Dr. Jeremy Weisz: 15:39
How did that start? The medical physics piece that started.
Keith Burns: 15:45
So, like I said, went to Emory, went to law school, you know, worked at the law firms, worked at Goldman Sachs. Michael was an entrepreneur. He had a custom tailoring business, and one of his clients was a search fund entrepreneur. So that person went out and found a company to buy, raised some capital, bought the business and was successful. I think he bought a stair company.
And so he introduced this concept of a search fund. Right around 2008, when Michael’s business was closing because of the great financial crisis. And we he shared it with me. And I was like, you know, this is something we should file away and we should really consider doing this because Michael and I have a really complementary skill set. And so fast forward that I’m still working at Goldman, having a really good career in compliance.
Michael’s at the University of Chicago, and they’re really starting to talk about ETA. And he was one of the leaders there in getting ETA as a real path at Booth. And he was like, I think I want to do this search fund thing. So I’m not going to recruit for private equity and banking. And I was like, look, don’t leave me behind.
I had gotten my first big bonus ever at Goldman, and I was like, I don’t think I can get two of these. Like, I can get one and walk away. So one hit wonder. But if I get two of these, like those, those handcuffs will go from being open to like fully closed the golden handcuffs. And so we were in a hotel in Chicago when he was in school.
We had a glass of wine and we said we were committed to buying this business. So we raised a search fund In 2013. We started in July of 2013, and by April of 2014 we had bought Kruger Gilbert Health Physics that that medical physics business in Maryland and we were off to the races.
Dr. Jeremy Weisz: 17:42
What were some of the things you did to help grow that? Right? I mean, because it’s still, I mean, successful at the time, but you really, you know, 100 times it or whatever, right? So what were some of the things you did to make it so big over time? Yeah.
Keith Burns: 18:02
I think we did a lot of things to grow it. But the first thing I’d say, and the most important thing we did and one of our, one of our board members, Rich Augustine, was really adamant that we get a basically an HR assessment. So there was this company called Right Management and they came in, they interviewed all the employees. They found what was working well, what wasn’t working well, and they got a list of suggestions for us to follow, and they essentially handed us a 40-page report of mostly what was wrong with the business. If you can imagine.
So it’s like these are three, you know, two pages of really great stuff about the business and the people and the clients. And it was 38 pages of stuff that we needed to fix in the business. And it really gave us great insight into sort of what we had stepped into. And it also gave us a roadmap. And so the first thing we did is we just meticulously over five years, it took us five years.
But everything in the report we addressed, so the 401K, the IT, the sharing of equipment, pay raises, how we structure who went to what client, you know, paying for support for conferences. You know our knowledge we improved our knowledge of the business. And so the first and most important thing, from my perspective, if you think about it, like building a house, is you have to have a good foundation, and that really comes from building a relationship with the people that are generating your revenue, that are generating your returns and showing that you care about those people. And in turn, you get that surplus, right? There’s always sort of the minimum level that any employee does to make sure they get fired.
They don’t get fired. Right. But there’s an excess. There’s more that they can give you. If they feel like you care about them, you respect them, you’re going to give them growth opportunities.
And they get to take some pride in what’s being built. And so I think the good thing that we did was by building that foundation when it was time for, you know, Michael was, you know, largely in charge of, of growth, you know, whether it was selling, you know, new clients or, you know, finding the next business that we wanted to buy, people were much more receptive to sort of taking on all the work that came with that, because we had really laid down that foundation of you told us what needs to be addressed. You. We gave you a voice and we heard you, and we addressed it now. Did we change everything to their benefit?
Not necessarily, but everything in there was fully addressed and acknowledged and worked on in some way. And a lot of cases. We flipped it to them and said, all right, you think the 401K sucks? So who’s on the 401K committee to find a new one? And I think that was the first thing.
But largely our business grew through acquisition. So we learned how to run the day-to-day business really well. We learned how to grow organically. We learned how to start, you know, raising prices where we needed to. We learned how to hire physicists really well.
