And Holiday Inns was started by a high school classmate of his that got him Kimmons Wilson. And Mr. Wilson wrote a book, and it was called Half Luck and Half Brains. And on the first page, it says, look, you don't have to work that hard. You just need to work a half a day. It doesn't matter whether it's the first 12 hours or the second 12. Just work half. So hard work is certainly part of the.

Formula.

VC. VC. So venture capital. I would say, John, in the friendship we've enjoyed and watching you, you get the most animated and exciting when you're working on a venture capital project. When you are hands-on with some young business owners, and you have that now. Can I say the name of the company?

Sure.

Toucan, which is some SMU students that you instructed, like Ryan, who went out and started a business. And you— and I don't think this is the first time that you've been involved with SMU students who came back with a business idea. So I always see your energy come through when you're involved in that. Tell us about some of those deals. Tell us about the deals you've gotten involved with with some of your students.

So it's actually fascinating. As I think back, you know, I've— across the entire 25 years I've taught the starting a business class, the entrepreneurship class. About 10 years ago, they— kicked me from one program, or the sort of more the broader MBAs, where that is an elective. So everybody in class was— I knew they wanted to be an entrepreneur. They kicked me upstairs to the executive program, and that's where it's mandatory. You have to take it. It's a capstone class. And I thought, well, gosh, I mean, these are like corporate warriors. They're going for the— I mean, they're just going to sort of be checking a box. Well, I'll tell you this. I've had more businesses started out of the Executive MBA program than I had out of the other programs. Interesting. You know, and it's a combination of things, but, you know, there is very much— there's a mindset of not only, yes, I'm doing this in the corporate world, but then I have, you know, the ability to guide and steer and direct and raise capital and kind of put that stuff together. Probably true, there have been several over the years, Lane. Probably the best illustration truly is Toucan Cocktails.

Tell us about that.

So these are a couple of students in my executive MBA class, and they started, they actually wrote the business plan in the class. That's great. Now, you know, John Dallagher, Stephen McCarthy, And John is fond of pointing out that they only got a B in the class, you know, and I was like, well— B's good.

I was like, well, I said— Hey, timeout, timeout. I just want to say what I've learned in the last 3 or 4 months of my beginning of my program, B's get degrees.

B's get degrees. Well, I pointed out to them, I was like, well, look, you know, I could get you an A or I could have written the investment check. Which one? To me, the investment check seems like a greater endorsement. Yes. Yeah. But, you know, the takeaway from this is John's 20-plus years in the alcohol industry, you know, product development, launching, you know, management, branding, this kind of stuff. His partner Stephen McCarthy is a biochemist. No. So he's responsible for the flavor, the taste, the formulation, the production. He's done things for like Gatorade and Pepsi and stuff like that. One of the things that comes up for me was like, you know, is it the— all these are important, but like, you know, is it the idea? Is it the money? Is it the market? Is it the timing? Truthfully, what trumps all of that is do you have the right people in the deal? And what I saw, Lane, was in class 3 years ago, I don't know whether this is going anywhere, but these are the right people in the deal. And that's what prompted me to write that interesting check.

Okay, one thing I'd like to, to jump in, and then as we, we begin to wrap up, I've heard repeatedly how important the people are, the right people in the deal. Your network is your net worth, etc. I would argue that I'm extremely good at the networking aspect and the people aspect and, and making connections and just the universe, spiritual, however you want to put it, putting two people together. Just like even right before we started, somebody was trying to find somebody and this person knew them, and it was me that brought those people together, whatever. But that happens all the time. What doesn't happen ever is my ability to monetize that. So for just, just selfishly, how can I start monetizing that, that type of gift?

