Chris Hurn, CEO of Community Bankshares, joined the show to talk straight about entrepreneurial leadership in high-stakes environments. He traces his roots to watching his single mother run a chocolate business out of their basement, an early masterclass in grit, marketing, and operations. That foundation shaped his view of what it means to lead—not just manage.

Now a leader in small business financing, Chris outlines the crucial difference between being an entrepreneur and becoming a CEO. He explains how leaders must eventually move beyond scrappiness and take calculated risks with debt to scale their companies. But he’s quick to note that optimism must be balanced with pragmatism. Cash flow—not charisma—is what gets a loan approved.

Chris also unpacks the coming wave of business acquisitions driven by baby boomer retirements, sharing insights on what industries are hot and where private equity is warping the landscape. His message is clear: real leadership is about seeing around corners and backing up vision with execution.

Want to learn more about Chris Hurn’s work? Check out their website at https://www.phxbusiness.com.

Connect with Chris Hurn on LinkedIn at https://www.linkedin.com/in/chrishurn/.

Key Points with Timestamps

• 00:02:00 – Chris shares how his mom’s basement chocolate business taught him the fundamentals of entrepreneurship

• 00:05:28 – Why America has stopped taking moonshots—and what that means for small business leaders

• 00:07:51 – The turning point when scrappy startups must become serious businesses

• 00:11:09 – Chris explains when taking on business debt makes sense—and when it doesn’t

• 00:13:59 – Why confidence and resilience are critical traits for founders

• 00:16:00 – The cash flow formula lenders use to assess business loan eligibility

• 00:20:00 – Reframing “high interest rates” with historical context

• 00:21:00 – Baby boomer retirements and the massive wave of business acquisitions

• 00:24:30 – Where to actually find businesses for sale (and what to avoid)

• 00:26:00 – How PE firms are skewing valuations—and how small businesses can still win

• 00:30:45 – Competing with bigger players without racing to the bottom on price

• 00:31:44 – Chris’s parting advice: find your niche, own it, and believe in your business

Transcript

00;00;00;00 - 00;00;30;20
Craig Andrews
I was in a coma for six weeks while the doctors told my wife I was going to die. When I woke up, she told me the most fantastic story. My team kept running the business without me. Freelancers reached out to my team and said, we will do whatever it takes. As long as Craig's in the hospital. I consider that the greatest accomplishment in my career.

00;00;30;23 - 00;00;51;10
Craig Andrews
My name is Craig Andrews and this is the Leaders and Legacies podcast where we talk to leaders creating an impact beyond themselves. At the end of today's interview, I'll tell you how you can be the next leader featured on this show.

00;00;51;10 - 00;01;10;19
Craig Andrews
Today I will welcome Chris Hurn. He is the president and CEO of Community Bankshares, which is the holding company for Community Bank and Trust, Phoenix Lender Services, and Thomas Financial Group. They finance the nation's small and underserved businesses through SBA seven, a,

00;01;10;19 - 00;01;11;26
Craig Andrews
USDA,

00;01;11;26 - 00;01;16;18
Craig Andrews
BNI and other government guaranteed loan programs.

00;01;16;18 - 00;01;20;15
Craig Andrews
Their target they finance projects from startups to over 100 million

00;01;20;15 - 00;01;21;05
Craig Andrews
with most

00;01;21;05 - 00;01;35;12
Craig Andrews
being business acquisitions, owner occupied operated commercial real estate, working capital business that refinancing and consolidation equipment franchises, partner buyouts and so forth.

00;01;35;15 - 00;01;54;02
Craig Andrews
And so, you know, right now we're at a time where interest rates are a little bit higher. Chris and I were talking about that in the green room. And I think it's a question that businesses are facing where, you know, when do I when do I finance, how much should I finance. And so I think this will be a really interesting discussion.

00;01;54;08 - 00;01;55;06
Craig Andrews
Chris, welcome.

00;01;55;14 - 00;01;57;09
Chris Hurn
Thanks for having me, Craig.

00;01;57;11 - 00;01;59;01
Craig Andrews
Yeah. So,

00;01;59;01 - 00;01;59;28
Craig Andrews
not,

00;01;59;28 - 00;02;08;10
Craig Andrews
you said something about growing up with a single mom, and she was a business person.

00;02;08;12 - 00;02;14;04
Chris Hurn
That's right. Yep, yep. She was. She was a chocolatier of all things.

00;02;14;04 - 00;02;16;17
Chris Hurn
And she started when I was about seven, and,

00;02;16;17 - 00;02;18;25
Chris Hurn
it was my younger brother and her, and I,

00;02;18;25 - 00;02;22;04
Chris Hurn
you know, making chocolate in the kitchen and in the basement for,

00;02;22;04 - 00;02;24;05
Chris Hurn
for many, many years, actually,

00;02;24;05 - 00;02;34;25
Chris Hurn
you know, going up and down the stairs, putting the chocolate molds in the freezer because you can't add more chocolate unless, you know, if you've if you've colored the chocolate, there's a whole, whole complex assembly line type thing.

00;02;34;25 - 00;02;35;05
Chris Hurn
But,

00;02;35;05 - 00;02;42;26
Chris Hurn
of course I hated it back then, but I learned all about marketing. I learned about, you know, manufacturing, you know, operations.

00;02;42;26 - 00;02;45;14
Chris Hurn
I even learned a little bit about accounting and finance. It was,

00;02;45;14 - 00;02;52;07
Chris Hurn
it was an interesting thing that the older I get, I look back on it fondly and, you know, think, wow, that was that was very helpful to my career.

