Suzanne Yoon, Kinzie Capital | Charting the Course of Value Creation in Private Equity

[00:00:00] Sean Mooney: Welcome to the Karma School of Business, a podcast about the private equity industry, business best practices, and real time trends. In this episode, we have an amazing conversation with Suzanne Yoon, founder and managing partner with Kinzie Capital Partners. This episode is brought to you today by BluWave.
I'm Sean Mooney, BluWave's founder and CEO. BluWave is the go to expert of those with expertise. BluWave connects proactive business builders, including more than 500 of the world's leading private equity firms and thousands of leading companies, to the very best professional service providers, independent consultants, and interim executives for their critical, variable, on point, and on time business needs.
Enjoy.
I am very excited to have Suzanne Yoon here with us today from Kinzie Capital. Suzanne, thanks for joining us.

[00:01:01] Suzanne Yoon: Hi, Sean. Thanks so much for having me.

[00:01:04] Sean Mooney: Yeah, this is, this is one of my favorite things to do at BluWave because I get to talk to, you know, people who are much better than myself and I get to copy what they do and incorporate into my life.
So I'm super excited to have this conversation with you, Suzanne, because I think this is gonna be a really good one. And so one of the things we love to do and when we kick these things off is, is get to know people a little better on a personal level. And Suzanne, you've got this kind of amazing and unique story in private equity.
So I'd love to hear a little bit, like, how did you get into this industry? What led you to it? What's kind of the life story?

[00:01:39] Suzanne Yoon: So I am the daughter of Korean immigrants and my father was an engineer and my mother was a nurse and my father, when we, when he, and that, and I'm actually originally from. Chicago, so they immigrated to Chicago.
And at some point he realized that in the company engineering company worked in because of his language barriers, he would have a difficult time being promoted, and I think that really launched him into borrowing money from a bunch of really friends and family and starting his first business little business, which was a deli in a town called Cicero's Italian neighborhood and in Chicago, and that kind of started.
His, I would say, building of small businesses kind of all throughout Chicago and I, I have, you know, I was a young child and, and really saw him do that. And, and actually my first job, I remember coming, you know, walking home from kindergarten, going across the street to the deli. And he would pay me in Twix bars to stack cigarettes in the, in the deli.
Couldn't, you know, buy the deli which is a really odd thing to have a five year old do today. But that's what, that's how my, I think my, my view into entrepreneurship and small business, you know, management started, unfortunately, when I was young, my father passed away in armed robbery, and so that led my, you know, my mother, at the time I was 10.
And I had two younger siblings and she was pregnant with my youngest. So overnight I actually kind of took over as the, almost the second parent. And you know, so we, I currently today live in, live in Chicago with my husband and my three boys. I did start my career in New York, but you know, if I think back to what really had like drove kind of my interest in business.
You know, and making money because that's what we do and private equity. Part of it was probably the influence of my father. And then secondly, just necessity, wanting, wanting really to have financial security, being able to take care of my family. And so I began my career actually in, in Chicago with AB Enamro Bank, and then quickly moved to New York.
And I was kind of back between New York and Chicago for about 14 years. And I, I would tell you my first, as I started in banking, I did rotations through various groups, went through credit training and then landed in our special assets group. And at the time, this is the mid nineties, mid to late nineties, when we could actually have banks could actually have off balance sheet private equity portfolios.
And so that was really my first entree into. You know, seeing what the buy side really looked like, and it's particularly private equity, like, you know, owning private positions and, you know, fast forward years later, I went from working all up and down the capital structure and credit to really, you know, focusing on equity.
The last 15 years of my career. And so in 2017, it kind of led me the East coast at the time I had moved my family back to Chicago and I had a very lucrative and stable career at a, you know, another private equity firm. I had made a name for myself in industry, but I always felt like something was kind of missing.
And I think the three things that really drove me to start Kinzie were one. I saw a real interesting market opportunity in the lower middle market to bring real operating and technology solutions to the lower middle market. Secondly, I did really want to be back in Chicago with my family. I have my children grow up here.
My husband's also from Chicago. The free babysitting was a real plus. With my family being around and then third and probably most importantly, like I really wanted, you know, an opportunity to create kind of my own destiny and create a culture and firm that, you know, I was going to be proud of that, you know, that would serve the marketplace.
I

[00:05:57] Sean Mooney: think that's a, it's an amazing story and an amazing background. And as I, as I listened to it, I was like, wow, well, that's more similar than I thought. So I'm, you know, product of Irish immigrants and I grew up. It was

[00:06:10] Suzanne Yoon: my husband, Irish immigrants.

