Dashboard: A Grand Experiment in Buying and Building Small Businesses

Welcome to another 21 Hats dashboard. I'm Lauren Felman and I'm here with Michael Brown who is co-founder and CEO of TeamShares, which has embarked on several worthy causes [music] including helping aging business owners sell their businesses and also spreading uh the adoption of employee ownership. Welcome back to the podcast, Michael. >> Thanks for having me uh back. It's hard to believe it's been three years. >> It is hard to believe. I appreciate you taking the time. Michael, you first joined us back then. At that point, Team Shares had already bought more than uh 60 businesses, I believe, in 40 industries with most of those businesses purchased uh having annual revenue between a million dollars and $5 million. Can you bring us up to date? Where do you stand now? [clears throat] >> Yeah. Um so at the end of 2025, we had 90 companies. Um and you know, our total operating profit from all the companies is about 60 million. um you know on a on a trailing 12-month basis and I would say we've widened our size criteria when we started off I think 1 to 5 million of revenue um you know which would have been sort of 200,000 to maybe up to maybe just scratching the surface of a million of operating profit. as we uh got further along and our financing capabilities expanded and and um you know had a more diversified company, we were able to we actually we actually originally had owners come to us. We actually had someone get on an airplane and show up at our office. And so we've we've actually um you know continued to do sort of true small businesses but add sort of like businesses that are a touch larger than that too that have also wanted the same model. So kind of right up to you know 5 million or so of operating profit. >> I think you said the total profit for all the businesses is around 60 million. Can you tell us what the revenues are for the group? >> Yeah, it's about 450 million of revenue and sort of 60 million of of operating profit. I would guess back then if we were at you know 60 companies then we might have been you know sort of 30-ish uh maybe maybe 25 to 30 million of operating profit um sort of back then. But I'm just going from memory. >> Got it. So now the big news for you is you're going public, which which seems kind of counterintuitive for a company that promotes employee ownership. [snorts] Can you tell us what you're doing and why? >> Sure. So we may not have touched on it in our in our last podcast, but it's been the plan from day one to go public. Um, and I can talk about it's the reason why we raise venture capital, right? So we raised venture capital to try and build the biggest company we could in order to address you know as many companies as possible that are facing succession and you know help bring employees into stock ownership as well. So uh that was a very deliberate decision. Um you know the alternative way for at least the typical alternative way for someone to um go and you know buy businesses at least would be to go and raise a private equity fund. And that for us wasn't sort of the model that we thought made a lot of sense for a lot of reasons. Um, we thought that a holding company um would be that's publicly traded would be the uh the best chance to continue to help expand our model to as many companies as possible because public companies have much greater access to capital uh than private companies do. So if the goal is to help both from a shareholder standpoint and from a you know from a social mission standpoint to help as many companies um come into our model as possible being public uh helps us maximize the odds of of of doing that and it's been the plan since day one. >> Yeah. I'm curious you mentioned uh that you started by raising venture capital. you know, the the typical business model for private equity um in buying businesses, rolling up businesses, sort of along the lines of what you do is to buy and then with a plan to flip them in five or seven years or whatever they choose. >> You have made the promise when you buy these businesses to keep them, to not sell them, to convert them to employee ownership and and hold on to them. How were you able to get venture capitalists to uh to back you given that you weren't going to have that automatic payday when you flipped the businesses? >> Yeah, there so there's two really great and important questions within your question. One is about sort of venture capital and how do how do venture capital you know investors sort of make a return in team shares and why did they back us the other is sort of you know like you know how how do you sort of make returns in acquiring a company right and what's >> so on the first part um you know this is a because our business in uh you know involves acquiring a business people tend to think oh it's a fund what so how is you know like union square ventures or coastal ventures how are they going to get paid back well the the investment um you know bet that they made alongside sort of management team is that we have an opportunity to build a large and enduring public company that has the opportunity because of a large company with a novel solution with a team that you know has um a real passion a real edge for what they're doing and can continue for decades to build a really large company. So there was never any sort of fund. it was just hey you're investing in a public in a in a private company hoping that it can become a large public company and that's really the sort of the core use case for venture capital and because uh the portfolio effect of venture capital it allows um it allows um those types of investors to take a lot of risk on novel ideas. So they were with us from the beginning and then in terms of the um so because of that when we go public um you know those shareholders that'll be sort of permanent capital. So those investors, there'll be some who, you know, made an early stage investment um and they will then sort of, you know, pass their shares through to their investors or sell their shares. And there'll be