00;02;52;07 - 00;02;56;02
Chris Hurn
Now, because what I do now is I finance entrepreneurs every day. And,

00;02;56;02 - 00;03;02;08
Chris Hurn
we're my team and I are very passionate about doing it. And I could probably trace it back to those, those early days.

00;03;02;08 - 00;03;04;01
Chris Hurn
Along with my, my,

00;03;04;01 - 00;03;14;17
Chris Hurn
my mother was also a real estate agent at one point, and I distinctly remember I was about 13 helping her actually pass, you know, study for the exam or the whatever.

00;03;14;17 - 00;03;24;03
Chris Hurn
It was the test and help her pass that. And that probably planted something in my head about, you know, finance in general, which is what I ultimately ended up doing. Yeah.

00;03;24;05 - 00;03;26;07
Craig Andrews
You know, as you were talking about that,

00;03;26;07 - 00;03;40;19
Craig Andrews
you know, I think could she do that today? Is it possible today to do make chocolate in your personal kitchen and then sell it to the public? Is that allowed?

00;03;40;22 - 00;03;45;01
Chris Hurn
Probably not. I'm pretty sure she violated a whole bunch of health codes at the time, but,

00;03;45;01 - 00;03;46;07
Chris Hurn
you know, she was a,

00;03;46;07 - 00;03;49;02
Chris Hurn
you know, a resourceful entrepreneur. And,

00;03;49;02 - 00;03;55;10
Chris Hurn
you know, to this day, I'm. I'm sure there's statute of limitations. I'm not sure she paid much in taxes back then, Craig, but,

00;03;55;10 - 00;03;56;13
Chris Hurn
but she had quite a following.

00;03;56;13 - 00;03;57;27
Chris Hurn
She developed quite a following.

00;03;57;27 - 00;04;02;26
Chris Hurn
You know, people, people enjoyed her story. They they loved her. Different chocolates that she did.

00;04;02;26 - 00;04;05;12
Chris Hurn
You know, she did some things that were a little bit outside the box,

00;04;05;12 - 00;04;12;08
Chris Hurn
compared to other folks back then and just, you know, and even to this day, she's now she just turned 75, and,

00;04;12;08 - 00;04;18;23
Chris Hurn
she still hears from people that, you know, were customers, 40 some years ago or 45 years ago, for instance.

00;04;18;26 - 00;04;23;29
Chris Hurn
So it's. Yeah, I don't know that you could do it quite today. She'd probably have to do one of those,

00;04;23;29 - 00;04;34;05
Chris Hurn
you know, one of those, kitchens, you know, where the where a bunch of different restaurants are out of came or what? That's called ghost kitchens. Yeah. So she probably had to do something like that, but,

00;04;34;07 - 00;04;36;25
Chris Hurn
Yeah, it's it was it was interesting.

00;04;36;25 - 00;04;44;07
Chris Hurn
For sure. Yeah, I actually I didn't even like chocolate for a while there because I think I got burned out on it, so I do now, of course.

00;04;44;10 - 00;04;45;11
Craig Andrews
You know, it's,

00;04;45;11 - 00;05;04;24
Craig Andrews
and this is a little divergent from finance, but you know, it's it's interesting, you know, things that people could get away with. Years ago, I remember Rachel Maddow had a little TV commercial where she's on the the Hoover Dam saying, you know, we built this and I forgot what the time frame she was talking about was an engineering marvel.

00;05;04;27 - 00;05;12;17
Craig Andrews
Yeah. And she was like, you know, we should be able to do this today. I'm like, well, not with today's OSHA regulations. You know how many people died building that dam?

00;05;12;20 - 00;05;21;20
Chris Hurn
That's right. Yeah, yeah, yeah. It's often times you think about it. I mean, I've said the same thing. I don't I don't say a lot of things, similarly with Rachel Maddow, but sometimes,

00;05;21;20 - 00;05;28;19
Chris Hurn
you know, I don't feel like we take enough moonshots as a society anymore. And part of the reason is because we are overly protective.

00;05;28;19 - 00;05;33;27
Chris Hurn
You know, we have a lot of regulations that prevent us from taking some of those risks.

00;05;33;27 - 00;05;35;28
Chris Hurn
For the for the sought after returns.

00;05;35;28 - 00;05;42;26
Chris Hurn
Same thing applies to any entrepreneur starting a business, quite frankly. Now, they may not be taking a moonshot necessarily, but,

00;05;42;26 - 00;05;48;17
Chris Hurn
but I think there's I think there's something to this. You know, we haven't been back to the moon in, what, 50 years?

00;05;48;17 - 00;05;49;22
Chris Hurn
Something like that.

00;05;49;22 - 00;05;50;02
Chris Hurn
Well, we're.

00;05;50;02 - 00;05;52;19
Craig Andrews
Just coming from Mars is we're skipping the moon. Just going to Mars?

00;05;52;20 - 00;06;03;12
Chris Hurn
Yeah, I know, I know, but you know what I mean? I mean, I think in some ways she's right. You know, they built the Hoover Dam in the mid 30s. And I kind of think it was done in like three years or something like that.

00;06;03;12 - 00;06;07;18
Chris Hurn
You know, Panama Canal is another example. A lot of people died, unfortunately, building that.

00;06;07;18 - 00;06;17;18
Chris Hurn
But you know, what a what a marvel that we were able to do that we had that we had that vision to do something so expansive that I'm sure there was tons of naysayers at the time.

00;06;17;18 - 00;06;31;00
Chris Hurn
But that's, you know, frankly, Craig, that's what fuels my passion for helping entrepreneurs because some of the businesses that have financed, you know, they, you know, they're little acorns, but they grow up to be gigantic oak trees and they're doing amazing stuff.