[00:06:14] Sean Mooney: I mean, it's a, it's a great, you know, background of, of, of similar people coming to this amazing country that we live in to, to kind of.
Make something of ourselves. And so, you know, my, you know, my, my great grandparents and grandparents, they were maids and chauffeurs and those types of things. And, and, and my grandfather and dad got involved in building a business in the manufacturing space and they would do these crazy things because they didn't know any better and they would work.
And, and so I grew up working in the backup manufacturing plants. And, uh, you know, wearing hard helmets and, and steel toe boots. And I was really a specialist at painting things, safety yellow. And so I think if I look under my nails today, there's probably like yellow paint in there, that's never,

[00:07:05] Suzanne Yoon: it's funny as you say that because the type of businesses we acquire.
I actually envy the experience you had, you know, like what you learned, just the processes, right? Manufacturing processes. I love manufacturing businesses and because they make things and you know, I think that's what really like America is all about too. And so I, I think that's, it's very cool that you did that.
I envy that experience, although I know some people might think that's odd.

[00:07:35] Sean Mooney: Yeah, no, I, I think the, the one that I got was it, it was more about building, building it. Yeah. Character in establishing tenacity and great at a young age. So they would have, I'm pretty sure plant level bonuses for who would mess with me the most.
And so one day they gave me a sledgehammer and threw me into a dumpster and said, today you're going to make more room. No need to do it. It was just like, you know, 110 degree Texas heat. And I just got to make more room. And yeah, exactly. It's like, there's probably a workout now that I could brand for that.
It's like the dumpster actually, you know, work out a similar deal where we kind of came into it, you know, went to start investment banking. And then similarly actually worked for a private equity firm that was affiliated with a large bank holding company. And then, and then eventually in life, I got into this, you know, what I call my fit of entrepreneurial craze or inspiration.
And so I love, you know, you did the same thing, Suzanne, like, what was that moment that said, I'm going to start a firm and explain kind of the, you know, the, the feeling at the time that led you to say, you know, jump off the proverbial cliff to building something. Yeah.

[00:08:47] Suzanne Yoon: I mean, I think I always had having come from an entrepreneurial family and probably inspired, you know, my entire life I've been inspired by my parents who literally just.
didn't speak the language, came here to study. I mean, it's, and at the time, like, really didn't have a community event to be around, like just the risk that they took. So, I mean, growing up in a family like that, I think. In, in some way, although I knew I wanted to get really good training and be in a great company, I, I didn't know I was going to end up an entrepreneur, but if I look at the groups and the type of products I was drawn to even early in my career and, you know, as a private equity investor, it was always like a new product group, a new, you know, opportunity.
I had a real interesting opportunity, even in my late twenties. To start up, you know, a new product group is essentially a, what today we would, you know, it was called the corporate restructuring and, you know, corporate restructuring group, but really what that was, was the first time that Avian Amaro and LaSalle Bank, when I was there, institutionalized the idea of structured equity and, you know, restructuring financings.
on the front end. And it was a time when people really were just trying to figure that out. And I thought that was so exciting. So I, I think having kind of been drawn to these different types of ideas, even within large organizations, I always knew, I think, ultimately I wanted to Start, like, start and build things and, and that's what obviously drew me to private equity, but then also really drew me to the idea of starting Kinzie.
I, I think it took me years to take that leap. And, but I eventually decided to start Kinzie because I wanted to return to Chicago. I really do believe in the value that we, as Kinzie, you know, can bring to the market. I found great partner and my partner, David Namkang, and then also his firm that he started Clarity Partners, which was a, which is currently a 160 plus person technology consulting firm.
And it was going to support my investment thesis around really being able to leverage technology and strong, strong operations to accelerate growth in these lower middle market companies. And, and, and lastly. I had the support and confidence, first and foremost, from my husband and my family, and I think we had a lot of Soul searching around we're about to really walk away from a lot of income and maybe we won't have any for an extended period of time.
Right? I think Sean, you know, what that's like, isn't it? Yeah. And we're going to also have to invest our life savings back into it. And, you know, that is virtually impossible without having the right support system. And so I feel like I had all these.
All these things happening that kind of pointed me to, you have to jump off the cliff, Suzanne. You don't know what is going to be down there, but like, just jump off. Was

[00:12:24] Sean Mooney: there one moment where you were at the go, no go, and you said, you know, and that's a hard 50, 50, you know, and something, maybe it's for 51, 49, but was there one moment where you said, all right, let's go.

