Episode 181: Business Growth Keys: What Every New Entrepreneur Should Know

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Today Counts Show Episode 181

Preview

Garen: We didn’t know what we didn’t know. And once we started learning, we realized that wow, we’ve gone all in on a business that has gone from “let’s put a little lipstick on the pig” to “this is a full-fledged turnaround prospect.”

Jim: I already love this conversation because those that are going to be listening to this podcast, this episode, they’re thinking about doing this or they’re in it. You’re kind of removing the facade, but I love how we’re starting. Hey, before we talk about the payoff, let’s talk about the reality. Right? So, all right, keep going. This is good.

Appreciating our Supporters

Winston: Hey, before we jump into the podcast, we want to thank all our donors and supporters who make the Today Counts Show possible. It’s through your generosity that we’re able to shape leaders through this content and this podcast. And be sure to like, subscribe, and follow wherever you find yourself coming across this content.

All right, let’s get to the podcast.

Introduction

Jim: Welcome back, everybody, to the Today Counts Show. I have with me today a friend of mine and somebody that I’ve worked with for a while, Garen Anderson. Garen is the CEO, and I have to look at my notes because I’ve known him as the CEO of such-and-such organization, but it is changing. By the time this podcast drops, it will be known as Lantern Learning Group. I don’t know if Lantern Learning Group is the right way to say it or the Lantern Learning Group, but Garen will correct me here in just a minute.

Garen, welcome to the studio. Welcome to the show. Good to see you.

Garen: I appreciate you having me on. I love spending time with you and talking about business stuff. It’s fun.

Jim: Was it good taking a drive out to the country?

Garen: It was. I kept waiting for the temperature to drop by 10 degrees. That did not happen.

Jim: Yeah, we don’t have much of a breeze today either, so it’s getting Texas hot here pretty quick.

The Entrepreneurial Beginning & Early Lessons

Garen, I have been fascinated with the story of what you and your bride Melissa have been building, and I thought maybe to give a little bit of a precursor to everybody—you guys got involved in this—what did you say earlier? What is the label for the business? Early child development.

Garen: Yep. Early child development, childcare, early learning.

Jim: Yeah. So, you’re an executive in the business sector, and then you have an opportunity. I do kind of remember how that opportunity came about. But what we’re going to learn today is about this opportunity, how you and Melissa seized the opportunity from one location, and how you grew it. And now it’s beyond growth. It’s exponential growth. It’s what I would call multiplication. You know, first you had addition, but now it’s like your math is multiplication.

Garen: Right.

Jim: Right. It kind of went from, “Hey, let’s do this shop,” and then you started adding, and now you use the term—or I would use the term—multiplication. So we’re going to learn about business principles today. We’re going to learn about things that you’ve learned also in leadership with people—all kinds of stuff. Before we get all over the place, maybe just give us an overview of how did this whole thing start in the beginning as an entrepreneur?

Garen: Well, so we started this in childcare and early learning in 2009. We had dabbled in a franchise model that we opened here in the San Antonio area. Did that for about seven years.

I always tell people that was our learning experience. And if you’ve been around a while in business, that means you got your tail kicked. Well, that’s the translation. And that was exactly what it was.

Jim: You’re either winning or you are learning, right?

A Market Resistant to Recession

Garen: We were learning a lot over those seven years. Didn’t appreciate what we were learning until later on, which is probably a whole other podcast.

But in 2009, exiting that opportunity and just found an unexpected door opened for us into the preschool industry, meaning infant through Pre-K primarily. So the youngest of learners. We had no experience in this outside of having kids of our own, but saw something in it that was really compelling to us. Not only from what we were interested in, what we were passionate about, which is huge, but also a market that was fairly— I wouldn’t say recession-proof, but recession-resistant.

And we quickly realized that there were opportunities in this market to do some things a little bit differently. Part of that by design, part of it because we didn’t know any better since we didn’t come from the industry. So we really had to lean into what we did know. And what we did know was that we were parents, we had children, and we had a community around us that had children. A lot of them too had their kids in programs and early learning along the way.

So, we ended up buying an existing preschool that a couple was exiting out. They were retiring out on the west side of San Antonio in a growing part of town. And it was Christian-based, which is not necessarily unique, but it is a little bit less common than most of the other models. And so that was compelling to us.

When I say we bought this, we rolled over 401ks, we liquidated our savings, college funds, everything we had to come up with a down payment on a loan to buy a business that we had no idea how to run.

The Leap into Preschool Ownership & Initial Struggles

Jim: So, let’s back up for a second. You were working in corporate America, you tried the franchise route, and then you saw this opportunity. It connected with you because it involved kids. You didn’t know anything about the business, but then, like we often hear in entrepreneurialism, you basically put all your bets in and you went to purchase this preschool near your home or in the general area.

Garen: Same city. Yeah, it was probably across town. It wasn’t near.

Jim: Okay. So, you obviously looked at the numbers and you saw the possibility there. In the conception of this, tell me what was going on in your mind, if you can remember. Was this somewhat to fix something that you thought maybe could be done better? Was it simply the affinity for kids? What was that bridge that had you go from, like you said, you were kind of minding your own business and then you see this opportunity? Besides the numbers, what caused you to get involved in this child care business?

Garen: Yeah, it’s a great question. Good point. I was in corporate America for almost a couple of decades before doing this. And while we had the franchise, I was doing both. You hear on Shark Tank, if you ever watch Shark Tank, somebody says they’re doing both, you see all the eyebrows perk in the room. And there’s a reason for that. We were no exception, we were not all in. We were very much trying to get the best of both worlds: to have security of corporate America, but also trying to dabble in doing something on your own.

The Corporate Job vs. Entrepreneurial “All In” Debate

Jim: I think that’s a good principle we could talk about right now. Do you still hold to that? If you were to mentor younger leaders or anyone thinking about doing something—whatever that something is—is it better to be all in than it is to maybe transition? What would you say about that?

Garen: Yeah, I would say you have to draw the line in the sand of what that tipping point is. Absolutely. I think it’s unrealistic at times when you hear people say, “Well, you got to be all in.” Because sometimes that’s just not practical. It’s not reasonable. You have to do both for a little while.