00;06;31;00 - 00;06;31;15
Chris Hurn
And,

00;06;31;15 - 00;06;47;07
Chris Hurn
you know, the breakthroughs in society come from entrepreneurs. They don't come from politicians, they don't come from media, they don't come from bureaucrats, they don't come from professors, they come from entrepreneurs. So that's that's what's really exciting about what I've done for the last almost 30 years.

00;06;47;09 - 00;06;53;03
Craig Andrews
Well, and here's I mean, here's another example. You know, you were talking about your mom starting her business in her kitchen.

00;06;53;03 - 00;06;56;17
Craig Andrews
There's a company. You've probably heard of them. They're called Hewlett Packard.

00;06;56;17 - 00;06;58;26
Chris Hurn
The garage. Yeah.

00;06;58;29 - 00;07;19;05
Craig Andrews
They their first product was a frequency counter for Disney or a frequent frequency generator for Disney. And they built. This was during the Great Depression. They launched both Disney and Hewlett Packard, launched during the Great Depression. That's right. And they painted the frequency generator. And then they put it in their mom's oven to bake the paint.

00;07;19;07 - 00;07;32;29
Chris Hurn
Yeah. And they were working out of their garage, which a lot of famous Silicon Valley stuff starts there. But yeah, I mean, again, that's a great example of being resourceful and adaptable and, you know, not letting a typical obstacle stand in the way.

00;07;33;01 - 00;07;51;15
Craig Andrews
So I guess this is part of the question that every entrepreneur has to answer is, you know, okay, you start young and scrappy. You do crazy things like that. And then at some point you have to grow up right. And and then you have to start fueling the growth of the business. And that's kind of where where you come in.

00;07;51;18 - 00;07;56;22
Craig Andrews
And I'll just be honest, that scares the crap out of me. It just terrifies.

00;07;56;22 - 00;08;21;08
Chris Hurn
Me. What scares the crap out of a lot of people? I mean, entrepreneurism is is not for everyone. I mean, I've I've probably talked more people out of becoming entrepreneurs than I should just because not everybody has the stomach for it, you know? I mean, like I said, the thing that moves society forward are the entrepreneurs that take the risks when everybody else tells them they're crazy and they're seeking the returns for those risks, they don't always succeed.

00;08;21;08 - 00;08;34;18
Chris Hurn
Of course, plenty of entrepreneurs have failures along the way, but it's not for everybody. You know, I would say if I had to guess maybe 25% to 30% of the population has has the,

00;08;34;18 - 00;08;43;01
Chris Hurn
the stomach for, for doing this. So but I mean, let me turn it on you. I mean, surely this podcast made you nervous when you started it, right?

00;08;43;08 - 00;08;46;02
Chris Hurn
You didn't know how this was going to go and yet you didn't.

00;08;46;04 - 00;08;48;11
Craig Andrews
Well, yeah, this wasn't such a big deal.

00;08;48;11 - 00;09;00;28
Craig Andrews
When I met my wife, I was starting my business, and we went out on a couple dates and it looked like it was going somewhere. And I sat down with her and I said, hey, I need to tell you, here's. Yeah, because we were both in our 40s at that point.

00;09;00;28 - 00;09;04;14
Craig Andrews
She had been married to a divisional president of U.S. Food Services.

00;09;04;17 - 00;09;05;19
Chris Hurn
Okay.

00;09;05;22 - 00;09;27;25
Craig Andrews
And I'm sitting there thinking she probably had a different vision for this phase of her life than what I have to offer. And I told her, I said, let me tell you what's going on. I'm starting a business. And I just want to be clear. The most likely outcome is it's going to fail right? And if it doesn't fail, the next most likely outcome will be a modest but livable income and said, let's not talk.

00;09;27;27 - 00;09;49;11
Craig Andrews
Fantastic. Well, that's just such a small probability, but this is the path I'm one, and it may not be the path you want, which is fine, but you have to you have to answer that question. Sure. She actually found it endearing because, like, guys were telling her how they were going to provide the world to her, and I'm like, no, I'm going to give you a life of poverty.

00;09;49;11 - 00;09;53;15
Craig Andrews
Are you in? And, but was that you sort.

00;09;53;15 - 00;09;53;21
Chris Hurn
Of,

00;09;53;21 - 00;09;58;07
Chris Hurn
set the expectations low so you can overdeliver, I guess. Yeah, yeah.

00;09;58;10 - 00;10;09;09
Craig Andrews
But it was it was what you're talking about. You know, I'm looking at it and it's like, you know, I think like a lot of entrepreneurs, I saw some things that were broken in the world. I felt like I could fix them.

00;10;09;09 - 00;10;13;07
Craig Andrews
But it's very high risk. And honestly, it's been really hard.

00;10;13;07 - 00;10;16;01
Craig Andrews
Yeah. Yeah, there's been there have been abundant times.

00;10;16;01 - 00;10;18;05
Craig Andrews
There have been some times,

00;10;18;05 - 00;10;19;25
Craig Andrews
and the,

00;10;19;25 - 00;10;42;04
Craig Andrews
but one of the questions, you know, one of the questions I wrestle with, it comes back to that. And that's where for me, I'm okay taking the risk, starting a business when it comes to getting debt to run the business, that's where it scares me. Okay, well, what's. And with imagine I'm not alone.

00;10;42;04 - 00;11;09;06
Craig Andrews
How do how do how do you process through. You know, getting the debt now, having that nice pile of money to fuel growth looks great. But you know, if you if you use it and the growth doesn't come now you're you're on the hook. And often you have your house as collateral, right. Or something like that. How how should businesses look at debt?

00;11;09;08 - 00;11;10;14
Chris Hurn
Well, I think,

00;11;10;14 - 00;11;31;07
Chris Hurn
unless you're starting a business where it's a proven concept, like a franchise, for instance, I finance a lot of startups in the franchise space, but this franchise is sort of turnkey, right? If you follow the directions, so to speak, from the franchise, or you should have similar output, you should have similar economic results. Right.

