JOHN ROOD – BUSINESS BUILDING IS SYSTEM BUILDING – EP. 78
My guest on this episode is John Rood. John started an education business with his wife that began as a SAT and other tests prep business and eventually found its niche in MCAT testing. Together they grew the business adding tutors and a management team before selling to private equity. John has also invested in a few search funds and is contemplating a search himself in the education space.
During this episode, we talk about starting their education business, how they pivoted from tutoring to content, building a business in the context of operating systems and learning from others, and the value of organizations like Traction and Entrepreneurs Organization to small business operators. We also talk broadly about education businesses and where future business models in the space might lead.
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It’s great to see you on the podcast, John. It was fun chatting you about your business and hearing more about your search work as well. I’ve been excited to have you. We had a previous guest in education space, so I’m excited to have another one too. Would you be able to give a background on your work so far, your education business, and then what you’re focusing on now?
Yeah, Alex, absolutely. Thanks for having me on. So my background, going back, I thought I wanted to be a lawyer, and then I went to college and then thought, “Hey, college is super fun. I want to be a professor.” So I went and tried to be a professor, went to graduate school, and it turns out that you can really only be a professor and have a good career if you’re one of the very top people, especially if you are in a low-demand field, which I certainly was. Turned out I was not going to be one of the top three graduates in political philosophy that year, so I went and tried to do something else.
So what I did was I went into management consulting, and I worked at a little firm here in Chicago, which was actually super fun. We came up basically with frozen food product ideas for large food companies, which was super fun. The great thing about consulting is that you work with really smart people, so I made a lot of friends there that I still have, but after a couple of years of that, I decided I just needed to go do something else. I had had have a little bit of experience doing test prep, because I’d worked briefly at Kaplan Test Prep, which is the industry giant, just as an instructor and on the corporate office.
So I started a little test prep tutoring company with my wife who’d also been briefly at Kaplan as an instructor. And we started teaching students on the law school admissions test just around Chicago, and it snowballed from there. At first, we were the instructors, and then we hired one instructor, and then we hired two instructors, and then we expanded our geographic footprint, ultimately found an online tutoring model, which was pretty successful for us. And then a couple of years in, we decided we wanted to have a significant pivot and move towards doing more content and more courses, and decided to focus on the medical college admissions test, the MCAT for students going to med school.
So we built a business there that did, let’s say we had print publications, we had flashcards, we had a learning management system, which we designed from the ground up, practice tests, still had our tutoring program. So it was really a full service MCAT test prep company. We ran that as that more content-based business for a couple of years. And then ultimately, we were able to have a pretty nice exit to private equity in[redacted]I worked there at my company for about a year and a half after it got sold and then left there at the end of[redacted]And then I had a struggle with figuring out what to do next. I think that one of the mistakes that I had made, which I wouldn’t make again, is if you are exiting a business, it’s not just like getting out of the business, but it’s getting into something else.
So I flailed around a little bit for a couple of months, lived through COVID as we all did. And then ultimately, it ended up essentially running a small search fund. So trying to find businesses that fit my ability to run them probably in the education training niche, and then also investing in some self-funded search deals myself.
Can you walk through what the different… I’m curious about the frozen food one, what kinds of frozen food did you… Were they like pre-made microwave dinners or are they more like mixes of different vegetables or fruits? What did you make?
We tried all of those things. It was an interesting company. The idea of this entire consulting firm was basically, there was one guy who was like the head partner and he was, I won’t go into detail about who he is, but he was a well-known professor at a really fancy business school. So like you’re a professor, maybe you make 200 or 250K being a professor, but then all those professors also have their own consulting firm. And so what he taught was this like innovation and product development process, and so at the consulting firm, they essentially just did the process that he was teaching, but for large companies.
So we would do a bunch of market research, we did focus groups, which was always super fun. Oftentimes, the clients were these huge food companies that, to your point, were doing frozen foods. I think that we had done work for the Healthy Choice brands, we did some work for the Hungry Man brand. I remember we did a bunch of pizza, so much frozen pizza stuff, but it was fun. The fun part about consulting is you get to like invent stuff without being responsible for making it. And so as an entrepreneur now, I don’t think that would be right for me, but imagine a world where you just could have a business idea, put it on a PowerPoint and then sell it for like a million dollars and not have to actually make it, that’s the promise of management consulting, I think.
I love it. And you mentioned that your education business added a content angle at one point where prior it was focused on tutoring and service-based, and then shifted to content and a higher value. Can you talk a little bit about that transition?
Yeah, sure. So we had a really nice tutoring business. Tutoring and test prep and supplemental educational services are, I think, really attractive first businesses for someone to start because there’s not a lot of barriers to entry. So if you or me or anyone listening wants to go have a business and be moderately successful within the first year, I think that you can hang up your shingle doing SAT or ACT prep or generalized tutoring in your city and have a decent business. And the margins can be pretty good, you can get to a certain amount of scale, but the challenge with that business is that because it’s so services based, first of all, it has all of the problems that you would associate with project-based revenue, as we say in the search fund world.