Ryan, that's actually a very, it's a very interesting question. And I can tell you, I sort of, I come from the school of thought that if you, you know, have a resource, if you have a connection, if you have a talent, if you have a skill and that sort of stuff, there is a sort of a universal balance to this. And so I'll meet with people, I'll help people out. Truthfully, for me, and this is my own deep personality, is I want people to be happy. And that sounds funny to say that, but I mean, that's like, I want you to feel satisfied and fulfilled. And I want to help you get to where you're going, which is clearly 25 years worth of worth of being an educator. I don't think— certainly there have been many missed opportunities in my own life and career, Ryan, but then there's been so many more that have come from Lane making an introduction to me or Andy making an introduction for me or coming to my class and speaking or where I can reach out and say, hey, we're in the middle of this fundraising, or we need this, or do you know anybody? I had one of my clients just this past week said, hey, look, we've built this huge database around real estate development, and we believe that we would benefit from an AI programmer on this. And I thought about that. And he said, you've got the biggest network I know. Who do you know? And I'm sitting there going, okay, I don't know AI programmers. I thought about it for 2 seconds and I said, David Evans is the principal of Sentiero Ventures, which is an AI-focused venture firm right here in old Parkland. I said, David will know the answer to this and I am happy to make that connection for you. So I think perhaps that's— and that's a very poor answer to your question, Ryan.

But here's the thing. But, but to your answer and to my original statement, I have a gentleman who's working on an AI, a big AI thing right now. And even your answer proves my point. Yes. Because that immediately I can marry the two. And then the thing that my guy's already working on, maybe it goes somewhere, maybe it explodes. Who knows? But it's just a weird— I think you did answer it by saying there's a universal scale. And maybe that scale is next year, maybe it's 5 years from now, and maybe— but the last 10, 15, 20 years of, you know, adding to it, when it balances, it'll be a windfall.

I think so. And let me actually add a little bit to that. There's maybe a little closer to an actual proper answer to your question, Ryan, is one of the things that I would do is I would be looking at, you know, and, and codify what can I contribute. So as you see opportunities, and you see things that it's like, wow, this is really cool, you know, this sort of stuff, you know, what's my contribution? And how would I value that contribution? You know, and is there some way that that makes sense? And in my world, what Churchill Terry has been built around is this, truthfully, financial expertise, you know, and the transaction knowledge and financing. I am a huge fan of clever, elegant solutions. So, anybody can solve the problem if the hammer is big enough, you know, and That's fine. And sometimes that's the way problems get solved. But what I really get excited about is when I see some clever, elegant financing solution or— gosh, this is going 100 years back. GE bought RCA or large chunks of RCA. This is 100 years ago in the '80s. And the day they completed the transaction, they already had a deal to sell RCA's television division to Thomson out of France, which would fund the rest. So they broke even. They didn't want the television division. So essentially, GE made televisions, RCA made televisions. You know, they put this deal together. We're going to buy RCA, and then we're going to combine the television divisions. And before the ink was dry, Thomson owned RCA and GE brands. GE had paid for the acquisition, and now they could do things with the satellite communications and other things like that. So when I see things like that, that's what I refer to when I say clever, elegant solutions where you can get a little something extra out of it. And I think that's what I would do if I were giving advice, which I'm not sure I would take advice from me. But if I were giving advice, I would sort of look at that and say, okay, what do I have? What can I contribute? And I guess not in a way that you have to think about it, Ryan. It's like, oh, you know, these 3 things, you know, and when I see something, this fits, it's like, oh, this, you need this, you know, we can collaborate on that.

Yeah. So to end, do you have any final thoughts, final questions?

No, I always end with a comment, which is I've enjoyed a warm friendship with John and always glad to share the room with you and appreciate you being part of our podcast and bringing your wisdom to the deal table.

Oh, Lane, this is, you know, it's a privilege to get invited. You know, as I'm sitting here kind of going, I can't believe we're out of time. You know, it flies. Isn't there another 2, 3 hours that.

We should be doing? And that's one of the things I was sharing with you earlier before and talking to Lane is like, because when we first were kind of vetting this idea, he's like, well, so what, like 20, 30 minutes? I'm like, I don't think you understand how quickly you just getting into a conversation, how quickly it just turns to an hour. Yeah. And like that.

Quick.

Yeah. So, but thank you so much for doing this with us.

And thank you for having me.

And I look forward to interacting with.

You in the future. Oh yeah, I was going to say you'll be in class in a year.

So I will say it is just—.

You better edit the podcast carefully.

I know, right? It's just the insanity of— on one hand, it is an executive MBA program, but like when you're telling people that I'm back in college, they're like, huh? And you're like, no, no, you don't understand. The average age is like 40. I'm like, okay. But I look forward to having you in class or being in your class rather.

I look forward to having you in class.

Well, again, thank you so much, and, uh, we'll see you around.

Oh, fantastic. Thank you guys. Cool.