105 | Building Profitable Businesses on Biblical Principles with David Reece

Patrick: [00:00:00] Have you ever wondered what it really looks like to build a thriving business without compromising your faith or your values? What if the same principles that make a company profitable could also make it purposeful, rooted in biblical wisdom, strong leadership, and long-term vision? Welcome back to another episode of the Vital Wealth Strategies Podcast.
I’m your host, Patrick Monig, and today we’re diving deep into that exact question with my guest, David Reese, the founder and CEO of the Reese Fund. David has built and led multiple successful manufacturing and construction businesses, and now he’s on a mission to buy and build Christian companies that are not only profitable, but are also purpose driven.
In this episode, we impact how faith-based management philosophies can transform a business from the inside out. How Biblical principles like stewardship, integrity. And rest can actually drive better performance and more sustainable growth. If you’ve ever wrestled with how to grow your business without losing sight of your values, or [00:01:00] how to use your business as a platform for impact, this conversation will inspire you.
We’ll talk about everything from creating strong operational systems, fostering a culture of excellence, to investing in opportunities that align with your convictions. And if you’re ready to start building your strategy to save more in taxes, strengthen your business, and grow your wealth with purpose, head over to vital strategies.com/tax.
That’s where you can connect directly with our team and begin crafting. A plan built around your goals. Again, that’s vital strategies.com/tax. Stick around to the end because David shares some incredible insights about creating long-term impact, how faith and finance intersect, and what it takes to build enduring wealth the right way.
And if this episode brings you value, take a moment to leave a quick review. It helps us reach more entrepreneurs who want to build profitable businesses with eternal purpose. All right, let’s dive in. Here’s my conversation with David Reese. I’m excited about our conversation today. We’ve got David Reese serves as a CEO and [00:02:00] president of, of multiple businesses.
But, uh, today we’re gonna be talking about, uh, the Reese Fund and, uh, we’re gonna get into to that. So, David, thank you so much for, for joining us here today.
David: Patrick, thanks for having me on. I’m excited to be here and I appreciate the work that you’re doing. I know that a lot of people kind of get into the space where they’re starting to do well and they need help pulling things together.
I think your, uh, business is doing neat stuff for people. And, uh, I, one time people, one time early on when I was looking at stuff where I was starting to make some money, I had the situation where somebody saw what was happening. They were like, wow, you pay the most number of dollars of taxes that I’ve ever seen per dollar of revenue.
And I said, thanks, not the award I wanted. And I think you can probably help people to avoid that problem. So hopefully you can help people to be spared from that award.
Patrick: Yeah, yeah. Uh, hopefully, and I’m, I’m sorry you were, uh, bestowed with that, that award. Uh, that’s, that’s no fun. But, uh, yes, we, we do like solving the tax problem.
And just speaking of problems, I think about the problems that, uh, that entrepreneurs have that I’ll say have a, a values based, uh, [00:03:00] approach. You know, they, they often struggle to align their business and investment decisions with, we’ll say, timeless biblical principles in a world that maybe pri prioritizes profit over principle, we love profit, we think everybody should be profit, profitable, but uh, not over.
Uh, let’s not worship at that alter. So. Then there’s this internal tension between pursuing growth and staying fulfilled to their convictions. And they wanna be excellent stewards of, of the business they’ve been given and all the wealth they’ve been given, but they wrestle with fear and uncertainty and maybe competing voices about what success really means.
And then, uh, from a philosophical point of view, it shouldn’t be so hard to run a thriving business and invest wisely, uh, while keeping scripture at the, the sort of the forefront, our ultimate authority when it comes to making decisions. And so true wealth shouldn’t require compromising our eternal value.
So I’m, I’m excited to, uh, dig into this discussion. Can you give us a little bit of your background? You’ve obviously run successful businesses if, uh, you’re winning awards for, uh, being in top tax brackets, sending lots of money [00:04:00] to the IRS, but, uh, yeah. Tell us a little bit about your background.
David: Yeah, absolutely.
So I, I was in, um. My dad actually taught me basic business stuff by he, by showing me how real estate works. Um, and mm-hmm. I find that real estate is one of the best places for people to start putting money early on because it’s like business in slow motion, right? You have all the same principles, the payments are really simple, you know, all, all that kind of stuff.
And so I find that it also is a great, great way of having something you actually control. So if you can, like, get a piece of real estate that you live in and then, you know, turn it into a rental and move on. So my dad taught me, uh, the basics that way. Uh, from there I had some stuff where I was doing contracting and consulting and doing a bunch of different things, and I got to get into a firm that had about 400 people and, and was able to, um, uh, have some neat projects with some of the manufacturers.
And I fell in love with basically, um, different operating principles, which is a weird, uh, weird romance I guess. I don’t know. Mm-hmm. Um, and, and so I, I started to really like looking at, I kind of thought operating principles for systems of operation for different types of manufacturing outfits were sort [00:05:00] of like.
Studies in Dominion, right? And it was like, how do you subdue the earth? How do you, how do you turn things efficiently into value? And so I really liked that. And, and I basically ran into, you know, the, the Toyota system with, you know, lean manufacturing and all that. Mm-hmm. And then I read, you know, why when that works and doesn’t work and all that.
Uh, and so, um, I was able to get into a place where there was a guy who had a company, um, and, uh, that was Armored Republic. And he, he hired me on to basically help to solve a bunch of problems. Um, within about a year, he made me CEO then I, I, I basically said, Hey, if I can repeat some of this stuff or do some generate some more value for you, would you willing to let me earn some of the company?
He was like, sure, if you can do that, I’ll let you do that. And so then that happened a couple of times, and from there, uh, I was able to buy the business. Um, and, uh, it was super volatile. The, the tactical industry, body armor, all that kinda stuff was just like mm-hmm. Ups and downs or wild. So I was like, okay, I wanna build some stable institutions, um, and I wanna build Christian businesses and to be able to consistently deal with stuff.
And so I went, okay. How do I, how do I do this? So I [00:06:00] started to look into other types of manufacturing that was more stable construction related things, um, and it started spread out. And so those, those different opportunities, aluminum, extruder windows, manu, uh, windows, uh, construction and installation doors, uh, we have ammunition, we have body arm, we have all this kinda stuff.
So there’s a bunch of different, uh, businesses that we’ve gotten into that are all in sort of the manufacturing or construction space. And, uh, that kind of, uh, made me go, okay, I, I love this. I love the physical elements. I love the, i the being able to, to deal with the operational principles in that. Um, and so what I really feel like when I’ve reached a point where things have succeeded well is when I’m able to kind of back out, out of a, uh, more operational partner and more of a, of a chairman of a board where I’m able to coach A CEO or, or a COO and those are the, mm-hmm.
That’s kind of the relationship where I feel like I can add the most. Is to be able to, uh, to do that and to have somebody else trained into, into [00:07:00] those operating, uh, day-to-day things because there’s, there’s a perspective that you need help with when you’re in the operation where you’re thinking about the big picture.
Um, and having done it a few times, it’s, it’s nice to be able to, to come in and talk to guys and help them to apply the operating principles and think about things from a strategic perspective.
Patrick: Yeah, I love that. And, and I, I, I do wanna highlight, uh, the real estate comment. ’cause I, you’re absolutely right.
