Preparing Our Kids For The Future of Business

Preparing Our Kids for the Future of Business

Announcer: You are listening to the Mastering Business Basics podcast, where we discuss how to build a solid foundation under your small business to improve your chances of success. And now, here is your host, Roger Pearson. 

Roger: Today we have a special guest on the show. His name is Jay Borgana, and he's had quite a career over his life. He's, started, a lot of businesses and sold them, and he's actually did a real estate service platform, and he built it up to about $350 million in revenue before he sold that. And today he's in mergers and acquisition. 

He has a company he leads called Acquisition Collective. But I think the most important thing, according to me, would be his kids business school, where children ages 8 through 14 build and operate real businesses. And considering the lack of business education in this country, even at the college level, I think that's a really important thing. 

So welcome to the show, Jay. 

Jay Bourgana: Thank you for having me 

Roger: I noticed one of the things that you help people with, and I just had a client, one of my tax clients called me earlier this year, and they were looking at buying a business. And so they, they sent me all the financials and everything else. I actually advised them against it 'cause they weren't good. 

But what do you think makes a business actually worth buying? 

Jay Bourgana: That's a great question. so when you're buying a business, you're buying a stream of earnings, and so the less risk in those earnings, the better. So anytime, I look at a business, I look in-- I'm looking at the retention of the client base and the retention of the talent. There... If I see high churn in-- or clients kinda leaving the business, a lot of new clients, clients that haven't been around that long, I can sense instability of the business. 

And same way in the talent side. If I see, a business been around for twenty-five years and, you know, the general manager just started this year or last year, that's not a good sign. So retention on both ends tells me, on the client side tells me that the business has good reputation, delivers quality consistently, has a strong, value, delivery. On the retention side, 

On the talent side, it tells me that the culture is strong, and it tells me that there's a compounding of knowledge that's staying inside the business. And when you have those two components, the high retention on the client side and high retention on talent, you tend to have a higher than average margin. So the earning-- That business, earns higher than, its cohort in the region, and that's a confirmation, so you'll see consistency on the, on the top line, you see consistency on the bottom line. You might see even growth of the bottom line without seeing a very, high, investment in marketing and sales. And but those two components, the retention on the talent and the retention on the client base is, is what I'm looking at. 

Roger: That's really important. I mean, the P&L doesn't tell you everything about a business. In fact, it probably tells you the least amount about a business because, being in the business I am, you can make figures look pretty much any way you want to. And the important thing about the retention is because there's a lot of people in business I think don't realize the cost of constantly training new people. 

It is... That's one of the most expensive costs that's gonna hit your business. And of course, the more retention you have, the less marketing expense you have to do. So those are vital. But when you're examining a business, how do you go about finding those two factors, what they are? 

Jay Bourgana: Oh, just ask questions. you know, if you sit with an owner and you go through, let's say, their top, you know, five clients. And I mean, usually my first meeting, I'll sit with the owner and I can tell...  I go through... I have a process of past, present, and future. So we talk about story, about how they got started, what... 

why they're passionate about a business, what, what's the evolution of that business. And then we talk about the present. And the present usually comes with, tell me a little bit about the clients. Who are they? Who are the top 50 clients or top 20 clients? Tell me about the top 10. 

How long have they been with you? And you could tell, you know, if a business has high retention or not. And the same thing when the people side. We talk about the team. They don't have to tell me exact names and, and the roles, but they can tell me like, you know, we can go, you know, from the people that the most senior to the less senior, and I can tell essentially just through pattern recognition, I can tell if the business has, high retention or not. And usually those businesses tend to over-earn. They have higher margin than average because I know that whatever space they're in, even if I don't know the space, I've done the research to understand the margin in that space. So I can tell if the business is, has that retention or not. 

Roger: Right. And, so it's worth buying... You know, you have business brokers out there, and I've talked with the business brokers, and, would you consider yourself a business broker in that sense of the word?  

Jay Bourgana: No, 

Roger: I think business brokers are just like real estate agents, 

Jay Bourgana: Yes 

Roger: and that's all they care about. 

But you actually go in and will analyze a business for a client. And, and so that's the big difference. And I think when somebody's looking for that, then your type of service is what you should be looking for, not go out and find a business broker who's gonna just say, "Oh, hey, I got some good stuff I can sell you." 