Jim: You’ve got to get there.

Garen: You’ve got to be able to pay your bills, provide for your family, do those things while ramping your business up. Where a lot of folks can find themselves is not committing to a timeline and that trigger of “when I get to X point, I’m going to go all in.” Because it’s nice to keep growing but still have that corporate salary. And so you start kicking that can down the road a little bit, and that’s eventually going to catch up with you. You’re going to have diminishing returns.

Jim: In a lot of different ways I would imagine it could catch up to you.

Garen: 100%.

Jim: Relationally, physically, at least those two, right? I would imagine.

Garen: A lot of things are going to suffer once you hit that tipping point.

Reality of Taking Over the First Preschool

Jim: So, did you keep the branding and the processes? Talk to us about that first unit. What was the life cycle there? What happened there?

Garen: It was a different brand. When we bought the facility, we quickly realized how much we didn’t know. We didn’t know the facilities were not good, the staff was not good, the leadership was not good, the programming was not good. I could keep going on. If I’m going to get to the point that was good, it never comes. We didn’t know what we didn’t know. Once we started learning, we realized that we had gone all in on a business that has gone from “let’s put a little lipstick on a pig” to this a full-fledged turnaround project.

Jim: I already love this conversation because those listening to this podcast, this episode, they’re thinking about doing this or they’re in it. You’re kind of removing the facade.

Garen: I’m very comfortable with–

Jim: Because it really is a success story. But I love how we’re starting: before we talk about the payoff, let’s talk about the reality. Keep going. This is good.

The “All In” Moment and Vision for Differentiation

Garen: I still had my corporate job and our tipping point was–

Jim: Even then.

Garen: Even then, right at the beginning. Our inflection point was—like General Patton said, “Your battle plan goes out the window at the first shot.” The first shot had been fired and our battle plan went out the window.

Melissa and I, my wife and I, got together and I said, “Hey, this is nothing but bad news. The good news is we can do this, but we got to go all in on this.” Between my background, your background, what we can do, the opportunity we see in the marketplace for a differentiated service that’s wanted out there—we believe it. That was the thesis at the time. “We can do this, but we got to go all in.”

So, I left my downtown job up on the 13th floor overlooking downtown on a Friday, and on Monday was in the center with Melissa answering phone calls, giving tours, and figuring out who we were going to be because we had to be something different than what we were at the time.

Jim: Clarification: was the corporate job something that you did eventually want to leave in your dreams? So, now it was just a safety net. So, it really wasn’t that hard to leave in the sense of dream and vision. It was just difficult to leave in the sense of a safety net.

Garen: 100%. That’s a very good recap. That was always the vision—to be all in. Back to my point earlier, I’m speaking from experience. It was certainly nice having that corporate job backing, that executive-level payroll, while trying to figure this other thing out on the side.

The Reality of Freedom and Accountability

Jim: Let’s talk about one more thing before you keep going because you’ve already brought some really good things out. Those listening—maybe they’re in that place now where they’re thinking what this will bring to them is that sense of freedom. Talk to me about the reality of freedom in running your own show versus helping somebody else run their show.

Garen: Yeah. It is freedom.

Jim: I feel a but coming.

Garen: There’s a but. An immense level of accountability that you also do not typically have. It’s not that when you work for somebody else you don’t have accountability. You do. But when you’re writing your own paycheck, it’s a whole other level of accountability. Especially now when it’s not only your livelihood that you’re responsible for, but everybody who works for you as well.

Jim: This is where you and I are on the same page. In other words, you have to do what you have to do. When we work corporate jobs, that’s what we’re supposed to do—we’re supposed to do what needs to be done. But when we truly are on our own, we’ll do what needs to be done because we have to.

Garen: In corporate America, if you don’t do well, if you don’t do a good job, the people that you work for are still going to get paid. When you work for yourself and you don’t do a good job, the people that work for you and they’re depending on you may not get paid.

Jim: A lot more responsibility.

Garen: Absolutely. So quickly, Jim, what we had to do was ask, okay, how are we going to compete because what we have now is not competitive.

Jim: You weren’t losing money though, were you? Or were you?

Overcoming Financial Challenges and Lack of Experience

Garen: On paper, we were crushing it and then reality set in and we were losing money. We were so far underwater within six weeks of us taking over that we couldn’t see the surface.

Jim: Was it a cash flow problem or a capital problem or both?

Garen: Cash flow problem. Cash flow. Yeah. Cash flow problem. Capital problem. We were already all in. You can’t go to the bank and say, “Sorry, I was wrong. I need more. I need more.” That ship has sailed.

Jim: No. So just to interject, one of the things I learned as a young banker—and some of the listeners already know this but maybe they don’t—first decade of my professional life I was a business banker, and one thing they taught us as young men who didn’t know anything was that when the savvy guy comes in, if it seems like he’s asking for way more than he needs, you know you’ve got an experienced person in front of you.

But if they’re just trying to get the loan, they’re bringing in the skinny plan and they’re coming begging and pleading, that’s when you know you’re dealing with somebody who might do well but maybe that’s when you have to ask the harder questions. You literally ask the customer, “Are you asking for enough money?” Because of how important capital is. Anyway, this is fun.

Learning the Hard Way About Seasonality

Garen: Just within six weeks of us taking over, we just didn’t have the experience to know the seasonality of our business. At the end of May, a lot of your Pre-K kids are going to be aging out and going off to kindergarten or maybe they leave for the summer. We just didn’t have the experience to even understand that. Nor did we go through the due diligence process pre-acquisition back then.

Jim: Did you have a broker that worked with you in the buying of the business or did you guys wing it?

Garen: We were winging it. Yeah, we were winging it for sure.

Jim: Probably to save money, you’re thinking.

Garen: Yeah. And not knowing any better. Really not knowing any better and not understanding how transactions like that worked and the right questions to ask.