[00:12:38] Suzanne Yoon: Yeah, I, I think there was, but it still took me four years after that moment. Like, so I, I will tell you that, like, I knew I had to do it and it was really, so I, I actually spend a lot of time meditating. I think that for me is what keeps me very grounded and, you know, especially given the stress of being an entrepreneur, the stress of private equity, I mean, just everything that comes at you in a given day.
And I, I do remember. Having a moment where I had to really dig really deep and knowing I wasn't going to stay where I was, what was my next step? And, and I remembered I was sitting on my couch having a moment and really thinking hard about the three paths that I could take. And none of them totally felt right.
And even though starting a firm and going out on my own was the scariest, in my gut and in my, you know, it's like I could feel it in my body, my head, my heart. Like I knew if I didn't do it, I would probably regret it the rest of my life.

[00:13:48] Sean Mooney: Yeah, no, I think that's, that's great. As I, Suzanne, as I listened to you talk here, I think we're like Marvel comic parallel timeline siblings or something because I too started in a, you know, I could have gone to Lehman Brothers or the restructuring group at Houlihan Loki.
I was like, that seems like more like what I used to do. So I went to start off and restructuring and, and similarly, and it was like, there was like, but there was this siren call through my whole life that Kept on pulling me to where I am today and I didn't even really know it. And it just kind of like, eventually it got me there.
And I don't think I've ever told the story at least outwardly when I was, I was, I was on this like 50, 50 or 51, 49, do I do this thing? And I was at a Houlihan Loki event at a JP Morgan conference in San Francisco. And they, they brought in these like soothsayers from Las Vegas called the Bumbees and they give you these utterly honest perceptions on people.
And I'm sitting there in this line and most people are like getting passive aggressive, like acknowledging. It's like, you look like you're really good at paddle tennis or like, kind of like cheap shots. I show up and they both kind of, they have like, You know, these headphones on the dark sunglasses, they both look to each other and kind of pause for a little bit and and 1 of them starts typing.
The other 1 starts typing. They're kind of time together and they type it up and they go. You look like you're like, uh, you know, kind of this safe. Company man, but you've got this startup idea and you're not sure you should do it, but I can see it glimmering from the edges of you and you need to just go ahead and do it.
And I know I hadn't told anyone about this, but I was like, what kind of like dark magic is this? And then that's a sign from God. Yeah. And so I said, all right, let's go. And like you, my wife, you know, how I convinced her to do this, you know, kind of like befuddling to me. I'm like, Whoa, she, she agreed. This is crazy.

[00:15:47] Suzanne Yoon: I will say for me, I think when I, when I was digging deep on where are the options, right. Even seven years ago, there are so few female partners. At private equity firms across the country, and I struggled with could I ever run a group at another private equity firm? And would I be able to get to the top?
And, you know, as I was thinking about that question, and you saying there was a moment. I do have a very clear moment and it was other people that came to me. I'm, I'm a member of a group called the private equity women's investor network, and it is the most senior women in private equity. It was started actually officially initially by LPs.
So very, very senior, you know, women. Who are decision makers at limited partners, large pension funds, funder funds, some of the most powerful in the world in terms of allocators that realize that all we had, there were women, but they were all on islands by themselves and didn't know each other. So I was fortunate enough to be included in this group a little earlier in my career, even before I made a partner or managing director and really learned from them.
And they, I think many of them were great mentors and friends and advocates of mine. I did go and people knew that I had kind of this desire potentially to start a firm or do my own thing or, or build a private equity firm within a larger asset manager. And ultimately it was this group of women that almost like sat me down.
And said, there's no, there are no women running firms and if you don't do it, who's going to do it and you should do it. And I think that that gave me kind of that last boost of confidence that I needed and that support that I needed outside of even my family to go do it. And you know, it's, it's, it's sometimes like voices from the outside.
Yeah. And, and in some ways I felt like I had no choice but to do it if I wanted to get to the top because women just didn't get to the top, you know, 10 years ago. Yeah.

