Matt Cole, SBJ Capital | No One Gets Through Life Unscathed: A Guide to Private Equity Problem Solving

Sean Mooney:
Welcome to the Karma School of Business podcast. In this episode, we have an awesome conversation with Matt Cole, managing director with SBJ Capital. This episode is brought to you today by BluWave. I'm Sean Mooney, BluWave's founder and CEO. BluWave is the go-to expert of those with expertise. BluWave connects proactive business builders, including more than 500 of the world's leading private equity firms and thousands of proactive companies to the very best service providers for their critical variable on point and on-time business needs. Enjoy.

Very excited to be here with my friend Matt Cole. Matt, thanks for joining us.

Matt Cole:
Thanks for having me. It's a pleasure to be here.

Sean Mooney:
It's always excited to see people in real life here, and so I'm very happy to see.

Matt Cole:
It's a treat every time and I wish it would happen more often.

Sean Mooney:
Absolutely. I think I've been saying this too shall pass for a number of years and as it relates to IRL as they say, I think that we're back in it.

Matt Cole:
Fully. I eagerly awaited it and happy to be back in it, so it's good to see you.

Sean Mooney:
This is great. So Matt, one of the things that I love to start these things off with is just a bit of the story of your own journey and in particular as it relates to private equity, because I think so many people find different paths into the industry and I'd love to hear what was your personal path into PE?

Matt Cole:
Yeah, yeah, no, happy to. And mine is a bit circuitous. I feel like it's a more well-trodden path now and people have to take certain steps and so forth and that was definitely not the case for me. To a certain extent I started on the traditional path I went to, coming out of undergrad, I went into investment banking. Had a great experience there and I remember distinctly near the end of my second year sitting down with the head of my group who did not always take a lot of time to sit down with the analysts, but sitting down with them and then asking me what I wanted to do next. And he rattled off a handful of private equity funds that he could plug us into and that made me think, "Oh, this private equity thing's kind of easy. You just go ask someone and they get you a job."

And for whatever reason at the time I knew long-term investment banking wasn't for me, even though it was a great learning ground, I was particularly focused on operations and getting a better understanding of what it meant to make a company successful. Some of the pitfalls that we would see caused companies problems as opposed to just working on spreadsheets and so forth, and some of the stuff they do as a junior person.

So I went that route, never really thinking I'd come back to pure investing world or the buy side or PE and I worked at a couple of different companies in corp dev and FP&A and strategy and was sort of a strategic buyer. And then it was opportunistic that I got into private equity and working at SBJ because I had worked with my colleague, Gus Spanos at an operating company. Developed a great relationship and through that he was someone that had prior PE experience, he was starting to think about launching a new fund and when he did, it was sort of the perfect time.

It was the right combination of experience that I had to bring banking and operating set of experiences to PE and somewhat entrepreneurial to be part of the founding team, help launch the firm and do everything from working on the fundraise and our first handful of investments to setting up the management company and figuring out how to set up a printer and hire people and go through it all.

Sort of my own entrepreneurial experience and was really fortunate to have done that and fortunate to have come into this industry working with people that I knew and had a good relationship with and I think it's going to help us be sort of an enduring firm for the long term as a result.

Sean Mooney:
Yeah, I think it's such a great history and path that you've taken because you've seen both sides, all sides of the equation. You've seen how the investment banking world works when they're bringing opportunities to market. You've actually worked in the operating companies and now you're in the private equity firm itself. How has all that kind of helped you as you grow and develop?

Matt Cole:
Yeah. I mean, it's critical and it's a part of the story that we tell everything we do at SBJ is we're first institutional capital investor, so these are family and founder owned businesses. They are not looking for someone with necessarily the shiny bulge bracket Wall Street resume to come in and tell them what the next opportunity is with their company.