Surrounding Yourself With Experts

Jim: I don’t mean to keep interrupting you, but you keep bringing up good stuff. One of the things I have learned—and you have made this very clear in all our conversations over the years—is that at some point you took a different approach. You surrounded yourself with professionals of every kind. In fact, if someone were to ask me, “What do you know of Garen Anderson’s leadership practices?” one of them that would come right off the top of my head is he surrounds himself with people who know more than he does about the particular areas of concern. That’s true, right?

Garen: That’s 100% true.

Jim: So if you’re thinking, do I really need an attorney? Do I really need this? Do I really need that? Yeah, you need that.

Garen: And not just an attorney you can afford, but an attorney who’s seasoned in M&A. Attorneys, like anybody else, have their specializations. A real estate attorney, because there’s real estate in the deal, doesn’t necessarily make them a good fit to help you on the acquisition side of the transaction. Surrounding yourself with people who’ve been there and done this a time or two before has been a good learning experience for us.

Jim: Great. Sorry to keep interrupting you, but this is really good. So, summer’s coming and you’re coming to some realization about many things that you’ve already mentioned. This is great. You’re doing great.

Developing a Unique Business Model and Proof of Concept

Garen: Yeah. So, we started looking out at the competitors in the area because we knew we had to rebrand. We had to distance from the existing brand. What is that going to look like? What’s our model going to be? And we’re learning this on the fly—learning what the industry is, what the models are out there, what differentiates the different teaching styles.

Back then in the area, there were just a lot of people focusing on the facilities they provided their services in. And what I mean by that—it was excessive capex facilities: putt-putt golf, indoor playgrounds, and all these things, which are totally cool but very expensive. We didn’t have the money to compete against that to begin with. We couldn’t just come up with money to do these things, or did we have the facilities to be able to do these things.

So, as we were looking at the market and what was being offered out there currently, it resonated with us that all of this excess—that’s not what we experienced as parents. We had an amazing experience with our kids that went to a program when they were young. So, what’s the disconnect? We were trying to bridge that gap between what we experienced as parents and what we were seeing in the marketplace.

Jim: Was it a competitive advantage or not? That was the question.

Building on Faith, Academics, and Teacher Retention

Garen: Yeah. What we realized was pretty simple. Our kids were in a church-based program. They had a really good–

Jim: Where your kids went.

Garen: Where our kids went. They had a really good spiritual development program, which was important to us. They were exceptionally well-prepared for kindergarten, so the academic programming was really good. And third, our son had the same teacher two years after our daughter. Within our industry, retaining teachers is really difficult. We didn’t appreciate that until later on when we saw how difficult it was and realized our experience meant they were doing something right to retain their teachers. Academics were really good and they had a spiritual development program.

We realized, as we looked out into the marketplace, at time it was just that within 3 to 5 miles of the center we had purchased, that was not an option. That was not model was not being offered. So, we said, “Okay, that’s where we’re going to plant our flag. That’s what we’re going to build our model around.” We came up with the Pillars Christian Learning Center brand. Back then it was the Pillars Christian Learning Center. There was one.

From One Center to a Growing Brand

Jim: In fact, it’s funny that you say that because when I pulled up the website in preparation for today, I thought to myself, gosh, I can’t remember. I know the expression is plural, but I’m not sure if they changed. And when I pulled up your website, I saw they sure did. They made it plural.

Garen: Yeah. There’s a whole other sidebar marketing conversation about this—when you’re positioning centers in the community. The Pillars Christian Learning Center, the  community but the Pillars Christian Learning Centers, that’s a whole thing. One little S on the end is a whole thing.

Jim: Yeah, the local neighbor wants to see it as “center”, but you’re “centers”. How do you communicate that? That’s good.

Garen: Anyway, we really had one shot to get it right because we had already put all of our money in, gotten the loans. We had about 74 kids in June 2009, and by April of the following year, we were up over 160 kids.

Jim: Oh wow.

Garen: So, we weren’t going to be living under a bridge. That was good. We could breathe, we could sleep at night. We were working our tails off, and that didn’t change. But the good thing was our theory got proven right. Our thesis got proven out—that this was a model that was sought after and not only in our market in that 3 to 5 mile area, it wasn’t being addressed in the marketplace but really anywhere.

Jim: So your proof of concept was academically preparing them for kindergarten and then the spiritual development piece.

Garen: Right. And finding the best talent you can and retaining them.

Jim: What did you learn about that? What’s the reality of acquiring and keeping good teachers?

The Challenges of Teacher Compensation and Retention

Garen: It’s tough. It’s tough. Because we’re not just competing against other childcare operators. We’re competing with every organization or every company out there that is trying to acquire talent in this same compensation range.

The unfortunate reality of our industry is teachers oftentimes aren’t paid what they should be. The challenge, the friction, is that to compensate them how they should be, you’d have to have tuition rates would have to be so high that parents likely wouldn’t be able to afford it. That’s the balance we’ve been working on for 16 years: to try to provide a service that’s affordable to families but gives you the ability to compensate these teachers, even remotely, as you’d want to. We’re still working on that. The industry is still working on that.

Jim: So it’s a moving target in some ways.

Garen: Yeah. You’ve got to do the things that everybody works on. You’ve got to work on your culture. You have got to work on the benefits you can provide. You’ve got to make sure that they’re resourced, that you’re onboarding well, that you’re training well. That you’re doing all the things everybody else is working on, we got to do the same thing.

It’s actually funny because when we first started—not so much anymore—a little bit. The industry is taking us a little more seriously now than they used to.

Jim: I would think so.

Garen: But it was very much, “Oh, you have Christian-based learning centers. How cute. Bless your heart.” You’re like, what are you talking about?

Jim: I know you well enough to know that as a competitor, you just wanted to punch that person in the nose.

Garen: You have to compete.

Growth and the Mission Support Team

Jim: Let’s contrast from that just to create context for everybody. In that first center, how many employees did you have?

Garen: About 25.

Jim: 25. And your corporate team would have been you and Melissa?

Garen: The corporate team of two. At the time, I don’t even know if you could say that because we were working in the center.

Jim: Okay. So now what does it look like today? You may not even know the exact number, but how many employees do you have? And what does your corporate team look like? Or a centralized team or whatever. I know you have different titles.