We learned how to build a culture. We used iOS or traction to build that business. So we started that in 2017. So we really built, you know, CDP as that really good, what we would call a platform to go out and acquire businesses. And what we did ultimately is we acquired these businesses and, you know, throughout time tried to come up with, you know, a best practice for how those practices should be run.
And, you know, you said 15 in the intro. They’ve since done more. So I think we’re approaching, you know, over 20 acquisitions that have gone into building one physics. But the business is now the largest player in the physics space, has a great management team that’s been pulled from, you know, really great companies, GE healthcare, etc., and is really poised to be a leader in the space for a long time, which is a far cry again from that 16 person company up in Jarrettsville. So we’re really proud of what the team has done.
Obviously, you know, Michael and I had the idea was our vision. But there were a lot of people, you know, our investors on both ends, you know, all of our employees, our customers that allowed us to get to that place.
Dr. Jeremy Weisz: 22:32
No. I love how you started with that foundation. Obviously, the board member talked about the HR assessment because I feel like when I talk to people, they’re really focused on marketing and sales and growth. And it looked like you kind of looked at the foundational piece, which was the staff to build on first before you kind of poured fuel on it. So it was an interesting I wasn’t expecting you to say that.
Keith Burns: 23:00
I, you know, you know, we were you know, we were at a conference together. And Dan Sullivan, you know, was at that conference and who not how is a book that I really I really resonate with and I don’t and I didn’t even know I don’t think he wrote it at the time, but like this concept that I wasn’t going to, you know, I don’t have a master’s or PhD in physics, so I can’t go do the actual work that my physicists were doing. And, you know, I wasn’t doing the contracts. You know, I wasn’t doing the billing. And so all of these things in business have to be executed through other people if you want to scale and grow.
And so that is the challenge. And I think all entrepreneurs that want to scale their business, it’s the hardest thing for them to embrace is the fact that scaling requires less tactics and more finding the right who’s to put in position. And I think that separates the people who basically have a job from the people who have built businesses, and then from the people that have built businesses to the people that have built empires. Right. Is the level to which you’ve embraced this concept, that you’re not the person that’s going to make the business go.
They’re going to be other people. And, you know, I, I’m a part of a coaching program at Dan Martell. He always talks about and I really love it is you have to have a vision big enough for your employees to fit their dreams in your dream. That’s great. It’s most of it’s most powerful thing I’ve ever heard.
And it’s what inspires me with Laura. It’s what inspires Michael is that we’re constantly sort of pushing how big can our vision be so that all of our employees’ visions can fit inside of that and have space to grow within that?
Dr. Jeremy Weisz: 24:54
I love that. So we talked about the foundation, right? I’d love to hear, as you add it, add-ons and made acquisitions under one of physics. What were some of the learnings there? And before you talk about that, Keith, when you talk about, I don’t know, I think in movies for some reason.
So when you’re talking about, you know, some staff will they’ll do the minimum, right? But in the right environment and right company, they will just give everything they have. Right. And I think of this, I don’t know if you’ve seen this clip before, it’s the death crawl scene from Facing the Giants. It’s I don’t know, I’m a sucker for a, like, a sappy feel good football movie.
So I encourage you to check this out. It’s I won’t even give it away. But some, you know, watch it. And it’s where you put, you know, they’re putting someone on their back and seeing like, how far can they push themselves. Right.
It makes me think of that staff who you were talking about doing the bare minimum versus like everything they got. So this, this scene and this is what I visualize with that. So I won’t play it here. But if anyone wants to check it out, just go to YouTube and put in death crawl scene from Facing the Giants. Yeah.
So talk about learnings from add-ons. Yeah.
Keith Burns: 26:23
The first thing I would say there’s a couple of things. The first thing is never promise that nothing will change. Now I would argue Michael would argue that we never told people that things wouldn’t change. But there are contrary views out of the almost 20 acquisitions that we’ve done that sometimes we might have said, you know, we’re going to keep things the same. They won’t change.