And it can be tough to scale, secondly, and then the value is not there from the perspective of the total enterprise value. So if you have a services business without a moat, the valuation of your business may be a couple of times earnings, whereas if you get more into the wider world of education and ed tech, those multiples are substantially higher. So we made the decision based on both an opportunity that we saw in the market and then also just where I wanted the value of that business to end up to say, “Let’s keep this great tutoring business that we have, there’s no reason to stop doing that, but let’s go write some books, let’s go write some software, let’s go write some practice materials.” And we were able to get some success there.
Was there a moment or a series of moments that led you to see this as an opportunity for your business and something that you should do?
Yeah, totally. So I had this incredible luck of getting a really good advisor on my team named Chris. And the way that we found Chris was by total accident. When I went to get my first office space, which you and I were discussing before we started recording here, I hired just a commercial real estate broker to find the space for me. She was showing the space and she was like, “Oh, what’s your business?” So I told her, “Oh, it’s tutoring and test prep.” She said, “Oh, I just sold a condo to a guy who had been in that business.” So I was like, “Oh, what’s his name?” He said, “Oh, this is name’s Chris. You should meet him.”
So we set up a time to meet. And he had worked at one of the really large test prep companies previously. And so I was able to get him on as an advisor, and he just opened my eyes to this little niche in this medical test prep market, which then was underserved, now it’s probably overserved, but in 2012, ’13, we were making this decision, it wasn’t. So basically got really lucky. The takeaway that I always tell people that are starting businesses like this is, it’s really important to get great advisors and great industry specific advisors. Yes, you want people that have run businesses and can show you like, “Here’s how to do hiring and firing and here’s how to withhold taxes,” and stuff like that, really mechanical stuff.
But if you’re starting a little business and it’s an industry where they’re like heavyweights there, go get someone who’s worked there to be an advisor for you. And it’s worth, if you have to pay cash, if you have to pay a little bit of equity, I think that’s definitely worth it to put together like a little mini board of advisors really early on.
And you mentioned earlier that it was project-based primarily, at least the tutoring side was. Can you clarify what you mean by that? Does that mean there’s just different classes of students coming in and then you cycle through and get a new crop of students? Is that how it works? Or can you just expand that a little bit more?
Yeah, that’s exactly it. So you’ve essentially got one product line, you sell it once to your students, and then all of your students essentially cycle every single year. It’s a business with 100% churn. Now, even when we moved up stream, test prep and tutoring is like that because you’re teaching someone to go do something, and assuming that you’ve done a passable job, they don’t need you anymore. So you teach them to take the SAT, they take the SAT and then you’re done. And they only come back if you have failed, basically. So that’s not the outcome that anyone wants. It was important for us to move to where we would have more of a suite of services, where we could get someone to come in and maybe they buy a $20 book, maybe they buy a practice test, but then we have the ability to upgrade them to a larger suite of product so we can really blow out what the lifetime value of the product would be by having a much wider suite of products.
Got you. Was there anything you could do to extend how long the customers stays with you or was the name of the game? Just increase their average purchase value?
I think it’s increased purchase value. In that field, for the same reasons that I just said, you don’t necessarily want people to be with you for a long time, because you’re always trying to think through, and frankly, you’re trying to balance, what are the needs of the student from you as an educator’s perspective versus you as a business person’s perspective? So in theory, if you’re going to teach someone how to take the SAT, could you sell them something where it was like four years and they started it when they were in middle school? Maybe you can do that. But from an educator’s perspective, what they really need is to study intently for four to six months. So that’s what our goal was.
I think that everyone in education is always thinking through, from our a product line perspective, how do you increase the number of years that you have with the student? So there’s like this dream that everyone in test prep and education has, which is like, you get students with some product when they’re in kindergarten and then you have supplemental tutoring for them, and then you have SAT test prep, and then you have like college admissions, and you have like graduate school prep. And that’s really hard to put together, but that is the dream.
Is it hard just because that’s just such a long runway of products for someone and it just takes a long time to develop all those or are there other hurdles in that too?
I think that the biggest hurdle is just that people lose track of your brand identity because the time horizons are really long. If you teach someone, let’s say you help them get into like a selective high school in a big metro area. In Chicago, there’s tests that you have to take as a seventh grader to get into a fancy high school. So you help someone with that, yeah, that kid wants SAT prep, but that’s four years later. So does mom or dad remember the name of your company? Well, probably they remember, but at the same time, they’re probably going to take a little bit of a flyer and look at some other choices too.
So what things did you do to continue having new students join your different classes? How would you keep folks coming in?