[00:18:20] Sean Mooney: I think that's an amazing story and certainly that organization is, is doing fantastic and important work. And I also think, you know, one of the most important trends that, you know, we get this This really privileged vantage here at BluWave because we get to work with all these great firms like yours and you get to see the trends as they're playing out and really what you're leading there is, I think, one of the most important moves in, in, in, in evolutions in PE because, you know, the last thing that the PE industry needs is more people like me.
So it shows like the

[00:18:58] Suzanne Yoon: creativity. The diversity of thought representatives of the consumer base, whether it's in the United States or globally to have to make better investment decisions. And I think

[00:19:12] Sean Mooney: that's a great way to, to, to phrase it. It's like, you know, you need to have the, the cross section of humanity in, if nothing else out of selfish altruism, because it creates better results, you know, by having different perspectives and different ideas of.
You know, similarly, maybe similarly exceptional and capable, but across the spectrum of entity is driving nothing but better results. And so I applaud you for, for starting your firm and and having the gumption to jump off that. Kind of proverbial cliff because I know it can be like, personally, it's terrifying and exhilarating.
It

[00:19:51] Suzanne Yoon: is terrifying. And then you like land in a bunch of shark infested water and you're swimming for your life, but you have no choice, right? So you have to do it

[00:19:59] Sean Mooney: to survive. Yeah. When I did it and we'll, we'll, we'll move on to like the, the meat of our conversation has been in a moment here, but it's what I always thought about, you know, as a, as a, someone who is a child of the eighties and nineties, there was this great movie called better off dead.
Which was John Cusack. And so there's this great scene that I want my 2 and there's this great scene where John is laying Meyer sitting on the top of this daunting mountain. And he's there with his, his kind of, you know, their mutual love interest in the, in the show, Monique, the foreign exchange student, he's like, how can we go down this mountain?
And we didn't want to jump off. And Monique goes, it's really easy. You just jump off the top of this cliff and you go really, really fast. If something gets in your way, turn. And he's like, what? And so he jumps off and tumbles down all the way down. But then, and then he figures things out in 30 movie seconds later, he's a professional skier.
And so, but to me, that's what it was like starting a business. Like you're just jumping off this cliff. You see other people. It makes it look really easy, but the reality is you're going to tumble. The key is you just get back up and you, you could fall, but you fall small. And then when something gets in your way, turn.
So, so, so we share that every year at our company, you know, when we do it, we do an all hands strategic kind of session. And, and it's like, this is what every day we're, we're jumping off cliffs. You know, it's okay to fall, but just get up quickly, turn it up quickly. So Suzanne, I'd love to, I'd love to get your perspective, you know, so you've been.
Professional investor, but what, what are some of the, as you think about your experience looking at all these great companies, what are, what are some of the most important traits that you. when thinking about, you know, what is a good company or could it be a good company?

[00:21:54] Suzanne Yoon: Right. So I am coming, I am now at over 25 years of experience, which I never thought I would be, you know, I would see that on people's resumes and when I was younger and I'm like, Oh wow, they're really old.
Right. But you know, when I think back through. That time frame and what has made real successful investments and really what we're looking for today are, you know, companies that have a clear differentiated product or service, right? They're necessary for their customer base. I think culturally. They are customer centric, they care about their customers and their vendors.
And I think third for us, which is a little more cultural in the terms of, you know, cause we want to see companies that will continue to grow. So we want to see a management team or, you know, some culture of a desire to improve desire to improve. Desire to grow. And, and why are we coming in? And it's usually because they want to, they know that they need to make changes.
But they don't know how and they need help doing it and they need help, you know, finding the right partner. And so I think those are probably the key area initially that we, we look for. Obviously there's so many other things like, do they have good financial controls or can they have good financial controls if we get there, obviously profitability, history of growth, but I think in order to.
Get to the type of returns that we are chasing. It does require a mindset, very much a growth mindset, which means you are open to changes and growing no matter how difficult they might be.

[00:23:51] Sean Mooney: I think that's, those are 100 percent spot on perspectives that I wish I could have summarized. That succinctly in my earlier life, for me, life's a journey.
It's not a destination. It's like little bits. It's this, they desire to improve, but not necessarily improve, but the, but I'd love to maybe double tap on some of those. And so if we think about, you know, business owners who are listening to this and they think, okay, Suzanne's looking for a differentiated product or service.
What does that mean in your mind? What does this, what does differentiation mean?

