Today’s guest is Dave Pope, a friend of mine from college who spent 14 years in sales in the Northeast before making a bold move and buying Kaytech, Inc., a surface preparation company based in Greenville, South Carolina.
At the time, he had no prior experience as a business owner.
In this episode, Dave shares what it’s really like before, during and after acquiring a small business with stories from his first year as an owner-operator.
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Episode Transcript
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Speaker 1 (00:00):
Don't be scared of taking the next step.
Just take small steps.
Go to those networking events.
Talk to people about doingthese things.
Talk to a banker.
It's not that difficult to pickup the phone and speak to a
business broker as a screening.
Just pick up and talk to themabout the local liquor store
that's for sale for half amillion dollars and it's got
(00:21):
$100,000 in cash flow.
Just learn about it.
Learn about the acquisitionprocess.
Talk to a few owners ofbusinesses just to see how the
conversation goes and dip yourtoe in the water.
Don't think that you need tocommit.
The commitment doesn't evencome when you've made the offer.
The commitment comes whenyou're starting to enter the
financing phase and you'reputting down payments down.
(00:42):
There are many months of goingthrough that acquisition process
when you can just pull the plugand say you know what?
I spent a thousand dollars onnetworking events, you know, and
drinking beers with someinteresting people and then I
decided it wasn't a good fit.
You can always turn around.
Speaker 2 (01:04):
Welcome to how I Built my Small Business.
I'm Anne McIntee, your host.
Today's guest is Dave Pope, afriend of mine from college who
spent 14 years in sales in theNortheast before making a bold
move in buying KTEC Inc, asurface preparation company
based in Greenville, southCarolina.
(01:25):
At the time, he had no priorexperience as a business owner.
In this episode, dave shareswhat it's really like before,
during and after acquiring asmall business, with stories
from his first year as anowner-operator.
If how I built my smallbusiness has brought you any
(01:49):
insight, inspiration or evenjust a spark of curiosity, there
are a few simple ways you cansupport the journey Follow the
show, share your favoriteepisode with a friend or leave a
quick review.
Each one truly helps me growthis show.
Thank you, let's get started.
(02:10):
Hey, dave, it is so good to seeyou.
Thanks for coming to chat withme today.
Speaker 1 (02:19):
You got it.
It's great to see you after allthese years.
Speaker 2 (02:22):
So I remember seeing the news on LinkedIn I think it
was about a year ago and it wasa post that you put that just
said that you bought a business.
And I checked your LinkedInprofile and I was like, yeah, no
, I think this is a big leap.
So can you take us back to thebeginning?
How did this all transpire?
Speaker 1 (02:40):
Sure, and you're absolutely right, it wasn't a
big leap.
It was a huge leap for ourfamily, not just me
(03:06):
professionally, but I think Iwas like a lot of folks our age
or even younger.
I was 43 years old.
I had been in the same job for15 years, which was a very good
company, a very stable company.
It provided for my family and Igot to live in a very nice town
in Connecticut.
But at some point I thought thatI was capable of more and I
have always been a fairlyambitious person.
And so I was just actuallyventing to one of our mutual
friends, joe, and he said youknow what?
I read a few books in businessschool about acquiring small
businesses that you might wantto read, and so that thought
(03:30):
hadn't crossed my mind.
I actually started to activelylook at different companies and
started to you know, what otherjob can I do with my existing
skill set?
And I realized very quicklythat I was never going to work
for anybody else Going throughthat interview process.
I said that I was never goingto work for anybody else Going
through that interview process.
I said, nope, not going to workfor somebody else ever again,
(03:51):
and I realized that I needed adifferent out and I knew that
starting a business was notsomething that we could do.
I've got a great wife and fourbeautiful children, so the idea
of no-transcript I really wantto spread the gospel about and I
(04:40):
talked to everybody I can aboutit.
That's in there.
You know, maybe not necessarilyin your 20s, because I had to
learn a lot just about businessin general and being in a small
business, but I would say, evenin your 20s or 30s it's
definitely possible to find asmall business that is
(05:02):
enduringly profitable, that hasan owner, that is too small for
private equity to be interestedin.
It's large enough that itemploys a number of employees
and the owner might not have asuccession plan.
Their kids are doing otherthings and they're not
interested in continuing on indad or mom's legacy, and these
(05:24):
people need someone to sell to,otherwise they're going to shut
down at some point and theydon't want to sell to their
competition because they hatetheir competition and they don't
want to sell out to largeconglomerates that are just
going to chop up the businessand turn it into something
that's not so.
I started to realize that inthis country you've got a
demographic curve right.
(05:44):
You've got your baby boomerswho are either dying or retiring
right now, and that's where alot of the wealth in this
country is concentrated.
So there's a real hugeopportunity for younger people.
If you can find investors oryou have some cash that you can
pull together, you canabsolutely make it work.
If you find a healthy business,give it a shot.
(06:06):
It's definitely possible.
Speaker 2 (06:09):
Yeah, so I want to touch back on when you mentioned
the books that you read, thatJoe had read in business school.
Do you remember what the titleswere?
Speaker 1 (06:16):
Sure.
So the first one was, I believe, buying a Small Business
Harvard Business Review.
That was essentially ablueprint of how we went about
this acquisition and there aresome things about that book that
I would, through the process ofgoing through this acquisition,
I would say there's some thingsin that book that I learned
(06:36):
from and used very well, butsome things I would definitely
say avoid this or avoid that ordon't do that at all.
And then there was another bookcalled Buy Then Build, which
was written by a guy, I think,probably younger than us, that's
bought and sold a number ofbusinesses.
Those books really put intoperspective that if you're
someone who works hard andyou're not afraid of some risk
(06:58):
and you're not afraid of theresponsibility of being a small
business owner, that's the bigone.
I think it's definitelypossible and I'm sure you have
stories of being a smallbusiness owner.
That's the big one.
I think it's definitelypossible and I'm sure you could.
You've had stories of being asmall business owner.
I mean, if the wifi goes out,if you have a hurricane which
happened last year and you don'thave power for a week, what do
you do?
Energy company isn't there.
Speaker 2 (07:18):
It kind of keeps it spicy, though right, Like it
keeps it new every day as a newchallenge.
And you mentioned the rightbusiness with the right cash
flow right.
So how did you analyze thebusinesses that you were able to
find and decide that it was theright decision?
Speaker 1 (07:36):
So when I started looking at businesses, you know
if you go to business brokerwebsites you're going to see a
lot of hospitality.
Go to business broker websites,you're going to see a lot of
hospitality.
You're going to see a lot ofliquor stores.
You're going to see somemanufacturing.
You'll see all kinds of mom andpop businesses that probably do
very well for themselves.
And then you find a fewdiamonds in the rough.
(07:59):
I knew I didn't want a fewthings.
I didn't want hospitality, Hothotels.
I didn't want to work weekends.
I've got kids.
I didn't want to work nightsand weekends, so that eliminated
hospitality.
I didn't want to work inanything with retail that
depended on foot traffic.
I didn't want to do anything intech, because that's not my
background.
(08:19):
I know nothing about buildingan app or finding customers
virtually it's not my background.
But I was interested in sometype of manufacturing.
So I looked at co-packingbusinesses.
I looked at a chemicalmanufacturer.
I looked at, actually, awedding tent rental company.
(08:39):
I mean that can be good, butthat means you've got to
supervise people in the field.
You know that very well.
You've got to work nights andweekends.
Potentially You've got a lot oflogistical challenges there.
So I knew the type of businessthat was going to fit us as a
family, where I wanted to keepsome regular-ish hours in terms
(09:01):
of business operations, and thatnarrowed it down pretty well.
I also started to workbackwards in terms of well, what
kind of cash flow did thebusiness need to have in order
to support the debt and also topay and keep a roof over our
heads?
So that also narrowed down thesize of the business.
And then I also needed tounderstand if it was a scalable
(09:25):
business.
So it's much more difficult toscale their businesses, and that
was part of the recipe ofnarrowing the field down.
And then, once I got an idea ofwhat I was looking for, it was
very rough around the edges, butI realized okay, now who do I
speak to?
I mean, how do you find thebusiness right?
That's difficult.
(09:46):
I even looked at a marina onthe coast of Connecticut.
There was a family that hasowned this marina for years and
years and years and I startedspeaking to people.
So I started speaking to ownerof a business and you're
thinking about selling.
Who do you speak to first?
Your accountants, your attorney, all the people in your circle
(10:09):
that handle your money andthings of that nature, and so I
started networking with and juststarted cold calling
accountants and attorneys and Istarted to attend a regular
merger and acquisition events inNew York and Connecticut
because that's a big hub ofwhere that's happening and
started to introduce myself toeveryone and essentially saying
(10:31):
I know that you're lowermid-market, that's where your
firm is centered, but I'minterested in the businesses
that are off your radar, thatare too small for you to be
interested in.
That's who I want to talk to,and through that process I
really met a lot of interestingpeople people who evaluate
businesses, people who advise onacquisitions.
You speak to all these peopleover months and months and
(10:53):
months and you start to build anetwork of folks that are very
helpful, because the morequestions you ask, people want
to give you knowledge, they wantto help.
Sometimes you have to pay themfor that help.
That was great to get theirperspective.
Actually, I looked at a medicaldevice manufacturer out of New
Jersey and that was only like atwo-person business but he was
(11:14):
doing like 1.5 in sales and itwas very profitable, but it
wasn't scalable and I didn'twant to live in Jersey, let's be
honest.
But you know.
So it took a lot of researchand just asking a lot of
questions of these owners andeventually you start to speak to
(11:37):
the owners of these businessesand learn more about what's
going on.
You know, it's just there's allthese interesting businesses
out there.
Speaker 2 (11:44):
I mean, you were clearly ambitious and you set
your criteria up front.
When you say that you spoke tothese businesses, what was your
evaluation process like?
I mean, is this a Zoom callwhere you are peppering them
with questions, or were you justlooking at their profit and
loss statements?
What was that initial part ofthe eval process like?
Speaker 1 (12:04):
Yeah.
So I was really trying to finda business that didn't have a
broker involved with it already,because once they get a
business broker involved thenthey start to evaluate the
business differently with a highprice tag, or position the
business in a different way.
I was trying to do that and Iwould say, if anybody's looking
(12:25):
to buy a small business, that'swhat you want to do is just walk
right in the front door andintroduce yourself to people.
If you can find them, that'sthe way to do it, because once
you get a third party involvedit complicates things.
But ultimately what I was doingis calling business brokers
quite a bit on the East Coast,and that's the other thing.
I had a fairly open idea ofwhere I wanted to live if I
(12:49):
moved and if the opportunity wasgood enough, I could justify
moving.
But I was looking a lot in theNortheast at the time and I was
in Connecticut.
Now we're in South Carolina.