Um, people think real estate is an investment, but we, we often point people back to, it’s like owning a small business. And, and I love your, your observation that it’s slow moving, you know, and it’s actually pretty easy to analyze an opportunity there. There’s not that many moving parts, uh, compared to a business.
And so I, I think that’s a great place to, to go. My wife and I were involved in about $150 million worth of real estate projects. Uh, I’ve Nice, we’ve had a real estate business for. 20 some years, and it’s been, I had some very similar, I had some people in my life that, uh, early on were like, Hey, you [00:08:00] see that, that building over there that puts 500 bucks a month in my pocket?
And I was like, how does that work? That’s awfully fascinating. Uh, and then I, I remember reading a book called Rich Dad Poor Dad, uh, in between undergrad and law school. Uh, the, the short story is I got a full ride to law school and dropped out. Uh, ’cause I was late for my first class buying a piece of real estate.
And we’re like, we’re gonna, we’re gonna go pursue this instead of the law degree. But, uh,
David: good decision. Uh, real,
Patrick: real, absolutely. And real estate is my first love. It’s like, I, I love looking at good real estate opportunity. My wife runs that business now, and it’s thriving now more than ever when she’s involved with that.
But it’s, uh, uh, it is a great opportunity to grow. Well, uh, we think it’s a fantastic asset class. And, uh, so I’m, I I love that. I also love your, uh, experience in the business world. You got involved in business figured out, man, I, I love this. And, uh, there. Uh, turned it into equity. You, you, you showed up, you added value, and, uh, uh, started getting ownership in those, those pieces of the business and then, uh, [00:09:00] uh, ultimately bought it.
So good for you. That is, that is exciting. So I, I don’t know where we want to go next, but I, I think about, uh, we’ve touched on a little bit of, I’ll say, uh, management philosophy. I think that’d be interesting. And then, uh, that might transition us to like investment philosophy and how, how Reese Fund thinks.
And, uh, then ultimately we can wrap up with, uh, there’s some opportunities out there, uh, that, uh, uh, people can invest in it if this conversation resonates so we’ll, we’ll sort of, uh, uh, tease that a little bit, but, um, yeah. Where would you like to start next with, uh, with this
David: one last quick comment of the real thing?
Yeah. One thing I found that was also really helpful is. Something that like, you know, as I was chasing down business world stuff, it was something that my wife, uh, we went to homeschool our kids. And so she was, she was able to kind of take over a lot of that and it became this thing where she developed a lot of knowledge.
So I found that like, as I was out trying to generate our, our income in that kind of shorter term way, she was able to help to manage some of that and relieve that. And so it was a really neat thing [00:10:00] for us in, in terms of a partnership of working together is, is that way that real estate can involve that, and it, it allowed for this training of business principles to build into the house.
Mm-hmm. Where everybody’s thinking about not only how to spend stuff, but also how you can buy assets that produce value. So I just, mm-hmm. I wanna, I always, I’m a pastor and we, you know, with family and all that kinda stuff, it’s like, how do you, how do you put all these things together? And I just wanna encourage people to think about how the house as a whole can be a productive economic unit, partly by dividing up labor like that.
But, but I know that, uh. We’re not here to talk about real estate
Patrick: principally though. Sure, sure. Yeah. Let me make one more comment because if I had to design the perfect, uh, combination of wealth building, it would be owning, building a growing real estate portfolio and owning a cash flowing business because all of the, the losses from the real estate, there’s, especially now with the, uh, accelerated depreciation, it’s back with the big, beautiful bill getting to push all that.
Oh, really? Down. We get a [00:11:00] hundred percent, um, you know, accelerated depreciation, it’s like the cost segregation study with a real estate professional, uh, and a cash flowing business. It can wipe out so much tax and you just look at the wealth building that happens there. It’s, it’s unbelievable. So That’s awesome.
That’s my last comment on the real estate side, but, uh, yes. Back to, uh, we’ll say growing businesses and, uh, thinking about management philosophy. Is that, is that a good place to start next?
David: That sounds great. So, um, with management philosophy, so. One of the things that I, I think is super important is that we have to recognize our finitude, right?
As creatures, we, we don’t, we can’t have everything in our mind simultaneously, right? We, we have to deal with a focus. And I’ve found that the, that the, the management of focus is one of the key things to actually doing anything well, you have to like actually shepherd that in. And, and so there’s so much information and so many things you could do, so many suggestions, right?
It always kind of come in and all the employees, you know, have these things about, like they, they either you’re, you’re either having this frustration where you can’t get employees to give [00:12:00] suggestions or you have a culture where there is sort of suggestion, uh, encouragement and you’ve got too many things to do.
And so picking those things, uh, is key. So I’ve found that having mental models to be able to think about business in a simplified way is one of the most important things. And being able to then figure out where to zero in. So having kind of quick checks, um, and so. Any business, there are five basic components, right?
You, you have a value proposition of what it is that you’re going to, that you provide, what va, what value you give. The, the next thing is, and that’s sort of r and d. Mm-hmm. Right? And, and so you’re thinking, Hey, which, which value propositions are we gonna focus on? What, what are we giving, uh, to our customer?
Then there’s, uh, there’s marketing, which is taking atten take, finding a market, finding the people who are potential purchasers, uh, getting their attention and turning it into interest. Uh, for sales, I think about the idea of taking people whose attention you’ve got, uh, and the interest you’ve got, and turning that into a paying customer.
And then you have this sort of operational piece where you’re, you’re focused on, um, how to actually get the [00:13:00] stuff to people that you promised them. Um, and so that’s, you know, whether that’s building a building or whether it’s shipping something or it’s fulfilling a service. Um, and then lastly, finance, right?
Which you have, you have basically the capital and the business measured by the balance sheet. You’ve got, uh, the, the profitability of the business and you’ve got cash flow. And, and anybody who’s running a business for five minutes knows the cash flow is a stressful part. And so. That whole thing right there is, is how do you, how do you simplify that?
So I like, like people who are around me, who are either being trained by me or who are kinda in the organization, interact a lot, know that that is something that we, we use a lot. We, we jump into those things and go, okay, what’s going on here with any b any given business, one part is harder than the other.
And so you’re figuring out what’s the one that has the problems the most and what’s the one that’s constraining the growth of the business. Um, and so I have found that the theory of constraints, uh, is a extremely useful mental model. Uh, you know, there’s the famous book, the Goal, you know, which, which kind of puts it in story form.
And just on a basic level, you’re trying to [00:14:00] figure out a way to measure your throughput of value to the customer and figure out which thing is stopping it. And a lot of the times it’s sales. A lot of the times it’s trying to figure out how to make the system operate efficiently and that that that system for production or manufacturing, when you, when you get it into a place where it’s kind of working, you typically can get it to a constraint point where it’s got up or down of some value, uh, that it can function inside of.
And then sales and marketing becomes the thing. And then you hit a point where you have a new fund problem where you’ve sold too much, like you’re running into with what you got going on. And, and you go, okay, well can we expand that? Or do we raise prices or do we, whatever? And so there’s, that’s sort of, you’re trying to get to a place where you’ve got the selling mechanisms and the, the delivery mechanisms functioning efficiently and well.