[00:24:23] Suzanne Yoon: So we're usually the first time institutional capital into a deal or maybe the second. You know, so that means that the founders or the, you know, management team that grew the business to wherever it is, is still heavily involved.
And so, you know, one of the things that I'm, I know, you know, especially for a lower middle market business, if they have a strong customer base, especially an enterprise level customer base, they usually have some type of differentiated product or service, right? They. They're either more nimble, like they've been able to create or better product, they're solving a problem for a customer that is, that is difficult, that would be difficult for that customer to solve without.
So you know, great example is we, we own a display, a large scale display company. Customized displays, but for specific, most of their work is in the home improvement space and what we loved about the business when we were just founder led when we, you know, founder, the founder was selling the business, they had a really differentiated service model.
relative to the industry and they were able to build that because it was so nimble. And then how could we really leverage off of it to continue to grow, which we have. And so, or, you know, we own a sporting goods, very specialized in golf distribution business. And they, we, we are the largest green grass sales team in the country, meaning we actually have one on one customer service for Our green grass, which is the clubs themselves and act essentially as the catalog, the office or business catalog for the golf club so that they can buy everything they need to run the golf course from us.
And no one else is doing that at the scale of, of this particular business. So it allows us to do additional acquisitions and get into different product lines and they did an amazing job building that business. And it was again, a founder led business that sold to us. So, you know, and I, as I think about.
That, you know, that, that's one. And then second reason why they grow is because they did a great job for their customers. And there's no way to continue to grow on that if you don't have a customer centric or customer first culture. So we, we, we certainly look for that. And then I think the third is they know that they have something special.
Yeah. They don't know how to scale it.

[00:27:03] Sean Mooney: Yeah. And I love that. And so if you're, you're building a business, you know, the top investors like Susanna, you say, have you built a mousetrap that's different, that's unique, and are you demonstrating your value by having, you know, enough of the best. Potential customers in the world say this is valuable and then do you, do you utterly delight them and then good things happen with more fuel and help.
So I think, I think it's a very excellent way to, to, to succinctly describe like what's going to make a great company and make it even better. And then I

[00:27:38] Suzanne Yoon: think that's one of the reasons why I love the lower middle market. You know, it's, it's not, it's not venture, you know, in the traditional venture sense.
But lower middle market businesses were generally started by someone, right? It's not, it hasn't been sold yet. They've built it to 30, 50, a hundred, you know, 200 million of revenue. And there is that like the entrepreneurial. desire, creativity, you know, growth mindset is what creates new ideas and new services for and, and, and, and draws customers away from established businesses.

[00:28:21] Sean Mooney: I totally agree. I mean, you're in the good to great business. You can take a really good business and make it great and you can do it in a foreseeable timeline. And I say, that's what drew me to lower middle market as well. And it's not that you can't do really well in the large cap private equity, but you're in more of the tankership business where you're like, you're changing things more kind of evolutionary.
You're taking, you know, more gradual turns in, in, but, you know, and I've

[00:28:46] Suzanne Yoon: been. In larger businesses as well, the portfolio management of larger businesses is very different than a lower market business. It is more governance management of the executive teams versus in the lower middle market, where it does take a significant amount of collaboration with the management teams and also sometimes having to bring in your own people, which is why having operating partners, strategic advisors, strategic executives, is so important.
And, and having organizations like BluWave are so important so that we can resource our portfolio companies properly.

[00:29:22] Sean Mooney: And that, that, and I think that makes a thousand percent sense. And in one of the things I'd love maybe on, you know, just to, to put a bow in this part of our conversation is I really like your, your point about the, this desire to, to kind of grow and improve.
And we'd all, we've all seen these examples where some people just want the money and they want to do the same. What if you're that business owner is private equity, the right, you know, kind of. Tool for you, if you're, you know, if you just want money, I can, but do more of the, you know, what's, what, what you're already doing.

[00:29:58] Suzanne Yoon: Well, the answer is no, because at the core we're investors. So we're looking for alpha. We have to outperform other investment classes and I think private equity has because they drive growth so aggressively. And so even at Kinzie, we have, we actually have a trademarked formula that we developed and it's accelerated value is a function of capital plus operations, operational excellence compounded by technology.
And so it is difficult to scale and grow a business. To the multiples that we want on a return, if you are going to do more of the same.

[00:30:42] Sean Mooney: Yeah, I think, I think that's, that's, that's spot on advice. And like, if you're going to get into the private equity world, amazing things can happen in the evolution of your business, but you have to have the right mindset and approach.
And it's, and if you have that, you know, the second bite of that apple is going to be really, really good.

[00:31:01] Suzanne Yoon: A lot of times, and most of the time, if done right. It's significantly more than the first time first bite at the apple.

[00:31:09] Sean Mooney: I think that's, that's spot on advice. And maybe that's, that's also a good segue.
Let's talk about how Kinzie capital, how your firm really approaches kind of value creation and the resources you bring with this kind of formula that, that you all have, have developed to, to drive kind of differential alpha and alpha.