I think it makes a big difference both in actual experience to be able to say we've walked in your shoes and in demeanor and approach for how we present ourselves to these companies and we call them partner companies for a reason. We are looking to work with them to figure out the next phase of growth, the next opportunity with the businesses and having been an operator comes across and the types of questions you ask and the empathy you have, the appreciation for what they've done and what they've accomplished. So it's part of our story and I think it'll continue to be a key part of hopefully what makes us successful.

Sean Mooney:
It's a good lens into your background and why you've gotten to where you've gotten. One of the other questions I really like to ask is in terms of the trivia, we would know you better if we knew this about you.

Matt Cole:
Yeah, I mean the funny thing is I think I am pretty much an open book for the most part and I don't know. What you see is what you get so maybe that means there's not much depth to me because there's not too many tricks up my sleeve or something like that. But the thing that comes to mind, I guess, is that I think about my wife and I and how we focus on getting outside with the kids, getting away from the devices. We do a lot of skiing, a lot of outdoor activities.

Getting to know me is the same way I think we've thought about developing relationships with our kids is just getting away, riding a chairlift at a ski mountain, going out to the beach. That's when things come out, that's when conversations happen, fewer distractions. So anyone that's up for some Northern California surfing or golf or skiing, that's the way to do it.

Sean Mooney:
So do you surf as well?

Matt Cole:
Not, well. My 15-year-old son is already better than me, so I support him in his surfing endeavors. But I learned when I moved out to the West Coast in my twenties, it's not something that's easy to learn as an adult and mostly I'm trying to stay out of the way of people that do know how to surf, but I like it. And it is one of those things that it's meditative in a way where you have to be present. There is no sort of faking it with mother nature and the ocean. And I enjoy it for that aspect, even if I'm not sort of ripping down waves.

Sean Mooney:
Even just sitting out there on the board and-

Matt Cole:
Sure. Yeah, it's great.

Sean Mooney:
... the fact that you can at least periodically defy gravity on a piece of...

Matt Cole:
Very briefly, exceptionally briefly, at least for me, but those moments make it worth it.

Sean Mooney:
Yeah, I occasionally get a little bit of guff because I moved from the New York area in a little coastal town to Nashville to start a company called BluWave.

Matt Cole:
Right, right.

Sean Mooney:
You occasionally see waves on the Cumberland River, but they're not blue.

Matt Cole:
Right, right. Well, maybe we get out to one of these wave machine places and we can both give it a shot.

Sean Mooney:
Absolutely. Maybe I'll try the boogie board.

Matt Cole:
Yeah, yeah. Sounds good.

Sean Mooney:
So one of the things that I love talking with people like you about and private equity people in general is this, I think everyone in the industry is smart enough, everyone has a variety of skills and almost kind of like a renaissance. Well, you got to be good at a lot of things, but one of the most, I think common indicators of success is this concept of tenacity and grit and overcoming and something gets in your way, you kind of figure out ways to go around it above and below, et cetera. And so I'd be curious, one is maybe one of the harder things that you've encountered in business or life and how you've kind of took it on and overcome that.

Matt Cole:
Yeah, I mean honestly it's a long list and I don't know, it reminds me of this one saying that has stuck with me that no one gets through life unscathed and it's true. I think everyone learns that with time and with age. And from a business perspective, obviously it's hard not to sort of think about the early days of Covid and obviously everyone had a lot that they were dealing with during that period, personally, professionally, et cetera.

But we were a consumer-oriented fund with site-based businesses, hair salons, gyms, restaurants, school uniforms, early education. We were here on fire for a little while and that was a pivotal moment that I think we solidified relationships with our, certainly our management teams to a certain extent, our lenders at times. How do you support the team through that type of an experience? And I know we weren't alone by any stretch through that, but it's still recent enough that certainly bubbles up. Now on the lighter side of things, thinking about a personal example, I went through a house remodel recently, and that-

Sean Mooney:
That'll test the best of us.