00;11;31;09 - 00;11;34;03
Chris Hurn
But non franchise startups,

00;11;34;03 - 00;11;51;10
Chris Hurn
you know, I think to be successful in business of course, you know, you have to you have to have a tolerance for risk. You know like you just said, you know there's going to be days where it's great and there's going to be days where it's awful. I mean, that's one thing. The entrepreneurial journey is literally a roller coaster, always.

00;11;51;12 - 00;11;56;15
Chris Hurn
So you have to kind of know that going into it. But I think the most successful entrepreneurs starting out,

00;11;56;15 - 00;12;11;21
Chris Hurn
have picked a niche, something that they can hopefully be, you know, a world beater in. And they've focused on that to try and dominate that niche. And, you know, it's it takes I would say in most cases, you know, you've got to establish yourself.

00;12;11;21 - 00;12;31;05
Chris Hurn
You've got to have proof of concept first before you take on debt. Not always, but but that does help. Okay. And there is a transition for the business owner from a mindset perspective. I think from going from an entrepreneur to becoming a CEO. Now, I would say that doesn't happen until you've done several million dollars in revenue.

00;12;31;05 - 00;12;33;02
Chris Hurn
And you've really gotten a lot more established.

00;12;33;07 - 00;12;43;26
Chris Hurn
But, you know, along that journey, at some point, if you believe in yourself enough and let's face it, entrepreneurs are notoriously optimistic, maybe sometimes too optimistic. Right.

00;12;43;26 - 00;12;47;13
Chris Hurn
Although that does get them through some of the tough times. Right. But,

00;12;47;13 - 00;12;50;26
Chris Hurn
you know, it's it's somewhat about betting on yourself. I mean, I've,

00;12;50;26 - 00;12;58;19
Chris Hurn
right now I'm the president, CEO of a bank holding company, which we own a bank, we own the lender service provider, we own a loan packager.

00;12;58;21 - 00;13;05;03
Chris Hurn
You know, we're one of the largest SBA lenders in the country. We are the largest USDA business lender in the country.

00;13;05;03 - 00;13;21;12
Chris Hurn
But, you know, I now have deposits to lend from, or I didn't have it in my previous two companies in this space. You know, I was the one that had, you know, tens of millions of dollars of, of commercial warehouse lines to finance the loans that I was making.

00;13;21;12 - 00;13;24;20
Chris Hurn
I didn't I couldn't rely upon deposits, which is what bankers do.

00;13;24;20 - 00;13;30;12
Chris Hurn
And I personally guaranteed it. And, you know, it's initially it's very terrifying.

00;13;30;12 - 00;13;36;01
Chris Hurn
But you quickly get through that because if nothing else, in my case, years ago, I thought, well, gee, I've got

00;13;36;01 - 00;13;40;19
Chris Hurn
my first $10 million line of credit. I don't have $10 million. I have to personally guarantee it.

00;13;40;19 - 00;13;59;07
Chris Hurn
But you know what? They can come after me. It's not there. And it is what it is. And you know what? If if I fail, if it blows up, I'll just figure something out and I'll start over again with something else. And I think that sort of confidence that you have in yourself, that you believe you're going to succeed.

00;13;59;10 - 00;14;07;20
Chris Hurn
But if you don't, fortunately, we live in a country where, you know, people believe in second chances and people can go and start over again.

00;14;07;20 - 00;14;18;00
Chris Hurn
I'm not saying it's not difficult to do that, but I think it comes down to believing in yourself, believing in your business, feeling like you do solve a problem. I mean, that's what entrepreneurs are.

00;14;18;00 - 00;14;19;13
Chris Hurn
They're problem solvers,

00;14;19;13 - 00;14;25;00
Chris Hurn
you know, and and just moving it forward. But at some point in the journey, once you've proven the concept,

00;14;25;00 - 00;14;28;09
Chris Hurn
you know, and you're really ready to grow the business,

00;14;28;09 - 00;14;39;06
Chris Hurn
much more so than you could organically. That's when people consider taking on business debt to fuel that growth. And, you know, it's important some people do it too early.

00;14;39;08 - 00;14;59;23
Chris Hurn
I will tell you, some people want too much. And as a, as a lender oftentimes will provide them feedback and say, well, you know, we'll finance you for X dollars. We can't finance you for Y dollars that you asked for, because quite frankly, we need you to prove that, you know, you can pay us back and and that this is going to execute on your vision.

00;14;59;26 - 00;15;16;20
Chris Hurn
You know, we don't want you to bite off too much than you can chew. So, so we deal with that sometimes as well. And of course, you know, I've seen some business plans in my time, Craig, that are just, you know, off the charts that just don't make any sense whatsoever. So, you know, I think I think that is a balancing act.

00;15;16;20 - 00;15;28;09
Chris Hurn
You know, entrepreneurs have to balance that eternal optimism with a little bit of pragmatism. And that doesn't always happen. And sometimes when somebody says they're going to grow 1,000% year, one a year to,

00;15;28;09 - 00;15;33;01
Chris Hurn
you know, that's a huge red flag for us as a lender, because that's just not realistic.

00;15;33;04 - 00;15;54;13
Craig Andrews
You know, is there a formula that helps guide how much that I can take on the fuel, the growth, and, you know, be able to, you know, to make sure that I can still pay this out, that this is going to be good, profitable growth for me rather than just growth for the sake of growth.

00;15;54;16 - 00;15;55;00
Chris Hurn
Yeah.