That is just not factually true. If you’re bringing two organizations together, even two well, running organizations together, you’re going to have to make choices and value judgments about how are we going to do air, how are we going to do marketing, how are we going to staff these companies? Do we want to leave them to operate under their separate brands, or do we want to create one brand? And in most cases, a, you know, sort of the loose, decentralized holding company, particularly if you’re in an industry where all the companies do the same thing, is a really tough thing to do. I don’t know if you have a software background, but there’s this, this concept of technical debt.
And the longer you leave old code in and you don’t update it and change it, that debt sort of follows you and eventually it catches up with you. There’s what I call integration debt. And when you are buying add ons in a business, if you don’t address those issues up front, how you’re going to treat air, how you’re going to do your finance, how you’re going to do your sales and marketing, how are you actually going to do the operations of the business? How are you going to layer management over it? Every time you do that, you’re going to incur some integration debt and it doesn’t go away.
And in some respects, as you’re scaling and growing, it collects interest. Right. And it compounds interest. And so you have to pay even more back later on. And so I’d say never, never just tell people things are going to change because they will and they will anchor to you telling them that.
And it will make it harder for you to make the changes when you need to. The second point, again, I went a little ahead, but that you do incur integration debt if you don’t have a focused strategy on how you’re going to pull two disparate, you know, five disparate, ten disparate companies together and being more thoughtful up front about that and going slow to go fast is is a phrase I’ve heard a lot from my mentors. Going slow to go fast. When you have a programmatic acquisition strategy, I think makes a lot of sense. It allows you to do that.
And then the third thing is, you know, from my perspective, you have to respect the culture of the businesses that you’re buying and look to not kill the things that make those companies great. There’s a tendency, you know, obviously, I talked about the integration debt. And if you’re thoughtful about it, you know, in a lot of cases, by the time you’ve done this for a while, you can say, this is how we do all these things. The other flip side of that is you still want to leave some ability to understand. And this comes in with listening to people and asking the right questions.
What is the secret sauce of this business? What about the culture draws these people here and making sure to the extent you can, you don’t actually kill what makes those companies special? And I think we probably made all three of those mistakes throughout our time period at one physics. And, you know, I don’t. I don’t know what they’re doing sort of day to day. But those are common mistakes.
I think anybody that is acquiring businesses that they make. But business is messy. You know, I think thinking that it’s ever going to get to a nice wrapped, beautiful, you know, Tiffany box type package is just unrealistic.
Dr. Jeremy Weisz: 30:28
No. That’s another great question to think about, which is what made those companies great. And you know, from an integration, it seems like a lot of lessons are with really integration pieces and bringing the companies together in a harmonious fashion to on both ends. Right. To not kill what’s great in this company and affect the greatness of the company that you’re currently running.
I’m curious. It makes me think, Keith, why services based companies? Because, I mean, you could go after software companies. I mean, there’s a lot of different companies. So talk about why that when you’re talking I’m like, oh, he should you know, they could probably acquire software companies. Right.
Keith Burns: 31:10
And we may and we may. I think services if you if I take you back to 2014, when we first bought the business, Michael and I had never run a business in our lives. Right. So services businesses, right. We had a recurring revenue.
You know, over 80% of our revenue was recurring. We had really low churn of clients. There were industry tailwinds that were supporting, you know, industry growth. We didn’t have high customer concentration. So it was an easy business for two jokers who had never run a business to run.
And so that’s why we like services then. And frankly it’s still why we like services now. You know, our perspective is business is hard enough. So if you’re going to search for one, try to find one that’s going to be easier rather than harder. Some people may disagree, and I think Michael and I now have the ability, I think, to open the aperture.
We probably could look at software and we may end up, you know, buying a software business at some point because we have more tools and more confidence in our ability to recognize the things that we know and what we don’t know and then find the right who’s that could support us. Like, I’m obviously I’m a lawyer by background. I have no coding experience whatsoever. But I also didn’t have a PhD in physics and I figured that one out. Right.