Matt Cole:
I met my significant other, wife in college and we've been together a long time, we've grown together. We generally think we're pretty good at a lot of things in our relationship. Apparently co-project managing something was a terrible idea. Nearly destroyed us. But at the same time, to bring it back around a little bit to business perspective, it was a great reminder to think about when you are negotiating an outcome with someone that you're going to have a long-term relationship, with a founder of a business you can't be transactional. You have to think about the big picture and the long-term and what's important. And that was definitely, that experience was a reminder. And also that I'll never do that again.

Sean Mooney:
So how do you, I'd be curious whether it's the homeroom model, which in some ways sounds like the most terrifying of all experiences, to this shock where the world literally just shut down with two weeks notice.

Matt Cole:
Yeah.

Sean Mooney:
How do you even find the grace and the calm to just take something on and figure it out?

Matt Cole:
Yeah. It's a good question. I don't think there's an easy answer. It's something that you always have to focus on, but just maintaining that long-term perspective, thinking about what's important. It's too easy to get hung up in day-to-day fire drills, piles of emails, what issue is around the corner and something like Covid in those early days with our businesses, it was just how can we support you? What can we do to help take some of these issues and mitigate them, put some of these fires out and think about what you're trying to accomplish long term because that didn't change. Same with the house remodel.

Sean Mooney:
Is your house done?

Matt Cole:
It is, thank goodness, and we're going to leave it just as it is.

Sean Mooney:
That'll be the last home model.

Matt Cole:
That's it.

Sean Mooney:
I've done one minor one myself, and we go through these series of buying a house that's perfect and ready to go to a fixer to a perfect ready to go. We're more of a fixer now. We do it and then we stress our relationship and then we'll say, "We'll wait for the next one."

Matt Cole:
It's human nature to forget about that and then you get reminded again.

Sean Mooney:
No, I think it's a great example of tenacity and grit. So one of the things that I think certainly is occurring in private equity if not elsewhere, is this the importance of value creation and there's a number of things that we all know that's driving that. How does your firm approach value creation at SBJ and what resources do you all bring to bear to support your portfolio company and their teams to do this?

Matt Cole:
Yeah, it's super important and like I said, we're first institutional capital investor, so everything's family and founder owned and so value creation's important to any investor. For us, you kind of distill it down to two things, professionalization and then accelerating growth.

Now the truth is I'm not a huge fan of the word professionalization. It sort of suggests deficiencies or things that we have too much respect for what these business owners have done to say that we're coming here to professionalize, we're coming to help solve problems that they probably know exist. We're bringing resources, people, outside perspective, access to experts that they, not don't know they exist, but maybe they don't have time or just financial resources or otherwise to go access. And that's what we're trying to bring. We work together to figure out the growth plan.

Yes, when you're sort of going through diligence and especially in an auction deal or something like that, you see the bullets on the page and you think you know, but these business owners know what the opportunities are. What we're there to help with is how are we going to ultimately execute on that? It's how we got to know each other. Bringing in third party resources, partners, consultants that we get to know through BluWave. That's part of it.

We brought in a full-time VP of talent, our first full-time operating partner and a low mid-market fund that is a, it's a well-known strategy mid-market and up, but I don't think there's a ton of funds of our size that have full-time VP talent operating partners because we are constantly augmenting the teams that we invest behind.

We've got this one stat that in our first fund we brought 40 C-level or heads of function, people that were new roles to the companies. Real estate heads or CFOs or a variety of things that are adding to the team that's there and bringing outside perspective outside board members, et cetera. So we are bringing the resources to execute on the plan that I think we jointly know exists so that the team is bought in, the management team is bought into what we're trying to accomplish and we can execute against.

Sean Mooney:
I love your point about these entrepreneurs and family owned businesses and I think a lot of people maybe, maybe not a lot, but certainly and substantially greater than one amount of people think that these business owners, let me show you the way the world works. And the reality is they often do, but really where they kind of struggle is a resources and then B, allocation and prioritization.

Matt Cole:
Sure.