But to your point, that's a lotof what we were doing is
signing a bunch of NDAs andtaking a look at P&Ls and
balance sheets just tounderstand the ins and outs of
the business and then if thatlooked compelling, then we might
(13:10):
talk to the owner in a phonecall with the business broker
just to ask some screeningquestions.
Speaker 2 (13:17):
But with KTAC, did you find it through one of these
brokers or are you saying thatyou found it off market?
Speaker 1 (13:23):
Right, I found it through a broker and what ended
up happening is I was speakingto somebody and my background is
the last 15 years.
I was in the industrialcoatings business and somebody
said hey, dave, you're in thepaint or metal finishing
business, right, that's kind ofwhat you do right now.
I'm like, yeah, yeah, yeah,that's kind of what I do.
And he said you know, you mightwant to talk to this guy.
(13:44):
I heard about a little businessdown in one of the Carolinas
that you know might havesomething going on.
So I ended up picking up thephone with a broker and at the
time the owner really didn'twant to let anybody know that
the business was for sale and itwas actually advertised in a
totally different city.
So you know business for saleand it was very vague about what
(14:05):
they did.
But it gave just enoughinformation for me, as somebody
who was experienced in thisindustry, to kind of say I think
I know what he's doing, I think.
So I picked up the phone, spoketo the business broker and he
said well, why don't you send meyour resume over and we'll make
a determination to see ifyou're legit, right, unless
you're fishing for information?
So we ended up getting on acall with the owner and he said
(14:26):
oh, by the way, it's actuallynot in Columbia or Charleston,
it's actually in Greenville,south Carolina.
I said oh well, that's greatbecause I like Greenville, and
so that conversation, there wasprobably a few phone calls that
we had which led to actuallycoming down to the company
itself and meeting the owner andhis wife, looking at the
(14:47):
facility, learning more of theins and outs of the business,
and then that was the I don'twant to say the most difficult
part, but finding theopportunity that could be a good
fit.
So at that stage now you'veactually committed your own time
and money to flying in andvisiting the company, then
(15:08):
figuring out how do I afford it,how do I get financing and is
this the right fit for us?
Because that's a big leap, youknow, especially when you're in
a job that was serving you.
Well, it was a good companythat I worked for and actually
it was actually family that Iwas working for.
So during this whole process Icouldn't consult with family
(15:29):
about the transaction until itwas actually done.
That was another layer ofcomplexity that I really didn't
enjoy.
But yeah, that was decisiontime, right, because you got
four kids in school and youdon't want to disrupt their
lives too much.
That was quite a thing.
Speaker 2 (15:47):
Well, what I love, though, about your story, from
what you've said so far, is justthat you made a decision, and
then you took all of the stepsthat you needed to in order to
make it happen.
Like you weren't sittingwaiting for the opportunity to
land on you.
You were going to networkingevents, you're reaching out to
brokers, lawyers, accountants,and you were really looking for
(16:08):
the right fit for you, and Ijust think it's an inspiration
to anybody that's out there whodreams of maybe following in
your footsteps in that kind of away.
So, when you mentionedfinancing, I wondered what did
you do?
So how did you get thefinancing to make the
transaction close?
Speaker 1 (16:29):
Yeah.
So through both of these booksthat I mentioned earlier, they
talk about that a bit and everydeal is going to be a little bit
different.
Looking back on it, I would saythat you really want to find a
way to make the financing workwith the owner, because you're
going to save quite a bit oninterest rather than going
(16:51):
through a bank that's going tobe charging you SBA fees that
are quite expensive.
So I would say, looking back onit, you really want to start to
begin having a workingrelationship with the owner or
owners, making them realize thatyou are a good candidate to buy
this business, because, as youknow, if you are the founder of
(17:12):
a business, you've built it fromnothing to what it is now.
It is a marketable asset thatsomebody is willing to spend
millions of dollars on, and soit's their baby, it's their
child, and they don't have tosell it to you.
They might be interested inselling it to you, but they
don't have to.
So you really need todemonstrate that you're capable
(17:34):
of taking on this responsibilityand growing it, and that's many
times.
I think what, in speaking withthese owners that's what they're
looking for is someone to takewhat they've built and grow,
because by the time they'reselling, they've made some money
.
They're tired.
Speaker 2 (17:51):
Yeah.
Speaker 1 (17:52):
You know they're not done, but they're saying I'm
ready, I'm tired and I need tohand this off to somebody else.
So you need to be that personthat can sell the owner on the
idea that you can grow thisbusiness.
And part of that conversationis I'm just not going to buy
this business and give you acheck and you walk away.
(18:13):
Because if you have an ownerthat says I want all my money as
soon as you sign the dottedline and I'm out, that's not a
good thing for you.
You need to know that this is aviable business that's going to
continue year after year,because that's too much risk and
you want to work with thatowner for many months after the
sale, because there'srelationships, there's
(18:35):
perspective, there's a lot youneed to learn in that first
three months.
I would say after three or fourmonths I was standing on my own
two feet, but I'll tell you what.
That first week I didn't knowwhich way it was up, and so I
would say work with an ownerthat is going to offer owner
financing as much as possible.
Now that's going to be trickyand that's not what we did 100%.
(18:59):
There was owner financingassociated with it.
There is skin in the game here,but I would have pushed harder
for more of that and I think ifyou read Dave Ramsey or listen
to his podcasts, he'll saysomething like you know sharing
in the profits and then, if it'san extremely profitable, five
years and you'll own it likethat.
But if the business proved tobe not very profitable, then it
(19:19):
might take you 12 years to buythe business.
I think he's got a very goodformula for financing an
acquisition that, frankly,doesn't have a bank involved.
Speaker 2 (19:28):
Okay, so you got partially seller financed and
then you for the other remainder.
Was it SBA or just atraditional bank?
Right, sba, yeah?
Speaker 1 (19:37):
And that's where you have to work with a banker and
find a banker that can closethat deal, because closing an
SBA acquisition and getting thatfinancing is a laborious
process.
It's just like getting amortgage.
They're going to ask for a lotof documentation.
They're going to ask for thesame documentation three times,
four times.
Then you've got to go throughthis whole due diligence process
(19:59):
with the existing owner thatthe SBA is going to be involved
with.
It takes a lot of energy.
I was working a full-time job atthe time but it's a lot of
hours and it's a lot of emails.
And now you're getting anattorney involved.
You're getting an accountantinvolved to do due diligence on
this business to make surethey're paying taxes.
You might have a merger andacquisition advisor that is
(20:19):
consulting you on an ongoingbasis.
Your accountant is just lookingat a tax liability.
That's what I learned.
He just is looking at the taxes.
He doesn't know anything aboutvaluation, doesn't know anything
about strategy of acquiring abusiness.
And you do need someone to.
And fortunately in my network Idid have people that I went to
college with or people I knewthat I could pick up the phone
(20:40):
and I trusted and said, hey,what do you think about this?
Somebody that I knew that hadacquired businesses, or one guy
was an attorney working for abig white shoe firm in New York
and then, through thatnetworking that I did locally,
there are all kinds of mergerand acquisition people who
evaluate businesses and then actas consultants on this.
You can find somebody like thatfor a very reasonable price.
(21:01):
That's just going to help youthrough that process and
mitigate risk.
That's what it's really aboutis mitigating risk.
Speaker 2 (21:07):
I like, too, that you acknowledged what you knew and
what you needed help with in theprocess.
Speaker 1 (21:11):
I knew yeah.
Speaker 2 (21:12):
You know, tapping the expertise of somebody in
mergers and acquisitions is sucha good play, but you had to
acknowledge that you needed it.
Speaker 1 (21:20):
Yeah, and I think maybe that is actually part of
getting a little older, right?
I would say, if you asked mewhen I was 35 years old, I'm too
headstrong to ask for help, andnow I think I'm getting much
better at acknowledging that I'mnot good at certain things and
I need people who know whatthey're doing to help.
(21:41):
And it was a process, right, itwas a process.
And once you start to get inover your head, then you start
to realize I need someone thatcan help me with this.
And then you start askingquestions.
Right, you start to say, well,can you help with this?
And like hey, I met you at anetworking event.
You said you consult onacquisitions, can you help?
Well, that's a deal is toosmall for me.
(22:02):
But here's a guy and that'sjust what networking is all
about.
And it took a long time.
The whole acquisition process,from just initially looking at
the business to putting a letterof intent together to the due
diligence.
I mean that was 10 months.
It's a long time.
It's a big investment in time,not so much the front end cost
(22:22):
of accountants or attorneys orconsultants, it's a time
investment.
And it's about the team ofpeople that you pull together
too.
Speaker 2 (22:30):
And once the deal was done, signed, delivered, money
transferred.
How did your family respondwhen you told them that you were
moving states, and what hasthat impact been like for them?
Speaker 1 (22:43):
Yeah.
So in my case, that wasactually, I would say, the most
difficult part, because I workedfor family, not my parents, but
I couldn't tell my parents whatI was doing and that really
broke my heart, because I have avery, very tight relationship
with my parents and I couldn'ttell them hey, I'm going to quit
, you know, a family business todo something else.
I knew that.
(23:04):
I couldn't ask them to keepthat secret and that was very
difficult.
I still regret that and theyunderstand why I had to do that
and everything was fine after alittle while.
But I would say, my immediatefamily, you know, bonnie and I
were talking about this for 10months to get it done.
And then, once we finallyactually sold our house in
(23:24):
Connecticut is when we told ourkids so we have 14, 12, 10 and
eight year old kids, four kids.
Yeah, now, keep in mind, we hadto sell our house.
We do acquire the business.
We had to move schools for thekids, you have to get housing in
another state.
I mean that there was a lot oflogistics in that last five
months.
That was brutal.
(23:44):
Don't suggest that everybody dothat, but just know what you're
getting into.
It's a lot of stress and sowhen we told our kids, I think
they didn't really know whatthat meant, but I would say that
they have been very resilientand very flexible.
I was very, very concerned withmy 12 year old son and my 10
year old daughter because theystill have very tight
(24:06):
relationships with some of theirfriends up in Connecticut who,
you know, they're going to go tosummer camp with this summer
and uprooting them.
We were really concerned aboutthat and they have done
exceptionally well.
They adjusted very well.
So that was difficult and thatwas part of this whole risk
analysis.
Right Is okay.
(24:28):
What are the all the goodthings about this transition and
things that could happen?
Where are the risks?
What are the downsides?
What are the things that wecould really miss out on and
potentially affect our familynegatively and that was
certainly part of it is how arethe kids going to respond?
Speaker 2 (24:46):
Yeah, but what an important lesson they get to not
just learn from you but towatch you and your wife grow
together.
This business, I mean I thinkyou can tell stories and then
your children can watch you, andwhen they watch you I think
that the learning may get a bitdeeper.
So amazing opportunity for themto be a part of this.