So have the confidence to figure it out. And I think we we’re more apt to do that now. But when people are beginning, I think it’s really important to focus on those industry and business characteristics. You know, it’s the thing I teach in my class. We teach them about how to think through a scorecard and what an ideal business looks like.
And we teach case studies in those classes where, you know, we teach some cases where it’s really clear that that was going to be an amazing business in hindsight. And then we teach them cases where, you know, it could have gone really well, but in actuality, in hindsight, you look at it, you’re like, yeah, there was some red flags with that business and that industry, and maybe they should think a little differently. And it also really just, you know, there’s a little bit of luck involved in all of this stuff and from an entrepreneurial perspective and buying businesses, but all else equal, we like services because they’re simpler businesses. And so if you’re really good at operating a business, then hopefully, you know, you can just build it that much more. But that’s the reason why.
Dr. Jeremy Weisz: 33:36
Yeah. And we’re going to talk about that with the red flags. And when things don’t go well because it kind of combines two things you were talking about so far which is church and tailwinds. Okay. So we’ll talk about the brass company.
But before we get into that, just talk about the teaching that you’re doing. Where are you doing it? What are you teaching?
Keith Burns: 33:59
Yeah. So Michael and I had a couple of investors and sort of colleagues in the space write a case study on Kruger, Gilbert and the business that we bought. And so probably from 2020 to 2024, every year, couple times a year, we would go to the University of Chicago, or we would go to Yale and teach these cases on our on our particular cases, guest speakers. And we got great feedback from the students. And then we would leave every time like, oh man, that was awesome.
Like, this is really yeah, we were energized.
Dr. Jeremy Weisz: 34:34
And so are these typically MBA students.
Keith Burns: 34:38
These are typically MBA students. Correct. So we were in the MBA program, full-time MBA program classes. And so Michael went to the University of Chicago booth and the professors there shout out to Mark Agnew and Brian O’Connor Built a great ETA program. They had taught classes there for 8 or 9 years.
And they wanted to one get a little bit of a break of teaching multiple semesters, but they were also building an ETA fellow program at Booth, and they asked Michael and I to join the faculty as an adjunct professor to teach a quarter of entrepreneurship through acquisition. And so we accepted.
Dr. Jeremy Weisz: 35:21
We taught an ETA for anyone listening is entrepreneurship through acquisition correct? Yeah.
Keith Burns: 35:28
Yeah, exactly. And so we taught for the first time in the fall. I was scared as heck to do it for the first time. Even though I know a lot about the industry, I’ve been in the industry, you know, 12 years. There’s just always a nervousness when you’re sort of on stage and in front of really smart students, and you want to make sure you’re prepared.
You don’t let them down. I had a blast. There’s some of the smartest, you know, students ever. The energy level is high. You know, they were asking really amazing questions.
It was just one of the best things I’ve ever done in my career. And so it reinforces again, just to be young and have that energy is so exciting. And to look at the world and the opportunities of ETA or the many other things that they could do. It’s really exciting. But it also reinforces the lessons that we teach around.
Why do you want to do search? What are good criteria for a company? Understanding the success and failure rates in search, which I think are really important. And just taking them through the life cycle. It also, you know, being a really great teacher helps you learn those concepts in a really strong way because you have to convey them to other people.
So it’s really been a really great refresher for us to be able to understand that and to, you know, give back to those students.
Dr. Jeremy Weisz: 36:57
Yeah. We’ll talk about some of the red flags we’re looking here. This is the University of Chicago. Do all the business schools have like entrepreneurship through acquisition program or is that not all of them or.
Keith Burns: 37:08
Not all of them? I think a lot of the top, you know, MBA programs have them. And this is really I mean, I think Michael and I the year we went out there may have been like 20 or 30 searches that were raised maybe. And now there’s, you know, well over 100, you know, 150.