Jay Bourgana: Yeah, the brokers do their role. So the role of the broker is to nurture a list of business owners over a period of a year to 10 years, and then just stay in touch with them and make sure that when the time comes and they're ready to sell, they're prepared a little bit in terms of like their, books and, their data room to be able to come on the market, and then facilitate that process to come on the market. 

So brokers are needed in the ecosystem because without them, we would have 20, 30% of the inventory of businesses for sale that we have today. So but they're not in the business of analyzing and qualifying and due diligence in the business. You know, they're, they're in the getting them off market to on market and moving them off market again. 

That's, so that's their goal. And they do their job well, and then so it's up to the buyer and their consultant to make sure that they're buying the right business, the right business for them 

Roger: How would somebody go about finding a person that offers your type of services? 

Jay Bourgana: I would say they need to be aware that they exist. and, you know, once you become aware they exist, it's easier to find them online. Also, networking there, you know, like you could connect with your chamber of commerce or your, industry mastermind. Any industry have their own association or their own, masterminds where they can find people like them who have gone through a transaction or have acquired something and worked with someone, you know, like me. 

Roger: Things for people to know. So, you built, like I said before, you built a business to, like, $350 million, which is mind-boggling in most people's minds probably. But what did you learn from that journey? 

Jay Bourgana: you know, I spent some time, like we men- I mentioned earlier, in consulting space, and so I was consulting for manufacturers and distributors and, I was helping heal businesses that were, you know, unwell. And what I found is that 80% of the values is from people. Is hiring, you know, having, the right vision for the business, having the right mission, hiring the right people for the right job, and then retaining them. 

You know, so that's sort of the retention piece that we talked about earlier, having a, a strong culture, and make... Having... Making sure that, people are connected to each other, and make sure that they're constantly learning, growing, and make sure that they have purpose, and they have a sense of like, what we do here, are the clients we're serving, how do we add value to society? to me, those are the, the, the, the ingredients that are missing, in unhealthy businesses. And as, Daniel Pink wrote a book called Drive, and he speaks about what motivates people. There are only things that... There are only three things that motivate people. their mastery, which is constantly learning and growing, a sense of autonomy, control over what they do every day, and a sense of purpose. What's the point here? What do we do here? What... How do we have an impact on our, you know, on, on society, on our customers, and, and on people? So those three, if you can deliver those three to people, you're gonna retain high-quality talent. And if we retain high-quality talent, your, your business is gonna grow continuously as that talent grows, and, and you're gonna be more profitable, and you're gonna have, you know, resources to reinvest in the business and, and keep growing 

Roger: I think, probably I, the way I would put it is you need to find employees that believe in the mission. 

Jay Bourgana: Yeah, 

Roger: You know? And if as a business owner you don't project that mission to your staff and your employees, you're not gonna be as successful. 

Jay Bourgana: 100%. 

Roger: You know, I think that's the main driving thing behind business, and it took me a lot of years to learn that. But, I find that to be very, very true. 

Jay Bourgana: A lot of business owners don't even know the mission themselves, you know, let, let alone communicate it. And, and then they... Or sometimes they have started knowing it, but they forgot, and they never actually got into the process of communicating. It's like anything else in business, you have to over-communicate. You have to say it in different ways, in different channels, in different formats all the time. 

Roger: That's true. That's absolutely true. And that's one of the things they don't teach. So I wanna talk about the work that you do with your children. What brought you to create the Kids Business School? 

Jay Bourgana: Yeah 

I have two young kids, they're eleven and thirteen. And I myself was looking for a program that will help them learn about starting, building, growing a business. And, I couldn't find one. There were a lot of, game-like, project-like, you know, PDF or, or PowerPoint-like bus-- programs. 

You know, that are like very short term, but they didn't really teach much, let alone business. So actually, they... Actually, they taught the wrong things. So I started this with my kids and a group of my friends' kids, where I meet with these kids once a week and we, brainstorm ideas on what businesses to start. And within one hour, they pick a business, and they go that week and, you know, start. You know, sell something, anything, it doesn't really matter what it is. Could be a product, could be a service. And then the next week they come back and they say, "Hey, I made 30 dollars. I had fifteen dollars in profit, and, this is what I did." 