00;15;55;00 - 00;15;59;28
Chris Hurn
I mean, there's a number of different formulas. I can tell you if I, if I pull the curtain back on lending,

00;15;59;28 - 00;16;13;15
Chris Hurn
business lending, commercial loans, one of the fundamental causes is cash flow. And I'll make it really simple for people. You'll you'll hear your banker throw out, you know, cash flow, debt service coverage ratios, DSR, all these different things.

00;16;13;17 - 00;16;40;09
Chris Hurn
And all it really means is, is does your business does your operating company throw off enough cash to support all the obligations and any existing or projected debt on an annualized basis? And what I mean by that is, you know, does your business throw off, in most cases, a pretty well run baseline? Well, let me back up. SBA has a requirement.

00;16;40;11 - 00;16;52;18
Chris Hurn
You have to basically throw off a $1, 15, $1.15 for every dollar of annualized debt for SBA to approve a lender lending you money, if that makes.

00;16;52;18 - 00;16;58;29
Craig Andrews
Sense. So let me. Yeah, yeah. Does that mean so let's say I'm going to borrow $1 million.

00;16;58;29 - 00;17;04;21
Craig Andrews
Yeah. That mean that I have to be generating what 1.15.

00;17;04;24 - 00;17;21;21
Chris Hurn
Now because you're looking at gross revenue. So it comes down to when I say cash available thrown off by the business I mean I'm talking net profit. I'm talking non-cash add backs like appreciation or excuse me depreciation amortization interest costs. You might have some extra surplus

00;17;21;21 - 00;17;25;09
Chris Hurn
owner's comp that that we can put into that calculation. Different things like that.

00;17;25;15 - 00;17;27;24
Chris Hurn
That's what I'm talking about okay.

00;17;27;24 - 00;17;31;22
Craig Andrews
So yeah it's it's net profit. It's not revenue.

00;17;31;29 - 00;17;34;17
Chris Hurn
It's basically EBITDA. Does your Ebit

00;17;34;17 - 00;17;39;17
Chris Hurn
show $1.15 for every dollar of annualized debt? Sorry, I've got some people,

00;17;39;17 - 00;17;42;06
Chris Hurn
doing construction outside.

00;17;42;09 - 00;17;43;24
Craig Andrews
We can't I can't hear you. So we're good.

00;17;43;24 - 00;17;45;09
Chris Hurn
Good, good, good. All right.

00;17;45;28 - 00;17;47;08
Craig Andrews
All right. Oh, cool.

00;17;50;05 - 00;17;58;05
Craig Andrews
Do you recommend that people go up to that, that, you know, 1.15 or what? What would you say is good practice?

00;17;58;08 - 00;18;00;11
Chris Hurn
Well, I mean, that's the minimum standard.

00;18;00;11 - 00;18;07;25
Chris Hurn
A lot of conventional banks, you know, they might have it might be 1.4 times, you know, this is a ratio 1.4 to 1.

00;18;07;25 - 00;18;12;12
Chris Hurn
You know, if it's a particular risky business, you may see somebody even higher than the,

00;18;12;12 - 00;18;17;03
Chris Hurn
but I think, you know, a well-run business is going to be north of that.

00;18;17;03 - 00;18;23;07
Chris Hurn
I mean, I have borrowers that are two times coverage, you know, three times coverage. It's rare, but it does happen.

00;18;23;07 - 00;18;31;02
Chris Hurn
But I think at that level, that means, you know, you've you've priced your product or service. Well, you've got some decent profit margin and,

00;18;31;02 - 00;18;37;16
Chris Hurn
you know, you've got some room to grow. So and it makes sense to, to take on business debt under that circumstances.

00;18;37;18 - 00;18;41;08
Craig Andrews
You know, you know,

00;18;44;23 - 00;18;58;19
Craig Andrews
So let's talk a little bit about interest rates. So, you know, the interest rates have been high. And if you've been in business for less than, you know, ten, 15 years, this probably just feels like outrageous.

00;18;58;21 - 00;19;06;12
Chris Hurn
Yeah. I mean, I think what people have to understand is we're we're reverting to the norm in terms of interest rates.

00;19;06;12 - 00;19;25;14
Chris Hurn
We had about 15 years post Great Recession where interest rates were absolutely, ridiculously low. And unfortunately, people's perspective until very recently has been the that's the norm. And, you know, we had that interest rate shock a couple of years ago where the prime rate, for instance, which,

00;19;25;14 - 00;19;28;25
Chris Hurn
almost doubled, well, actually more than doubled in about 15 months time.

00;19;29;01 - 00;19;31;15
Chris Hurn
That put a lot of stress on the system.

00;19;31;15 - 00;19;36;05
Chris Hurn
Now people have, you know, things have normalized a little bit. Prices come down a little bit.

00;19;36;05 - 00;19;46;11
Chris Hurn
But yeah, if people don't have a longer term perspective, if, you know, if you're a business owner in your 30s, you're probably thinking, this is this is a horrible time to,

00;19;46;11 - 00;19;55;07
Chris Hurn
to be taking on any debt when the reality is it's this is we're probably still slightly below the average over the last, say, 50 years.

00;19;55;09 - 00;20;03;09
Chris Hurn
So it's just it's it's interesting. Again, you don't you don't hear about it as much. Maybe in the last six months or so.

00;20;03;09 - 00;20;16;11
Chris Hurn
You hear it more on the consumer side, you know, with, you know, home loans for instance, things like that. But on the business side, you know, 2 or 300 basis points probably shouldn't make a huge amount of difference in your business.

