As enticing as entrepreneurship is, it is often misunderstood. Join us as we take a look at the inner workings of the concept as well as the mindset of those who choose this path.
My guest, John Panaccione is the co-founder of Folla Capital, an SEC-registered broker-dealer focused on helping small businesses and startups raise capital. Before launching Folla Capital in 2020, he co-founded and led a software company called the LogicBay Corporation from its launch in 2003 to its sale to Pluribus Technologies in 2020. During that time, he learned everything there is to know about the challenging world of small business finance the only way you can – the hard way - by doing. Along the way, in 2013, John also co-founded a non-profit VETtoCEO with another Army veteran-turned-business-owner. VETtoCEO’s mission is to help transitioning military members explore small business ownership as a viable career path when leaving military service. Contact information for John can be found on either of his websites.
As enticing as entrepreneurship is, it is often misunderstood. Join us as we take a look at the inner workings of the concept as well as the mindset of those who choose this path.
My guest, John Panaccione is the co-founder of Folla Capital, an SEC-registered broker-dealer focused on helping small businesses and startups raise capital. Before launching Folla Capital in 2020, he co-founded and led a software company called the LogicBay Corporation from its launch in 2003 to its sale to Pluribus Technologies in 2020. During that time, he learned everything there is to know about the challenging world of small business finance the only way you can – the hard way - by doing. Along the way, in 2013, John also co-founded a non-profit VETtoCEO with another Army veteran-turned-business-owner. VETtoCEO’s mission is to help transitioning military members explore small business ownership as a viable career path when leaving military service. Contact information for John can be found on either of his websites.
Welcome to The Water Trough, where we can't make you drink, but we will make you think. My name is Ed Drawster, the Small Business Doctor, and I'm really excited you chose to join me here as we discuss topics that are important for small business folks just like you. If you're looking for ideas, inspiration, and possibility, you've come to the right place. Join us as we take steps to help you create the healthy business that you've always wanted. Hello folks. This is Ed draws to the small business doctor. I don't want to welcome you back to the water trough today. I'm joined by my friend, John Panichone. John is the co founder of Fala Capital, an SEC registered broker dealer focused on helping small businesses and startups raise capital. Before launching followup capital. in 2020.. He co-founded and led us software company called the logic bay corporation from its launch in 2003 to its sale to pluribus technologies in 2020. During that time he learned everything there is to know about the challenging world of small business finance. The only way you can, the hard way by doing it. In 2013, John also, co-founded a nonprofit company called vet to CEO with another army veteran turned business owner that to CEO his mission is to help military members explore small business ownership as a viable career path. After they have left military service... So John, I want to welcome you. Great to be here and I'm really, privileged to be here. Thank you. I'm privileged to have you here, John. it's been my honor to work with you with my students in my classroom as part of what I consider business experts that joined. My classes periodically, throughout the years. And I think the opportunity to do this with you today is quite cool. Demystifying Entrepreneurship, Rethinking the Aurum. I think that's a really powerful title because people tend to jump into things without any particular idea about what they're doing. It just sounds like a great idea. I'm going to be an entrepreneur. I'm going to start my own business. My first question to you is the relationship between entrepreneurship and small business ownership. Talk to me about that. Yeah, that's a really big point to me. I talk about that a lot, as you know. So I think entrepreneurship is more of a state of mind it's a weird word because it means different things to different people, clearly. And there's no beginning or end to it. It's just like a way of being where a small business ownership is a lot more clearer.. Like if you're successful being an entrepreneur, you own a small business and it's much more concrete to me. And I think it's a different mindset. If you call yourself one over the other. That's a really good point. I agree with you about entrepreneurship, being a mindset and small business ownership is. Kind of task oriented. The culmination of that entrepreneurial spirit, would you say? Right, It's more like an end state or a goal versus a state of being. Gotcha. so an entrepreneur maybe it's part of our construct that we could go down that path. But having that position as a small business owner is something that requires much more of us. It's not just a spiritual thing. It is a factual physical thing that we have to engage in. When it