(25:11):
Tell us just really, you knowfrankly, like what has the
learning curve been like, goingfrom being an employee to now an
owner operator?
Speaker 1 (25:22):
Yeah, now you're signing the checks, right?
Yeah, exactly.
Yeah, that was quite atransition, right?
Is you know?
You sign the paperwork and thenthe next day you own this
business and then you show up towork and you meet the employees
for the first time.
That was a transition becausethe employees you know owners
(25:44):
don't want to tell theiremployees, hey, the business is
for sale and you knowsomething's going to happen.
They don't want to do that.
So we were introduced to allthe employees more than anything
else.
It was guys, nothing's going tochange at this company.
Like, we don't want to make anybig changes, Nobody's getting
laid off.
(26:04):
And right off the bat, we madesome changes that were very
positively received by theemployees because we wanted to
acknowledge that they'revaluable.
I mean, realistically, when youbuy a company, yeah, you might
be buying a building and youmight be buying equipment, you
might be buying a machinery, butthe company is the people and
without the people you can't getany work done.
And I would say that someonecould get ahead of themselves
(26:28):
and say, okay, we're going toslash expenses and we're going
to put new compensation plans inplace to be more lucrative for
ownership and squeeze everyounce of labor and profit out of
the business.
There's a temptation to do that, to be very headstrong and come
in and make changes rapidly,and I would not recommend you do
(26:48):
that.
The owner of the business thatyou just bought that business
off of.
There's a reason why they weresuccessful and you need to
acknowledge that and you need tomake sure that you're treating
the employees well, especiallythe ones that have been there
for a long time.
And if you've gotten that far,you're smart enough to know how
you're going to grow.
You're a smart person.
(27:08):
That means you've alreadygotten the bank on board.
You've already got that letterof intent signed.
You've demonstrated yourcompetence.
Now you're across the finishline.
Don't make any big changes.
Small, incremental changes overtime to grow the business and
whether that be in sales,whether that be maybe moving
into a different industry, takeit slow, no big changes.
Speaker 2 (27:29):
Yeah, for the sake of the company and the existing
team, but also for yourself, sothat you can learn the ropes of
the business.
Speaker 1 (27:37):
Oh, yeah, yeah.
And to get back to you knowlearning curve, it was a big
learning curve.
I've always actually thought ofmyself as a small business
person.
I worked for a couple of largecompanies right out of college
and very quickly realized thatthat's not who I am.
When I was younger, I workedfor either family or other small
businesses.
That that's not who I am.
When I was younger, I worked foreither family or other small
(27:57):
businesses.
I mean, my first job wasscooping ice cream at 14 or 15
for $4.25 an hour.
I can remember that really well.
And then I was working inconstruction with family, and
then I was doing all kinds ofstuff that young people do for
work just to make a buck.
And that's how I grew up.
Small businesses and then movingto New York working in finance
for a little bit and thengetting laid off in August of
2008, three months before I wasgoing to get married made me
(28:19):
realize that maybe I'm not thebig company guy after all.
And so, getting back to thatlearning curve, it wasn't that
drastic because I've been withsmall businesses, but now you're
stepping into a management roleand now you're managing people.
Now you are the person sayingyes or no, and making big
decisions and when I say bigdecisions like whether to hire
(28:42):
and fire people, pricing yourproduct, you know these are all
things that you're secondguessing yourself on all the
time.
And it's you, it's all on you.
Now.
You can't go and consult theboss, you can't go and consult
other people.
It's like you're the one and Ienjoy that.
That's what I signed up for.
That's a lot of pressure thatyou can't necessarily explain to
(29:02):
somebody unless they'reactually experiencing that,
because that's where the rubbermeets the road.
Speaker 2 (29:07):
You need some critical thinking skills and the
ability to problem solve andmake decisions.
Speaker 1 (29:12):
Oh yeah, oh yeah, like we had Hurricane Helen came
through here and we were all upand running full steam and all
of a sudden lost power becausethe transformer on one of the
telephone poles went out and thepower company looked at their
grid and said no, you know, mrPolk, you have power according
to our system.
And I'm saying my electricianis telling me that I'm not
(29:33):
getting three phase power to runour compressors.
And I need, mark, ourcompressors to be running,
because it's a big part of ourbusiness and it's not any of our
equipment.
It's Duke Energy.
And what do you do?
It's Hurricane Helen.
Every major manufacturer hason-call generators on contract
and you're a small business andI needed what was it?
(29:53):
40 kilowatts of energy.
I it was a tractor trailer, orI needed a generator as big as a
tractor trailer, and I couldn'tfind that, and every all they
were all taken up.
So if we didn't have power,we're not putting out product,
and so that's on you, like, howdo you solve that?
And so it was.
That's on you, like, how do yousolve that?
And so it was a lot of phonecalls.
Speaker 2 (30:20):
Yeah, that's.
That's a big one and thatactually makes me think of a
little side tangent Maybe youand I can talk about it after
the show mainly about thedemands for power needs
increasing within the UnitedStates because of all the
database centers and AI growingand let's talk about that later.
But so what skills from yourcorporate career, which skills
do you think really prepared youfor this transition?
Speaker 1 (30:41):
I think that goes to narrowing down the skills you
have right now versus what thecompany you're thinking of
acquiring needs.
So in this case it was a verystable business that hadn't had
any really any sales effort putinto it in many years and
(31:02):
actually that's pretty commonwith businesses that are
established right.
The owners built it, they'remaking good money, they don't
need to get out of bed and knockon doors, which is typical.
But my skillset was very muchin sales and, more importantly,
technical sales, where I wasdealing with engineers all the
time and dealing with atechnical subject matter and I
(31:23):
like building things.
So I knew that that skill setjust in my interests and just
what I like to do and also whatI have been doing on the last 15
years was a good fit in termsof where I fit in the company.
Because you have to understandwhen you step in, are you going
to be stepping on the toes ofother people there where the
business really might need more,somebody like a president, ceo
(31:56):
that's really hitting the streettrying to expand the business
and leading the engineering topeople in house.
So in terms of preparing, Iwould say my weak spot is things
like just the day-to-dayrunning of things, all the POs
and the invoicing and thingslike that.
We hired a business manager todo that.
That is something I'm not goodat.
That's where you hire people.
That's a plug in the dam thatyou need to figure out, because
(32:18):
the previous owner and his wifewere doing that when we acquired
the business.
My wife is still at home withkids, so we couldn't have her do
it.
That's a full-time job.
So, understanding your strengthsand weaknesses, as soon as you
come in, saying all right, wheredo I fit into the company?
And I knew my skill set wasmore sales and my weakness is
(32:39):
just that day-to-day back officestuff that I don't have any
experience with.
And actually hiring somebodyfor that was actually kind of
scary, right?
Because you're the new owner ofa business, two months in now
you're interviewing someone torun the books.
Do you hire somebody that'syoung and a spitfire that might
leave in two years, or do youhire somebody that's going to be
(32:59):
more expensive and got a lot ofexperience and is more likely
to stick around because of avariety of factors?
Important decisions, right.
Speaker 2 (33:10):
Yeah, big decisions.
Have you hit any points whereyou've just thought my gosh, I'm
in over my head?
Speaker 1 (33:18):
I will say it's a different level of stress
Because now it's on you and it'sall on you, and I've always
responded well to stress.
I'm still a competitive athlete, so if you're the kind of
person that deals well withstress, you'll be fine.
But it's a different level ofstress altogether because you're
(33:42):
in charge.
Speaker 2 (33:43):
And you're, you're writing those checks.
You're writing those checksevery month, absolutely and
every you know you gotta makepayroll, you've gotta pay the
rent, pay the bank, all thesethings, so yeah, and beyond the
stress, do you think there'sanything that nobody prepared
you for when it came to becominga business owner that you kind
(34:04):
of wish somebody had?
Speaker 1 (34:06):
I think there are things that I could have done
differently during theacquisition.
Things like shoot, who knows,maybe should have low-balled
them instead of giving them theprice that I did.
It's not that I feel like Ioverpaid, but I feel like maybe
you know what, maybe I couldhave paid a little bit less if I
(34:28):
played my cards right andstrategy, having a more
strategic approach to thatacquisition, having gone through
it now.
Now there are other steps thatI would do if I were acquiring a
different business to help thisbusiness grow, which I've been
thinking about, I would approachthat much differently, just
strategically.
Speaker 2 (34:47):
It's always easier in retrospect to see how we could
have done things better ordifferently.
So this is such a bold andagain inspiring move that you've
made in midlife.
And if somebody is listening inwho is in their early 40s or
maybe they're in their late 30sor any age really, but I'm
thinking of early 40s justbecause that's when you made
(35:09):
this decision, in this big moveIf they're in a corporate job
and it's pretty mundane theykind of just feel too like they
have more that they can do.
They like what you've done, butthey're scared.
They're scared of that leap.
What would you say to them?
Speaker 1 (35:26):
I would say I'll leave you with this.
I didn't want to regretanything in my life.
I know myself well enough whereI'm ambitious, I'm capable and
I'm a smart enough guy to getthis stuff done.
And if I didn't do this then Ididn't want to be 55 years old,
(35:47):
too old to do it, because now mykids are in college, now my
kids are in high school and Ican't move and I've got college
bills.
It's too late in life at thatpoint and I had this
conversation with my wife,bonnie, very frequently is, you
know, I just don't want to livewith regret.
And that's really what startedto put me over the edge.
It wasn't the fear of takingthe next step, it was you know
(36:10):
what.
I just came to this realizationthat I never want to live with
regret because you've got onelife to live and 10 years down
the road you might not be ableto take the same amount of risk
or it might be totally out ofthe cards.
So that was really for me whatwas the most important thing.
So I would say don't be scaredof taking the next step, just
take small steps.
(36:31):
Go to those networking events,talk to people about doing these
things.
Talk to a banker.
It's not that difficult to pickup the phone and speak to a
business broker.
As a screening, just pick upand talk to them about the local
liquor store that's for salefor half a million dollars and
it's got $100,000 in cash flow.
Just learn about it.
(36:52):
Learn about the acquisitionprocess.
Talk to a few owners ofbusinesses it.
Learn about the acquisitionprocess.
Talk to a few owners ofbusinesses just to see how the
conversation goes and dip yourtoe in the water.
Don't think that you need tocommit until you actually are
now.
The commitment doesn't evencome when you've made the offer.
The commitment comes whenyou're starting to enter the
financing phase and you'reputting down payments down.
(37:12):
There are many months of goingthrough that acquisition process
when you can just pull the plugand say you know what?
I spent $1,000 on networkingevents and drinking beers with
some interesting people and thenI decided it wasn't a good fit.
You can always turn around.
Speaker 2 (37:27):
Yeah, I really love too that perspective that you
had, which was not a decisionmade out of fear, but one out of
excitement for the potential ithad for your family.