00;20;16;14 - 00;20;20;18
Chris Hurn
If you're, you know, if you've properly priced things and if you're in a growth mode,

00;20;20;18 - 00;20;22;16
Chris Hurn
I think you're going to be fine. And,

00;20;22;16 - 00;20;28;17
Chris Hurn
you know, when I got into business lending money to entrepreneurs back in the mid-nineties,

00;20;28;17 - 00;20;36;07
Chris Hurn
I can remember distinctly my very first approval letter I offered was it was a 12, 12.5%, frankly,

00;20;36;07 - 00;20;40;04
Chris Hurn
you know, these days where we're lending in the 8 to 9% range.

00;20;40;04 - 00;20;44;22
Chris Hurn
So, you know, pretty, pretty different world. We're in.

00;20;44;25 - 00;20;50;13
Craig Andrews
What areas are you seeing growing? What's what sectors are you seeing the most growth?

00;20;50;15 - 00;20;53;21
Chris Hurn
I see a lot of growth these days with,

00;20;53;21 - 00;20;58;27
Chris Hurn
business acquisition lending. And that's predominantly because baby boomers own,

00;20;58;27 - 00;21;14;24
Chris Hurn
about 56% of all of America's small businesses. And they're reaching an inflection point where they want to sell the business, or they're going to have to shut it down, or they have to get it to their kids. And if they want to sell the business, then the kind of financing that I provide,

00;21;14;24 - 00;21;26;09
Chris Hurn
predominantly SBA financing is hands down the best option for them out there, unless someone wants to pay cash for the business, which, you know, even if you have the cash, that doesn't make that doesn't make you a good steward of putting

00;21;26;09 - 00;21;45;06
Chris Hurn
all the cash into purchasing a business necessarily. So, yeah, I see a lot of that. I think we're going to have a massive amount of growth in that area over the next decade as baby boomers are retiring every day. You know, I think I've seen a statistic that says like 9000 baby boomers retire every day for the next roughly ten years.

00;21;45;12 - 00;21;48;10
Chris Hurn
So you're going to have a huge transfer of,

00;21;48;10 - 00;21;56;11
Chris Hurn
you know, ownership that's going to happen. Huge transfer of wealth, for that matter, as we know, on the retirement side. But it's a it's a huge opportunity for us.

00;21;56;11 - 00;22;05;24
Chris Hurn
You know, SBA has a cap on their seven eight loans right now, a $5 million. And quite frankly, that hasn't been indexed for inflation in about since 2010.

00;22;05;27 - 00;22;25;16
Chris Hurn
So there's some there's some bills in Congress now that would push that up to $10 million because believe it or not, there's plenty of small businesses. What I would consider small businesses that are worth under $10 million but worth more than 5 million. And you're going to see a lot of those transfer here over the coming decades. So it's a huge it's a huge growth area for us.

00;22;25;18 - 00;22;32;15
Chris Hurn
We do about 60% of our volume right now is financing business acquisitions like that across the board, all sorts of different industries.

00;22;32;17 - 00;22;42;03
Craig Andrews
Yeah. I got to say, that's actually something that interests me is, you know, it maybe, as you know, in addition to what I've got going on there,

00;22;42;03 - 00;22;56;19
Craig Andrews
you know, is finding one of these businesses that's been set up that's, you know, and going in, of course, buying a business is easy. Figuring out how they ran it successfully is hard.

00;22;56;22 - 00;22;59;02
Craig Andrews
But what,

00;22;59;02 - 00;23;07;14
Craig Andrews
what categories of businesses, you know, like what sectors, what verticals are you seeing the most activity?

00;23;07;16 - 00;23;08;20
Chris Hurn
I see a lot of business,

00;23;08;20 - 00;23;18;22
Chris Hurn
activity in e-commerce. Of course, the problem as a lender, of course, is there's not much collateral oftentimes there, but hence why I use government guaranteed lending for these things.

00;23;18;22 - 00;23;23;17
Chris Hurn
Very, very difficult to do business acquisition financing with a conventional ordinary bank,

00;23;23;17 - 00;23;26;28
Chris Hurn
for reasons like lack of collateral, for instance.

00;23;27;01 - 00;23;30;02
Chris Hurn
I see a lot in the what I would say the,

00;23;30;02 - 00;23;36;23
Chris Hurn
the contractor space, the trade space, you know, plumbers, Hvac, electricians, you know, things of that nature.

00;23;36;23 - 00;23;37;29
Chris Hurn
You know, there's a lot of,

00;23;37;29 - 00;23;48;14
Chris Hurn
business acquisitions that occur in the franchise space, you know, someone buying a new concept or buying multiple units of a concept that happens a lot.

00;23;48;16 - 00;23;57;16
Chris Hurn
I think those those would be the ones that that jump out of me. I mean, you always seen the other things. You know, professional services could be accounting firms, Dennis. You know,

00;23;57;16 - 00;23;59;24
Chris Hurn
ophthalmologists, all sorts of different things like that.

00;23;59;24 - 00;24;05;21
Chris Hurn
But, you know, I'd like to see more manufacturing, of course. And obviously this administration is pushing that,

00;24;05;21 - 00;24;13;18
Chris Hurn
that's that's a good thing for us in terms of bringing back jobs and the multiplier effect that the manufacturing businesses have across other industries.

00;24;13;18 - 00;24;15;21
Chris Hurn
So those are the kinds of things that I'm saying, you.

00;24;15;22 - 00;24;25;17
Craig Andrews
Know, how do you find these businesses? You know, the baby boomers, they're retiring. And, you know, the kids don't want to have the business and they're trying to. So how do you find these guys?

00;24;25;20 - 00;24;28;29
Chris Hurn
A lot of times that comes to us through business brokers,

00;24;28;29 - 00;24;44;15
Chris Hurn
no different than how would you find a house? You know, you'd go to the people that do this every day, which in, in the case of house hunting would be a realtor. Right? So in our world, it's business brokers. You know, you we like to deal with people that are experts that do this for a living.