Sean Mooney:
And it's interesting, when I was in PE for 20 years, I never really fully appreciate it because I never was an operator per se, but now having started and built a company or building a company, you totally get it in ways that I never did before where you said, "Yeah, I know we're going to get to that, but we don't have the bandwidth." So I-

Matt Cole:
Yeah, no, bandwidth is a huge part of it. And I think it is also part of our culture as a firm and how we present ourselves that sure, we have ideas on sectors, we have theses on sectors, we do a lot of diligence to uncover things about some of these businesses that maybe they're not as focused on, but we'll never come in pretending to know more about that business after a few month diligence period then the people that have been there for extended periods of time or started that business themselves.

And one, I just think it's just a fact. And two, I just think it would be incredibly arrogant to come in any other way. And I think that's also maybe part of the fact that we have been operators and have had too many things on the to-do list such that you're just trying to get through the day and you know where the opportunity is and you know what you need to do, but you need some help and that's what we're trying to do.

Sean Mooney:
Yeah, I think that that is spot on. And I always kind of joke if I were to ever go back into private equity, which I have no plans to do, I don't think you guys would take me back, but if I did, I was like, "That'd have to be so much better."

Matt Cole:
Yeah, the lessons learned that you can apply for sure.

Sean Mooney:
Absolutely. So as you think about your firm and you think about the opportunities that are out there, sometimes it can be really, in times like now where we're maybe in a recession, maybe not. Who cares if you're growing 0.5% or declining 0.5%, what's the real difference? But one of the things that's really important is how do you manage through it? And so what are some of the thematic areas that you're engaging in with your portfolio companies that probably other companies and business leaders should be thinking about as well?

Matt Cole:
Yeah, I mean the initial thought is just, there's been some obvious ones in the last couple years where labor cost, labor optimization, pricing strategy, if you weren't having those conversations over the last couple of years, you're missing out on something. And I don't think that's novel, but that's certainly been a big theme just as a result of the environment that we've been in.

Fast-forward to today, a new banking crisis, there's always something that comes up. The market's always changing. I think we're still trying to focus on the here and now. How do you continue to be efficient and thoughtful about labor and not just cost, but also recruiting, retention because a lot of hidden costs with turnover and we're very mindful of that and we're having that conversation with our teams all the time, but also looking forward.

And part of the value creation story that I didn't touch on as much before is the use of data and how are you using data? How are you implementing systems? Especially as a small company, what can you do? I'll mention this not to get out over my skis. Obviously AI has become a much bigger conversation this year. Not that it's new, it's sort of incremental innovation for the last 20 years or so, but arguably maybe there's a turning point with it in the near term and medium term.

And it's an open question for us. What does that mean for smaller business? A variety of industries are going to be disrupted, but it's an opportunity for us to be having conversations with our companies, our partners to say, "What are we doing? How are we preparing ourselves for some of these things that are seemingly inevitable, but even if they're not just how are we getting ready for potential technology disruptions and what are the opportunities for us?"

And again, with a small company, sometimes you got to walk before you run. And so we've been very focused on better use of data, implementing systems, scalability, managing with data, all the types of things that then to the extent there are opportunities with newer technologies, be it AI or something else, you're in a better position to take advantage of it. So it's that sort of readiness conversation that we've been having, and I expect we're going to be having more over the next 12, 18 months.

Sean Mooney:
I think your perspective there is right on point. In terms of what we see it's a lot of thoughtfulness around, we all want to be sprinters, but let's get that foundation. There's so much value in getting the data clean and visualizing it and then analyzing that before you're building some cloud LLM that's proprietary and there's just so much benefit you can get from doing those basics.

And the tools are commercialized now such that any company can and should use them and so the smallest of the small companies should be using Snowflake and Tableau or Power BI and get a part of the bundle and they all can do it without too much expense and it'll change fundamentally how they understand their business.

Matt Cole:
No, I totally agree. And look, part of it is also that transition from being founder, family owned and run where there is a lot of institutional knowledge and how do you ultimately go through that phase of growth where that knowledge in people's heads is being managed across an organization and managed with data, which is ultimately the only way you're going to be able to scale.