others that will, you know, continue to hold um stock for, you know, a decade or more. Um but now we we don't need to provide a return. Other investors can come and buy their shares from them. And that's one of the great beauties of going public. Um the but for from the management team and for for many of our investors, it's not an exit. this is just sort of the next phase of building the company and scaling our mission. Um, and then in terms of the sort of like the I guess internal return for for us because we're an operating company, we're a corporation. These are all sort of internal returns and internal cash flow that's reinvested in, you know, acquiring more companies to start the employee ownership journey. Um, you know, we we absolutely measure how companies are performing, but we're not a fund. We don't buy and sell. And why don't we do that? We always try and have Lauren, you know, a capitalist re. We're a positive sum business. We're very much a for-profit business, right? Um that is a that is a a capitalist business, but we believe in multistakeholder capitalism. We believe in positive sum thinking. We try and always make sure that we have the the reasons that we do things line up with shareholder values and our own, you know, sort of business values, right, for all our stakeholders. And for us, it's very simple. Like we just actually don't think that private equity is a good way to invest. It may have been 30 or 40 years ago, but actually the returns of private equity are not very good. Um, and that that is with all the we like due respect to how much work goes into, you know, sort of building companies and raising capital and stuff, but the returns are just not very good. And if you buy a business for five times and sell it a few years later for six or seven times, well, that's great, but what do you do next? Whereas, if you're a business owner, you people can just should just relate to you to being a business owner. you sell a business when you're 60 or 65 or 70 because every year you own it, you get another year of cash flow. So if you have a 20 or 100 year ownership view with a company, you have 20 or 20 or 100 years of cash flow, not a sort of quick return. And then that so that's the sort of shareholder and capitalist side of it. And then on the company side of it, I think that private equity, we try and always just be neutral about everything. We're we're neither for private equity nor against it. we just think it's a it's just a thing that is um and it it you know and it exists. Um but I think that the reputation of private equity is is often uh far behind um the current reality. So I mean private equity in you know the early days was there was a lot of slash and burn. I think that private equity for many decades now has been actually more focused on growth. I actually think the issue um for from a company perspective um you know business owner perspective with private equity is twofold. Um one it's quite likely the company will be for sale multiple times right and that's not a healthy thing for a company to just always be for sale. Um and and two, the reason why um you know, private equity firms are often able to pay a much higher price than sort of team shares would um is is that oftent times um part of the investment case is to reduce overhead costs by dismissing you know sort of part of the you know management team or the um you know at least more of the middle management team and that's not our model at all. Um and so it that's those are all sort of personal decisions. Um and people should be allowed to do with their business whatever they please. Um but for us I think mostly because it is um the business is always for sale or perpetually for sale two or three or four times. And you know look there there's um you know real pressure to cut costs. Uh those are just outcomes that not every business owner wants. >> So everything you just said makes a lot of sense to me. I'm curious how hard was it for you to find investors who believe that? So I think that a lot of investors um sort of believe well you fall into one of two camps. Okay. So I do think that there are I think it's like um what's the phrase like received wisdom. I think it's received wisdom that the private equity model is like that's how you make money right and like this is it but actually the data shows that it doesn't uh and actually the data shows that holding companies ranging from you know Berkshire Hathaway to constellation software to you know like Roer back in the day or publicly traded companies in Europe like um you know Lifco they they actually provide far greater shareholder returns than owning a business for two to four or five years. Um so you either know that data or you don't. I think that's probably the way you look just among investors. You either know that holding companies are better shareholder returns than private equity or you don't. Um, and if you if you don't know that, I can't really help you. Um, you're going to need to just sort of study the data [laughter] and check your assumptions. And this is partly why team chairs is a contrarian company. I think amongst investors who do understand that of which there are a number because obviously Birkshire Hathaway is really famous. There's just probably not everyone knows all the other companies that are sort of, you know, sort of Bergkshire like in a different model, right? >> Sure. >> I think the debate on that this I think investments into a company whether public or private can always be framed into almost like debates about like the risks of the company and are they going to achieve XYZ. I don't think that that was sort of ever really like a debate about team shares. It was more like how big can you get? How long is it going to take? Like you know like um will the employees stay? those those types of things. Um if you thought about it as like a decision tree, yeah, do you believe private equity is the optimal model or not or holding companies and then you know if you believe holding companies are a great model, it was really more of a bet on you know execution