[00:31:29] Suzanne Yoon: I spoke about this a bit previously, but when I. Looked at the marketplace going back much less obvious, by the way, in 2012 than it is today, but I really started to feel my own pains around portfolio management, you know, after everyone started using the iPhone, because it was like going seeing color for the first time when we all got smartphones in the investment world and how quickly technology was moving and having executives that actually were just Very good leaders, CEOs, CFOs knew their industries, but where technology was a complete black hole.
You and I have both been through restructuring. How many, how many bankruptcies did we hear of? Because, you know, an implementation went bad because it wasn't done. It wasn't executed well. And so just. I think the fear of making technology investments, even going back to 2012, you know, to the early 2010s and then into, you know, the last 15 years is still kind of a fear because it can be very expensive if it's not executed.
Right? You. You can lose your shirt. And so I really looked at that as an opportunity for a firm that could, you know, looking at the larger firms out there, like Bain and KKR and who have large operating teams because they have billions and billions and billions of dollars under management and can afford to have those people in house.
And how could I. Bring that type of resourcing to the lower middle market. So I was very fortunate to be able to partner with my co founder and head of technology apps at Kinzie, David Namkang. He was the founder of a 160 person technology consulting and management consulting firm that does enterprise level work.
And we were able to create a strategic partnership with them. We're actually co office. So I have access to his entire team really anytime I need them or like we need them or portfolio companies see them. And that's not just at, you know, when we think about ERP and EPM implementation, but everything from digital web, custom application development, data analytics.
security and IT infrastructure. And then outside of that, his network, you know, his technology network to be able to bring in the right people for the right sizing and, and then also having BluWave, you know, to help us resource that. So for me, the, the value creation, what, you know, private equity of the past.
Where everybody looked like geniuses where they were buying right? 20 years ago. We're buying. We just talked about this. They were buying at 3 to 4 times and interest rates came down over time. And the companies were kind of slowly growing. You look like geniuses because you're able to get to your multiples fast because you're buying low now.
Today multiples are higher. You know, the debt loads are heavier. Like, what are you really going to do to get to that alpha? The only way, in my view, it's like, you got to get back to fundamentals, which is really value creation in the operations.

[00:34:43] Sean Mooney: Yeah. And I love that, that perspective, particularly where you're, where you're, you're taking and applying the technologies to, to more traditional economy companies that.
In some ways don't naturally go there in ways that they, they should. Software is in everything now. And, and, you know, you're right in, in 2005 in private equity, I thought I was Neo, you know, from the movie, the matrix with like the end of the first movie. I was like, Oh, there's, I can see the ones and zeros cascading around me.
Little did I know buying low, selling high now, now the world is just so much more competitive and, and efficient in the industry is an industry. And, you know, bringing this tech mindset to traditional economy companies has got to just drive tremendous, you know, value inherently to companies that if they're forward thinking on it can probably, you know, start picking up the pace and lapping their competitors who weren't adopted.
So, you know, and one of the things that I, I, I'd love to get your perspective on is, you know, today, as you're engaging with your portfolio companies and. Yeah. Thinking about some of the commonalities that can make these companies bigger, safer, stronger, more valuable over time. Like what are some of the things that you're kind of messaging and working with them on kind of these, you know, in some ways probably week, you know, the board meetings happen every week, you know, kind of a thing.

[00:36:13] Suzanne Yoon: But I think, you know, given where we are in the environment, I don't think there's not, there's probably not one private equity firm that isn't thinking about cash management or the balance sheet. Because that that's actually, you know, critical right now and making sure that we're not over leveraging a business, especially in the lower middle market.
I think the other is when, you know, most of smaller, these lower middle market companies have pretty lean management teams and lean teams. And so when we're acquiring them particularly. And we're like sub 15 million of EBITDA as low as 3 million of EBITDA. So you can imagine, I mean, even in that range, the, the bench strength changes dramatically and getting a company and the management team and the company to go through the type of changes you need.
At, you know, within their own infrastructures to grow can be very painful. And so, you know, we talk a lot about the J curve in private equity, but getting the management teams and the employees to understand that there, that there's going to be a J curve and that, that that's uncomfortable and it's a very scary place to be.
For for people, you know, management teams, but it's very difficult to get to that hockey stick growth, right? Without making the investments on the front end. So, for those of you who know what the grinder model is. You'll, you'll understand the grinder curve is not a smooth curve. You know, the, it's really like a step growth and every step is very uncomfortable.
It's really squiggly. You know, if you look at the grinder curve model and so I think it's just leaning in trying to get our management teams to lean into the discomfort, knowing that that's going to be there in order to grow. And I think the second piece along with that is really giving them. And helping them and collaborating with them on making sure that they have the right operating system in place to execute that growth and be able to push accountability.
Down to all the employees of an organization, I think

[00:38:32] Sean Mooney: I really like those perspectives. And 1, I think we both appreciate from our earlier experiences in the restructuring role, this whole idea that good companies don't go out of business because they're good or bad. It's because they run out of cash. So let's not run out of cash.
1st, and that's part of the reason why private equity outperforms every other asset class, not only over time, but through cycles because they have this. This appreciation for cash flow. It's very old school, but you got to make money.