I think that there’s two important things in this market and they’re really obvious we think about it, so the devil’s in the details.The first one is referral. So just as with a lot of businesses, if you do a good job and you seed referrals a little bit, you can get a lot of success that way. The second thing we did was that we created a lead magnet. We offered one section of our content for free and that got us just a ton of attention. So even to this day now, the business is still operating, even though I’m not involved with it at all, still students will say like, “Oh, everyone, who’s going to take this test has got to sign up for this free resource.” I think in education, that’s wildly important.
And you see that being played out across basically every education company where it’s going to offer some a free trial.
From your time at Kaplan as an instructor, what kinds of lessons did you pull from the way they ran their business to the way you decided to run your business?
I was with Kaplan really briefly, so I probably learned way more about how they operate while I was running my business than I did when I was working for them. But I would say they had a level of standardization that I probably would have underestimated as a student. When you’re an instructor at Kaplan, they gave you this big binder, and I don’t know if it’s still a binder and this was like 2007 now, but they gave me this big binder, it was like six inches thick. And literally, it said, “Write this on the board.” And it said like, “Make this joke, make this like logical connection.” It really was just like the McDonald’s or Burger King of education.
And I don’t even mean that in a bad way, I mean that in a positive way. So they’re able to hire much more freely because I think that their training and development resources were really good. So I think when you’re starting out running a tutoring company, you tend to think like, “Well, everything has to be totally customized and we’re going to hire great instructors that just know how to do this innately. And those things may be true, but having great material for those people to use as educators turned out to be really important too.
In our previous call, you talked about building a business in the context of building systems, and it sounds like you’ve learned a lot of systems from Kaplan and just building the business yourself. Can you talk about the different systems you’ve put in place and the importance of having a process in your business?
Thank you for asking. I’m super passionate about that. I feel like basically there’s this line that they have at, what is it? It’s Vista Equity, the big private equity firm that buys software, and they say all software tastes like chicken. I think that that’s a great line. And I think that most businesses end up having the same problems, and oftentimes those problems have the same solution. And the way I found this out, I, as many people do, just as a small business owner would struggle with all this stuff, he’s like, “Oh, what am I going to do? How am I going to make this decision on hiring and firing? How am I going to make this decision on like structuring the strategy of my company?”
And then when I got a little bit of scale, I was really fortunate to join a group called Entrepreneurs’ Organization, which I think probably a lot of people will have heard of, it’s very much like YPO, it’s its sister organization, there’s lots of others that are like it. But I started to go to lots of EO events and I was like, “Okay, here’s all the problems in my business. What do I do?” And basically, everyone’s, there was like, “Oh. Everyone has the exact same problems, and here’s the solution.” And I was like, “Oh, that’s great. Thanks for telling me that.” And the solution turned out to be systems.
There’s lots of great books about it. The one that I ended up really like glomming onto and making like the Bible for running our business was this book called Traction by Gino Wickman, which tons of people have heard of basically everyone that I knew in Entrepreneurs’ Organization had read the book and put at least some of it into their business. And so a lot of people know about it, I’m happy to dive into it if you want. But I think having frameworks for how to do like the daily running of the business is critically important because especially first time entrepreneurs don’t necessarily know how to do that and will frequently make exactly the same mistakes that everyone else has.
And so to the extent that you could avoid that, that’s a very good thing.
Can you walk through an example within your business of a system that you implemented?
Yeah, totally. So I think that the system that turned out to be the most impactful was just a very basic quarterly and annual goal-setting system. We got ours out of Traction. A lot of people also use OKRs, which I guess is big at Google and one of the fancy VCs wrote a big book about it, so that’s popular too. But the goal setting process for us, I would say previously, goal setting would be me sitting there and being like, “Okay, this is what we want to do this year. It’d be good if the salespeople sold some stuff, try to sell more than you sold last month.” And that was terrible, that was all a terrible way to do it. The right way to do it is to sit down and have a formalized annual goal setting process and say, “Here’s our 10-year plan. Here’s our three-year plan. Here’s what we have to accomplish this year in order to make the right progress towards those things.”
And so every department in the company should have specific goals for the year and then those goals are broken down on a quarterly basis. And then within the departments, it’s broken down even further. I’m a big proponent that with a possible exception of very, very frontline, low level, like customer support people, which oftentimes are outsourced anyway, almost everyone at the company should have a specific quarterly quantitative goal that they’re pushing towards. And when we put that in, that was hugely impactful on our business.
A quantitative goal seems pretty obvious for someone like a sales person. Can you give an example of what a quantitative goal might be for a different role in your company?
Yeah, totally. So if I think about like the company that we ran, I agree, sales is pretty obvious, marketing is generally pretty clear too. So we’re saying, “We need this many in the top of the funnel. We need this conversion rate from paid spend, from earned media, etc.” I think that where it gets more challenging to your point is when we think about it more on the product side or even the technology side, because those things can be a little bit more unpredictable. But on our business, for example, we were an education content and services business, so we said, “Hey, this is the publication that we’re writing this quarter.”