Um, and, and then from there you’re trying to figure out how to, before you try to grow a team, you want things to run efficiently, right? And so you’re using, there’s a lot of tools from lean manufacturing that I think are super useful to tighten things up there. But you have. People can try to over tinker with lean and never kinda move on.
Or they can try to do that too early before they’re really producing [00:15:00] value. Um, and they can kind of go pull this effort into one area but not know which part of the business. So those things together are sort of the, I slap those three things together and it becomes sort of the, the, the minimum set of ideas that are kind of necessary to make somebody function well as a manager in one of my organizations.
Patrick: Yeah, I, I love it. This is, uh, this is so good because I, I, I think there’s so much there. It can be tempting to, uh, be so into the operations, like you’re talking about lean, like creating efficiencies and that, that, that’s all fantastic, but at the end of the day, if we’re not, you know, creating interested buyers and then selling to those interested buyers, uh, it doesn’t, it doesn’t really matter what, uh, we have going on.
So all those things need to, um, marry together nicely. That is, that is good. And we, we’ve also back to your, your final point on the finance side. We, we’ve seen people run businesses really well, but they don’t have a good eye on the finances. You know, they might be generating lots of revenue, uh, but the, [00:16:00] you know, their, their cash flow, you know, is sort of outta whack.
And it’s not as easy to manage cash flow as, as a lot of people think. And so it, uh, yeah. Um, you know, between accounts receivable, accounts payable, you know, a lot of those things, it, uh, it can throw people a little sideways. You can run a very successful business and then run yourself outta cash. And it’s the number one reason businesses go outta business.
So, um, yeah. This is, um, this is good. All right. Um, so I love all this and I, I wanna tie this a little bit to, uh, the Reese Fund. And can you, can you explain that, because I, I think, I think management philosophy matters when we’re talking about Reese Fund and, and how this applies. So can you introduce that to us?
David: Yeah. So Reese Fund, uh, basically we, we try to. Buy and build Christian businesses. We’re, we’re trying to, uh, have explicitly Christian mission statements. We’re trying to apply biblical principles into, uh, the standards and even reference it back to specific or explicit, uh, you know, uh, scripture. And then to be able to [00:17:00] try to make it so that there’s a place where, uh, where the cultural impact there occurs at that level, where people are, um, thinking about, okay, well how, how do I apply the word of God to this area?
How, how do I fulfill these duties? How do I make it so that culturally there’s an encouragement, uh, you know, to Christianity as opposed to this sort of DEI world or whatever that makes it so that there’s, there’s a bunch of philosophies that are, that are, that are different or contrary to, uh, the Bible and said, we have, okay, well, well, we have the liberty, praise God to be able to have a Christian culture.
Mm-hmm. Um, and so we wanna encourage people to be bold in that. Um, and so. For example, we try to encourage the use. I think the book of Proverbs is the, you know, god-given manual for productivity, right? It’s just a, it’s an amazing thing. And I think in particular versus, uh, chapters 25 to 29 is sort of the middle management chunk of the book.
It’s very specifically, you’re not the king, um, but you’re in a position in the court of the king, right? You’re in this place where you’re part of influencing the institution, uh, and you’re not in charge of the whole, uh, but you’re, you [00:18:00] know, the, the effect of you and your peers and the person leading the organization from the highest rank, that combination of people is really gonna set the thing.
And so it really gives a great warning to people who are CEOs who are running or owning businesses, uh, thinking about the importance of the people they’ve got right below them, um, and the impact they have. Um, and then also for people who are in positions where they have significant influence, uh, how they can help to, to push the institution.
And so, um, those, those pieces, right, where you think about like, okay, here’s, here’s management philosophy as regards methods. Here’s management philosophy as regards overarching principles of, of what’s true, what’s real, what’s good, and if you can push those together, right? The methods of, of thinking about, uh, basic functionality of business as a philosophy is necessary for effective work.
Uh, but whether the work you’re doing is good or bad, uh, is based upon the definition of what’s good, right? And so you, and so that idea that, that you, that you’re trying to put [00:19:00] money not only to make money, but to have it make money while doing what’s, what’s good, and having then that money be put into the hands also of people who are going to then deploy to do things you think are good.
Um, that’s a significant, significant thing. And so I think that capital formation to make things happen is the big problem, uh, for being able to accomplish a lot of big things in the world. Um, and then also who controls that capital, how it’s directed, uh, is a big part of what shapes life. And I think people under undervalue under.
The degree to which, you know, the working life. Um, and, and business dramatically shapes culture and creates the incentive structures. And so I think that, uh, that idea of Christian business is key to being able to, to see a culture, uh, that is less anti antithetical to Christianity. Uh, and that’s sort of the, the reason I wanted to do this.
So it makes getting capital harder, uh, but we’ve been able to build up a good network of investors and, and all that. And, and it’s kind of something where I’ve thought, if [00:20:00] we do this long enough and we get big enough, then we can see a lot more capital that’s, that’s, you know, predisposed or prejudice towards that Christian causes and, and, and building out institutions that support the same values and uh, and truths that I believe in.
Patrick: Yeah. Yeah. This is fantastic. So many things I want to, uh, touch on here. So I’m a part of C 12, which is a Christian business owner like forum where every month we get together with, uh, other Christian leaders that are, are trying to figure out, uh, how to effectively bring. Ministry into our businesses, right?
Like we’ve got an opportunity to, uh, bring into the marketplace. And, and so that, that leads me to a question. You know, one of the things you, you talked about was like bringing a Christian culture, uh, into some of these businesses that you’re acquiring into the Reese Fund. And maybe, maybe you can clarify for me, is it, uh, I, I know you’re looking for fantastic business opportunities, right?
Uh, you’re looking to, to buy on the value side. Uh, does it mean like the, the company you’re targeting [00:21:00] has to be a Christian business, or is that not necessarily the case?
David: It’s not necessarily the case. We’ll buy businesses, we look at it. If we think the culture is gonna be like, it’s just gonna just totally reject what we’re doing.
Mm-hmm. Um, then, then we, we’ll go, okay, no, we’re gonna pass. Uh, but basically we’re looking for businesses that are, that are gonna be kind of easier to bring that in because there’s kind of already some people that are kind of happy there or they kind of have. Principles of how they’ve operated that make it so that they’ve been encouraged to think about, uh, things from a local perspective with, with some area.
So we’re looking for, for targets that are gonna be the, not the hardest, um Yep. To deal with. And that way’s gonna be an immediate revolt. Yeah. Um, but we also, and we are happy to look, we have a deal right now, we’re working on where the, the owners are Christian and they’ve had a Christian culture including prayer and some of the meetings and stuff like that.
So we’re really excited about that. Uh, so that’s always the best when we can preserve something and continue to improve it. But being able to take businesses that are not owned by Christians is also something if it’s a culture where we think, Hey, these, these values, these principles are not going to be immediately kind of just like, uh, you [00:22:00] know, something that everybody goes ah, and, and, and rents away.
Right. And so those are sort of the two categories.
Patrick: Fantastic. Thank you for that distinction, because I, I’ve got some follow up questions around that and, and I think one of the things that we, we think about is there’s not a Christian value that isn’t great for running a business. And, and so you think about, um.
You know, we, we look at, let’s just start off with, uh, Jesus talked about the, the two greatest commandments. Uh, love the Lord God and love your neighbor as yourself. Right? And, uh, and I think about what happens when you start to love your neighbor. It, and, and we see Jesus model this, uh, throughout the, the scriptures.