Dr. Jeremy Weisz: 37:27
So you need to be on their podcast. Keith, I don’t know. Have you been on it?
Keith Burns: 37:32
I just recorded it.
Dr. Jeremy Weisz: 37:34
Okay. I was going to say I’m going to email them today after this. If that’s the case, the NBA insider podcast. And like you said, Brian O’Connor is right here. So I’m glad because they were I was going to have to stalk them to get you on.
Keith Burns: 37:46
I will have an episode dropping, I would say in the next two weeks it’s already been recorded. So yeah, they got me on there. So I’m, I’m on the circuit, so to speak. I appreciate you being an advocate.
Dr. Jeremy Weisz: 37:57
Yeah. Okay. Good. That’s good.
Keith Burns: 38:00
But yeah, it’s a great program. I mean, they’re doing an amazing job at Polsky. With, you know, Brian and Mark and the rest of the team over there. They’re amazing. So I love being a part of the faculty.
Dr. Jeremy Weisz: 38:14
Talk about red flags. We can get into specifics, you know, with the brass company. But just in general, you mentioned some companies that you’re looking at the kind of the case studies. There were red flags.
Keith Burns: 38:31
Yeah. So what you’re referring to is, you know, we teach there’s a number of cases where there are different red flags that, you know, we want the students to look at and evaluate. In this one case, there’s a really strong CEO has worked in, you know, major industrial companies, Six Sigma. Background. Really smart.
Really talented. Finds a business making different types of brass products for the altar of churches. And, you know, churches tend to buy these things on a regular cadence and cycle. Obviously, churches have endured as clients for millennia. And so the thought process was that, you know, churches have endured for a millennia.
They should go for another millennia, and they should continue to buy, you know, these brass things. And so, you know, he bought the business. There were a number of, you know, regulatory issues. There was an actual fire. But the most important thing that happened was there were demographic changes.
You know, one, it was around the great financial crisis. So there were changes in just general spending at churches, right? When people’s pocketbooks are a little lighter, they spend less in churches. And then there was also a demographic shift that people start going to church less, and so they go to church less. They put less in the altar plate.
You know, the, the, the money plate. And so, you know.
Dr. Jeremy Weisz: 39:58
And also even with like Covid and everything, I mean, there’s virtual right. So like maybe there’s, there may be like same membership, but they’re not necessarily going in either.
Keith Burns: 40:09
So you take all those things into account. And the business was challenged to perform. They ran it for a long time admirably. You know, got investors, you know, some of their money or most of the money back. But it wasn’t it wasn’t the home run, so to speak, of investment opportunities.
And when you look at it in hindsight, you know, you see a business that was more of a manufacturing, you know, type business versus a recurring revenue service business. They had inventory, you know, they had to sell through distributors or catalogs and things like that. You know, they had a small town total addressable market. So they’re selling to, you know, churches in the US. It’s not as big as if they were, you know, you know, real estate, healthcare, some of the bigger marketplaces.
And so those are some of the red flags like in search in general. And ETA, you’re not necessarily targeting the biggest Tam in the world, but you do. You do want to have some size that Tam can be too small even for, for a search fund company. And it doesn’t give you enough runway to grow. Not finding a recurring revenue business is a big one, and one of my, you know, great investors.
Will Thorndike. The first time I met him, he asked Michael, and I like, why do you want to buy a recurring revenue business? And we gave him some answers. And I think they were smart, but they weren’t the right ones. And he was like, it’s because it buys you time.
If you don’t have to think about going out and generating that next dollar of revenue tomorrow, because that client comes back year after year and they’re under contract and they pay you every month. Like, that gives you time to learn how to be a CEO and learn how to run that business. And a lot of people buy these, you know, project-based businesses or these manufacturing businesses, distribution businesses where there isn’t, you know, steady, recurring revenue. And it causes a lot of stress if there’s a downturn in the marketplace. Sellers can be a red flag.