comes to small business, you espouse, there's basically three paths to small business ownership. Want to talk about those for me? Yeah. So the three paths are, the one that gets all the glory and the sexy one is the startup path. And just to be crystal clear, I've done 3 startups. I'm not anti startup. A lot of my comments sometimes come over that way, but startups are clearly where all the fun is and where all the mystique is. But that's 1 of the past. But there are 2 other paths. And the second path is franchising and franchising has a mixed reputation. Some people don't like franchising Some people love franchising and Franchising in general is kind of misunderstood. I'm a big fan of franchising and we can get into the reasons why later if you'd like, and then the third one, which is, I'm guilty here, it is my favorite based on what I know today is buying an existing business and, you can also buy an existing franchise, like a hybrid there. But, those are the three paths to small business ownership. And I think one of the smart things to do if you think you're an entrepreneur or want to be an entrepreneur is consider all three paths with an open mind, depending on who you are, what your background is, what you're trying to achieve and what kind of resources you have. So I think running it through three filters is a good idea for anybody. I think the idea of entrepreneurship inspires a lot of people to be creative, but then distracted, to lose sight of what really matters. I like the idea that you're bringing people back into focus and reminding them to look at the options rather than assume I'm going to start up a business from scratch. let's face it. If I have a franchise and or I buy a business, I'm still starting up in some fashion, but starting up you're referring to is basically from scratch. There's nothing there. It's totally conceptual. And then, I think there's a lot of, implied issues with the 3 pass we can get into. But 1 of them is that, Most of us believe that the startup path is the cheapest of the three. So a lot of entrepreneurs, we want to bootstrap it. We don't have a lot of money and say, well, I can't even consider a franchise or, an existing business. That sounds ridiculous. I don't have the money. So we go down the startup path, but I have seen firsthand that as a startup, the cost to get to Is a heck of a lot higher in most cases than if you took one of the other paths to get to the same point. that's an example of the implications of what we're talking about here. That's a great distinction to make. in addition to the fact that the cost of a startup might be more involved than it appears. what else do you see in startups that can be maybe not evident to folks who are considering this path? Yeah, I think there's a lot of, I call it fog, like you have the fog of war. I think there's something I call the fog of entrepreneurship. There's a lot of misinformation out there. And, there's this whole culture we have in the United States about, startup is cool. And it is don't get me wrong. But we walk away from a lot of events and things thinking the wrong things are important. Let me give you an example. if you look at any research study that. Looks at small business failure the top 2 reasons are always the same Sometimes they flip flop, but number 1 is, there's no market for that great idea. and then number 2 is they run out of cash. So how do you mitigate the top 2 risks? If you put that aside for a minute, and then you go to some of these entrepreneurial events. I call them revivals, some of them. it's all about your passion. What are you passionate about? And look at the quality of life. You can, decide what you do every day. If you're an entrepreneur and follow your passion, like that is the wrong advice. Think about how that flies in the face of the top two reasons businesses fail. if I like to be a puppeteer and I'm passionate about being a puppeteer. And I want to make a living at it and I'll wake up at noon because I wanted to find my day. I may not succeed as a small business person if the market for puppeteers in my area isn't big enough. That's what I think the people need to understand. And I can't tell I'm passionate about it because I've seen too many people kind of crash against the rocks chasing a dream with that advice. That's why it's important to me. Interesting point. I encourage clients to identify their passion and to be comfortable, familiar with it, and to believe in it, because I think that the passion is the fuel for the necessary motivation to go forward. On the other hand, that is not sufficient. I do think it's a good starting point. I think that's an important thing to make note of. It is not The sole criterion for going forward, but it is something. That has to exist fundamentally, would you say? Yeah, it's a good point, but I think the important point is the convergence of what you're saying what I'm saying. You have to be passionate and the passion cannot be. I want to make money if that's your passion That leads to failure as well. So that's the other end of the spectrum. But let me give you an example. I'm just making this up back to the three pass. Let's just say I love to work with children. Right. Okay. I like to be