Uh, he doesn’t come and beat people up. The only time Jesus was really angry was with the, uh, we’ll call it the spiritual elite, right? You know, the, the religious elite, maybe, um, you know, that those are the people he got frustrated with, but we’ll, we’ll see Jesus like, uh, approach people. And he, he showed up with grace and [00:23:00] kindness and, and mercy.
And so I think about that as a leader, and it’s like, we’re not, uh, look, I, I would, I would love for you to believe what I believe, but it’s not a requirement to work here. Uh, and, and what that really is going to mean for you is we’re gonna care about you in probably a way you’ve never been cared for before.
Uh, because that’s what we’re called. Again, we’re not gonna do that necessarily over, uh, we’re gonna do that because we’re called to do that. But we’re also gonna do that because we’re, we’re trying to run a very successful business, and we think that’s a part of that. And so, um, I don’t know if you have any thoughts or comments on, you know, uh, bringing Christian culture into a favorable secular environment.
Um, can you just talk a little bit about, you know, how, ’cause I, I think the way, here’s, here’s a few thoughts. ’cause when we’re hiring people, we do not shy away from who we are. Uh, and it’s okay for people to self-select out. And we don’t make it a requirement. Like, Hey, here’s what we think are, you know, the truths and here’s how we’re gonna run our business.[00:24:00]
Here’s some optional things we do. You’re not required to show up to, you know, our, our Tuesday Bible study. But if you want to, you’re welcome to. Um, you know, and, and you know, our core values have, you know, if you, you understand the scriptures, you’re gonna start to see, you know, those things through our core values and.
Mission and vision and all those other things. And so, um, yeah, I’m, I’m curious how, how you go about bringing those things into a business.
David: Yeah, so I think, I think the idea that you’re very straightforward about who you are is extremely important. I think that the, uh, the thing is people are afraid of being targeted by malicious people.
If they are really straightforward, the reality is the bigger threat is for people to not understand. And, um, as far as malicious people go, if you treat them justly, then that protects you from a lot of problems from malicious people. I think the Lord often makes it so that, you know, somebody wants to set a trap for you, and if you’re seeking to honor him, that he’ll cause the trap to spring on themselves, like some sort of Looney Tunes episode.
Mm-hmm. And so, does anybody even know what Looney [00:25:00] Tunes is anymore? I mean, I feel like I,
Patrick: maybe, I certainly do. The Wiley Coyote Roadrunner, those were, uh, you know, Tom and Jerry. Those are, those are, you know, core memories for me growing up. But, uh,
David: yeah, so. So that, um, that idea that, um, that I think it’s important to be, to be straightforward, bold, clear.
Um, and then if people are like, yeah, I don’t agree with you, but I’d still like to be a part of this, they have some idea of the kind of culture, and it’s typically because they like something about the externals of what that culture creates, right? And so, and so then they at least value what you’re building.
And so then when there’s sort of, um, you know, also you find that it draws people in who also appreciate what you’re trying to build, right? So there’s this, there’s this line of repulsion effect. There’s the, the drawing in, and then there’s other people who are just like, sure, yeah, I like some of the elements of that.
And so it helps with that. Then internally, uh, if people start to go, oh, you know, I didn’t really think about what this is, it encourages them to, to go, Hey, this is not changing, right? So, so [00:26:00] they start to go, okay, I, I’m gonna, I’m gonna leave. And they, it makes it, so the leaving process is something, uh, that, that also is, is typically less, less awful, less dramatic.
And then sometimes you’ll have people that just kind of freak out, especially if you buy a business. Um, and, and then you kind of say, Hey, this is the culture that we’re trying to put into place. And so what I try to do is I try to do enough to be clear to begin with for the takeover. Um, and then I also try to, at the same time, gradually bring certain things in.
So one of the things we’re really clear about right away is something that helps to build credibility, that we mean it, we mean it for their good. And that is we come in and we talk about, Hey, for the Lord’s Day, we’re gonna make sure everybody gets to rest, and we’re gonna make sure that we, unless there’s like, you know, an ox on the ditch that we gotta take care of, unless there’s a, a necessary work to avoid the destruction of value or life or some sort of mercy that we need to give to, to, to avoid, you know, you know, suffering to somebody that, you know, our, especially if it’s our fault mm-hmm.
We’re, we’re gonna, we’re gonna avoid, uh, interrupting people’s time to arrest them. Um, and we want to make sure that people are free to worship God and to be able [00:27:00] to focus on their families during that time. And so that is one of those early announcement things that we do that helps people to kinda be like, what is this?
This is a little bit weird. And they’re kinda like, well, I’ve heard of Chick-fil-A, you know? And so that, like, that basic idea is, is one of the early things that we announce. Um, and so then there’s sort of this gradually increasing, uh, application of things and trying to be gentle with people along the way.
And so I can talk about that for hours, but just that, that’s sort of the, some of the basic thoughts around that.
Patrick: Yeah. Yeah. I love it. And just on your point on rest and Sabbath, um, you know, you look at the 10 Commandments and it’s, it’s honor of the Sabbath. It’s in there right next to, you know, uh, don’t murder, you know, uh, don’t worship false idols, don’t cheat on your spouse.
You know, all of those. Mm-hmm. Those other things. And it’s one of those that’s feels like it’s really easy to, uh, push through, like, ah, that doesn’t apply. I don’t need to rest. And, uh, uh, we also look at, uh, I, I read a book, John Mark Comer wrote, uh, [00:28:00] called Ruthless Elimination. Hurry. Great book, highly recommend it.
And, um, uh, really got us to like, not just think about Sabbath, what it truly means to rest and be disconnected. And, uh, and Jesus points out Sabbath wasn’t made for God, it was made for man, you know, and it’s, it’s good for us to, to rest and refresh and, uh, so I, I really appreciate that. And again, there’s all this, we’ll say secular data around rest makes your people more productive, you know?
Yeah. And so it’s not just a biblical principle, it’s a wise business move too, to, to give your people time to just, uh, to refresh and not expect them to respond to emails and be producing something on, uh, on, on Sunday. So that’s, uh, that’s great. Thank you.
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So thinking a little bit more on the investment philosophy side, you know, there’s, um, uh, how do you, you know, when I think about a fund, the goal is to, uh, increase the value of the investment. So we, we wanna make a great buy. Um, and, and I’m curious your thoughts on. You know, how we manage the risks there.
’cause, you know, businesses is challenging. You know, the number of businesses that don’t make it, uh, are, are high. Now those established businesses, uh, generally have a much lower, uh, failure rate. But, um, yeah. How, how do you go about, uh, finding those, [00:30:00] those right opportunities and, and analyzing those and figuring out which investments make the most sense?
David: Absolutely. So typically, uh, there’s some really basic elements of what we’re looking for in due diligence. So one of the things is, uh, you’re looking for, you know, you’ve run through the five aspects of business, right? You think about, you know, value proposition, what, what is being provided here. And you think about who are their customers and what, you know, what’s the likelihood they’re gonna continue needing this, right?