And then we talk about what worked, and we talk about what didn't work, and then we set a plan for what we do next week. And then maybe next week we're gonna change locations. Maybe next week we're gonna change pricing. Maybe next week we're gonna add another product. Maybe we're gonna, speak a certain way, have a different type of sign or marketing. And then through these evolutions and these improvements, we're teaching unit economics. We're teaching client acquisition costs. We're teaching lifetime value. We're teaching, marketing. We're teaching sales. We're teaching handling objections. All these elements that as entrepreneurs, we learn much later in life, we're teaching them to eight, nine, ten, eleven-year-olds, that can build, a foundation of understanding business, and they can continuously improve from there. 

Roger: So it's more of an organic type school where you just, you go a week at a time and you just kinda move and transition it to whatever you feel is the best situation for the children to learn 

Jay Bourgana: Yeah. And so there's two components, almost like, like if you're familiar with martial arts dojos, you know, there's an element of... There's a, a light curriculum. There are certain things that they will learn over time, but then the majority of the, the teaching is actually, adapting to where the kids are in that business cycle. And so, you know, there are certain things that we would teach during, Christmas time that we're not gonna teach, you know, in, Q1. So like, the kids' businesses go through the same cyclicality as any other business. So they're experiencing, you know, the rush during, the, the holidays, and then they're experiencing the lows in Q1.  Depends on the, on the service or the product. And so we have to teach them to kind of adapt to those things and then adjust to what's happening in front of them in the marketplace. 

Roger: So is this like a kind of an evolving thing where, some, some of the kids get older and they kind of transition out of it and you bring new ones in constantly? 

Jay Bourgana: What the goal is for them, to go through almost like a belt system from a white belt to a black belt, so they can stay in up to, like, 15 years. And I think after that we'll have our own YPO-type mastermind where they can continue, 'cause business learning never ends. And my hope and my mission is that those kids will take the mantle and open their own schools as, you know, ideal franchisees and to be the next generation of business kids business school owners 

Roger: That's a great idea. That actually, the kids you've started to go out and teach other kids, and it just spreads from there. 

Jay Bourgana: Exactly 

Roger: That would be an amazing thing. It really would. 'Cause I, you know, I talked to the kids... I taught tax classes, beginning tax classes for a few years, and some of the, um... 

I had all kinds of people sign up, but some of them were actually business majors, college business majors. And it blew me away because they would come up to me, after class and they'd say things like, "Well, we tried to talk to our professors about these type of things that you're teaching, and they told us, 'Oh, we don't teach that here. You have to go someplace else and find that out.'" And I'm going, "How can you be a business major and not talk about the fundamentals of taxation in this country?" . It just blew me away. But that's happening everywhere. It's happening in every level of school. It's just not there. 

There's a few schools that are bringing it back in business classes, but I mean, that's, like, probably less than 1% of the schools in this country are doing that. So I think what you're doing is a fantastic thing going, starting, because it's sorely needed in this country. Because this is a country built on capitalism. If you're gonna succeed here, and anybody can succeed here if they wanna work hard enough, but you have to educate yourself. And, this is one area that, you know, we have too many liberal arts graduates from colleges, that are up to debt,  

Jay Bourgana: And just to add to that, the world, the world will be such, so much better if majority or all of us understood the difference between revenue and profit. it's just such a simple concept that you could still see adults going out and look at business owner-- look at a business and think that, oh, that business is making so much money, or that, you know, that town is generating so much taxes that they must be flushed with cash flow. And which cannot be close to reality. So just having empathy, you know, for these business owners, understand that, you know, revenue is not profit. Revenue is not, you know, free cash flow. that's a huge, you know, evolution in being a citizen and being a, you know, a normal citizen in society. 

Roger: You're absolutely right there. So how do you work with the parents of all these kids that you're helping? I mean, do you have to help create like a support system and teach them also? 

Jay Bourgana: We, you know, if they're, if they're open, they can absolutely sit in and learn as well at the same time as their kid, you know, which we recommend because it creates this connection, this deeper connection. At the minimum, we just want them to allocate a couple hours a week for, to help the kid with their business. 