00;24;44;21 - 00;24;47;25
Chris Hurn
I don't advise somebody just jumping on the internet and,

00;24;47;25 - 00;24;51;29
Chris Hurn
you know, googling to see if there's any businesses for sale in your community.

00;24;51;29 - 00;24;54;00
Chris Hurn
You could find one, but it's probably not,

00;24;54;00 - 00;25;06;00
Chris Hurn
a real efficient way to do so. Probably makes a lot more sense to go to somebody who does this for a living daily. And that's, in essence, very analogous to why you would, you know, you could always buy a home,

00;25;06;00 - 00;25;08;09
Chris Hurn
directly or, you know, a seller could, could have,

00;25;08;09 - 00;25;10;02
Chris Hurn
you know, for sale by my owner.

00;25;10;06 - 00;25;11;24
Chris Hurn
But that doesn't always,

00;25;11;24 - 00;25;18;25
Chris Hurn
you know, resulting in the best outcome compared to working with a realtor, for instance. So it's no different in my world. Yeah.

00;25;18;28 - 00;25;23;11
Craig Andrews
Yeah, yeah. Well, we're selling our house, and our realtor,

00;25;23;11 - 00;25;27;13
Craig Andrews
has had us doing things we would have never done on our own. And,

00;25;27;13 - 00;25;49;15
Craig Andrews
And we get it. We we we, you know, we can see it. And that's, you know, that. That's why you want to have a pro. Yeah. I think my perception is like a lot of the trades, like the Hvac and plumbing that they've gotten kind of pitted because the private equity activity, you know, they private equity has been over paying for these businesses.

00;25;49;22 - 00;26;04;08
Craig Andrews
Right. And so everybody is thinking, that I mean, I'd love to own an Hvac company right now, but I don't think anybody would sell them for a reasonable price because everything they're seen going on with private equity.

00;26;04;11 - 00;26;07;26
Chris Hurn
Yeah, it has skewed the market a little bit. And I will say,

00;26;07;26 - 00;26;14;00
Chris Hurn
as a, you know, conventional lender, we do have to get business valuations done to, to,

00;26;14;00 - 00;26;18;10
Chris Hurn
confirm, you know, the price of which the seller is selling their business.

00;26;18;10 - 00;26;25;18
Chris Hurn
And it doesn't always work out. And sometimes, you know, we have to push it back to, to our buyer and, and say, sorry, you know, this doesn't pencil out.

00;26;25;18 - 00;26;28;26
Chris Hurn
You know, you need to go and renegotiate with the seller because,

00;26;28;26 - 00;26;38;18
Chris Hurn
you know, the economics of the business don't support the sale price that you want, that you want to do here, or the purchase price of our buyer. So it happens,

00;26;38;18 - 00;26;39;02
Chris Hurn
you know,

00;26;39;02 - 00;26;51;09
Chris Hurn
I think also, I think I actually think we're on more on the tail end of, you know, the PE firms getting involved in some of the trades because, you know, it's it's not as easy as those guys thought.

00;26;51;09 - 00;26;57;12
Chris Hurn
Sometimes. You know, what the, the mindset has been. Oh, you know, you went to Wharton, you got an MBA.

00;26;57;12 - 00;27;12;05
Chris Hurn
You know, you'll go do a roll up of, you know, as many plumbers as you possibly can, but that doesn't mean that kids know as much about plumbing. Okay? And I'm not saying you have to, you know, be in the field for, for decades to know about how to run a plumbing business.

00;27;12;12 - 00;27;19;14
Chris Hurn
But you do have to get your hands dirty. You do have to roll up your sleeves. You do need to be able to, you know,

00;27;19;14 - 00;27;25;04
Chris Hurn
manage blue collar, for instance. It's very different than managing white collar as, as you may know.

00;27;25;04 - 00;27;32;21
Chris Hurn
So, you know, there's there's aspects of this that can maximize your success or, or frustrate the hell out of you, frankly.

00;27;32;22 - 00;27;33;08
Chris Hurn
So

00;27;33;08 - 00;27;38;05
Chris Hurn
I'm not so sure that pe I think they just have so much,

00;27;38;05 - 00;27;50;14
Chris Hurn
ammunition, there's so much dry powder that they've got to put it to work in different areas. I mean, you also see it in franchising. You know, PE has got has really pushed into franchising over the last 20 years because again, it's

00;27;50;14 - 00;27;53;02
Chris Hurn
it's another place to deploy their capital.

00;27;53;09 - 00;28;12;28
Chris Hurn
And at least in franchising, I would argue that it's it's repeatable success. You know, it's a basically a it's a system that like I said earlier, if if you follow the instructions of the franchise or you should have repeatable results and should get the similar results of what the franchise or expects and what other franchises get in the system.

00;28;13;05 - 00;28;13;21
Chris Hurn
So,

00;28;13;21 - 00;28;16;15
Chris Hurn
yeah, I think PS you know, it's kind of like a,

00;28;16;15 - 00;28;29;01
Chris Hurn
you know, it's a it's like a, it's a creeping sea monster with tentacles all over the place. It's going to continue to push more and more into small business. I'm just not so convinced it's always going to be the trades per se.

00;28;29;04 - 00;28;48;04
Craig Andrews
Yeah. There's in Saint Louis, there's four Hvac companies that are owned by one PE firm. Yeah, all the trucks have their own wraps. They're four different companies that flood the zoom with Google ads. Yep. You go off and you get three quotes and they're all the same because they all came out of the same quoting computer. Right, right.