So you on a basic level, like do they want, do we expect them to keep wanting this thing for a, a period of time going into the future at least long enough to be able to do a return of capital? Um, and, and preferably for longer than that. Or is there a transition process to something new and better that the same business can provide and we can participate in that, that transition, right.
So then you are looking at the, the marketing process and you’re going, okay, is there, is there some way here to, is there a larger addressable market or is there a way to take the same business activities and provide, you know, some sort of larger addressable market, uh mm-hmm to support have kind of side by side business units that would make the same [00:31:00] infrastructure easy.
Uh, you know, whenever you’re looking at trying to get new stuff out there, the basic matrix for thinking about that is the easiest thing to do is to keep selling the same thing to the same people. Mm-hmm. Right? If you got a business where you got repeat to the same people, it’s a great, you, you got put a stable way of continuing to do stuff.
And so this, this idea of ongoing thing, then the next highest risk after that is trying to take the same thing you already do and seeing if you can sell it to new people, right? Mm-hmm. So, okay, well, I mean, are there new people we can sell this to doing the exact same thing. Um, and then, uh, and then from there you’re looking at what about taking our current people and using the trust we’ve got and trying to offer something new to them?
Right. And, and so those, those two are more risky than the same thing to the same people, but less risky mm-hmm. Than if you said, here’s a new activity to a new group of people. Right. And, and so that right there, a lot of times people are looking for, you know, they’re looking for the next big thing. It’s like, Hey, a new activity with a new group of customers.
Well, no, the probability [00:32:00] of failure there is a lot higher. Mm-hmm. And so we’re looking at are there ways to try to add on those, those other things on the side where it’s either just a new activity or just a new group of people while retaining one of the other ones. So that’s, that’s a big part of it.
Mm-hmm. The next thing is we go, okay, so for the sales process here, like, you know, how, how does it look? Is this something that’s gonna be, uh, is it simple? It’s like just a website, you know? And, and are you able to just, you know, put some ads in front of people and have them sell it? Or is this like a you gotta break in and get new things, new people where you can talk to them about this issue and, you know, and so.
There’s some ways that are, it’s nice to sell direct to consumer in that it’s like easy to get, you know, new customers cheaply a lot of the time. The problem is that typically means that the value per person that you’re selling to is a lot lower, uh, which means you’re, you’re looking at volume and of transactions.
Whereas if you’ve got a sales relationship where you’re doing a lot, where you’re saying, Hey, we’re, we’re gonna sell tens of thousands or hundreds of thousands of dollars to the same [00:33:00] customer every month. Okay, well then you can really afford to invest in trying to, to grow that out. Um, and so we think about the, those, those processes, the value deliverying, is there a way, is there a value of scale here?
Is there any opportunity to invest? Um, and, and then from there we’re, you know, obviously your goal is to have the least capital in, to do the most growth. Um, and to be able to think about can you improve margins? And so we love looking for places where you look around at that and you go, Hey, there’s all sorts of stuff here where the activities are inefficient, right?
So when you, when you’re looking to buy a business, that idea of like, there’s inefficiency here. Mm-hmm. That right there is. Smell of opportunity, right? Yeah. Because, ’cause whenever something’s going badly already, um, then the ability to fix it becomes opportunity to make the business better. Yeah. So if you find a place and everything’s kind of like, you’re like, oh, this doesn’t seem very, things are not going very well here.
Um, and, and it’s still making money, then you’re like, okay, well this, this is, this is opportunity. Yeah. And so the other thing is we’re looking for ways of reducing the risk on the acquisition [00:34:00] itself, where you go, okay, why is the person leaving here? You know, why are they selling? And so retirement is our, our preferred reason for selling because, you know, if somebody’s older, they’ve done the work and they’ve made a bunch of money and they’re just going, you know, at the end here, uh, this, this is where this is, there’s, there’s, there’s more businesses being sold by people who are retiring now at any point in history.
Right? Yeah. And there’s less people looking to buy them, uh mm-hmm. Than there have been historically, any American history where entrepreneurship of individuals is, is reduced to, a lot of people are afraid of doing that. So we go, okay, we’re gonna look for these. The other thing is for what we’re looking at, we’re looking largely at businesses that do more than 2 million in EBITDA and do less than 10.
Mm-hmm. The reason we want it to be more than two most of the time is because we want there to be enough institutional setup that there’s the, the risk of of brain drain is reduced. Mm-hmm. So there’s more people who know things and, and to make it, and we know that the owners are leaving. So what’s happening here in terms of this idea of, okay, how do we [00:35:00] reduce the risk of the loss of knowledge that’s necessary to function?
Yep. And so, um, and so that, that idea that you’re, you’re trying to have institutionalization, but once you get above $5 million in ebitda, or even above 10, uh, especially 10, you really start to have multiples on the business purchase price really start to go up. Mm-hmm. And so we find that the best competitive advantage for us is to come into that space where it’s, you know, over two, but under 10 in terms of the, you know, the earnings before.
Interest, taxes, depreciation, and amortization. Yeah. And that ability to, to buy in that space where there is some institutional girth, but there’s also, it’s small enough that a lot of, uh, a lot of the, the really big institutions don’t want to come in because of the level of work involved in those takeovers.
Patrick: Yeah. Yeah. I, I love this. There’s so many good things you talked about there. I, I love the, the threshold of 2 million of ebitda. It’s really hard to get a business to 2 million and have it solely dependent on one person. You know, like, it, it’s got enough, like you’re [00:36:00] talking about organizational structure around it to, to run.
When you take one key person out of it, it’s not all gonna fall apart. Now, not that that key person isn’t really important to, to running that operation, but, uh, at least you’re aware like, okay, we see this function that this person sets in and we, we go from there. And then, you know, the 10 million of ebitda, you’re, you’re right.
You know, it’s, it’s interesting how we see the multiples as EBITDA starts to grow. You know, you get to five, six. 7 million of ebitda, the multiple might be. ’cause now there is real enterprise value here. You know, it might be 12 x versus two or three x at, at 2 million. So, um, you know, those are, those are really in interesting distinctions.
Um, and, uh, Cody Sanchez wrote a, an interesting book called Main Street Millionaire, and she talks about the same statistics, like the number of people that are running, I’ll say fairly successful businesses making a healthy income, but they’re looking to retire and they don’t, they don’t know what to do with this business.
You know, it’s not necessarily big enough to sell [00:37:00] to private equity. They don’t know how to find a buyer traditionally. Uh, and so I love the fact that you’re going, Hey, let’s, let’s go find some of these neglected markets and take advantage of, uh, not take advantage, create an opportunity for the seller to sell, uh, sure.
Capitalize on their, their hard work and us to take this business to the next level. So I think that is, that is great. Anything else on that? Because I’ve got some follow up questions on, um, sort of next steps for re fund and where, where you see this going. So,
David: yeah, one thing I wanna communicate is just that, you know, the value of the purchases there.
You know, a lot of the times we’re able to get stuff where, you know, we are really talking about being able to purchase somewhere between two times and kinda six times, uh, the, the yearly earnings. And if we’re able to get, you know, seller financing where a, a big chunk of that, you know, let’s say, you know, a quarter or a third or a half of the value is seller financing.
The, the investors end up having a lot less [00:38:00] capital they have to have on the line there. They can really make it so that the cash flow for servicing any sort of debt or whatever for taking things over can be a lot more positive. And so, uh, we, we, we found that the multiple, you know, you look at the public markets, right?