Cause I think that when weapproach our decisions in life
from a fear place, then it justfeels like the momentum is like
cut off at the knees, you know,whereas if we are approaching it
(37:48):
from like the what, if, likewhat, if it's better for our
family, then it's just so muchmore motivating and inspiring.
So you're in now, after oneyear.
How are you feeling and whatexcites you the most, and also
what keeps you up at night?
Speaker 1 (38:05):
The first year was good.
We knew it was going to be alot of learning.
What I'm excited about is thatwe're talking to a variety of
different potential newcustomers that could really
launch us into, let's say, thatit could be very exciting, and
there's a lot of new technologyout there.
There are a lot of people whowe haven't been speaking to and
there's a lot of work out therethat needs to be done.
(38:27):
We're in a fairly unique nicheand I love talking to people,
because once you start to talkto somebody and you ask them a
lot of questions, then they sayyou need to talk to this guy
over here and this girl overhere.
They have something to do withthat.
You never know where thoseconversations are going to go,
and I think that we're in agreat position where all we just
(38:47):
needed to do was the businessto chug along as it always has,
and then our job is to find anew business and take it in
different directions.
But there's a lack of people outthere who want to get work done
, who actually want to work.
But if you're a worker, I wouldsay this is probably the best
time in the last 80 years to bea hard worker because everybody
(39:08):
else is looking for a shortcut.
Everybody else wants to be amiddleman.
Everybody else wants to dosomething.
That's oh yeah, you know, make$100,000 a month for you know,
sitting on your couch doingsomething online.
It's like I've got news for you.
That's not going to happen.
And if you hustle, there'sprobably not a better time to be
a hard worker.
And if, if you're not, ifyou're not afraid of that, then
(39:32):
I think you should definitelytake advantage and do some
reading and talk to a lot ofpeople.
Speaker 2 (39:36):
Yeah, I am so excited .
Well, I mean I guess I shouldtemper what I say there, but I
see so much opportunity rightnow because of the silver
tsunami, because the people, theboomers who are retiring and
they have these businessesthey've cared for deeply for
many years and nobody to handthe reins to.
So I'm not really in a spacewhere I necessarily am looking
(39:57):
to purchase a business, but, mygoodness, there is opportunity
out there and I know there'salso a lot of economic
uncertainty.
Are you having any worries orconcerns about how tariffs might
impact you and your business?
Speaker 1 (40:11):
So we are in manufacturing and our customers
will definitely see some of that, but specifically for what we
do, I'm not anticipating tariffsis going to have an oversized
impact on our sales or revenues.
If I were buying things out ofChina on a regular basis, I
would have some real concerns.
I spoke to a gentleman when wewere looking at different
(40:35):
businesses.
He was a tier one retailer forWalmart.
He was doing a ton of businesswith Walmart selling bird
feeders and bird baths out ofChina.
He was killing it, absolutelykilling it, and he had built
this business in two or threeyears.
But it was like, well, whathappens when Walmart finds
(40:56):
another supplier and just blowsyour business out of the water
Like there's nothing there?
And that's what I you juststarted making me think about
how that's how tariffs might beaffecting his business, right?
I think he was doing like 1.5in sales and you know healthy
margins.
Speaker 2 (41:12):
On bird feeders.
Speaker 1 (41:13):
On bird feeders.
Speaker 2 (41:14):
Goodness gracious.
Speaker 1 (41:14):
But he had one or two major retailers as customers.
Speaker 2 (41:18):
Oof, that's dangerous .
Speaker 1 (41:20):
Yeah.
Speaker 2 (41:21):
Yeah.
Well, how are your numberslooking from the time that you
purchased the business to now?
Is it sustaining?
Has it dipped?
Is it growing?
Can you give us any insightsinto the performance since you
took over Sure?
Speaker 1 (41:34):
Yeah, so sales have remained.
I think for the first year.
It's remained fairly consistent, which is really all we were
looking for.
You don't want sales to dip asa result of new ownership, right
, so it's remained consistent.
But the reason why we're hereis to grow, so we're speaking to
more and more customers all thetime, and so that's why I'm
(41:57):
very optimistic that in the next24 months could be very busy,
but you want to make sure thatyou're buying a business that's
enduringly profitable.
They don't have to have the typeof valuations that tech
companies have to have, but theyneed to.
It needs to be a profitablebusiness that, year over year,
has proven itself to beconsistent, and that's really.
It doesn't have to be a sexybusiness Like what we do is not
(42:19):
sexy by any stretch of theimagination.
There are a lot of veryuninteresting businesses out
there that do very well forthemselves and the owner needs
to sell, and so find a sleepybusiness that has limited
competition.
That's a niche player.
It's not in a commodity kind offield where you're just getting
undercut by the competition allthe time.
Find that sleepy little mom andpop.
(42:41):
You know local marina thatsells burgers and marina slips,
and you know they're the onlyperson in the area and they've
got a monopoly on the business.
Speaker 2 (42:51):
So niche players like that- yeah, I love it, it, it.
It really is very inspiring.
So I just have one morequestion for you.
If you could go back and talkto yourself when you were in
your early 20s or a recentgraduate, what life wisdom would
you give yourself?
Speaker 1 (43:09):
Oh boy, you know I'm torn.
I want to tell my 23-year-oldself to work for yourself and
find your own way and don't workfor somebody else, because
there's a lot more potentialwhen you're the boss.
I'm tempted to tell my kidslook, I'll help you start a
business, I will be the guardrails and you start your own
(43:32):
business.
I would love to be able to saythat, on the same token, there
is some value in learning onother people's dime and when
you're in your twenties.
I still had a lot to learn and Ithink I actually worked for big
companies right out of collegeand for me that was not a good
decision.
You learn a lot more with asmall business, so you're going
to learn a lot more just workingfor a small company small
(43:56):
business, so you're going tolearn a lot more just working
for a small company.
So if you're for me and my kids, I would encourage them to do
the same.
But hey, if you're like I said,if you're a hard worker,
there's a lot of opportunity outthere and you can't be afraid
of waking up early and saying,well, got to keep on working
because nobody else is, and sothere's a lot of opportunity out
there.
Speaker 2 (44:19):
Yeah, you got to have the right mindset.
Yeah, yeah, go and get it.
Dave, thank you so much forjust sitting and chatting with
us.
I think this episode isactually so inspiring because
you're in the trenches and youmade this big, bold leap that I
don't know anybody else who'sdone anything, quite like how
you have.
Speaker 1 (44:32):
There might be a reason else.
Speaker 2 (44:33):
who's done anything, quite like how you have, there
might be a reason.
It's so wonderful to hear,though, and you've got the smile
on your face and I feel likethis is going to work out very
well for you and your family.
Thank you so much for sharing.
Speaker 1 (44:46):
It was so much fun.
It's great catching up with you.
Thank you.
Speaker 2 (44:53):
Today's key takeaways .
If you're ambitious and feelinglike you're capable of more
than what you're doing in yourjob, start by reading a few
books about acquiring smallbusinesses.
Educate yourself on the process.
Two great ones to start withare Buying a Small Business from
Harvard Business Review and BuyThen Build by Walker Diebel.
(45:16):
Look at the skills you alreadyhave.
Then figure out what level ofcash flow a business would need
to support both your lifestyleand the business itself.
You're looking for anenduringly profitable small
business with an owner whodoesn't have a succession plan,
that's too small for privateequity to care about, but big
(45:39):
enough to employ a team and hasa reason to sell.
Working hard and taking on riskand responsibility isn't for
everyone, but if that's in yournature, this path might be a
perfect fit.
But if that's in your nature,this path might be a perfect fit
.
Keep in mind that businessbroker websites only show a
certain type of listing.
(46:00):
You may find a few diamonds inthe rough, but they're not
always representative of what'sout there.
Start narrowing things down.
Know what you don't want.
This alone will eliminate a lot.
Think about your skills andwhat industries you understand.
Work backwards.
(46:20):
What level of cash flow does abusiness, need to cover debt and
put a roof over your head.
That will help you narrow downwhat size business to look for
and make sure it's scalable.
Now, how do you find a business?
Start networking.
(46:41):
Talk to accountants, attorneys,anyone who handles other
people's money, even small tomid-market private equity groups
.
Ask if they've come across anybusinesses that are too small
for them to pursue.
By doing this kind of outreach,you'll likely meet people who
evaluate businesses and adviseon acquisitions.
Ideally, you want to talkdirectly to the owner, but you
(47:02):
can also start by reaching outto business brokers in regions
you'd be willing to live in.
Sign NDAs, start reviewingfinancials and see what you
might want to explore.
You don't need money to startthis process.
There's plenty of low-stakeslearning you can do now, like
going to open houses beforeyou're ready to buy a home.
(47:24):
It's the same thing.
That said, just because youwant to buy a business doesn't
mean the seller wants to sell itto you.
You have to prove you're theright person to take the reins.
For many founders, the businessis their baby.
When it comes to financing,consider negotiating more seller
financing.
(47:45):
It often comes with a lowerinterest rate and keeps more of
the seller's skin in the game.
Getting an SBA loan is timeintensive, more like a mortgage
process than you'd expect.
You'll need to provide multiplecopies of documents repeatedly.
You'll also want an accountantto help with tax implications, a
(48:07):
lawyer to review the legaldetails, possibly a mergers and
acquisitions advisor to supportvaluation strategy and reduce
your risk.
Be honest about what you don'tknow and surround yourself with
the right people.
Fill the gaps From start tofinish.
It can take about 10 months toidentify a business, sign a
(48:31):
letter of intent, an LOI, gothrough due diligence and
finally close the deal Once youown it.
Don't rush in and make massivechanges.
Use that first year to learn.
Focus on small, incrementalimprovements that strengthen the
business over time.
If you're transitioning fromcorporate life, narrow in on
(48:52):
your skills now.
Compare them to the skills thebusiness needs.
Identify what you're not goodat and make sure there's enough
cash flow to hire for thoseroles.
Know your strengths andweaknesses.
When everything is yourdecision, it's a different kind
of stress.
Mindset is everything.
(49:14):
Do you believe you're capable?
Do you believe you can figureit out?
One of the top regrets of thedying, according to palliative
nurse Bonnie Ware, is not havingthe courage to live a life true
to themselves.
No regrets.
Don't be afraid to take thenext step.
(49:35):
Start small.
Go to networking events.
Talk to people.
Call a banker.
Reach out to a business brokerand just screen a conversation.
Learn about the acquisitionprocess.
Talk to a few business ownersand see what those conversations
feel like.
It's a great time to be someonewho's willing to work hard.
(50:00):
A lot of people are out therelooking for shortcuts.
Look for a business that isenduringly profitable, one with
consistent performance over time.
Ideally, you want a sleepybusiness, a niche player with
limited competition, and ifyou're in your 20s, you've still
(50:21):
got a lot to learn.