Garen: We call it our mission support team. We’ve always just not loved that “corporate team” label, but we call it mission support.

Jim: I have a friend that calls their leadership team the “pit crew.”

Garen: Oh, really? That’s cool. Today we have close to 30 on our corporate team, mission support team. As of last week, we’re up to 24 centers in two states, so employees now well over 600.

Jim: That gets you up in the morning, I can imagine.

Purpose That Fuels Growth

Garen: Yeah, it does. A fortunate thing about this, it’s been very hard. What’s made it easy is knowing we get up every day knowing that we’re helping or hurting some family or some child with their future. That’s unique. I can say from experience that I’d sometimes go for years not being able to answer that question, if what I was doing really made a difference in this world.

Jim: Beautiful.

Garen: Now we don’t have to wait years or months or weeks. Every day we know if we’re helping or hurting the communities  that we’re serving.

Jim: That must impact your breathing positively. The way you look at oak trees positively. Those times where you can sit and ponder, even when facing obstacles, remembering the good that it’s doing—I can imagine that is added fuel. So you’re transitioning from survival to succeeding to now where it is truly remarkable of what happened.

Garen: Know your why.

Jim: Yeah. Know your why. That’s good. Let me ask you some questions and let’s see if I can posture them right to where they make sense because my intuition is kicking in. I want to see how you answer these questions.

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Scaling Challenges and Capital Access

Jim: It’s kind of not fair because I didn’t really set you up for this particular question. So let me see if I can explain it. In my world, in working with leaders around the country, I noticed that when they go from one to X, they can look back and say when we went from one to two, it was hard, but we went from this number to this number, it was really hard.

How would you describe the scaling process? Which, in your memory, has been the most difficult? Has it been going from one to two or from one to five, or how would you describe that in the dynamics? I mean, how do you know when your indirect costs are worth laying over?

You got your simple P&L for running one. Once you figured it out, you had your simpler P&L running one organization, one location, and then you’re at X locations. How do you know when you can add that? Some people call it overhead, some call it indirect cost—whatever. Does that make sense how I’m posturing the question?

From One Center to Two and Beyond

Garen: Yeah, it does, we had two. We opened in 2012, our second location. We went about six years before we opened our third.

Jim: Interesting.

Garen: And that’s a capital question. It’s a source of funding question.

Jim: So how many years from the first one to the second one?

Garen: Three.

Jim: And then double that to the third.

Garen: Correct.

Jim: So that says something.

Garen: Right. A lot of that was a function of access to capital. We were Christian-based, so we didn’t have access to SBA secured loans. So if you’re a small business and don’t have access to SBA—as a banker, you know—it’s pretty tough sledding. So it forced us to look at alternative ways to raise capital to continue to grow.

Finance as the First Key Hire

But also, at the same time, in order to do that, now if you’re going to level up that sophistication—if you’re going into financial partners or any kind of venture capital, PE, or family office—you have to level up your financial reporting and management. And that’s what we did first. We hired a person—that was our first, really, outside of Melissa and I—our first corporate team person was for finance.

Jim: Especially finance today, there’s so many metrics and business intelligence that you can pull from finance that maybe—even when I was a banker—we probably didn’t do as well as we do today. I mean, some of the CFOs I know around this country, many of them almost share COO/CEO responsibilities—those three, and then maybe throw in a CPO, a Chief People Officer. It’s almost like they become one mind. There’s a first among equals, but there seems to be that thrust.

How much data has really helped make better business decisions, moving on—especially when you have to get more sophisticated, find out where the holes in your organization are, because they’re not obvious all the time. Right? Did I say that right?

The Inflection Point—Expanding Into New Markets

Garen: No, that’s absolutely right. But the inflection point for us, where I think it got really hard, was not necessarily store-based or location-based. It was really market-based when we decided to go into a second market five hours away. That’s where it got real, and that’s where it got a lot more challenging, and we had to really start beefing up our support to be able to pull that off.

Jim: So your first source of capital was—was it owner-financed or bank-financed besides your own pulling yourself up by your bootstrap—credit cards, 401k? So was it owner-financed, or did you get bank funds along with your down payment?

Garen: For the very first location?

Jim: Yeah.

Garen: All of the above.

Jim: All of the above. Okay.

Garen: Yeah, it was all of the above. We had an SBA secured loan that primarily covered the real estate. We had an owner carryback, owner-seller note for the business.

Jim: Gotcha.

Garen: And then—

Jim: So you put together the puzzle and made it work. When in the history did you seek outside capital for that expansion, and did you give equity away? Was it a loan? Or was it again both?

Partnering with a Family Office and Equity Decisions

Garen: That came in 2018. And again, because we had chosen to be Christian-based in our programming and naming everything, it excluded us from SBA. So we partnered with a small family office. It’s a whole other conversation of how we got put in touch with these guys, but they were a very small family office. We did have to give equity away. That was back in 2017–2018.

Jim: Is it generally true to say to the listening audience that when you’re trying to get significant funds, it’s difficult to get funds just for this flat interest rate, or even if it’s adjustable in some way, because people that want in simply want more of the reward? And so therefore, you really are looking at equity—an equity swap, I guess, is the way you would say it. You’re receiving capital for equity. What advice would you give in that process?

Picking a Side—Growth Speed vs. Ownership

Garen: So I think there are a couple of things I talk to—and I love talking to—folks who are just getting started and maybe only been in this a few years and trying to grow, because I think of a couple of variables. The first is it’s going to be different for everybody. One thing that makes it different for everybody is—I’m 55. My lens is different than somebody who’s 35.

We don’t own our real estate, but that’s because it doesn’t make sense for us to own our real estate given our timeline, which is just not enough. Our revenue is going to be worth more than our real estate. That doesn’t make it the right solution. That’s what’s right for us this time where we’re at. If I was 35 and had much longer for it to appreciate—

Jim: So my son, who’s 40—real estate should be something he considers in his portfolio. I’m at 65, not so much, unless I’m going to leave it in the living trust, but not so much.

