Digest

Brent Bishore, founder of Permanent Equity, delves into the complexities of scaling a business that acquires small businesses. He argues that a hands-off approach is not feasible due to the inherent challenges of small businesses, including regulatory complexities, the need for active leadership, and the constant risk of entropy. Bishore draws parallels to Warren Buffett's early career, emphasizing the importance of active involvement and the role of chance in success. He highlights the need for a strong team, a commitment to continuous learning, and the importance of reinvesting earnings to fuel growth. Bishore also shares his personal motivation for his work, which is to help families transition their businesses and serve as an ambassador for the kingdom of God. He emphasizes the importance of serving others and the transformative power of faith in his life.

Outlines

00:00:00

Introduction

This Chapter introduces Brent Bishore, founder and CEO of Permanent Equity, and the focus of the conversation: the profound changes he's made in his personal life and how he applies those lessons to his business.

00:05:07

Personal Transformation: Overcoming Shame and Fear

This Chapter delves into Bishore's personal journey of transformation, highlighting the impact of confronting shame and fear in his relationships. He shares a pivotal moment where a stranger's observation about his inner life sparked a profound shift in his perspective. Bishore discusses the importance of seeking help, the challenges of awareness without healing, and the transformative power of vulnerability.

00:12:13

The Subtlety of Control in Relationships

This Chapter explores the subtle ways in which we can exert control in our relationships, often unconsciously. Bishore uses the example of always paying for meals as a form of control and discusses the importance of giving others agency in relationships. He also delves into the concept of the 'hero' and 'victim' dynamic, highlighting how well-intentioned actions can sometimes have unintended negative consequences.

00:28:44

Living Out of Love vs. Fear

This Chapter examines the fundamental choice we all face: to live out of fear or out of genuine love and care for ourselves and others. Bishore contrasts the scarcity-driven mindset of fear with the abundance-driven mindset of love, highlighting the importance of protecting and nurturing love in our relationships. He shares his own struggles with anxiety and the need for validation, and how he's working to shift towards a more loving and outward-focused approach.

00:39:47

Shifting Habits and Mindset

This Chapter explores the importance of habits and mindset shifts in personal transformation. Bishore discusses his journey with weight loss, alcohol consumption, and the power of changing his identity to embrace a healthier lifestyle. He emphasizes the importance of asking others how they want to be loved and the transformative power of operating out of abundance in relationships.

00:50:50

Balancing Love and Operating in Business

This Chapter transitions to the business side of the conversation, exploring how to balance love and operating principles. Bishore challenges the conventional wisdom of operating out of scarcity, arguing that a mindset of abundance leads to more sustainable success. He discusses the importance of creating win-win relationships, treating people with honor and care, and prioritizing long-term value over short-term gains.

01:05:04

Debt as an Amplifier, Not a Source of Return

This Chapter delves into Bishore's perspective on debt in business. He argues that debt is not a source of return but an amplifier, making good things great but potentially destroying mediocre or bad businesses. He emphasizes the importance of understanding and mitigating risk, especially in the context of unpredictable markets. Bishore shares his experience with an aerospace business and how their decision to avoid debt allowed them to navigate the pandemic successfully.

01:13:22

Stewardship vs. Ownership

This Chapter concludes the conversation with a discussion of the importance of a stewardship mindset in business. Bishore argues that families entrusting their businesses to others should be viewed as stewards, responsible for maintaining the health and legacy of the company. He contrasts this with the traditional private equity model of leverage buyouts, which he believes often leads to short-term gains at the expense of long-term sustainability.

01:17:40

Incentives and Alignment

This Chapter delves into the unique incentive structure of Permanent Equity, contrasting it with the traditional private equity model. Bishore argues that the traditional model, with its focus on short-term gains and leverage buyouts, often leads to misaligned incentives and unsustainable practices. He emphasizes the importance of aligning incentives for all stakeholders, including investors, the firm, and the companies they acquire. Bishore explains how Permanent Equity's fee model, which involves taking no fees and instead sharing in the free cash flow of the companies, creates a more sustainable and aligned approach.

01:28:32

Leadership and Acquisitions

This Chapter explores the importance of understanding and predicting human behavior, particularly in the context of leadership and acquisitions. Bishore advocates for using personality tests like Myers-Briggs and Enneagram to gain a deeper understanding of individuals and their motivations. He emphasizes the importance of empathy and humility in leadership, particularly when it comes to hiring, firing, and guiding CEOs. Bishore shares his own experiences with the challenges of leadership and the importance of learning from mistakes.