But if business ownership iseven a faint idea in your future
, go work for a small business.
You'll learn more, faster andfrom closer to the center of
real decision-making.
That's it for today.
I release episodes once a week,so come back and check it out.
(50:42):
Have a great day.
Don't be scared of taking the next step.
Just take small steps.
Go to those networking events.
Talk to people about doingthese things.
Talk to a banker.
It's not that difficult to pickup the phone and speak to a
business broker as a screening.
Just pick up and talk to themabout the local liquor store
that's for sale for half amillion dollars and it's got
(00:21):
$100,000 in cash flow.
Just learn about it.
Learn about the acquisitionprocess.
Talk to a few owners ofbusinesses just to see how the
conversation goes and dip yourtoe in the water.
Don't think that you need tocommit.
The commitment doesn't evencome when you've made the offer.
The commitment comes whenyou're starting to enter the
financing phase and you'reputting down payments down.
(00:42):
There are many months of goingthrough that acquisition process
when you can just pull the plugand say you know what?
I spent a thousand dollars onnetworking events, you know, and
drinking beers with someinteresting people and then I
decided it wasn't a good fit.
You can always turn around.
Speaker 2 (01:04):
Welcome to how I Built my Small Business.
I'm Anne McIntee, your host.
Today's guest is Dave Pope, afriend of mine from college who
spent 14 years in sales in theNortheast before making a bold
move in buying KTEC Inc, asurface preparation company
based in Greenville, southCarolina.
(01:25):
At the time, he had no priorexperience as a business owner.
In this episode, dave shareswhat it's really like before,
during and after acquiring asmall business, with stories
from his first year as anowner-operator.
If how I built my smallbusiness has brought you any
(01:49):
insight, inspiration or evenjust a spark of curiosity, there
are a few simple ways you cansupport the journey Follow the
show, share your favoriteepisode with a friend or leave a
quick review.
Each one truly helps me growthis show.
Thank you, let's get started.
(02:10):
Hey, dave, it is so good to seeyou.
Thanks for coming to chat withme today.
Speaker 1 (02:19):
You got it.
It's great to see you after allthese years.
Speaker 2 (02:22):
So I remember seeing the news on LinkedIn I think it
was about a year ago and it wasa post that you put that just
said that you bought a business.
And I checked your LinkedInprofile and I was like, yeah, no
, I think this is a big leap.
So can you take us back to thebeginning?
How did this all transpire?
Speaker 1 (02:40):
Sure, and you're absolutely right, it wasn't a
big leap.
It was a huge leap for ourfamily, not just me
(03:06):
professionally, but I think Iwas like a lot of folks our age
or even younger.
I was 43 years old.
I had been in the same job for15 years, which was a very good
company, a very stable company.
It provided for my family and Igot to live in a very nice town
in Connecticut.
But at some point I thought thatI was capable of more and I
have always been a fairlyambitious person.
And so I was just actuallyventing to one of our mutual
friends, joe, and he said youknow what?
I read a few books in businessschool about acquiring small
businesses that you might wantto read, and so that thought
(03:30):
hadn't crossed my mind.
I actually started to activelylook at different companies and
started to you know, what otherjob can I do with my existing
skill set?
And I realized very quicklythat I was never going to work
for anybody else Going throughthat interview process.
I said that I was never goingto work for anybody else Going
through that interview process.
I said, nope, not going to workfor somebody else ever again,
(03:51):
and I realized that I needed adifferent out and I knew that
starting a business was notsomething that we could do.
I've got a great wife and fourbeautiful children, so the idea
of no-transcript I really wantto spread the gospel about and I
(04:40):
talked to everybody I can aboutit.
That's in there.
You know, maybe not necessarilyin your 20s, because I had to
learn a lot just about businessin general and being in a small
business, but I would say, evenin your 20s or 30s it's
definitely possible to find asmall business that is
(05:02):
enduringly profitable, that hasan owner, that is too small for
private equity to be interestedin.
It's large enough that itemploys a number of employees
and the owner might not have asuccession plan.
Their kids are doing otherthings and they're not
interested in continuing on indad or mom's legacy, and these
(05:24):
people need someone to sell to,otherwise they're going to shut
down at some point and theydon't want to sell to their
competition because they hatetheir competition and they don't
want to sell out to largeconglomerates that are just
going to chop up the businessand turn it into something
that's not so.
I started to realize that inthis country you've got a
demographic curve right.
(05:44):
You've got your baby boomerswho are either dying or retiring
right now, and that's where alot of the wealth in this
country is concentrated.
So there's a real hugeopportunity for younger people.
If you can find investors oryou have some cash that you can
pull together, you canabsolutely make it work.
If you find a healthy business,give it a shot.
(06:06):
It's definitely possible.
Speaker 2 (06:09):
Yeah, so I want to touch back on when you mentioned
the books that you read, thatJoe had read in business school.
Do you remember what the titleswere?
Speaker 1 (06:16):
Sure.
So the first one was, I believe, buying a Small Business
Harvard Business Review.
That was essentially ablueprint of how we went about
this acquisition and there aresome things about that book that
I would, through the process ofgoing through this acquisition,
I would say there's some thingsin that book that I learned
(06:36):
from and used very well, butsome things I would definitely
say avoid this or avoid that ordon't do that at all.
And then there was another bookcalled Buy Then Build, which
was written by a guy, I think,probably younger than us, that's
bought and sold a number ofbusinesses.
Those books really put intoperspective that if you're
someone who works hard andyou're not afraid of some risk
(06:58):
and you're not afraid of theresponsibility of being a small
business owner, that's the bigone.
I think it's definitelypossible and I'm sure you have
stories of being a smallbusiness owner.
That's the big one.
I think it's definitelypossible and I'm sure you could.
You've had stories of being asmall business owner.
I mean, if the wifi goes out,if you have a hurricane which
happened last year and you don'thave power for a week, what do
you do?
Energy company isn't there.
Speaker 2 (07:18):
It kind of keeps it spicy, though right, Like it
keeps it new every day as a newchallenge.
And you mentioned the rightbusiness with the right cash
flow right.
So how did you analyze thebusinesses that you were able to
find and decide that it was theright decision?
Speaker 1 (07:36):
So when I started looking at businesses, you know
if you go to business brokerwebsites you're going to see a
lot of hospitality.
Go to business broker websites,you're going to see a lot of
hospitality.
You're going to see a lot ofliquor stores.
You're going to see somemanufacturing.
You'll see all kinds of mom andpop businesses that probably do
very well for themselves.
And then you find a fewdiamonds in the rough.
(07:59):
I knew I didn't want a fewthings.
I didn't want hospitality, Hothotels.
I didn't want to work weekends.
I've got kids.
I didn't want to work nightsand weekends, so that eliminated
hospitality.
I didn't want to work inanything with retail that
depended on foot traffic.
I didn't want to do anything intech, because that's not my
background.
(08:19):
I know nothing about buildingan app or finding customers
virtually it's not my background.
But I was interested in sometype of manufacturing.
So I looked at co-packingbusinesses.
I looked at a chemicalmanufacturer.
I looked at, actually, awedding tent rental company.
(08:39):
I mean that can be good, butthat means you've got to
supervise people in the field.
You know that very well.
You've got to work nights andweekends.
Potentially You've got a lot oflogistical challenges there.
So I knew the type of businessthat was going to fit us as a
family, where I wanted to keepsome regular-ish hours in terms
(09:01):
of business operations, and thatnarrowed it down pretty well.
I also started to workbackwards in terms of well, what
kind of cash flow did thebusiness need to have in order
to support the debt and also topay and keep a roof over our
heads?
So that also narrowed down thesize of the business.
And then I also needed tounderstand if it was a scalable
(09:25):
business.
So it's much more difficult toscale their businesses, and that
was part of the recipe ofnarrowing the field down.
And then, once I got an idea ofwhat I was looking for, it was
very rough around the edges, butI realized okay, now who do I
speak to?
I mean, how do you find thebusiness right?
That's difficult.
(09:46):
I even looked at a marina onthe coast of Connecticut.
There was a family that hasowned this marina for years and
years and years and I startedspeaking to people.
So I started speaking to ownerof a business and you're
thinking about selling.
Who do you speak to first?
Your accountants, your attorney, all the people in your circle
(10:09):
that handle your money andthings of that nature, and so I
started networking with and juststarted cold calling
accountants and attorneys and Istarted to attend a regular
merger and acquisition events inNew York and Connecticut
because that's a big hub ofwhere that's happening and
started to introduce myself toeveryone and essentially saying
(10:31):
I know that you're lowermid-market, that's where your
firm is centered, but I'minterested in the businesses
that are off your radar, thatare too small for you to be
interested in.
That's who I want to talk to,and through that process I
really met a lot of interestingpeople people who evaluate
businesses, people who advise onacquisitions.
You speak to all these peopleover months and months and
(10:53):
months and you start to build anetwork of folks that are very
helpful, because the morequestions you ask, people want
to give you knowledge, they wantto help.
Sometimes you have to pay themfor that help.
That was great to get theirperspective.
Actually, I looked at a medicaldevice manufacturer out of New
Jersey and that was only like atwo-person business but he was
(11:14):
doing like 1.5 in sales and itwas very profitable, but it
wasn't scalable and I didn'twant to live in Jersey, let's be
honest.
But you know.
So it took a lot of researchand just asking a lot of
questions of these owners andeventually you start to speak to
(11:37):
the owners of these businessesand learn more about what's
going on.
You know, it's just there's allthese interesting businesses
out there.
Speaker 2 (11:44):
I mean, you were clearly ambitious and you set
your criteria up front.
When you say that you spoke tothese businesses, what was your
evaluation process like?
I mean, is this a Zoom callwhere you are peppering them
with questions, or were you justlooking at their profit and
loss statements?
What was that initial part ofthe eval process like?
Speaker 1 (12:04):
Yeah.
So I was really trying to finda business that didn't have a
broker involved with it already,because once they get a
business broker involved thenthey start to evaluate the
business differently with a highprice tag, or position the
business in a different way.
I was trying to do that and Iwould say, if anybody's looking
(12:25):
to buy a small business, that'swhat you want to do is just walk
right in the front door andintroduce yourself to people.
If you can find them, that'sthe way to do it, because once
you get a third party involvedit complicates things.
But ultimately what I was doingis calling business brokers
quite a bit on the East Coast,and that's the other thing.
I had a fairly open idea ofwhere I wanted to live if I
(12:49):
moved and if the opportunity wasgood enough, I could justify
moving.
But I was looking a lot in theNortheast at the time and I was
in Connecticut.
Now we're in South Carolina.
But to your point, that's a lotof what we were doing is
signing a bunch of NDAs andtaking a look at P&Ls and
balance sheets just tounderstand the ins and outs of
the business and then if thatlooked compelling, then we might
(13:10):
talk to the owner in a phonecall with the business broker
just to ask some screeningquestions.
