Nikonomics - The Economics of Small Business

64 - How Permanent Equity Built a 9 Figure, Debt-Free Portfolio with Mark Brooks

Sep 30, 2024

Mark Brooks, Managing Director of Permanent Equity, shares insights on their innovative investment strategy that focuses on debt-free acquisitions. He explains the unique 30-year fund model and why it diverges from traditional private equity. The conversation discusses how they identify key business metrics and the importance of aligning incentives with cash flow rather than EBITDA. Mark also delves into managing post-sale relationships and the significance of maintaining seller engagement for long-term success. A compelling look at sustainable business growth!

47:44

Episode guests

Mark Brooks

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Quick takeaways

Permanent Equity's 30-year fund model emphasizes long-term partnerships with family-owned businesses, prioritizing stability over quick exits.

The commitment to debt-free acquisitions allows businesses to focus on sustainable cash flow and profitability without financial burdens.

A unique incentive structure ties executive compensation to cash flow distributions, fostering accountability and aligning interests with actual business performance.

Deep dives

Unique Investment Fund Model

Permanent Equity operates on a distinctive 30-year fund model, which diverges significantly from the traditional private equity approach. Unlike typical funds that aim to buy, grow, and sell businesses within a 7 to 10 year timeframe, Permanent Equity focuses on long-term partnerships with family-owned businesses. This model prioritizes stability and sustained growth, allowing them to invest in companies without the pressure of a quick exit strategy. By emphasizing relationships over short-term gains, the fund aims to create lasting value for both the businesses and their investors.

Intro

3min

Bridging the Valuation Gap

5min

Aligning Business Incentives for Success

2min

Navigating Private Equity Acquisitions

21min

Mastering Cash-Flowing Assets

11min

The Allure of Digital Content and a Passion for Reading

3min

Cherishing Moments: Reflections on Life's Priorities

3min

🚨MY NEWSLETTER https://nikolas-newsletter-241a64.beehiiv.com/subscribe 🚨

Join me, Nik (https://x.com/CoFoundersNik), as I talk with Mark Brooks (https://x.com/markbrooks), the Managing Director of Permanent Equity, a unique investment fund founded by Brent Beshore. With 16 businesses and 900 employees, Permanent Equity uses a 30-year fund model and focuses on debt-free acquisitions, which goes against the grain in private equity. We discuss how they identify unique metrics for each business, incentivize operators without using EBITDA, and manage post-sale relationships.

Questions this Episode Answers:

What is Permanent Equity’s unique 30-year fund model?
Why does Permanent Equity pursue debt-free acquisitions?
How do they identify key metrics for each business?
Why don’t they incentivize operators based on EBITDA?
How do they approach post-sale seller relationships?

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Love it or hate it, I'd love your feedback.
Please fill out this brief survey with your opinion or send me an email at Nik@cofounders.com with your thoughts.
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This week we covered:

00:00 Highlights
00:19 Welcome to Nickonomics
01:15 Interview with Mark Brooks
02:00 Understanding Traditional Private Equity
05:27 Permanent Equity's Unique Approach
07:44 Incentive Alignment and Cash Flow
08:44 Newsletter Promotion
09:14 Challenges with Incentive Alignment
11:04 Structuring Purchases and Keeping Owners Onboard
14:38 Value Proposition and Legacy Considerations
17:29 Operational Support and Back Office Functions
23:02 Metrics and Day-to-Day Operations
25:59 Understanding Leverage Points in Business
26:40 Key Business Metrics Categories
27:45 Dogmatic vs. Flexible Business Approaches
28:24 Industry-Specific Metrics and Opinions
29:42 Tracking Metrics and Reporting
31:17 Managing a Portfolio of Businesses
33:19 Delegation and Business Growth
39:33 Characteristics of Successful Companies
45:06 Advice for Entrepreneurs and Personal Reflections

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Nikonomics - The Economics of Small Business

64 - How Permanent Equity Built a 9 Figure, Debt-Free Portfolio with Mark Brooks

Episode guests