Choosing Between Real Estate and Revenue Growth

Garen: Yeah, that. So our path—growing the number of locations, growing our revenue—was much more valuable in our time horizon than the real estate was. And so that’s why we’ve chosen that path. Real estate also takes a lot of capital. You’ve got to park a lot of cash. It’s more difficult to grow quickly.

Jim: It’s a long play.

Garen: Yeah, it’s much more difficult to grow quickly when you’re wanting to own the real estate. But it doesn’t make it wrong. A lot of people I would advise—hey, if you want to own real estate, that’s great. You’re 35, that’s fine. You’re going to grow slowly. You need to accept that. You have to pick a side a little bit—how you want to grow and what your long-term plans and goals are. There’s really no one right answer for everybody on that.

Evolving to a Multi-Brand Holding Company: Lantern Learning Group

Jim: You know, Garen, there’s a couple more business questions I want to ask you, and then I want to transition, if that’s okay, to leadership questions. Not that they’re unrelated—they are very much related—but what I find fascinating, and I do know that this question will be important for some listeners because I’m actually in conversations about this.

So you have gone from one brand now to multiple brands, but you’ve created—what’s the right thing to call your new name? Does that represent a holding company, or how would you describe that? And why did you choose to envelop multiple brands versus take the Pillars Christian Learning Center and flush that throughout the organization?

Preparing for Rapid Growth with SOPs

Garen: Yeah, great question. As we’ve continued to grow, we were partnered with a small family office for six years. We got to a point—as most relationships like that go—either there’s getting too many zeros in the deals, or it’s just time that they want to go invest in other things, whatever. We got to that point and went through a process last year and recapitalized with a new equity partner, much larger, which is kind of the natural progression to try to grow to 75–100 locations over the next three to five years.

That’s intense. But we were ready for that. We’ve been building our organization and our processes and our SOPs and all the boring things that you need to do and making sure—

Jim: Which entrepreneurs hate.

Garen: Absolutely, but you’ve got–

Jim: SOPs—standard operating procedures. They’re processes that we need to create so that we’re doing the same thing consistently and we’re all doing the same thing.

Garen: And you can scale with it.

Jim: And you can scale with. Yeah. Very good.

Private Equity, Consolidation, and Roll-Up Strategies

Garen: And we really worked on a lot of those things for a couple of years, preparing for a much more rapid pace of growth. So I feel like we did the right things the right way in that regard. Did a lot of other things not right, but that is one thing that we really did—I feel like we did the right things at the right time.

So the equity partners that we have now—fantastic, primarily focused on education, just as passionate as we are. When we went through this process, you hear the horror stories about private equity, and a lot of it, they will even say, is deserved. The reputation—and the early child care, early learning market—private equity has descended on our industry pretty heavily in the last five to ten years. Reason being, a lot like other industries like veterinary or assisted living—very fragmented industry. So a lot of consolidation.

Jim: High demand.

Garen: High demand so a lot of consolidation starting to go on—a lot of aggregation, a lot of roll-up. Meaning, roll-up is when you start buying one, two, three.

Jim: Getting things underneath your own umbrella.

The Birth of Lantern Learning Group

Garen: Right. How you do that was a big part of our strategy and why Lantern Learning Group is coming into existence this month.

Jim: So many don’t do that well, and I have found that just because someone’s bigger doesn’t mean they know how to do it well. In fact, sometimes the organizations that are bigger are a little bit too optimistic and maybe a little bit sloppy. It sounds like you have gone into it with much more humility based upon your bruises in the past and were more prepared. That’s what it sounds like.

Garen: Yeah. I would agree with that. It was important to maintain what has been successful for us, which was the quality and differentiation of our programming—offering the markets something that’s not readily available. They want more of it. It’s not rocket science. Now, how do you do that at scale?

So the Pillars Christian Learning Centers was the only brand that we had. Last year we acquired our first non-Christian brand—more of what they call a traditional model, play-based model. But the reason we did that is we went through a four-month process of figuring out what are we going to grow up to be, and what are we committing to, what are our non-negotiables over the next three to five years as we continue to grow.

Jim: That’s a good exercise right there.

 A Purpose-Driven Network of Schools

Defining the Vision and Structure

Garen: Yeah. And it was that we were going to be a purpose-driven network of schools aligned with shared values.

Jim: Who was the “we” that was involved in that conversation?

Garen: It was our corporate team along with our equity partners—our financial sponsors—along with some consultants that came in to help guide us through that process.

Jim: Good.

Garen: So knowing that the path of least resistance when you’re growing in our industry—and it’s the same with others—is roll-up: buy a brand, absorb them into your umbrella company, and now the differentiators—what do you do with those? Do you leave them as their existing brand? There are plenty of organizations out there where you have an umbrella company X and underneath you may have 12, 50, 15 operating brands underneath them.

The other pendulum swing is you rebrand everything—you have a branded house. The first one is called a house of brands; you have a whole bunch of them. Or you have a branded house that, when you acquire somebody, you’re going to roll them up and rebrand them to your brand.

Our strategy is in the middle a little bit. We’re focused on having fewer brands that all have a shared value set and differentiation in the marketplace. To house that, we developed the Lantern Learning Group—that’s the umbrella company, the parent brand.

Balancing Brands Under One Umbrella

Jim: So I heard you say “the.” Are you using “the,” or using just Lantern Learning Group?

Garen: Lantern Learning Group.

Balancing Brands Under One Umbrella

Jim: Okay. It’s the new name.

Garen: Yeah. Our marketing person is rolling over right now when they hear this. Sorry.

Jim: It’s hard not to put the word “the” because it sets up anything: the light, the house.

Garen: Yeah. Good point. Underneath that we’ll have three, maybe four, operating brands, and then that’s how we’re—

Jim: So the tricky part then is, if I’m getting this right, you coach me. We’re leaving such-and-such a brand in its community because it has more value and fits that local organization. The challenge would be that you mentioned standard operating procedures.

How difficult will that be to see consistent in the bowels of the organization regardless of the brand? But maybe that’s part of the learning process as well, or maybe there’s a core set that applies to everybody and yet some nuances. I don’t know.