00;28;48;04 - 00;28;56;16
Craig Andrews
And and what and what he's done there is they've pushed the rates up right. So high that,

00;28;56;16 - 00;29;15;10
Craig Andrews
I think, you know, for example, you know, some numbers I saw recently, you know, what was a $20,000 Hvac? The PE companies are selling for 40, right? Yeah. And and the PE companies have loaded the entities with debt. So they have to charge these rates.

00;29;15;12 - 00;29;37;28
Craig Andrews
This is why I said loved owning an Hvac company because you come in with you run the company well, make good margins, do decent marketing. And you could totally cripple these guys because they can't. You don't compete on price, you know, don't race to the bottom but make a healthy profit. You can make a healthy profit and still be substantially cheaper than them.

00;29;38;00 - 00;29;45;23
Chris Hurn
And yeah, yeah, you probably can. Although I would I would just say that's you know, that's a dangerous slippery slope though.

00;29;45;23 - 00;29;49;23
Chris Hurn
I don't I think small businesses can compete with bigger companies.

00;29;49;23 - 00;29;57;05
Chris Hurn
On other variables other than price. I think it's really dangerous for a small business to try to compete on price. So, you know, in a.

00;29;57;05 - 00;30;00;23
Craig Andrews
Situation. And that's why I'm trying to say it's not about race to the bottom. It's not

00;30;00;23 - 00;30;05;23
Craig Andrews
exactly. It's about what I'm talking about is,

00;30;05;23 - 00;30;18;25
Craig Andrews
go back five years or six years before the PE be at the set your pricing at what was the top of the market. They're adjusted for inflation, what have you. Sure. You know still be you know healthy price.

00;30;18;25 - 00;30;43;00
Craig Andrews
But the PE guys have to charge significantly more to service their debt. Right. And and I just don't think that that's sustainable. I think I think a well-run company that makes very, very good profits can come in lower than the PE guys while not competing on price, you know, have great service, have great marketing and clean their clock.

00;30;43;02 - 00;30;45;16
Chris Hurn
Yeah, I think I think it's it happens.

00;30;45;16 - 00;31;00;12
Chris Hurn
I just think also you got to remember the PE guys have much deeper pockets than that small business. And if they're really getting their butts kicked, pretty sure the PE guys are going to try to throw out a ridiculous number to buy the business as well, because sometimes that's what they do.

00;31;00;12 - 00;31;22;06
Chris Hurn
Just if they get a nuisance, sometimes it's easier for them to throw some money at it. And like I said, they got a lot more resources so that I've seen that a few times as well. But yeah, but regardless, I do think, you know, people freak out about like when Walmart enters a community. I'm sorry, Walmart doesn't do everything well, you know, and they're not always the cheapest.

00;31;22;08 - 00;31;43;24
Chris Hurn
And they certainly don't provide the best service. And they can't niche down into certain sectors. You know, or areas of the business. And so that's where I think small businesses, if they they get past the the headline freak out, they can compete well with larger companies being Walmart or others. It's just you've got to sort of again, you gotta believe in your business.

00;31;44;01 - 00;31;57;23
Chris Hurn
You have got to find your right market, your right niche, and do what you can to try and dominate it. And I think I've seen a lot of examples of that where they've competed well against big companies, and those are the guys I like to finance. Frankly.

00;31;57;25 - 00;32;00;08
Craig Andrews
You know. Well,

00;32;00;08 - 00;32;02;03
Craig Andrews
Chris, this has been fascinating.

00;32;02;03 - 00;32;07;16
Craig Andrews
And how did people reach you?

00;32;07;19 - 00;32;10;14
Chris Hurn
They can reach me, reach out to any of those companies.

00;32;10;14 - 00;32;14;08
Chris Hurn
Phoenix business is probably the best way. Business.com.

00;32;14;08 - 00;32;16;10
Chris Hurn
Community bank shares, dot com.

00;32;16;10 - 00;32;18;21
Chris Hurn
And those those are probably the best ways to get Ahold of me.

00;32;18;21 - 00;32;20;05
Chris Hurn
Look me up on LinkedIn.

00;32;20;05 - 00;32;24;10
Chris Hurn
I used to have a lot of social media presence. I don't do that as much anymore.

00;32;24;13 - 00;32;36;13
Chris Hurn
You can. You can Google me, and you'll find me in a lot of different media outlets. I do I do a lot of podcasts, do a lot of public speaking, a lot of a lot of press. So a lot of ways to reach out to me, follow me. And,

00;32;36;13 - 00;32;37;25
Chris Hurn
and you can always just email me,

00;32;37;25 - 00;32;38;25
Chris Hurn
my emails.

00;32;38;28 - 00;32;44;15
Chris Hurn
See. Hern. So it looks like churn that community bank shares.com.

00;32;44;18 - 00;32;47;00
Craig Andrews
Chris thanks for coming on Layers and Legacies.

00;32;47;02 - 00;32;49;24
Chris Hurn
Thanks for having me Greg. Take care.

00;32;49;24 - 00;33;16;20
Craig Andrews
This is Craig Andrews. I want to thank you for listening to the Leaders and Legacies podcast. We're looking for leaders to share how they're making the impact beyond themselves. If that's you, please go to Ally's for me.com/guest and sign up there. If you got something out of this interview, we would love you to share this

00;33;16;20 - 00;33;18;15
Craig Andrews
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00;33;18;17 - 00;33;41;27
Craig Andrews
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00;33;41;29 - 00;33;50;04
Craig Andrews
Please go ahead and subscribe. Your thumbs up. Ratings and reviews go a long way to help promote the show. It means a lot to me.

00;33;50;04 - 00;35;52;09
Craig Andrews
It means a lot to my team. If you want to know more, please go to Ally's for me.com. Or follow me on LinkedIn. Thanks for listening. We'll see you next time.