and and time and things like that. >> So let's talk about what you do. Um, I kind of think of team shares as something of a big experiment. Uh, both in terms of understanding how you help business owners exit, sell their business and how you help employees get a stake in the outcome. Lots of people are doing this at small scale. You're doing it at a very large scale and I presume learning a lot of things that uh a lot of business owners would would love to know. for example, you you train managers uh to take over these companies. You bring in presidents to run them. Um [snorts] has your thinking about what constitutes good management of a small business evolved at all? >> Yeah, I think I mean first of all, so I I receive the the word experiment with like great delight. I think it's a like a huge compliment and I think that um I think it uh speaks to creating something novel and also creates speaks to sort of the start of ethos of always being able to continue to innovate and and and run sort of experiments within your model right to keep tweaking things. Um I I do think hopefully we're now at a stage, you know, sort of number of companies and um you know uh you know size of financial footprint that I I think we've shown that the experiment is paying off and that the market is is is really receiving what we're doing well both on the business owner side and on the employee side and on the shareholders side. But that said, so what have we learned within that? I think um I I think we've done a a really good job u retaining key employees, right? That's the first thing that when we underwrite a company, we we just are not able to acquire a company. We can't provide what we provide to um you know that the true sort of main street business that is sort of you know spouses into employees that just is is too owner dependent. For us we need something that is you know 20 30 40 50 employees sometimes even 100 depends on the size of the company but there are generally five key employees ranging from a general manager to a bookkeeper to a parts manager. It just depends on the business model and we've retained about 90% of those people. Of the 10% that leave, um, usually about half is sort of, uh, you know, sort of voluntary attrition that, um, you know, maybe it was a son or daughter that sort of decide they want to transition out. The other is that, hey, the the leadership team of that company determine after a couple years it may not be the right fit. So, I think that we've learned that that really assessing um, the team, it it is a is a core part of what we do. um you know both on again on the business and the capital side and the and the social mission side is that making sure that we're providing um you know durability to the business and opportunity I think that we on the sort of we we tend to about four and five companies we need to hire an external president someone who can be the president role to us means the ultimate leader who is financially accountable um for for the financial performance of the company before that it was the the founder owner right >> yep >> um and So, you know, we we we nearly always are able to retain for many many years the sort of general manager, the or the VP of operations, the so-called right hand, but they're already busy with a full-time job. And two, they they may not have had P&L responsibility before, which is a big thing. I mean, I even think of myself taking that on uh knowing I was going to do it. Uh and so, we find that it's sort of a bridge is is often needed or bringing in an external present. And I think the biggest thing we've learned which is just so obvious in hindsight but was a miss of projection was that industry experience is really what you want. And I think because the founders I think because we were total outsiders and generalists and we sort of figured it out. Um you know how to run small businesses through very humbling experiences by the way like lots of trial and error and mistakes. Um I I we we came into it with this perspective that like oh well like yeah if you bring in people from McKenzie right? uh that's a that's a scalable template and it turns out that in some businesses that can be a great answer especially if that person you know not only worked at say McKenzie but like they also were an engineer and were in the military and they worked at Caterpillar right that's a very different profile than you know like I was right um sort of coming out of investment banking and never managed anyone I think that um I think that industry experience is just um it's so funny because early on we we tried hiring from industry and it didn't go that And I think over time we we just realized that like oh we we should just sort of we're not picking the right people. Um and I and I think that that was very key. I think the other thing too is that um I think in the early days we talked only about when we would showed up at the companies we we would talk only about employee ownership and you know how great it was. Um and we didn't talk enough about sort of how team shares as a business makes money and in that you know that it's a it's a for-profit business. I think trust went up um as we were able to explain, you know, the whole picture. >> I think you're probably not the only ones who've learned that lesson. I'm always uh intrigued in talking to people about the uh the searcher model, which I'm guessing you're probably familiar with. Uh >> is it search? >> Yes. where you know the theory is you get a bunch of smart MBAs who have been taught how to run a business and know all the software tools and can come in and take over a any kind of bluecollar business in particular a home services businesses business and and run it better than someone who actually knows how to change toilets or you know mow the lawn or whatever founder of the business >> right um and I think that's a really interesting debate because obvious viously there are advantages to both. Um and it sounds like you you've learned that lesson as well. >> Yeah, I think that so it's actually like even if you take it up a level