Garen: More the latter. There’s a core set. Really what is tricky is you have brands out there that are very well established in their communities that we’re very thoughtful about when we acquire—what are we going to do with that brand? Because the reality is, in order to help yourself compete and for operational efficiency, it’s to only have a smaller number of brands for brand density, for brand recognition, for marketing purposes.

Jim: Logical.

Garen: At the same time, it’s hard to manage 12 different websites, 12 different sets of collateral, 12 different operating procedures. That’s difficult.

Jim: If you ever had a central phone bank, then you have to route those things specifically.

Garen: Right.

Jim: That’s just in my head because I’m working with that right now.

Garen: So that’s why we landed on very much a kind of in-between hybrid approach of what we see primarily out in our industry.

Transitioning to Leadership Lessons

Jim: This is really good. The first thing that came to me about 15 minutes into this is that we’re going to have to have you back on the show, first of all, because there are so many things we can talk about. What I’d like to do is maybe head towards home. Let’s talk about Garen Anderson and maybe some of the leadership things that you have learned throughout this journey that you’ve been on—whether it be how to take care–

One of the questions that I have for you that I just—the horse at the starting gate wants to ask you this question so bad. As the business has become larger and more complex, do you find yourself still in that massive tension that you and I have talked about a hundred times about how much time you’re investing thinking and working on the business versus getting sucked into the operating and such-and-such part of that?

I think a lot of people would like to know what your journey is, what your struggle is, because it’s common to all leaders.

Then maybe what we can do is talk about who is Garen Anderson, because you’re probably learning a lot about him—speaking of him in third person as if he’s not here. But as you step outside of yourself and you look at him, you look at this journey, what have you learned about him? What’s he learning? What are some things that he would share about leadership and what he’s learned?

But let’s start with the first one. As it’s become more complex, do you find the need to set aside more time to think, more time to problem-solve? Or does the business just suck you into that black hole? What’s your wrestling match look like?

Leadership: Ideas, Self-Awareness, and Culture of Debate

The Value of Reflection and Ideas

Garen: All of that. I feel like I’m at my best for the organization and our team members and the families that we serve, when I do have that time to think and to really spend time with myself being thoughtful about where the organization is heading—what are we doing today, what are some things we could try? I’m an idea guy. And what I always tell everybody is my ideas aren’t always good.

That’s a qualifier. I think sometimes people are like, “Oh, he’s an idea guy.” I’m like, “Well, idea guys are good. But idea guys have to really be self-aware that all their ideas aren’t good.” But sometimes you’re not aware of that. And that’s where a leadership team—a really solid leadership team surrounding you— that you enable to be confident enough to tell you that, “Hey, that is indeed an idea–”

Jim: “That we should vet out.

Garen: “That we should talk a little more about before we do that.” That’s a good leadership team around you. And then be able to have the confidence with each other and the maturity to talk.

Balancing Creativity with Structure

Jim: That’s so hard to do though, Garen, because when you think about it, if you’re kind of that imagination guy—that’s what I call it—and it’s a God-given gift that all of us need to get better at, but a lot of that comes natural with you. So, in order for your organization to continue to march forward, it needs the antithesis of that. It needs people that are putting the SOPs together. Those are not idea people, those are not your creatives. Those are your operators, those are the ones who like that.

Yet when you come back from a retreat, when you come back from some downtime, you come back fully loaded, do you find that this team that you’ve put together—are they holding on for dear life for what you’re going to be bringing, or have you conditioned them now to where they go, “You know, he’s going to bring back three or four ideas, and we probably need to take it through the vetting process, because some of them have turned out to be amazing, exponentially changing, transforming ideas”?

Or do you see everybody hiding when you come back, and they can just sense it?

Learning to Prioritize Ideas

Garen: I think I’ve grown. I’ve evolved. I think for a long time they dreaded when we came back from a conference because I was a sponge—and Melissa and I both—and we’d come back and we’d have, “Hey, there are these 15 things that we think we need to try.” It was overwhelming. And so you try 15 things and you don’t do any of them well, and so all 15 things—those ideas must stink. Well, no. You just didn’t do any of them well because you did all of them at the same time.

And so I think I’ve gotten better at prioritizing and really thinking through those things myself before I roll those out to the team to make it a little more digestible, and then really just encouraging and almost mandating debate and dialogue and idea sharing.

Jim: I’ve seen that in you.

Garen: Yeah. But that’s difficult. It’s difficult. A lot of people, especially now as we grow larger and we get folks that are joining us for the first time—we’re so fortunate to start bringing in super amazing, experienced people that have worked in other organizations in our industry.

Integrating New Perspectives Without Losing Identity

Remember, we do a lot of things differently. Some of it was by design; some of it was by default because we didn’t know what normal was. We didn’t have industry experience, so we were just trying to figure it out.

And we always say, “Hey, we’re trying to be the best childcare company around, no doubt, but we’re also trying to be the best company that happens to be in childcare.” It’s two different ways of looking at it.

But when you start integrating professionals onto your team that have amazing experience that’s different, that brings in a whole other—it’s been another learning experience for me to continue to reinforce, “Hey, we need to value these ideas that are coming in from other organizations.” But there is also another lens to that—that the people coming in from other organizations need to also value what we’ve learned over the years and why we do some of the things we do.

They always say somewhere there in the middle there are two good ideas on each side of the table, and somewhere in the middle there’s great—and that is hard to do. I think the tendency is, “Hey, they’re pros. They know what to do. They know how to do it, so just let them do their thing.”

Now my challenge to that is, I agree to a point, as long as we’re all in alignment with what we’re trying to do. Because sometimes what we’re trying to do is, by design, different, and so we have to challenge, “If this is the way it’s always been done and we’re trying to be different in the marketplace, those don’t—”

Jim: Is that helping us or impeding us?

Building a Culture of Dialogue and Debate

Garen: Correct. That’s where you have to make sure—and it’s difficult—to instill a culture of dialogue and debate.

Jim: That’s good.

Garen: You know, we’re going to come out of this and some of our ideas are going to be liked, some of them aren’t. We’re going to get mad and we’re going to get our feelings hurt and we’re going to have to go sulk a little bit, and then we’re going to get back in tomorrow and high-five and keep going forward with what we’ve decided on doing for the organization—our strategic plan—how we’ve decided to do this to begin with. Because it just doesn’t reconcile, “Let’s keep doing things the same way,” when you’re, by design, wanting to be different.