around kids and that's my passion. I just love being with kids. I decided not to become a teacher, which is an obvious choice, but I want to have a business around kids. So maybe I open an ice cream shop. I can start up an ice cream shop from scratch. I can buy an ice cream franchise or I can look for an existing ice cream shop where the owner wants to sell. or I start a daycare. I can buy a daycare franchise or buy 1 that already exists. So I'm kind of marrying my passion with. A viable business strategy to get there, right? Picking one of the three paths. And I think that alignment is important. Totally agree with you. the alignment is important. The passion is something that draws us towards this idea. And I think all of us can say we'd like to fulfill our dreams, depending on how you define dream. But absolutely. A dream, a passion alone is not going to accomplish anything other than fulfill that, uh, that ephemeral need, if you will. Okay. But not the basic needs like housing and shelter and food, right. But but it is interesting, and I love the way that you identify these three paths. Let's go out of franchising for a minute. you mentioned people love them, they hate them. and it comes in different directions. A lot of that mystique is, as you mentioned, the cost, of franchising.. Leaving startup aside for the moment, I don't have that kind of money to buy a franchise. what are the things you find attractive about them in general? and how do you think that they can fulfill the desire of people to reach their goals, to reach their dreams? Yeah, good question. I'm a big fan of franchising and for a couple of reasons you're alluding to the number one reason I'm a fan of franchising. Remember we talked about the top 2 reasons business fail usually in the number 1 slot. It's there's no market for that great idea. So that's usually number 1 of cash. And sometimes it flip flops. But think about a well branded franchise like the 1 I pick on all the time is Jersey Mike's When you think of a Jersey Mike sandwich shop, they've taken the number one failure that small business fell right off the table. If you buy a Jersey Mike's franchise and put that Jersey Mike sign in your window and on the road, you're probably going to have customers on day one, They clearly understand who their market segment is. There's an allegiance to that brand you know, think of Dunkin Donuts, any famous franchise brand, right? They're taking the number 1 reason right off the table for you as an entrepreneur. The second one is, franchises get a bad rap because people say, wow, that's way too expensive. And I have no idea how much a jersey might cost, but let me just stick with that example. Let's just say it's 400, 000. the franchise fee is, I don't know, 40, 000. And then the other 360 is like, you're kidding me. I don't have 400, 000. And you're probably right. But the reason that's a good thing is. Trust me, after opening up a hundred jersey mics across the country, they know exactly how much money you need to get up and running without running out of cash, which is the number two reason. So that's why that number always looks big. That's realistic. Even if I opened Johnny's sandwich shop and became successful, I probably need close to that to get to success as well. So that's another reason you buy a franchise, you know what that number is. And I'll give you a third reason. banks will not give Johnny, a loan for Johnny's Startup Sandwich Shop. I'm telling you that right now. but I could probably get a loan for Jersey Mike's pretty easy. So maybe you have to put 10 percent down on a 400, 000 loan. So now I'm only spending 40, 000 and I have a Jersey Mike's. And I have 400, 000 loan versus trying to bootstrap it all on my own. that's an example of how to think differently. About these options, you're going to look at bankability, finance ability, and what's going to get you there the quickest. when you look at those 3 paths with whatever idea you have. Well, certainly in a startup, you have to engage in things that you've probably never done before, or certainly a lot of things you've never done before. And in a franchise, you've got the advantage of a business that has been cultivated and is now a tried and true system, if you will. Maybe that's not the right word, but I think it's the right idea. And so in the franchise, you are admitting, I don't know everything, but somebody else has gone through it. And it's figured it out. So my realm of responsibility has shrunk. Maybe the things that are more manageable for me. you know, they've done a lot of these things. You say identify the market. Okay, right then and there. Identifying a market is a big deal. It's a big challenge for startup people for ideas are there people out there? How do you totally and properly assess that? many of us don't have a clue how to do that. And the information that we get may not be accurate. So the franchise has done that. I can see where it's not only money, it's time spent, these things have been done for you. So the franchise is kind of like a door that's open. You can walk through versus a door that you have to build. Yeah, that's very well said, so how about buying an existing business? I believe you said this is probably