The basic benefit of the public markets is liquidity, the multiple on public markets. It is, you’re looking on average, you know, 20 times the yearly earnings, uh, 25 on, you know, like the s and p 30 with nasdaq, whatever unit. So you’re looking at, okay, these are these multiples. The company has to, has to continue to operate for 20 years at the same level of profitability to pay for itself.
Uh, if it, if we’re buying itself with its own earnings, right? Yes. And so on these private markets, you know, if you’re looking at something where you’re, where you’re doing six times, you’re like, okay, well six years it does that. And if there’s any growth that shortens it, right? And the whole, the whole idea of, of paying a high multiple is theoretically you’re expecting growth to make it so that in the long run it’s gonna continue to make it to go up.
And you’re, you’re not looking typically at, at merely the value of, of its income. You know, a 5% return, you know, one is something that [00:39:00] is not what you’re gonna go, I’m buying stock for this. Right? Right. So, so I think that the liquidity is the value there where you can sell it quickly. And so what people do when they’re, when you’re doing something like private equity or whatever, you, you end up with, you know, a tie up of some time for the money.
So the higher multiple, you’re basically taking on the idea of a higher multiple. Uh, and you’re getting rid of liquidity for that. They both have risks of the up and down of a business. Mm-hmm. Um, it’s a base, the same basic type of, of risk. Um, you have a increased volatility with smaller businesses. Right.
So the, the volatility increases the, it’s the same basic enterprise risk principle, uh, with a, with a multiplier of up and down, uh, when you’re dealing with small businesses. Mm-hmm. And so, mm-hmm. This idea of giving up, uh, liquidity, uh, makes it so that people who can afford to tie up money, uh, can get a lot better returns if they’re willing to tie up money for periods of time.
And if you stage that and sort of have like multiple businesses. So this idea of trying to have sort of a conveyor belt of deals really turns into one of the competitive [00:40:00] advantages for doing something like what we’re doing with refund, right. Where we we’re going, okay, we’re always looking for a good deal.
Then as you start to increase the size of deals, you might start to reduce the frequency of deal, right? So we’ve mm-hmm. Recently kinda moved into, uh, more of our deals being, uh, being bigger. Mm-hmm. So we have, we have our biggest deal ever right now that we’re working on. Uh, and so, you know, for us it’s a big deal.
Um, pun totally intended, and that’s, uh, but, but that, that idea that you’re looking at this benefit of being able to buy, uh, with value that’s totally different from the value you can find in public markets.
Patrick: Mm-hmm. Yeah. I, I love this. And so I want to talk a little bit more about, um, synergies. I, I’m thinking about Reese Fund and you’re acquiring different businesses.
Are you seeing opportunities to, because, and, and here’s, here’s where I’m going with this. Like right now we’ve got clients that are selling either majority share or min minority share to, to private equity. And then they’re, they’re making additional, uh, [00:41:00] acquisitions inside of their, and that that EBITDA number is growing.
And like we just talked about. The larger that EBITDA figure gets, the larger the multiple gets. So, uh, you know, by making acquisitions you can, if I buy at a, a two or three or four x multiple, but then I add that to my $10 million EBITDA figure, now it’s worth a 10, 12, 13 x mul multiple. Um, those are exciting that, that arbitrage makes a, a ton of sense.
And so, um, I’m just curious about long-term vision for, for Reese fund. Is there opportunity to, you know, sort of build a portfolio of businesses that all create some, some synergy, you know, that that can work together? And then is the goal to eventually, uh, get the, that dollar figure to the point where you’re selling it?
Or is it just going to be a cashflow machine that produces for the owners?
David: Yeah, so our goal is to, is to generate the cashflow machine. So as opposed to the buy and flip, our model is buy and hold. And I believe that there’s long term [00:42:00] benefits that build in. I think that what you’ve expressed is sort of, I think the.
Standard model. Um, and, and I think the standard model is built upon trying to take advantage of those, uh, those multiple growths. Right. And, and I think that it makes total sense. I am seeing a little bit of erosion, uh, in, in the market of that sort of the stair stepping of the multiples. And it seems like the multiple points are starting to rise, um, in terms of where you start to see those big, those big step functions of value.
And I think it’s because the market is, you know, reacting to the fact that there’s an increased supply of people doing exactly what you’re talking about. Uh, but I think that the, and I think the other thing is the whole model of buying, stripping down and flipping, um, to create sort of a deferred maintenance.
You know, ebitda that number on, on, on a lot of these businesses is something that a lot of people, uh, have done. Uh, and I think that there’s sort of that, that idea. So I think that the, the, the long-term cash flow generation policies. [00:43:00] That are built around trying to build, you know, Christian culture into an institution has a lot of the long term competitive advantages.
Um, I think that for, for capital, both are very viable. Right. I think that, uh, but I think that institutionally, uh, that there’s a long term institutional value to the buy and hold. Yeah. Um, and so that, that sort of buy and hold method, um, for us, what we typically end up doing is we end up buying back equity, uh, from our equity partners.
Um, and so the idea there is we have to have a model built in where it’s either got, you know, some sort of a, you know, we typically doing something like a dividend or, uh, and, and a dividend with like a buyback floor. Um, and then we might have sort of like a either an algorithm for like, okay, based upon where profitability goes, that’ll raise the price, or we might have a conversion, right?
So like our most recent deal, we have a, a conversion right. Built in. So it’s like, here’s this dividend, it’s a preferred dividend, here’s a floor we can keep it at. And then you have, you know, some period of time, uh, in five years in this case where you’re able to do, uh, do a conversion.
Patrick: Mm-hmm. [00:44:00] This is, this is great.
And one of the things that, that sparks my, my thinking is, uh, I think maybe a famous example of what you’re talking about is, is Warren Buffet, right? Yeah. Like, Warren’s known for, uh, buying, holding or long, long periods of time, you know, he does divest occasionally, but, uh, the goal is to buy it with a thought process of never selling it.
Let’s just buy a super attractive cash flowing business that has, um, you know, a a lot of the things that you’re, you’re talking about, you know, uh, strong reputation, um, you know, Warren’s not necessarily looking for Christian ethos and that type of thing, but, you know, they are looking for successful businesses.
And, you know, the reason those, those large EBITDA businesses have tremendous value is because they’re so robust. The, the likelihood that a rogue wave is gonna take them out is just so low. And so. There’s, there’s [00:45:00] a lot of, of safety and security in a business that has built an enterprise to, to that level.
And so I, I love what you’re doing there, and I think it really is, um, long-term vision, right? Like we, we’ve got a long-term plan here. We think bringing Christian principles to the marketplace and running successful businesses on those is, is great, and it’s gonna provide tremendous value back to the, the shareholders.
So, uh, this is good. So good. Um, and, and regarding some of
David: the benefits of Synergy, right? You, there’s still ways, like for example, we have an aluminum extruder and we have a, a window installer, right? A glazer. And so. If there’s purchasing of extruded aluminum, right. That occurs there. Right. And so if you can, if you can, if you can provide benefit there by having lower price to one and having a higher price to the other, ’cause you’re eliminating a, a distribution channel and it’s in between and you’re, and you’re making it, it’s easy to do ’cause you have a stable customer or whatever.