Key Leadership Attributes: Competitiveness, Why, and Fulfillment

The Learner’s Edge in Leadership

Jim: Yeah. If I were to ask you, looking over this journey, what are three leadership attributes that you think—whether unknowingly or consciously—that you have practiced during this journey that has helped you get to where you are today? I’m going to already put one on the table, so you’ll get four if you can come up with three others. I think one thing that’s very clear—it’s similar to this thing that we talked about with ideas—but I see a learner in you. Always learning.

Patrick Lencioni has a process called the Working Genius, and he created an acrostic called WIDGETS, and I can’t imagine that you are not naturally gifted in the Invention side of things. Maybe the Wonder side too, I don’t know. But if you are a WI—that’s what it would stand for—that’s the turbocharged part. But you also have some Tenacity. So if I were to take a guess, I’d say you’d probably be somewhere like an IT or a TI—Invention, Tenacity, or Tenacity, Invention.

That is a leadership characteristic I see in you—that learner that always wants to get better. But what are some other things that you would share with the listening audience that—these attributes have served me well on this journey?

Competition with a Purpose

Garen: Great question. I’m competitive.

Jim: Okay, that’s a good.

Garen: I like to win. Back to our conversation earlier—it’s kind of like, “Oh, you’re in the preschool business. That’s cute.” You’re like, “No, like everybody else, we have to compete. We have to be good, we have to market ourselves well, we have to brand ourselves well. We have to operate well, we have to sell well, we have to do all the things everybody else has to do.” And that’s fun. And that’s fun, especially getting to the end of the day and knowing that you’re doing it for a really good reason.

Staying Grounded in the “Why”

I think what’s served me well is staying grounded with why we’re doing what we’re doing. And it seems like the more we grow, the more of my time I utilize reinforcing our why within the organization. Why are we arguing right now? Let me remind everybody why we’re arguing in the room. We’re trying to find a solution to this that’s better than how we currently do it. And if we do that, we’re going to provide a better development program for our teachers, who will be able to teach these kids better, and we’re offering them a better shot to be successful in life.

Wow. That’s a why.

Jim: Yeah. And to keep the why in front of everybody.

Garen: To keep it in front of them.

Jim: Micro and macro.

Garen: And drill it down. Make sure that everybody understands that. And then that takes intentionality. It takes time. It takes repeating it a million times.

Jim: Almost sounds like an effective football coach. It really does, because you can’t give the speech once. It’s not just about—I mean, the scoreboard’s part of it, but it’s not all of it. It’s how you get those numbers on the scoreboard, and why, and together. That’s good. Okay.

Passion for People and Growth

Garen: Yeah. I’m super passionate—and this is probably scar tissue from my corporate life—I’m super passionate about making sure that the people that work in our organization are fulfilled and they’re growing and developing, and they understand the impact they’re making every day. Like I said, it doesn’t have to be every year—it’s every day. Just reinforcing collaboration and respect for others’ ideas and trying to always find that new great that could be a combination of two or three or four goods.

I think I’ve grown a lot in that because I think there was a long time where I had a hard time not believing all my ideas were the best at all times. I’ve forced the issue of my ideas because I thought they were good, and then they’d belly flop, and I’d realize, “Oh, I’m flawed as well. All my ideas aren’t good after all.” Maybe I don’t have to fail every time. Maybe I can get some good, sound advice from the people around me who’ve been around also, that have also seen a lot and been through a lot, to poke holes in my ideas before we go do some things.

The Freedom of Humor and Humility

Jim: You’re intense, but those people that know you also know that you have a sense of humor. I think this is what I’m learning at my age is that God made me competitive like you. God made me want to win. But what He’s teaching me as I get older is also how to laugh at myself. I noticed that the more I can laugh at myself, the better I’m able to compete. Have you noticed that?

Garen: Absolutely. Yeah. 100%. It’s very liberating.

Jim: Yeah. A little less insecure. In fact, to say that, I said less insecure. I didn’t say I wasn’t insecure, right? So just be able to say, “Hey, you know what? I’m more insecure than I realized,” and then get a little chuckle out of that and then walk around myself and say, “Why am I?”

Humility in Leadership

Garen: And you know who benefits a lot from knowing that as well as? The people who work for you.

Jim: Yeah. They go, “Oh, I thought I was the only one not qualified.”

Garen: Absolutely. Yeah. 100%. I think I’ve grown a lot in that over the years as well, not feeling like I always have to be the guy who’s right or the smartest guy in the room.

Jim: One last question.

Garen: That ship had sailed a long time ago—people figuring out that was not the case.

Jim: I don’t know. You’re a pretty smart guy. You’re a pretty smart guy. One of the smartest guys I know. In fact, you and I are going to be in a retreat together here in a little while. And I know that other guys are going to get a lot of benefit from your fellowship with them. This doesn’t have to be the last question, but I think where I would like to end—and then if you want to add anything beyond this, please feel free—as long as I get your commitment to come back on the show.

Garen: 100%.

Jim: Okay. Because we just scratched the surface. I think, frankly, we could just come here and say, “Hey, what do you want to talk about, Garen?” And I think we’d have a blast.

Garen: I agree. You make it very easy. I appreciate it. It’s fun.

Integrating Faith into the Business and Future Vision

Faith at the Core of Leadership

Jim: So you’re a man of faith. How much have you wrestled with how faith integrates into what you’re doing day in, day out? Just tell us about that journey, because there are a lot of new Christians who are part of the Lead Today community, and they’re trying to figure that out. I have the joy and opportunity to work with them and try to explain my own view, but I would love it if you took a minute here and just said, what does that look like for you?

Garen: It’s actually topically so relevant right now because we recently integrated our first non-Christian brand, and for the folks who have been in the organization for a long time, we knew nothing else but our mission being very clear to grow God’s kingdom. But now you’re buying six centers up in Dallas that don’t have any kind of spiritual development programming or culture or anything else.