is because you have this debate in startups too of like generalist versus specialist. The answer like all things the answer is always great. You want both like you know same thing with AI like oh yeah it's going to do everything. No, it's going to be AI plus a human, right? That's my own opinion but um the uh so so I think that that is very true and that's how we sort of think about sort of matching um you know presence in our model in terms of the search fund model like I think that you know a search fund is is is quite different than what we do uh it's analogous of course because hey it's going and you are acquiring a small business or a small to mid-size enterprise from often a retiring owner um their difference is that they are building to it's a single LBO typically Typically, some people do it in a different way, but the typical model is you search for two years, you find something or twothirds of people find something and then they they uh raise the capital and then they close it and those are a bunch of steps to get through and then you've got to operate it and that the goal is to sell the company within three to five years. You could think of it as like a single LBO um a single leverage buyout, a single private equity deal. Um as for the sort of leadership piece, look, I think it can work. I think it comes down to the person, right? I think the thing is is that no matter the business model, whether it's ours or a search fund or, you know, you know, anything in between at the end of the day, running a small business, it's a gritty job, right? And it's not a strategy job. And I think that that was part of our mistake in in hiring generalists early on. We, by the way, we like we never described it as a strategy job. I think that people thought it was going to be a strategy job. uh and we try and even explain in my in my job like strategy is like 2% of my job right uh the rest of it is all execution um and so I think that that is whether you're a search fund whether you're starting a business whether you're inheriting a business whether you're a president in a team shares model I think at the end of the day uh or you're you're an employee getting hired into a small business I think that it is all about execution uh and that's very different than knowledge work where ideas are the execution rather than let let's say invoicing uh is the execution >> right you said you've learned a lot through trial and error what what percentage of the businesses you've bought have failed >> uh very few I think our our failure rate is something like one and a half percent per year um so so it's it's very rare um and most of them were sort of like really early acquisitions that were really small in two particular industries. Um it was either sort of in the contracting space sort of construction um or really small restaurants. We're talking 1 million of revenue, 2 million of revenue. Um you know, we had an idea to try and buy a couple of restaurants in a in a particular geographic market and and then you run them as a combined company. I think there was a combination of we didn't have the industry hiring model down yet. We it was a weird time right 22 to 23 to 24 the inflation uh situation was really I mean for for some small business cost was far in excess of the headline 8% inflation um and then I think that those businesses both the industry and the size of those companies you talking one two three million of revenue they are there is just much more um key person risk in transitioning the business like are you going to be able to keep doing the same amount of revenue and profit that the owner did. And at that size, because the owner, this is, you know, you there's a reason your podcast is called 21 Hats. Uh, in all seriousness, I mean, financially, the the founders of those businesses, they are doing multiple jobs, right? They're doing two or three people's jobs to replace them. Um, and so, so those were, you know, it was extraordinarily painful. Um, you know, there were a few businesses that we did have to to shut down. There were a few we were able to convince the former owners to to take them back over. Um but we learned um from those mistakes and you know moved on to try and make sure that we picked companies that worked really well in our in our model going forward. >> That's a remarkably low percentage of businesses to fail. Uh >> we're very proud I mean we're very proud of it but it's very I mean I can tell you like those were somber discussions. We we tried in in those cases for you know in some cases you know two years um to try and get the companies and and and for those ones that didn't work out there were there were another you know like you know there were sort of like you know two or three times that in businesses that went through through a tough period and we we were able to turn them around. Yes it is it is um compared to any stats around starting businesses acquiring businesses um it is a remarkably low number. You just mentioned that you did you kept trying in some cases for years. Do you think there were occasions when you tried too hard and too long because of the employee ownership aspect? >> Yes, but also the shareholder aspect too, right? So I I don't I actually could say actually it was the So let me just give you the shareholder side of it first. Okay. >> Sure. >> Because again it's always always trying to vote. We don't think that they are like z we don't think that they're like um competing interests in the same way that Amazon figured out that like hey if you treat consumers really well in the long run shareholder interests are served too right and it's a controversial idea our application is totally different but I'm just saying it's it's a contrarian idea and so so I think that um if you acquire business right and let's say it has a dollar profits right and the profits go to zero. Okay. Well, that's, you know, that's unfortunate um for for everyone. Um but if the profits can get back to a dollar, right, and you have a multi-deade, you know, sort of ownership period, you you are far better off