Speaker 2 (13:17):
But with KTAC, did you find it through one of these
brokers or are you saying thatyou found it off market?
Speaker 1 (13:23):
Right, I found it through a broker and what ended
up happening is I was speakingto somebody and my background is
the last 15 years.
I was in the industrialcoatings business and somebody
said hey, dave, you're in thepaint or metal finishing
business, right, that's kind ofwhat you do right now.
I'm like, yeah, yeah, yeah,that's kind of what I do.
And he said you know, you mightwant to talk to this guy.
(13:44):
I heard about a little businessdown in one of the Carolinas
that you know might havesomething going on.
So I ended up picking up thephone with a broker and at the
time the owner really didn'twant to let anybody know that
the business was for sale and itwas actually advertised in a
totally different city.
So you know business for saleand it was very vague about what
(14:05):
they did.
But it gave just enoughinformation for me, as somebody
who was experienced in thisindustry, to kind of say I think
I know what he's doing, I think.
So I picked up the phone, spoketo the business broker and he
said well, why don't you send meyour resume over and we'll make
a determination to see ifyou're legit, right, unless
you're fishing for information?
So we ended up getting on acall with the owner and he said
(14:26):
oh, by the way, it's actuallynot in Columbia or Charleston,
it's actually in Greenville,south Carolina.
I said oh well, that's greatbecause I like Greenville, and
so that conversation, there wasprobably a few phone calls that
we had which led to actuallycoming down to the company
itself and meeting the owner andhis wife, looking at the
(14:47):
facility, learning more of theins and outs of the business,
and then that was the I don'twant to say the most difficult
part, but finding theopportunity that could be a good
fit.
So at that stage now you'veactually committed your own time
and money to flying in andvisiting the company, then
(15:08):
figuring out how do I afford it,how do I get financing and is
this the right fit for us?
Because that's a big leap, youknow, especially when you're in
a job that was serving you.
Well, it was a good companythat I worked for and actually
it was actually family that Iwas working for.
So during this whole process Icouldn't consult with family
(15:29):
about the transaction until itwas actually done.
That was another layer ofcomplexity that I really didn't
enjoy.
But yeah, that was decisiontime, right, because you got
four kids in school and youdon't want to disrupt their
lives too much.
That was quite a thing.
Speaker 2 (15:47):
Well, what I love, though, about your story, from
what you've said so far, is justthat you made a decision, and
then you took all of the stepsthat you needed to in order to
make it happen.
Like you weren't sittingwaiting for the opportunity to
land on you.
You were going to networkingevents, you're reaching out to
brokers, lawyers, accountants,and you were really looking for
(16:08):
the right fit for you, and Ijust think it's an inspiration
to anybody that's out there whodreams of maybe following in
your footsteps in that kind of away.
So, when you mentionedfinancing, I wondered what did
you do?
So how did you get thefinancing to make the
transaction close?
Speaker 1 (16:29):
Yeah.
So through both of these booksthat I mentioned earlier, they
talk about that a bit and everydeal is going to be a little bit
different.
Looking back on it, I would saythat you really want to find a
way to make the financing workwith the owner, because you're
going to save quite a bit oninterest rather than going
(16:51):
through a bank that's going tobe charging you SBA fees that
are quite expensive.
So I would say, looking back onit, you really want to start to
begin having a workingrelationship with the owner or
owners, making them realize thatyou are a good candidate to buy
this business, because, as youknow, if you are the founder of
(17:12):
a business, you've built it fromnothing to what it is now.
It is a marketable asset thatsomebody is willing to spend
millions of dollars on, and soit's their baby, it's their
child, and they don't have tosell it to you.
They might be interested inselling it to you, but they
don't have to.
So you really need todemonstrate that you're capable
(17:34):
of taking on this responsibilityand growing it, and that's many
times.
I think what, in speaking withthese owners that's what they're
looking for is someone to takewhat they've built and grow,
because by the time they'reselling, they've made some money
.
They're tired.
Speaker 2 (17:51):
Yeah.
Speaker 1 (17:52):
You know they're not done, but they're saying I'm
ready, I'm tired and I need tohand this off to somebody else.
So you need to be that personthat can sell the owner on the
idea that you can grow thisbusiness.
And part of that conversationis I'm just not going to buy
this business and give you acheck and you walk away.
(18:13):
Because if you have an ownerthat says I want all my money as
soon as you sign the dottedline and I'm out, that's not a
good thing for you.
You need to know that this is aviable business that's going to
continue year after year,because that's too much risk and
you want to work with thatowner for many months after the
sale, because there'srelationships, there's
(18:35):
perspective, there's a lot youneed to learn in that first
three months.
I would say after three or fourmonths I was standing on my own
two feet, but I'll tell you what.
That first week I didn't knowwhich way it was up, and so I
would say work with an ownerthat is going to offer owner
financing as much as possible.
Now that's going to be trickyand that's not what we did 100%.
(18:59):
There was owner financingassociated with it.
There is skin in the game here,but I would have pushed harder
for more of that and I think ifyou read Dave Ramsey or listen
to his podcasts, he'll saysomething like you know sharing
in the profits and then, if it'san extremely profitable, five
years and you'll own it likethat.
But if the business proved tobe not very profitable, then it
(19:19):
might take you 12 years to buythe business.
I think he's got a very goodformula for financing an
acquisition that, frankly,doesn't have a bank involved.
Speaker 2 (19:28):
Okay, so you got partially seller financed and
then you for the other remainder.
Was it SBA or just atraditional bank?
Right, sba, yeah?
Speaker 1 (19:37):
And that's where you have to work with a banker and
find a banker that can closethat deal, because closing an
SBA acquisition and getting thatfinancing is a laborious
process.
It's just like getting amortgage.
They're going to ask for a lotof documentation.
They're going to ask for thesame documentation three times,
four times.
Then you've got to go throughthis whole due diligence process
(19:59):
with the existing owner thatthe SBA is going to be involved
with.
It takes a lot of energy.
I was working a full-time job atthe time but it's a lot of
hours and it's a lot of emails.
And now you're getting anattorney involved.
You're getting an accountantinvolved to do due diligence on
this business to make surethey're paying taxes.
You might have a merger andacquisition advisor that is
(20:19):
consulting you on an ongoingbasis.
Your accountant is just lookingat a tax liability.
That's what I learned.
He just is looking at the taxes.
He doesn't know anything aboutvaluation, doesn't know anything
about strategy of acquiring abusiness.
And you do need someone to.
And fortunately in my network Idid have people that I went to
college with or people I knewthat I could pick up the phone
(20:40):
and I trusted and said, hey,what do you think about this?
Somebody that I knew that hadacquired businesses, or one guy
was an attorney working for abig white shoe firm in New York
and then, through thatnetworking that I did locally,
there are all kinds of mergerand acquisition people who
evaluate businesses and then actas consultants on this.
You can find somebody like thatfor a very reasonable price.
(21:01):
That's just going to help youthrough that process and
mitigate risk.
That's what it's really aboutis mitigating risk.
Speaker 2 (21:07):
I like, too, that you acknowledged what you knew and
what you needed help with in theprocess.
Speaker 1 (21:11):
I knew yeah.
Speaker 2 (21:12):
You know, tapping the expertise of somebody in
mergers and acquisitions is sucha good play, but you had to
acknowledge that you needed it.
Speaker 1 (21:20):
Yeah, and I think maybe that is actually part of
getting a little older, right?
I would say, if you asked mewhen I was 35 years old, I'm too
headstrong to ask for help, andnow I think I'm getting much
better at acknowledging that I'mnot good at certain things and
I need people who know whatthey're doing to help.
(21:41):
And it was a process, right, itwas a process.
And once you start to get inover your head, then you start
to realize I need someone thatcan help me with this.
And then you start askingquestions.
Right, you start to say, well,can you help with this?
And like hey, I met you at anetworking event.
You said you consult onacquisitions, can you help?
Well, that's a deal is toosmall for me.
(22:02):
But here's a guy and that'sjust what networking is all
about.
And it took a long time.
The whole acquisition process,from just initially looking at
the business to putting a letterof intent together to the due
diligence.
I mean that was 10 months.
It's a long time.
It's a big investment in time,not so much the front end cost
(22:22):
of accountants or attorneys orconsultants, it's a time
investment.
And it's about the team ofpeople that you pull together
too.
Speaker 2 (22:30):
And once the deal was done, signed, delivered, money
transferred.
How did your family respondwhen you told them that you were
moving states, and what hasthat impact been like for them?
Speaker 1 (22:43):
Yeah.
So in my case, that wasactually, I would say, the most
difficult part, because I workedfor family, not my parents, but
I couldn't tell my parents whatI was doing and that really
broke my heart, because I have avery, very tight relationship
with my parents and I couldn'ttell them hey, I'm going to quit
, you know, a family business todo something else.
I knew that.
(23:04):
I couldn't ask them to keepthat secret and that was very
difficult.
I still regret that and theyunderstand why I had to do that
and everything was fine after alittle while.
But I would say, my immediatefamily, you know, bonnie and I
were talking about this for 10months to get it done.
And then, once we finallyactually sold our house in
(23:24):
Connecticut is when we told ourkids so we have 14, 12, 10 and
eight year old kids, four kids.
Yeah, now, keep in mind, we hadto sell our house.
We do acquire the business.
We had to move schools for thekids, you have to get housing in
another state.
I mean that there was a lot oflogistics in that last five
months.
That was brutal.
(23:44):
Don't suggest that everybody dothat, but just know what you're
getting into.
It's a lot of stress and sowhen we told our kids, I think
they didn't really know whatthat meant, but I would say that
they have been very resilientand very flexible.
I was very, very concerned withmy 12 year old son and my 10
year old daughter because theystill have very tight
(24:06):
relationships with some of theirfriends up in Connecticut who,
you know, they're going to go tosummer camp with this summer
and uprooting them.
We were really concerned aboutthat and they have done
exceptionally well.
They adjusted very well.
So that was difficult and thatwas part of this whole risk
analysis.
Right Is okay.
(24:28):
What are the all the goodthings about this transition and
things that could happen?
Where are the risks?
What are the downsides?
What are the things that wecould really miss out on and
potentially affect our familynegatively and that was
certainly part of it is how arethe kids going to respond?
Speaker 2 (24:46):
Yeah, but what an important lesson they get to not
just learn from you but towatch you and your wife grow
together.
This business, I mean I thinkyou can tell stories and then
your children can watch you, andwhen they watch you I think
that the learning may get a bitdeeper.
So amazing opportunity for themto be a part of this.
(25:11):
Tell us just really, you knowfrankly, like what has the
learning curve been like, goingfrom being an employee to now an
owner operator?
Speaker 1 (25:22):
Yeah, now you're signing the checks, right?
Yeah, exactly.
Yeah, that was quite atransition, right?