So as we break that down, what does it look like for everyone on the team to say like, “This is like the output that you need to have, this is where we need to be at certain milestones”? And some of that seems really obvious, but I think that a lot of small businesses just don’t take the time to do it. They say like, we’re going to work on this stuff, wrench on it and see where we get. But being able to communicate really clearly to every member of the team like, “Here’s what the expectation is for the company and here’s what the expectation is for you,” that’s really impactful.
I asked you earlier about a different moment that clued you in that you need to adjust your business or add the content side. Were there different moments along the way within your business that told you that you need to add systems into your company?
Here’s one that was really impactful to me. I didn’t go to business school, I didn’t study business in college or anything like that, and so I came up and then just, I think had some weirdly snotty ideas about some things. I think a lot of people hold this idea that aren’t entrepreneurs, they say, “Oh, companies that have values and visions and stuff, that’s all like corporate boiler plate crap, none of that matters.” I think I thought that too. I was doing an interview and someone asked me, and this was probably 2011, now this is a long time ago. They were like, “So what are the values of your company?” I was like, “Well, we try to do these things for our customers. I don’t really know. We didn’t really formalize it.” And they’re like, “Oh, okay.”
And luckily, that person still ended up coming to our company and was a good contributor, but I reflected on that and I thought, “Wait a second. We really need to formalize that.” So I went out and started looking around to see who’s doing good writing on culture, who’s doing good writing on the meaning and purpose behind businesses. And actually got the first framework that we use out of Traction. I think that my thinking has evolved a little bit on how to think about those like cultural frameworks you put into business. I think that was really critically important, just being able to think through, what is the business doing, why should people come work here in addition to just getting a paycheck? That stuff is really important. And I think a lot of first-timers tend to overlook that.
What writings did you find were particularly valuable in thinking through building a culture?
The one that I like now is called Culture by Design. I found this from one of your podcasts guests, actually Michael Gurley, who I know you’d had on, is big on Twitter. Culture by Design takes this idea that what most businesses do is create. It’s like sit down in a conference room, they’re like, “Here’s what our values are.” And the values, even if you’re doing basically a good job, the values for most businesses also tastes like chicken. “We’re going to serve our customers really well and we’re going to respect each other in the workplace and blah, blah, blah.” Sometimes these do better than others.
One of my competitors in test prep had done a really good job of making their values being kind of like either at work… A company can be fast or slow, we’re fast, but they would also say why that was good and why it was bad. They were like, “This is fast, we’re fast. We get things done, we produce more, but at the same time, we’re going to make more mistakes which we have to go back and fix.” Those are good values. But what I liked in Culture by Design was it defines not the values, but the behaviors. So we say not like, “Here’s what we see as God’s law for our business.” It’s, “Here’s what we actually do.”
So you can drill down into a higher level of specificity and say like, “Here are the behaviors that we want to replicate in our business.” That’s a lot more actionable, especially when you’re doing it for the first time.”
Can you talk about some of your messaging to your team in communicating those new values?
Yeah, I think that it was really well received. I think that first of all, you want to have a moderately collaborative process. It can’t be the thing where people are voting where you’re doing this work at an all hands, but I do think that it was valuable in our company to bring in a couple of our top people, essentially, we brought in our VP-level folks and did this exercise together, as the entrepreneur, as a CEO, you have to make the final decisions, you have to break the ties. So it is your call, but I think any people onboard in that process is important. And then getting your managers built and to spread that throughout the organization is really important. I think to your question, the biggest challenge is you roll something like that out and your frontline folks listen to it and they’re like, “Okay, here’s another thing that came down from corporate that we have to pretend to care about and deal with.”
And then next month there’ll be some other thing that they find some other conference. So I think first of all, you have to say upfront, “This is definitely what we’re doing. These are definitely the values and the processes or the tools that we’re using.” And then you have to, again as the CEO, you have to verbally and in writing, reinforce that stuff all the time. So when you have an all hands, you start with your values. When you have a planning meeting, you start with your values. When you do hiring and firing and promotion, you think about it from the lens of those values as well?
So, does Susan from accounting, like how in line does she with our values? You’re trying to hire for a new position, obviously skills are important, but making sure that there’s that cultural fit, I think is important too. And so in the hiring process, making sure that you are explicit with people like, “This is really what we do, and if it doesn’t resonate with you, you shouldn’t work here.” I think that you want to make sure that you’re using strong language, really all around instilling those cultural things.
I keep thinking of that scene from Office Space where the boss is talking about the different, like make sure that everything you’re doing is good for the company, and he has the consultants there. Watching that movie, it seems really vague the different goals or values for the business, but how did you take the values that you communicated and connect them with some of your quantitative goals for the company?