And so we're super focused on that and our teams certainly get it, and it's not that we're trying to make them all use ChatGPT every day, but maybe there is an opportunity and just using data in a more sophisticated way will always be important.

Sean Mooney:
And I imagine, correct me if I'm wrong here, but a lot of founder owner businesses, they kind of keep the information tight, very tight. And so a lot of times the senior member of the teams don't even know the revenue of the business or certainly don't know the full P&L or the balance sheet or the income statement. I imagine if you're able to even just share those kinds of information and then even if you can give it more regular, that in itself has got to be this-

Matt Cole:
A hundred percent. And just having the regular cadence when you have those conversations and review things and go one step further and say every company, every industry arguably, but certainly every company has a few set of KPIs that really drive the business. And sometimes the ones that you think they're going to be going in aren't the ones that you're focused on a year or two later.

And by leveraging data, by having cleaner data, you can get to the point where you can be really managing the business around just a few KPIs. And the more getting that information into all of the hands to your point and all the people and the brains that need to be thinking about it, is an important part of this exercise of bringing in a private equity partner and thinking about how you're going to scale.

Sean Mooney:
And I also really like your point about few KPIs and-

Matt Cole:
Keep it short.

Sean Mooney:
It's interesting, and I kind of preached that before in prior lives, and then we, even at BluWave went along that journey where we were bringing all these data tools in and we realized that Tableau is named Tableau for a reason because there comes this tableau of charts that ends up looking like an impressionist painting up close where it's just a bunch of dots.

Matt Cole:
Yeah, yeah.

Sean Mooney:
But you pull out and if you have fewer, you can actually see pictures. I think that's another really good lesson learned for anyone building a business. Know the few things that matter.

Matt Cole:
Yeah. And it's a-

Sean Mooney:
And that takes work.

Matt Cole:
It takes work and you don't always know it. So our early education business, what we realized that the key metric to be tracking was conversion of tour to enrollment as in a family that comes into tour the school, how many of them actually enroll? And there's a lot of things behind that and how many people even came into tour? Do you have the capacity and so forth?

But if you're really just focused on that and what that meant from a consumer experience perspective and customer service and so forth. That was really going to drive the business forward and we didn't know that on day one, but as you get into it and you have the data that you can track, you see how important that is ultimately to the bottom line.

Sean Mooney:
Yeah, I think that's really insightful as we were kind of talking to understand the three things that matter it really requires you to think about and understand your business. And that's not easy. It is so much easier to have 50 tableau kind of things, but if it's like, no, you got three. So I think that's a great lesson for any business leader out there is take that time to know fewer things. And that gives me anxiety and apprehension, even myself as a business leader, like, "Oh, [inaudible 00:23:30]-

Matt Cole:
Think about what those are. Yeah, yeah.

Sean Mooney:
I got to make decisions and-

Matt Cole:
That's right.

Sean Mooney:
Allocate? So I think that's great. One of the things that I love, Matt, about the opportunity to work with you and your colleagues at SBJ and others in PE is you all are so in tune with the business world and you figure things out just by virtue of who you are and what attracted you to the industry. And so one of the things I love at BluWave is getting to work with you all. Every day I'm like, "I didn't know you could do that. Why didn't I know that before?"

And so I write this email what I wish I knew, and there's all these things that I wish I knew before and just kind of am flabbergasted. So I'd be curious if you were to go back to younger Matt, 22 years old and go back and say, "Here's something I wish I knew then," what would one of those be?

Matt Cole:
That's such a hard one for me because it's a great question and to be able to demonstrate sort of perspective and what have you learned over the course of your career? And here I am in my mid-forties, I've been at this for a while, and as I think about it, I realize me at 22, I wouldn't have listened. It would've fallen on deaf ears.