getting the company sort of back to profitability, right? than than than to sort of shut it down because you have a multi-deade period of profitability and you risked capital to take on that business and start start the sort of journey for that company, right? And then I think on the employee ownership side, I think that um when you have a company that's both a good steward of capital but also takes a really long-term perspective, I think that it creates trust um and it and there's like alignment and that our model, you know, the way that employership happens is is through profit is through cash flow. So everyone's aligned. So um no, I don't think that employee ownership on its own was a cause. I think was us being like really um long-term minded. I do think there were some cases where that was too long because a little bit like you know the first time in your career if you have to let someone go you may wait too long. >> Sure. >> Um for us I think now it first of all it just almost never happens. It's very rare like I don't think it's happened in a couple of years and two we just now we have so much more data in the companies. We now have weekly operating KPIs and we have people who are directly responsible for making sure that the companies are are thriving and if we see something slipping, you know, even in a couple of weeks, we're able to um react and not react is the wrong word, almost like um get ahead of it before we see any issues coming. And and I would say three years ago, none of that software was built. and you know we were really um seeing the business um you know with us almost like a 90-day lag um in terms of financial reporting. >> So what do you think is the most important reason that explains that low failure rate? I is it the professionalization of the operation that you were just describing? Is it employee ownership? Are you skimming the cream off the off the top? Are you just buying profitable businesses that are much less likely to fail? >> Look, I I think it's one of those thing I remember someone using the phrase overdetermination where there's like, you know, seven or eight or nine reasons and it's like it's it's it's yes to all of that and like another seven reasons, right? So, I think first of all the all of the people at TeamShares really really care, right? like and and again we've constructed in the way that this is a missionoriented for-profit company and there are people who come and leave other opportunities to come spend time working on this company and scaling this you know as you called it kind of grand experiment right so I think we have everyone really cares everyone's in it for the long term everyone cares about sustainable profitability treating people well relationships all of that stuff um I do think that we um have a fiduciary duty to pick lowrisk businesses that can transition really well. And there are businesses that would be great if like you and I bought individually, right, to only work on that. And there are businesses that just don't work in the team shares model, right? I'll give you an example. We came across a call center business and they had part of their operations offshore. And you know it was interesting because they were able to pay the people in the offshore market well above market and then charge their customers a lot less. Um so kind of everyone was winning operationally very hard for team shares to be involved in a call center business in a in a developing market. It's just really really really hard. Uh and so that business was actually a great business. It was just sort of more operationally be super challenging. And so I think that um we do focus on businesses where because the mistakes we've made early on were the businesses where that had too much kind of key person transition risk. We are picking businesses that are um you know durable but we're also coming to terms at terms that are our market we're not going to be able to um sort of pay the types of multiples that a private equity firm or rollup would. Um, and I think that that it's the whole platform together of buying good businesses, hiring great leaders, retaining all the key employees, having people learn about stock and profitability, see the numbers in our software, and just having a lot of trust, right? And so, you know, like there's some uh you know, this is like very off media training to bring up, but you know, the vast vast majority of people are really happy because they get to keep their job. There's no cut in pay or benefits. They have an opportunity to earn stock. And sure, a bottom third of of of folks who are more temporary, they're never going to care about employee ownership. But the long-term employees now have a real opportunity to know that company is in a in a permanent sort of joint state of ownership with us and the employees. and and an opportunity to participate in in the in the the value and the profits of the company. >> You mentioned the the period from I think 22 to 24 being an unusual period especially with inflation. 25 was an unusual period too for all sorts of reasons. And um I I don't think I've seen another year like it where there was so much uncertainty and so much confusion as to whether the economy was good, bad, indifferent. I mean, people just to this day can't completely agree on it. And you, you know, I can find people who tell you that small businesses did just fine and others who tell you that small businesses were devastated. >> What's your view of that? You have you see a lot more small businesses than most people. Yeah. Just 25. >> Was it a good, bad, terrible year for small businesses large and your businesses in particular? >> Yeah. So thankfully for for uh team shares 2025 was a was a really good year. It was a record year both in terms of acquisitions um and that we acquired 25 million of sort of new IBIDA from new companies but also um the profits of of the existing companies grew sort of organically meaning sort of like you know the companies that were owned the year before all of them grew sort of a mid- teens um profit growth rate um which