First of all, they don’t all necessarily have to connect up. So I think that you set your behaviors and your values, but also people understand the business and it has to make money. In some sense, those don’t line up. In theory, you can set as one of your values, we make money, but no one likes that because as an entrepreneur, people’s hear that and that means that you’re going to buy a yacht based on their hard work. And that’s not what you want to communicate to your people. So some of that doesn’t necessarily line up directly, but where it does, I think that you can say, “Hey, one of the behaviors that we really want to make sure that we’re doing is that we have a behavior or a value,” you could say that was, “We want to make sure that we educate customers, whether they work with us or not.”
So we would spend a lot of time with students on the phone or in chat, even if they weren’t already a customers or frankly, even if they weren’t going to be our customers. So we had people that would call in, be like, “Hey, can you talk to me in detail about this thing. By the way, I’m already in a class at Kaplan.” And it was important to us that we would get the reputation as the approachable people that students wanted to talk to because ultimately, that’s a behavior that would connect up with our values, but then ultimately connects up with the kind of financial results of the business.
That’s interesting too. How did you make yourself easy to talk to? Was it picking up the phone quickly or just taking a customer service set of values or something like that? What went into creating that effect for students?
The basics of it is the things that you had said, which is doing the basics of being responsive, which sounds so silly, but I think that we’ve seen a lot, small business acquisitions have gotten really trendy. On Twitter, everyone says, “Hey, I was talking to a small business owner and I did like a secret shopper and no one picks up the phone, no one responds to voicemails.” That stuff is really typical. So if you have a small business, just doing those very basic things that show that you care about your customers, even a little, that actually goes a long way.
But in this specific context, what we would do is we understood that as sellers of high priced educational support services, what we were selling was really important to parents. So this was not like,” I’m going to buy a t-shirt, if I don’t like it, I’m going to throw it away.” This is working to decide, this little gym you get into Stanford or not, and that’s an important thing for parents. So part of it was, we want to educate about the tests, part of it was women educated about the process. And part of it was, we want to show a high degree of empathy to parents who are in this hard decision.
So we would frequently have sales calls with people that would last 20, 30, sometimes 40 minutes where they’re just like, basically we’re giving them an hour of free therapy. Now, did each one of those close? No. Some of those close, some of those didn’t close, but ultimately, what I think is really important was that we set the expectation that like, “Hey, give us a call. Let’s talk, we’ll figure out if we can work together later, but for now, let’s just talk.”
Did you build goals around that too? Because I imagine as a sales person or customer service person, if you spend an hour with someone on the phone and they don’t close, that’s obviously a risk to some of your quantitative goals for that time period, but did you build goals around like, it’s okay to have these long calls even if it doesn’t result in a sale or something else?
Yeah, totally. And again, that goes back to what behaviors we’re trying to put into our company. And so by establishing that behavior of doing long sales calls is consistent with our value set, that makes it okay. And now obviously, you also have to fiddle with the incentive structure because the incentives is not just values, it’s also money. So sales people are on commission, they don’t want to spend 40 minutes of their time talking to someone when it’s not going to close. And so I think that the ways that we thought through that was number one, frankly, have enough salespeople such that they don’t need to pretend that they’re going through a tunnel on a bad to get to a good call.
And that happens a lot in companies that are very sales focused. So we didn’t want to do that. And then also I think that we were able to prove quantitatively that a lot of these long calls, even if they didn’t convert right away, ultimately converted down the road. Because again, we’re setting our value proposition and brand proposition as being really approachable. And that’s something that creates goodwill for people if they do come to us later on, or if they’re looking to refer someone else to similar services.
It sounds like you’ve done a pretty good job, or you had done a pretty good job scaling your business and adding systems and building a management structure. What did you find more challenging as your business grew?
The short answer is people. When I say I’m thinking like, what are the individual people, things that were challenging, but it’s almost always people in a business like this, and then really in any business, because people are ultimately going to drive the performance of the company to the extent that you as the entrepreneur, as the CEO, figure out how to be a good manager, how to create the right incentive structures, how to convince highly talented people to come work at your business when they have other options, especially in the climate that we’re in now, in the economic cycle, that’s so important.
And so the challenges that we had were not so much, can we create a good product? We knew we could create a good product, I think of course it’s possible, but it’s like, can we get the top people in our field to come work at our company? Can we incentivize them correctly? That to me is like, when I say all businesses tastes like chicken, all businesses ultimately come down to people problems.
Just in the education space, what trends are you seeing? And what do you think the next couple years of education businesses, what do you think they’ll look like? And what do you think ends up changing the most?