The first says, “Oh, here we go. Selling out. Selling out.” And so where I think we’re being successful in reconciling that is trying to accomplish the same thing in different ways is a biblical principle. The apostles went out to speak. They knew they couldn’t do the same thing with everybody; it wouldn’t work the same way.

Jim: Exactly. Correct.

Framing Faith as Character Development

Garen: And I consider our mission no different. This is not seceding from the union. It’s, how do we do the same thing in different ways? How do we reach more people? And if it’s not spiritual development—we call it character development. When we’re talking about two-, three-, four-year-olds—is it a whole lot different? Probably not. Well, it’s not, right? And how do we frame that in our programming to add that component in?

If at some point down the road it solicits the question of, “Hey, I like what my kid’s learning. I like what these people are about. What is it about that?” and it will all come back to, “Hey, this is who we are as people. This is how we started. This is what we’re based on.” If we get some families in these other organizations to start asking questions, then we’ve done our job.

Culture That Speaks for Itself

Jim: I would say too, Garen, that some people won’t get it, and I don’t know why some won’t get it, but I can be kind of sarcastic on this particular topic because of the Lead Today community. The Lead Today Community— we provide mentoring and coaching and advisement to leaders. That’s what we do, and we come in with a servant’s mindset. We don’t know everything, but we want to be faithful. We want to be available, we want to be teachable, we learn a lot through the process, and yes, we are a faith-based organization.

What we have found, especially once we’ve learned how to do this better and better, is that people check us out often before they invite us into their house. We don’t get a lot of pushback because it doesn’t take much digging to find out that we’re a faith-based organization. So we find a lot of it naturally comes from our culture. It just breeds into our culture because a lot of the wisdom literature that we pull from anyway comes from at the very least the Book of Proverbs.

But I’ll say it this way: I’m not necessarily talking about people who label themselves Christians. I’m talking about people who you can see live it out in their daily life. I can tell by the difference in who mows my lawn. I can tell when there is a person of faith that I’m dealing with around our house from those who don’t—eventually.

Expanding the Front Door of Mission

And not to say that those who are not believers are dishonest or anything like that, because I’ve worked with some really great people. I think that is exciting because I think what it’s doing is opening up your front door larger—that’s how I look at it—than it was before. Because before you have the word “Christian” in it, and so that in a way can possibly filter out people who say they don’t want to deal with that for whatever reason.

But now they have an opportunity to walk into your doors, and your culture is going to be what it is. Yeah, that’s a good example. So you have some work to do about expanding the minds of others and how they think about the mission.

 Shared Values, Different Expressions

Garen: Yeah, I think it’s going back to, “Hey, we’re a purpose-driven network of schools that are aligned with shared values.” Those values are not inconsistent with my faith. And so again, it’s doing things in different ways to try to accomplish the same thing. We will have brands whose purpose is not to be a mission field—that is right directly.

Jim: But I’m looking even at your new name for your company overall—your umbrella name—Lantern. Am I reading too much into that to know why you picked Lantern?

Garen: No.

Jim: Yeah. “A city on a hill cannot be hidden,” right? “To be light of the world.” So that’s pretty cool to me.

 From Small Beginnings to National Impact

Garen: Yeah. I agree. We feel like it’s been a very fulfilling career so far being able to take the Pillars Christian Learning Centers from its infancy and just a theory to proving to our industry that this is a model that is sought after and is needed and is scalable and investable.

Because we don’t want to be the only ones doing this, we want others around the country who are doing this. We’re the largest Christian-based—faith-based, Christian-based—preschool organization in the country now.

Jim: Wow, congratulations. I did not know that.

Garen: Well, thank you. But we have 17. I want to keep it in perspective. Out of all of them out there, it’s still super, super, super small. What we’re hoping to open people’s eyes to, and I think we are, is that this is not some niche, little, cute business model.

Jim: And don’t ever say that again.

Garen: That’s right. That it’s something that is for real, and a lot of people want more of it, and we want to try to do as much as we can, but we also want others to have the confidence to go, “Hey, that will work.”

Excellence in Faith-Based Education

We’ve talked about before—I’m getting back onto the Pillars Christian Learning Center brand—but excellent academics and spiritual development is common and sought after and highly regarded at every other level of education.

I always challenge people: tell me the top five private schools in your area, and four out of the five are probably going to be Christian-based.

Jim: Oh, yeah.

Garen: You know I’m an Aggie, right? But you look at the collegiate level, and Baylor, TCU—going around Texas—and does anybody question the academics of those?

Jim: Well, even those that are a little wider than Christianity that I have worked with and have talked to—they would call themselves “God and country,” meaning that it’s a God-fearing school. They may not have a certain doctrine, but it’s a God-fearing school. So it’s very difficult to find private organizations that—for whatever reason, that’s an interesting question in itself—why they don’t leave that behind, why they don’t leave faith behind. Faith comes in it.

It’s like the Book of Romans, chapter 1—that creation certainly should at least make us curious, and how crazy it is.

 Reaching Families Beyond Christian Schools

Garen: Right. We love what we do. We’re glad that it’s given us the opportunity to not only continue to scale the Pillars Christian Learning Centers, but now it’s given us the opportunity to branch out into some other brands and reach families. We’re realists. We know that they are not likely going to choose a Christian-based program. So somebody’s going to do it. Why not us?

Jim: Yeah. Why not?

Garen: When we know what we’re going to deliver, the values that we’re committed to, the purpose that we’re committed to, why not us?

Jim: My imagination already went into an idea of elective events that are made available through that. But don’t share that with your team because they might get upset.

Garen Anderson, CEO of—watch this—I’m not going to say the word “the”, Lantern. I did not say the Lantern Learning Group. Thanks for being with us today.

Garen: Thank you. I’d love to come back. I hope everybody listening to this got something out of it—a thing or two. And I love sharing what I’ve learned over the years.

Outro

Winston: Hey, thank you so much for joining us on the Today Counts Show. We’ve got so much more planned for you, so stay tuned and stay connected on Instagram, LinkedIn, Facebook, and subscribe on YouTube. And remember, today counts.
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