is you know helps everyone win right um so that so so internally thankfully the data um was really really strong for team shares. The outside perception, the amount of certainty, the the amount of times the recession debate came up again was was insane. Um and and [laughter] justifiably so. the uh you know a uh you want to call team share is an experiment uh [laughter] there have been a few policy experiments uh that that have been run uh you know from the spring onwards and it created a lot of uncertainty and um to the point where uh financing sort of dried up overnight because whenever in the at the bank level at the sort of institutional level like you know AI is its own thing and it's totally decoupled from you know, sort of most macro um economic stuff. So that sort of kept plowing ahead. But uh yeah, it was just sort of pencils down um for a lot of um you know, sort of any sort of financing and then and then just for companies themselves. Yeah, of course it has a knock-on effect of like great uncertainty for hiring and capital spending and you know then of course then there's there's companies that um you know are directly exposed uh by some of the policy changes that have that have been made. Do you have any manufacturing companies? >> We do have manufacturing companies but our companies are are all on shore. Um so actually so our I think you know I think literally 100% of our revenue is and then I and then you know very little I mean obviously there's an indirect exposure that people do buy things um internationally but >> well not just that people even domestic manufacturers uh saw their expenses go up because of the raw materials that were were tariffed. Did you did you have an answer to that problem? >> Yeah, I mean I think the the the unfortunate answer is that tariffs uh have to have to be paid by someone and it usually has to be paid at least in part by the consumer, right? And so tariffs raise prices like that's just that's just sort of like from the economics textbook. Um now most of our sort of like input costs across shares I think just really is domestic um sourcing all the way through. So there's very little exposure to imported parts and stuff. There's some indirect exposure, but it's very very very small. And so, you know, we knew which companies, there's a small handful of companies that had a little bit of, you know, importing of raw materials. And we were able to to manage it by balancing, you know, sort of, you know, price adjustments where needed. Um, but yeah, we we we focus on really simple businesses that don't have crossborder complications. Uh and that that goes like back to the beginning. Um I think we just want to have really simple to understand, simple to operate businesses that are durable and and you know full of great people and and reliably produce cash flow. >> Has AI had an impact on those simple businesses? Have you found ways to implement it to help them? >> So we've been using AI and building it into our software at the team shares level um you know for years, right? to help sort of like automate more tasks, you know, ranging from accounting to even the analysis up front. Um, we're now starting to run um, you know, certain implementations at some of the companies. We're sort of testing, you know, which places is it going to be most useful um, and then you know you know try and get adoption across the company again to help make running a business easier. What's really interesting with the small business AI debate is is that and this is someone like I'm an hourly active user of chat GBT. Like I'm not an AI skeptic. I love AI. I just think like with all new technologies, you get these maximalists that say it's going to solve every problem under the sun and that's ludicrous, right? But AI is really fascinating to me and we use a lot. But what's really interesting, Orin, is the the narrative in small business is like I think it's hilarious. I mean, people make these comments. People have raised in huge sums of money making statements like AI is going to take all the cost out of running a small business. Well, anyone who's ever uh made human contact with a small business knows that they are 100% owner escorps run by incredibly frugal people. Uh there's no cost to take out. [laughter] Now, what it can do is I think it can allow you to scale with fewer people. I think it allows a customer service rep to handle two or three times the revenue that he or she might have been able to do before. I think it allows you to complete certain tasks um much faster, right? And with greater accuracy. But um I just think that the the premise of like having costs to take out in a small business and we're talking about like you know 10 20 30 40 it's different if JP Morgan says hey yes we have 100,000 employees there's cost there's people or jobs are going to be limited this that's not I don't think that's really feasible at least in the in the short term and in our case it's not within our values uh we do not come in to to cut people uh we come in to buy the business the way it is and you try and help it um continue to evolve and strengthen. >> Do you think your business model would work if you were not converting the employees to employee owners? >> Sure. I I think I think you could I think you could absolutely because I I think that experiment has been run before. It's called Bergkshire Hathaway, right? Um so yeah, absolutely absolutely you could. um we think that uh now I don't know that people's success rate would be as high because um one you know look when you acquire a small business right it's generally all people driven it's not like you're buying you know sort of at least we're not sort of buying companies that we don't think they generally exist or businesses with 10-year contracts and you know you're you're buying businesses that are heavily dependent on people and retaining and motivating them and giving them an opportunity is very key to the success of the profits of the business. Again, this is why we don't think that um you know sort of employee equity and shareholder equity are