I mean, great. That’s wonderful for, for both of those, right? That kind of thing. And then you’ve also got, you know, with our [00:46:00] central services, we essentially do things like hr, accounting, it, you know, legal, right? Yeah. Some of the obvious things that are sort of easy to apply to different kinds of businesses.
Mm-hmm. Um, and so those things, you can have really high quality talent and reduce the cost that’s going for that talent, each of the businesses. And, and so that’s just, those are some of the ways that, that we find that there’s a lot of benefit between the businesses.
Patrick: Yeah. Yeah. If I can nerd out on a finance idea for a second, you know, you think about cost of goods sold, right?
Like that’s, that’s sort of in every business you wanna do that as efficiently as possible. But then, then after our gross margin, we have. Um, operating expense, you know, the opex and that’s HR and all those other functions. And so when you can create lots of efficiency there, that’s wonderful. You know, if, if I can have one superstar team on HR that manages all of this for all these businesses, that’s great.
Then having, I’ll say, you know, a bunch of mediocre talents spread across, right. You know, just ’cause I can’t have the depth and breadth because it’s, we’re not big [00:47:00] enough, uh, on each of those individual businesses. So, uh, I think that’s, um, that’s wonderful. Lots of wisdom there. So. Good. Very good. All right, so if it’s okay, can we venture into, um, you know, we, we’ve talked about, uh, management philosophy, we’ve talked about Reese funds.
Now let’s talk about, let’s say I, I raise my hand and I say, Hey, David, the, the work you’re doing here is incredible. Um. I think that the unique thing about Reese Fund and, and what you’re doing is it, it stands out, it’s something different. It says, yes, this is who we are, we’re planning a flag on our values, and uh, uh, we’re gonna manage this way.
And some people are gonna say, I love that. Other people are gonna be like, nah, not for me. And that’s okay. In my book, I think we should be, um, we talk about a beige Camry. Nobody gets super excited about a beige Camry. It’s a very effective car for getting you around. But it’s, it’s not that exciting. You know what people do get excited about?
We’ll say yellow Lamborghini. People are gonna go, I love that, or I hate that. And that’s totally fine. [00:48:00] And so I, I think you’re, you’re doing a great job with Reese Fund saying, Hey, this is who we are. Uh, we’re not wavering from this. And so let’s say somebody is listening to this going, man, this is incredible.
Uh, I wanna learn more about, uh, the investment and we’ll, we’ll sort of give people some, um, how to connect with you. But can you just tell us a little bit of the, the overview of what it looks like to invest. Reese fund and, uh, you know, if I come to you and say, Hey, I’ve got some some money, I wanna get started, what do we need to do from there?
David: Yeah, great. So basically, you know, the way things are, are set up in terms of regulatory environment is mm-hmm. These types of things, just to be an accredited investor, which means you either have to have like a million dollars of net worth or, uh, some income number that’s relatively high, and I mm-hmm.
Can’t remember what that is right now. Yeah. I think it might be 200 grand or 300 grand
Patrick: Yeah.
David: A year. I think
Patrick: it might be, and, and I can look these up, but I think it’s two 50 for an individual or maybe a half million for a, a household. But, uh, yeah, we, we can look those numbers up, but I, I would say most of the people listening to this are either well on their way to that, that [00:49:00] net worth and income number or, um, you know, aspiring to be there.
So, and I also wanna highlight we’re, we’re not giving investment advice. Talk to your advisors before you, you make investment decisions, but, uh, I think this information’s good for, for people listening. So, sorry about that. Go ahead.
David: Yeah, no problem. So people fill that out, basically, they’re, they’re affirming that they’re, they’re able to do that.
We typically have a non-disclosure because we’re gonna give a bunch of details about the business. Being a private business and smaller, you know, we’re trying to, uh, we wanna maintain the competitive advantage of kind of being under the radar. I don’t want the information to go out and be public. So, uh, people look at the, you know, they’re, they’re agreeing to keep that information confidential.
When they look at it, they get to dig into the deal. And, um, basically, um, so I’ll use our, our, our most recent thing. For example, basically we’re doing, uh, a maximum of, of 250 shares at, uh, $30,000 a share. And they’re set up to be preferred shares who get, basically you end up doing a, a 9% dividend on it.
Then there’s sort of a floor of, after a certain number of years where [00:50:00] five years in we can buy it back. And I think seven and a half years is you, you can put it back and you, and you’re collecting the dividend the whole time. And then you get the idea that you can, uh, put it back at 150% of the initial investments.
We kinda set up like a floor like that, right? Mm-hmm. And so that, that, then the other thing is for the first five years, they have a conversion rate. So if there were any common dividend that could be, um. It could be announced that they’d have an option to convert into that and start participating in that.
Um, or, and if they just saw it and said, Hey, the business is doing really well, even there’s no dividend. I, I’d like to convert to, you know, have the common stock because I think it’s gonna be, you know, worth way more or whatever. So you could theoretically, like wait until right the end of the five years, you know, collect the preferred dividend, convert over to the common and stick around in that and participate.
And so those are sort of, uh, the way of trying to make it so that you’ve got some sort of a cash flow, have some sort of a positive return at the end on the return of capital. Make sure it’s, uh, it’s something that’s occurring there while you’re also collecting the cash. And then to make it so there’s like a, an unlimited upside by having the ability to go into the common stock.
So that’s sort of, uh, the [00:51:00] example. Uh, and that one, you know, we’re doing, that’s, again, that’s a manufacturer. We’re, we’re buying it, um, we’re buying it at six times the earnings, and it’s over, it’s over a $6 million EBITDA one, right? Mm-hmm. So we’re looking, we’re looking at, you know, that, and we think that there’s opportunity.
It’s, it’s doing a combination of. It’s doing structural steel and fabrication of steel stuff. And so I love that. Right? And so you got this, yeah. This, this huge chunk of land and, and a building and doing all that kind of stuff. And so it’s just this neat industrial opportunity. Um, and, and I, and it’s got a combination of engineering stuff and manufacturing stuff and construction related things.
And so you just look at the set of activities and you’re like, well, they’re piecing a lot of stuff together and it kind of niche there. And, and so I love those kinds of things. And on a basic level we go, yeah, I think there’s opportunity to grow this, but we think the business is a, is a durable business.
Mm-hmm. Um, and, and that it’s able to, you know, provide a lot of neat, uh, value. And so the ways that can interlink with some of the other businesses as well, where they generate value is, and we go, okay, we’re doing windows, we’re doing doors. You know, we’re doing aluminum extrusion. And so if somebody wants, you know, [00:52:00] special fabricated steel or whatever, there’s, whether it’s structural or, or industrial or heavy equipment, you know, it’s easy to kind of connect into some of those.
And so it’s neat the way that as you build out relationships, you end up with the ability to do more business. Um, and, and the way those things kind of interconnect there. So, so that. People go to the website, they sign up, they get the information, and then, um, they can kind of find out more, uh, about it.
And with this one, one of the last thing neat things about this mm-hmm. You know, buying it at the, uh, at the place where it’s about, uh, well actually it’s five times, sorry, I said six times. It’s five times multiple on it. So gotta a deal here where we can do something and, and you go, we, we were able on this one to get half of it, uh, to be seller financed at a 10 year note of the 4% interest rate.