And I mean, as I just think about my route to PE and to some extent my somewhat non-traditional path to getting here, for me it was just embracing the journey and the successes and failures and everything in between. That's been the reality for me. And I think the best or the biggest lesson learned for me is more than what I've been learning more recently is to just have accepted that because it wasn't a direct path. There were a lot of ups and downs, but it got me to this point and I think I'm at the right place and I'm extremely excited about what I'm doing now, excited about the firm that I'm part of, and it was a journey getting there.

Sean Mooney:
I think that is a great mindset to have and a really hard one. And that's absolutely one that I wish I had as well because it's so easy to just put the blinders on and run and run and run. And I think I probably went through kind of an existential crisis because I had been working my entire life to become a partner at a really good PE firm. And then I got there and I said, "Wait a minute. I don't even remember the journey here," because I'd been chasing this one thing.

And then you get it and you're like looking left and right, you're like, "What do I do now?" And I never took time to smell the roses, and part of that's probably just my DNA, I can't help but just keep on pushing things, but boy, do I wish I did that. And I'm trying to find the grace in my life to do that better now, and I still have a hard time.

Matt Cole:
It's a constant lesson. I won't sit here and pretend that it's all, I've solved the riddle. It's a constant battle. So I completely appreciate where you're coming from. I had different visions of where my career was going to go a couple times. I'm really excited about where I'm at now, but that was not always obvious how this was going to go.

Sean Mooney:
It's like this whole idea that life's a journey, not a destination.

Matt Cole:
Yeah, yeah.

Sean Mooney:
So even at BluWave, I try to tell folks, since we have Libby who runs our office operations and she's our ultimate utility glue person, I just ask her, "Libby, can you just remind me every once in a while give people hugs and say, good job?" Because I have just such a hard time. It's not that I don't appreciate it's just the blinders are on.

Matt Cole:
Oh, you're a hundred percent right. So you'll find this maybe a little bit amusing. I present myself as relatively relaxed, I think. It's not always what's going on underneath the surface and I'll have these periods where I'm really focused on something and I'm staying up too late and working late into the night and not sleeping enough, and it catches up with me. So I've gotten to the point now where I put on my email calendar at 10:30, it's time to go to bed because otherwise I need something to pop up and say, get up and keep going tomorrow, but you got to slow down.

Sean Mooney:
I like that idea. I'm going to start scheduling just kind of my moments of humanity because I think it's just so easy to-

Matt Cole:
Schedule the team hug. There you go.

Sean Mooney:
So I'm going to put that recurring every three weeks. I don't know if I could do every week. Every three weeks, "Say, good job."

Matt Cole:
Yeah, right. We get going and yeah, there's a lot of type A people running around and you need those reminders to keep some perspective.

Sean Mooney:
I think that's a great lesson, and I'm definitely borrowing these scheduling things too-

Matt Cole:
Right. Little things, yeah.

Sean Mooney:
Because it helps, right? It is just not that people like you or me or others, we don't want to do those things. It's just life moves fast and you're just trying to keep up with it.

Matt Cole:
Right, right.

Sean Mooney:
Well, Matt, I really appreciate you spending the time here with us. I've learned a ton and I know others will as well. So thanks once again, and we appreciate you taking the time to be here with us.

Matt Cole:
It was a real pleasure. Thanks for having me along.

Sean Mooney:
Special thanks to Matt for joining. If you'd like to learn more about Matt and SBJ Capital, please see the episode notes. That's all we have for today.

For more information on this podcast and BluWave, go to BluWave.net/podcast. That's B-L-U-W-A-V-E. Please continue to look for us anywhere you find your favorite podcasts, including Apple, Google, and Spotify. We truly appreciate your support.

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Private equity insights for and with top business builders, including investors, operators, executives and industry thought leaders. The Karma School of Business Podcast goes behind the scenes of PE, talking about business best practices and real-time industry trends. You'll learn from leading professionals and visionary business executives who will help you take action and enhance your life, whether you’re at a PE firm, a portco or a private or public company.

BluWave Founder & CEO Sean Mooney hosts the Private Equity Karma School of Business Podcast. BluWave is the business builders’ network for private equity grade due diligence and value creation needs.