like like as long as you do it in a thoughtful and profitable way. I don't I don't think that they are sort of um sort of really at odds with each other. Um so yes, of course you could acquire uh small business without employership. We don't we think that our model is superior both for um both for players and for shareholders. Um and we think that it's a really important thing to exist in the world and and because it is contrarian um you know like it's just not what most people are trying to do and it allows us to do do things differently and have a differentiated offering and and and a part of our differentiation too is that for a retiring business owner you don't have to go through all of this yourself. You just can sell the business when you're ready to retire and retire in 3 to 6 months. Some people stay a year. It depends on the situation, but you just get to sell the business and work towards retirement. It's not like a 10 or 20 year journey for you. >> What do your employee owners actually get in terms of ownership? Do the do they get a percentage of profits each year? Uh do they get a piece of equity when they sell when they leave or retire? Um do they have a say in how the company is managed? >> Yeah. So the we probably talked about this in the last podcast but to to recap yeah there's a you know we show up and and do a you know 10 year uh sorry a 10% uh restricted stock grant um that people earn through service over four years and then the rest of it is based on how um the uh how the business performs um with a with a path to majority employee ownership over over a couple of decades. So it's sort of the same ownership period that a um that I guess sort of a founding owner uh would typically own a business for. And so most of the value um in stock ownership um is from the appreciation of shares and it's really meant to reward the people that stay the longest. Now everyone participates um or in in most cases in the smaller employee bases sort of everyone participates. Sometimes when you get into retail concepts with 200 employees and seasonal workers, it's sort of only sort of the you know like really long-term employees but um the yeah so the so most of the participation is through long-term you know appreciation the stock from staying and profit performance. There are dividends um and those you know become meaningful over time but for now you know early on it is really about the um the long-term value of the stock. In talking to uh business owners who are considering some form of employee ownership, an issue that often comes up is the employees don't always welcome uh employee ownership. Uh as the owner uh articulates it, their immediate response is often, you know, that's a [clears throat] retirement plan. I need the money now. Um do you face that at all? >> Look, the it it's a totally fair question. we're not a retirement plan, right? And so that both things are true that I completely understand if someone is at, you know, towards the end of their career, but like you are not a retirement plan, right? We're a way for people to earn stock through um, you know, through staying. And so I think that um sort of setup is really kind of between the the former owner and sort of their decisions. Um but uh it really the the value is for the people who who are you know going to stay and kind of build the company over the next you know sort of 20 years with us. >> Do you think they really feel like owners? >> It depends. I mean the the status again there's there's a top third uh and I'm saying in terms of like how much they value uh employers there's there's kind of always a top third that really uh really really value it both financially and um emotionally culturally there's there's generally middle third that is like neutral and maybe they start off skeptical but become like okay I I'm getting a dividend and you know they said what they're going to do and you know within six to 18 months, people are feeling pretty good. And then there's a bottom third of of people who who really don't care about it all. Um either because they mostly because actually they're probably just going to be a short-term employee with the company could be seasonal, could be, you know, only a year or two and that's not what employee ownership or or any including like partnerships like Price Waterhouse like it's you know you you create you know stock wealth by staying there for two decades, right? Or three decades. So, so, so we're okay with that. That's natural. That's human nature. Um, but I think that you want to have a majority of the people um be, you know, be supportive. >> Do your employees assume any risk if the business were to fail? >> No. And that's a key differentiation. And when people say, well, why does it take 20 years? Like, well, we're taking every dollar of the risk, right? like there's a there's an SBA market out there for people to go and you know save up and and um you know take on a personal guarantee and take on debt service and cut their salary and um that market's out there for people to go to go to go take advantage of. We we wanted to provide an opportunity that was um you know again positive for because the the reality is is that in small businesses the the profitability levels is like a percentage of revenue. They pale in comparison to you know professional services or software everything. And so like the the pay in these small businesses is is is middle inome pay or or or lower middle- inome pay. So how could you sort of you know have the ability to take generally take serious financial risk um you know in taking so we wanted to create a way for people to earn it um you know in an aligned way as the company itself uh you know produces profits and people um stay for the long term. >> Do you do something to segregate or protect the money that your businesses will need to pay out employees who retire or leave? Is that money protected in some way against the failure of the business? >> Uh, no. We're not a retirement benefit plan. Um, so we're not um it's we're not a retirement benefit plan, >> but when somebody