You know, let's say the kid just wants to sell bottles of water at the park, you know, which is a very simple business. Well, we want them to help them take them to Costco, grab a case of water, and then maybe take them to the park so they can sell that water. You know, that's as, like, simple as that. You know, if they wanna make some cookies, if they wanna, you know, door knock the neighborhood so they can do some, you know, like a home service type business, we just want them to be supportive and if they need a ride, if they need... And it doesn't take usually two hours a week, but if, it's possible, allocate that. That's, that's all we request at the minimum. 

Roger: That's great. Wow. I'm just blown away by that. I think that's just the greatest thing. That is just the greatest thing. 

Jay Bourgana: And I can tell you, and I, and the one thing that I tell the parents also, it really doesn't matter if the kid's gonna be business owner or entrepreneur at all.  I care less if they become entrepreneur. What I really want them to understand is, the, the, the concept of value creation. 'Cause a- as an entrepreneur, we're problem solvers. We, we scan the world for problem that we can solve for society, and then we can, you know, exchange value for that solution. And so taking kids through that process of watching their community and seeking problems to solve, and then, getting feedback, a real feedback from the market, and then tweaking that solution and then seeing, you know, the feedback improve, and then tweaking a little bit and seeking that feedback improve, and then getting feedback from adults, like, you know, there's something that changes in the chemistry of the kid's brain when an adult gives them $20 for a product or a service. 

Then immediately it's different level of confidence, different level of self-reliance, different level of resilience that shows up, in the kid, and that's all we want. We just wanna turn on those parts of the brain that tells them, like, "You have agency. You can go out in the world and see problems and solve them. Well, don't wait for someone else to solve that problem. You can go out and seek feedback from people. You can go out and you can pay attention to how people consume your service or product and see how you can tweak things and change to improve the, the value." And all these things just makes, you know, the kids better humans, better adults, better citizens. 

You know, what, if they wanna be doctors, they become better doctors. If they wanna be, tax advisors, they become better tax advisors. They wanna be, you know, employees at a,  in government, they can be better employees. All these values are experienced in, in real life, and they can be absorbed much easier and, and they're not really some things that you can learn at home or at school 

Roger: No, they aren't. You've gotta learn them yourself. You have to experience them. You know, and one of the things that I teach in, all the things that I do is that even if you don't wanna go into your business yourself, if you know the art of business, you'll be a better employee, and whatever field you go into or whoever you work for, you're gonna go up the ladder a lot faster because you're gonna understand. 

If you understand how a business works, you can see things in your employer's business that will need fixing that a regular employee's not gonna see that doesn't have that education. So it's-- I don't understand why we don't-- more people teach basic, basic capitalism because it affects everything, whether  you're working for yourself, whether you're working for somebody else. It's going to help you improve your life and the country as far as that matters. 

Jay Bourgana: 100%. And, it installs two very important values, which is, the value of growth and learning and, and constantly be developing your skills, and then the value of contribution. Always seeking to add value, always seeking to contribute to whether it is to your, to your employer or to your community or whatever. 

You're paying attention, then you're finding ways to improve or increase value. So, if you have those two components the value of growth and the value of contribution. You're going to have a successful life, you're going to have a fulfilling life. You're going to feel good, because there's no limit to how much you can learn.   There's no limit to how much you can contribute. So, it's a continuous process that never ends, and it's such a fulfilling process because it aligns your natural gifts with what society and what the world needs, and that's kinda like where, that's what, that's where joy and happiness come from. 

Roger: Well, I agree with you completely there. You know, I can't imagine anything, There's two things I love to do. I love to create. Create, whether it's websites, or whether it's landscapes or whatever, or writing books, whatever. I love to create. I love to teach. It took me a lot of years to learn those two things because I was going through the standard things. 

I was managing restaurants and managing supermarkets and, and then and several companies and everything else, but there really wasn't any fulfillment there. I was just doing it, and, I didn't know why. Parts of it I really enjoyed, and then parts of it I didn't, and I wish I would've learned that much, much sooner, and I wish I would've learned what you're teaching these kids right now because I could be in a totally different place today than I am. 

I was doing the things, but I didn't understand why I was doing the things. I could go in and take a business and make it work right, but I didn't understand why I was doing to do that, if that makes any sense. 