your favorite one. Is that correct? Yeah, absolutely. It's my favorite one. We can get into the reasons why. the thing most people don't know, especially like entrepreneurs that are thinking startup is there's a huge market for existing businesses. And it happens every day, all across the country, and that is because whoever owns a small business, eventually, they want to get to something called an exit. And so an exit is, okay, what am I going to do with this thing? I want to retire. how am I going to unwind myself from this business that has value that I've spent blood, sweat, and tears creating? And that's a big question for every small business owner. now lots of people pass it on to their children. For example, a lot of people think my kids are going to kill my business. So I'm not going to do that. People get sick, unfortunately. they get older, And there's nothing wrong with the business and you're not taking advantage of that person. If that's the reason, but you're actually doing them a favor. There's all these opportunities to buy existing businesses, and it happens every day, all day, everywhere in the country. And it's something. That an entrepreneur can do and I've seen it done without any money out of pocket, something called seller financing. And the reason it's my favorite, it's the only of 3 options where you can actually pull it off potentially without any of your own money. It's hard, but there is a potential. so there's lots of reasons. I love it. And the last point I'll make is, let's just say you have a startup idea. It doesn't matter what it is. The cool thing to do is to find an existing business that is in the ballpark of what you want to do, it's in the industry in some way, shape or form. And then you take that business over, you get a paycheck on day one, you have customers on day one, then you incubate your startup idea within that existing business. And then you achieve your startup dream by jumpstarting it through the existing business. You know, that's just a different way to get there. What kind of things does one need to think about when they're looking into buying an existing business? What sorts of things might be considered, it's essential that you know these things or do these things. What sort of stuff is there? Yeah, there's a whole long list of, stuff due diligence items. You want to look at the records. You want to look at customer lists. You want to look at who the employees are, how long they've been there, what their roles are. You want to look at the supply chain. you want to have an account and look at the books to make sure they're accurate and all that stuff. There's a whole host of things that you have to do when you want to buy a business. The good news is there's best practices. And there's people that know how to help you do that. you do touch on another point though, you need a lot of people to help you buy a business for sure. and my day job,, I play a role in that, but I think no matter which path you take, and this is another part of a point I made earlier about this misunderstanding of entrepreneurship is we don't do any of these things on any of the three paths alone, if you think you can, Good luck, right? That's why the startup path is usually one people lean towards because they can go so far down that path, at least alone, eventually, you're going to need a team to help you get, to a business. That's a real business that's performing and sustainable. And that takes a small crowd of people. Back to your question, if you're going to buy a business, you need that crowd of people right away, even before you buy the business. If you're doing a startup, eventually you will have a crowd, whether you like it or not, but, it kind of grows over time. So I tell entrepreneurs, hey, build your team early because it's the team that's going to help you become successful. And you need all kinds of people to help you be successful. Absolutely. I can relate to clients that I have had, some of whom thought that they did have the ability to do everything found out very quickly. They did not. And I think this leads to a very interesting point. I call it the small business Machado, you know, the macho, where. We see ourselves as small business owners. it's a badge of honor. we've accomplished this. Whether or not we succeeded, we accomplished this. in my line of work, for example, people are often not willing to admit they need help, They'd rather hide behind the fact that it's not working, but not discuss it. It's when somebody actually speaks up and says, I don't understand why. I can't figure out ABC when they actually can say these things they've acknowledged that they've got a problem that they can't resolve. And oftentimes it's because it's embarrassing to come to this point to be. This business owner and have to acknowledge the fact that you don't have all the answers or that you don't understand these things is very painful, because it is totally contradictory to the notion that you've achieved this goal. I think they focus on, their accomplishment, but they don't acknowledge the fact that none of us have the capacity to do it all. It is, as you say, it's about a team. At what point do we open up to that? Is it too soon or