[00:39:01] Suzanne Yoon: That seems so obvious to us as private equity investors, but I, I also have to remind myself.
that these, you know, founders, entrepreneur, you know, entrepreneurial businesses that we're acquiring that have grown to where they are today. A lot of times the management of the financials was on the P and L, you know, some of them don't have any debt. They, you know, they manage their inventory, but not in the most efficient way.
And so also, you know, teaching and being a partner in, in teaching and collaborating on how to manage a balance sheet. It's also a big part of lower middle market portfolio management.

[00:39:44] Sean Mooney: Yeah. And I think that's a great point around the balance sheet matters and, and you're right. So many people think of the world through the P and L, but there's not only, there's not only kind of, you know, risk on the balance sheet, but there's tremendous opportunity by understanding that if you manage that inventory a little better, it's free money.
If you do your payables a little better, it's free money. So there's just tremendous ways to unleash value. And the other thing that you said, I really love is this whole grinder curve thing, which I had to Google because I didn't know what it was until now. So I was like, Oh, that's how I describe, you know, what we do in our business to the team here.
But I didn't know there was a term for it. And because I only know how to speak metaphorically using the work like, and as it's in every conversation I have, it's this, I was like, you know, we're, we're, we're taking off. We're building our plane as it's taking off. And then you, you level out, you feel the wings wobbling, and then you got to do something different to get to the next altitude.
And then you feel the wings wobbling and. And now apparently there's a term for it, so I'm going to be studying an

[00:40:42] Suzanne Yoon: article about the grinder curve to your whole

[00:40:44] Sean Mooney: team. I will. I literally, right after a conversation, there will be a deep dive down the Google. So thank you. So I'd love to, it's a flip the page here and, and get back to, to some of, you know, kind of your more personal perspectives on things.
And I'd be curious, you know, with this, you know, kind of amazing story and path. If you could go back to your, you know, probably hard charging or harder charging 22 year old self, getting ready to take on the world, what might be one of the piece of advice that you'd share with yourself that you wish you knew that

[00:41:23] Suzanne Yoon: I would tell my 22 year old self that experience.
Definitely Trump's intellect that experience takes time as a very impatient young woman. So

[00:41:37] Sean Mooney: I can absolutely appreciate that.

[00:41:39] Suzanne Yoon: And I, I think as I've gotten older, maybe some people might find this that somewhat self serving, but I have. I have, I have come to really appreciate gray hair.

[00:41:53] Sean Mooney: I very much appreciate that comment, given that those are the only color hairs I have left on my head.
But the gray hair is, you know, it's, it's this whole idea that life is a journey, not a destination. And you kind of learn things over time. And the other thing that really makes me feel better about myself. With that comment is I, I built a career in private equity by being in rooms with the smart, with many of the smartest people in the world in that room, knowing that I was never that person.
And so I was able to overcome be being smart enough, but then having experience and tenacity and grit and kind of, in some ways doing, doing pretty, pretty well, but, but not necessarily always being that person,

[00:42:35] Suzanne Yoon: you really bring up a great point. You know that it's not just experience, but like great experience does take tenacity and grit and hard work and that will trump pure intellect any

[00:42:50] Sean Mooney: day.
Absolutely. And that goes, I think that that syncs nicely with what you're talking about with the grinder curve and the J curves like there's. The world is not up into the right. It's a series of dips and it's a more of a meandering path. And a lot of people don't get up in the right. They just go down, you know, after they get to the first trouble.
So I think it's a great lesson. I'd be curious, maybe as we're, we're, you know, coming to, you know, full circle here, maybe with this in mind and wisdom in mind that you've talked about, are there any kind of. Business or personal books that you like and you share with, with your team. That would be good to talk about here.

[00:43:28] Suzanne Yoon: So I, I actually discovered a book. It's been around for a long time, but I discovered it this year, earlier this year, it's a book called traction and it's written by Gino Wickman and it was the premise of the entrepreneurial operate operating system, and I've read it now several times, it's almost becoming a little bit of a.
Bible to me. So I actually carry it with me. I reference it constantly and it's, it's, it's a great leadership book, but also a great guide on how to really create an operating system in a company and, and, and to create accountability. You know, with every person in the organization and and my feedback from others who have read this book or use the system across many entrepreneurs and, you know, executives has been that it has really helped them create true growth and accountable growth.