Jay Bourgana: Yeah. Yeah, yeah. Purpose. Yeah, that's what we talked about. And I mean, that's one of the things when I sold my company and I moved, I retired. I moved to Hawaii, had the mai tais on the beach thing for five years, and I felt this emptiness. And that emptiness came, you know, I spent quite a bit of time meditating on that, trying to understand kinda like why I should be happier. 

I'm, you know, living the dream. And, I found that I, of all the things that I did in my business, there were two things that I missed. One of them was being in the arena, being in the game, learning. You know, because when you're in it, you're constantly learning because you have to, you know, you have to adapt, you have to compete, you have to change, you have to... Technology change, people change, all kinds of stuff, trends, economy, everything. So because of all those things, you're constantly learning, you're constantly paying attention to what's happening. And then the other side of it was the transformation that I was having on my team, on my people, on my clients, on my suppliers. 

You know, I was invested in all these people that were in my ecosystem, and I loved seeing that transformation of someone starting with us from, you know, the lower role to moving up and, you know, making a better living and starting a family and building a, buying a house and, you know, seeing that transformation, how they transform themselves and the DNA or the trajectory of their DNA, you know, in their, in their community. 

So those two components are what I missed, and that's why when I came back, I wanted to do something that fulfilled those two things, me continuously learning and also continuously contributing and seeing that transformation in people. 

Roger: I think you've definitely done that. Definitely done that. 

Jay Bourgana: Appreciate it. 

Roger: So is there anything that we have not discussed today that you think it would be important for our audience to know? 

bWell, listen, we're living in an age of transformation right now with AI and, technology changes and interest rates being up and, a lot of entrepreneurs are, feeling the heat right now. It's tough out there. And, you know, there's some entrepreneurs that are adapting and changing, and there's some that are, like, sitting still waiting for things to change to go back to where they were.

And I invite, all the business owners that listen, that are listening here to, take the step to, take on-- put their competitor's hat and then go back to, go back to basics. Go back to, the basics of business and go back to, being, being-- having that student mindset around understanding technology 'cause, you know, AI feels like it's changing so fast that people cannot catch up. And, I can tell you that only two percent of population in the United States is actually using, AI or paying for AI, for actual use case. So we're still really early.

I invite business owners to, you know, go back to the early years, and learn then, learn with their team and encourage their team to learn these skills. And, and then, you know, go back to the mindset of being a little bit more resourceful, doing more with less, cutting, you know, things that are not needed, tightening things around because everything's costing more money now, so you gotta, you know, you have to be resourceful. I just came back from a trip to China.  And, I was surprised-- it was surprising to see how, resourceful and adaptive the population is there. Even though they're going through their real estate recession that they just had in two thousand eighteen, they've gone through COVID, they've gone through the trade war, they're super positive, they're excited about the future, they're willing to do the work and compete anywhere in the world. 

They're not, you know... We're-- I feel like we're in the US are-- talk about and think about China more than China thinks about the US. but I would say it was very interesting to see that level of resourcefulness and adaptability there. So I definitely encourage business owners to go back to that, you know, the, the early years, the early resourceful years,  the zero to one period, where they first started and do more with less and continuously learn. 

So those are the two advice that I would give entrepreneurs listening to this. 

Roger: I think that's very good advice. You know, I think too many people lose track of where they started out. And, it's easy to get off on a wild thing off to the side and forget your core. You always gotta remember your core. That's why I teach fundamentals, you know, because that's... You gotta know the fundamentals first, so. 

Jay Bourgana: 100%. 

Roger: Well, Jay, I enjoyed having a conversation with you today, and I appreciate you coming on the show. 

Jay Bourgana: Thank you for having me, Roger.

Roger: Should want to contact you how would they do that? 

Jay Bourgana: Yeah. you can find me online on acquisitioncollective.biz, or, they can Google my name, or they, if they're interested in our kids business school, it's kidsbusinessschool.com. Very easy to remember. We'd love to, We, do classes online, and we do them in person. and we also teach in schools. 

Roger: Wow. So you've got the entire gamut covered there. That is awesome. Well, thank you again, and good luck in all your endeavors 

Jay Bourgana: Thank you for having me. 

Announcer: You have been listening to the Mastering Business Basics podcast with your host, Roger Pearson. For more information about all of the business education options that are available, we invite you to visit seagulltechnologies.com and continue your journey.