too late? Yeah, and I think, in your opening comment there, you asked a few questions. That's what people do. Then you used questions as the point you were making. And, you know, 1 thing somebody told me a long time ago, I thought it was stupid when I heard it, but it's proven to be true is the people I respect the most has had the most success in life and in business are people. When I close my eyes and think about them, they're just really good at asking good questions. they're not the arrogant person who keeps babbling on about knowing everything, Nobody likes to be around those people for too long, but they're just really good at absorbing things around them and asking good questions. And, that's how they've succeeded. they're question askers versus trying to say that they know it all. it's funny you started out with that because it's so true. Again, There is perhaps a certain degree, of a need for autonomy in those that will go down this path. whether it's because they got burned working for or with somebody else, or they always seen themselves as being able to go down this path,, these folks. Come here, for a host of reasons, but oftentimes it's to fulfill or to reinforce something that is really personally valuable to them. And autonomy, I believe, is at the center of that. And I don't mean by autonomy, the ability to call in on schedule either. That's not what I'm referring to. That's a component, but that's not really what this is. it's much deeper than that. It's much more broad than that. If it were just about setting your schedule, you know, and I know this isn't the right way to go. but I think it's really interesting that these. Folks who get into this position, they come here with preconceived notions of what's going to happen, and they suddenly become aware of the fact, the preconceived notions that are put out there for us are relatively meaningless, and our own experience is going to be. Unique, you and I could be doing the very same thing, but our experiences would be totally different. there's no amount of how to out there. That's going to make it that easy for you. You're going to have to encounter it as you go. Yeah. That's one of the coolest thing about being an entrepreneur you're starting with a white canvas and you're. Painting your own way forward and everybody has a different painting in the end, right? Because it is different for everybody. It's different because there's so many variables involved with succeeding as an entrepreneur. There is no. how to manual, as you said, to gets it right. So that's actually the funnest part about taking the path, you're choosing to take that leap to define your own destiny, and that's, the fun of it., you know, why that's so powerful is I've yet to meet an entrepreneur, even ones that have hit brick walls and failed, they get up again and they do it over and over again and they'll never go back, right? Like how many times have you met entrepreneurs? You're like, it was really tough and I've learned so much, but I would do it all over again and I would never go back to working for the man or the woman, and, I hear that over and over again and it's it's proof on what you're saying. That is the, allure of entrepreneurship. If you ask me. Autonomy. and I suppose that belief in oneself too, knowing that you're going to have to put in the effort and knowing your limitations. At the same time, yeah, and accepting the challenge and just knowing that the challenges never end. I mean, I had my first company. For 17 years, I still had hot potato problems on the last day when I turned the keys over, like I did on day 1, but, you just get used to that. And that's part of the,, way of life is a small business owner, that has to be something you, you like to do. And that challenge that autonomy to, start that ball rolling and deal with it as that ball starts to get bigger and bigger and bigger. And calling the shots every day is, the golden ring you're trying to grab by being in a small business owner. Absolutely. Hey, listen, I would be remiss if I did not take a few moments here to ask you a bit more about Vets2CEO. and I want to preface this by saying, again, I really admire this nonprofit what brought you there, in view of the entrepreneurship and the vets of which you are one, by the way, and thank you for your service. can you just talk about that for a bit? Yeah, I started it in 2012, which was, you know, I started my company 2003. So I was nine years into my company. Long, long story short, me and another army guy that owned a manufacturing firm.. He bought a business by the way. I started mine from scratch and we both said, you know what? Well, we learned a lot of what we know about being an entrepreneur based on our experience in the army. but it took us a decade to figure that out. so I said, shouldn't take people coming out of the military a decade for the switch to go off. So we started an accelerator program. Nonprofit, which the crown jewel is the 8 week accelerator program we do online for free for veterans and people getting out of the military and it's tailored for people with military experience and it's like a mini MBA. It's like any other entrepreneurial accelerator program, but there are some things we beef