Education, I think obviously has had a huge amount of transition in the last year. A lot of the famous education at tech people have all said something like, “We saw five to 10 years of digital transition happen in the last 18 months due to COVID.” School totally went online basically overnight. I remember we pulled our son out of school on March 13th, which was a Friday, Friday the 13th, ironically. On Sunday, we got the note from Chicago public schools saying that schools basically canceled. And two weeks later, he was back in school on Zoom, which was first of all, is an incredible achievement, but being able to make that transition, there’s so many opportunities to pop up.
I could talk all day about what are the opportunities that big businesses have, but for more small business and operator perspective, there’s a bunch of opportunities. One of them is, I think that there’s been so much excitement in the market about getting more kids online for supplementary services that the counter cyclical opportunity opens up as well of doing more brick and mortar stuff. I signed my kid up for online Minecraft camp for this week before he start school. That wasn’t available easily in Chicago, but if I could have put him in-person camp this week, definitely would have done that. And every parent I talk to, wants their kids to do less screen and less Zoom.
So I think there’s an opportunity for more operators to do exactly that. So I would say, make sure that you’re not sleeping on in-person technology camp, don’t sleep on in-person music school, just because things are moving online, there’s opportunities there. The other big opportunity is in workforce training and development, just something that I’m super interested and passionate about. I think that everyone has known for a long time, the colleges in general are not doing a super good job of preparing students for the workforce. So a lot of that work has now fallen on essentially private providers.
And so there’s big private providers that do boot camps, there’s like Lambda School where you can learn to code for free until you get a job. There’s also a lot of hyper niche opportunities. For Lambda School that’s really big, there’s opportunities to teach a stay-at-home moms, how to do proofreading or something like that. We haven’t done a good job getting people into careers, so what are the really niche careers that we can then go out and teach people how to do? There’ll be a lot of interesting businesses around that.
Any that you’re looking to start?
The one that I can’t get out of my mind and I don’t know exactly what it’s going to end up being, but there’s so much focus and attention on our white collar knowledge workforce, because that’s where VCs come from and that’s where people they’re famous on Twitter come from, but there’s this underserved market of blue collar workers who oftentimes can get up-skilled and move into higher wage positions. And a lot of people are working on that problem. But I think there’s also this problem where there’s this mismatch between blue collar talent and employment.
Right now, it’s hard to hire. It’s incredibly hard to hire for everyone, especially for blue collar. That’s why anytime you travel, the hotel doesn’t want to clean your room because they can’t hire staff. It’s harder to get someone to come do landscaping, it’s hard to hire landscapers. So blue collar workers in this environment have this incredible amount of economic power, which I don’t think that they’ve had before. So I’m trying to think through this week, what can you do such that a blue collar worker, maybe they’re making 15 bucks an hour, but someone across town would love to hire them for 20. How can you make that marketplace more efficient in a way that’s not just a job board?
Job board is what I was thinking too, but how could you build it into be more beyond just a job board?
Yeah. I don’t have the answer worked out, but the theory that I’m contemplating in the shower this week is trying to think through, is there a way to build a blue collar LinkedIn, because if you are a computer programmer and you’re on LinkedIn, every day you get messaged by recruiters constantly, because that’s an in demand white collar profession. How could you build that? Maybe it’s on the local level where if you are a commercial painter, and again, you make 15 bucks an hour, but across town someone would love to hire you at 30, they just don’t know your name, how can you create the platform such that people that want to hire painters could go on and message people?
So figuring out how to operationally give blue collar workers the same access to recruiters and that ecosystem of hiring at scale that right now our white collar professionals have.
Are you looking to buy, build or run a business in the future? Or is search investing going to be your way of creating impact in businesses or this industry?
I want to do both. Search investing is really interesting to me. I’m just getting into it, making my first investments now, but that’s something I want to continue doing because I think that first of all, I think it’s an attractive asset class, but also I think is highly meaningful being able to transition local businesses to the next generation of ownership. I think that’s a good thing for the world, but I do think that just investing is probably not right for me.
I think that the model that I really want to be more involved in is, I want to be able to think through like, what are interesting ways to solve problems, go learn everything I can about the market and then get the right team together to go run it with me as the investor or the chair person or whatever, the title doesn’t really matter. And my thought process there is, it’s hard to be an entrepreneur, it’s hard to be a business owner, and there’s so many people that I think if they could just snap their fingers and be in a small business as the CEO, would they do it? Of course they would.
And a lot of those people are in middle management at large companies. And so I saw this all the time in Test Prep because a Test Prep as I mentioned, I worked briefly at Kaplan and left, and many years later started a tutoring company. You see people frequently in education leaves the company that they’re at and go put out their own shingle. And that’s an opportunity that can happen in any niche. So if you can find someone who could be an incredible founder or CEO and just use the capital and then needs to structure around the idea, I think that’s super powerful.
How do you think you find those types of people today?