And so, uh, and there’s a seven year balloon on that, but you go like, wow. I mean the, the money, you know, being able to get that dramatically reduces the cost of, of that transaction. So that’s some of the neat example, that kind of things you can do on these deals. Yeah. So every deal is unique. Um, but you love when you can pull together kind of some, a number of neat [00:53:00] things, uh, to reduce the cost of a transaction and, and to make it so that there’s a lot of value that gets transferred over, uh, to an new ownership group.
Patrick: I, I love this. And, and you’re talking about some key principles in, I’ll say negotiation and, and transactions in general. Sometimes people are really excited about their number, right? Like, I want to tell my friends, I sold my business for whatever the number is. And, and generally there’s, there’s three factors when it comes to, uh, transaction.
There’s, uh, price, there’s payment, and there’s term, right? So if I think about that, and I can pay you, I could, I could pay this seller 10 x. Okay? And a scenario where I could pay 10 x is I get financing that, um, runs out for a hundred years, right? And I have such a low payment that my cash flow is just through the roof.
Now, it’s gonna be hard for me to build equity, but in your, you know, our previous parts of this discussion, it was like, I’m not planning on selling [00:54:00] this thing anyway. You know? And so it’s like we could create a, a cashflow monster. Not that that’s necessarily a wise thing to do, but I, I look at the, uh, the present value of your financing and it’s really, really valuable, you know?
Right. It makes an economic impact on. The number and the, the cash flow and all those other pieces that you were, you were talking about. And so it’s like, I’m okay giving a decent number, but when I get favorable investment terms, uh, that, uh, really can make a deal, uh, work. And it makes me think back to my, my early days of, of real estate investing and I didn’t have the capital to, to go do things.
So it was like I had to get, I had to find a, a distressed seller that would, uh, participate in the financing. And it allowed us to, uh, uh, really put together some fantastic deals that, uh, were a win for everybody. You know, that the seller felt good, they got a problem off their hands. We got an opportunity.
And this goes back to, uh, your point earlier on identifying opportunities. If there’s something messy going on and it’s still creating cash flow, like that’s exciting, right? [00:55:00] And so, uh, if you can solve those problems, every dollar, like we’ve talked about, that, that hits the bottom line, increases the value of our business by multiple.
And so that, uh. It’s all, all really exciting. David, I I love the work you’re doing here. I think this is, um, this is fantastic. If, if somebody’s listening to this and wants to know more, uh, reese fund.com and that’s R-E-E-C-E fund.com, we’ll have a link to that in the show notes. Um, and if you just scroll down, there’s an investment in Inquiry box, just fill out your information, um, David and their team will get together and, uh, get you that information and, uh, be in touch.
Because when this episode comes out, there’s a couple weeks left. Um, I think at the end of November, you’re gonna be closing down the, the fund and, uh, uh, who knows when the next opportunity is gonna be out there. So I think there’s, you know, there’s, there’s definitely people that, um, are looking for these values-based opportunities, you know, that align with the scripture, that say, Hey, yes, I, I, I want to be involved with, [00:56:00] um, businesses that have this, this thinking and thought process.
And, uh. I’m, I’m so glad that you’re bringing these opportunities to the marketplace, but I’m also excited if people wanna take, uh, advantage of this. There’s a limited time and they need to get, uh, moving on. And so that’s reese fund.com and then just scroll down and fill out the investment inquiry section.
So, um, David, this has been great. Is there anything else we should be talking about, whether it’s from management philosophy, investment philosophy, or, uh, just details around the, the fund in general that we haven’t covered yet?
David: Yeah, I, I think one of the things that’s really important for people to think about is that when, when you’re dealing, when you’re dealing with deal world in general mm-hmm.
Um, you know, there’s three big things that are being organized, and those are deals, management and capital. And if you’re able to get deals with management, then their values align and capital, that the, their values align and you’re able to make it so that you have shared objectives, um, and you’re trying to accomplish a [00:57:00] shared mission.
The, the environment becomes a lot less mercenary. And it becomes a lot more something where there’s a, a cooperative effort in a division of labor. Um, and so one of the things I’ve been excited about is just that kind of over time as I’ve been working with people and doing multiple deals with the same people and, and starting to, um, kind of benefit from the interaction of those things is the way that they kind of feed each other.
Um, and the way that you end up with investors who care about your fund that are connecting you to other people to work with and management sources, and then the way that they also connect you to other deals. Um, and so there’s this kind of neat way that it builds on itself where there’s, you know, you, you mentioned before sort of not having the, the beige Camry, right?
Mm-hmm. And so this idea that like this, this name, thinking about it as polemical marketing, where you’re sort of like, where you, you have a polarization effect mm-hmm. Um, makes it so that you end up with management deals and capital that are all aligned. [00:58:00] Um, and, and it makes it so that there’s this.
Feeding, uh, system where people are working together. Um, and, and then of course those businesses have ways of working with each other and customers that are like, Hey, I like what you’re doing. Yeah. Uh, you kind of start to appear as well. So there’s, there’s this, there’s a pretty amazing, uh, way that things coalesce, uh, that I’ve been excited to see.
And, uh, I think that’s you and I met, right? I think my mm-hmm. One, one of the guys on my team. Was it a, a some sort of Christian conference or something like that? Yeah, yeah. There’s a sort of discussion there. I mean, so it’s, it’s sort of a, it is, is the way that that builds out over time, uh, to make it so that there’s a self filtering system that encourages things that are going to fit well together.
Um, and so I just, I, I think that that’s something that I have been blessed by. Um, some of those things I thought about, and some of them were a surprise to me as I was going. And it’s just interesting how. Um, how kind of blessings have been accumulating and accruing, uh, across, uh, across time and the way that these things interrelate.
So I just, um, I have been [00:59:00] really thankful for that. And God is wiser than men. You’re trying to take the next step, do the next thing. Mm-hmm. And, and it’s amazing how, uh, so often these things build on themselves in ways that you didn’t expect.
Patrick: Yeah. Yeah. This is great. And, and I look at the, the good work you’re doing and, and it’s, it’s, it’s spreading over many, many facets.
It’s these businesses, it’s impacting investors in a po positive way. And I love that you’re grounding your work in, uh, the truth of the scripture. Uh, it gives you clarity, confidence, and I’ll just say peace in this process that you’re building businesses that glorify the Lord, you know, and, and you talked about the, the cascading effect of the blessing.
You know, it’s blessing people in many different ways. And I think that, uh, this is great. So, um, David, this has been a wonderful conversation. I appreciate it. Uh, I think we’ll probably have to follow up more and just see how. We can work together in, I think there’s probably multiple, multiple facets, but I, I think this is great.
Again, check out the good work they’re doing, reese fund.com. Uh, we’ll have a link to that in the show notes. But [01:00:00] David, thanks so much for joining us here today. Thanks,
David: Patrick. God bless. Thank you.
Patrick: Thanks so much for tuning into this week’s episode of the Vital Wealth Strategies Podcast. I hope you found real value in this conversation with David Reese.
His approach to business leadership and faith is such a powerful reminder that profitability and purpose don’t have to compete. If you got something out of this episode, take a moment to share with another entrepreneur or business owner who could use these insights. Don’t forget to leave us a quick review.
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