up like half the modules are in finance. and we don't talk at all about HR or leading others or whatever, cause military people are pretty good at that, but we really suck at sales and marketing and finance, unless you've been a recruiter. it's tailored to offset those things. And since then we've done over 50 cohorts and over 9, 000 people have gone through it. fast forward to today. Now there's all kinds of programs and nonprofits out there now, 11 years later. That kind of do what we do, but we've been doing it the longest and so we're real proud of the fact that we have a lot of people still serving on active duty. And because it's online, they can participate. they're a year out from getting out and they're getting themselves ready to become entrepreneurs or take that path. And it's really evolved nicely over the years. But thank you for asking about it. You can tell I'm passionate about it. Never made a dime off of it. But, I've learned more by running that program it's like a second MBA I have because of what I've learned. it's interesting, as you said, you haven't made a dime. But you're following your passion. The part you haven't mentioned is the impact you've had on these folks that are transitioning from a very different world to a world in which the bulk of us live, not the same world. when you talk about demystifying entrepreneurship, you're also talking about, not only demystifying as an understanding, but trying to help people appreciate their inspiration., That's what I believe you're doing there with that. And I think that really fits right into the demystifying entrepreneurship, rethinking the aura. You're giving people an opportunity to be inspired and to see that there's things out there beyond what they know. or maybe to get out of that unfortunate rut there and thinking there's no place for me because I'm not going to fit in out there. I'm glad you brought that up. Thank you for the kind words. I've learned through working with veterans that the same applies for other types of people, inner city use that, don't even think about going to college. I think in their screwed for life, no, that's not the case. if you apply yourself and absorb some of the knowledge that are available in these free programs, there's nothing standing in your way of success as a small business owner. And. that's just as true for veterans who have a different experience in life than most, better and worse in many ways. and just like different groups of people that feel like they're disadvantaged. I think it's the great leveler in this country. And, there's nothing standing in anyone's way and it's not money. It's not money. Money. It should not be the excuse because it's not, that's the beauty of it. Thank you for pointing that out. The inspiration applies to any one in any position where that inspiration is lacking, where they don't see that potential and entrepreneurship and it's accompanying autonomy is an opportunity that is available to anyone who wants to, but it's particularly difficult and awkward for those that feel as if they're marginalized and have no ability. To go anywhere. Thank you for putting it out there like that. Yeah. And if there's 1 thing that frustrates me is when I run into 1 of those people, what was me, X, Y, Z, fill in the blank. I personally, don't have a lot of patience for that. I'm like, no, you know what, I don't want to bore you with my history, by the way, but that's not an excuse, but on the other hand, if you get someone who's been disadvantaged. For things beyond their control. I meet a lot of these people too. they're busting down brick walls, like doing what they got to do to take this path we're talking about. I love those people because, they're doing what we're talking about here. And they're not letting, preconceived limitations stop them from, being successful as an entrepreneur. So very true. Well, John, do you have anything you'd like to leave us with before we part company here? not really, I can go on and on, but, great questions, Ed. thank you for the good work you do, like this podcast, for example. the role you and guys like you play in the ecosystem is absolutely critical to, the resources people have. So I want to thank you for, doing what you do. I thank you for that. And I want you to know I'm honored to not only call you a friend, but to be in your company when it comes to this sort of stuff, So thank you very kindly for being here again. my guest is John Penichone. Who, by the way, I like to call panache own, because I tend to miss up long worded names like that. john is the co-founder of followup capital and that's to CEO. Thank you so much for being here. I know that you've inspired me. I'm sure you've inspired those who will listen to this podcast as well. So thank you again. Thank you, Ed. If anybody wants to hit me up on LinkedIn or whatever, you can find me with that weird name. I'd be glad to help anybody out out there that needs it. We will make sure to share your information in the transcripts that follow. Folks, this is Ed Draws for the Small Business Doctor here at the Watertrough. Until we meet again, I'd like to wish you a healthy business. Click Just Dance for easy access to more videos like this on YouTube.