01:43:50

The Acquisition Playbook

This Chapter dives into the acquisition playbook used by Permanent Equity. Bishore emphasizes the importance of identifying mispriced opportunities, understanding the core action of a business, and identifying the lids that are holding it back from growth. He also discusses the importance of having a clear understanding of the risks involved in an acquisition and the ability to mitigate those risks.

01:55:18

Post-Acquisition Integration and Learning

This Chapter focuses on the post-acquisition integration process and the importance of continuous learning. Bishore explains how Permanent Equity uses a dual-hook infrastructure to ensure constant feedback loops and information sharing between the firm and the acquired companies. He emphasizes the importance of transparency, humility, and a long-term perspective in guiding and supporting the CEOs of the acquired companies.

02:01:34

Scaling a Small Business Acquisition Firm

This Chapter explores the challenges of scaling a business that acquires small businesses. Bishore discusses the complexities of regulatory compliance, the need for active leadership, and the constant risk of entropy. He draws parallels to Warren Buffett's early career, emphasizing the importance of active involvement and the role of chance in success. He highlights the need for a strong team, a commitment to continuous learning, and the importance of reinvesting earnings to fuel growth.

02:11:40

Personal Motivation and Success

This Chapter delves into Bishore's personal motivation for his work, which is to help families transition their businesses and serve as an ambassador for the kingdom of God. He emphasizes the importance of serving others and the transformative power of faith in his life.

Keywords

Q&A

• What are some of the key changes Brent Bishore has made in his personal life that have had a profound impact on him?

  Bishore has made significant changes in his personal life, including confronting shame and fear in his relationships, seeking help from a counselor, and shifting his mindset from scarcity to abundance. He has also made changes to his physical health, including working out regularly and giving up alcohol except for celebrations.

• How does Brent Bishore apply his personal transformation to his business practices?

  Bishore believes that operating out of abundance rather than scarcity is essential for both personal and professional success. He advocates for creating win-win relationships, treating people with honor and care, and prioritizing long-term value over short-term gains. He also emphasizes the importance of a stewardship mindset in business, focusing on the long-term health and legacy of the companies he acquires.

• What is Brent Bishore's perspective on debt in business?

  Bishore believes that debt is not a source of return but an amplifier. He argues that while debt can magnify positive outcomes, it can also destroy mediocre or bad businesses. He emphasizes the importance of understanding and mitigating risk when using debt, especially in unpredictable markets.

• Why does Brent Bishore believe that a stewardship mindset is important in business?

  Bishore believes that those who manage or oversee businesses, particularly family-owned businesses, should act as stewards of the company's legacy and ensure its long-term health and sustainability. He argues that this approach prioritizes the well-being of all stakeholders, including employees, customers, and communities, over short-term financial gains.

• What are some of the key takeaways from Brent Bishore's conversation about personal transformation and business practices?

  Key takeaways include the importance of confronting shame and fear in our relationships, operating out of abundance rather than scarcity, prioritizing long-term value over short-term gains, and embracing a stewardship mindset in business. Bishore's insights offer a refreshing perspective on how to navigate relationships, build businesses, and live a more fulfilling life.

• How does Brent Bishore define 'elders' and how does this concept relate to his personal transformation?

  Bishore distinguishes between 'elders' and 'elderly.' Elders are outwardly focused, genuinely caring, and live with joy and freedom, while elderly are self-focused, irritable, and live in fear. Bishore's journey has been about moving from a fear-driven mindset to one of love and care, becoming an elder rather than elderly.

• What is the 'conflict pattern' that Brent Bishore discusses and how can it be helpful in understanding relationships?

  The conflict pattern describes three basic moves in conflict: move against (confrontational), move towards (avoidant), and move away (isolating). Understanding this pattern can help us identify our own and others' conflict styles and navigate disagreements more effectively.

• How does Brent Bishore's approach to business differ from traditional private equity practices?

  Bishore's approach to business prioritizes long-term value creation and sustainable growth over short-term gains. He avoids excessive debt, focuses on building win-win relationships, and emphasizes the importance of treating all stakeholders with respect and care. This contrasts with traditional private equity practices that often prioritize short-term returns and leverage buyouts, which can lead to unsustainable practices and harm the long-term health of businesses.