It’s totally networking. I’ll give you an example. I’ve been interested this year in the parent-coaching world, which is obviously what that is. I’m a parent, I have a challenge with the way I’m parenting, I need to go find someone to help me out with it, is distinct in a couple of weirdly technical ways from just getting a therapist. And there’s this little community of parent coaches where there’s some organizations that train them and then they all go off on their own. I would love to put that organization together to bring that to more people at scale and make that both accessible to customers and also a fulfilling career.
So, how do I go about that? Well, I’m going to call everybody in space. I know a bunch of people in the space, I want to keep meeting more people. And ultimately, I think that I’ll find in that space, someone who’s going to meets those characteristics that I was discussing, which is number one, would love to be a CEO founder, but has some barriers. Number two, the barriers are overcomeable with some capital and some structure. And three, they know that market and they know that world down path.
They’re the subject matter expert, they’re the crafts person and just need some help or can accelerate their progress by putting some capital and some business acumen in place.
It’s a nice hybrid between being an operator and investing. You mentioned investing probably isn’t the only thing you want to do long term, but being a chair of a board or heavily involved with one entrepreneur or maybe a couple, it seems a nice, happy medium between the two or between the investor or being an operator.
Yeah, I think so. I think that part of it is just driven by the fact that I was in a business for so long and relatively recently gotten out of it. I just don’t want to do it right now, again, all the way. I also think that there’s risks to that. And the risk, I think is, you just had a guest on your podcast a couple of days ago, Brent Beshore, who I’m sure everyone in the space knows and I’ve read his book. And one of the things that stuck out with me in the book is that there’s three ways that you can approach being an investor/chairperson.
One way is to say, “You’re in charge of the business, send me the report at the end of the end of the quarter, call me if you have questions or don’t, I don’t care.” The other thing that you can do is say, “I’m a CEO of this business, I make the decisions and everyone reports to me.” And the very worst thing to do is to be in the middle where you say like, “I’m in the middle sometimes. If the CEO makes the decision I don’t like, I’m going to come in to overrule them and look over their shoulder, just make everyone nervous and muddy up the lines of communication.” That’s I think the problem to avoid. So I’m not sure what the answer is there, but I’m keen to avoid that problem.
Is it just maybe more frequent feedback loop you could have with the CEO that keeps something consistent so they’re not always worried that you’re going to email and overrule some random decision they made during the week, but you have a scheduled time that you chat and discuss ongoings in the business? What are some of your ideas for fixing that?
One of my ideas is, I’m a big believer that every business and every leadership team should have a regularly scheduled weekly management meeting. And I’m also the believer it should be highly structured, because I’ve seen really bad weekly management meetings where people come in and just like, shoot the breeze about what they did the weekend, shoot the breeze about what they’re doing that week and then that’s it, and it takes an hour or so. When I was in my business, we ran a meeting structure that I got from book traction, I’m a shameless fan boy of it, but it’s a highly structured meeting where you’re going over your quarterly goals and giving an update, you’re reviewing your KPIs scorecard.
You’re talking very specifically about the challenges that are occurring in the business and making a plan at that very second to go fix them. That’s a format that I love. I’ve put that in a couple of other businesses I’ve been involved with over the years, I’ve seen a lot of other people operate that kind of format. And so that connects up with your question because I think that if there’s going to be a management meeting and it’s the CEO and the top people, can the investor chairperson participate in that? I don’t know. I tend to think, yes, as long as you are not an over ruler, as long as you’re clearly there to help and not to meddle.
But to have that structure where this is the touch point with the investor and we’re not going to have another one, that’s one way you can do it. The other way, it’s just the classic private equity owned, we’re going to do a meeting every week and you send me your numbers. And then I come on a call 10 minutes late, and for my last thing hardly look at your spreadsheet and make some random off the cuff remarks. That’s another way that you could do it.
That doesn’t seem your style.
I don’t think that’s how I’m going to do it, but that’s the way you could do it.
Excellent. Moving on to some closing questions, you’ve been obviously in the education business, but I’d be curious, what class in college would you teach if it could be about any subject you wanted?
I love this question, and I had a lot of choices because I’m so passionate about learning and I’m so passionate about getting students prepared for their careers. And what I ended up with is I’d love to teach a course on lifetime learning, which is, we in our society for some reason, I think it’s a mistake has said, adult students are going to have all of their formalized learning in four consecutive years at the beginning of their career. And that’s not great. So students come out in the world and soon find out number one, they don’t have the right skills. And even if they do, when they graduate, those skills are outdated within five years.
So the course I would love to teach is how to do planning for lifetime learning. So how do you think about your career not just as your first job, but a 60 year arc and thinking through how do you find the right resources, the right courses, the right books, the right networking contacts to say, “Here’s where I am today, I want to move to the next phase, how do I get there without the benefit of being in college?” I would love to teach that.