Is you know?
You sign the paperwork and thenthe next day you own this
business and then you show up towork and you meet the employees
for the first time.
That was a transition becausethe employees you know owners
(25:44):
don't want to tell theiremployees, hey, the business is
for sale and you knowsomething's going to happen.
They don't want to do that.
So we were introduced to allthe employees more than anything
else.
It was guys, nothing's going tochange at this company.
Like, we don't want to make anybig changes, Nobody's getting
laid off.
(26:04):
And right off the bat, we madesome changes that were very
positively received by theemployees because we wanted to
acknowledge that they'revaluable.
I mean, realistically, when youbuy a company, yeah, you might
be buying a building and youmight be buying equipment, you
might be buying a machinery, butthe company is the people and
without the people you can't getany work done.
And I would say that someonecould get ahead of themselves
(26:28):
and say, okay, we're going toslash expenses and we're going
to put new compensation plans inplace to be more lucrative for
ownership and squeeze everyounce of labor and profit out of
the business.
There's a temptation to do that, to be very headstrong and come
in and make changes rapidly,and I would not recommend you do
(26:48):
that.
The owner of the business thatyou just bought that business
off of.
There's a reason why they weresuccessful and you need to
acknowledge that and you need tomake sure that you're treating
the employees well, especiallythe ones that have been there
for a long time.
And if you've gotten that far,you're smart enough to know how
you're going to grow.
You're a smart person.
(27:08):
That means you've alreadygotten the bank on board.
You've already got that letterof intent signed.
You've demonstrated yourcompetence.
Now you're across the finishline.
Don't make any big changes.
Small, incremental changes overtime to grow the business and
whether that be in sales,whether that be maybe moving
into a different industry, takeit slow, no big changes.
Speaker 2 (27:29):
Yeah, for the sake of the company and the existing
team, but also for yourself, sothat you can learn the ropes of
the business.
Speaker 1 (27:37):
Oh, yeah, yeah.
And to get back to you knowlearning curve, it was a big
learning curve.
I've always actually thought ofmyself as a small business
person.
I worked for a couple of largecompanies right out of college
and very quickly realized thatthat's not who I am.
When I was younger, I workedfor either family or other small
businesses.
That that's not who I am.
When I was younger, I worked foreither family or other small
(27:57):
businesses.
I mean, my first job wasscooping ice cream at 14 or 15
for $4.25 an hour.
I can remember that really well.
And then I was working inconstruction with family, and
then I was doing all kinds ofstuff that young people do for
work just to make a buck.
And that's how I grew up.
Small businesses and then movingto New York working in finance
for a little bit and thengetting laid off in August of
2008, three months before I wasgoing to get married made me
(28:19):
realize that maybe I'm not thebig company guy after all.
And so, getting back to thatlearning curve, it wasn't that
drastic because I've been withsmall businesses, but now you're
stepping into a management roleand now you're managing people.
Now you are the person sayingyes or no, and making big
decisions and when I say bigdecisions like whether to hire
(28:42):
and fire people, pricing yourproduct, you know these are all
things that you're secondguessing yourself on all the
time.
And it's you, it's all on you.
Now.
You can't go and consult theboss, you can't go and consult
other people.
It's like you're the one and Ienjoy that.
That's what I signed up for.
That's a lot of pressure thatyou can't necessarily explain to
(29:02):
somebody unless they'reactually experiencing that,
because that's where the rubbermeets the road.
Speaker 2 (29:07):
You need some critical thinking skills and the
ability to problem solve andmake decisions.
Speaker 1 (29:12):
Oh yeah, oh yeah, like we had Hurricane Helen came
through here and we were all upand running full steam and all
of a sudden lost power becausethe transformer on one of the
telephone poles went out and thepower company looked at their
grid and said no, you know, mrPolk, you have power according
to our system.
And I'm saying my electricianis telling me that I'm not
(29:33):
getting three phase power to runour compressors.
And I need, mark, ourcompressors to be running,
because it's a big part of ourbusiness and it's not any of our
equipment.
It's Duke Energy.
And what do you do?
It's Hurricane Helen.
Every major manufacturer hason-call generators on contract
and you're a small business andI needed what was it?
(29:53):
40 kilowatts of energy.
I it was a tractor trailer, orI needed a generator as big as a
tractor trailer, and I couldn'tfind that, and every all they
were all taken up.
So if we didn't have power,we're not putting out product,
and so that's on you, like, howdo you solve that?
And so it was.
That's on you, like, how do yousolve that?
And so it was a lot of phonecalls.
Speaker 2 (30:20):
Yeah, that's.
That's a big one and thatactually makes me think of a
little side tangent Maybe youand I can talk about it after
the show mainly about thedemands for power needs
increasing within the UnitedStates because of all the
database centers and AI growingand let's talk about that later.
But so what skills from yourcorporate career, which skills
do you think really prepared youfor this transition?
Speaker 1 (30:41):
I think that goes to narrowing down the skills you
have right now versus what thecompany you're thinking of
acquiring needs.
So in this case it was a verystable business that hadn't had
any really any sales effort putinto it in many years and
(31:02):
actually that's pretty commonwith businesses that are
established right.
The owners built it, they'remaking good money, they don't
need to get out of bed and knockon doors, which is typical.
But my skillset was very muchin sales and, more importantly,
technical sales, where I wasdealing with engineers all the
time and dealing with atechnical subject matter and I
(31:23):
like building things.
So I knew that that skill setjust in my interests and just
what I like to do and also whatI have been doing on the last 15
years was a good fit in termsof where I fit in the company.
Because you have to understandwhen you step in, are you going
to be stepping on the toes ofother people there where the
business really might need more,somebody like a president, ceo
(31:56):
that's really hitting the streettrying to expand the business
and leading the engineering topeople in house.
So in terms of preparing, Iwould say my weak spot is things
like just the day-to-dayrunning of things, all the POs
and the invoicing and thingslike that.
We hired a business manager todo that.
That is something I'm not goodat.
That's where you hire people.
That's a plug in the dam thatyou need to figure out, because
(32:18):
the previous owner and his wifewere doing that when we acquired
the business.
My wife is still at home withkids, so we couldn't have her do
it.
That's a full-time job.
So, understanding your strengthsand weaknesses, as soon as you
come in, saying all right, wheredo I fit into the company?
And I knew my skill set wasmore sales and my weakness is
(32:39):
just that day-to-day back officestuff that I don't have any
experience with.
And actually hiring somebodyfor that was actually kind of
scary, right?
Because you're the new owner ofa business, two months in now
you're interviewing someone torun the books.
Do you hire somebody that'syoung and a spitfire that might
leave in two years, or do youhire somebody that's going to be
(32:59):
more expensive and got a lot ofexperience and is more likely
to stick around because of avariety of factors?
Important decisions, right.
Speaker 2 (33:10):
Yeah, big decisions.
Have you hit any points whereyou've just thought my gosh, I'm
in over my head?
Speaker 1 (33:18):
I will say it's a different level of stress
Because now it's on you and it'sall on you, and I've always
responded well to stress.
I'm still a competitive athlete, so if you're the kind of
person that deals well withstress, you'll be fine.
But it's a different level ofstress altogether because you're
(33:42):
in charge.
Speaker 2 (33:43):
And you're, you're writing those checks.
You're writing those checksevery month, absolutely and
every you know you gotta makepayroll, you've gotta pay the
rent, pay the bank, all thesethings, so yeah, and beyond the
stress, do you think there'sanything that nobody prepared
you for when it came to becominga business owner that you kind
(34:04):
of wish somebody had?
Speaker 1 (34:06):
I think there are things that I could have done
differently during theacquisition.
Things like shoot, who knows,maybe should have low-balled
them instead of giving them theprice that I did.
It's not that I feel like Ioverpaid, but I feel like maybe
you know what, maybe I couldhave paid a little bit less if I
(34:28):
played my cards right andstrategy, having a more
strategic approach to thatacquisition, having gone through
it now.
Now there are other steps thatI would do if I were acquiring a
different business to help thisbusiness grow, which I've been
thinking about, I would approachthat much differently, just
strategically.
Speaker 2 (34:47):
It's always easier in retrospect to see how we could
have done things better ordifferently.
So this is such a bold andagain inspiring move that you've
made in midlife.
And if somebody is listening inwho is in their early 40s or
maybe they're in their late 30sor any age really, but I'm
thinking of early 40s justbecause that's when you made
(35:09):
this decision, in this big moveIf they're in a corporate job
and it's pretty mundane theykind of just feel too like they
have more that they can do.
They like what you've done, butthey're scared.
They're scared of that leap.
What would you say to them?
Speaker 1 (35:26):
I would say I'll leave you with this.
I didn't want to regretanything in my life.
I know myself well enough whereI'm ambitious, I'm capable and
I'm a smart enough guy to getthis stuff done.
And if I didn't do this then Ididn't want to be 55 years old,
(35:47):
too old to do it, because now mykids are in college, now my
kids are in high school and Ican't move and I've got college
bills.
It's too late in life at thatpoint and I had this
conversation with my wife,bonnie, very frequently is, you
know, I just don't want to livewith regret.
And that's really what startedto put me over the edge.
It wasn't the fear of takingthe next step, it was you know
(36:10):
what.
I just came to this realizationthat I never want to live with
regret because you've got onelife to live and 10 years down
the road you might not be ableto take the same amount of risk
or it might be totally out ofthe cards.
So that was really for me whatwas the most important thing.
So I would say don't be scaredof taking the next step, just
take small steps.
(36:31):
Go to those networking events,talk to people about doing these
things.
Talk to a banker.
It's not that difficult to pickup the phone and speak to a
business broker.
As a screening, just pick upand talk to them about the local
liquor store that's for salefor half a million dollars and
it's got $100,000 in cash flow.
Just learn about it.
(36:52):
Learn about the acquisitionprocess.
Talk to a few owners ofbusinesses it.
Learn about the acquisitionprocess.
Talk to a few owners ofbusinesses just to see how the
conversation goes and dip yourtoe in the water.
Don't think that you need tocommit until you actually are
now.
The commitment doesn't evencome when you've made the offer.
The commitment comes whenyou're starting to enter the
financing phase and you'reputting down payments down.
(37:12):
There are many months of goingthrough that acquisition process
when you can just pull the plugand say you know what?
I spent $1,000 on networkingevents and drinking beers with
some interesting people and thenI decided it wasn't a good fit.
You can always turn around.
Speaker 2 (37:27):
Yeah, I really love too that perspective that you
had, which was not a decisionmade out of fear, but one out of
excitement for the potential ithad for your family.
Cause I think that when weapproach our decisions in life
from a fear place, then it justfeels like the momentum is like
cut off at the knees, you know,whereas if we are approaching it
(37:48):
from like the what, if, likewhat, if it's better for our
family, then it's just so muchmore motivating and inspiring.