[00:44:34] Sean Mooney: I love it. And that is a, I agree. I love that book. And, and I was just serendipitously interest. I was introduced to it when I was kind of kicking off and, and, and kind of running in circles, trying to get going to my brother who started a company. That was one of his Bibles. He's like, you've got to read traction.
And I did. And it's so, it just great lays out this wonderful methodology for bringing order and discipline to a company in a way that. Almost anyone can, if they have a little bit of discipline, you know, themselves and how they think, I'd be, I'd be curious, you know, have you, have you found ways, you know, are you using it within your portfolio companies?
Are you using it within your firm? Are you using it kind of in, in different areas? How, how, and where are you? You know,

[00:45:18] Suzanne Yoon: I think, I think not unlike portfolio, you know, portfolio company, we just closed our first institutional fund. We closed our first institutional fund, and that really brought us to a new milestone.
Within the organization and as a leader, when I started the firm, I was doing everything. And now going to a place where I have to do more, you know, get away from direction and more delegation. I really, I started to, I've started to implement it at Kinzie amongst my team, but also I've realized that it's a, it's a huge plus at our portfolio companies.
We actually have a portfolio company that where the CEO actually also carries it in his backpack. I did not introduce him to it. And, you know, has notes. It's almost like he's, he lives with it. So it's, I do think it, it does work and it's a great guide for really any leader. Or if, you know, someone doesn't have an operating system in a, in a company, it's a great place to start.

[00:46:20] Sean Mooney: Yeah, Suzanne, I love what you said there in that you're using it. Within your management company. And it's this, you know, it's a, in some ways a quite unique perspective of the business of private equity is actually a business and we're going to run ourselves just like a portfolio company of ours. And so I think, yeah, it's, it's, it's a, it's an amazing, I think it's a very important and, and, and not always common approach yet in, in, in some parts of private equity.
And so I really love that you're, you're, you're, you know, first, almost like living it yourself. Within your, your, your private equity firm and then bringing it to your portfolio companies. And so I really applaud you for doing that.

[00:47:02] Suzanne Yoon: Thank you. Well, I couldn't do it without a team really dedicated to it as well.
They, you know, we have a, I think culturally at our firm, like one of our core values is innovation and, you know, having a growth mindset. And I think, you know, we have to try these things and make sure that we're in line with our portfolio companies, because it's very difficult from a governance standpoint to tell someone to do something that you are not doing yourself.
You know, I think about that as a parent, I think about that as a CEO, and I certainly think about that as a portfolio manager. So

[00:47:40] Sean Mooney: that's great. And as I look back on my older days, I think I, when people would ask me what they do, sometimes I'd say, Oh, I'm a cobbler and they go, what? I was like, Oh, well, I, you know, I'm a cobbler.
My kids never have shoes on. I'm, I'm really good as do as I say, not as I do. So I think, I think it's, it's really good to see that you are doing as you say, and doing as you do and, and, and kind of living the message. And so that is, I think something that I'll absolutely take away. And had I gone back to my 22 year old self, that would have been good to know.
So Suzanne, thank you so much. This has been a really. Fun and really insightful conversation. And I appreciate you sharing these pearls of wisdom with us and the listeners here today. Well,

[00:48:23] Suzanne Yoon: thank you so much, Sean. It was great to hear your story too. It was very, really fun.

[00:48:27] Sean Mooney: Absolutely. Thanks, Suzanne. Talk to you soon.
Special thanks to Suzanne for joining. If you'd like to learn more about Suzanne and Kinzie Capital, please see the episode notes for links. Please continue to look for us anywhere you find your favorite podcasts, including Apple, Google, and Spotify. We truly appreciate your support. If you like what you hear, please follow, rate, review, and share.
It really helps us when you do this, so thank you in advance. In the meantime, if you need to be connected with the world's best in class, private equity grade, professional service providers, independent consultants, interim executives, or anything else, give us a call or visit our website at BluWave. net.
That's B L U W A V E dot net, and we'll support your success onward.

Private equity insights for and with top business builders, including investors, operators, executives and industry thought leaders. The Karma School of Business Podcast goes behind the scenes of PE, talking about business best practices and real-time industry trends. You'll learn from leading professionals and visionary business executives who will help you take action and enhance your life, whether you’re at a PE firm, a portco or a private or public company.

BluWave Founder & CEO Sean Mooney hosts the Private Equity Karma School of Business Podcast. BluWave is the business builders’ network for private equity grade due diligence and value creation needs.