So, what would you teach? Would you teach how to continually find new books or meet people or take courses, different classes? What sorts of pieces of that course would you include?
I think the first one, and again, you’re seeing I’m big on this, I think the first is goal setting. First is thinking about where do people want to get in their career? Because I remember when I graduated college, and like I said, I was like, “Oh, I’ll going to law school. Oh, I’ll be a professor. Oh, I’ll go into consulting.” People that are trying to just don’t know. And that’s okay, you don’t have to know and you shouldn’t know, but as you start to develop in your career, you say like, “Okay, I got this job in PR or whatever. And I like it and I want to be the CEO of a PR firm. How do I get there?”
So first of all, how do you structure working back from that? And then how do you think, “Okay, what I’m going to do is I’m going to take a course from a college, I’m going to combine that with a cohort-based course from a practitioner that only teaches, and I’m also going to join on deck for PR or whatever.” So it’s a matter of what are the goals and then how do you find the resources and put them together in a coherent way?
I love that. What strongly held belief have you changed your mind on?
This is one that I really struggled with, I’ve changed this in the last 18 months. I sold my company, I worked there for 18 months, then I left. And I decided to take a little time off, but then my little time off became a lot more time off because COVID hit and I wanted to teach kindergarten to my kids as opposed to them just watching TV all day, I guess. So it didn’t seem the right time to start a business or really get involved in anything. And I have this thing in my mind, which is like, what will people say if they know that I haven’t been doing anything productive in the business world for six or eight months?
What will they think? All the people that thought I was so smart, now they know that I’m not going to accomplish anything in life. And I just realized that’s stupid and no one cares. Maybe my dad calls me every week is like, “Do you have a job?” “No, I don’t have a job yet.” But other than my dad, absolutely no one cares. I could just like disappear from the business world and that would be okay, people would not be upset. Now, I don’t want to do that. I want to be here and add value and create things and build, but I just think that separating out what I really want to be doing in every different phase of life, for every different season of life is totally divorced from my expectation of what people think I should be doing because people don’t care.
That’s a good one. That’s a hard one to get over too, I think, especially in my experience in school for most of my life at this point, you care very strongly about what other people think of you because it’s reflected in how they interact with you, your friendships, your grades are in some ways a reflection of what other professors think of you. And getting over that it’s been hard, but were there a few things you did or came to understand that made that easier to not care what other people thought of you?
Yeah. I went to therapy. I’m a huge proponent of mental health services, I’m a huge fan of therapy. I’ve had a therapist that I’ve worked with on and off for six or seven years. And then on top of that, I’ve had, I mentioned parent coaching, I’ve gotten a parent coach. I’ve gotten all sorts of health in different phases of my life. And I’m always really open with that because I think that it’s so impactful for a lot of people, maybe even for everyone, but especially for entrepreneurs and business owners, where the decisions that we make in our business life seem so impactful, and so like permanent. And being able to talk that over with someone who’s only in your corner, I think that that’s really important.
I love that. What’s the best business you’ve ever seen?
The best business I’ve ever seen, you’re going to love this because in the small business Twitter, these lawn care businesses are so trendy right now, and I finally learned why, because I have this vacation rental property on the shore of Lake Michigan in Michigan, we have a lawn care service for it. And I’ve had the same lawn care service for five years and they are absolutely terrible, they’re the poster child of… And if the guy hears this podcast, but he won’t, he doesn’t care, he knows the stuff. They don’t answer the phone, they don’t respond to emails, they’re subscription based.
So they’re like, “Okay, you sign on this dotted line, and every week we’re going to mow your lawn until your lawn doesn’t need mowing, and then we’re going to come and shove your snow.” And they bill me every month and I’m not going to ever unsubscribe because number one, they actually do show up for the thing that they said they’re going to do. I could try to go to a competitor and I’ve tried, but all the competitors are like one-person shops, which they can’t provide that level of service.
So I get this terrible service from these guys, they don’t take my calls, they don’t want to hear from me, they’re not going to customize the service at all, they don’t care if anyone ran over the flowers, but I’m going to keep paying them basically forever as long as I own that house.
Something I think you should start.
I thought of that, yeah. I thought about trying to buy that business, but I think that the one thing that’s a hang up there is right now getting blue collar seasonal labor is so, so hard and so, so competitive. I’m sure it’s a tough time to be in that business.
Oh yeah. I’m sure, it’s certainly not an easy one. There’s a couple of lawn care folks I chat with and hiring folks has been really hard, and other folks just leave too and find other jobs. There’s been a lot more turnover recently. Thank you, John, for coming on the podcast. It has been so much fun to hear about education business and different advice for searchers or folks thinking about operating businesses. And I love your comment about therapy too, that’s something I should probably look into as well. Definitely would be helpful, but thank you, John, for sharing your time. This has been awesome.
Yeah. Alex, this is super fun. Thanks a lot.