• What is the significance of Brent Bishore's decision to avoid debt in his aerospace business?

  Bishore's decision to avoid debt in his aerospace business demonstrates his commitment to operating out of abundance and prioritizing long-term sustainability. This decision allowed the business to navigate the pandemic successfully, while other businesses that were heavily leveraged struggled. It also highlights the importance of considering the long-term consequences of financial decisions, not just short-term gains.

• How does Brent Bishore's perspective on ownership and stewardship differ?

  Bishore believes that those who manage or oversee businesses should act as stewards, responsible for maintaining the health and legacy of the company. This contrasts with the traditional view of ownership, which often prioritizes maximizing profits and short-term gains. Bishore's stewardship mindset emphasizes the importance of honoring the legacy of family-owned businesses and prioritizing the well-being of all stakeholders.

• How does Permanent Equity's incentive structure differ from the traditional private equity model?

  Permanent Equity takes no fees and instead shares in the free cash flow of the companies they acquire. This creates a more aligned incentive structure, where the firm's success is directly tied to the long-term success of the companies. The traditional model, with its focus on short-term gains and leverage buyouts, often leads to misaligned incentives and unsustainable practices.

• Why does Brent Bishore believe that understanding human behavior is crucial in business?

  Bishore believes that predicting human behavior is essential for success in business, particularly in the context of leadership and acquisitions. He advocates for using personality tests like Myers-Briggs and Enneagram to gain a deeper understanding of individuals and their motivations.

• What is Brent Bishore's approach to hiring and firing CEOs?

  Bishore emphasizes the importance of empathy and humility in leadership, particularly when it comes to hiring, firing, and guiding CEOs. He believes that it's important to understand the individual's personality and motivations, and to provide support and guidance when necessary. He also acknowledges that he has made mistakes in the past by being too tolerant of poor performance.

• What is the acquisition playbook used by Permanent Equity?

  Permanent Equity focuses on identifying mispriced opportunities, understanding the core action of a business, and identifying the lids that are holding it back from growth. They also emphasize the importance of having a clear understanding of the risks involved in an acquisition and the ability to mitigate those risks.

• How does Permanent Equity ensure continuous learning and improvement?

  Permanent Equity uses a dual-hook infrastructure to ensure constant feedback loops and information sharing between the firm and the acquired companies. They also conduct quarterly reviews of their investments, using a "baseball card" system to track progress and identify areas for improvement.

• What are some of the key challenges that Brent Bishore has faced in his career?

  Bishore has faced challenges in balancing his personal transformation with his business practices, in navigating the complexities of leadership, and in learning from his mistakes. He has also had to confront the challenges of operating in a market that is often driven by short-term gains and unsustainable practices.

• What are some of the key lessons that Brent Bishore has learned about business and leadership?

  Bishore has learned the importance of operating out of abundance, prioritizing long-term value over short-term gains, embracing a stewardship mindset, and understanding and predicting human behavior. He has also learned the importance of humility, transparency, and continuous improvement.

• Why does Brent Bishore believe that a hands-off approach to acquiring small businesses is not feasible?

  Bishore argues that small businesses are inherently complex and require active involvement. He cites factors such as regulatory complexities, the need for dynamic leadership, and the constant risk of entropy as reasons why a hands-off approach is not sustainable.

• How does Brent Bishore's experience with Warren Buffett's early career support his argument for active involvement in small business acquisitions?

  Bishore draws parallels to Warren Buffett's early career, highlighting how Buffett's success was not solely due to his investment acumen but also his willingness to actively engage with the businesses he acquired. He emphasizes that Buffett's early investments, like Sandhills Publishing and Dempster Mill Manufacturing, required significant effort and involvement to turn around.

• What are some of the key challenges that Permanent Equity faces as it scales its business?

  As Permanent Equity scales, it faces challenges such as building a larger organization, managing a growing portfolio of companies, and maintaining a strong team culture. Bishore highlights the need to reinvest earnings to fuel growth and the importance of building a layer of overhead to support the expanding operations.

• What is Brent Bishore's personal motivation for his work?

  Bishore's personal motivation is to help families transition their businesses and serve as an ambassador for the kingdom of God. He believes that his work is a calling to serve others and promote a more just and loving world.

• How does Brent Bishore's faith influence his approach to business?

  Bishore's faith informs his belief in the importance of serving others and operating out of abundance. He sees his work as a way to make a positive impact on the world and to live out his values.

Show Notes