So if you have a seller that throughout the buying process is not trustworthy. You know, says one thing, but the books show another thing. Those can be big red flags as well. But you know, an ideal case. You want a recurring revenue business with high cash flow EBITDA to free cash flow conversion with some industry tailwinds for growth.
You know, low customer concentration. So the opposite of that. You know you got businesses with high customer concentration. You have a really slow or no growth industry. It’s not recurring revenue.
And you have a lot of your capital tied up in CapEx and other things to sort of continue maintenance of the business. Those are businesses that can work, but they require a higher level of operational excellence in order to make it work.
Dr. Jeremy Weisz: 43:17
Yeah. You’re like, business is tough enough. Let’s just make it as easy as humanly possible.
Keith Burns: 43:22
Yeah, yeah, I had to walk away, you know, from a deal at the end of last year and great business from my perspective. But one of my investors asked me if, if you were a first-time Entrepreneur and or there was a first-time entrepreneur and they were going to buy this business. And they asked you, what should they do? What would you tell them? And I was like, I probably would tell them not to buy it.
But I’m me, right? So like, I think I’ll be great. But the bottom line is like, business is hard enough. And so the easier you can make it on yourself, the better. And you just, you just need one success.
And so it’s better to stack the deck in your favor by picking a simple business model, a simple business with the attributes that, you know, we talked about without the red flags. And that’s going to give you a better likelihood of success in a pretty hard thing that not everybody’s going to be successful in.
Dr. Jeremy Weisz: 44:26
Keith, first of all, I have one last question, but thank you. This has been really instructive. I’ll have to listen to this, because there’s a lot of points in here that I just need to sink in further. Last question is, you know, your mom really instilled education in you, so I’d love to hear some of your favorite books. In business.
You know, you mentioned that Dan Sullivan books who not how any other books that you recommend or that you like that people should check out?
Keith Burns: 44:58
Yes. So I would say the most inspirational book for me was Why Should White Guys Have All the Fun? It was a biography of Reginald Lewis. So he was the first, you know, black entrepreneur to buy $1 billion company. He was a lawyer like me, actually, from Baltimore, where I’m living now.
So a lot of congruence there. But I read that book as a young person and really thought it was possible. I love who, not how. I love the Hard Thing about Hard Things by Ben Horowitz. Again, business is hard enough, and I think he does a really good job of telling you how hard business is. I also, I like Shoe Dog a lot as well.
Dr. Jeremy Weisz: 45:44
I love that book. I feel like it’s entrepreneurial therapy.
Keith Burns: 45:49
It really it really is because Phil Knight went through some stuff. And I think a lot of what we deal with day to day in entrepreneurship is just persistence and being able to sort of wade through the muck. So those are I mean, I have a longer list, but those are some of the good ones. And then one that’s more philosophical is Viktor Frankl’s Man’s Search For Meaning.
Dr. Jeremy Weisz: 46:17
One of my favorites.
Keith Burns: 46:17
Rounds it out and puts it all, all this stuff that we’re doing in perspective. So those are just a couple that spring to mind.
Dr. Jeremy Weisz: 46:24
I love it. I’m going to have to check out I love the title. Why should white guys have all the fun? I’m going to have to check this book out. Hopefully it’s on Audible because yeah, I think it is on Audible.
I’m going to buy it after we get off and listen to it.
Keith Burns: 46:37
Yeah, I love it. Yeah. He’s. Yeah. He has a great, great arc and a great story.
And it was really inspiring for me.
Dr. Jeremy Weisz: 46:47
Keith I want to be the first one to just say thank you. Thanks for sharing your journey, your stories. Everyone can check out Lullwaterco.com to learn more if you know what he’s talking about. If you know of a business that seems interesting, message them.
You know and he talked kind of about the criteria what they’re looking for. And Keith I just want to thank you so much. And we’ll see everyone next time.
Keith Burns: 47:10
All right. Thank you Dr. Appreciate it man.