retires, they do get to sell their shares, right? >> Correct. >> So, it kind of works the same way, but you're saying it's >> well, the cash flows of the business are able to to repurchase that stock. But no, we don't we don't um and we we don't um is this will show up in our financial statements as a public company, but we uh we don't carry a liability um uh for the uh for the stock program. >> So what would happen if a if somebody worked at a business for 19 years and it and it failed? Would corporate team shares step in to protect those employees? We haven't come across that scenario of owning a business for 19 years and it failing. And so I think if that were to happen, we would make the right decision at the time, balancing shareholder interests and employee interest. >> I see. How many employees does team shares have? >> Uh at the parent company, it's about 85 people and then I think if you consider all the all the companies um all the subsidiaries, it's it's um you know it's well over 2,000. At the parent level, is there some form of employee ownership there for those employees? >> Yeah, absolutely. Um, every employee in um at Team Shures, Inc. has uh stock options in Team Trur Inc. >> How does it work for a public company to make the promise to never sell the business that it requires? Are are is that as firm a commitment uh going forward knowing that the the shares can be publicly owned? Yeah, I mean again it all comes back to having um a business model premised on things that are good for shareholders and good for you know companies and employees. And so again it comes back to this there's this received wisdom that it that it's better um better investing and better sort of returns to buy and sell a company quickly. Publicly traded companies are worth much more than private companies. And so it would be not in our interests or the local company and employee interests to um to sell a company. We just think it is much better off um in the system than trying to sell it to a um you know a competitor or to a uh to a private. So so it is or you know to a competitor to you know PE firm it just would just not be valued as highly as as a consolidated public company. So I think it's well within shareholder interests um or you know the permit ownership model and then again it's a highly differentiated promise that others can't or or won't make and that's a promise we can make to retiring owners that we will you know not sell your business for a profit. >> We're just about out of time here. A couple of quick questions I I just wanted to nail down. Um, h how do you find the businesses that you buy? Uh we get over 70,000 listings of businesses uh every year of businesses that are actively for sale from business brokers and M&A advisors and uh those listings are uh gathered into our software and we we start the process of of moving uh you know moving each acquisition through our underwriting process and we'll end up um of the 70,000 13,000 are kind of size qualified and we end up doing real work on about 3,000 uh companies per year. Um so we're able to um you know find companies that we think fit our model. Well, >> sounds like a job for AI. >> Yeah, look there is there is meaningful I mean like there's tons of human decision and as there should be it's a very important job both again on the shareholder side and on the on the you know the the human side of the business. Um but yeah there it it saves a lot of steps um and we've been building it in for years. I asked you this question last time three years ago whether you saw a way that you might be able to help the business owner and there are far too many of them who's too much a part of the day-to-day business to actually sell their business. There are a lot of those businesses right now especially with the baby boomers aging out. >> Have you gotten closer to figuring that problem out >> you know? Okay. So team share is the company um I don't think that's going to be in scope for us to to to solve that certainly not to solve that problem. uh I can I can give I mean maybe in the long distant future we can you know help create tools and things like that but we have a really you know focused sort of plan ahead of us we next we don't now uh in terms of just like my sort of personal opinion as a business person sort of what what a business owner should think about it's probably the same answer I said last time they should read and implement traction or some other system like that that is a management system um that helps people build the processes is the team the responsibility so that the business is not owner dependent and um you know I think the reason why I always recommend traction is there's a bunch of there's a bunch of them out there uh and I don't want to name the other ones because I don't want there any of them work whichever one gravitates to the reason why I always recommend traction or EOS's I guess is traction is the book and EOS is is the name of the entrepreneurial operating system it's com it's fairly complete and it's fairly simple a lot of the other ones can get really hung up in like you just they're overly analytical and everything like it is just a very simple playbook. Uh when you read the book and then you have a decision making you want to try an implement do you want to pay an imple to come in I think overall I think it's better to bring an imple um we have no financial relationship with the US uh just to be very clear I just think that's how I figured out how to run a business and I think that it works for all businesses uh whether it's five employees or 50. So, >> Michael Brown, I kept you longer than I promised. I apologize. The fact is I could probably talk to you all day. [music] I find this all fascinating. I really appreciate what you're doing and uh you're coming here and sharing it with us. >> Of course. Uh thanks uh thanks for having us on and um look forward to keeping [music] in touch. >> Michael Brown is the co-founder and CEO of TeamShares. [music] You can learn more about TeamShares at teamshares.com. Thank you, Michael. >> Thanks. Bye-bye.