So you're in now, after oneyear.
How are you feeling and whatexcites you the most, and also
what keeps you up at night?
Speaker 1 (38:05):
The first year was good.
We knew it was going to be alot of learning.
What I'm excited about is thatwe're talking to a variety of
different potential newcustomers that could really
launch us into, let's say, thatit could be very exciting, and
there's a lot of new technologyout there.
There are a lot of people whowe haven't been speaking to and
there's a lot of work out therethat needs to be done.
(38:27):
We're in a fairly unique nicheand I love talking to people,
because once you start to talkto somebody and you ask them a
lot of questions, then they sayyou need to talk to this guy
over here and this girl overhere.
They have something to do withthat.
You never know where thoseconversations are going to go,
and I think that we're in agreat position where all we just
(38:47):
needed to do was the businessto chug along as it always has,
and then our job is to find anew business and take it in
different directions.
But there's a lack of people outthere who want to get work done
, who actually want to work.
But if you're a worker, I wouldsay this is probably the best
time in the last 80 years to bea hard worker because everybody
(39:08):
else is looking for a shortcut.
Everybody else wants to be amiddleman.
Everybody else wants to dosomething.
That's oh yeah, you know, make$100,000 a month for you know,
sitting on your couch doingsomething online.
It's like I've got news for you.
That's not going to happen.
And if you hustle, there'sprobably not a better time to be
a hard worker.
And if, if you're not, ifyou're not afraid of that, then
(39:32):
I think you should definitelytake advantage and do some
reading and talk to a lot ofpeople.
Speaker 2 (39:36):
Yeah, I am so excited .
Well, I mean I guess I shouldtemper what I say there, but I
see so much opportunity rightnow because of the silver
tsunami, because the people, theboomers who are retiring and
they have these businessesthey've cared for deeply for
many years and nobody to handthe reins to.
So I'm not really in a spacewhere I necessarily am looking
(39:57):
to purchase a business, but, mygoodness, there is opportunity
out there and I know there'salso a lot of economic
uncertainty.
Are you having any worries orconcerns about how tariffs might
impact you and your business?
Speaker 1 (40:11):
So we are in manufacturing and our customers
will definitely see some of that, but specifically for what we
do, I'm not anticipating tariffsis going to have an oversized
impact on our sales or revenues.
If I were buying things out ofChina on a regular basis, I
would have some real concerns.
I spoke to a gentleman when wewere looking at different
(40:35):
businesses.
He was a tier one retailer forWalmart.
He was doing a ton of businesswith Walmart selling bird
feeders and bird baths out ofChina.
He was killing it, absolutelykilling it, and he had built
this business in two or threeyears.
But it was like, well, whathappens when Walmart finds
(40:56):
another supplier and just blowsyour business out of the water
Like there's nothing there?
And that's what I you juststarted making me think about
how that's how tariffs might beaffecting his business, right?
I think he was doing like 1.5in sales and you know healthy
margins.
Speaker 2 (41:12):
On bird feeders.
Speaker 1 (41:13):
On bird feeders.
Speaker 2 (41:14):
Goodness gracious.
Speaker 1 (41:14):
But he had one or two major retailers as customers.
Speaker 2 (41:18):
Oof, that's dangerous .
Speaker 1 (41:20):
Yeah.
Speaker 2 (41:21):
Yeah.
Well, how are your numberslooking from the time that you
purchased the business to now?
Is it sustaining?
Has it dipped?
Is it growing?
Can you give us any insightsinto the performance since you
took over Sure?
Speaker 1 (41:34):
Yeah, so sales have remained.
I think for the first year.
It's remained fairly consistent, which is really all we were
looking for.
You don't want sales to dip asa result of new ownership, right
, so it's remained consistent.
But the reason why we're hereis to grow, so we're speaking to
more and more customers all thetime, and so that's why I'm
(41:57):
very optimistic that in the next24 months could be very busy,
but you want to make sure thatyou're buying a business that's
enduringly profitable.
They don't have to have the typeof valuations that tech
companies have to have, but theyneed to.
It needs to be a profitablebusiness that, year over year,
has proven itself to beconsistent, and that's really.
It doesn't have to be a sexybusiness Like what we do is not
(42:19):
sexy by any stretch of theimagination.
There are a lot of veryuninteresting businesses out
there that do very well forthemselves and the owner needs
to sell, and so find a sleepybusiness that has limited
competition.
That's a niche player.
It's not in a commodity kind offield where you're just getting
undercut by the competition allthe time.
Find that sleepy little mom andpop.
(42:41):
You know local marina thatsells burgers and marina slips,
and you know they're the onlyperson in the area and they've
got a monopoly on the business.
Speaker 2 (42:51):
So niche players like that- yeah, I love it, it, it.
It really is very inspiring.
So I just have one morequestion for you.
If you could go back and talkto yourself when you were in
your early 20s or a recentgraduate, what life wisdom would
you give yourself?
Speaker 1 (43:09):
Oh boy, you know I'm torn.
I want to tell my 23-year-oldself to work for yourself and
find your own way and don't workfor somebody else, because
there's a lot more potentialwhen you're the boss.
I'm tempted to tell my kidslook, I'll help you start a
business, I will be the guardrails and you start your own
(43:32):
business.
I would love to be able to saythat, on the same token, there
is some value in learning onother people's dime and when
you're in your twenties.
I still had a lot to learn and Ithink I actually worked for big
companies right out of collegeand for me that was not a good
decision.
You learn a lot more with asmall business, so you're going
to learn a lot more just workingfor a small company small
(43:56):
business, so you're going tolearn a lot more just working
for a small company.
So if you're for me and my kids, I would encourage them to do
the same.
But hey, if you're like I said,if you're a hard worker,
there's a lot of opportunity outthere and you can't be afraid
of waking up early and saying,well, got to keep on working
because nobody else is, and sothere's a lot of opportunity out
there.
Speaker 2 (44:19):
Yeah, you got to have the right mindset.
Yeah, yeah, go and get it.
Dave, thank you so much forjust sitting and chatting with
us.
I think this episode isactually so inspiring because
you're in the trenches and youmade this big, bold leap that I
don't know anybody else who'sdone anything, quite like how
you have.
Speaker 1 (44:32):
There might be a reason else.
Speaker 2 (44:33):
who's done anything, quite like how you have, there
might be a reason.
It's so wonderful to hear,though, and you've got the smile
on your face and I feel likethis is going to work out very
well for you and your family.
Thank you so much for sharing.
Speaker 1 (44:46):
It was so much fun.
It's great catching up with you.
Thank you.
Speaker 2 (44:53):
Today's key takeaways .
If you're ambitious and feelinglike you're capable of more
than what you're doing in yourjob, start by reading a few
books about acquiring smallbusinesses.
Educate yourself on the process.
Two great ones to start withare Buying a Small Business from
Harvard Business Review and BuyThen Build by Walker Diebel.
(45:16):
Look at the skills you alreadyhave.
Then figure out what level ofcash flow a business would need
to support both your lifestyleand the business itself.
You're looking for anenduringly profitable small
business with an owner whodoesn't have a succession plan,
that's too small for privateequity to care about, but big
(45:39):
enough to employ a team and hasa reason to sell.
Working hard and taking on riskand responsibility isn't for
everyone, but if that's in yournature, this path might be a
perfect fit.
But if that's in your nature,this path might be a perfect fit
.
Keep in mind that businessbroker websites only show a
certain type of listing.
(46:00):
You may find a few diamonds inthe rough, but they're not
always representative of what'sout there.
Start narrowing things down.
Know what you don't want.
This alone will eliminate a lot.
Think about your skills andwhat industries you understand.
Work backwards.
(46:20):
What level of cash flow does abusiness, need to cover debt and
put a roof over your head.
That will help you narrow downwhat size business to look for
and make sure it's scalable.
Now, how do you find a business?
Start networking.
(46:41):
Talk to accountants, attorneys,anyone who handles other
people's money, even small tomid-market private equity groups
.
Ask if they've come across anybusinesses that are too small
for them to pursue.
By doing this kind of outreach,you'll likely meet people who
evaluate businesses and adviseon acquisitions.
Ideally, you want to talkdirectly to the owner, but you
(47:02):
can also start by reaching outto business brokers in regions
you'd be willing to live in.
Sign NDAs, start reviewingfinancials and see what you
might want to explore.
You don't need money to startthis process.
There's plenty of low-stakeslearning you can do now, like
going to open houses beforeyou're ready to buy a home.
(47:24):
It's the same thing.
That said, just because youwant to buy a business doesn't
mean the seller wants to sell itto you.
You have to prove you're theright person to take the reins.
For many founders, the businessis their baby.
When it comes to financing,consider negotiating more seller
financing.
(47:45):
It often comes with a lowerinterest rate and keeps more of
the seller's skin in the game.
Getting an SBA loan is timeintensive, more like a mortgage
process than you'd expect.
You'll need to provide multiplecopies of documents repeatedly.
You'll also want an accountantto help with tax implications, a
(48:07):
lawyer to review the legaldetails, possibly a mergers and
acquisitions advisor to supportvaluation strategy and reduce
your risk.
Be honest about what you don'tknow and surround yourself with
the right people.
Fill the gaps From start tofinish.
It can take about 10 months toidentify a business, sign a
(48:31):
letter of intent, an LOI, gothrough due diligence and
finally close the deal Once youown it.
Don't rush in and make massivechanges.
Use that first year to learn.
Focus on small, incrementalimprovements that strengthen the
business over time.
If you're transitioning fromcorporate life, narrow in on
(48:52):
your skills now.
Compare them to the skills thebusiness needs.
Identify what you're not goodat and make sure there's enough
cash flow to hire for thoseroles.
Know your strengths andweaknesses.
When everything is yourdecision, it's a different kind
of stress.
Mindset is everything.
(49:14):
Do you believe you're capable?
Do you believe you can figureit out?
One of the top regrets of thedying, according to palliative
nurse Bonnie Ware, is not havingthe courage to live a life true
to themselves.
No regrets.
Don't be afraid to take thenext step.
(49:35):
Start small.
Go to networking events.
Talk to people.
Call a banker.
Reach out to a business brokerand just screen a conversation.
Learn about the acquisitionprocess.
Talk to a few business ownersand see what those conversations
feel like.
It's a great time to be someonewho's willing to work hard.
(50:00):
A lot of people are out therelooking for shortcuts.
Look for a business that isenduringly profitable, one with
consistent performance over time.
Ideally, you want a sleepybusiness, a niche player with
limited competition, and ifyou're in your 20s, you've still
(50:21):
got a lot to learn.
But if business ownership iseven a faint idea in your future
, go work for a small business.
You'll learn more, faster andfrom closer to the center of
real decision-making.
That's it for today.
I release episodes once a week,so come back and check it out.
(50:42):
Have a great day.
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